- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
FORM 8-K/A
CURRENT REPORT
-------------------
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) APRIL 30, 1996
LASERMEDICS, INC.
(Exact name of registrant as specified in its charter)
Commission File Number 33-49972
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
120 Industrial Boulevard, Sugar Land, Texas
77478 (Address of principal executive offices,
including zip code.)
713-276-7000
(Registrant's telephone number, including area code)
2427 Murphy Road, Missouri City, Texas 77459
(Former address of registrant)
- - --------------------------------------------------------------------------------
LASERMEDICS, INC.
FORM 8-K/A
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 30, 1996 Lasermedics, Inc. a Texas corporation (the
"Company"), entered into an agreement with Maxxim Medical, Inc., a Delaware
corporation ("Maxxim"), whereby the Company purchased certain assets of ( and
assumed certain liabilities associated with) the Henley Healthcare Division
("Henley") of Maxxim for an estimated purchase price of approximately $13
million. This purchase price (i) was determined by adding $1.0 million to the
estimated net book value of the Henley assets as of April 30, 1996 and (ii) is
subject to adjustment based on a final determination of the net book value of
the Henley assets following the closing. The assets acquired consist of real
property; tangible personal property including machinery, equipment, furniture
and fixtures; general intangibles; contracts; business licenses; accounts
receivable; inventory; and prepaid expenses.
The purchase price was paid by the issuance of the Company's
convertible subordinated promissory note in the principal amount of $7,000,000
(the "Note") with the balance of the purchase price being paid in cash. The
Company obtained the cash portion of the purchase price pursuant to a loan
agreement entered into with Comerica Bank-Texas, a Texas banking corporation
("Comerica"), which loan is secured by substantially all of the assets of the
Company including the Henley assets acquired from Maxxim.
Henley specializes in the manufacturing and marketing of a complete
line of physical therapy products and is the second largest provider of turn-key
physical therapy products in the U.S. The Company intends to continue the
manufacturing and marketing of this line of products and believes that the
acquisition of Henley will complement as well as diversify its total product
offering and will help provide an international distribution system for its
non-invasive low-energy laser for the treatment of repetitive stress disorders
including carpal tunnel syndrome.
The Note is due and payable on March 1, 2003 with interest payable
semi-annually on November 1 and May 1 of each calendar year and calculated at a
rate equal to 2% per annum and increasing annually 2% per annum. The Company may
redeem all or any portion of the outstanding principal amount of the Note at
redemption prices ranging from 104% to 110% of the principal amount being
redeemed, depending on when the redemption occurs as set forth in the Note. In
addition, the Note is subject to mandatory redemption in annual installments of
$1.4 million commencing on March 1, 1999 at premiums starting at 7% and
decreasing 1% each year. The Company is also required to redeem 40% of the Note
upon the completion of a public offering. The Note is convertible into common
stock at an initial conversion price of $3 per share, provided that upon the
occurrence of any default under the Note, the conversion price will be
automatically adjusted to an amount equal to the lesser of the conversion price
then in effect or 80% of the average market price for the Company's common stock
for the 30 trading
2
days immediately preceding the event of default. The conversion price is also
subject to adjustment upon the occurrence of certain events (including certain
issuances of common stock for less than the conversion price) to provide
anti-dilution protection. The common stock issuable on conversion of the Note is
subject to the terms of a registration rights agreement entered into by the
Company and Maxxim whereby Maxxim (and certain subsequent holders) shall retain
certain demand and piggyback registration rights with respect to those shares of
common stock.
The loan agreement with Comerica provides for a revolving loan, which
permits borrowings up to $4,000,000 pursuant to a borrowing base calculation
derived from the Company's accounts receivable and inventory. The $4,000,000
revolving loan also includes a $250,000 letter of credit facility. In addition,
the Company received two term loans in the amount of $893,000 and $1,616,000,
respectively. The revolving loan's maturity date is two years from the date of
the loan agreement while the maturity dates of the $893,000 and $1,616,000 term
loans are five years and fifteen years, respectively, from the date of the loan
agreement, except that Comerica may call the $1,616,000 term loan beginning on
the fifth anniversary of the loan agreement. All of the borrowings from Comerica
are secured by substantially all of the assets of the Company including the
Henley assets acquired from Maxxim. The loan agreement also contains a number of
affirmative covenants, negative covenants and financial covenants with which the
Company must comply including a minimum tangible net worth, leverage ratio,
working capital ratio, fixed charge ratio and interest coverage ratio. The
Company is also limited in the amount of its capital expenditures and research
and development expenditures, and all future acquisitions and major corporate
transactions require approval of Comerica, as do offerings of securities by the
Company.
ITEM 5. OTHER EVENTS
The Company's Board of Directors increased the number of directors
constituting the entire Board of Directors from two to four, effective January
15, 1996, and elected Dan D. Sudduth and Dr. Pedro A. Rubio to fill the
vacancies created by such increase.
Mr. Sudduth is President and Director of AMC Home Healthcare, Inc., a
respiratory therapy company in Houston, Chairman of Mezzanine Financial
Relations, Inc., a merchant banking firm in Houston and Chief Financial Officer
and Director of Creative Communications International, Inc., a Houston
telecommunications company. From 1992-1994 Mr. Sudduth served as Chairman and
CEO of Heart Labs of America, Inc. (NASDAQ: HLOA), a provider of Continuous
Passive Motion services. From 1988-1992 he was President, Chief Financial
Officer and Director of American BioMed, Inc. (NASDAQ: ABMI), a manufacturer and
distributor of minimally invasive surgical devices, and from 1982-1989 served as
President and CEO of First Stamford Group, Inc., a financial consulting firm
that specialized in mergers & acquisitions. Prior to 1988, Mr. Sudduth served in
various business executive positions in industry including the commercial
banking industry. Mr. Sudduth holds a Bachelor of Business Administration degree
from Lamar University.
Dr. Rubio is Clinical Associate Professor of Surgery at the University
of Texas Health Science Center (Houston) and Director of Education of the Laser
Training Institute (Houston).
3
He served as World President of the International College of Surgeons (Chicago)
in 1995, and is Chairman Emeritus of the Department of Surgery at the
Columbia/HCA Medical Center Hospital (Houston). He also practiced in
cardiovascular, thoracic and general surgery, has published numerous papers
(including surgical atlases, monographs and dissertations) in national and
international journals, and holds the following degrees: Bachelor of Science,
Master of Science in Surgical Technology, Doctor of Philosophy in Biomedical
Technology and Doctor of Medicine and Surgery. Dr. Rubio is a Diplomate of the
American Boards of Surgery, Laser Surgery, Abdominal Surgery, Forensic Medicine,
Quality Assurance and Pain Management.
In connection with the acquisition of Henley, the Company entered into
an agreement with Maxxim, Mr. Michael Barbour (the Company's President and a
director) and Dr. Chadwick Smith (the Company's Chairman of the Board of
Directors) pursuant to which, among other things, (i) the Company created two
vacancies in its Board of Directors and elected a nominee of Maxxim, Mr. Kenneth
W. Davidson, to fill one vacancy, (ii) Mr. Barbour and Dr. Smith agreed to vote
their shares of the Company common stock in favor of such nominee during the
term of the agreement and (iii) the Company elected Dr. Ernest J. Henley, a
director of Maxxim, to fill the other vacancy.
Mr. Davidson has served as Chairman of the Board of Directors, Chief
Executive Officer and President of Maxxim since November 1986, prior to which
time he was the Corporate Director of Business Development at Intermedics, a
manufacturer of implantable medical devices.
Dr. Henley has served as a director and consultant to Maxxim since 1976
and for more than the past five years has been a professor of Chemical
Engineering at the University of Houston.
Also, in connection with the acquisition of Henley the Company
terminated the employment agreements under which Mr. Barbour and Dr. Smith
currently serve. The Company anticipates entering into new employment agreements
with Mr. Barbour and Dr. Smith. Such agreements could include an increase in
base salary, granting of stock options and other changes in compensation.
The Board of Directors of the Company adopted a 1996 Incentive Stock
Option Plan (the "Employee Plan"), effective January 15, 1996, covering 1.2
million shares of the Company's common stock and a 1996 Non-Employee Directors
Stock Option Plan (the "Outside Director Plan") covering 250,000 shares of
common stock. Both of these Plans will be subject to further approval by the
Company's shareholders at the upcoming annual meeting and shareholders will be
receiving proxy materials relating to those Plans for approval at that time.
In connection with their election to the Board of Directors, Mr.
Sudduth and Dr. Rubio were each granted stock options effective January 15,
1996, under the Non-Employee Director Stock Option Plan to purchase a total of
25,000 shares of the Company's common stock at a price of $5.50 per share. These
options are subject to shareholder approval of the NonEmployee Director Stock
Option Plan.
4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
(a) Financial Statements of Business Acquired:
The financial statements of Henley required to be furnished with this
Form 8-K/A are included herein as follows:
(i) Divisional statement of net assets as of October 29, 1995
(audited.)
(ii) Statements of revenues and direct expenses for the years ended
October 29, 1995 and October 30, 1994 (audited) and for the
six months ended April 30, 1995 and 1996 (unaudited.)
(iii) Statements of cash flows for the years ended October 29, 1995
and October 30, 1994 (audited) and for the six months ended
April 30, 1995 and 1996 (unaudited.)
(b) Pro Forma Financial Information:
The pro forma financial information required to be furnished with this
Form 8-K/A are included herein as follows:
(i) Unaudited pro forma combined balance sheet as of December 31,
1995 (for the Company) and as of January 31, 1996 (for
Henley.)
(ii) Unaudited pro forma combined statement of operations for the
year ended December 31, 1995 (for the Company) and for the
year ended January 31, 1996 (for Henley.)
(iii) Unaudited pro forma combined balance sheet as of March 31,
1996 (for the Company) and as of April 30, 1996 (for Henley.)
(iv) Unaudited pro forma combined statement of operations for the
three months ended March 31, 1996 (for the Company) and for
the three months ended April 30, 1996 (for Henley.)
(c) The following exhibits, from which schedules and attachments have been
omitted and will be furnished to the Commission upon its request, are filed with
this report on Form 8-K/A. Exhibits incorporated by reference to a prior filing
(of Form 8-K) are designated by an asterisk (*); all other exhibits not so
designated are documents required to be filed as exhibits to this Form 8-K/A:
5
EXHIBITS
Exhibit
Number Description
- - ------- -----------
1.1 Agreement of Purchase and Sale of Assets dated April 30, 1996 by and
between the Company and Maxxim.
1.2* Lasermedics, Inc. Convertible Subordinated Promissory Note dated April
30, 1996 in the original principal amount of $7,000,000 payable to
Maxxim.
1.3* Registration Rights Agreement dated April 30, 1996 by and between the
Company and Maxxim.
1.4* Voting and Shareholders Agreement dated April 30, 1996 by and between
Michael M. Barbour, Chadwick F. Smith, MD, and Maxxim.
1.5 Loan Agreement dated April 30, 1996 between Comerica Bank-Texas and
the Company.
6
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED
HEREUNTO DULY AUTHORIZED.
LASERMEDICS, INC.
(Registrant)
Date: July 15, 1996 By: /s/ MICHAEL M. BARBOUR
MICHAEL M. BARBOUR
President & Chief Executive Officer
7
<PAGE>
HENLEY HEALTHCARE
DIVISIONAL STATEMENT OF
NET ASSETS
OCTOBER 29, 1995, AND
APRIL 30, 1996 (UNAUDITED)
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
To Henley Healthcare:
We have audited the accompanying divisional statement of net assets of Henley
Healthcare (Henley) (operated as a division of Maxxim Medical, Inc. (Maxxim) as
of October 29, 1995, and the related statements of revenues and direct expenses
and cash flows for the years ended October 29, 1995 and October 30, 1994. These
divisional financial statements are the responsibility of Maxxim's management.
Our responsibility is to express an opinion on these divisional financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The divisional statements of net assets, revenues and direct expenses and cash
flows were prepared for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission. As discussed in note 1, such
statements do not reflect certain corporate overhead expenses incurred by
Maxxim, the former parent, on behalf of Henley.
In our opinion, the divisional financial statements referred to above present
fairly, in all material respects, the net assets of Henley (operated as a
division Maxxim) as of October 29, 1995, and the related statements of revenues
and direct expenses and cash flows for the years ended October 29, 1995 and
October 30, 1994, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Houston, Texas
June 7, 1996
<PAGE>
HENLEY HEALTHCARE
DIVISIONAL STATEMENT OF NET ASSETS
As of October 29, 1995 and April 30, 1996
(in thousands)
April 30,
October 29, 1996
ASSETS 1995 (UNAUDITED)
------- -----------
Current assets:
Cash and cash equivalents .......................... $ 2 2
Accounts receivable, net ........................... 3,783 3,322
Inventory, net ..................................... 6,732 5,924
Prepaid expenses ................................... 34 22
------- ------
Total current assets ........................... 10,551 9,270
Property and equipment, net ............................ 1,871 1,755
Goodwill and other intangibles, net of
accumulated amortization ............................. 1,004 920
------- ------
Total assets ................................... $13,426 11,945
======= ======
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable ................................... 375 376
Accrued liabilities ................................ 347 76
------- ------
Net assets ..................................... $12,704 11,493
======= ======
See accompanying notes to consolidated financial statements.
<PAGE>
HENLEY HEALTHCARE
STATEMENTS OF REVENUES AND DIRECT EXPENSES
For the years ended October 30, 1994 and October 29, 1995 and
the six months ended April 30, 1995 and 1996
(in thousands)
Six months ended
April 30,
1995 1996
October 30, October 29, ---- ----
1994 1995 (unaudited)
-------- ------- ----------------
Net sales ............................ $ 19,527 18,680 10,035 8,339
Cost of sales ........................ 8,586 8,557 4,537 3,712
-------- ------- ------ ------
Gross profit ................ 10,941 10,123 5,498 4,627
Operating expenses:
Selling .......................... 6,736 5,626 3,044 2,361
Distribution ..................... 618 628 364 329
General and administrative ....... 2,080 2,344 1,076 1,266
Research and development ......... 834 851 456 352
-------- ------- ------ ------
Total divisional expenses ... 10,268 9,449 4,940 4,308
Income from operations ............... 673 674 558 319
Other income (expense), net .......... (42) (75) 11 (49)
-------- ------- ------ ------
Divisional income ........... $ 631 599 569 270
======== ======= ====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
HENLEY HEALTHCARE
STATEMENTS OF CASH FLOWS
For the years ended October 30, 1994 and October 29, 1995 and
the six months ended April 30, 1995 and 1996
(in thousands)
<TABLE>
<CAPTION>
Six months ended
April 30,
October 30, October 29, 1995 1996
1994 1995 (unaudited)
------- ------ --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Divisional income ........................................... $ 631 599 569 270
Adjustments to reconcile divisional
income to net cash provided by operating
activities:
Depreciation and amortization ......................... 520 552 272 217
Decrease (increase) in receivables .................... 660 167 (823) 461
Decrease (increase) in inventory ...................... 1,592 (1,203) (244) 808
(Increase) decrease in prepaids ....................... (8) 5 8 12
(Decrease) increase in accounts
payable ............................................ (98) (61) 555 1
Increase (decrease) in accrued
expenses ........................................... -- 274 342 (271)
------- ------ ---- ------
Total adjustments ............................. 2,666 (266) 110 1,228
------- ------ ---- ------
Net cash provided by operating activities ..... 3,297 333 679 1,498
------- ------ ---- ------
Cash flows from investing activities - purchases
of equipment, net .......................................... (24) (435) (217) (17)
------- ------ ---- ------
Cash flows from financing activities - (distributions to) funding
by owner .................................................... (3,271) 102 (462) (1,481)
------- ------ ---- ------
Net increase in cash and
2 -- -- --
Cash and cash equivalents at beginning of period ................ -- 2 2 2
------- ------ ---- ------
Cash and cash equivalents at end of period ...................... $ 2 2 2 2
======= ====== ==== ======
</TABLE>
HENLEY HEALTHCARE
NOTES TO FINANCIAL STATEMENTS
October 29, 1995, and April 30, 1996
(1) BASIS OF PRESENTATION
On April 30, 1996 (the closing date), Lasermedics, Inc. (Lasermedics)
entered into an Asset Purchase Agreement (Asset Purchase Agreement)
with Maxxim Medical, Inc. (Maxxim), under which Lasermedics acquired
certain assets and assumed certain liabilities of the Henley Healthcare
Division of Maxxim (Henley). The purchase price for assets acquired and
liabilities assumed was $13,000,000 subject to various post-closing
adjustments. The assets acquired pursuant to the Asset Purchase
Agreement consist primarily of accounts receivable, equipment,
manufacturing facilities in Sugarland, Texas and Belton, Texas, a
distribution facility in Akron, Ohio, and certain intangible and other
assets.
The accompanying statements of divisional assets and liabilities
reflects the assets acquired and liabilities assumed of Henley by
Lasermedics pursuant to the Asset Purchase Agreement. The statement of
divisional assets and liabilities reflects Maxxim's historical carrying
values of the transferred assets and liabilities, adjusted to exclude
certain assets and liabilities, which were not acquired or assumed as
described in the Asset Purchase Agreement.
The accompanying statements of operating revenues and direct expenses
before corporate overhead allocations reflect the operations related to
the division purchased as described in the Asset Purchase Agreement.
Direct costs and an allocation of certain indirect costs of Maxxim
related to the divisions not acquired have been excluded from the
statements of revenues and direct expenses of the division purchased
before corporate overhead allocations. Such allocations are based on
determinations that management believes are reasonable. Maxxim provides
certain services including finance services, legal and professional
services, human resource services, and management information
department services to the acquired operations. The statements of
revenues and direct expenses of product lines purchased before
corporate overhead allocations do not include these central office
general and administrative expenses, interest expense, or income taxes,
and therefore, may not be representative of future operations.
The unaudited interim divisional statement of net assets and statements
of revenues and direct expenses reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the
results of the interim periods presented.
CONCENTRATION OF CREDIT RISK
Credit receivables have a concentration of credit risk in the hospital
and healthcare sectors. Henley performs continuing credit evaluation of
its customers and generally does not require collateral; however, in
certain circumstances, Henley may require letters of credit from its
customers. Historically, Henley has not experienced significant losses
related to receivables from individual customers or groups of customers
in any geographic area.
(2) SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is priced at the lower of cost or market. In determining
market value, allowances for excess and obsolete items are provided.
Cost is determined using the average cost method.
Inventory as of October 29, 1995 and April 30, 1996, included the
following (in thousands):
October 29, April 30,
1995 1996
------ -----
(unaudited)
Raw materials .......................... $2,314 2,063
Work in progress ....................... 51 30
Finished goods and goods
purchased for resale .................. 4,367 3,831
------ -----
$6,732 5,924
====== =====
As of October 29, 1995 and April 30, 1996, approximately $2,354 and
$2,427 (unaudited), respectively, of Henley's inventory was on
consignment.
PROPERTY, PLANT AND EQUIPMENT
The costs of ordinary maintenance and repairs are expensed, while
renewals and betterments are capitalized.
Depreciation on property and equipment is computed for financial
reporting purposes using the straight-line method over the estimated
useful lives of the assets. As of October 29, 1995 and April 30, 1996
property and equipment included the following (in thousands):
Useful October 29, April 30,
Life 1995 1996
---- ---- ----
(unaudited)
Land $ 194 194
Buildings and improvements 5-15 years 1,436 1,436
Machinery and equipment 3-10 years 1,918 1,935
Furniture and fixtures 3-7 years 220 220
------- ------
3,768 3,785
Accumulated depreciation (1,897) (2,030)
------- ------
$ 1,871 1,755
======= ======
INCOME TAXES
The Henley division was included in Maxxim's consolidated income tax
return. Maxxim does not allocate federal income taxes (or tax benefits)
to members of the consolidated group for financial reporting purposes
on the basis of each division's contribution to the components of
consolidated taxable income.
GOODWILL AND INTANGIBLES
Goodwill represents the excess of the aggregate price paid by Henley in
a business combination accounted for as purchases over the fair value
of the tangible and identifiable intangible net assets acquired.
Goodwill is being amortized on a straight-line basis for 10 years.
Henley assesses the recoverability of this intangible asset by
determining whether amortization of the goodwill balance over its
remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill
impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting Henley's average
cost of funds. Intangibles consist of patents and other intangibles
which are amortized on a straight-line basis for 10 years.
REVENUE RECOGNITION
Henley recognizes revenue upon shipment to customers, pursuant to
customer orders. For most products sold for home use or directly to
patients, Henley also requires a letter of medical necessity from a
physician and insurance verification prior to revenue recognition.
USE OF ESTIMATES IN THE PREPARATION
OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF (FAS 121). FAS 121 is effective for fiscal year beginning
after December 15, 1995. Henley has not completed the analysis required
by FAS 121 and, as a result, the impact that the adoption of FAS 121 is
expected to have on Henley's financial statements is not known. Henley
expects to adopt FAS 121 prior to the first fiscal quarter of 1997.
(3) RELATED PARTY TRANSACTIONS
Maxxim provides certain services to the Henley division, the costs of
which are not allocated to the Henley division. Accordingly, the
financial statements do not include the costs of such services
including, among others, legal, tax, finance and administrative
services.
(4) COMMITMENTS AND CONTINGENCIES
LEASES
Henley is obligated under various operating leases. Rent expense under
these operating leases for fiscal years 1995 and 1994 was approximately
$43,500 and $43,500, respectively, and approximately $23,400
(unaudited) for the six months ended April 30, 1996. Minimum future
rental payments as of October 29, 1995 are as follows (in thousands):
FISCAL YEARS
------------
1996 $ 47
1997 47
1998 49
1999 50
2000 50
---
$ 243
LITIGATION
Henley was the defendant in a lawsuit that originated in 1989, that
alleged product patent infringement. This lawsuit was settled in April
1996 for approximately $270,000. The settlement liability was retained
by Maxxim and is not reflected in the statement of revenues and direct
expenses or statement of net assets.
In the ordinary course of business, Henley has been named in various
lawsuits. While the final resolution of any matter may have an impact
on Henley's consolidated financial results for a particular reporting
period, management believes, based on consultation with legal counsel,
that the ultimate resolution of these matters and the matters
specifically discussed above, will not have a material adverse impact
on Henley's financial position or results of operations.
Pro Forma Combined Financial Information
The following unaudited pro forma combined financial statements and explanatory
notes are presented to reflect the acquisition of certain assets and the
assumption of certain liabilities of Henley Healthcare Division ("Henley
Healthcare"), a division of Maxxim Medical, Inc.("Seller"), by Lasermedics, Inc.
(the "Company") on April 30, 1996 (the "Acquisition"). The purchase price,
estimated to be $13,498,522, including acquisition costs of approximately
$650,000, was paid by the issuance of the Company's convertible subordinated
promissory note in the principal amount of $7,000,000 with the balance of the
purchase price being paid in cash. The Company obtained the cash portion of the
purchase price pursuant to a loan agreement entered into with Comerica Bank -
Texas, a Texas banking corporation.
The pro forma combined balance sheets give effect to the Acquisition and to (1)
the issuance of the Company's convertible subordinated promissory note in the
principal amount of $7,000,000 and (2) the receipt of net proceeds from bank
borrowings obtained to pay the remaining purchase price of the acquisition, as
if these transactions had occurred at the end of the periods presented. The pro
forma statements of operations give effect to these transactions as if they had
occurred at the beginning of the periods presented.
The pro forma combined balance sheets combine (1) the balance sheet of the
Company as of December 31, 1995 with the balance sheet of Henley Healthcare as
of January 31, 1996 and (2) the balance sheet of the Company as of March 31,
1996 with the balance sheet of Henley Healthcare as of April 30, 1996. The pro
forma combined statements of operations combine (1) the statement of operations
for the Company for the three months ended March 31, 1996 with the statement of
operations of Henley Healthcare for the three months ended April 30, 1996 and
(2) the statement of operations of the Company for the fiscal year ended
December 31, 1995 with the statement of operations for Henley Healthcare for the
fiscal year ended January 31, 1996.
The pro forma information should be read in conjunction with (1) the notes
thereto, (2) the historical financial statements for the Company, including the
related notes thereto, included in the Company's Form 10-KSB for the fiscal year
ended December 31, 1995 and included in the Company's Form 10-QSB for the three
month period ended March 31, 1996, and (3) the historical financial statements
for Henley Healthcare for the year ended October 31, 1995 and the sixth month
period ended April 30, 1996 included in the Company's Form 8-K/A.
The unaudited pro forma information may not be indicative of the combined
results of operations or combined financial position that actually would have
been achieved had the Acquisition been consummated as of the dates and for the
periods indicated or which may be obtained in the future.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995 FOR LASERMEDICS, INC. AND
AS OF JANUARY 31, 1996 FOR HENLEY HEALTHCARE
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------- UNAUDITED
HENLEY PRO FORMA
LASERMEDICS, INC. HEALTHCARE ADJUSTMENTS COMBINED
----------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $203,364 $ 1,600 $ (13,981) (h) $ 190,983
Accounts Receivable, net 32,669 3,528,282 3,560,951
Inventory, net 114,732 6,611,587 6,726,319
Due from Seller 154,021 (g)(h) 154,021
Prepaid Expenses 25,375 25,375
Other Current Assets 100,000 100,000
--------------------------------------------------------------------------------
Total Current Assets 450,765 10,166,844 140,040 10,757,649
Property and Equipment, net 51,074 1,795,553 1,629,538 (h) 3,476,165
Goodwill and Other Intangibles, net 482 1,019,928 (747,954) (f) 272,456
Goodwill Arising from Acquisition 276,262 (h) 276,262
License Agreement 101,850 101,850
--------------------------------------------------------------------------------
Total Assets $604,171 $12,982,325 $ 1,297,886 $14,884,382
================================================================================
Current Liabilities:
Accounts Payable $439,641 $ 288,282 $ 333,425 (h) $ 1,061,348
Accrued Liabilities 184,664 353,367 538,031
Line of Credit - Bank 3,797,725 (h) 3,797,725
--------------------------------------------------------------------------------
Total Current Liabilities 624,305 641,649 4,131,150 5,397,104
Note Payable - Seller 7,000,000 (h) 7,000,000
Notes Payable - Bank 2,507,412 (h) 2,507,412
Notes Payable 335,833 335,833
--------------------------------------------------------------------------------
Total Liabilities 960,138 641,649 13,638,562 15,240,349
Net Assets 12,340,676 (12,340,676) (h) -
Stockholders' Deficiency (128,167) (128,167)
Treasury stock, at cost (227,800) (227,800)
--------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Deficiency/
Net Assets $604,171 $12,982,325 $ 1,297,886 $14,884,382
================================================================================
</TABLE>
See Notes to Pro Forma Combined Financial Statements
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995 FOR LASERMEDICS, INC.
AND FOR THE YEAR ENDED JANUARY 31, 1996 FOR HENLEY HEALTHCARE
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
UNAUDITED
HENLEY PRO FORMA
LASERMEDICS, INC. HEALTHCARE ADJUSTMENTS COMBINED
----------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Net Revenue $ 527,176 $18,413,653 $18,940,829
-----------------------------------------------------------------------
Costs and expenses:
Cost of revenue 344,076 8,263,199 8,607,275
Selling, general and
administrative expenses 1,518,922 9,788,601 $ 18,417 (c) 11,179,234
(171,697)(d)
24,991 (e)
Interest Expense 83,779 518,000 (a) 1,153,478
551,699 (b)
-----------------------------------------------------------------------
Total costs and expenses 1,946,777 18,051,800 941,410 20,939,987
-----------------------------------------------------------------------
Net income (loss) $(1,419,601) $ 361,853 $(941,410) $(1,999,158)
=======================================================================
Net income (loss) per common share $ (1.38)
================
Weighted average number of common
shares outstanding 1,443,578
================
</TABLE>
See Notes to Pro Forma Combined Financial Statements
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
As of December 31, 1995 and for the year then ended for Lasermedics, Inc. and As
of January 31, 1996 and for the year then ended for Henley Healthcare
The unaudited pro forma combined statement of operations reflects the following
pro forma adjustments:
(a) Reflects the interest expense on the $7,000,000 promissory
note payable to Seller at an effective interest rate of 7.4%.
(b) Reflects the interest expense on borrowings under a credit
facility including $3,797,725 under a revolving credit line ,
and term loans of $1,616,000 and $891,412 at the rate of 8.75%
per annum.
(c) Reflects the amortization of $18,417 on the goodwill resulting
from the Acquisition.
(d) Reflects the elimination of amortization of goodwill recorded
on the Statement of Revenues and Direct Expenses of Henley
Healthcare.
(e) Reflects additional depreciation expense of $24,991 on
property and equipment acquired from the Seller.
The unaudited pro forma combined balance sheet reflects the following pro forma
adjustments:
(f) Reflects adjustment to write off goodwill recorded on the
Henley Healthcare Divisional Statement of Net Assets.
(g) Reflects a post closing adjustment to the purchase price in
connection with the Acquisition.
(h) Reflects the Acquisition at a cost estimated to be $13,498,522
(including acquisition costs of approximately $650,000) of
which $13,981 was paid in cash. The remaining portion of the
purchase price was paid by the issuance of a promissory note
to the Seller in the amount of $7,000,000 and borrowings under
a credit facility including a revolving credit line of
$3,797,725 and term loans of $1,616,000 and $891,412. The
estimated fair market value of property and equipment is
assumed to be $3,425,091. The estimated fair value of the note
payable-Seller amounted to $7,000,000 pursuant to an appraisal
by an investment banker.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996 FOR LASERMEDICS, INC. AND
AS OF APRIL 30, 1996 FOR HENLEY HEALTHCARE
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------- UNAUDITED
HENLEY PRO FORMA
RMEDICS, INC. HEALTHCARE ADJUSTMENTS COMBINED
------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,909 $ 1,909
Accounts Receivable, net $ 23,565 3,321,542 3,345,107
Inventory, net 44,376 5,924,078 5,968,454
Due from Seller $ 154,021 g)(h) 154,021
Prepaid Expenses 22,021 22,021
Other Current Assets 100,000 100,000
Restricted Cash 296,792 296,792
--------------------------------------------------------------------------
Total Current Assets 464,733 9,269,550 154,021 9,888,304
Property and Equipment, net 49,615 1,755,149 1,669,942 (h) 3,474,706
Goodwill and Other Intangibles, net 920,378 (719,744) (f) 200,634
Goodwill Arising from Acquisition 1,055,324 (h) 1,055,324
License Agreement 101,850 101,850
--------------------------------------------------------------------------
Total Assets $ 616,198 $11,945,077 $ 2,159,543 $14,720,818
==========================================================================
Current Liabilities:
Bank Overdraft $ 13,981 (h) $ 13,981
Accounts Payable $ 498,214 $ 376,230 332,947 (h) 1,207,391
Accrued Liabilities 201,373 76,325 277,698
Line of Credit - Bank 3,797,725 (h) 3,797,725
--------------------------------------------------------------------------
Total Current Liabilities 699,587 452,555 4,144,653 5,296,795
Refundable Subscriptions 356,405 356,405
Note Payable - Seller 7,000,000 (h) 7,000,000
Notes Payable - Bank 2,507,412 (h) 2,507,412
Notes Payable 352,082 352,082
--------------------------------------------------------------------------
Total Liabilities 1,408,074 452,555 13,652,065 15,512,694
Net Assets 11,492,522 (11,492,522) (h) -
Stockholders' Deficiency (791,876) (791,876)
Treasury stock, at cost -
--------------------------------------------------------------------------
Total Liabilities and
Stockholders' Deficiency/
Net Assets $ 616,198 $11,945,077 $ 2,159,543 $14,720,818
==========================================================================
</TABLE>
See Notes to Pro Forma Combined Financial Statements
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 FOR LASERMEDICS, INC.
AND FOR THE THREE MONTHS ENDED APRIL 30, 1996 FOR HENLEY HEALTHCARE
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------
UNAUDITED
HENLEY PRO FORMA
LASERMEDICS, INC. HEALTHCARE ADJUSTMENTS COMBINED
----------------- ----------- ---------- ----------
<S> <C> <C> <C>
Net Revenue $ 147,747 $3,974,373 $4,122,120
---------------------------------------------------------------------------
Costs and expenses:
Cost of revenue 97,795 1,883,875 1,981,670
Selling, general and
administrative expenses 493,861 2,231,748 $ 17,589 (c) 2,706,522
(42,924) (d)
6,248 (e)
Interest Expense 129,500 (a) 267,425
137,925 (b)
---------------------------------------------------------------------------
Total costs and expenses 591,656 4,115,623 248,338 4,955,617
---------------------------------------------------------------------------
Net loss $(443,909) $ (141,250) $(248,338) $ (833,497)
===========================================================================
Net loss per common share $ (0.56)
================
Weighted average number of common
shares outstanding 1,481,324
================
</TABLE>
See Notes to Pro Forma Combined Financial Statements
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
As of March 31, 1996 and for the three months then ended for Lasermedics, Inc.
and As of April 30, 1996 and for the three months then ended for Henley
Healthcare
The unaudited pro forma combined statement of operations reflects the following
pro forma adjustments:
(a) Reflects the interest expense on the $7,000,000 promissory note
payable to Seller at an effective interest rate of 7.4%.
(b) Reflects the interest expense on borrowings under a credit facility
including $3,797,725 under a revolving credit line , and term loans of
$1,616,000 and $891,412 at the rate of 8.75% per annum.
(c) Reflects the amortization of $17,589 on the goodwill resulting from
the Acquisition.
(d) Reflects the elimination of amortization of goodwill recorded on the
Statement of Revenues and Direct Expenses of Henley Healthcare.
(e) Reflects additional depreciation expense of $6,248 on property and
equipment acquired from the Seller.
The unaudited pro forma combined balance sheet reflects the following pro forma
adjustments:
(f) Reflects adjustment to write off goodwill recorded on the Henley
Healthcare Divisional Statement of Net Assets.
(g) Reflects a post closing adjustment to the purchase price in connection
with the Acquisition.
(h) Reflects the Acquisition at a cost estimated to be $13,498,522
(including acquisition costs of approximately $650,000) of which
$13,981 was paid in cash. The remaining portion of the purchase price
was paid by the issuance of a promissory note to the Seller in the
amount of $7,000,000 and borrowings under a credit facility including
a revolving credit line of $3,797,725 and term loans of $1,616,000 and
$891,412. The estimated fair market value of property and equipment is
assumed to be $3,425,091. The estimated fair value of the note
payable-Seller amounted to $7,000,000 pursuant to an appraisal by an
investment banker.
EXHIBIT 1.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets (this "AGREEMENT") is
entered into and effective this the 30th day of April, 1996 by and between
LASERMEDICS, INC., a Texas corporation (the "BUYER"), and MAXXIM MEDICAL, INC.,
a Delaware corporation (the "SELLER"). Buyer and Seller may be hereinafter
sometimes referred to collectively as the "PARTIES" or singularly as a "PARTY."
W I T N E S S E T H :
WHEREAS, the Seller is the owner of the Business (as hereinafter
defined) and certain assets associated with the Business;
WHEREAS, the Buyer desires to purchase the Business as a going
concern and along therewith all or substantially all of the assets owned by the
Seller and used principally in the Business and the Seller desires to sell the
Business and all of such assets to the Buyer;
WHEREAS, in connection with such purchase and sale, the Parties
desire to provide for certain terms and conditions with respect to the transfer
of such assets and the assumption of certain liabilities associated with the
Business;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
1.1 ACCOUNTS PAYABLE. The term "Accounts Payable" shall have the
same meaning as contained in Section 2.7(iii) of this Agreement.
1.2 ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall have
the same meaning as contained in Section 2.1(f) of this Agreement.
1.3 AFFILIATE. The term "Affiliate" of a person shall mean, with
respect to that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of management and policies of a person whether
through the ownership of voting securities, by contract, through the holding of
a position as a director or officer of such person, or otherwise. As used in
this Section, the term "person" means an individual, a
-1-
corporation, a partnership, an association, a joint stock company, a trust, an
incorporated organization, or a government or political subdivision thereof.
1.4 ASSETS. The term "Assets" shall have the same meaning as
contained in Section 2.1 of this Agreement
1.5 BALANCE SHEET DATE. The term "Balance Sheet Date" shall mean
March 31, 1996.
1.6 BELTON REAL PROPERTY. The term "Belton Real Property" shall have
the same meaning as contained in Section 2.1(e) of this Agreement.
1.7 BILL OF SALE. The term "Bill of Sale" shall have the same
meaning as contained in Section 5.2 of this Agreement.
1.8 BUSINESS. The term "Business" shall mean the current business of
Seller conducted through its Henley Healthcare Division consisting of the
manufacture, sale and lease of physical therapy, exercise and other medical
equipment and related products throughout the world.
1.9 BUSINESS LICENSES. The term "Business Licenses" shall have the
same meaning as contained in Section 2.1(d) of this Agreement.
1.10 CASH PURCHASE PRICE. The term "Cash Purchase Price" shall have
the same meaning as contained in Section 2.10 of this Agreement.
1.11 CLOSING. The term "Closing" shall mean the consummation of the
events and transactions to take place on the Effective Date pursuant to Article
V herein.
1.12 COMMON STOCK. The term "Common Stock" shall mean the common
stock of Buyer, par value $.01 per share.
1.13 COMPETING BUSINESS. The term "Competing Business" shall have
the same meaning as contained in Section 5.13(b) of this Agreement.
1.14 CONTRACTS. The term "Contracts" shall have the same meaning as
contained in Section 2.1(c) of this Agreement.
1.15 CONVERTIBLE NOTE. The term "Convertible Note" shall mean that
certain promissory note of even date herewith in the original principal amount
of $7,000,000 made by Buyer payable to the order of Seller and delivered by the
Buyer to the Seller at the Closing.
1.16 CUSTOMERS. The term "Customers" shall have the same meaning as
contained in Section 3.22 of this Agreement.
-2-
1.17 EFFECTIVE DATE. The term "Effective Date" shall mean 11:59
p.m., April 30, 1996.
1.18 ENVIRONMENTAL LAWS. The term "Environmental Laws" shall have
the meaning contained in Section 3.27(g) of this Agreement.
1.19 EMPLOYEE. The term "Employee" shall mean all of those persons
listed on SCHEDULE 1.19 attached hereto and incorporated herein by reference who
shall consist of employees of the Seller who as of the Effective Date are
employed or otherwise perform a substantial amount of his or her work or provide
a substantial amount of services in connection with the operation of the
Business, including those, if any, on disability, sick leave, layoff or leave of
absence, who, in accordance with the Seller's applicable policies, are eligible
to return to active status.
1.20 ESTIMATED BALANCE SHEET. The term "Estimated Balance Sheet"
shall have the same meaning contained in Section 2.10(a) of this Agreement.
1.21 ESTIMATED NET ASSET VALUATION. The term "Estimated Net Asset
Valuation" shall have the same meaning contained in Section 2.10(a) of this
Agreement.
1.22 EXCLUDED ASSETS. The term "Excluded Assets" shall have the
meaning contained in Section 2.2 of this Agreement.
1.23 FINAL BALANCE SHEET. The term "Final Balance Sheet" shall have
the meaning contained in Section 2.11(a) of this Agreement.
1.24 FINAL NET ASSET VALUATION. The term "Final Net Asset Valuation"
shall have the meaning contained in Section 2.11(a) of this Agreement.
1.25 FIXTURES AND IMPROVEMENTS. The term "Fixtures and Improvements"
shall have the meaning contained in Section 2.1(g) of this Agreement.
1.26 GAAP. The term "GAAP" means generally accepted accounting
principles consistently applied.
1.27 GENERAL INTANGIBLES. The term "General Intangibles" shall have
the same meaning as contained in Section 2.1(b) of this Agreement.
1.28 HAZARDOUS MATERIALS. The term "Hazardous Materials" shall have
the same meaning as contained in Section 3.27(g) of this Agreement.
1.29 INVENTORIES. The term "Inventories" shall have the same meaning
as contained in Section 2.1(k) of this Agreement.
-3-
1.30 LIENS. The term "Liens" shall mean all restrictions or
conditions to transfer or assignment, mortgages, deeds of trust, liens, security
interests, pledges, claims, rights of first refusal, options, charges,
liabilities, obligations, privileges, equities, easements, rights-of-way,
limitations, reservations, restrictions and other encumbrances of any kind or
nature.
1.31 NON-COMPETE TERM. The term "Non-Compete Term" shall have the
same meaning as contained in Section 5.13(b) of this Agreement.
1.32 PERMITTED ENCUMBRANCES. The term "Permitted Encumbrances" shall
mean either (a) the Liens described or referred to in SCHEDULE 1.32 attached
hereto and incorporated herein by reference; (b) Liens for current taxes and
assessments not yet due and payable, including, but not limited to, Liens for
nondelinquent ad valorem taxes, or nondelinquent statutory liens arising other
than by reason of any default on the part of Seller; or (c) all recorded leases,
restrictions, licenses, rights-of-way, easements and restrictive covenants.
1.33 POST-SALE TAX OBLIGATIONS. The term "Post-Sale Tax Obligations"
shall have the same meaning as contained in Section 2.7(vii).
1.34 PRE-SALE TAX OBLIGATIONS. The term "Pre-Sale Tax Obligations"
shall have the same meaning as contained in Section 2.8(iii).
1.35 PROHIBITED CUSTOMERS. The term "Prohibited Customers" shall
have the same meaning as contained in Section 5.13(a) of this Agreement.
1.36 PURCHASE PRICE. The term "Purchase Price" shall mean the
consideration payable to the Seller for the Assets as further defined in Section
2.3.
1.37 PURCHASE PRICE ADJUSTMENT. The term "Purchase Price Adjustment"
shall have the same meaning as contained in Section 2.11(c) of this Agreement.
1.38 REAL PROPERTY. The term "Real Property" shall mean the Belton
Real Property and the Sugar Land Real Property, collectively.
1.39 REALTY RIGHTS. The term "Realty Rights" shall have the same
meaning as contained in Section 2.1(h) of this Agreement.
1.40 REGISTRATION AGREEMENT. The term "Registration Agreement" shall
have the same meaning as contained in Section 5.2(i) of this Agreement.
1.41 SAP. The term "SAP" shall have the meaning provided in Section
2.10(a) of this Agreement.
1.42 SECURITY AGREEMENT. The term "Security Agreement" shall have
the same meaning as contained in Section 5.2(k) of this Agreement.
-4-
1.43 SENIOR LENDER. The term "Senior Lender" shall mean Comerica
Bank- Texas.
1.44 SUBSTITUTE NOTE. The term "Substitute Note" shall have the same
meaning as contained in Section 2.11(c) of this Agreement.
1.45 SUGAR LAND REAL PROPERTY. The term "Sugar Land Real Property"
shall have the same meaning as contained in Section 2.1(e) of this Agreement.
1.46 TANGIBLE PERSONAL PROPERTY. The term "Tangible Personal
Property" shall have the same meaning as contained in Section 2.1(a) of this
Agreement.
1.47 TAXES. The term "Taxes" shall have the meaning contained in
Section 2.7 of this Agreement.
1.48 TAX OBLIGATIONS. The term "Tax Obligations" shall have the
meaning contained in Section 2.7 of this Agreement.
1.49 TITLE COMPANY. The term "Title Company" shall mean Partners
Title Company of Houston, Texas.
1.50 TRANSITION AGREEMENT. The term "Transition Agreement" shall
have the same meaning as contained in Section 5.2(j) of this Agreement.
1.51 VOTING AGREEMENT. The term "Voting Agreement" shall have the
meaning contained in Section 5.2(b) of this Agreement.
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
2.1 SALE OF ASSETS. Subject to the terms and conditions set forth in
this Agreement, the Seller agrees to sell, convey, transfer, assign and deliver
to the Buyer, and the Buyer agrees to purchase from the Seller on the Effective
Date all of the following assets (such assets to be referred to herein as the
"ASSETS"):
(a) all tangible personal property (such as office equipment,
computer equipment and associated hardware and software, machinery and
equipment, rental equipment, parts and supplies, furniture, automobiles,
trucks, and forklifts) used principally in the Business and owned or
leased by the Seller, including, but not limited to, that which is more
fully described on SCHEDULE 2.1(A) attached hereto and incorporated herein
by reference, but excluding Inventories (as defined in Section 2.1(k)
herein) (collectively, the "TANGIBLE PERSONAL PROPERTY");
-5-
(b) Seller's general intangibles, claims, rights of set off, rights
of recoupment, goodwill, patents, copyrights, service marks, trademarks,
trade and assumed names, including the name "Henley Healthcare,"
inventions, trade secrets, covenants by others not to compete and royalty
rights and other proprietary intangibles, licenses and sublicenses granted
and obtained with respect thereto (and with respect to the operation of
the Tangible Personal Property), and rights thereunder, which are
principally used in the Business, and remedies against infringements
thereof, and rights to protection of interests therein under the laws of
all jurisdictions, including, but not limited to, that which is more fully
described on SCHEDULE 2.1(B) attached hereto and incorporated herein by
reference (collectively, the "GENERAL INTANGIBLES");
(c) to the extent transferable, all leases, subleases, contracts,
contract rights, and agreements relating principally to the operation of
the Business, including, but not limited to, that which is more fully
described on SCHEDULE 2.1(C) attached hereto and incorporated herein by
reference (collectively, the "CONTRACTS");
(d) to the extent transferable, Seller's franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies
relating principally to all or any of the Assets or to the operation of
the Business, including, but not limited to, that which is more fully
described on SCHEDULE 2.1(D) attached hereto and incorporated herein by
reference (collectively, the "BUSINESS LICENSES");
(e) that certain real property located in Belton, Texas as more
fully described on SCHEDULE 2.1(E)-1 attached hereto and incorporated
herein by reference (the "BELTON REAL PROPERTY") and that certain real
property located in Sugar Land, Texas (the "SUGAR LAND REAL PROPERTY") as
more fully described on SCHEDULE 2.1(E)-2 attached hereto and incorporated
herein by reference;
(f) all accounts receivable relating principally to the Business and
all other rights of Seller to payment for goods sold or leased or for
services rendered, including, without limitation, those which are not
evidenced by instruments or chattel paper, whether or not they have been
earned by performance or have been written off or reserved against as a
bad debt or doubtful account in the Estimated Balance Sheet (or will be so
written off or reserved against in the Final Balance Sheet); together with
all instruments and all documents of title representing any of the
foregoing, all rights in any merchandise or goods which any of the same
represent, and all rights, title, security and guaranties in favor of
Seller with respect to any
-6-
of the foregoing, including, without limitation, any right of stoppage in
transit (collectively, the "ACCOUNTS RECEIVABLE");
(g) all estates, rights, titles and interest in and to all plants,
factories, warehouses, storage facilities, laboratories, buildings, works,
structures, fixtures, landings, construction in progress, improvements,
betterments, installations and additions constructed, erected or located
on or attached or affixed to the Real Property (collectively, the
"FIXTURES AND IMPROVEMENTS").
(h) all estates, rights, titles and interest in and to all
tenements, hereditaments, easements, rights-of-way, rights, licenses,
patents, rights of ingress and egress, reversionary interests, privileges
and appurtenances belonging, pertaining or relating to the Real Property;
any and all rights to the present or future use of wastewater, wastewater
capacity, drainage, water or other utility facilities relating to the Real
Property, including, without limitation, all reservations of or
commitments or letters covering any such use in the future whether now
owned or hereafter acquired, and the entire right, title and interest of
Seller, if any, in, to and under all streets, ways, alleys, passages,
strips, gores, pipes, pipelines, sewers, sewer rights, ditches, waters,
water courses, water rights and powers, air rights, railroad sidings,
minerals, mineral rights and mineral interests adjoining, upon, above, in,
under or pertaining to the Real Property; all options and rights to
purchase or otherwise acquire real property that is adjacent to or nearby
the Real Property, and all claims or demands whatsoever of Seller, either
in law or in equity, with respect to the Real Property, including, without
limitation, any unpaid awards to be made relating thereto, including any
unpaid awards or damages payable by reason of damage thereto or by reason
of a widening of any adjoining streets or roads or a changing of the grade
with respect to same (collectively, the "REALTY RIGHTS").
(i) Seller's customer and supplier lists, advertising and
promotional materials, and copies of Seller's books, records, ledgers,
files, documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, studies, reports, and
any and all other printed or written materials all of which are related
principally to the Business or the Assets or which are required or
necessary in order for Buyer to conduct the Business in the manner in
which it was conducted by Seller prior to the Effective Date;
(j) the goodwill and going concern value of the Business;
-7-
(k) all of Seller's inventories located either at the Real Property
or elsewhere insofar as such inventories relate principally to the
Business, including, without limitation, finished goods, work-in-progress,
raw materials, supply inventories, and other inventories (collectively the
"INVENTORIES");
(l) all of Seller's backlog of orders for products manufactured or
sold by Seller relating principally to the Business, which were accepted
by Seller in the ordinary course of business prior to the Effective Date
and not invoiced or shipped (or canceled) prior to the Effective Date
(collectively, the "BACKLOG ORDERS");
(m) all right, title and interest of Seller in and to all prepaid
rentals, other prepaid expenses, bonds, deposits and financial assurance
requirements, and other current assets relating principally to any of the
Assets or the Business;
(n) all petty cash of Seller kept on hand at the Real Property for
use principally in the Business; and
(o) all other or additional privileges, rights, interests,
properties and assets of Seller of every kind and description and wherever
located that are used principally in the Business or intended for use
principally in the Business in connection with, or that are materially
necessary to the continued conduct of, the Business as conducted by Seller
prior to the Effective Date.
2.2 EXCLUDED ASSETS. The Assets shall not include any of the assets
of Seller related to the Business as of the Effective Date, set forth on
SCHEDULE 2.2 attached hereto and incorporated herein by reference (the "EXCLUDED
ASSETS").
2.3 PURCHASE PRICE. In consideration for the purchase of the Assets
and Seller's performance of certain other agreements as provided herein, Buyer
shall, at the Closing, (i) execute and deliver the Convertible Note, and (ii)
pay to Seller the Cash Purchase Price in readily available funds. The
Convertible Note and the Cash Purchase Price are referred to collectively herein
as the "PURCHASE PRICE."
2.4 ALLOCATION OF PURCHASE PRICE. Following determination of the
Final Net Asset Valuation pursuant to Section 2.11 herein, the Parties shall
endeavor to agree on an allocation of the Purchase Price, as adjusted, and shall
report this transaction for federal income tax purposes in accordance with the
allocation so agreed upon. The Parties for themselves and for their respective
successors and assigns covenant and agree that they will file coordinating Form
8594's in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, with their respective income tax returns for the taxable year that
includes the Effective Date.
-8-
2.5 TAXES. Buyer shall be liable for the payment of all sales and
use taxes arising out of the sale, transfer or removal of the Assets. The Buyer
shall not be responsible for any business, occupation, withholding or similar
tax, or any taxes of any kind of the Seller, related to any period before the
Effective Date.
2.6 TITLE TO ASSETS AND RISK OF LOSS. Title to the Assets and risk
of loss or damage to the Assets by casualty (whether or not covered by
insurance) will pass to the Buyer immediately upon the Effective Date.
2.7 ASSUMED LIABILITIES. Upon the terms and subject to the
conditions contained herein, at the Closing effective as of the Effective Date,
Buyer shall assume all of the liabilities and obligations of Seller pertaining
to the Business other than the Retained Liabilities as hereinafter defined
including but not limited to the following (the "ASSUMED LIABILITIES"):
(i) the rights and obligations of Seller to perform the Contracts
to the extent the Contracts have not been performed and are not in default
at the Effective Date;
(ii) the liabilities and obligations of Seller in performing
standard warranty repairs or replacement of products sold by Seller in
connection with the Business;
(iii) all of the accounts payable and trade payables of the Business
(the "ACCOUNTS PAYABLE") at the Effective Date;
(iv) ad valorem or similar Taxes to be prorated in accordance
with Section 2.9 of this Agreement;
(v) any claims by any Employee relating to or arising out of (y)
their employment (including without limitation any modification or
termination thereof) by Buyer, or (z) any pension or other benefit
liabilities of Buyer incurred after the Effective Date;
(vi) those liabilities and obligations specified in Section 5.6
herein;
(vii) any Federal, state, local or foreign income, sales, real or
personal property or other taxes, assessments, fees, levies, imposts,
duties, deduction, penalties or other charges of any nature whatsoever
(including without limitation interest and penalties) imposed by any law,
rule or regulation (collectively, "TAXES") which are attributable or
relating to the Assets or the Business for any periods , commencing on and
after the Effective Date (collectively, the "POST-SALE TAX OBLIGATIONS");
and
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(viii)any other liabilities or obligations of the Business including
those specifically assumed pursuant to the terms of this Agreement;
2.8 RETAINED LIABILITIES. Buyer shall not assume or agree to pay,
perform or discharge any of the following liabilities or obligations of Seller
pertaining to the Business (collectively, the "RETAINED LIABILITIES"):
(i) those liabilities and obligations specified in Section 5.6
herein;
(ii) all liabilities and obligations arising in connection with the
defective performance of any Contract by Seller;
(iii) any Federal, state, local or foreign Taxes which are
attributable or relating to the Assets or the Business for any periods
ending immediately prior to the Effective Date (collectively, the
"Pre-Sale Tax Obligations");
(iv) any claims by or against any of Seller's directors, officers,
employees or stockholders relating to (i) this Agreement or its
performance or consummation, (ii) Seller's conduct of the Business prior
to the Effective Date, (iii) their employment (including without
limitation any modification or termination thereof) by Seller, (iv) any
employment contract with Seller or (v) any pension or other benefit
liabilities of Seller;
(v) ad valorem or similar Taxes to be prorated in accordance
with Section 2.9 of this Agreement;
(vi) any dividend or other distribution declared or otherwise
payable by Seller;
(vii) any note, account payable or other obligation to any Affiliate
of Seller, or
(vii) any litigation described on SCHEDULE 3.8 attached hereto and
incorporated herein by reference.
2.9 AD VALOREM TAXES. Seller and Buyer shall each pay its respective
pro rata portion of all 1996 ad valorem or similar Taxes under the Real
Property. Seller shall pay to Buyer at the Closing estimated ad valorem or
similar Taxes for the current year (based on the prior year's Taxes) prorated to
the date of the Closing; Seller shall make available to Buyer copies of all
statements and assessments reflecting such prior year's Taxes. Buyer shall pay
such sums to the appropriate taxing authorities when due, prior to becoming
delinquent. Buyer shall promptly forward to Seller after receipt by Buyer copies
of all 1996 Tax assessments under any
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such property. If the 1996 Taxes shall be readjusted such that the amounts
payable are greater than the prior year's Taxes, Seller shall pay its pro rata
share of any difference promptly upon notice of such Taxes having been paid by
Buyer. If such 1996 Taxes shall be readjusted such that the amounts payable are
less than the prior year's Taxes, Buyer shall refund to Seller its pro rata
share of such reduction promptly upon payment of such Taxes by Buyer. Except as
provided in Sections 2.5, 2.7(iv) and 2.7(vii) of this Agreement, Buyer shall
have no other liability for Taxes payable by Seller (including income Taxes)
relating to the Business or the transactions contemplated hereunder. Except as
provided in Section 2.5, 2.8(iii) and 2.8(v), Seller shall have no other
liability for Taxes payable by Buyer (including income Taxes) relating to the
Business or the transactions contemplated hereunder.
2.10 DETERMINATION OF CASH PURCHASE PRICE AT THE CLOSING.
(a) ESTIMATED BALANCE SHEET; ESTIMATED NET ASSET VALUATION. The term
"ESTIMATED BALANCE SHEET" shall mean the schedule attached hereto as
SCHEDULE 2.10 and incorporated herein by reference of the Assets and the
Assumed Liabilities prepared by Seller as of the Balance Sheet Date,
certified by Seller as having been prepared in accordance with its
standard historical accounting principles consistently applied ("SAP"),
and delivered to and accepted by Buyer on or before the Effective Date.
Seller represents and warrants that the Estimated Balance Sheet has been
prepared with no mark-ups to fair market or replacement value of property,
plant and equipment; Real Property and Tangible Personal Property has been
valued at historical cost and depreciated on a basis consistent with prior
years; Inventory has been valued in accordance with SAP; and Accounts
Receivable and Assumed Liabilities (which are specific to the Henley
Healthcare Division) have been valued at their book value. The term
"ESTIMATED NET ASSET VALUATION" shall mean the dollar value of the Assets
purchased by Buyer net of the Assumed Liabilities as contained on the
Estimated Balance Sheet prepared in accordance with SAP.
(B) DETERMINATION OF CASH PURCHASE PRICE. For purposes of this
Agreement, the "CASH PURCHASE PRICE" shall mean $6,002,543, which
represents the Estimated Net Asset Valuation as described on SCHEDULE
2.10, less $6,000,000, and which amount shall be subject to post-closing
adjustment in accordance with Section 2.11 of this Agreement.
2.11 ADJUSTMENT OF CASH PURCHASE PRICE AFTER THE CLOSING.
(A) FINAL BALANCE SHEET. The term "FINAL BALANCE SHEET" shall mean
the Estimated Balance Sheet revised in accordance with SAP and the
standards set forth in Section 2.10(a) only to reflect the carrying value
of the Accounts Receivable, Accounts Payable and Inventory as of the
Effective Date, which shall be delivered by Seller to Buyer on or before
the fifteenth (15th) day after the Effective Date. The term "FINAL NET
ASSET VALUATION" shall mean the dollar value of the Assets purchased by
Buyer net of the Assumed Liabilities as contained on the Final Balance
Sheet prepared in accordance with SAP.
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(B) DETERMINATION OF FINAL NET ASSET VALUATION. The Final Balance
Sheet shall be prepared by Seller in accordance with Section 2.11(a) and
delivered to Buyer within fifteen (15) days after the Effective Date.
Buyer shall review the Final Balance Sheet and report to Seller in writing
within fifteen (15) days of receipt thereof of any objection; provided,
however, Seller may only object to Buyer's valuation of the Accounts
Receivable, Accounts Payable and Inventory. If Buyer and Seller cannot
resolve Buyer's objection, if any, as to the Accounts Receivable, Accounts
Payable and Inventory within thirty (30) days thereafter, either Buyer and
Seller may, within six (6) months thereafter, mutually select and retain
Ernst & Young, or in the event of a conflict, any other independent public
accounting firm which has no prior conflicts to review such accounts as
reflected on the Final Balance Sheet. If the Buyer and Seller cannot agree
on an independent public accounting firm, then each may pick a firm and
the two firms shall pick an independent public accounting firm which has
no prior conflicts to exclusively conduct such review. Such firm's
conclusion as to the carrying values of the Accounts Receivable, Accounts
Payable and Inventory reflected on the Final Balance Sheet for purposes of
determining the Final Net Asset Valuation shall be conclusive. Seller and
Buyer shall share equally in the expenses of retaining such accounting
firm. Buyer shall pay the expenses of its accountants for their review, if
any, of the Final Balance Sheet, and Seller shall pay the expenses of
Seller's accountants, if any, for their review of the Final Balance Sheet.
In determining the Final Net Asset Valuation, the Parties shall not take
into account the actual collections of Accounts Receivable that occur
after the Effective Date and may subsequently occur prior to such final
determination.
(C) ADJUSTMENT OF PURCHASE PRICE. Immediately upon the final
determination of the Final Balance Sheet pursuant to this Section 2.11,
the Purchase Price shall be adjusted as follows (the "PURCHASE PRICE
ADJUSTMENT"): (i) to the extent the Final Net Asset Valuation exceeds the
Estimated Net Asset Valuation, the Purchase Price shall be increased by
such excess, and (ii) to the extent the Estimated Net Asset Valuation
exceeds the Final Net Asset Valuation, the Purchase Price shall be
decreased by such excess. If the Purchase Price is increased as a result
of the Purchase Price Adjustment, then, within ten (10) days after the
determination of the Purchase Price Adjustment: (w) to the extent of
$500,000, Buyer shall deliver to Seller the Purchase Price Adjustment in
readily available funds, and (x) to the extent the Purchase Price
Adjustment exceeds $500,000, the principal amount of the Convertible Note
shall be increased by the amount of such excess. If the Purchase Price is
decreased as a result of the Purchase Price Adjustment, then, within ten
(10) days after the determination of the Purchase Price Adjustment: (y) to
the extent of $500,000, Seller shall deliver to Buyer the Purchase Price
Adjustment in readily available funds, and (z) to the extent the Purchase
Price Adjustment exceeds $500,000, the principal amount of the Convertible
Note shall be decreased by the amount of such excess. Furthermore, if a
Purchase Price Adjustment requires an increase or decrease in the
principal amount of the Convertible Note as hereinabove described, Seller
shall tender the Convertible Note to Buyer simultaneous with the issuance
by Buyer of a new convertible note in exactly the same form as the
Convertible Note, but reflecting the revised principal balance dated as of
the Effective Date (the "Substitute Note"). For
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purposes of this Agreement, upon the issuance of any Substitute Note, such
Substitute Note shall constitute and be defined as the "Convertible Note"
hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
With respect to each of the following items, the Seller hereby
represents and warrants to Buyer that as of the Effective Date:
3.1 TITLE TO ASSETS. The Seller has and will convey good and
indefeasible title to the Assets (other than the Real Property) free and clear
of Liens, except for Permitted Encumbrances and except as disclosed on SCHEDULE
3.1 attached hereto and incorporated herein by reference. The Seller is in
possession of all property leased to it from others. The Assets constitute all
of the material property, whether real, personal, mixed, tangible or intangible,
that is used in the Business by the Seller and that are necessary for the
continued conduct of the Business as conducted by Seller prior to the Effective
Date except for the Excluded Assets.
3.2 TAX RETURNS. Within the times and in the manner prescribed by
law, including extensions permitted thereunder, the Seller has filed and will
file all Tax reports and returns required by law and has paid and will pay all
Tax Obligations. Except as otherwise disclosed on SCHEDULE 3.8, there are no
present disputes as to taxes of any nature payable by the Seller. Seller has not
received notice of any Tax deficiency outstanding, proposed or assessed against
or allocable to Seller, nor has Seller executed any waiver of any statute of
limitations on the assessment or collection of any Tax or executed or filed with
the Internal Revenue Service or any other governmental body any agreement now in
effect extending the period for assessment or collection of any Taxes against
Seller. To Seller's knowledge, there are no Tax Liens upon, pending against or,
to the best of Seller's knowledge, threatened against any Asset.
3.3 CONTRACTS. SCHEDULE 2.1(C) attached hereto and incorporated
herein by reference lists all of the material contracts, agreements, and other
written arrangements to which the Seller is a party, or by which the Seller or
the Assets are bound pertaining principally to the Business. To the best of
Seller's knowledge, each of the Contracts is valid and in full force and effect.
There has not been any default by the Seller, or to the best of Seller's
knowledge, any other party to any of the Contracts, or any event that with
notice or lapse of time or both, would constitute a default by the Seller, or to
the best of Seller's knowledge, any other party to any of the Contracts. The
Seller has not received notice that any party to any of the Contracts intends to
cancel or terminate any of the Contracts or exercise or not exercise any options
that they might have under any of the Contracts. In the event any of the
Contracts is, or is later determined to be, non-assignable, and the other party
to any such Contract refuses to consent to the assignment of same, then the
Seller shall subcontract to the Buyer or its designee, if the Buyer so desires,
the remaining work on such Contract, and the Seller shall forward to the Buyer
or its designee all proceeds of such Contract received by the Seller; provided,
however, that Seller shall be reimbursed for any reasonable out-of-pocket
expenses incurred by it. Seller enjoys peaceful and undisturbed possession under
all leases included in the Contracts.
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3.4 TANGIBLE PERSONAL PROPERTY AND INVENTORIES. SCHEDULE 2.1(A)
attached hereto and incorporated herein by reference, constitutes the most
recent list of material Tangible Personal Property regularly prepared by Seller
based on perpetual records and cycle counts which is owned by, leased by, in the
lawful possession of, or used by the Seller in connection principally with the
ownership and operation of the Business. Except as disclosed on SCHEDULE 3.4
attached hereto and incorporated herein by reference, no material Tangible
Personal Property used principally by the Seller in connection with its Business
(i) is held under any lease, security agreement, conditional sales contract, or
other title retention or security arrangement which is not described on SCHEDULE
2.1(C) attached hereto and incorporated herein by reference, or (ii) is located
other than in the possession of the Seller. To the best of Seller's knowledge,
all items of raw materials, work in process and finished goods included in the
Inventories, consist of items of a quality and quantity useable and saleable in
the ordinary course of business by Seller, except for obsolete and slow moving
items and items below standard quality, all of which have been written down on
the books of Seller to net realizable market value or have been provided for by
adequate reserves on the Estimated Balance Sheet and will be reflected on the
Final Balance Sheet. Except as disclosed on SCHEDULE 2.10 attached hereto and
incorporated herein by reference, no material items included in the inventories
have been pledged as collateral or are held by Seller on consignment from
others. The Inventories are valued at the lower of cost (determined on a
first-in, first-out basis) or market value and on a basis consistent with that
of prior years.
3.5 BUSINESS LICENSES. SCHEDULE 2.1(D) attached hereto and
incorporated herein by reference is a schedule of all material Business Licenses
owned by the Seller or in which the Seller has any rights or licenses
principally in connection with the Business, together with a brief description
of each. To the best of Seller's knowledge, the Seller has not infringed nor is
now infringing, on any license belonging to any other person, firm, or
corporation in connection with the Business. To the best of Seller's knowledge,
the Seller owns or holds adequate licenses or other rights to use all licenses
necessary for the Business as now conducted by the Seller, and that use does
not, and will not, conflict with, infringe on or otherwise violate any rights of
others. To the best of Seller's knowledge, Seller is in compliance in all
material respects with the terms of the Business Licenses. None of the Business
Licenses have been, or to the knowledge of Seller, are threatened to be,
revoked, canceled, suspended or modified.
3.6 EMPLOYMENT CONTRACTS. Except as disclosed on SCHEDULE 3.6
attached hereto and incorporated herein by reference, the Seller does not have
any employment contracts, collective bargaining agreements, pension, bonus, or
profit sharing plans providing for employee remuneration or benefits with
respect to the Employees that by their terms or by law will become binding upon
or the obligations of Buyer. The Seller is in compliance with, and upon the
Closing will remain in compliance with all of its obligations under such
agreements or other arrangements.
3.7 COMPLIANCE WITH LAWS. To the best of Seller's knowledge, the
Seller has complied with, and is not in violation of, applicable federal, state
or local statutes, laws, and regulations (including, without limitation, any
applicable building or other law, ordinance or regulation) that affect, or are
likely to affect, directly or indirectly, any of the Assets or the Business.
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3.8 LITIGATION. Except as disclosed in SCHEDULE 3.8 attached hereto
and incorporated herein by reference, there is no suit, action, arbitration or
legal, administrative or other proceeding or governmental investigation pending
or, to the best of Seller's knowledge, threatened against or affecting the
Seller with respect to the Business, the Assets or the Assumed Liabilities.
There are no judgments outstanding and unsatisfied against Seller or the Assets.
3.9 NO BREACH OR VIOLATION. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in or constitute any of the following: (i) a default,
breach or violation or an event that, with notice or lapse of time or both,
would be a default, breach or violation except for third party consents
described in this Agreement or any schedule prepared and delivered in connection
herewith, of any lease, license, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, security agreement or other
agreement, instrument or arrangement by which the Assets or the Seller may be
affected, or to which the Assets or the Seller may be bound, (ii) an event that
would permit any party to terminate any Contract or License, (iii) the creation
or imposition of any Lien on any of the Assets; (iv) a violation of Seller's
Certificate of Incorporation, as amended, or its Bylaws, as amended; or (v) to
the best of Seller's knowledge, a violation of any statute, judgment, order,
decree or regulation or rule of any governmental body known to Seller applicable
or relating to Seller or the Assets or the Business.
3.10 AUTHORITY. The Seller has the full right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement,
and Seller has obtained all approvals or consents of any persons or other
entities other than the Seller required to consummate the transactions
contemplated hereby, except as disclosed on SCHEDULE 3.10 attached hereto and
incorporated herein by reference.
3.11 EMPLOYEES. SCHEDULE 1.19 attached hereto and incorporated
herein by reference, designates a list of Employees of the Business all of whom
will be terminated by Seller immediately upon the Effective Date hereof.
3.12 VALID AND BINDING OBLIGATIONS. The execution and delivery of
this Agreement and each other document, instrument and agreement to be executed
by the Seller in connection herewith has been duly authorized and, upon their
execution and delivery, will constitute the legal, valid, and binding
obligations of the Seller, enforceable in accordance with each such agreement's,
document's, or instrument's respective terms, except as may be limited by
applicable bankruptcy laws, insolvency laws, and other similar laws affecting
the rights of creditors generally.
3.13 GENERAL INTANGIBLES. SCHEDULE 2.1(B) attached hereto and
incorporated herein by reference contains a description of all of the material
intangible property owned by the Seller and used principally in the conduct of
the Business. The Seller is the sole owner of all of the General Intangibles,
free and clear of any Liens, other than Permitted Encumbrances. To the best of
Seller's knowledge, use of the General Intangibles will not, and the conduct of
the Business as conducted prior to the Effective Date did not infringe upon any
patents, trade or
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assumed names, trademarks, service marks, or copyrights belonging to any other
person, firm, or corporation. The Seller is not a party to any license,
agreement, or arrangement, whether as licensor, licensee, or otherwise, with
respect to any of the General Intangibles. There are no pending or, to the
knowledge of Seller, threatened infringement claims against Seller by any person
with respect to any of the General Intangibles, nor has any such item been
declared invalid or been limited by any court or agreement.
3.14 LEASED ASSETS. SCHEDULE 3.14 attached hereto and incorporated
herein by reference, contains a description of all of the personal property
leased pursuant to the Contracts, which are the only assets used in the conduct
of the Business which are not owned by the Seller.
The Seller is not in default of any lease or any Contract.
3.15 EMPLOYEE BENEFITS. SCHEDULE 3.15 attached hereto and
incorporated herein by reference, shall set forth a list of all "employee
benefit plans" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), that are maintained or
sponsored by the Seller or any Affiliate for the benefit of any Employee (the
"PLANS"). Each Plan is in full force and effect, and neither the Seller nor to
the best of Seller's knowledge, any other party is in default under such Plan.
To the best of Seller's knowledge,there have been no claims of default, and
there are no facts or conditions which if continued, or on notice, will result
in a default under any Plan. No Plan will, by its terms or under applicable law,
become binding upon or become an obligation of the Buyer. No assets of or
liabilities under the Plan shall be transferred to the Buyer or to any plan of
the Buyer.
3.16 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 3.16
attached hereto and incorporated herein by reference, no consent, approval or
authorization of, or filing or registration with, any governmental or regulatory
authority, or any other person or entity other than the Seller, is required to
be made or obtained by the Seller in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
3.17 DISCLOSURE. The Seller has made available to the Buyer true,
complete and correct copies of all Contracts, documents concerning all
litigation and administrative proceedings, Plans, Licenses, insurance policies,
lists of suppliers and customers, and records relating principally to the Assets
and the Business, and such information covers all commitments and liabilities of
the Seller relating principally to the Business or the Assets .
3.18 BROKERS. Neither the Seller, nor any of their respective
officers, directors, or employees, has employed any broker, agent, or finder, or
incurred any liability for any brokerage fees, agent's fees, commission or
finder's fees in connection with the transaction contemplated herein that would
give rise to any valid claim against Buyer.
3.19 SALE OF ASSETS. For purposes of determining whether a sales and
use tax charge is applicable, the sale of the Assets constitutes: (i) the sale
of the entire operating assets of a business or of a separate division, branch,
or identifiable segment of a business, and (ii) a sale
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outside the ordinary course of Seller's business, and represents an isolated or
occasional sale by a seller who does not regularly engage in such business.
3.20 LIENS ON ASSETS. All Liens of any third party as to all or any
of the Assets have been removed on or before the Effective Date, and the Seller
has furnished evidence thereof to Buyer.
3.21 REAL PROPERTY.
(a) All of the real property owned by the Seller in connection with
the Business is described on SCHEDULE 2.1(E)-1 AND SCHEDULE 2.1(E)-2.
Seller has and will convey to Buyer good and indefeasible title to the
Real Property free and clear of any and all Liens other than Permitted
Encumbrances.
(b) To the best of Seller's knowledge, the Real Property does not
violate any provisions of any applicable building code, fire, health or
safety regulations, or other governmental ordinances, orders or
regulations. No condition exists with respect to the Real Property which
would prevent, or require repair or modification thereof as a prerequisite
to Buyer using the Real Property in the conduct of the Business.
(c) To the best of Seller's knowledge, the zoning classification of
the Real Property is such that the Real Property may be used as currently
used in the Business.
(d) There are no parties in possession of any portion of the Real
Property as lessees, tenants at sufferance or trespassers.
(e) To the best of Seller's knowledge, there is no pending or
threatened condemnation or similar proceeding or assessment affecting the
Real Property, or any part thereof, nor is any such proceeding or
assessment contemplated by any governmental body or entity.
(f) Seller has complied in all material respects with all applicable
laws, ordinances, regulations, statutes, rules and restrictions relating
to the Real Property, or any part thereof.
(g) There are water, sewer, and electricity lines to the Real
Property presently sufficient for the conduct of the Business in the
ordinary course of business.
(h) The Real Property has full and free access to and from public
highways, streets or roads and, to the best of Seller's knowledge,
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there is no pending or threatened proceeding by any governmental entity
which would impair or result in the termination of such access.
3.22 CUSTOMERS. Seller has as of the Effective Date furnished Buyer
all of its current documentation containing the names of substantially all
customers of the Business (the "Customers"). The Seller does not have any
information, nor is Seller aware of any facts, indicating that any of these
customers intend to cease doing business with the Seller.
3.23 INSURANCE POLICIES. The Seller has maintained and now maintains
(i) insurance on all its Assets and businesses of a type customarily insured,
covering property damage and loss of income by fire or other casualty, and (ii)
insurance protection against all liabilities, claims and risks against which it
is customary to insure.
3.24 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Neither
Seller, nor any Affiliate of Seller, has any direct or indirect interest in or
is an officer, director, employee or consultant of or otherwise receives
remuneration from any person which is a competitor, supplier or customer of the
Seller, or in any person from whom or to whom the Seller leases any personal
property, or in any other person with whom the Seller is doing business.
3.25 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all the necessary corporate powers to own the Assets and to carry on the
Business as now owned and operated by it. Seller is duly qualified and licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction where the ownership of the Assets or the leasing of its properties
or the conduct of the Business requires such qualification, except where the
failure to so qualify or be licensed would not have a material adverse effect on
the Business or the Assets.
3.26 FINANCIAL STATEMENTS. The Estimated Balance Sheet has been, and
the Final Balance Sheet will be, prepared from the books and records of Seller
in conformity with SAP. The Estimated Balance Sheet presents, and the Final
Balance Sheet will present, fairly the Assets and Assumed Liabilities as of the
Effective Date.
All Accounts Receivable which are classified as current assets on the
Estimated Balance Sheet are, and all Accounts Receivable which will be
classified as current assets on the Final Balance Sheet will be, (i) bona fide
receivables and (ii) stated in accordance with SAP. All Accounts Receivable
which are classified as current assets on the Estimated Balance Sheet, and all
Accounts Receivable which will be classified as current assets on the Final
Balance Sheet, (i) were acquired in the ordinary course of business and (ii),
subject to the reserve for doubtful accounts, need not be written-off as
uncollectible.
The Inventories reflected on the Estimated Balance Sheet have been, and
the Inventories reflected on the Final Balance Sheet will be, valued in
accordance with SAP, and the value of obsolete materials and materials of below
standard quality has been, and in the case of the Final Balance Sheet will be,
written down or reserved against in accordance with SAP. There have
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been, and in the case of the Final Balance Sheet will be, no write-ups of
inventories or other assets.
3.27 ENVIRONMENTAL MATTERS. Without in any manner limiting any other
representations and warranties set forth in this Article III:
(a) to the best of Seller's knowledge, in connection with the
Business, neither Seller, nor the Real Property nor any facility presently
or formerly owned, leased or operated by Seller ("Seller Site"), nor any
of the Assets, is in violation of, or has violated, or has been or is in
non-compliance with, any Environmental Laws (as defined below) in
connection with the ownership, use, maintenance or operation of the
Assets, or conduct of the Business;
(b) to the best of Seller's knowledge, the Assets include all
environmental and pollution control equipment necessary for compliance
with all Environmental Laws (including, without limitation, all applicable
licenses and operation of the Business as it is presently conducted);
(c) to the best of Seller's knowledge, no Hazardous Materials
(as defined below) have been incorporated into any of the Assets;
(d) to the best of Seller's knowledge there are no, and there has
never been any, underground storage tanks (as defined under Environmental
Laws) located under the Real Property or, to the Seller's knowledge, any
Seller Site;
(e) Seller has not received any notices of any violation of,
noncompliance with, or remedial obligation under Environmental Laws,
relating to the ownership, use, maintenance, operation of the Assets or
the conduct of the Business nor, to the best of Seller's knowledge, is
there any basis for any of the foregoing;
(f) there are no writs, injunctions, decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings or investigations pending
or, to the best of Seller's knowledge, threatened, relating to the
ownership, use, maintenance, operation of the Assets, or the conduct of
the business, nor, to the best of Seller's knowledge, is there any basis
for any of the foregoing; and
(g) as used in this Agreement, (i) the term "Hazardous Materials"
means (x) asbestos, polychlorinated biphenyls, urea formaldehyde, lead
based paint, radon gas, petroleum, oil, solid waste, pollutants and
contaminants, and (y) any chemicals, materials, wastes or
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substances that are defined, regulated, determined or identified as toxic
or hazardous in any Environmental Laws, including, but not limited to,
substances defined as "hazardous substances," "hazardous materials," or
"hazardous waste" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sec 9601, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; or comparable state and local statutes or in the
regulations adopted and publications promulgated pursuant to said
statutes, and (ii) "Environmental Laws" means any applicable federal,
state, or local laws, rules, or regulations, common law or strict
liability provisions, and any judicial or administrative interpretations
thereof, including any judicial or administrative orders or judgments,
relating to health, safety, industrial hygiene, pollution or environmental
matters (in effect as of the Effective Date).
3.28 INVESTMENT REPRESENTATIONS. The Seller (i) is an "Accredited
Investor" as that term is defined under the Securities Act of 1933, as amended
(the "Securities Act"), (ii) through its counsel, its employees, and other duly
authorized representatives, has made an extensive investigation of the assets
and liabilities, business and financial affairs, and operations of the Buyer,
(iii) is aware of the risks associated with ownership of the Convertible Note
and the Common Stock into which the Convertible Note may be converted, (iv) is
capable of bearing the financial risks associated with such ownership and (v) is
acquiring the Convertible Note and upon any conversion will acquire the Common
Stock for the account of the Seller for investment and not with a view to the
distribution thereof within the meaning of the Securities Act.
3.29 SOLVENCY. Seller is not now insolvent, nor will Seller be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. As used in this Section 3.29, (x) "insolvent" means, for any Person,
that the sum of the present fair saleable value of its assets does not and/or
will not exceed its debts and other probable liabilities, and (y) the term
"debts" includes any legal liability, whether matured or unmatured, liquidated
or unliquidated, absolute, fixed or contingent, disputed or undisputed or
secured or unsecured.
Except as set forth in this Article III, Seller has made no
representations to Buyer of any fact or condition which would affect Buyer's
decision to purchase the Assets hereunder; nor of such Assets being suitable for
Buyer's intended use and Buyer specifically acknowledges there are no
representations except as set out above.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that as of the Effective
Date:
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4.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. Buyer is duly qualified and licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction where the ownership of its assets or the leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to so qualify or be licensed would not have a material adverse effect on
its business or its assets.
4.2 AUTHORITY. Buyer has the right, power, legal capacity, and
authority to execute, deliver and perform this Agreement, and Buyer has obtained
all approvals or consents of any persons or other entities required to
consummate the transactions contemplated hereby.
4.3 VALID AND BINDING OBLIGATIONS. The execution and delivery of,
this Agreement and each other document, instrument and agreement to be executed
by the Buyer in connection herewith has been duly authorized, and upon their
execution and delivery, will constitute the legal, valid, and binding
obligations of Buyer, enforceable in accordance with each such agreement's,
document's or instrument's respective terms, except as may be limited by
applicable bankruptcy laws, insolvency laws, and other similar laws affecting
the rights of creditors generally.
4.4 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or filing or registration with, any governmental or regulatory authority, or
any other person or entity other than the Buyer, is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby.
4.5 BUYER'S BENEFIT PLANS. SCHEDULE 4.5 lists each and every benefit
plan maintained by the Buyer which shall be provided to each Employee hired by
Buyer.
4.6 COMMON STOCK AND PREFERRED STOCK. Buyer is authorized to issue
up to 10,000,000 shares of Common Stock of which 2,092,331 shares are issued and
outstanding (except that those shares of Common Stock set forth on lines 20 and
22 of SCHEDULE 4.6 attached hereto will not be considered validly issued until
the Buyer issues instructions to its transfer agent to issue the certificates
representing such shares), 1,622,832 shares are reserved for issuance in
connection with outstanding options, warrants or other rights to purchase Common
Stock and 1,450,000 shares are reserved for issuance in connection with options
to be issued under the Buyer's stock option plans. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and non-assessable and, for those owners and record holders
owning five percent (5%) or more of Buyer, are owned of record and beneficially
as described on SCHEDULE 4.6 attached hereto and incorporated herein by
reference. Except as provided in SCHEDULE 4.6 attached hereto and incorporated
herein by reference, there are no outstanding options, warrants or rights to
purchase or acquire any capital stock of Buyer, and there are no contracts,
commitments, understandings, arrangements or restrictions by which Buyer is
bound to sell or issue any shares of Common Stock. Except as disclosed on
SCHEDULE 4.6,
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Buyer has no subsidiaries or ownership interests in other corporations,
partnerships, joint ventures or other entities.
4.7 TAX RETURNS. Within the times and in the manner prescribed by
law, including extensions permitted thereunder, the Buyer has filed and will
file all Tax Reports and returns required by law and has paid and will pay all
Tax Obligations. To the best of Buyer's knowledge, there are no present disputes
as to taxes of any nature payable by the Buyer. Buyer has not received notice of
any Tax deficiency outstanding, proposed or assessed against or allocable to
Buyer, nor has Buyer executed any waiver of any statute of limitations on the
assessment or collection of any Tax or executed or filed with the Internal
Revenue Service or any other governmental body any agreement now in effect
extending the period for assessment or collection of any Taxes against Buyer. To
Buyer's knowledge, there are no Tax Liens upon, pending against or, to the best
of Buyer's knowledge, threatened against any Asset.
4.8 FINANCIAL STATEMENTS. The audited financial statements of the
Buyer as of and for the period ended December 31, 1995, as previously furnished
by Buyer to Seller (collectively, the "1995 FINANCIAL STATEMENTS") have been
prepared in accordance with GAAP and fairly present the financial condition and
results of operations of the Buyer as at the dates and for the periods then
ended. Buyer has no liabilities, obligations or commitments of any nature
(absolute, accrued, contingent or otherwise) (herein "LIABILITIES") except (i)
Liabilities which are adequately reflected or reserved against in the 1995
Financial Statements, (ii) Liabilities which have been incurred in the ordinary
course of business and consistent with past practice since the date of the 1995
Financial Statements, subject to normal year end adjustments, (iii) Liabilities
which under GAAP were not required to be reflected or reserved against in the
1995 Financial Statements and (iv) the debt incurred by Buyer in connection with
those transactions entered into with the Senior Lender on even date herewith to,
among other things, pay the Cash Purchase Price, .
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
SCHEDULE 4.9 attached hereto and incorporated herein by reference, other than in
the ordinary course of business, since December 31, 1995, with respect to the
Buyer there has been no:
(i) material adverse change in the financial condition, liabilities,
assets, business or prospects of the Buyer's business from that reflected
in the 1995 Financial Statements;
(ii) waiver or release of any material right of or claim held by
the Buyer;
(iii) material loss, destruction or damage to any property of the
Buyer, whether or not insured except to the extent that such property has
been repaired or replaced;
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(iv) labor trouble pending, or to the best of Buyer's knowledge,
threatened, involving the Buyer, or material change in the personnel of
the Buyer or the terms and conditions of their employment;
(v) acquisition or disposition of any material assets, individually
or in the aggregate, nor any contract or arrangement therefor, nor any
other material transaction by the Buyer;
(vi) transfer or disbursement of funds or assets exceeding $50,000
in the aggregate by the Buyer;
(vii) material change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) by the Buyer;
(viii)revaluation by the Buyer of any of its material assets or
liabilities;
(ix) increase in salary or other compensation payable or to become
payable by the Buyer to any of its officers, directors or employees, or
the declaration, payment or commitment or obligation of any kind for the
payment, by the Buyer, of a bonus or other additional salary or
compensation to any such person;
(x) amendment or termination of any material contract, agreement,
permit or license to which the Buyer is a party and for which Buyer's
written consent is required except for any employee benefit plans;
(xi) sale, transfer, encumbrance, mortgage, pledge or other
encumbrance of any material asset of the Buyer;
(xii) other event or condition of any character that has or might
reasonably have a material adverse effect on the financial condition,
business, assets or prospects of the Buyer; or
(xiii) agreement by the Buyer to do any of the things described in
the preceding clauses (i) through (xii).
4.10 OPERATIONS OF THE BUYER. Except as disclosed on SCHEDULE 4.10
attached hereto and incorporated herein by reference, since December 31, 1995:
(i) the Buyer has used its commercially reasonable efforts to
preserve the business organization of its business intact, to keep
available
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to its business its employees, and to preserve its present relationships
with suppliers, customers and others having business relationships with
it;
(ii) the Buyer has maintained and operated its business in
accordance with its standard business practices;
(iii) the Buyer has not entered into any material agreement or
instrument which would constitute an encumbrance of the Assets, which
would bind Buyer, the Seller or the Assets after Closing, other than in
the ordinary course of business, or which would be outside the normal
scope of maintaining and operating its business and the Assets in the
ordinary course of business;
(iv) the Buyer has not breached any material provision of any
material contracts to which the Buyer is a party, and has maintained the
Buyer's books of account and records in the usual, regular and customary
manner;
(v) to the best of Buyer's knowledge, the Buyer has complied with
all statutes, laws, ordinances and regulations applicable to the Buyer and
the conduct of its business;
(vi) except in the ordinary course of business, the Buyer has not
removed or disposed of, nor permitted the removal or disposal of, any of
its material assets unless such assets were replaced with an item of at
least equal value that is properly suited for its intended purpose; and
(vii) the Buyer has made all payments within a commercially
reasonable period of time from their due date arising in connection with
the ownership, use, insurance, operation and maintenance of its business
in the usual, regular and customary manner consistent with its prior
practices except as has been otherwise agreed to by the Buyer and its
payees, and has taken all action reasonably necessary or prudent to
prevent liens or other claims for the same from being filed or asserted
against any part of its assets.
4.11 BROKERS. Neither Buyer nor any of its respective officers,
directors, or employees, has employed any broker, agent, or finder, or incurred
any liability for any brokerage fees, agent's fees, commissions or finder's fees
in connection with the transactions contemplated herein that would give rise to
any valid claim against Seller.
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ARTICLE V
THE CLOSING
5.1 CLOSING. The Closing, including without limitation, the Payment
of the Cash Purchase Price and issuance of the Convertible Note by the Buyer to
the Seller and the transfer of the Assets and Assumed Liabilities by the Seller
to the Buyer and the other transactions contemplated hereby shall take place on
and as of the Effective Date.
5.2 SELLER'S OBLIGATIONS. At the Closing, the Seller shall deliver
or cause to be delivered to the Buyer:
(a) Such documents, including a bill of sale, assignments and
consents, as are deemed reasonably necessary by Buyer's counsel to
transfer ownership of the Assets, except the Real Property, and to
evidence the assumption of the Assumed Liabilities, including but not
limited to properly endorsed certificates of title; transfer documents
relating to patents, trademarks, copyrights, and FDA Licenses; and two (2)
duly authorized and executed originals of a Bill of Sale, Assignment and
Assumption Agreement between the Buyer and the Seller (the "BILL OF
SALE");
(b) Two executed copies of a Voting and Shareholders'
Agreement in a form acceptable to Buyer and its counsel (the "VOTING
AGREEMENT");
(c) Two executed copies of a legal opinion of Boyer, Ewing & Harris
Incorporated, legal counsel for Seller, in a form acceptable to Buyer and
its counsel;
(d) One (1) duly authorized and executed original of a Special
Warranty Deed transferring the ownership of the Sugar Land Property to the
Buyer, in a form acceptable to Buyer and its counsel;
(e) One (1) duly authorized and executed original of a Special
Warranty Deed transferring the ownership of the Belton Property to the
Buyer, in a form acceptable to Buyer and its counsel;
(f) One (1) duly authorized and executed original of a Non-
Foreign Affidavit as required by Section 1445 of the U.S. Internal Revenue
Code pertaining to the Sugar Land Property;
(g) One (1) duly authorized and executed original of a Non-
Foreign Affidavit as required by Section 1445 of the U.S. Internal Revenue
Code pertaining to the Belton Property;
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(h) Certified resolutions of the Board of Directors of the Seller,
in a form acceptable to Buyer and its counsel;
(i) Two executed copies of a Registration Rights Agreement in
a form acceptable to Buyer and its counsel (the "REGISTRATION AGREEMENT");
(j) Two executed copies of a Transition Agreement in a form
acceptable to Buyer and its counsel (the "TRANSITION AGREEMENT");
(k) Two executed copies of a Security Agreement in a form
acceptable to Buyer and its counsel (the "SECURITY AGREEMENT"); and
(l) All other items required to be delivered hereunder or as may be
requested which are necessary or would reasonably facilitate consummation
of the transactions contemplated hereby.
In addition, the Seller will put the Buyer into full possession and enjoyment of
all Assets immediately upon the occurrence of the Closing.
5.3 BUYER'S OBLIGATIONS. At the Closing, the Buyer will deliver or
cause to be delivered to the Seller, or other designated person, the following:
(a) Wire transfer to the Seller in the amount of the Cash Purchase
Price;
(b) Two (2) duly authorized and executed originals of the Bill of
Sale;
(c) At Buyer's expense, a commitment to issue an owner's title
policy issued by the Title Company in the amount of $900,000 insuring that
Buyer owns fee simple title to the Sugar Land Property subject to no
exceptions other than (i) all of the applicable Permitted Encumbrances;
(ii) the exception as to taxes which shall have inserted the year of
Closing; (iii) the "survey" exception; and (iv) other exceptions which
Buyer approves in writing;
(d) At Buyer's expense, a commitment to issue an owner's title
policy issued by the Title Company in the amount of $1,120,000 insuring
that Buyer owns fee simple title to the Belton Property subject to no
exceptions other than (i) all of the applicable Permitted Encumbrances;
(ii) the exception as to taxes which shall have inserted the year of
Closing; (iii) the "survey" exception; and (iv) other exceptions which
Buyer approves in writing;
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(e) Two executed copies of the Voting Agreement in a form
acceptable to Seller and its counsel;
(f) Two executed copies of a legal opinion of Porter & Hedges, legal
counsel for Buyer, in a form acceptable to Seller and its counsel;
(g) Two executed copies of the Registration Rights Agreement
in a form acceptable to Seller and its counsel (the "REGISTRATION
AGREEMENT");
(h) Two executed copies of the Security Agreement in a form
acceptable to Seller and its counsel;
(i) Two executed copies of the Transition Agreement in a form
acceptable to Seller and its counsel;
(j) The Convertible Note;
(k) Certified resolutions of the Board of Directors of the Buyer,
in a form acceptable to Seller and its counsel; and
(l) All other items required to be delivered hereunder or as may be
requested or which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby.
5.4 [INTENTIONALLY OMITTED].
5.5 FURTHER ASSURANCES. At and after the Closing, each of the
Parties shall take all appropriate action and execute all documents of any kind
which may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. The Seller, at any time at or after the Closing, will
execute, acknowledge and deliver any further bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by the Buyer, for the purpose of
assigning and confirming to the Buyer, all of the Assets. The Buyer shall notify
the Seller promptly, and in no event more than ten (10) business days after the
Buyer's receipt, of any tax inquiries or notifications thereof which relate to
any period prior to the Effective Date, and the Seller shall prepare and deliver
responses to such inquiries as the Seller deems necessary or appropriate.
5.6 LIABILITIES CONCERNING SALES AND RENTALS OF PRODUCTS AND
SERVICES. Except as otherwise provided in Section 2.7(ii), the Seller shall be
liable for all products liability claims as well as other liabilities (i)
involving products sold or services provided by the Seller prior to the
Effective Date, and (ii) involving products rented by Seller prior to the
Effective Date, but only to the extent that the event or circumstance giving
rise to such claim or other liability
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occurred prior to the Effective Date; and Seller shall indemnify the Buyer from
any and all Damages arising therefrom, as defined in Article VI herein, in the
manner described in Article VI. In addition to those liabilities and obligations
specified in Section 2.7(ii), the Buyer shall be liable for all products
liability claims as well as other liabilities (i) involving products sold or
services provided by the Buyer on and after the Effective Date and (ii)
involving products rented by Buyer (which shall include all rental contracts
outstanding on the Effective Date which are being acquired by Buyer hereunder)
on and after the Effective Date, but only to the extent that the event or
circumstance giving rise to such claim or other liability occurred on or after
the Effective Date; and the Buyer shall indemnify the Seller from any and all
Damages arising therefrom in the manner described in Article VI herein.
5.7 SELLER'S EMPLOYEES. Notwithstanding any provision of this
Agreement, the Buyer shall be prohibited from interviewing or otherwise
employing any person who is an employee of Seller and who is not an Employee for
a period of one (1) year immediately after the Closing.
5.8 DISCLAIMER OF WARRANTIES. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED HEREIN, THE BUYER HEREBY ACKNOWLEDGES AND AGREES THAT ALL OF
THE TANGIBLE PERSONAL PROPERTY, FIXTURES AND IMPROVEMENTS, AND REAL PROPERTY ARE
BEING SOLD ON AN AS IS, WHERE IS WITH ALL FAULTS BASIS AND THAT THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED THAT WOULD APPLY TO SUCH ASSETS (OTHER THAN AS
EXPRESSLY SET FORTH IN THIS AGREEMENT) ARE HEREBY DISCLAIMED AND EXCLUDED FROM
THIS AGREEMENT.
5.9 LICENSES. To the extent permitted under applicable law, on or
before the Effective Date, Seller shall have executed and delivered to Buyer
assignments of all the Business Licenses that are assignable. With respect to
any Business License in which the consent of a governmental authority or third
party is required, Buyer shall, with Seller's cooperation, use commercially
reasonable efforts to procure the assignment of all such Business Licenses to
Buyer. Prior to the successful procurement of any such consent or approval to
the assignment of any Business Licenses in which same is required, Seller agrees
that it shall perform all acts and execute any and all documents as may be
reasonably requested by Buyer so that Buyer may realize the benefits of such
Business Licenses as Buyer deems reasonably necessary or desirable, until such
time as such Business Licenses are successfully assigned to Buyer. Buyer agrees
to indemnify and hold harmless Seller and its Affiliates from all reasonable
out-of-pocket costs, liabilities, losses and damages incurred by it in
connection with its performance of its obligations under this Section 5.9.
5.10 ASSIGNMENT OF CONTRACTS. On or before the Effective Date,
Seller shall have executed and delivered to Buyer assignments of all the
Contracts that are assignable. With respect to any Contract in which the consent
of a governmental authority or third party is required, Seller shall, with
Buyer's reasonable cooperation, use commercially reasonable efforts
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to procure the assignment of all such Contracts to Buyer. Prior to the
successful procurement of any such consent or approval to the assignment of any
Contracts in which same is required, Seller agrees that it shall perform all
acts and execute any and all documents as may be reasonably requested by Buyer
so that Buyer may realize the benefits of such Contracts as Buyer deems
reasonably necessary or desirable, until such time as such Contracts are
successfully assigned to Buyer. In the event any of the Contracts are, or are
later determined to be non-assignable, then the Seller (to the extent permitted
under the terms of the Contracts or applicable law), shall subcontract to Buyer
or its designee, if Buyer so desires, all of the rights, duties and obligations
under the Contracts, and the Seller shall forward to Buyer or its designee all
proceeds of the Contracts that it receives. To the extent any such Contract
cannot be subcontracted, Buyer agrees to cooperate with Seller and enter into
such other commercially reasonable arrangements as will enable Seller to fulfill
its remaining obligations under said Contracts. Buyer agrees to indemnify and
hold harmless Seller and its Affiliates from all reasonable out-of-pocket costs,
liabilities, losses and damages incurred by it in connection with Buyer's
performance of its obligations under this Section 5.10.
5.11 EMPLOYEES. Immediately upon the occurrence of the Closing,
Buyer shall offer employment to all of the Employees on the same compensation
and substantially the other benefits and working terms and conditions, as
provided by Seller immediately prior to the Effective Date to be effective as of
the Effective Date. Seller shall use reasonable efforts to assist Buyer in the
hiring of the Employees. Buyer shall have no liability or obligation with
respect to any employee benefits of the Employees that existed prior to the
Effective Date. To the extent that any Employee hired by the Buyer is subject to
a covenant not to compete with the Seller on and after the Effective Date,
Seller hereby acknowledges that for the purpose of such covenant, Buyer shall
not be considered a competitor of Seller and Seller hereby consents to the
employment of such Employee by Buyer.
5.12 NON-COMPETE; NON-SOLICITATION. (a) During the Non-Compete Term
(defined below), neither Seller nor any of its Affiliates shall, directly or
indirectly, for themselves or on behalf of any other person, corporation, firm,
partnership, association or any other entity (whether as an individual, agent,
servant, employee, employer, officer, director, shareholder, investor, lender,
financier, principal, consultant or in any other capacity) (i) engage or
participate in any Competing Business (defined below) anywhere throughout the
world; (ii) induce any customers of Buyer or its Affiliates, including without
limitation the Customers (collectively, the "PROHIBITED CUSTOMERS") to patronize
any Competing Business (other than the businesses of Buyer and its Affiliates);
(iii) canvass, solicit or accept any Competing Business from any Prohibited
Customer unless directed to do so by Buyer; (iv) request or advise any
Prohibited Customer to withdraw, curtail or cancel such customer's business with
Buyer or its Affiliates with respect to any Competing Business; or (v) disclose
to any other person, firm or corporation engaged in any Competing Business the
names or addresses of any of the Prohibited Customers. Notwithstanding the
foregoing, nothing contained in this Agreement shall prohibit Seller's ownership
of any of the Common Stock or any other security of Buyer, or having unlimited
representation on the board of directors of Buyer, or providing consulting
services to Buyer.
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(b) For purposes of this Agreement, the term "COMPETING BUSINESS" is
defined to mean the business of manufacturing, selling or leasing any of the
types of physical therapy, exercise or other medical equipment manufactured,
leased or sold by Seller through its Henley Healthcare Division prior to the
Effective Date except that the term "Competing Business" shall not mean the
manufacturing, selling or leasing of the "woundcare kits" that were previously
sold by Seller through its Henley Healthcare Division. The term "NON-COMPETE
TERM" shall mean the five year period following the Effective Date.
(c) During the Non-Compete Term, the Seller and its Affiliates shall
submit or refer to Buyer all solicitations, inquiries or purchase requests
received by the Seller or its Affiliates from any party regarding any Competing
Business.
(d) During the Non-Compete Term, the Seller and its Affiliates shall not,
directly or indirectly, induce or attempt to influence any employee of Buyer or
any of its Affiliates, including without limitation the Employees hired by Buyer
as a result of its consummation of this Agreement, to terminate his/her
employment or to hire any such employee, whether or not so induced or
influenced; provided, however, that at any time after the first full year of the
NonCompete Term: (i) if an Employee solicits employment from Seller or any of
its Affiliates, then Seller or its Affiliate may employ such Employee without
violating this Section 5.12(d), and (ii) the Seller and its Affiliates may
undertake any action otherwise prohibited by this Section 5.12(d) if Seller and
its Affiliates first obtain the written consent of Buyer.
(e) During the Non-Compete Term, without the prior written consent of
Buyer, the Seller and it Affiliates shall not, for themselves or on behalf of
any other corporation, person, firm, partnership, association or any other
entity (whether as an individual, agent, servant, employee, employer, officer,
director, shareholder, investor, lender, financier, principal, consultant or in
any other capacity) disclose to any person or entity any of the customer lists,
trade secrets, confidential information, financial and accounting information,
pricing, advertising or marketing plans, methods, systems or other procedures
used or owned by Buyer in connection with the Assets purchased pursuant to this
Agreement; provided, however, and notwithstanding the foregoing, that neither
the Seller nor its Affiliates shall be prohibited from disclosing information
that is in the public domain or generally known in the industry or subsequently
enters the public domain or becomes generally known in the industry through no
fault of the Seller or its Affiliates or if required by law or court order.
(f) The Parties hereby acknowledge that (i) the agreements and covenants
set forth in this Section 5.12 are being made for good and valuable
consideration, the receipt and sufficiency of which is acknowledged; (ii) the
agreements of the Parties contained in this Section 5.12 are an important aspect
of this Agreement, and Buyer would not have entered into this Agreement absent
the inclusion of this Section 5.12, and (iii) the restrictions imposed hereby,
including the geographic area and duration of the covenants made by them herein,
are reasonable and necessary to protect Buyer.
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(g) If the Seller or its Affiliates breach or indicate an intention to
breach any term or provision of this Section 5.12, the Parties agree that Buyer
shall be entitled to the right of both temporary and permanent injunctive relief
and/or specific performance. The right of Buyer to such relief shall not be
construed to prevent Buyer from pursuing, either consecutively or concurrently,
any and all other legal or equitable remedies available to it for such breach or
threatened breach, specifically including, without limitation, the recovery of
monetary damages.
(h) If any court determines that any provision of this Section 5.12, or
any part thereof, is unenforceable because of the duration or geographic scope
of such provision, the Parties agree that such court shall have the power to
reduce the duration or geographic scope of such provision, as the case may be,
and the Parties agree to request the court to exercise such power, and, in its
amended form, such provision shall then be enforceable and shall be enforced.
5.13 TERMINATION OF EMPLOYMENT AGREEMENTS AND STOCK OPTIONS. As of the
Effective Date, Buyer shall have obtained the termination or rescission of all
employment agreements or arrangements with respect to payment of salary or
severance pay or any other renumeration whatsoever to all employees/consultants,
including but not limited to: (i) Mike Barbour ("Barbour") and Chadwick Smith
("Smith"), including but not limited to those certain Employment Agreements
dated as of January 15, 1996 by and between Buyer and each of Barbour and Smith
along with any prior agreements between Buyer, and Barbour and Smith, and (ii)
Stephen Barbour ("S. Barbour"), including but not limited to that certain
Employment Agreement dated as of December 16, 1993 by and between Buyer and S.
Barbour along with any prior agreements between Buyer and S. Barbour. In
addition, Buyer shall have caused the rescission of those certain stock options
or rights thereto previously granted under that certain Non-Qualified Incentive
Stock Option Plan dated as of January 15, 1996 under which each of Barbour and
Smith received or were to receive options to purchase 400,000 shares of Common
Stock. Furthermore, Barbour, S. Barbour and Smith shall have released any and
all claims they might otherwise have under claims against Buyer, Seller or any
Affiliate thereof with respect to such employment matters and stock options, as
applicable.
ARTICLE VI
INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in this Agreement shall survive (and
shall not be extinguished by any investigation made by or on behalf of either
party) for eighteen (18) months after the Closing Date. Neither Party shall make
a claim against the other with respect to Damages unless such claim is made on
or before eighteen (18) months after the Closing Date. Notwithstanding the
foregoing: (i) the representations and warranties of the Seller set forth in
Sections 3.1, 3.20 and 3.21 of this Agreement shall survive indefinitely; and
(ii) the representations and warranties of the Seller set forth in Section 3.2
and the representations and warranties of the Buyer set forth in Section 4.7
shall survive after the Effective Date until the expiration of the statute of
limitations applicable to any claims thereunder. In the event that it is
asserted in writing that any Party has violated any of the representations and
warranties made by it and a claim for indemnification is
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made thereon by written notice delivered to the indemnifying Party within the
aforementioned time period, such representation or warranty shall survive until
the final adjudication of the issue in the form of a final, non-appealable
judgment by a court of law having jurisdiction of the matter or until the issue
is otherwise settled by the Buyer and the Seller.
6.2 INDEMNIFICATION.
A. BY THE SELLER. The Seller shall indemnify, save, defend and hold
harmless the Buyer and Buyer's Affiliates, shareholders, directors, officers,
partners, agents and employees (and in the event the Buyer assigns its right,
title and interest hereunder to a corporation, which shall be permitted
hereunder, such assignee's shareholders, directors, officers, agents and
employees) (collectively, the "BUYER INDEMNIFIED PARTIES") from and against any
and all costs, lawsuits, losses, liabilities, deficiencies, claims and expenses,
including interest, penalties, attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively
referred to herein as "DAMAGES"), (i) incurred in connection with or arising out
of or resulting from or incident to any breach of any covenant or warranty, or
the inaccuracy of any representation, made by the Seller in or pursuant to this
Agreement or any other agreement contemplated hereby or in any schedule,
certificate, exhibit, or other instrument furnished or to be furnished by the
Seller or its Affiliates under this Agreement, or (ii) relating to any of the
Retained Liabilities.
B. BY THE BUYER. The Buyer shall indemnify, save, defend and hold
harmless the Seller and its Affiliates, shareholders, directors, officers,
partners, agents and employees (collectively, the "SELLER'S INDEMNIFIED
PARTIES") from and against any and all Damages (i) incurred in connection with
or arising out of or resulting from or incident to any breach of any covenant or
warranty, or the inaccuracy of any representation, made by the Buyer in or
pursuant to this Agreement or any other agreement contemplated hereby or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by the Buyer under this Agreement, or (ii) relating to the Assumed Liabilities.
C. DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("NOTICE OF ACTION"); provided that the failure of any
indemnified Party to give timely notice shall not affect its rights to
indemnification hereunder to the extent that the indemnified Party demonstrates
that the amount the indemnified Party is entitled to recover exceeds the actual
damages to the indemnifying Party caused by such failure to so notify within ten
(10) days. The indemnifying Party may elect to compromise or defend any such
asserted liability and to assume all obligations contained in this Section 6.2
to indemnify the indemnified Party by a delivery of notice of such election
("NOTICE OF ELECTION") within ten (10) days after receipt of the Notice of
Action. Upon
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delivery of the Notice of Election, the indemnifying Party shall be entitled to
take control of the defense and investigation of such lawsuit or action and to
employ and engage attorneys of its own choice to handle and defend the same, at
the indemnifying Party's sole cost, risk and expense, and such indemnified Party
shall cooperate in all reasonable respects, at the indemnifying Party's sole
cost, risk and expense, with the indemnifying Party and such attorneys in the
investigation, trial, and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified Party may, at its own
cost, risk and expense, participate in such investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. If the Notice of
Election is delivered to the indemnified Party, the indemnified Party shall not
pay, settle or compromise such claim without the indemnifying Party's consent,
which consent shall not be unreasonably withheld. If the indemnifying Party
elects not to defend the claim of the indemnified Party or does not deliver to
the indemnified Party a Notice of Election within ten (10) days after delivery
of the Notice of Action, the indemnified Party may, but shall not be obligated
to defend, or the indemnified Party may compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf, for the
account, and at the risk, of the indemnifying Party.
D. THIRD PARTY CLAIMS. The provisions of this Section 6.2 are not
limited to matters asserted by the Parties, but cover costs, losses,
liabilities, damages, lawsuits, claims and expenses incurred in connection with
third party claims.
E. LIMITATION ON INDEMNIFICATION. Notwithstanding any provision
contained in this Agreement, neither Buyer nor Seller, nor any Affiliate of
either, shall be required to pay an indemnified Party or any Affiliate thereof
any amount with respect to any claim for Damages under this Section 6.2 with
respect to any breach of any warranty or the inaccuracy of any representation
contained in this Agreement ("REPRESENTATION AND WARRANTY DAMAGES"), until the
Representation and Warranty Damages which the indemnified Party and its
Affiliates suffered under this Agreement aggregate at least $150,000 (the
"THRESHOLD"), at which time and in such event the indemnified Party or Affiliate
shall be entitled to receive payment for all of the aggregate Representation and
Warranty Damages to the extent they exceed the Threshold. Furthermore, the
maximum aggregate amount for which the Buyer or the Seller and their respective
Affiliates shall be liable for any and all claims of Representation and Warranty
Damages by the other Party and its Affiliates hereunder shall be $7,500,000.
F. CONSEQUENTIAL DAMAGES. Neither Seller nor Buyer, nor any
Affiliates of Seller or Buyer, shall in any way be liable to or indemnify the
other for such Party's damages arising out of any loss or interruption of
business, profits, business opportunities or goodwill, loss of use of
facilities, cost of capital, claims of customers, or any other indirect, special
or consequential damages or any cost or expense related to such damages. The
limitation against both liability and indemnification contained herein shall
apply whether the action in which recovery of damages is sought is based on
contract, tort (including sole, concurrent or other negligence and strict
liability), statute or otherwise. To the extent permitted by law, any statutory
remedies which are inconsistent with the provisions of these terms are waived.
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G. OTHER LIMITATIONS ON BUYER'S DAMAGES. Seller shall not in any way
be liable to or indemnify Buyer for Damages to the extent (a) caused by Buyer,
its employees, agents, contractors, subcontractors, tenants or any third party
on or after the Effective Date; or (b) recovered or recoverable from or against
any third party (including any insurance proceeds) unless it is conclusively
determined that recovery from such third party cannot be made within a
reasonable period of time.
H. OTHER LIMITATIONS ON SELLER'S DAMAGES. Buyer shall not in any way
be liable to or indemnify Seller for Damages to the extent (a) caused by Seller,
its employees, agents, contractors, subcontractors, tenants or any third party
before the Effective Date; or (b) recovered or recoverable from or against any
third party (including any insurance proceeds) unless it is conclusively
determined that recovery from such third party cannot be made within a
reasonable period of time.
I. EXCLUSIVE REMEDY. The remedies of Buyer and Seller provided for
under this Article VI shall be the sole and exclusive remedies of the Parties
with respect to the matters covered by this Article. Without limiting the
generality or effect of the foregoing, as a material inducement to the other
Party entering into this Agreement, except for the remedies set forth in Article
VI, each of the Parties hereby waives any claim or cause of action which it
might assert under the common law, federal, state or foreign securities, trade
regulation, environmental or other law, including, but not limited to, CERCLA,
RCRA, and any comparable state laws, for which a remedy is provided in this
Article VI.
J. MEDIATION. The parties agree that prior to any litigation under
this Agreement, the Parties will submit all disputes to non-binding mediation by
a third party mutually acceptable to both Parties.
K. ASSIGNMENT OF CLAIMS. In the event that any of the Damages for
which an indemnifying Party is responsible or allegedly responsible hereunder
are recoverable or potentially recoverable against any third party and payment
is made by the indemnifying Party to the indemnified Party notwithstanding the
provisions of Sections 6.2(G) and 6.2(H), as applicable, then, the indemnified
Party shall assign any and all rights that it may have that are related in any
fashion to the Damages or the facts or circumstances giving rise thereto to the
indemnifying Party as a condition to any payment due under this Article VI, or,
if such rights are not assignable under applicable law or otherwise, the
indemnified Party hereunder shall attempt in good faith to collect any and all
damages and losses on account thereof from such third party for the benefit of,
and at the expense and direction of, the indemnifying Party.
ARTICLE VII
MISCELLANEOUS
7.1 FEES. Except as expressly set forth herein to the contrary, each
Party shall be responsible for all costs, fees and expenses (including attorney
and accountant fees and
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expenses) paid or incurred by such Party in connection with the preparation,
negotiation, execution, delivery and performance of this Agreement, or otherwise
in connection with the transactions contemplated hereby.
7.2 MODIFICATION OF AGREEMENT. This Agreement may be amended or
modified only in writing and signed by the Parties.
7.3 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed during regular
business hours during a business day to the appropriate location described
below, or three (3) business days after posting thereof by United States
first-class, registered or certified mail, return receipt requested, with
postage and fees prepaid and addressed as follows:
IF TO BUYER: Lasermedics, Inc.
Attn: Mr. Michael M. Barbour
President
2427 FM 1092
Missouri City, Texas 77459
Telephone Number (713) 261-5079
Telefax Number (713) 261-5165
With copy to: Robert G. Reedy, Esq.
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Telephone Number (713) 226-0600
Telefax Number (713) 228-1331
IF TO SELLER: Maxxim Medical, Inc.
c/o Mr. Kenneth W. Davidson
Chairman of the Board, President
and Chief Executive Officer
104 Industrial Blvd.
Sugar Land, Texas 77478
Telephone Number (713) 240-5588
Telefax Number (713) 240-9123
With copy to: Mr. J. Randolph Ewing, Esq.
Boyer, Ewing & Harris Incorporated
Nine Greenway Plaza, Suite 3100
Houston, Texas 77046
Telephone Number (713) 871-2025
Telefax Number (713) 871-2024
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Any Party at any time by furnishing notice to the other Party in the manner
described above may designate additional or different addresses for subsequent
notices or communications.
7.4 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not invalidate or affect the enforceability of
any other provision of this Agreement.
7.5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the
Schedules attached hereto and incorporated herein by reference sets forth the
entire agreement between the Parties with respect to the subject matter hereof.
This Agreement shall be binding upon and shall inure to the benefit of the
Parties and their respective successors and assigns.
7.6 WAIVER. No delay in the exercise of any right under this
Agreement shall waive such rights. Any waiver, to be enforceable, must be in
writing and signed by the Party against which the waiver is subject to be
enforced.
7.7 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Texas (other than its
choice of law principles).
7.8 ASSIGNMENT. Neither Party may assign this Agreement or any
interest herein without the prior written consent of the other Party. Any
attempted assignment by either Party of their rights or obligations without such
consent shall be null and void. Notwithstanding the foregoing, either Party may
assign its rights, duties, and obligations under this Agreement to an Affiliate,
in which event such Affiliate shall be entitled to enforce all of such
assignor's rights thereunder; provided, however, that in the event of any such
assignment, the assignor shall remain liable. The Seller hereby acknowledges and
consents to the Buyer's collateral assignment of its rights under this Agreement
(and all agreements, instruments and other documents executed and delivered in
connection herewith) to the Senior Lender, such assignment being effective as of
the date hereof. Reference to any of the Parties in this Agreement shall be
deemed to include the successors and permitted assigns of such Party.
7.9 HEADINGS. Headings in this Agreement are for convenience only
and shall not affect the interpretation of this Agreement.
7.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to
this Agreement are and shall be hereby incorporated in and made a part of this
Agreement.
7.11 SPECIFIC PERFORMANCE; REMEDIES. Each of the Parties hereby
agrees that the transactions contemplated by this Agreement are unique, and that
each Party shall have, in addition to any other legal or equitable remedy
available to it, the right to enforce this Agreement by decree of specific
performance. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or
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prevailing Party or Parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding in addition to any
other remedies to which it or they may be entitled at law or equity. Except as
otherwise provided in Article VI of this Agreement, the rights and remedies
granted herein are cumulative and not exclusive of any other right or remedy
granted herein or provided by law.
7.12 RIGHTS AND LIABILITIES OF PARTIES. Except as provided in
Article VI of this Agreement, nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the Parties and their respective successors
and assigns, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third persons to any Party to this Agreement,
nor shall any provision give any third person any right of subrogation or action
over against any Party to this Agreement.
7.13 SURVIVAL. This Agreement, including but not limited to all
covenants, warranties, representations and indemnities contained herein, shall
survive the Closing (with the representations and warranties surviving in
accordance with Section 6.1 of this Agreement), and all other documents,
instruments or agreements relating to the Assets, the Business and the
transactions contemplated herein, and shall not be deemed merged therein.
7.14 COUNTERPARTS. This Agreement 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 agreement.
7.15 PRESS RELEASE. Neither Party shall issue any press release or
make any public statement regarding the transactions contemplated hereby without
the prior written approval of the other Party except as may be otherwise
required by law.
7.16 MAINTENANCE OF RECORDS. To the extent reasonably required by
Seller and Buyer or mandated by a regulatory or governmental agency or legal
process:
(a) Each Party shall allow the other Party and its agents access to
all business records and files (including tax records, personnel records
and medical records) of Seller related to the Business which relate to
periods prior to the Effective Date, upon reasonable advance notice during
normal working hours at any location where such records are stored, and
such Party shall have the right, at its own expense, to make copies of any
such records and files, provided however, that any such access or copying
shall be had or done in such a manner so as not to interfere with the
normal conduct of business; and
(b) Each Party shall make available to the other Party upon written
request: (a) personnel of the Business to assist such Party in locating
and obtaining records and files maintained by such Party for periods prior
to the Effective Date; and (b) any personnel of the Business whose
assistance or participation is reasonably required by such Party in
anticipation of, preparation for, or the prosecution or defense of
existing or future
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litigation, tax returns or other matters, in which such Party is involved,
or in order to address any liability of such Party pertaining to the
Business; provided, however, that the furnishing Party shall be reimbursed
for the reasonable costs of providing such benefits measured by the salary
and benefits paid to the employees providing such service.
(c) Each Party shall preserve all records in its possession which
relates to the Business or the Assets for a period of not less than seven
(7) years. Subsequent to the termination of such seven (7) year period,
neither Party shall destroy or otherwise dispose of any such records
without first giving the other Party ninety (90) days prior notice during
which period the other Party may remove any or all of such records at its
expense.
Seller covenants and agrees that all information furnished to the Seller after
the Effective Date or any other person for the benefit of Seller pursuant hereto
will be kept confidential by Seller to the extent reasonably practicable or such
other person and will not be used in any manner adverse to Buyer or the
Business.
EXECUTED AND DELIVERED EFFECTIVE in multiple counterparts effective
as of the date first written above.
BUYER:
LASERMEDICS, INC.
a Texas corporation
By: Michael M. Barbour
President
SELLER:
MAXXIM MEDICAL, INC.,
a Delaware corporation
By: Kenneth W. Davidson,
Chairman of the Board, President
& Chief Executive Officer
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SCHEDULES
1.19 Employees
1.32 Permitted Encumbrances
2.1(a) Tangible Personal Property
2.1(b) General Intangibles
2.1(c) Contracts; Assignability
2.1(d) Business Licenses
2.1(e)-1 Belton Real Property
2.1(e)-2 Sugar Land Real Property
2.2 Excluded Assets
2.10 Estimated Balance Sheet
3.1 Encumbrances on Assets
3.4 Exceptions to Tangible Personal Property
3.6 Employment Contracts
3.8 Litigation
3.10 Authority
3.14 Leased Assets
3.15 Employee Benefit Plans
3.16 Consents and Approvals
4.5 Buyer's Benefit Plans
4.6 Beneficial Common Stock Ownership
4.9 Absence of Certain Changes or Events
4.10 Operations of Buyer
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LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
LASERMEDICS, INC.
DATED
APRIL 30, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. DEFINITIONS............................................. 1
1.1. DEFINED TERMS........................................... 1
1.2. ACCOUNTING TERMS........................................ 12
1.3. SINGULAR AND PLURAL..................................... 12
SECTION 2. LOANS, INTEREST AND FEES................................ 12
2.1. LOANS................................................... 12
2.1.1. REVOLVING LOANS.............................. 12
2.1.2. TERM LOAN A.................................. 13
2.1.3. TERM LOAN B.................................. 13
2.2. BORROWING PROCEDURES.................................... 13
2.2.1. NOTICE....................................... 13
2.2.2. BANK OBLIGATIONS............................. 13
2.3. NOTES................................................... 13
2.3.1. REVOLVING NOTE............................... 13
2.3.2. TERM NOTE A.................................. 14
2.3.3. TERM NOTE B.................................. 14
2.4. INTEREST; PAYMENTS...................................... 14
2.4.1. REVOLVING NOTE............................... 14
2.4.2. TERM NOTE A.................................. 14
2.4.3. TERM NOTE B.................................. 15
2.4.4. TERM NOTE B ANNUAL CALL PROVISIONS........... 15
2.5. MAXIMUM RATE............................................ 15
2.6. FEES.................................................... 17
2.6.1. PREPARATION FEES............................. 17
2.6.2. COMMITMENT FEE............................... 17
2.7. BASIS OF COMPUTATION.................................... 17
2.8. MANDATORY PREPAYMENTS................................... 17
2.9. BASIS OF PAYMENTS; APPLICATION.......................... 18
SECTION 3. SECURITY................................................ 18
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK............. 18
4.1. CONDITIONS TO FIRST DISBURSEMENT........................ 18
4.1.1. DOCUMENTS EXECUTED AND FILED................. 18
4.1.2. BORROWING AUTHORIZATIONS..................... 19
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4.1.3. CERTIFIED ARTICLES AND BYLAWS................ 19
4.1.4. CERTIFICATES OF EXISTENCE, GOOD
STANDING AND QUALIFICATION.................. 19
4.1.5. AUDITS, EQUIPMENT APPRAISALS................. 19
4.1.6. UCC, PATENT AND TRADEMARK LIEN SEARCH........ 19
4.1.7. HAZARD INSURANCE............................. 20
4.1.8. PURCHASE AGREEMENT AND SUBORDINATED
DEBT DOCUMENTS............................. 20
4.1.9. APPROVAL OF BANK COUNSEL..................... 20
4.1.10. FINANCIAL STATEMENTS......................... 20
4.1.11. OTHER INFORMATION AND DOCUMENTATION.......... 20
4.2. CONDITIONS TO ALL DISBURSEMENTS AND ISSUANCES........... 20
4.2.1. CERTIFICATE.................................. 20
4.2.2. LETTERS OF CREDIT............................ 21
4.2.3. BANK SATISFACTION............................ 21
SECTION 5. WARRANTIES AND REPRESENTATIONS.......................... 21
5.1. CORPORATE EXISTENCE AND POWER........................... 21
5.2. AUTHORIZATION AND APPROVALS............................. 21
5.3. VALID AND BINDING AGREEMENT............................. 22
5.4. ACTIONS, SUITS OR PROCEEDINGS........................... 22
5.5. SUBSIDIARIES............................................ 22
5.6. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS...... 22
5.7. ACCOUNTING PRINCIPLES................................... 22
5.8. NO ADVERSE CHANGES...................................... 23
5.9. CONDITIONS PRECEDENT.................................... 23
5.10. TAXES................................................... 23
5.11. COMPLIANCE WITH LAWS.................................... 23
5.12. INDEBTEDNESS............................................ 23
5.13. MATERIAL AGREEMENTS..................................... 23
5.14. MARGIN STOCK............................................ 24
5.15. PENSION FUNDING......................................... 24
5.16. MISREPRESENTATION....................................... 24
5.17. BORROWING BASE COMPONENTS............................... 24
5.17.1. ELIGIBLE ACCOUNTS............................ 24
5.17.2. ELIGIBLE INVENTORY........................... 26
5.18. ASSUMED NAMES; OTHER NAMES.............................. 26
SECTION 6. AFFIRMATIVE COVENANTS................................... 27
6.1. FINANCIAL AND OTHER INFORMATION......................... 27
6.1.1. ANNUAL FINANCIAL REPORTS..................... 27
6.1.2. MONTHLY FINANCIAL STATEMENTS................. 27
6.1.3. NO DEFAULT CERTIFICATE....................... 27
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6.1.4. AGING AND BORROWING BASE CERTIFICATE......... 28
6.1.5. SEC REPORTS.................................. 28
6.1.6. HENLEY AUDITED FINANCIAL STATEMENTS.......... 28
6.1.7. INVENTORY NOT IN WAREHOUSE................... 28
6.1.8. ADVERSE EVENTS............................... 29
6.1.9. MANAGEMENT LETTERS........................... 29
6.1.10. AUDITS....................................... 29
6.1.11. TAX RETURNS.................................. 29
6.1.12. OTHER INFORMATION AS REQUESTED............... 29
6.2. INSURANCE............................................... 29
6.3. TAXES................................................... 30
6.4. MAINTAIN CORPORATION AND BUSINESS....................... 30
6.5. MAINTAIN TANGIBLE NET WORTH............................. 30
6.6. MAINTAIN LEVERAGE RATIO................................. 30
6.7. MAINTAIN WORKING CAPITAL................................ 31
6.8. FIXED CHARGE COVERAGE RATIO............................. 31
6.9. INTEREST COVERAGE RATIO................................. 31
6.10. QUICK RATIO............................................. 31
6.11. CURRENT RATIO........................................... 31
6.12. ERISA................................................... 31
6.13. USE OF LOAN PROCEEDS.................................... 31
6.14. KEY AGREEMENTS.......................................... 31
6.15. LOCKBOX DEPOSITS........................................ 31
6.16. NOTICE OF EVENTS........................................ 31
6.17. TITLE INSURANCE POLICY.................................. 32
6.18. CERTIFICATE OF TITLE.................................... 32
6.19. CERTIFICATES OF GOOD STANDING AND QUALIFICATION......... 32
6.20. EQUIPMENT AUDITS........................................ 32
6.21. REAL ESTATE AUDITS...................................... 33
6.22. CONSENTS TO ASSIGNMENTS................................. 33
SECTION 7. NEGATIVE COVENANTS...................................... 33
7.1. CAPITAL EXPENDITURES; FDA EXPENDITURES.................. 33
7.2. STOCK ACQUISITION....................................... 33
7.3. LIENS AND ENCUMBRANCES.................................. 33
7.4. INDEBTEDNESS............................................ 33
7.5. EXTENSION OF CREDIT..................................... 34
7.6. GUARANTEE OBLIGATIONS................................... 34
7.7. SUBORDINATE INDEBTEDNESS................................ 34
7.8. PROPERTY TRANSFER, MERGER AND FORMATION
OF SUBSIDIARIES....................................... 34
7.9. ACQUIRE SECURITIES...................................... 35
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7.10. PENSION PLANS........................................... 35
7.11. MISREPRESENTATION....................................... 35
7.12. MARGIN STOCK............................................ 35
7.13. COMPLIANCE WITH ENVIRONMENTAL LAWS...................... 35
7.14. DIVIDENDS............................................... 35
7.15. PURCHASE AGREEMENT; SUBORDINATED DEBT DOCUMENTS......... 35
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF
PROCEEDS................................................ 36
8.1. EVENTS OF DEFAULT....................................... 36
8.1.1. FAILURE TO PAY MONIES DUE.................... 36
8.1.2. MISREPRESENTATION............................ 36
8.1.3. NONCOMPLIANCE WITH BANK AGREEMENTS........... 36
8.1.4. OTHER DEFAULTS............................... 36
8.1.5. JUDGMENTS.................................... 36
8.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC......... 36
8.1.7. CHANGE OF CONTROL OR MANAGEMENT.............. 37
8.1.8. INADEQUATE FUNDING OR TERMINATION OF
EMPLOYEE/BENEFIT PLAN(S)................... 37
8.1.9. OCCURRENCE OF CERTAIN REPORTABLE EVENTS...... 37
8.1.10. LOSS OR DAMAGE............................... 37
8.1.11. ADVERSE CHANGE............................... 37
8.1.12. PBGC......................................... 37
8.2. REMEDIES................................................ 38
8.3. APPLICATION OF PROCEEDS................................. 38
8.4. CUMULATIVE REMEDIES..................................... 38
SECTION 9. MISCELLANEOUS........................................... 38
9.1. INDEPENDENT RIGHTS...................................... 38
9.2. COVENANT INDEPENDENCE................................... 39
9.3. WAIVERS AND AMENDMENTS.................................. 39
9.4. GOVERNING LAW........................................... 39
9.5. SURVIVAL OF WARRANTIES, ETC............................. 39
9.6. ATTORNEYS' FEES......................................... 39
9.7. PAYMENTS ON SATURDAYS, ETC.............................. 39
9.8. BINDING EFFECT.......................................... 39
9.9. MAINTENANCE OF RECORDS.................................. 40
9.10. NOTICES................................................. 40
9.11. COUNTERPARTS............................................ 40
9.12. HEADINGS................................................ 40
9.13. CAPITAL ADEQUACY........................................ 40
9.14. COSTS AND ATTORNEYS' FEES............................... 41
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9.15. GENDER.................................................. 42
9.16. JOINT AND SEVERAL OBLIGATIONS........................... 42
9.17. SEVERABILITY OF PROVISIONS.............................. 42
9.18. ASSIGNMENT.............................................. 43
9.19. WAIVER OF JURY TRIAL.................................... 43
EXHIBITS:
EXHIBIT A - Borrowing Base Certificate
EXHIBIT B - Revolving Note
EXHIBIT C - Term Note A
EXHIBIT D - Term Note B
EXHIBIT E - Officer's Certificate
EXHIBIT F - Subordination Agreement
EXHIBIT G - Compliance Certificate
SCHEDULES:
SCHEDULE 5.4 - Actions, Suits or Proceedings
SCHEDULE 5.6 - Existing Liens
SCHEDULE 5.11 - Compliance With Laws
SCHEDULE 5.12 - Indebtedness
SCHEDULE 5.13 - Material Agreements
SCHEDULE 5.17.2 - Location of Inventory
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LOAN AGREEMENT
THIS LOAN AGREEMENT is made and delivered this 30th day of April, 1996,
by and between LASERMEDICS, INC., a Texas corporation, and COMERICA BANK-TEXAS,
a Texas banking corporation.
WITNESSETH:
WHEREAS, the Borrower desires to (a) borrow from the Bank from time to
time an amount not to exceed in the aggregate $4,000,000 for the working capital
needs of the Borrower and establish a sublimit under such facility for the
issuance of letters of credit, (b) make a $893,000 term loan and (c) make
another $1,616,000 term loan; and
WHEREAS, the Bank is willing to supply such financing subject to the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
SECTION 1.DEFINITIONS
1.1. DEFINED TERMS. As used herein, the following terms shall have the
following respective meanings:
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" and "INVENTORY" shall have the
meanings assigned to them in the UCC on the date of this Agreement.
"AGREEMENT" shall mean this Loan Agreement, as the same may be amended,
restated and modified from time to time.
"APPLICATIONS" shall have the meaning ascribed to such term in the
Letter of Credit Agreement.
"BANK" shall mean Comerica Bank-Texas, a Texas banking corporation.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWER" shall mean Lasermedics, Inc., a Texas corporation.
"BORROWING AUTHORIZATION" shall mean (i) with respect to a corporation,
a certificate of the Secretary or an Assistant Secretary of a corporation as to
the resolutions of the Board of
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Directors of such corporation authorizing the execution, delivery and
performance of the documents to be executed by such corporation; the incumbency
and signature of the officer of such corporation executing such documents on
behalf of such corporation, and the Organizational Documents of such corporation
and (ii) with respect to a partnership, joint venture or other non- individual
Person, such written instruments as shall be required by the Bank authorizing
the execution, delivery and performance of the documents to be executed by such
Person; the incumbency and signature of the representative of such Person
executing such documents on behalf of such Person, and the Organizational
Documents of such Person.
"BORROWING BASE" shall mean, on any day the sum of:
(a) eighty percent (80%) of the aggregate outstanding principal balance
of the Borrower's Eligible Accounts (other than Home Care Receivables)
PLUS
(b) sixty percent (60%) of the aggregate outstanding principal balance
of the Borrower's Home Care Receivables; PROVIDED, that in no event may
the Medicare Receivables component of Home Care Receivables exceed
$500,000, PLUS
(c) thirty-five percent (35%) of the book value of the Borrower's
Eligible Inventory (exclusive of Tens Units) PLUS
(d) the lesser of (i) twenty-five percent (25%) of the Tens Units which
qualify as Eligible Inventory, and (ii) $500,000.
Notwithstanding the foregoing, in no event may the Borrower's Eligible
Inventory component of the Borrowing Base exceed at any time fifty
percent (50%).
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
EXHIBIT A to this Agreement, completed in all appropriate respects and executed
by the chief executive officer, chief financial officer, or treasurer of
Borrower or by any other officer of Borrower designated in writing by any of the
chief executive officer, chief financial officer or treasurer, such designation
to be acceptable to Lender in its sole discretion, and setting forth Borrower's
computation of the Borrowing Base as of the date of such certificate.
"BUSINESS DAY" shall mean a day on which the Bank is open to carry on
its normal commercial lending business.
"CAPITAL EXPENDITURES" SHALL MEAN, AS TO ANY PERSON AND AS OF THE DATE
OF DETERMINATION, EXPENDITURES FOR FIXED OR CAPITAL ASSETS, ALL DETERMINED IN
ACCORDANCE WITH GAAP.
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"CASH FLOW" shall mean (without duplication), as to any Person and for
any period, the sum of (a) Net Income before taxes AND (b) the sum of (1)
depreciation, depletion, obsolescence of property, and (2) interest expense, all
determined in accordance with GAAP.
"COLLATERAL" shall mean any property of any Company in the possession
of the Bank, any amount in any deposit account of any Company with the Bank and
all of the Borrower's Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments and Inventory, wherever located and
whether now owned or hereafter acquired, together with all replacements thereof,
substitutions therefor and all proceeds and products thereof.
"COMMITMENT AMOUNT" shall mean $4,000,000.
"COMPANIES" shall mean the Borrower and all of its Subsidiaries, and
"COMPANY" shall mean any one of them.
"CONTRACT RATE" shall mean, as of any date of determination, the annual
rate of interest which, pursuant to SECTION 2.4 of this Agreement would be
applicable to the Notes if the annual rate of interest were determined without
the Maximum Legal Rate limitation.
"COVER" shall have the meaning ascribed to such term in the Letter of
Credit Agreement.
"CURRENT ASSETS" shall mean, as of any applicable date of
determination, all cash, nonaffiliated customer receivables, United States
government securities and inventories of a Person that should be classified as
current in accordance with GAAP.
"CURRENT LIABILITIES" shall mean, as of any applicable date of
determination, all liabilities of a Person that should be classified as current
in accordance with GAAP.
"CURRENT MATURITIES OF CAPITAL LEASES" shall mean, as of any date of
determination, all current maturities of capital leases of a Person as
determined in accordance with GAAP.
"CURRENT MATURITIES OF LONG TERM DEBT" shall mean, as of any date of
determination, all current maturities of long term debt of a Person as
determined in accordance with GAAP.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
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"DISBURSEMENT DATE" shall mean each date upon which the Bank makes a
loan to the Borrower under SECTION 2.1 of this Agreement.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Borrower for which
each of the warranties set forth in SECTION 5.17.1 of this Agreement shall be
true (as of any applicable date of determination) and which has been represented
by the Borrower to be an "ELIGIBLE ACCOUNT" on the Borrowing Base Certificate.
"ELIGIBLE INVENTORY" shall mean that Inventory of the Borrower for
which each of the warranties set forth in SECTION 5.17.2 of this Agreement shall
be true (as of any applicable date of determination) and which has been
represented by the Borrower to be an item of "ELIGIBLE INVENTORY" on a Borrowing
Base Certificate.
"ENVIRONMENTAL LAWS" shall mean all requirements imposed by any law
(including The Resource Conservation and Recovery Act and The Comprehensive
Environmental Response, Compensation, and Liability Act), rule, regulation or
order of any governmental authority in effect at the applicable time which
relate to (i) noise; (ii) pollution, protection or clean-up of the air, surface
water, ground water or land; (iii) solid, gaseous or liquid waste generation,
recycling, reclamation, treatment, storage, disposal or transportation; (iv)
exposure to Hazardous Substances; (v) the safety or health of employees or (vi)
regulation of the manufacture, processing, distribution in commerce, use,
discharge, release, threatened release, emission or storage of Hazardous
Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in SECTION 8.1 of this Agreement.
"FDA EXPENDITURES" shall mean any and all costs and expenses
(including, without limitation, expenses for travel, outside consultants and
engineers, expert witnesses, attorneys and other outside professionals)
associated with seeking approval of laser-related products from the United
States Food and Drug Administration.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of any Company) which have been
furnished to the Bank for the purpose of, or in connection with, this Agreement
and the transactions contemplated hereby.
"FINANCING STATEMENTS" shall mean UCC financing statements describing
the Bank as secured party and the Borrower as debtor covering the Collateral and
otherwise in such form, for filing in such jurisdictions and with such filing
offices as the Bank shall reasonably deem necessary or advisable.
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"FIXED CHARGE COVERAGE RATIO" shall mean, as of any day and for any
Person, the ratio of (a) Cash Flow for the most recently ended 12 month period
as of such day to (b) an amount equal to the sum of (1) Current Maturities of
Long Term Debt as of the end of such 12 month period, (2) Current Maturities of
Capital Leases as of the end of such 12 month period, (3) interest expense for
such 12 month period, (4) taxes for such 12 month period, and (5) non-financed
Capital Expenditures for such 12 month period.
"GAAP" shall mean those principles and practices (a) which are
recognized as such by the Financial Accounting Standards Board, (b) which are
applied for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the most recent
audited financial statements of the relevant Person furnished to the Bank, and
(c) which are consistently applied for all periods after the date hereof so as
to reflect properly the financial condition, and results of operations and
changes in financial position, of such Person. If any change in any accounting
principle or practice is required by the Financial Accounting Standards Board in
order for such principle or practice to continue as a GAAP or practice, all
reports and financial statements required hereunder may be prepared in
accordance with such change only after written notice of such change is given to
the Bank.
"HAZARDOUS SUBSTANCE" shall mean any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other material which
is or becomes listed, regulated, or addressed under any Environmental Law,
including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"HOME CARE RECEIVABLES" shall mean those Eligible Accounts arising in
connection with the sale, lease or other form of rental of Inventory of the
Borrower to or for use by home facility patients and users, including, without
limitation, the Medicare Receivables.
"INDEBTEDNESS" shall mean all loans, advances and indebtedness of the
Borrower to the Bank under this Agreement, all Letters of Credit Liabilities,
and all other indebtedness, obligations and liabilities whatsoever of the
Borrower to the Bank, whether matured or unmatured, liquidated or unliquidated,
direct or indirect, absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising pursuant to the Loan Documents.
"INTEREST COVERAGE RATIO" shall mean, for any Person and as of any day,
the ratio of (a) Cash Flow for the most recently ended 12 month period as of
such day to (b) interest expense for such 12 month period.
"KEY AGREEMENTS" shall mean any contracts or agreements between the
Borrower and customers of the Borrower under which or pursuant to which the
Borrower is reasonably expected to derive five percent (5%) or more of its gross
revenues during any 12-month period, and any and all renewals, extensions and
modifications thereof.
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"LETTER OF CREDIT" shall have the meaning ascribed to such term in the
Letter of Credit Agreement.
"LETTER OF CREDIT AGREEMENT" shall mean the Letter of Credit Agreement
dated concurrently herewith executed by and between the Borrower and the Bank,
as it may from time to time be amended, modified, restated or supplemented.
"LETTER OF CREDIT DOCUMENTS" shall mean the Letter of Credit Agreement,
the Letters of Credit and the Applications.
"LETTER OF CREDIT LIABILITIES" shall have the meaning ascribed to such
term in the Letter of Credit Agreement.
"LIEN" means any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions.
"LOAN DOCUMENTS" shall mean any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to all or
any part of the Indebtedness, including, without limitation, the Notes, this
Agreement, the Letter of Credit Documents, the Security Documents, all
instruments, certificates and agreements now or hereafter executed or delivered
to the Bank pursuant to any of the foregoing or in connection with the Loans or
the Letters of Credit or any commitment regarding the Loans or the Letters of
Credit and all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.
"LOANS" shall mean the Revolving Loans, Term Loan A and Term Loan B.
"LOCKBOX" shall mean a post office box number established by the
Borrower with the Bank to which all payments by the Borrower's Account debtors
are to made.
"LOCKBOX AGREEMENT" shall mean collectively, any and all agreements
between the Borrower and the Bank establishing a Lockbox, as the same may be
amended, restated, replaced, substituted for or supplemented from time to time.
"MAXIMUM AVAILABLE AMOUNT" shall mean the lesser of (1) the Commitment
Amount and (2) the Borrowing Base.
"MAXIMUM LEGAL RATE" shall have the meaning set forth in SECTION 2.5 of
this Agreement.
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"MAXXIM" shall mean Maxxim Medical, Inc., a Delaware corporation.
"MEDICARE RECEIVABLES" shall mean those Eligible Accounts of which the
Account debtor is a governmental authority or any agency thereof and which are
governed by the United States Social Security Act, as amended, AND/OR THE TEXAS
HUMAN RESOURCES ACT, AS AMENDED, and which such Eligible Accounts are not
subject to the Federal Assignment of Claims Act or of a type which applicable
federal or Texas law prohibits the taking of a security interest therein.
"MORTGAGE" shall mean the Deed of Trust and Security Agreement dated
concurrently herewith executed by the Borrower in favor of Gary W. Orr, Trustee
for the benefit of the Bank, as the same may from time to time be amended,
modified, restated or supplemented.
"NET INCOME" shall mean, for any Person and as of any date of
determination, gross revenues and other proper income credits, less all proper
income charges, including taxes on income, all determined in accordance with
GAAP.
"NOTES" shall mean the Revolving Note and Term Note A and Term Note B.
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a corporation,
the certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Bank.
"PAST DUE RATE" shall mean on any day the lesser of (a) Prime Rate for
such day plus five percent (5%) per annum and (b) the Maximum Legal Rate on such
day.
"PATENT SECURITY AGREEMENT" shall mean, collectively, that certain
Patent Security Agreement dated concurrently herewith executed by the Borrower
and the Bank, and all additional patent security agreements executed as security
for the Indebtedness and all related recordation form cover sheets and any and
all amendments, modifications, renewals, extensions and supplements thereof or
thereto from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
person succeeding to the present powers and functions of the Pension Benefit
Guaranty Corporation.
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"PERMITTED INVESTMENTS" shall mean:
(a) expense accounts for and other advances to directors,
officers and employees in the ordinary course of business up to an
aggregate amount of $25,000 outstanding at any time;
(b) marketable obligations issued or unconditionally
guaranteed by the United States Government or issued by any of its
agencies and backed by the full faith and credit of the United States
of America, in each case maturing within one year from the date of
acquisition (and investments in mutual funds investing primarily in
those obligations);
(c) short-term investment grade domestic and eurodollar
certificates of deposit or time deposits that are fully insured by the
Federal Deposit Insurance Corporation or are issued by commercial banks
whether domestic or foreign having combined capital, surplus, and
undivided profits of not less than $100,000,000 (as shown on its most
recently published statement of condition;
(d) commercial paper and similar obligations rated "P-1" or
better by Moody's Investors Service, Inc., or "A-1" or better by
Standard & Poors Corporation;
(e) readily marketable tax-free municipal bonds of a domestic
issuer rated "AAA" or better by Moody's Investors Service, Inc., or
"AAA" or better by Standard & Poors Corporation, and maturing within
one year from the date of issuance (and investments in mutual funds
investing primarily in those bonds);
(f) readily marketable shares of any money market fund having
total assets in excess of $250,000,000, unless the Bank has disapproved
such fund in writing;
(g) demand deposit accounts maintained in the ordinary course
of business; and
(h) extensions of credit in connection with trade receivables
and overpayments of trade payables, in each case resulting from
transactions in the ordinary course of business.
"PERMITTED LIENS" shall mean:
(i) Liens and encumbrances in favor of the Bank;
(j) Liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and not yet past due or
being contested in good faith by
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appropriate proceedings and, if requested by the Bank, bonded in a
manner satisfactory to the Bank;
(k) Liens not delinquent created by statute in connection with
worker's compensation, unemployment insurance, social security and
similar statutory obligations;
(l) Liens of mechanics, materialmen, carriers, warehousemen or
other like statutory or common law liens securing obligations incurred
in good faith in the ordinary course of business that are not yet due
and payable;
(m) Encumbrances consisting of zoning restrictions,
rights-of-way, easements or other restrictions on the use of real
property, none of which materially impairs the use of such property by
any Company in the operation of the business for which it is used and
none of which is violated in any material respect by any existing or
proposed structure or land use;
(n) the Subordinated Liens;
(o) purchase money Debt to acquire Equipment not exceeding, in
the aggregate, $500,000 outstanding at any one time; and
(p) Existing liens described in SCHEDULE 5.6 attached hereto.
"PERMITTED SUBSIDIARY INVESTMENTS" shall mean, with respect to the
Borrower, loans, advances or extensions of credit to one or more Subsidiaries so
long as the aggregate amount thereof outstanding as of any date of determination
of the Tangible Net Worth of the Borrower and its Subsidiaries does not exceed
five percent (5%) of the aggregate Tangible Net Worth of the Borrower and the
Subsidiaries on a consolidated basis.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision or agency or other entity.
"PRIME RATE" shall mean that annual rate of interest designated and
announced by the Bank as its prime rate and which is changed by the Bank from
time to time. The Prime Rate may not necessarily be the lowest rate charged by
the Bank.
"PURCHASE AGREEMENT" shall mean that certain Agreement of Purchase and
Sale of Assets dated as of , 1996, executed by and between the Borrower and
Maxxim.
"REVOLVING LOAN" shall mean an advance made by the Bank to the Borrower
under SECTION 2.1 of this Agreement on a Disbursement Date.
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"REVOLVING NOTE" shall mean a promissory note conforming to SECTION
2.3.1 of this Agreement and in the form of EXHIBIT B to this Agreement, and any
and all renewals, extensions, modifications, rearrangements and/or replacements
thereof.
"REVOLVING NOTE MATURITY DATE" shall mean two (2) years from the date
hereof or such earlier date as may be designated by the Bank pursuant to SECTION
8.2 hereof.
"SECURITIES OFFERING" shall mean any offering or issuance of a
"security" (as that term is defined in the Securities Act of 1933), whether or
not subject or required to be registered with the Securities and Exchange
Commission or any other governmental authority or agency thereof.
"SECURITY DOCUMENTS" shall mean (a) one or more security agreements
executed by the Borrower in favor of the Bank pursuant to which the Borrower
grants to the Bank a security interest in the Accounts, Chattel Paper,
Documents, Equipment, Fixtures, General Intangibles, Goods, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all proceeds
and products thereof, (b) the Financing Statements, (c) the Mortgage, (d) the
Title Insurance Policy, (e) the Lockbox Agreement and any and all other
documentation reasonably required by Bank to establish a Lockbox with Bank any
and all other security agreements, assignments collateral assignments, pledges,
mortgages, deeds of trust and guaranties from time to time securing the
Indebtedness or any thereof, (f) the Trademark Security Agreements, (g) the
Patent Security Agreements, (h) the Subordination Agreement, and (i) any and all
renewals, extensions, amendments, modifications, replacements, supplements,
substitutions and rearrangements thereof, thereto or therefor.
"SUBORDINATED DEBT DOCUMENTS" shall mean the Subordinated Note, the
Subordinated Security Agreement, the Subordinated Financing Statement and any
and all other documents, instruments, and any and all other papers now or
hereafter governing, evidencing, guaranteeing or securing or otherwise relating
to all or any part of the indebtedness evidenced by the Subordinated Note, and
all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing permitted herein
or in the Subordination Agreement.
"SUBORDINATED FINANCING STATEMENT" shall mean UCC financing statements
describing Maxxim as secured party and the Borrower as debtor covering the
property described in the Subordinated Security Agreement and otherwise.
"SUBORDINATED LIENS" shall mean the Liens arising pursuant to the
Subordinated Security Agreement and expressly made subordinate to the Liens of
the Bank in and to the Collateral pursuant to the Subordination Agreement.
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"SUBORDINATED NOTE" shall mean, collectively, that certain Subordinated
Convertible Promissory Note in the original principal sum of $7,000,000 dated of
even date herewith, executed by the Borrower, payable to the order of Maxxim,
with a final stated maturity of March 1, 2003, together with the "Substitute
Note" (as that term is defined in the Purchase Agreement).
"SUBORDINATED SECURITY AGREEMENT" shall mean that certain Commercial
Security Agreement of even date herewith, executed by the Borrower, as debtor,
and Maxxim, as secured party, covering all or a portion of the Collateral.
"SUBORDINATION AGREEMENT" shall mean that certain Subordination
Agreement substantially in the form of EXHIBIT F attached hereto and
incorporated herein by reference for all purposes, dated concurrently herewith,
by and among the Borrower, the Bank and Maxxim, as the same may be amended,
restated and modified from time to time.
"SUBSIDIARIES" shall mean any corporation of which more than fifty
percent (50%) of the outstanding voting securities shall, as of any applicable
date of determination, be owned directly, or indirectly through one or more
intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, for any Person and as of any
applicable date of determination, tangible net worth of a Person as determined
in accordance with GAAP.
"TANGIBLE NET WORTH STEP-UP" shall mean, on any date it is determined
which occurs on or after February 29, 1996, an amount equal to the seventy-five
percent (75%) of the aggregate amount of Net Income of the Companies earned
during each calendar month occurring after the date hereof which has ended as of
such date of determination.
"TENS UNITS" shall mean transcutaneous electrical nerve stimulation
devices manufactured by the Borrower.
"TERM LOAN A" shall mean the loan described in SECTION 2.1.2 hereof.
"TERM NOTE A" shall mean a promissory note, in the original principal
sum of $893,000, and otherwise in the form of EXHIBIT C to this Agreement, and
any and all renewals, extensions, modifications, rearrangements and/or
replacements thereof.
"TERM NOTE A MATURITY DATE" shall mean five (5) years from the date
hereof or such earlier date as may be designated by the Bank pursuant to SECTION
8.2 hereof.
"TERM LOAN B" shall mean the loan described in SECTION 2.1.3 hereof.
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"TERM NOTE B" shall mean a promissory note, in the original principal
sum of $1,616,000, and otherwise in the form of EXHIBIT D to this Agreement, and
any and all renewals, extensions, modifications, rearrangements and/or
replacements thereof.
"TERM NOTE B MATURITY DATE" shall mean fifteen years from the date
hereof or such earlier date as may be designated by the Bank pursuant to SECTION
8.2 hereof or SECTION 2.4.4 hereof.
"TITLE INSURANCE POLICY" shall mean the policy of title insurance in a
face amounts reasonably satisfactory to the Bank, issued in favor of the Bank by
a title insurance company satisfactory to the Bank and insuring that title to
the property covered by the Mortgage is vested in the Borrower free and clear of
any lien, security interest or any other objection, exception or requirement
other than those permitted hereunder, and that the Mortgage creates a valid
first and prior lien on all such property, subject only to such exceptions as
may be approved in writing by the Bank. The Title Insurance Policy shall contain
a complete and accurate description of the Mortgage, shall specify the recording
and filing information applicable to it and shall describe the property covered
by the Mortgage identically to the description thereof in the Mortgage.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Texas and as amended from time to time.
"WORKING CAPITAL" shall mean as to a Person, the difference of such
Person's Current Assets to its Current Liabilities (including, without
limitation, the Revolving Loans).
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
1.3. SINGULAR AND PLURAL. Where the context herein requires, the
singular number shall be deemed to include the plural, and vice versa.
SECTION 2.LOANS, INTEREST AND FEES.
2.1. LOANS.
2.1.1. REVOLVING LOANS. Subject to the terms and conditions of
this Agreement and the other Loan Documents, the Bank agrees to make
loans to the Borrower on a revolving basis of such amount as the
Borrower shall request pursuant to SECTION ? of this Agreement at any
time from the date of this Agreement until (but not including) the
Revolving Note Maturity Date, up to an aggregate principal amount
outstanding at any time not to exceed the difference of the Maximum
Available Amount then in effect MINUS
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the Letter of Credit Liabilities as of such time, provided that each
Disbursement Date for the Revolving Loans under this Agreement must be
a Business Day.
2.1.2. TERM LOAN A. Subject to the terms and conditions of
this Agreement and the other Loan Documents, the Bank agrees to make a
loan to the Borrower on the date hereof in an amount equal to $893,000.
2.1.3. TERM LOAN B. Subject to the terms and conditions of
this Agreement and the other Loan Documents, the Bank agrees to make a
loan to the Borrower on the date hereof in an amount equal to
$1,616,000.
2.2. BORROWING PROCEDURES.
2.2.1. NOTICE. The Borrower shall give the Bank notice of the
Borrower's desire for a Revolving Loan by 2:00 p.m. (Houston, Texas
time) on the day of the requested Revolving Loan. Such notice shall be
by telephone communication from an officer of the Borrower who has been
given access by the Borrower to a security code given to the Borrower
by the Bank in accordance with a security letter from the Borrower to
the Bank, in form and substance acceptable to the Bank. Such notice
shall specify the proposed Disbursement Date and the principal amount
of the proposed Revolving Loan.
2.2.2. BANK OBLIGATIONS. The Bank agrees to make the Revolving
Loan on the Disbursement Date as set forth in a notice to the Bank from
the Borrower conforming to the requirements of SECTION 2.2.1 by
crediting the Borrower's general deposit account with the Bank in the
amount of such Revolving Loan, provided, however, that the Bank shall
not be so obligated if:
(a) Any of the conditions precedent set forth in
SECTION 4 of this Agreement shall not have been satisfied or
waived by the Bank in accordance with SECTION 9.3 of this
Agreement; or
(b) Such proposed Revolving Loan would cause the
aggregate unpaid principal amount of the Revolving Loans
outstanding under this Agreement to exceed the lesser of the
Commitment Amount or the Borrowing Base, on the Disbursement
Date.
2.3. NOTES.
2.3.1. REVOLVING NOTE. The Revolving Loans shall be evidenced
by the Revolving Note, executed by the Borrower, dated the date of this
Agreement, payable to the Bank on the Revolving Note Maturity Date
(unless sooner accelerated pursuant to
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the terms of this Agreement), and in the principal amount of the
original Commitment Amount. The date and amount of each Revolving Loan
made by the Bank and of each repayment of principal thereon received by
the Bank shall be recorded by the Bank in its records or, at the option
of the Bank, on a schedule attached to the Revolving Note. The
aggregate unpaid principal amount so recorded by the Bank shall
constitute the best evidence of the principal amount owing and unpaid
on the Revolving Note, PROVIDED, HOWEVER, that the failure by the Bank
so to record any such amount or any error in so recording any such
amount (whether on the schedule attached to the Revolving Note or
otherwise) shall not limit or otherwise affect the obligations of the
Borrower under this Agreement or the Revolving Note to repay the
principal amount of all the Revolving Loans together with all interest
accrued or accruing thereon.
2.3.2. TERM NOTE A. Term Loan A shall be evidenced by Term
Note A.
2.3.3. TERM NOTE B. Term Loan B shall be evidenced by Term
Note B.
2.4. INTEREST; PAYMENTS.
2.4.1. REVOLVING NOTE. Subject to the provisions of SECTION
2.5 below, prior to and on the Revolving Loan Maturity Date, the
Revolving Note shall bear interest on the outstanding principal balance
from time to time outstanding at a rate equal to the lesser of (a) the
Maximum Legal Rate, and (b) the Prime Rate in effect from time to time
PLUS one-half of one percent (1/2%) per annum until the Revolving Note
Maturity Date, and after the Revolving Loan Maturity Date, at the Past
Due Rate. Interest shall be payable to the extent then accrued on the
first (1st) day of each calendar month, beginning June 1, 1996, until
the Revolving Loan Maturity Date and from and after such maturity, on
demand. Without notice to the Borrower or any other Person, the rate of
interest applicable to the Revolving Note shall change as and when the
Bank's Prime Rate changes.
2.4.2. TERM NOTE A. Subject to the provisions of SECTION 2.5
below, Term Note A shall bear interest on the outstanding principal
balance from time to time outstanding under Term Note A at a rate equal
to the lesser of (a) the Prime Rate plus one-half of one percent (1/2%)
per annum until the Term Note A Maturity Date, and after the Term Note
A Maturity Date, at the Past Due Rate, and (b) the Maximum Legal Rate.
Term Note A shall be payable in monthly principal installments of
$14,883.34 each, the first of such principal installments being due and
payable on June 1, 1996 and a like principal installment to be due and
payable on the first day of each succeeding calendar month thereafter
until Term Note A (including all accrued interest thereon) has been
fully paid and satisfied; PROVIDED, that on the Term Note A Maturity
Date, all principal of Term Note A and all accrued and unpaid interest
thereon shall be finally due and payable. Accrued interest on Term Note
A shall be due and payable concurrently
14
with and in addition to the principal installments provided for
hereinabove. Without notice to the Borrower or any other person, the
rate of interest applicable to Term Note A shall change as and when the
Bank's Prime Rate changes.
2.4.3. TERM NOTE B. Subject to the provisions of SECTION 2.5
below, Term Note B shall bear interest on the outstanding principal
balance from time to time outstanding under Term Note B at a rate equal
to the lesser of (a) the Prime Rate plus one-half of one percent (1/2%)
per annum until the Term Note B Maturity Date, and after the Term Note
B Maturity Date, at the Past Due Rate, and (b) the Maximum Legal Rate.
Term Note B shall be payable in monthly principal installments of
$8,977.78 each, the first of such principal installments being due and
payable on June 1, 1996 and a like principal installment to be due and
payable on the first day of each succeeding calendar month thereafter
until Term Note B (including all accrued interest thereon) has been
fully paid and satisfied; PROVIDED, that on the Term Note B Maturity
Date, all principal of Term Note B and all accrued and unpaid interest
thereon shall be finally due and payable. Accrued interest on Term Note
B shall be due and payable concurrently with and in addition to the
principal installments provided for hereinabove. Without notice to any
Borrower or any other person, the rate of interest applicable to Term
Note B shall change as and when the Bank's Prime Rate changes.
2.4.4. TERM NOTE B ANNUAL CALL PROVISIONS. Notwithstanding
anything contained in this Agreement, Term Note B or any of the Loan
Documents (and without limiting any other provision contained in any of
them for the acceleration of the maturity of Term Note B), beginning
with the fifth (5th) anniversary date of this Agreement and with
respect to each anniversary date of this Agreement occurring
thereafter, the Bank, in its sole and absolute discretion, with or
without cause, may elect to accelerate the final stated maturity of
Term Note B to any such anniversary date by giving written notice to
the Borrower of such election no later than thirty (30) days prior to
the applicable anniversary date.
2.5. MAXIMUM RATE. The following provisions shall control this
Agreement and the Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement, any Note, any of the other Loan Documents
or in any other agreement between the Borrower and the Bank, or the
occurrence of an Event of Default, or the exercise by the Bank of the
right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this
Agreement or any other agreement between the Borrower and the Bank, or
the arising of any contingency whatsoever, shall entitle the Bank to
collect, in any event, interest exceeding the maximum rate of
nonusurious interest allowed from time to time by applicable state or
federal laws as now or as may hereinafter be in effect (the "MAXIMUM
LEGAL RATE") and
15
in no event shall the Borrower be obligated to pay interest exceeding
such Maximum Legal Rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever
operate to bind, obligate or compel any Company to pay a rate of
interest exceeding the Maximum Legal Rate shall be without binding
force or effect, at law or in equity, to the extent only of the excess
of interest over such Maximum Legal Rate. In the event any interest is
charged in excess of the Maximum Legal Rate (the "EXCESS"), the
Borrower acknowledges and stipulates that any such charge shall be the
result of an accidental and bona fide error, and such Excess shall be,
first, applied to reduce the principal of any obligations due, and,
second, returned to the Borrower, it being the intention of the parties
hereto not to enter at any time into an usurious or otherwise illegal
relationship. The parties hereto recognize that with fluctuations in
the Prime Rate from time to time announced by the Bank such an
unintentional result could inadvertently occur. By the execution of
this Agreement, the Borrower covenants that the credit or return of any
Excess shall constitute the acceptance by the Borrower of such Excess,
and the Borrower shall not seek or pursue any other remedy, legal or
equitable, against the Bank based, in whole or in part, upon the
charging or receiving of any interest in excess of the Maximum Legal
Rate. For the purpose of determining whether or not any Excess has been
contracted for, charged or received by the Bank, all interest at any
time contracted for, charged or received by the Bank in connection with
the Borrower's obligations shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement. If at
any time the rate of interest payable hereunder with respect to any
Note shall be computed for such Note on the basis of the Maximum Legal
Rate, any subsequent reduction in the Contract Rate shall not reduce
such interest thereafter payable hereunder with respect to such Note
below the amount computed on the basis of the Maximum Legal Rate until
the aggregate amount of such interest accrued and payable under this
Agreement equals the total amount of interest which would have accrued
if such interest had been at all times computed solely on the basis of
the Contract Rate for such Note.
(b) Unless preempted by federal law, the rate of interest from
time to time in effect hereunder shall not exceed the "INDICATED RATE
CEILING" from time to time in effect under Chapter 1 of the Texas
Credit Code (Vernon's Texas Civil Statutes), Section (a)(1), Article
5069-1.04, as amended.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the
Indebtedness which sets forth or prescribes any account, right or
claims or alleged account, right or claim of the Bank with respect to
the Borrower (or any other Company in respect of the Indebtedness),
whether or not any provisions of this Section is referred to therein.
All such documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the obligations
asserted by the Bank thereunder, be automatically
16
recomputed by the Borrower or any other Company, and by any court
considering the same, to give effect to the adjustments or credits
required by this Section.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this
Agreement than is presently allowed by applicable state or federal law,
then the limitation of interest hereunder shall be increased to the
maximum rate of interest allowed by applicable state or federal law, as
amended, which increase shall be effective hereunder on the effective
date of such amendment, and all interest charges owing to the Bank by
reason thereof shall be payable upon demand.
(e) The provisions of Chapter 15 of the Texas Credit Code
(Vernon's Texas Civil Statutes), Article 5069-15, as amended, are
specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other agreements executed in connection
herewith or therewith or to the transactions contemplated hereby or
thereby.
2.6. FEES.
2.6.1. PREPARATION FEES. Simultaneously with the execution of
this Agreement, the Borrower shall pay to the Bank the amount of the
expenses (including attorney's fees and disbursements) incurred by the
Bank in connection with the preparation of this Agreement and the other
Loan Documents.
2.6.2. COMMITMENT FEE. The Borrower agrees (subject to SECTION
2.5 hereof) to pay to the Bank in arrears a commitment fee for the
period from and including the date of this Agreement to the Revolving
Note Maturity Date equal to one-fourth of one percent (0.250%) per
annum on the average daily difference between the Commitment Amount and
the aggregate unpaid principal balance of the Revolving Loans. Such
commitment fee shall be payable on the last Business Day of June,
September, December and March, beginning June, 1996, and on the
Revolving Note Maturity Date, for the periods ending on such dates.
2.7. BASIS OF COMPUTATION. The amount of all accrued interest and fees
hereunder and under the Notes shall be computed for the actual number of days
elapsed in a year consisting of 360 days, unless the Ceiling Rate would thereby
be exceeded, in which event, to the extent necessary to avoid exceeding the
Ceiling Rate, interest shall be computed on the basis of the actual number of
days elapsed in the applicable calendar year in which accrued.
2.8. MANDATORY PREPAYMENTS. The Borrower shall pay to the Bank the
amount, if any, by which the aggregate unpaid principal amount of all Revolving
Loans from time to time exceeds the Borrowing Base, together with all interest
accrued and unpaid on the amount of such
17
excess, but without other premium or penalty. Such prepayment shall be
immediately due and owing upon the occurrence of any such excess.
2.9. BASIS OF PAYMENTS; APPLICATION. All sums payable by the Borrower
to the Bank under this agreement shall be paid directly to the Bank at its
principal office in immediately available funds, without setoff, deduction or
counterclaim. All payments and prepayments shall be applied first to interest,
the balance to principal.
SECTION 3.SECURITY.
To secure full and timely performance of the Borrower's covenants set
out in this Agreement and to secure the repayment of the Notes and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower agrees to
grant and assign a lien upon and security interest in the Collateral pursuant to
the Security Documents and other instruments and agreements satisfactory to the
Bank.
SECTION 4.CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
4.1. CONDITIONS TO FIRST DISBURSEMENT. The obligations of the Bank
under this Agreement are subject to the occurrence, prior to or on the
Disbursement Date first occurring, of each of the following conditions, any or
all of which may be waived in whole or in part by the Bank in writing:
4.1.1. DOCUMENTS EXECUTED AND FILED. The Borrower shall have
executed (or caused to be executed) and delivered to the Bank, the
following, all in form satisfactory to the Bank:
(a) The Notes;
(b) The Mortgage;
(c) The Patent Security Agreement;
(d) The Trademark Security Agreement;
(e) The Subordination Agreement;
(f) The Financing Statements;
(g) An initial Borrowing Base Certificate;
18
(h) A landlord's consent in form and substance
satisfactory to the Bank, executed by the landlord of the
Borrower's Ohio location;
(i) The Letter of Credit Documents; and
(j) The other Security Documents (exclusive of the
Title Insurance Policy).
4.1.2. BORROWING AUTHORIZATIONS. The Borrower shall have
furnished to the Bank a copy of resolutions of the Borrowing
Authorization for the Board of Directors of the Borrower authorizing
the execution, delivery and performance of this Agreement, the
borrowing hereunder, the Notes and the other Loan Documents, which
shall have been certified by the Secretary or Assistant Secretary of
each Company as of the Disbursement Date first occurring.
4.1.3. CERTIFIED ARTICLES AND BYLAWS. The Borrower shall have
furnished to the Bank a copy of the Organizational Documents of each of
the Companies.
4.1.4. CERTIFICATES OF EXISTENCE, GOOD STANDING AND
QUALIFICATION. The Borrower shall have furnished to the Bank a
certificate of existence and good standing with respect to the
Borrower, which shall have been certified by the state agencies issuing
the same as of a date reasonably near the Disbursement Date first
occurring.
4.1.5. AUDITS, EQUIPMENT APPRAISALS. The Bank shall have
received (a) a report of an independent collateral field examiner
(which may be, or be affiliated with, the Bank) with respect to the
Accounts and Inventory of the Borrower, with all matters disclosed
therein being satisfactory to the Bank, and (b) an appraisal of the
"orderly liquidation sale" value of the Borrower's Equipment reflecting
an amount not less than $1,000,000, prepared by an appraisal firm
acceptable to the Bank.
4.1.6. UCC, PATENT AND TRADEMARK LIEN SEARCHES. The Bank shall
have received (a) UCC, record and copy search, disclosing no notice of
any liens or encumbrances filed against any of the Collateral in any
relevant jurisdiction other than as relate to Permitted Liens (but
exclusive of the Subordinated Liens). In addition, the Bank shall
receive searches of the records of the United States Patent & Trademark
Office reflecting title to the patents and trademarks covered by the
Patent Security Agreement and the Trademark Security Agreement is in
the Borrower (or, where an express assignment of such patents and
trademarks pursuant to the Asset Purchase Agreement, in Maxxim) and
disclosing no notice of any liens or encumbrances filed against any of
such Collateral in any relevant jurisdiction other than the Patent
Security Agreement, the Trademark Security Agreement and other than as
relate to Permitted Liens.
19
4.1.7. HAZARD INSURANCE. The Borrower shall have furnished to
the Bank, in form and amounts and with companies satisfactory to the
Bank, evidence of hazard insurance policies naming the Bank as
"loss/payee", and relating to the assets and properties (including, but
not limited to, the Collateral) of the Borrower.
4.1.8. PURCHASE AGREEMENT AND SUBORDINATED DEBT DOCUMENTS. The
Bank shall have received a fully executed copy of the Purchase
Agreement and the Subordinated Debt Documents, together with all
schedules, annexes and other attachments contemplated therein, and
shall have received evidence satisfactory to the Bank that the
transactions contemplated therein have been consummated.
4.1.9. APPROVAL OF BANK COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other
related legal matters shall have been satisfactory to and approved by
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., legal counsel for the
Bank.
4.1.10. FINANCIAL STATEMENTS. The Borrower shall have
furnished to the Bank consolidated (if applicable) annual audited
financial statements for the Borrower and for Maxxim for their
respective most recently ended fiscal year.
4.1.11. OTHER INFORMATION AND DOCUMENTATION. The Bank shall
have received such other information, certificates and executed
documents as they shall have reasonably requested.
4.2. CONDITIONS TO ALL DISBURSEMENTS AND ISSUANCES. The obligation of
the Bank to make any Revolving Loan on any Disbursement Date or to issue any
Letter of Credit, including, but not limited to, the Disbursement Date or of the
date of the issuance of a Letter of Credit, whichever occurs first, are subject
to the occurrence, prior to or on the Disbursement Date related to such
Revolving Loan or the issuance date of such Letter of Credit, whichever occurs
first, of each of the following conditions, any or all of which may be waived in
whole or in part by the Bank in writing:
4.2.1. CERTIFICATE. If such Loan is to made after the date
hereof and is not being made pursuant to an automated advance and
repayment mechanism provided to the Borrower by the Bank, the Bank
shall have received a certificate substantially in the form of EXHIBIT
E attached hereto and incorporated herein by reference for all
purposes, executed by the chief executive or chief financial officer of
the Borrower, certified as of such Disbursement Date, and confirming
that, as of such Disbursement Date:
(a) No Default or Event of Default has occurred and
is continuing; and
20
(b) The warranties and representations set forth in
SECTION 5 of this Agreement are true and correct on and as of
such Disbursement Date.
4.2.2. LETTERS OF CREDIT. If a Letter of Credit is being
requested, the Borrower shall have satisfied any and all requirements
of the Letter of Credit Agreement within the times set forth therein.
4.2.3. BANK SATISFACTION. The Bank does not have actual
knowledge that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and
is continuing;
(b) Any provision of law, any order of any court or
other agency of government or any regulation, rule or
interpretation thereof has had a material adverse effect on
the validity or enforceability of any Loan Document.
SECTION 5.WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
5.1. CORPORATE EXISTENCE AND POWER. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the law of the state of its incorporation.
The Borrower and each of the Subsidiaries have the corporate power and authority
to own their respective properties and assets and to carry out their respective
business as now being conducted and are, or will within thirty (30) days from
the date hereof be, qualified to do business and in good standing in every
jurisdiction (including, without limitation, Ohio) wherein the failure to be so
qualified could have a material adverse effect on the Borrower or any
Subsidiary. The Borrower has the corporate power and authority to execute and
perform this Agreement, to borrow money in accordance with its terms, to execute
and deliver the Notes and other Loan Documents, to grant to the Bank liens and
security interest in the Collateral as hereby contemplated and to do any and all
other things required of it hereunder.
5.2. AUTHORIZATION AND APPROVALS. The execution, delivery and
performance of this Agreement, the borrowings hereunder and the execution and
delivery of the Notes, the Letter of Credit Documents and other Loan Documents
to which any of the Companies is a party have been duly authorized by all
requisite corporate action, do not require registration with or consent or
approval of, or other action by, any federal, state or other governmental
authority or regulatory body, or, if such registration, consent or approval is
required, the same has been obtained and disclosed in writing to the Bank or
will be completed or obtained concurrently with the execution and delivery of
this Agreement, will not violate any provision of law, any order of any court or
other agency of government, the Organizational Documents of any Company,
21
any provision of any indenture, agreement or other instrument to which any of
the Companies is a party, or by which it or any of its properties or assets are
bound, will not be in conflict with, result in a breach of or constitute (with
or without notice or passage of time) a default under any such indenture,
agreement or other instrument, and will not result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of any of the Companies other than in favor of the Bank and
as contemplated hereby.
5.3. VALID AND BINDING AGREEMENT. This Agreement is, and the Notes, the
Security Documents, the Letter of Credit Documents and all other Loan Documents
to which any of the Companies is a party will be, when delivered, valid and
binding obligations of such Company, enforceable in accordance with their
respective terms except for laws and equitable principles affecting the
enforcement of creditors' rights generally.
5.4. ACTIONS, SUITS OR PROCEEDINGS. Except as disclosed on SCHEDULE
5.4, there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau or other administrative agency, pending, or, to the best knowledge
of the Borrower, threatened against or affecting any Company, or any properties
or rights of any Company which, if adversely determined, could reasonably be
expected to materially impair the right of any Company to carry on business
substantially as now conducted or could reasonably be expected to have a
material adverse effect upon the financial condition of any Company.
5.5. SUBSIDIARIES. The Borrower has no Subsidiaries.
5.6. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens and the liens and security interests securing indebtedness to be
satisfied in full with proceeds from the initial loan hereunder (and which such
liens and security interests are to be released simultaneously with such
satisfaction), no Company's assets and properties, including, without
limitation, the Collateral, is subject to any mortgage, pledge, lien, security
interest or other encumbrance of any kind or character.
5.7. ACCOUNTING PRINCIPLES. The Financial Statements have been prepared
in accordance with GAAP and fully and fairly present in all material respects
the financial condition of each Company as of the dates, and the results of
their operations for the periods, for which the same are furnished to the Bank.
To the best of any Company's knowledge and belief, no Company has any material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, the
Financial Statements.
22
5.8. NO ADVERSE CHANGES. There has been no material adverse change in
the business, properties or condition (financial or otherwise) of any of the
Companies since the date of the latest of the Financial Statements.
5.9. CONDITIONS PRECEDENT. As of each Disbursement Date, all
appropriate conditions precedent referred to in SECTION 4 hereof shall have been
satisfied (or waived in writing by the Bank).
5.10. TAXES. Each Company has filed by the due date therefor all
federal, state and local tax returns and other reports they are required by law
to file and which are material to the conduct of their respective businesses,
have paid or caused to be paid all taxes, assessments and other governmental
charges that are shown to be due and payable under such returns, and have made
adequate provision for the payment of such taxes, assessments or other
governmental charges which have accrued but are not yet payable. No Company has
any knowledge of any deficiency or assessment in a material amount in connection
with any taxes, assessments or other governmental charges not adequately
disclosed in the Financial Statements.
5.11. COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 5.11, each
Company has complied with all applicable laws, to the extent that failure to
comply would materially interfere with the conduct of the business of any of the
Companies.
5.12. INDEBTEDNESS. Except as permitted by SECTIONS 7.5, 7.6 and 7.7 of
this Agreement, and as otherwise disclosed on SCHEDULE 5.12, neither the
Borrower nor any of the Subsidiaries has any indebtedness for money borrowed or
any agreements of guarantee or surety except for the endorsement of negotiable
instruments by the Borrower and the Subsidiaries in the ordinary course of
business for deposit or collection.
5.13. MATERIAL AGREEMENTS. Except as disclosed on SCHEDULE 5.13,
neither the Borrower nor any of the Subsidiaries has any material leases,
contracts or commitments of any kind (including, without limitation, employment
agreements, collective bargaining agreements, powers of attorney, distribution
contracts, patent or trademark licenses, contracts for future purchase or
delivery of goods or rendering of services, bonus, pension and retirement plans,
or accrued vacation pay, insurance and welfare agreements); to the best
knowledge of the Borrower, other than with respect to consents to the assignment
of such material leases, contracts or commitments required by the terms thereof
disclosed on SCHEDULE 5.13, all parties to such agreements (including, without
limitation, the Borrower and the Subsidiaries) have complied with the provisions
of such leases, contracts or commitments; and to the best knowledge of the
Borrower, no party to such agreements (including, without limitation, the
Borrower and the Subsidiaries) is in default thereunder, nor has there occurred
any event which with notice or the passage of time, or both, would constitute
such a default. The Borrower have no Key Agreements as of the date hereof.
23
5.14. MARGIN STOCK. No Company is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any "MARGIN STOCK" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any Revolving Loan will be used, directly or indirectly, to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or for any other purpose which might
violate the provisions of Regulation G, T, U or X of the said Board of
Governors. The Borrower does not own any margin stock.
5.15. PENSION FUNDING. No Company has incurred any material accumulated
funding deficiency within the meaning of ERISA and has not incurred any material
liability to the PBGC in connection with any employee benefit plan established
or maintained by the Borrower or any of the Subsidiaries and no reportable event
or prohibited transaction, as defined in ERISA, has occurred with respect to
such plans.
5.16. MISREPRESENTATION. No warranty or representation by any Company
contained herein or in any certificate or other document furnished by any
Company pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such warranty or representation not
misleading in light of the circumstances under which it was made.
5.17. BORROWING BASE COMPONENTS.
5.17.1. ELIGIBLE ACCOUNTS. As to each Account represented by
the Borrower to be an "ELIGIBLE ACCOUNT" on a Borrowing Base
Certificate, as of the date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the
business of the Borrower out of either a bona fide sale of
Inventory by the Borrower, and in such case such Inventory has
in fact been shipped to, and accepted and retained by, the
appropriate account debtor or the sale has otherwise been
consummated in accordance with such order, or services
performed by the Borrower under an enforceable contract (other
than those relating to training), and in such case such
services have in fact been performed for the appropriate
account debtor in accordance with such contract.
(b) Such Account represents a legally valid and
enforceable claim which is due and owing to the Borrower by
such account debtor and for such amount as is represented by
the Borrower to the Bank on such Borrowing Base Certificate,
such Account is due and payable not more than thirty (30) days
from the delivery of the related Inventory, or the performance
of the related services, giving rise to such Account and such
Account has not been due for more than ninety (90) days from
the date of invoice.
24
(c) The unpaid balance of such Account as represented
by the Borrower to the Bank on such Borrowing Base Certificate
is not subject to any defense, counterclaim, setoff, credit,
allowance or adjustment by the account debtor because of
returned, inferior or damaged Inventory or services, or for
any other reason, except for customary discounts allowed by a
Borrower in the ordinary course of business for prompt
payment, and there is no agreement between the Borrower, the
related account debtor and any other person for any rebate,
discount, concession or release of liability, in whole or in
part.
(d) The transactions leading to the creation of such
Account comply with all applicable state and federal laws and
regulations.
(e) The Borrower has granted to the Bank a perfected
security interest in such Account (as an item of the
Collateral) prior in right to all other persons (other than
Permitted Liens), and such Account has not been sold,
transferred or otherwise assigned by the Borrower to any
person, other than the Bank.
(f) Such Account is not represented by any note,
trade acceptance, draft or other negotiable instrument or by
any chattel paper, except any such as have been endorsed and
delivered by the Borrower to the Bank on or prior to such
Account's inclusion on such Borrowing Base Certificate.
(g) The Borrower has not received, with respect to
such Account, any notice of the death of the related account
debtor or any partner thereof, nor of the dissolution,
liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or
the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or
against, such account debtor.
(h) The account debtor on such Account is not:
(i) an affiliate of the Borrower,
(ii) the United States of America or any
department, agency or instrumentality thereof, in any
case other than in the case of a Medicare Receivable,
(iii) a citizen or resident of any
jurisdiction other than one of the United States or
Canada, unless the Borrower has received a letter of
credit in an amount equal to or greater than such
Account issued by a financial institution
25
acceptable to the Bank and otherwise in form and
substance satisfactory to the Bank,
(iv) one which has more than twenty-five
percent (25%) of the aggregate Accounts owed by it
which are more than ninety (90) days past the date of
invoice, or
(v) an account debtor whom the Bank has, in
the exercise of such Bank's sole discretion,
determined to be (based on such factors as the Bank
deems appropriate) an ineligible account debtor and
as to which the Bank has notified the Borrower,
PROVIDED, HOWEVER, that any such notice shall not
apply as to any Account of such account debtor which
has been included on a Borrowing Base Certificate by
the Borrower prior to the giving of such notice by
the Bank and which meets each and every other
requirement under this Agreement for the denomination
of such Account as an "ELIGIBLE ACCOUNT."
5.17.2. ELIGIBLE INVENTORY. As to each item of Inventory
represented by the Borrower to be "ELIGIBLE INVENTORY" on a Borrowing
Base Certificate, as of the date of each such Borrowing Base
Certificate:
(a) Such item of Inventory is of good and
merchantable quality and is usable or salable by the Borrower
in the ordinary course of the Borrower's business, and is not
obsolete.
(b) The Borrower has granted to the Bank a perfected
security interest in such item of Inventory (as an item of the
Collateral) prior in right to all other persons (other than
Permitted Liens), and such item of Inventory has not been
sold, transferred or otherwise assigned by the Borrower to any
person, other than the Bank and other than sales in the
ordinary course of business occurring after the date of such
Borrowing Base Certificate.
(c) Such item of Inventory is located within the
United States of America and is in the possession and control
of the Borrower at one of the locations described on SCHEDULE
5.17.2 attached hereto.
5.18. ASSUMED NAMES; OTHER NAMES. Neither the Borrower nor any of the
other parties to the Purchase Agreement has changed its name during the last
five (5) years. The only assumed names used by Maxxim in connection with its
Henley Healthcare division in the last five (5) years are "Henley Operating
Company, Henley International and Henley Healthcare."
26
SECTION 6.AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on each Note
and other Indebtedness is paid in full, all Letter of Credit Liabilities have
been terminated, paid in full or otherwise satisfied and the ability, if any, of
the Borrower to obtain Revolving Loans or Letters of Credit under the Letter of
Credit Agreement has irrevocably terminated, the Borrower covenants and agrees
that it will (or will cause each other Company to):
6.1. FINANCIAL AND OTHER INFORMATION.
6.1.1. ANNUAL FINANCIAL REPORTS. Furnish to the Bank in form
satisfactory to the Bank not later than ninety (90) days after the
close of each fiscal year of the Borrower beginning with its 1995
fiscal year, on a consolidated and consolidating basis, a balance sheet
as at the close of each such fiscal year, statements of income and
statements of cash flows for each such fiscal year, and such other
comments and financial details as are usually included in similar
reports. Such reports shall be prepared in accordance with GAAP by
independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Bank and shall contain
unqualified opinions that the financial statements present fairly the
Companies' financial position and results of operations in all material
respects. In addition, the Borrower shall furnish or cause to be
furnished to the Bank in form satisfactory to the Bank not later than
ninety (90) days after the close of Maxxim's 1995 fiscal year, on a
consolidated and consolidating basis, a balance sheet as at the close
of such fiscal year, statements of income and statements of cash flows
for each such fiscal year, and such other comments and financial
details as are usually included in similar reports for Maxxim's 1995
fiscal year.
6.1.2. MONTHLY FINANCIAL STATEMENTS. Furnish to the Bank not
later than twenty (20) days after the close of each month of each
fiscal year of the Borrower, beginning with February 1996, financial
statements containing the balance sheet of the Borrower as of the end
of each such period, statements of income and statements of cash flows
of the Borrower up to the end of such period, all on a consolidated
basis. These statements shall be prepared on substantially the same
accounting basis as the statements required in SECTION 6.1.1 of this
Agreement and shall be in such detail as the Bank may reasonably
require, and the accuracy of the statements shall be certified by the
chief executive or financial officer of the Borrower.
6.1.3. NO DEFAULT CERTIFICATE. Together with each delivery of
the financial statements required by SECTIONS 6.1.1 and 6.1.2 of this
Agreement, furnish to the Bank a compliance certificate substantially
in the form of EXHIBIT G attached hereto and incorporated herein by
reference for all purposes, duly executed by its chief executive or
financial officer stating, among other things, that no Event of Default
or Default has
27
occurred, or if any such Event of Default or Default exists, stating
the nature thereof, the period of existence thereof and what action the
Borrower propose to take with respect thereto accompanied by such
supporting calculations contained in such certificate as the Lender may
request.
6.1.4. AGING AND BORROWING BASE CERTIFICATE. Furnish to the
Bank monthly by the 10th of each month a Borrowing Base Certificate
confirming that the sum of (1) the aggregate unpaid principal balance
of all the Revolving Loans PLUS (2) the aggregate Letter of Credit
Liabilities, does not exceed the Maximum Available Amount as then in
effect (or if such is not the case, accompanied by a prepayment of the
Revolving Note or Cover for Letters of Credit or a cancelled Letter of
Credit, or combination thereof, in accordance with SECTION 2.8 of this
Agreement), an aging as of the end of the preceding month of the
Borrower's Accounts in a form satisfactory to the Bank, a summary of
the Borrower's Inventory as of the end of such calendar month, prepared
in reasonable detail and containing such other information as the Bank
may request, and an aging as of the end of the preceding month of the
Borrower's accounts payable in a form satisfactory to the Bank in its
sole and absolute discretion. In addition, furnish the Bank by the 10th
of the month, a Borrowing Base Certificate confirming that the sum of
(1) the aggregate unpaid principal balance of all the Revolving Loans
PLUS (2) the aggregate Letter of Credit Liabilities, does not exceed
the Maximum Available Amount as then in effect (or if such is not the
case, accompanied by a prepayment of the Revolving Note or Cover for
Letters of Credit or a cancelled Letter of Credit, or a combination
thereof, in accordance with SECTION 2.8 of this Agreement).
6.1.5. SEC REPORTS. Furnish to the Bank within five (5) days
after the filing with the Securities and Exchange Commission by any
Company, true, correct and complete copies of all such filings, of any
financial statements, registration statements, reports and proxy
statements.
6.1.6. HENLEY AUDITED FINANCIAL STATEMENTS. Furnish to the
Bank as soon as available but in no event later than , 1996, a copy of
the audited financial statements for the Henley Healthcare division as
of the end of October, 1994 and October, 1995.
6.1.7. INVENTORY NOT IN WAREHOUSE. Furnish to the Bank not
later than twenty (20) days after the close of each fiscal quarter of
the Borrower, beginning with March 31, 1996, a listing of all Inventory
of the Borrower held by third parties on a consignment basis or
otherwise not in the possession of the Borrower at one of the locations
described on SCHEDULE 5.17.2 hereof, including, without limitation, a
description of its value and the location and the name, address and
telephone number of each such third party and otherwise containing such
other information as the Bank may request.
28
6.1.8. ADVERSE EVENTS. Promptly inform the Bank of the
occurrence of any Event of Default or Default, or of any occurrence
which has or could reasonably be expected to have a materially adverse
effect upon the Borrower's business, properties, financial condition or
ability to comply with its obligations hereunder.
6.1.9. MANAGEMENT LETTERS. Furnish to the Bank, promptly upon
receipt thereof, copies of all management letters and other reports of
substance submitted to the Borrower by independent certified public
accountants in connection with any annual or interim audit of the books
of the Borrower.
6.1.10. AUDITS. From time to time, at any time upon the
request of the Bank, a report of an independent collateral field
examiner (which may be, or be affiliated with, the Bank) with respect
to the Accounts component included in the Borrowing Base. From time to
time, at any time upon the request of the Bank, a report of an
independent collateral field examiner (which may be, or be affiliated
with, the Bank) with respect to the Inventory component included in the
Borrowing Base (PROVIDED, HOWEVER, that so long as no Event of Default
has occurred which is then continuing, the Bank shall not require such
a report more than twice per calendar year). So long as no Event of
Default has occurred which is then continuing, the Borrower will not be
responsible for the cost of any such audit. Upon the occurrence of an
Event of Default, the Borrower shall promptly pay to the Bank upon
demand, the costs of all such audits occurring after such occurrence of
an Event of Default.
6.1.11. TAX RETURNS. As soon as it has been filed with the
United States Internal Revenue Service, each Company's federal tax
return.
6.1.12. OTHER INFORMATION AS REQUESTED. Promptly furnish (or
cause to be furnished) to the Bank such other information regarding the
operations, business affairs and financial condition of the Companies
as the Bank may reasonably request from time to time and permit the
Bank, its employees, attorneys and agents, to inspect all of the books,
records and properties of the Companies at any reasonable time.
6.2. INSURANCE. Keep its (and cause the Subsidiaries to keep their
respective) insurable properties (including, but not limited to, the Collateral)
adequately insured and maintain insurance against fire and other risks
customarily insured against by companies engaged in the same or a similar
business to that of the Borrower or the Subsidiaries, whichever is applicable,
necessary worker's compensation insurance, public liability and product
liability insurance, and such other insurance as may be required by law or as
may be reasonably required in writing by the Bank, all of which insurance shall
be in such amounts, containing such terms, in such form, for such purposes and
written by such companies as may be satisfactory to the Bank. All such policies
shall contain a provision whereby they may not be canceled except upon thirty
days' prior written notice to the Bank. The Borrower will deliver to the Bank,
at the Bank's request,
29
evidence satisfactory to the Bank that such insurance has been so procured and,
with respect to casualty insurance, names the Bank as "loss/payee" and as its
interest may appear. If the Borrower fails to maintain satisfactory insurance as
herein provided, the Bank shall have the option to do so, and the Borrower
agrees to repay the Bank, with interest at the Past Due Rate, all amounts so
expended by the Bank. The Borrower hereby appoints the Bank as the Borrower's
attorney-in-fact, which appointment is coupled with an interest and irrevocable,
to endorse any check or draft payable to the Borrower in connection with
returned or unearned premiums on said insurance or the proceeds of said
insurance, and any amount so collected may be applied toward satisfaction of the
Indebtedness, PROVIDED, HOWEVER, that the Bank shall not be required hereunder
so to act. The provisions of this Section are in addition to and cumulative of
the insurance provisions set forth in the Mortgage.
6.3. TAXES. Pay promptly and within the time that they can be paid
without interest or penalty all taxes, assessments and similar imposts and
charges of every kind and nature lawfully levied, assessed or imposed upon the
Borrower, the Subsidiaries and their respective property, except to the extent
being contested in good faith and, if requested by the Bank, bonded in a manner
satisfactory to the Bank. If the Borrower shall fail to pay such taxes and
assessments by their due date, the Bank shall have the option to do so, and the
Borrower agrees to repay the Bank, with interest at the Past Due Rate, all
amounts so expended by the Bank.
6.4. MAINTAIN CORPORATION AND BUSINESS. Do or cause to be done all
things necessary to preserve and keep in full force and effect the Borrower's or
any of the Subsidiaries' corporate existence, rights and franchises, if any, and
comply with all applicable laws unless the failure to do so could not reasonably
be expected to have a material adverse effect on the Borrower or any of its
property or business; continue to conduct and operate their respective
businesses substantially as conducted and operated during the present and
preceding calendar year; at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of their respective
property used or useful in the conduct of their respective business and keep the
same in good repair, working order and condition; and from time to time make, or
cause to be made, all needed and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
6.5. MAINTAIN TANGIBLE NET WORTH. Maintain on a consolidated statement
basis a Tangible Net Worth of not less than the sum of (a) $823,000 PLUS (b) the
Tangible Net Worth Step-Up.
6.6. MAINTAIN LEVERAGE RATIO. Have on a consolidated statement basis
the ratio of (a) Debt less the Debt evidenced by the Subordinated Debt Documents
to (b) Tangible Net Worth plus the Debt evidenced by the Subordinated Debt
Documents, of not more than 1.25 to 1.00 at all times.
30
6.7. MAINTAIN WORKING CAPITAL. Maintain on a consolidated statement
basis Working Capital of not less than $7,200,000 at all times.
6.8. FIXED CHARGE COVERAGE RATIO. Maintain a Fixed Charge Coverage
Ratio of not less than 1.20 to 1.00 at all times.
6.9. INTEREST COVERAGE RATIO. Maintain an Interest Coverage Ratio of
not less than 1.75 to 1.00 at all times.
6.10. QUICK RATIO. Maintain on a consolidated statement basis the ratio
of (a) cash plus nonaffiliated customer receivables to (b) Current Liabilities
(inclusive of outstanding Revolving Loans), of not less than 0.80 to 1.00 at all
times.
6.11. CURRENT RATIO. Maintain at all times on a consolidated statement
basis the ratio of (a) Current Assets to (b) Current Liabilities (inclusive of
outstanding Revolving Loans), of not less than 2.50 to 1.00 at all times.
6.12. ERISA. At all times meet and cause each of the Subsidiaries to
meet the minimum funding requirements of ERISA with respect to the Borrower and
the Subsidiaries' employee benefit plans subject to ERISA; promptly after the
Borrower knows or has reason to know of the occurrence of any event, which would
constitute a reportable event or prohibited transaction under ERISA, or that the
PBGC or the Borrower (or any Subsidiary) has instituted or will institute
proceedings to terminate an employee pension plan, deliver to the Bank a
certificate of the chief financial officer of the Borrower setting forth details
as to such event or proceedings and the action which the Borrower (or any
Subsidiary) proposes to take with respect thereto, together with a copy of any
notice of such event which may be required to be filed with the PBGC; and
furnish to the Bank (or cause the plan administrator to furnish the Bank) a copy
of the annual return (including all schedules and attachments) for each plan
covered by ERISA, and filed with the Internal Revenue Service by the Borrower
(or any Subsidiary), not later than ten (10) days after such report has been so
filed.
6.13. USE OF LOAN PROCEEDS. Use the proceeds of any Revolving Loan for
the purpose set forth in the recitals to this Agreement.
6.14. KEY AGREEMENTS. Promptly upon entering into any Key Agreement,
provide true, correct and complete copies thereof to the Bank.
6.15. LOCKBOX DEPOSITS. Direct all Account debtors to make remittance
to the Lockbox.
6.16. NOTICE OF EVENTS. Notify the Borrower immediately upon acquiring
knowledge of the occurrence of, or if the Borrower or any of the Subsidiaries
causes or intends to cause,
31
as the case may be: (1) the institution of any lawsuit or administrative
proceeding affecting the Borrower or any of the Subsidiaries involving monetary
claims in excess of $250,000 or the institution of any lawsuit or administrative
proceeding affecting the Borrower or any of the Subsidiaries, the adverse
determination under which could have a material adverse effect on the business,
condition (financial or otherwise), operations, property or prospects of the
Borrower any of the Subsidiaries or on their respective ability to perform any
of their respective obligations under any Loan Document to which it is a party;
(2) any material adverse change, either in any case or in the aggregate, in the
assets, liabilities, business, condition (financial or otherwise), operations,
property or prospects of the Borrower and the Subsidiaries on a consolidated
basis; (3) any Event of Default or any Default, together with a detailed
statement by an appropriate officer or other responsible party acceptable to the
Bank one behalf of the Borrower of the steps being taken to cure the effect of
such Event of Default or Default; (4) the occurrence of a default or event of
default by the Borrower or any of the Subsidiaries under any agreement or series
of related agreements to which it is a party where such default could result in
monetary damages in excess of $250,000, and (5) any change in the accuracy of
the representations and warranties of the Borrower or any of the Subsidiaries in
this Agreement or any other Loan Document. The Borrower will notify the Bank in
writing within 30 days prior to the date that the Borrower or any of the
Subsidiaries changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records.
Any notice of a name change delivered to the Bank shall be accompanied by such
certificates of governmental authorities as the Bank may require substantiating
such name change.
6.17. TITLE INSURANCE POLICY. Deliver to the Bank the Title Insurance
Policy within ten (10) days from the date hereof.
6.18. CERTIFICATE OF TITLE. Have any assets subject to certificate of
title laws which is greater than in the aggregate at any time $50,000 unless the
certificates of title thereto have been delivered to the Bank.
6.19. CERTIFICATES OF GOOD STANDING AND QUALIFICATION. Furnish to the
Bank within thirty (30) days from the date hereof a certificate from the
appropriate public official of each jurisdiction (including, without limitation,
Ohio) as to the due qualification to do business and good standing of the
Borrower where such qualification is necessary to conduct the Borrower's
business in such jurisdiction.
6.20. EQUIPMENT AUDITS. From time to time, at any time upon the request
of the Bank, a report of an independent collateral field examiner (which may be,
or be affiliated with, the Bank) with respect to the Companies' Equipment. So
long as no Event of Default has occurred which is then continuing, the Borrower
will not be responsible for the cost of any such audit. Upon the occurrence of
an Event of Default, the Borrower shall promptly pay to the Bank upon demand,
the costs of all such audits occurring after such occurrence of an Event of
Default.
32
6.21. REAL ESTATE AUDITS. From time to time, at any time upon the
request of the Bank, a report of an independent collateral field examiner (which
may be, or be affiliated with, the Bank) with respect to the Collateral covered
by the Mortgage. So long as no Event of Default has occurred which is then
continuing, the Borrower will not be responsible for the cost of any such audit.
Upon the occurrence of an Event of Default, the Borrower shall promptly pay to
the Bank upon demand, the costs of all such audits occurring after such
occurrence of an Event of Default.
6.22. CONSENTS TO ASSIGNMENTS. Within twenty (20) days from the date
hereof, the Borrower shall obtain all consents to the assignment by Maxxim to
the Borrower pursuant to the terms of the Purchase Agreement of the material
leases, contracts and commitments listed on SCHEDULE 5.13 hereof and for which
approval by the other party thereto is required in connection with such
assignment.
SECTION 7.NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on each Note
and other Indebtedness is paid in full, the Borrower covenants and agrees that
it will not and will not permit any Subsidiary to:
7.1. CAPITAL EXPENDITURES; FDA EXPENDITURES. Make (a) Capital
Expenditures on a consolidated basis during any fiscal year of the Borrower in
excess of $500,000, or (b) FDA Expenditures on a consolidated basis during any
fiscal year of the Borrower in excess of $200,000.
7.2. STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire
any of the shares of its capital stock, or make any commitment to do so.
7.3. LIENS AND ENCUMBRANCES. Create, incur, assume or suffer to exist
any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease required to be capitalized
under GAAP) upon any of its property or assets, whether now owned or hereafter
acquired, other than Permitted Liens.
7.4. INDEBTEDNESS. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for (1) the Indebtedness, (2) the Subordinated
Debt, (3) other indebtedness subordinated to the prior payment in full of the
Indebtedness upon terms and conditions approved in writing by the Bank, (4)
existing indebtedness to the extent set forth on SCHEDULE 5.12, (5) other Debt
not to exceed in the aggregate $500,000 at any time, and (6) renewals and
extensions thereof (but not increases
33
therein), trade indebtedness incurred and paid in the ordinary course of
business, contingent indebtedness to the extent permitted by SECTION 7.7 of this
Agreement, indebtedness secured by Permitted Liens, and obligations to the
extent permitted by SECTION 7.11 of this Agreement.
7.5. EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person in excess of $50,000 in the aggregate at any time, except for (a)
sales on open account and otherwise in the ordinary course of business and (b)
Permitted Subsidiary Investments.
7.6. GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other person through the furnishing
of goods, supplies or services, by way of stock purchase, capital contribution,
advance or loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other person, or otherwise,
except for the endorsement of negotiable instruments by a Borrower in the
ordinary course of business for deposit or collection.
7.7. SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
7.8. PROPERTY TRANSFER, MERGER AND FORMATION OF SUBSIDIARIES. Sell,
lease, transfer or otherwise dispose of all or, except as to the sale of
Inventory in the ordinary course of business, any material part (and in any
event more than five percent [5%] during the term of this Agreement) of its
properties and assets (whether in one transaction or in a series of
transactions), change its name, consolidate with or merge into any other
corporation, permit another corporation to merge into it, acquire all or
substantially all the properties or assets of any other person, enter into any
reorganization or recapitalization or reclassify its capital stock, enter into
any sale-leaseback transaction, or form, acquire or permit to exist any
Subsidiary without the express written consent of the Bank given in its sole and
absolute discretion. Nothing contained in this Agreement or any of the other
Loan Documents (including, without limitation, the references to Subsidiaries or
consolidated and consolidating financial statements) shall be deemed or
construed as a consent to the Borrower's creation or acquisition of any
Subsidiary. Should the Bank in its sole and absolute discretion consent to the
creation or acquisition of any Subsidiary, then a Subsidiary wholly owned by the
Borrower may be merged into, or consolidated with, the Borrower or another
Subsidiary wholly owned by the Borrower, and such Subsidiary may sell, lease or
transfer all or a substantial part of its assets to the Borrower or another
Subsidiary wholly owned by the Borrower, and the Borrower or such Subsidiary may
acquire all or substantially all of the properties and assets of the Subsidiary
so to be merged into, or consolidated with, it or so to be sold, leased or
transferred to it.
34
7.9. ACQUIRE SECURITIES. Purchase or hold beneficially any stock or
other securities of, or make any investment or acquire any interest whatsoever
in, any other Person except for Permitted Investments.
7.10. PENSION PLANS. Allow any fact, condition or event to occur or
exist with respect to an employee pension or profit sharing plan which might
constitute grounds for termination of any such plan or for the appointment by a
United States District Court of a trustee to administer any such plan, or permit
any such plan to be the subject of termination proceedings (whether voluntary or
involuntary) from which termination proceedings there may result a liability of
the Borrower or any of the Subsidiaries to the PBGC which in the opinion of the
Bank, will have a materially adverse effect upon the operations, business,
property, assets, financial condition or credit of the Borrower.
7.11. MISREPRESENTATION. Furnish (or permit any other Company to
furnish) the Bank with any certificate or other document that contains any
untrue statement of a material fact or omits to state a material fact necessary
to make such certificate or document not misleading in light of the
circumstances under which it was furnished.
7.12. MARGIN STOCK. Apply any of the proceeds of any Note to the
purchase of carrying of any "MARGIN STOCK" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
7.13. COMPLIANCE WITH ENVIRONMENTAL LAWS. Use (or permit any tenant to
use) any of its respective properties or assets for the handling, processing,
storage, transportation, or disposal of any Hazardous Substance except in all
respects in compliance with Environmental Laws, generate any Hazardous Substance
except in all respects in compliance with Environmental Laws, conduct any
activity which is likely to cause a release of any Hazardous Substance, or
otherwise conduct any activity or use any of its respective properties or assets
in any manner that is likely to violate any Environmental Law.
7.14. DIVIDENDS. Declare or pay any dividend (other than dividends
payable solely in shares of its capital stock) (or permit any other Company to
do so) on, or make any other distribution with respect to (whether by reduction
of capital or otherwise), any shares of its capital stock except dividends from
a Subsidiary to the Borrower.
7.15. PURCHASE AGREEMENT; SUBORDINATED DEBT DOCUMENTS. Terminate or
agree to the termination of the Purchase Agreement or any of the Subordinated
Debt Documents or amend, modify or obtain or grant a waiver of any provision of
the Purchase Agreement or any of the Subordinated Debt Documents, unless the
same shall be consented to in writing by the Bank.
35
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.
8.1. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an Event of Default (herein so called) hereunder:
8.1.1. FAILURE TO PAY MONIES DUE. If any principal of or
accrued interest on any Note, any fees under SECTION 2.6 of this
Agreement or any other Indebtedness shall not be paid when due, by
acceleration or otherwise.
8.1.2. MISREPRESENTATION. If any warranty or representation of
any of the Companies in connection with or contained in this Agreement,
or if any financial data or other information now or hereafter
furnished to the Bank by or on behalf of any Company shall prove to be
false or misleading in any material respect.
8.1.3. NONCOMPLIANCE WITH BANK AGREEMENTS. If any Company
shall fail to perform any of its Debt and covenants under, or shall
fail to comply with any of the provisions of, this Agreement or any
other agreement with the Bank to which it may be a party.
8.1.4. OTHER DEFAULTS. If any Company shall default in the due
payment of any of its indebtedness (other than the Indebtedness) or in
the observance or performance of any term, covenant or condition in any
agreement or instrument evidencing, securing or relating to such
indebtedness and such default results in the acceleration of the Debt,
irrespective of whether any such default shall be forgiven or waived by
the holder thereof, unless such payment is being contested in good
faith and adequate reserves for the payment thereof have been
established.
8.1.5. JUDGMENTS. If there shall be rendered against any
Company one or more judgments or decrees involving an aggregate
liability of $50,000 or more, which has or have become nonappealable
and shall remain undischarged, unsatisfied by insurance and unstayed
for more than 20 days, whether or not consecutive; or of a writ of
attachment or garnishment against the property of any Company shall be
issued and levied in an action claiming $50,000 or more and not
released or appealed and bonded in a manner satisfactory to the Bank
within 30 days thereafter.
8.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC. If the Borrower
or any Subsidiary shall voluntarily suspend transaction of its
business; or if any Company shall not pay its debts, generally, as they
mature or shall make a general assignment for the benefit of creditors;
or proceedings in bankruptcy, or for reorganization or liquidation of
any Company under the Bankruptcy Code or under any other state or
federal law for the relief of debtors shall be commenced by any Company
or shall be commenced against any Company and shall not be discharged
within sixty (60) days of commencement; or
36
a receiver, trustee or custodian shall be appointed for any Company or
for any substantial portion of its respective properties or assets.
8.1.7. CHANGE OF CONTROL OR MANAGEMENT. If Michael M. Barbour
or Chadwick F. Smith shall cease to serve as officers of the Borrower
in substantially the same capacity as they currently serve or if
Michael M. Barbour or Chadwick F. Smith shall cease to serve as a
member of the Borrower's board of directors.
8.1.8. INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT
PLAN(S). If any Company shall fail to meet its minimum funding
requirements under ERISA with respect to any employee benefit plan
established or maintained by such Company, or if any such plan shall be
the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of any Company to the PBGC which in the opinion of the Bank
will have a materially adverse effect upon the operations, business,
property, assets, financial condition or credit of any Company.
8.1.9. OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there shall
occur, with respect to any pension plan maintained by any Company, any
reportable event (within the meaning of section 4043(b) of ERISA) which
the Bank shall determine in good faith constitutes a ground for the
termination of any such plan, and if such event continues for 30 days
after the Bank gives written notice to the Borrower, provided that
termination of such plan or appointment of such trustee would, in the
opinion of the Bank, have a materially adverse effect upon the
operations, business, property, assets, financial condition or credit
of any Company.
8.1.10. LOSS OR DAMAGE. If any loss, theft, substantial damage
or destruction to or of any material portion of the Collateral occurs
which is not fully covered by insurance after the payment of industry
standard deductibles by the Borrower under applicable insurance
policies.
8.1.11. ADVERSE CHANGE. If any material and adverse change in
the business operations and condition, financial or otherwise, of any
Company occurs.
8.1.12. PBGC. Except as expressly permitted herein, if a
notice of lien, levy or assessment is filed of record with respect to
all or any of the assets of any Company by the United States of
America, or any department, agency, or instrumentality thereof, or by
any state, county, municipal or other governmental agency, including,
without limitation, the PBGC, or if any taxes or debts owing at any
time or times hereafter to any one of them becomes a lien or
encumbrance upon the Collateral or any other assets of the Borrower or
any Subsidiary.
37
8.2. REMEDIES. Upon the occurrence of any Event of Default, and at any
time thereafter, the obligation, if any, to make a Revolving Loan or to issue
Letters of Credit shall cease and terminate, and the Bank shall have the right,
at its option, to declare the unpaid balance of the Indebtedness to be
immediately due and payable without further notice (including notice of intent
to accelerate and notice of acceleration), protest or demand or presentment for
payment, all of which are hereby expressly waived by the Borrower, to require
Borrower to pay to the Bank, in immediately available funds, an amount equal to
the then aggregate amount available for drawings under all Letters of Credit
(which funds shall be held by the Bank as Cover) and to enforce or avail itself
of any and all powers, rights and remedies available at law or provided in this
Agreement, the Notes, the Letter of Credit Documents, the other Loan Documents
or any other document executed pursuant hereto or in connection herewith.
Notwithstanding any provision in this Section to the contrary, upon the
occurrence of any Event of Default, the Bank shall have the right, immediately
and without notice, to take possession of and exercise possessory rights with
regard to any Collateral. Every power, right or remedy of the Bank set forth in
this Agreement, the Notes, the Letter of Credit Documents the other Loan
Documents or any other document executed pursuant hereto or in connection
herewith, or afforded by law may be exercised from time to time, and as often as
may be deemed expedient by the Bank.
8.3. APPLICATION OF PROCEEDS. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Bank, first upon all expenses authorized by the Uniform Commercial Code and
all reasonable attorneys' fees and legal expenses incurred by the Bank; the
balance of the proceeds of such sale or other disposition shall be applied to
the payment of the Indebtedness, first to interest, then to principal; and the
surplus, if any, shall be paid over to the Borrower or to such other person or
persons as may be entitled thereto under applicable law. The Borrower shall
remain jointly and severally liable for any deficiency, which shall pay to the
Bank immediately upon demand.
8.4. CUMULATIVE REMEDIES. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by law
or by any mortgage, security agreement or other document contemplated hereby.
Nothing herein contained is intended, nor should it be construed, to preclude
the Bank from pursuing any other remedy for the recovery of any other sum to
which the Bank may be or become entitled for the breach of this Agreement by the
Borrower.
SECTION 9.MISCELLANEOUS.
9.1. INDEPENDENT RIGHTS. No single or partial exercise of any right,
power or privilege hereunder, or any delay in the exercise thereof, shall
preclude other or further exercise of the rights of the parties to this
Agreement.
38
9.2. COVENANT INDEPENDENCE. Each covenant in this Agreement shall be
deemed to be independent of any other covenant, and an exception in one covenant
shall not create an exception in another covenant.
9.3. WAIVERS AND AMENDMENTS. No forbearance on the part of the Bank in
enforcing any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the Borrower
hereunder or by any Company under any of the other Loan Documents, shall
constitute a waiver of any of the terms of this Agreement or of any such right.
No Default or Event of Default shall be waived by the Bank except in writing
signed and delivered by an officer of the Bank, and no waiver of any Default or
Event of Default shall operate as a waiver of any other Default or Event of
Default or of the same Default or Event of Default on a future occasion. No
other amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or any Note or other documents contemplated hereby
shall be effective unless the same shall be in writing and signed and delivered
by an officer of the Bank.
9.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND
PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF TEXAS.
9.5. SURVIVAL OF WARRANTIES, ETC. All of the covenants, agreements,
representations and warranties made by any Company in connection with this
Agreement and any document contemplated hereby shall survive the borrowing and
the delivery of the Notes hereunder and shall be deemed to have been relied upon
by the Bank, notwithstanding any investigation heretofore or hereafter made by
the Bank. All statements contained in any certificate or other document
delivered to the Bank at any time by or on behalf of any Company pursuant hereto
or in connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower in connection with this
Agreement.
9.6. ATTORNEYS' FEES. The Borrower agrees that it will pay all
reasonable costs and expenses of the Bank in connection with the enforcement of
the Bank's rights and remedies under this Agreement and in connection with the
preparation or making of any amendments, modifications, waivers or consents with
respect to this Agreement.
9.7. PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a Saturday, Sunday or
any other day which is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension, if any, shall be included in
computing interest in connection with such payment.
9.8. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns; provided, however, Borrower
39
may not assign or transfer its rights or obligations hereunder without the prior
written consent of the Bank.
9.9. MAINTENANCE OF RECORDS. The Borrower will keep all of its records
concerning the Collateral at its principal place of business. The Borrower will
give the Bank prompt written notice of any change in its principal place of
business, or in the location of said records.
9.10. NOTICES. Except as expressly provided herein, all notices and
communications provided for herein or in any other Loan Document contemplated
hereby or required by law to be given shall be effective when received or, in
the case of notices sent by mail from the Bank to the Borrower, upon sending by
first class mail, postage prepaid, addressed as follows: if to the Borrower, to:
2427 FM 1097, Missouri City, Texas 77459, Attn: Chief Executive Officer, and if
to the Bank, to: Gary W. Orr, 1601 Elm Street, Dallas, Texas 75201, with a copy
to P.O. Box 4167, Houston, Texas 77210-4167, Attn: Michael G. Turner, or to such
other address as a party shall have designated to the other in writing.
9.11. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
9.12. HEADINGS. Article and section headings in this Agreement are
included for the convenience of reference only and shall not constitute a part
of this Agreement for any purpose.
9.13. CAPITAL ADEQUACY. If as a result of any regulatory change
directly or indirectly affecting the Bank or any of the Bank's affiliates there
shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the Bank
or any of the Bank's affiliates of making or maintaining any loan hereunder or
to any other party maintaining any participation therein, or reduce any amount
receivable in respect of any such loan (which increase in cost, or reduction in
amount receivable, shall be the result of the Bank's or the Bank's affiliated
company's reasonable allocation among all affected customers of the aggregate of
such increases or reductions resulting from such event), then, within ten (10)
days after receipt by the Borrower of a certificate from the Bank containing the
information described in this Section below which shall be delivered to the
Borrower, the Borrower agrees from time to time to pay the Bank such additional
amounts as shall be sufficient to compensate the Bank or any of the Bank's
affiliates (for as long as such increased costs or reductions in amount
receivable exist) for such increased costs or reductions in amount receivable
which the Bank determines in the Bank's sole discretion are material. The
certificate requesting compensation under this Section shall identify the
regulatory change which has occurred, the requirements which have been imposed,
modified or deemed applicable, the amount of such additional cost or reduction
in amount receivable and the way in which such amount has been calculated.
40
9.14. COSTS AND ATTORNEYS' FEES. If the Bank retains an attorney in
connection with any default or to collect, enforce or defend this Agreement, any
of the Notes or any of the Loan Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if the Borrower sues the Bank
in connection with this Agreement, any of the Notes or any of the Loan Documents
and does not prevail, then the Borrower agree to pay to the Bank, in addition to
principal and interest, all reasonable costs and expenses incurred by the Bank
in trying to collect this note or in any such suit or proceeding, including
reasonable attorneys' fees. To the extent not prohibited by applicable law, the
Borrower will pay all costs and expenses and reimburse the Bank for any and all
expenditures of every character incurred or expended from time to time,
regardless of whether or not a default has occurred, in connection with (a) the
preparation, negotiation, documentation, closing, renewal, revision,
modification, increase, review or restructuring of this Agreement or any of the
other Loan Documents including, without limitation, legal, accounting, auditing,
architectural engineering and inspection services and disbursements, or in
connection with collecting or attempting to enforce or collect this Agreement,
any of the Notes or any of the other Loan Documents, (b) the Bank's evaluating,
monitoring, administrating and protecting any Collateral now or hereafter
securing payment of any part of the Indebtedness and (c) the Bank's creating,
perfecting and realizing upon Payee's security interests in and liens on any
Collateral, and all costs and expenses relating to the Bank's exercising any of
its rights and remedies hereunder or under any other Loan Document or at law,
including, without limitation, all appraisal fees, consulting fees, filing fees,
taxes, brokerage fees and commissions, title review and abstract fees, UCC
search fees, other fees and expenses incident to title searches, reports and
security interests, escrow fees, attorneys' fees, legal expenses, court costs,
other fees and expenses incurred in connection with any complete or partial
liquidation of any Collateral and all fees and expenses for any professional
services relating to the Collateral or any operations conducted in connection
with it; PROVIDED, that no right or option granted by the Borrower to the Bank
or otherwise arising pursuant to any provision of this or any other instrument
shall be deemed to impose or admit a duty on the Bank to supervise, monitor or
control any aspect of the character or condition of the Collateral or any
operations conducted in connection with it for the benefit of the Borrower or
any other Person other than the Bank. The Borrower agrees to indemnify, defend
and hold the Bank, its shareholders, directors, officers, agents and employees
(collectively "INDEMNIFIED PARTIES") harmless from and against any and all loss,
liability, obligation, damage, penalty, judgment, claim, deficiency, expense,
action, suit, cost and disbursement of any kind or nature whatsoever (including
interest, penalties, attorneys' fees and amounts paid in settlement), REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE
INDEMNIFIED PARTIES, imposed on, incurred by or asserted against the Indemnified
Parties growing out of or resulting from this note, any Loan Document or any
transaction or event contemplated herein or therein (except that such indemnity
shall not be paid to any Indemnified Party to the extent that such loss, etc.
results from the gross negligence or willful misconduct of that Indemnified
Party). Any amount to be paid under this Paragraph by the Borrower to Payee
shall be a demand obligation owing by such the Borrower to Payee and shall bear
interest from the date of expenditure until paid at the Past Due Rate.
41
9.15. GENDER. Throughout this Agreement, the masculine shall include
the feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
9.16. JOINT AND SEVERAL OBLIGATIONS. The Borrower shall be jointly and
severally liable for the payment and performance of the Indebtedness without
regard to which the Borrower receives the proceeds hereof. The Borrower hereby
acknowledges that it expects to derive economic advantage from each of the
Revolving Loan.
9.17. SEVERABILITY OF PROVISIONS. Any provision of this Agreement, any
Note or any other Loan Documents that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, such Note or such other documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
42
9.18. ASSIGNMENT. The Bank shall have the absolute and unrestricted
right to sell, assign, transfer, or grant participation in, all or any portion
of the loans and any collateral, guaranties or other security relating thereto
without the consent of the Borrower; provided, however, no such action on the
part of the Bank shall have the effect of changing any of the Borrower's
obligations hereunder without the written consent of the Borrower. The Bank
shall give the Borrower written notice of any absolute assignment of any of the
loans if the result thereof will be to cause the Borrower to deal directly with
another financial institution which is not the successor in interest by merger
to the Bank.
9.19. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY
IRREVOCABLY WAIVE THE RIGHT TO TRAIL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS
OR PROCEEDINGS AT ANY TIME IN WHICH THE BORROWER AND BANK ARE PARTIES ARISING
OUT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
LASERMEDICS, INC., a Texas corporation
By: /s/ MICHAEL M. BARBOUR
MICHAEL M. BARBOUR, PRESIDENT
COMERICA BANK-TEXAS, a Texas banking
corporation
By: /s/ MITCHELL SCHULMAN
MITCHELL SCHULMAN, VICE PRESIDENT
43
<PAGE>
EXHIBIT A
EXHIBIT A
_______________________________________________________________
Report of Accounts Receivable (Accounts Financing)
COMERICA Bank-Texas
Comerica Bank-Texas
Commercial Loan Accounting Services
Post Office Box 650282
Dallas, Texas 75265-0282
We submit the following information with the Security Agreement (Accounts
Receivable) heretofore executed by the undersigned in favor of the Bank.
ACCOUNTS RECEIVABLE
1. Balance Accounts Receivable ____________, 19____ $______________________
2. Charges Billed This Month To Date (Dr. To A/R) $______________________
3. Payments Credited This Month To Date (Cr. To A/R $______________________
4. Balance Accts. Rec. (Control) __________, 19____ $______________________
5. Charges Since Last Report ______________________
6. Payments Since Last Report _____________________
7. Ineligible Accounts (see attached) $______________________
8. Net Accounts Receivable (Line 4 Less Line 7) $______________________
9. Loan Formula__________% Of Net Accounts Receivable $______________________
10. Inventory Advance (see attached) $_______________ $______________________
11. Overformula $_______________ $______________________
12. Other____________________________________________ $______________________
13. Total Borrowing Base (Line 9 Plus 10, Plus 11,
Plus/Minus 12) $______________________
Loan Balance
Loan Balance Per Last Report $______________________
Less Net Payments (see attached tape) $______________________
Plus Note Advances (see attached tape) $______________________
Current Loan Balance $______________________
Plus Letters of Credit $______________________
Other________________________________________________ $______________________
Total Balance $______________________
To the best of my knowledge and belief, this information is correct and may be
relied upon by you as a basis for advancing any credit to us.
Company Name_________________________________________
By___________________________________________________
___________________________________
[LOGO) Inventory Report (Accounts Financing)
Comerica Bank - Texas
Accounts Financing Department
Post Office Box 650282
Dallas, Texas 75265-0282
We submit the following information with the Security Agreement (Accounts
Receivable and Inventory) heretofore executed by the undersigned in favor of the
Bank.
1. Inventory beginning balance at ________________ $ ___________________
2. Purchases: (Report major categories of inventory purchased)
Description Amount
A. ______________________________ ______________________________________
B. ______________________________ ______________________________________
C. ______________________________ ______________________________________
D. ______________________________ ______________________________________
E. ______________________________ ______________________________________
Total _______________________
3. Sales at cost: (Report major categories of inventory sold)
Description Amount
A. ______________________________ ______________________________________
B. ______________________________ ______________________________________
C. ______________________________ ______________________________________
D. ______________________________ ______________________________________
E. ______________________________ ______________________________________
Total (________________________)
4. Inventory Balance at ___________ $____________________
5. General Ledger Inventory Total at (A) [ ] ___________ $____________________
6. Perpetual List Inventory Total at (A) [ ] ___________ $____________________
7. Available Advance Amount (B). Inventory Formula at __% $____________________
8. Maximum Loan Allowed on Inventory $____________________
- - -------------------------------------------------------------------------------
Adv. Available Advance
Category (C) Mix % List Value Rate % (D) Amount (D)
Raw Materials ______ _______________ X ____ = ____________________
Work in Process ______ _______________ X ____ = ____________________
Finished Goods ______ _______________ X ____ = ____________________
_________________ ______ _______________ X ____ = ____________________
_________________ ______ _______________ X ____ = ____________________
_________________ ______ _______________ X ____ = ____________________
Total 100% _______________
Company Name _______________________________
Prepared by _______________________________
(A) Check the inventory source (5. or 6.) to be used for calculating Available
Advance Amount in 7.
(B) Prior to any applicable loan or inventory advance cap.
(C) Change to applicable categories titles when necessary.
(D) To be completed only if separate inventory advance rates are to be applied
to individual components, in which case this section overrides line 7,
above.
Supplemental Listing of Ineligible Accounts
Attach this listing to the month end Reports of Accounts Receivable
and submit along with month end aging.
A. Over 90 days from invoice date _______________________________
B. Contra Accounts (A/R & A/P from _______________________________
same customer)
C. Accruals to A/R (Volume discounts, _______________________________
Co-op Advertising, R/A)
D. Foreign Accounts _______________________________
E. Government Accounts _______________________________
F. Affiliate Accounts _______________________________
G. Retention/Dated Sales/Guaranteed _______________________________
Sales/Consignment Sales
H. A/R resulting from Bonded Jobs _______________________________
I. Service Charges _______________________________
J. Credit Memos/Balances _______________________________
K. Pre-Billed Accounts _______________________________
L. Maintenance Contracts _______________________________
M. Other (defined as: __________________) _______________________________
Total Ineligibles:
(carry forward to line 7 of report) ===============================
*** Please note all ineligibles on the actual aging (i.e. highlight,
circle, underline, etc.) ***
<PAGE>
EXHIBIT B
REVOLVING NOTE
Houston, Texas
$4,000,000 April 30, 1996
FOR VALUE RECEIVED, LASERMEDICS, INC., a Texas corporation, promises to
pay to the order of COMERICA BANK-TEXAS, a Texas banking corporation, at any
office thereof in the State of Texas (or such other place as the holder hereof
may hereafter designate in writing), in immediately available funds and in
lawful money of the United States of America, the principal sum of Four Million
Dollars ($4,000,000) (or the unpaid balance of all principal advanced against
this note, if that amount is less), together with interest as follows: (a)
interest on the unpaid principal balance of this note from time to time
outstanding at the Stated Rate and interest on all past due amounts, both
principal and accrued interest, from the respective due dates thereof until paid
at the Past Due Rate and (b) the Additional Interest; PROVIDED, that for the
full term of this note the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby (including, but not limited to, all
interest on this note at the Stated Rate plus the Additional Interest) shall not
exceed the Maximum Legal Rate.
1. DEFINITIONS. As used in this note, the following terms shall have
the respective meanings indicated:
(a) "ADDITIONAL INTEREST" means the aggregate of all amounts accrued or
paid pursuant to this note or any of the other Loan Documents (other than
interest on this note at the Stated Rate) which, under applicable laws, is or
may be deemed to constitute interest on the indebtedness evidenced by this note.
(b) "LOAN AGREEMENT" means the Loan Agreement dated concurrently
herewith between Maker and Payee, as the same may be amended, supplemented,
restated or replaced from time to time.
(c) "MAKER" means LASERMEDICS, INC., a Texas corporation.
(d) "OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Indebtedness.
(e) "PAYEE" means COMERICA BANK-TEXAS, a Texas banking corporation, and
any other holder or holders of this note from time to time and, upon acquisition
of this note by any holder or holders other than the named payee, effective as
of the time of such acquisition, the term "Payee" shall mean all of the then
holders of this note, to the exclusion of all prior holders not then retaining
or reserving an interest in this note, to the end that all the rights,
INITIALLED FOR IDENTIFICATION:
Page 1 of 6 Pages
powers, remedies, liens, benefits and privileges accruing and to accrue
hereunder to Payee, as such term is used herein, shall inure to the benefit of
and be owned and held by the holder or holders of this note from time to time,
whether such holder acquires this note through succession to or assignment from
a prior Payee.
(f) "STATED RATE" means, on any day, the rate per annum as provided in
Section 2.4 of the Loan Agreement for interest on principal of this note, not to
exceed the Maximum Legal Rate for such day.
Capitalized terms used herein and not defined herein shall have the meanings
herein as are assigned to them, respectively, in the Loan Agreement.
2. LOAN AGREEMENT; ADVANCES; SECURITY. This note has been issued
pursuant to the terms of the Loan Agreement, and is the Revolving Note referred
to in the Loan Agreement. Advances against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of and security provided for in the Loan Agreement. The
unpaid principal balance of this note at any time shall be the total of all
amounts lent or advanced against this note less the amount of all payments or
permitted prepayments made on this note and by or for the account of Maker. All
loans and advances and all payments and permitted prepayments made hereon may be
endorsed by the holder of this note on a schedule which may be attached hereto
(and thereby made a part hereof for all purposes) or otherwise recorded in the
holder's records; PROVIDED, that any failure to make notation of (a) any advance
shall not cancel, limit or otherwise affect Maker's obligations or any holder's
rights with respect to that advance, or (b) any payment or permitted prepayment
of principal shall not cancel, limit or otherwise affect Maker's entitlement to
credit for that payment as of the date received by the holder.
3. COMPUTATION OF INTEREST. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made.
4. MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST; MANDATORY PREPAYMENTS.
Accrued and unpaid interest on the unpaid principal balance of this note shall
be due and payable as provided in Section 2.4.1 of the Loan Agreement. In
addition, the principal of this note, together with accrued and unpaid interest
on the unpaid principal balance of this note, shall be due and payable on the
Revolving Note Maturity Date. Mandatory Prepayments of this note shall be made
in accordance with Section 2.8 of the Loan Agreement.
5. NO USURY INTENDED; SPREADING. Reference is hereby made to Section
2.5 of the Loan Agreement, which is incorporated herein and hereby made a part
hereof. Notwithstanding any provision to the contrary contained in this note or
any of the other Loan Documents, it is expressly provided that in no case or
event shall the aggregate of (i) all interest on the unpaid
INITIALLED FOR IDENTIFICATION:
Page 2 of 6 Pages
balance of this note, accrued or paid from the date hereof and (ii) the
aggregate of any other amounts accrued or paid pursuant to this note or any of
the other Loan Documents, which under applicable laws are or may be deemed to
constitute interest upon the indebtedness evidenced by this note from the date
hereof, ever exceed the Maximum Legal Rate. In this connection, Maker and Payee
stipulate and agree that it is their common and overriding intent to contract in
strict compliance with applicable usury laws. In furtherance thereof, none of
the terms of this note or any of the other Loan Documents shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the Maximum Legal Rate.
Maker or other parties now or hereafter becoming liable for payment of the
indebtedness evidenced by this note shall never be liable for interest in excess
of the Maximum Legal Rate. If, for any reason whatever, the interest paid or
received on this note during its full term produces a rate which exceeds the
Maximum Legal Rate, the holder of this note shall credit against the principal
of this note (or, if such indebtedness shall have been paid in full, shall
refund to the payor of such interest) such portion of said interest as shall be
necessary to cause the interest paid on this note to produce a rate equal to the
Maximum Legal Rate. All sums paid or agreed to be paid to the holder of this
note for the use, forbearance or detention of the indebtedness evidenced hereby
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of this note, so
that the interest rate is uniform throughout the full term of this note. The
provisions of this Paragraph shall control all agreements, whether now or
hereafter existing and whether written or oral, between Maker and Payee.
6. DEFAULT. If any Default or Event of Default or similar event (however
denominated) occurs under any Loan Document, then that shall automatically
constitute default under this note, the obligation (if any) of Payee to make
further advances against this note shall cease and terminate and the owner or
holder hereof may, at its, his or her option, exercise any or all rights, powers
and remedies afforded under any Loan Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
7. NO WAIVER BY PAYEE. No delay or omission of Payee or any other holder
hereof to exercise any power, right or remedy accruing to Payee or any other
holder hereof shall impair any such power, right or remedy or shall be construed
to be a waiver of the right to exercise any such power, right or remedy. Payee's
right to accelerate this note for any late payment or Maker's or any other
person or entity (other than Payee) to any of the Loan Documents' failure to
timely fulfill its other obligations hereunder or under the other Loan Documents
shall not be waived or deemed waived by Payee by Payee's having accepted a late
payment or late payments in the past or Payee otherwise not accelerating this
note or exercising other remedies for Maker's or any other person or entity
(other than Payee) to any of the Loan Documents' failure to timely perform its
obligations hereunder or under the other Loan Documents. Payee shall not be
obligated or be deemed obligated to notify Maker that it is requiring Maker to
strictly comply with the terms and provisions of this note and the other Loan
Documents before accelerating this
INITIALLED FOR IDENTIFICATION:
Page 3 of 6 Pages
note and exercising its other remedies hereunder or under the other Loan
Documents because of Maker's failure or any other person or entity (other than
Payee) to timely perform its obligations under this note and the other Loan
Documents.
8. WAIVERS BY MAKER AND OTHERS. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
9. PARAGRAPH HEADINGS. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
10. VENUE; CHOICE OF LAW. This note is performable in Harris County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Harris County, Texas, or in
the United States District Court for the Southern District of Texas, Houston
Division (collectively, the "SPECIFIED COURTS"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this note or any
of the Loan Documents brought in any Specified Court, and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Maker further
irrevocably consents to the service of process out of any of the Specified
Courts in any such suit, action or proceeding by the mailing of copies thereof
by certified mail, return receipt requested, postage prepaid, to Maker. Nothing
herein shall affect the right of Payee to commence legal proceedings or
otherwise proceed against Maker in any jurisdiction or to serve process in any
manner permitted by applicable law. Maker agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
INITIALLED FOR IDENTIFICATION:
Page 4 of 6 Pages
11. OFFSET RIGHTS. Payee is hereby authorized at any time and from time
to time, without notice to any person or entity (and Maker hereby WAIVES any
such notice) to the fullest extent permitted by law, to set-off and apply any
and all monies, securities and other properties of Maker now or in the future in
the possession, custody or control of Payee, or on deposit with or otherwise
owed to Maker by Payee--including without limitation all such monies, securities
and other properties held in general, special, time, demand, provisional or
final accounts or for safekeeping or as collateral or otherwise (but excluding
those accounts clearly designated as escrow or trust accounts held by Maker for
others unaffiliated with Maker)-against any and all of Maker's obligations to
Payee now or hereafter existing under this note, irrespective of whether Payee
shall have made any demand under this note. Payee agrees to use reasonable
efforts to promptly notify Maker after any such set-off and application made by
Payee, PROVIDED that failure to give--or delay in giving--any such notice shall
not affect the validity of such set-off and application or impose any liability
on Payee. Payee's rights under this Paragraph are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which
Payee may have.
12. SUCCESSORS AND ASSIGNS. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
13. RECORDS OF PAYMENTS. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
14. SEVERABILITY. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. SALE AND ASSIGNMENT. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be made as provided in the Loan Agreement.
17. PREPAYMENT. Maker may at any time pay the full amount or any part
of this note without the payment of any premium or fee.
INITIALLED FOR IDENTIFICATION:
Page 5 of 6 Pages
18. REVOLVING LOAN. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Revolving Note Maturity Date. Maker may
borrow, repay and reborrow hereunder, and except as set forth in the Loan
Agreement, there is no limitation on the number of advances made hereunder so
long as the total unpaid principal amount at any time outstanding hereunder does
not exceed the lesser of (a) the Borrowing Base, or (b) the Commitment Amount.
Pursuant to Article 15.10(b) of Chapter 15 ("CHAPTER 15") of Title 79, Texas
Revised Civil Statutes, 1925, as amended, Maker and Payee expressly agree that
Chapter 15 shall not apply to this note or to any loan evidenced by this note
and that neither this note nor any such loan shall be governed by or subject to
the provisions of Chapter 15 in any manner whatsoever.
19. BUSINESS LOANS. Maker warrants and represents to Payee and all other
holders of this note 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, household or agricultural use, as such terms are used in
Chapter One.
20. ENTIRE AGREEMENT. This note and the other Loan Documents embody the
entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other Loan
Documents.
LASERMEDICS, INC.,
a Texs corporation
By: Michael M. Barbour, President
Page 6 of 6 Pages
4
<PAGE>
EXHIBIT C
TERM NOTE A
Houston, Texas
$893,000 April 30, 1996
FOR VALUE RECEIVED, LASERMEDICS, INC., a Texs corporation, promises to
pay to the order of COMERICA BANK-TEXAS, a Texas banking association, at any
office thereof in the State of Texas (or such other place as the holder hereof
may hereafter designate in writing), in immediately available funds and in
lawful money of the United States of America, the principal sum of Eight Hundred
Ninety-Three Thousand Dollars ($893,000) (or the unpaid balance of all principal
advanced against this note, if that amount is less), together with interest as
follows: (a) interest on the unpaid principal balance of this note from time to
time outstanding at the Stated Rate and interest on all past due amounts, both
principal and accrued interest, from the respective due dates thereof until paid
at the Past Due Rate and (b) the Additional Interest; PROVIDED, that for the
full term of this note the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this note for the use, forbearance or
detention of the debt evidenced hereby (including, but not limited to, all
interest on this note at the Stated Rate plus the Additional Interest) shall not
exceed the Maximum Legal Rate.
1. DEFINITIONS. As used in this note, the following terms shall have
the respective meanings indicated:
(a) "ADDITIONAL INTEREST" means the aggregate of all amounts accrued or
paid pursuant to this note or any of the other Loan Documents (other than
interest on this note at the Stated Rate) which, under applicable laws, is or
may be deemed to constitute interest on the indebtedness evidenced by this note.
(b) "LOAN AGREEMENT" means the Loan Agreement dated concurrently
herewith between Maker and Payee, as the same may be amended, supplemented,
restated or replaced from time to time.
(c) "MAKER" means LASERMEDICS, INC., a Texas corporation.
(d) "OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Indebtedness.
(e) "PAYEE" means COMERICA BANK-TEXAS, a Texas banking association, and
any other holder or holders of this note from time to time and, upon acquisition
of this note by any holder or holders other than the named payee, effective as
of the time of such acquisition, the term "Payee" shall mean all of the then
holders of this note, to the exclusion of all prior holders not then retaining
or reserving an interest in this note, to the end that all the rights,
INITIALLED FOR IDENTIFICATION:
Page 1 of 6 Pages
powers, remedies, liens, benefits and privileges accruing and to accrue
hereunder to Payee, as such term is used herein, shall inure to the benefit of
and be owned and held by the holder or holders of this note from time to time,
whether such holder acquires this note through succession to or assignment from
a prior Payee.
(f) "STATED RATE" means, on any day, the rate per annum as provided in
Section 2.4 of the Loan Agreement for interest on principal of this note, not to
exceed the Maximum Legal Rate for such day.
Capitalized terms used herein and not defined herein shall have the meanings
herein as are assigned to them, respectively, in the Loan Agreement.
2. LOAN AGREEMENT; ADVANCES; SECURITY. This note has been issued
pursuant to the terms of the Loan Agreement, and is Term Note A referred to in
the Loan Agreement. Advances against this note by Payee or other holder hereof
shall be governed by the terms and provisions of the Loan Agreement. Reference
is hereby made to the Loan Agreement for all purposes. Payee is entitled to the
benefits of and security provided for in the Loan Agreement. The unpaid
principal balance of this note at any time shall be the total of all amounts
lent or advanced against this note less the amount of all payments or permitted
prepayments made on this note and by or for the account of Maker. All loans and
advances and all payments and permitted prepayments made hereon may be endorsed
by the holder of this note on a schedule which may be attached hereto (and
thereby made a part hereof for all purposes) or otherwise recorded in the
holder's records; PROVIDED, that any failure to make notation of (a) any advance
shall not cancel, limit or otherwise affect Maker's obligations or any holder's
rights with respect to that advance, or (b) any payment or permitted prepayment
of principal shall not cancel, limit or otherwise affect Maker's entitlement to
credit for that payment as of the date received by the holder.
3. COMPUTATION OF INTEREST. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made.
4. MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST. The principal of this
note and accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable as provided in Section 2.4.2 of the Loan
Agreement. All principal of this note, together with accrued and then unpaid
interest on the unpaid principal balance of this note, shall be finally due and
payable on the Term Note Maturity Date.
5. NO USURY INTENDED; SPREADING. Reference is hereby made to Section 2.5
of the Loan Agreement, which is incorporated herein and hereby made a part
hereof. Notwithstanding any provision to the contrary contained in this note or
any of the other Loan Documents, it is expressly provided that in no case or
event shall the aggregate of (i) all interest on the unpaid balance of this
note, accrued or paid from the date hereof and (ii) the aggregate of any other
INITIALLED FOR IDENTIFICATION:
Page 2 of 6 Pages
amounts accrued or paid pursuant to this note or any of the other Loan
Documents, which under applicable laws are or may be deemed to constitute
interest upon the indebtedness evidenced by this note from the date hereof, ever
exceed the Maximum Legal Rate. In this connection, Maker and Payee stipulate and
agree that it is their common and overriding intent to contract in strict
compliance with applicable usury laws. In furtherance thereof, none of the terms
of this note or any of the other Loan Documents shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention
of money, interest at a rate in excess of the Maximum Legal Rate. Maker or other
parties now or hereafter becoming liable for payment of the indebtedness
evidenced by this note shall never be liable for interest in excess of the
Maximum Legal Rate. If, for any reason whatever, the interest paid or received
on this note during its full term produces a rate which exceeds the Maximum
Legal Rate, the holder of this note shall credit against the principal of this
note (or, if such indebtedness shall have been paid in full, shall refund to the
payor of such interest) such portion of said interest as shall be necessary to
cause the interest paid on this note to produce a rate equal to the Maximum
Legal Rate. All sums paid or agreed to be paid to the holder of this note for
the use, forbearance or detention of the indebtedness evidenced hereby shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of this note, so that the
interest rate is uniform throughout the full term of this note. The provisions
of this Paragraph shall control all agreements, whether now or hereafter
existing and whether written or oral, between Maker and Payee.
6. DEFAULT. If any Default or Event of Default or similar event (however
denominated) occurs under any Loan Document, then that shall automatically
constitute default under this note, the obligation (if any) of Payee to make
further advances against this note shall cease and terminate and the owner or
holder hereof may, at its, his or her option, exercise any or all rights, powers
and remedies afforded under any Loan Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
7. NO WAIVER BY PAYEE. No delay or omission of Payee or any other holder
hereof to exercise any power, right or remedy accruing to Payee or any other
holder hereof shall impair any such power, right or remedy or shall be construed
to be a waiver of the right to exercise any such power, right or remedy. Payee's
right to accelerate this note for any late payment or Maker's failure to timely
fulfill its other obligations hereunder or under the other Loan Documents shall
not be waived or deemed waived by Payee by Payee's having accepted a late
payment or late payments in the past or Payee otherwise not accelerating this
note or exercising other remedies for Maker's failure to timely perform its
obligations hereunder or under the other Loan Documents. Payee shall not be
obligated or be deemed obligated to notify Maker that it is requiring Maker to
strictly comply with the terms and provisions of this note and the other Loan
Documents before accelerating this note and exercising its other remedies
hereunder or under the other Loan Documents because of Maker's failure to timely
perform its obligations under this note and the other Loan Documents.
INITIALLED FOR IDENTIFICATION:
Page 3 of 6 Pages
8. WAIVERS BY MAKER AND OTHERS. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
9. PARAGRAPH HEADINGS. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
10. VENUE; CHOICE OF LAW. This note is performable in Harris County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Harris County, Texas, or in
the United States District Court for the Southern District of Texas, Houston
Division (collectively, the "SPECIFIED COURTS"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this note or any
of the Loan Documents brought in any Specified Court, and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Maker further
irrevocably consents to the service of process out of any of the Specified
Courts in any such suit, action or proceeding by the mailing of copies thereof
by certified mail, return receipt requested, postage prepaid, to Maker. Nothing
herein shall affect the right of Payee to commence legal proceedings or
otherwise proceed against Maker in any jurisdiction or to serve process in any
manner permitted by applicable law. Maker agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
11. OFFSET RIGHTS. Payee is hereby authorized at any time and from time
to time, without notice to any person or entity (and Maker hereby WAIVES any
such notice) to the fullest extent permitted by law, to set-off and apply any
and all monies, securities and other properties of Maker now or in the future in
the possession, custody or control of Payee, or on
INITIALLED FOR IDENTIFICATION:
Page 4 of 6 Pages
deposit with or otherwise owed to Maker by Payee--including without limitation
all such monies, securities and other properties held in general, special, time,
demand, provisional or final accounts or for safekeeping or as collateral or
otherwise (but excluding those accounts clearly designated as escrow or trust
accounts held by Maker for others unaffiliated with Maker)-against any and all
of Maker's obligations to Payee now or hereafter existing under this note,
irrespective of whether Payee shall have made any demand under this note. Payee
agrees to use reasonable efforts to promptly notify Maker after any such set-off
and application made by Payee, PROVIDED that failure to give--or delay in
giving--any such notice shall not affect the validity of such set-off and
application or impose any liability on Payee. Payee's rights under this
Paragraph are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Payee may have.
12. SUCCESSORS AND ASSIGNS. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
13. RECORDS OF PAYMENTS. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
14. SEVERABILITY. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. SALE AND ASSIGNMENT. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be made as provided in the Loan Agreement.
17. PREPAYMENT. Maker may at any time pay the full amount or any part
of this note without the payment of any premium or fee.
18. BUSINESS LOANS. Maker warrants and represents to Payee and all other
holders of this note 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, household or agricultural use, as such terms are used in
Chapter One.
INITIALLED FOR IDENTIFICATION:
Page 5 of 6 Pages
19. ENTIRE AGREEMENT. This note and the other Loan Documents embody the
entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other Loan
Documents.
LASERMEDICS, INC., a Texas corporation
By: Michael M. Barbour, President
Page 6 of 6 Pages
<PAGE>
EXHIBIT D
TERM NOTE B
Houston, Texas
$1,616,000 April 30, 1996
FOR VALUE RECEIVED, LASERMEDICS, INC., a Texs corporation, promises to
pay to the order of COMERICA BANK-TEXAS, a Texas banking association, at any
office thereof in the State of Texas (or such other place as the holder hereof
may hereafter designate in writing), in immediately available funds and in
lawful money of the United States of America, the principal sum of One Million
Six Hundred Sixteen Thousand Dollars ($1,616,000) (or the unpaid balance of all
principal advanced against this note, if that amount is less), together with
interest as follows: (a) interest on the unpaid principal balance of this note
from time to time outstanding at the Stated Rate and interest on all past due
amounts, both principal and accrued interest, from the respective due dates
thereof until paid at the Past Due Rate and (b) the Additional Interest;
PROVIDED, that for the full term of this note the interest rate produced by the
aggregate of all sums paid or agreed to be paid to the holder of this note for
the use, forbearance or detention of the debt evidenced hereby (including, but
not limited to, all interest on this note at the Stated Rate plus the Additional
Interest) shall not exceed the Maximum Legal Rate.
1. DEFINITIONS. As used in this note, the following terms shall have
the respective meanings indicated:
(a) "ADDITIONAL INTEREST" means the aggregate of all amounts accrued or
paid pursuant to this note or any of the other Loan Documents (other than
interest on this note at the Stated Rate) which, under applicable laws, is or
may be deemed to constitute interest on the indebtedness evidenced by this note.
(b) "LOAN AGREEMENT" means the Loan Agreement dated concurrently
herewith between Maker and Payee, as the same may be amended, supplemented,
restated or replaced from time to time.
(c) "MAKER" means LASERMEDICS, INC., a Texas corporation.
(d) "OBLIGOR" means any person or entity now or hereafter primarily or
secondarily obligated to pay all or any part of the Indebtedness.
(e) "PAYEE" means COMERICA BANK-TEXAS, a Texas banking association, and
any other holder or holders of this note from time to time and, upon acquisition
of this note by any holder or holders other than the named payee, effective as
of the time of such acquisition, the term "Payee" shall mean all of the then
holders of this note, to the exclusion of all prior holders not then retaining
or reserving an interest in this note, to the end that all the rights,
INITIALLED FOR IDENTIFICATION:
Page 1 of 6 Pages
powers, remedies, liens, benefits and privileges accruing and to accrue
hereunder to Payee, as such term is used herein, shall inure to the benefit of
and be owned and held by the holder or holders of this note from time to time,
whether such holder acquires this note through succession to or assignment from
a prior Payee.
(f) "STATED RATE" means, on any day, the rate per annum as provided in
Section 2.4 of the Loan Agreement for interest on principal of this note, not to
exceed the Maximum Legal Rate for such day.
Capitalized terms used herein and not defined herein shall have the meanings
herein as are assigned to them, respectively, in the Loan Agreement.
2. LOAN AGREEMENT; ADVANCES; SECURITY. This note has been issued
pursuant to the terms of the Loan Agreement, and is Term Note A referred to in
the Loan Agreement. Advances against this note by Payee or other holder hereof
shall be governed by the terms and provisions of the Loan Agreement. Reference
is hereby made to the Loan Agreement for all purposes. Payee is entitled to the
benefits of and security provided for in the Loan Agreement. The unpaid
principal balance of this note at any time shall be the total of all amounts
lent or advanced against this note less the amount of all payments or permitted
prepayments made on this note and by or for the account of Maker. All loans and
advances and all payments and permitted prepayments made hereon may be endorsed
by the holder of this note on a schedule which may be attached hereto (and
thereby made a part hereof for all purposes) or otherwise recorded in the
holder's records; PROVIDED, that any failure to make notation of (a) any advance
shall not cancel, limit or otherwise affect Maker's obligations or any holder's
rights with respect to that advance, or (b) any payment or permitted prepayment
of principal shall not cancel, limit or otherwise affect Maker's entitlement to
credit for that payment as of the date received by the holder.
3. COMPUTATION OF INTEREST. Interest on the amount of each advance
against this note shall be computed on the amount of that advance and from the
date it is made.
4. MANDATORY PAYMENTS OF PRINCIPAL AND INTEREST. The principal of this
note and accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable as provided in Section 2.4.3 of the Loan
Agreement. All principal of this note, together with accrued and then unpaid
interest on the unpaid principal balance of this note, shall be finally due and
payable on the Term Note Maturity Date.
5. NO USURY INTENDED; SPREADING. Reference is hereby made to Section 2.5
of the Loan Agreement, which is incorporated herein and hereby made a part
hereof. Notwithstanding any provision to the contrary contained in this note or
any of the other Loan Documents, it is expressly provided that in no case or
event shall the aggregate of (i) all interest on the unpaid balance of this
note, accrued or paid from the date hereof and (ii) the aggregate of any other
INITIALLED FOR IDENTIFICATION:
Page 2 of 6 Pages
amounts accrued or paid pursuant to this note or any of the other Loan
Documents, which under applicable laws are or may be deemed to constitute
interest upon the indebtedness evidenced by this note from the date hereof, ever
exceed the Maximum Legal Rate. In this connection, Maker and Payee stipulate and
agree that it is their common and overriding intent to contract in strict
compliance with applicable usury laws. In furtherance thereof, none of the terms
of this note or any of the other Loan Documents shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention
of money, interest at a rate in excess of the Maximum Legal Rate. Maker or other
parties now or hereafter becoming liable for payment of the indebtedness
evidenced by this note shall never be liable for interest in excess of the
Maximum Legal Rate. If, for any reason whatever, the interest paid or received
on this note during its full term produces a rate which exceeds the Maximum
Legal Rate, the holder of this note shall credit against the principal of this
note (or, if such indebtedness shall have been paid in full, shall refund to the
payor of such interest) such portion of said interest as shall be necessary to
cause the interest paid on this note to produce a rate equal to the Maximum
Legal Rate. All sums paid or agreed to be paid to the holder of this note for
the use, forbearance or detention of the indebtedness evidenced hereby shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread in equal parts throughout the full term of this note, so that the
interest rate is uniform throughout the full term of this note. The provisions
of this Paragraph shall control all agreements, whether now or hereafter
existing and whether written or oral, between Maker and Payee.
6. DEFAULT. If any Default or Event of Default or similar event (however
denominated) occurs under any Loan Document, then that shall automatically
constitute default under this note, the obligation (if any) of Payee to make
further advances against this note shall cease and terminate and the owner or
holder hereof may, at its, his or her option, exercise any or all rights, powers
and remedies afforded under any Loan Document and by law, including the right to
declare the unpaid balance of principal and accrued interest on this note at
once mature and payable.
7. NO WAIVER BY PAYEE. No delay or omission of Payee or any other holder
hereof to exercise any power, right or remedy accruing to Payee or any other
holder hereof shall impair any such power, right or remedy or shall be construed
to be a waiver of the right to exercise any such power, right or remedy. Payee's
right to accelerate this note for any late payment or Maker's failure to timely
fulfill its other obligations hereunder or under the other Loan Documents shall
not be waived or deemed waived by Payee by Payee's having accepted a late
payment or late payments in the past or Payee otherwise not accelerating this
note or exercising other remedies for Maker's failure to timely perform its
obligations hereunder or under the other Loan Documents. Payee shall not be
obligated or be deemed obligated to notify Maker that it is requiring Maker to
strictly comply with the terms and provisions of this note and the other Loan
Documents before accelerating this note and exercising its other remedies
hereunder or under the other Loan Documents because of Maker's failure to timely
perform its obligations under this note and the other Loan Documents.
INITIALLED FOR IDENTIFICATION:
Page 3 of 6 Pages
8. WAIVERS BY MAKER AND OTHERS. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Loan
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally waive notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability on
or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or
to maintain perfection of any lien against or security interest in any such
security or the partial or complete unenforceability of any guaranty or other
surety obligation, in each case in whole or in part, with or without notice and
before or after maturity.
9. PARAGRAPH HEADINGS. Paragraph headings appearing in this note are
for convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
10. VENUE; CHOICE OF LAW. This note is performable in Harris County,
Texas, which shall be a proper place of venue for suit on or in respect of this
note. Maker hereby irrevocably agrees that any legal proceeding in respect of
this note shall be brought in the district courts of Harris County, Texas, or in
the United States District Court for the Southern District of Texas, Houston
Division (collectively, the "SPECIFIED COURTS"). Maker hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Maker hereby irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this note or any
of the Loan Documents brought in any Specified Court, and hereby further
irrevocably waives any claims that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum. Maker further
irrevocably consents to the service of process out of any of the Specified
Courts in any such suit, action or proceeding by the mailing of copies thereof
by certified mail, return receipt requested, postage prepaid, to Maker. Nothing
herein shall affect the right of Payee to commence legal proceedings or
otherwise proceed against Maker in any jurisdiction or to serve process in any
manner permitted by applicable law. Maker agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
11. OFFSET RIGHTS. Payee is hereby authorized at any time and from time
to time, without notice to any person or entity (and Maker hereby WAIVES any
such notice) to the fullest extent permitted by law, to set-off and apply any
and all monies, securities and other properties of Maker now or in the future in
the possession, custody or control of Payee, or on
INITIALLED FOR IDENTIFICATION:
Page 4 of 6 Pages
deposit with or otherwise owed to Maker by Payee--including without limitation
all such monies, securities and other properties held in general, special, time,
demand, provisional or final accounts or for safekeeping or as collateral or
otherwise (but excluding those accounts clearly designated as escrow or trust
accounts held by Maker for others unaffiliated with Maker)-against any and all
of Maker's obligations to Payee now or hereafter existing under this note,
irrespective of whether Payee shall have made any demand under this note. Payee
agrees to use reasonable efforts to promptly notify Maker after any such set-off
and application made by Payee, PROVIDED that failure to give--or delay in
giving--any such notice shall not affect the validity of such set-off and
application or impose any liability on Payee. Payee's rights under this
Paragraph are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Payee may have.
12. SUCCESSORS AND ASSIGNS. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
13. RECORDS OF PAYMENTS. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
14. SEVERABILITY. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it. Each waiver in this note is subject to the
overriding and controlling rule that it shall be effective only if and to the
extent that (a) it is not prohibited by applicable law and (b) applicable law
neither provides for nor allows any material sanctions to be imposed against
Payee for having bargained for and obtained it.
15. SALE AND ASSIGNMENT. Payee reserves the right, exercisable in its
sole discretion and without notice to Maker or any other person, to sell
participations or assign its interest, or both, in all or any part of this note
or any loan evidenced by this note.
16. NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be made as provided in the Loan Agreement.
17. PREPAYMENT. Maker may at any time pay the full amount or any part
of this note without the payment of any premium or fee.
18. BUSINESS LOANS. Maker warrants and represents to Payee and all other
holders of this note 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, household or agricultural use, as such terms are used in
Chapter One.
INITIALLED FOR IDENTIFICATION:
Page 5 of 6 Pages
19. ENTIRE AGREEMENT. This note and the other Loan Documents embody the
entire agreement and understanding between Payee and Maker and other parties
with respect to their subject matter and supersede all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Maker acknowledges and agrees that there is no oral agreement between
Maker and Payee which has not been incorporated in this note and the other Loan
Documents.
LASERMEDICS, INC., a Texas corporation
By: Michael M. Barbour, President
Page 6 of 6 Pages
<PAGE>
EXHIBIT E
<PAGE>
CERTIFICATE
The undersigned hereby certifies that [he] [she] is the
______________________________ of Lasermedics, Inc. ("BORROWER"), and that as
such is authorized to execute this certificate on behalf of the Borrower
pursuant to the Loan Agreement (the "LOAN AGREEMENT") dated as of
, 1996 by and between the Borrower and Comerica Bank - Texas (the
"BANK"); and that a review of the Borrower has been made under [his] [her]
supervision with a view to determining whether the Borrower have fulfilled all
of their obligations under the Loan Agreement and the other Loan Documents; and
on behalf of the above-named Borrower further certifies, represents and warrants
as follows (each capitalized term used herein having the same meaning given to
it in the Loan Agreement unless otherwise specified):
(a) the Borrower has fulfilled its respective obligations
under the Loan Documents.
(b) The representations and warranties made in each Loan
Document are true and correct in all respects on and as of the date
hereof, with the same force and effect as if made on and as of the date
hereof.
(d) No Default has occurred and is continuing.
DATED as of __________________________________.
[ADD SIGNATURE LINE FOR
INDIVIDUAL EXECUTING
CERTIFICATE]
<PAGE>
EXHIBIT F
SUBORDINATION AGREEMENT
by and among
MAXXIM MEDICAL, INC.,
LASERMEDICS, INC.
and
COMERICA BANK - TEXAS
APRIL 30, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. CERTAIN DEFINITIONS................................................... 1
2. SUBORDINATION PRIOR TO PROCEEDING OR SENIOR EVENT OF DEFAULT.......... 5
3. SUBORDINATION IN THE EVENT OF INSOLVENCY, ETC......................... 5
4. SUBORDINATION IN THE EVENT OF A SENIOR EVENT OF DEFAULT -
SUSPENSION PERIOD................................................... 6
5. SUBORDINATION IN THE EVENT OF A SENIOR EVENT OF
DEFAULT-BLOCKAGE PERIOD............................................. 6
6. NO ACCELERATION OF THE JUNIOR CLAIMS.................................. 7
7. TURNOVER; NO PAYMENTS EXCEPT AS AGREED................................ 7
8. THE BORROWER'S OBLIGATION ABSOLUTE.................................... 7
9. SUBROGATION........................................................... 7
10. SUBORDINATED AND PERMITTED LIENS...................................... 8
11. FURTHER ASSURANCES.................................................... 8
12. NO PREJUDICE OR IMPAIRMENT............................................ 8
13. PAYMENT IN FULL....................................................... 9
14. REINSTATEMENT IN CERTAIN EVENTS....................................... 9
15. NOTICE................................................................ 9
16. REPRESENTATIONS AND WARRANTIES OF SUBORDINATE CREDITOR................ 9
17. CERTAIN CONFIRMATIONS BY SUBORDINATE CREDITOR......................... 10
18. RECEIPTS IN EXCESS OF SENIOR CLAIMS................................... 10
19. ASSIGNMENT; BINDING EFFECT............................................ 10
20. ...................................................................... 11
i
22. COUNTERPARTS.......................................................... 12
23. SEVERABILITY.......................................................... 12
24. AMENDMENT............................................................. 12
25. NO ORAL AGREEMENTS.................................................... 12
26. DESCRIPTIVE HEADINGS.................................................. 12
27. GOVERNING LAW......................................................... 12
28. SUBMISSION TO JURISDICTION............................................ 12
29. TRIAL BY JURY......................................................... 13
ii
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("AGREEMENT") is dated effective as of
April 30, 1996. The parties to it are MAXXIM MEDICAL, INC. (the "SUBORDINATE
CREDITOR"), a Delaware corporation, LASERMEDICS, INC. (the "BORROWER"), a Texas
corporation, and COMERICA BANK - TEXAS ("SENIOR CREDITOR"), a Texas banking
association.
In order to induce the Senior Creditor to extend credit and other
financial accommodations to the Borrower pursuant to the Senior Loan Documents
(defined below), as a condition precedent to such credit and financial
accommodations and understanding that the Senior Creditor is relying hereon in
extending credit and financial accommodations to the Borrower, the Subordinate
Creditor has agreed to subordinate certain indebtedness, obligations and
liabilities of the Borrower herein described to the extent and in the manner set
forth below, and, therefore, the parties hereto agree as follows, intending to
be bound legally, to-wit:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
ACTION means
(a) any acceleration of the maturity of, Junior Claims;
(b) any legal action, suit or proceeding to collect or enforce,
or attempt to collect or enforce, Junior Claims, whether through
commencement or joinder of a suit, action or proceeding (judicial or
otherwise);
(c) any commencement of or joinder in a Proceeding except where
the Senior Creditor shall join or shall request the Subordinate Creditor
to file a claim in a Proceeding;
(d) any action to enforce rights or remedies under the
Subordinated Term Note;
(e) foreclosure or attempted foreclosure of any Lien held by the
Subordinate Creditor, if any, (except as permitted herein);
(f) a Conversion; and
(g) acts necessary or incidental to the foregoing in
contemplation of pursuing any of the foregoing.
BLOCKAGE PERIOD means, with respect to the Junior Claims, the
period of time commencing on the date a Stop Payment Notice is received and
ending 180 days thereafter; PROVIDED, HOWEVER, that such Blockage Period shall
be extended for an unlimited and indefinite period of time if the Senior
Creditor has accelerated the maturity of the Senior Claims and has
-1-
commenced and is actively pursuing collection of the Senior Claims, and/or has
commenced action to foreclose or otherwise realize upon collateral.
Notwithstanding the foregoing, no Blockage Period shall extend beyond the time
when all Senior Claims have been Paid in Full.
CONVERSION means the exercise of the Subordinate Creditor's
rights under Article IV of the Subordinated Term Note to convert all or a
portion of the Junior Claims at any time or from time to time into fully paid
and nonassessable shares of common stock of the Borrower.
DELAY PENALTY means, with respect to any regularly scheduled
payment or mandatory redemption under Article II of the Subordinated Term Note
which comes due while a Suspension Period or Blockage Period is in effect and
which is ended by the delivery of a Reinstatement Notice, an amount equal to the
per diem rate of interest on past due principal as provided under the
Subordinated Term Note TIMES the number of days that such scheduled payment or
mandatory redemption was delayed TIMES the amount of such scheduled payment.
JUNIOR CLAIMS means all principal of, interest (including
interest accrued subsequent to the filing of any petition under any bankruptcy,
insolvency or similar law) on and expenses and other claims arising in
connection with the Subordinated Term Note, and all indebtedness now existing or
hereafter created of the Borrower to the Subordinate Creditor, whether direct or
indirect, primary or secondary, joint or several, fixed or contingent and
whether originally payable to the Subordinate Creditor or to a third party and
subsequently acquired by the Subordinate Creditor, and whether evidenced by
note, application for or agreement for reimbursement of advance under letter of
credit, open account, overdraft, indorsement, surety agreement, guaranty or
otherwise; together with any and all amendments, modifications, supplements,
renewals, extension, rearrangements or refinancings thereof.
LIENS means, with respect to any Property, any mortgage, lien,
pledge, collateral assignment, hypothecation, charge, security interest, or
other encumbrance of any kind in respect of such Property, whether vested or
perfected.
PAID IN FULL means that the Senior Claims have been paid in full
in cash, or payment in cash or cash equivalents has been provided for.
PERMITTED ACTION means (a) Action taken by the Subordinate
Creditor AFTER (i) the Senior Claims have been accelerated and (ii) the Senior
Creditor and the Borrower have been given 30 days prior written notice from the
Subordinate Creditor of its intent to declare the Subordinated Term Note due and
payable and no Stop Payment Notice shall have been delivered to the Subordinate
Creditor within such 30-day period, or (b) a Conversion.
NOTWITHSTANDING THE FOREGOING OR ANY OTHER PROVISION HEREOF TO
THE CONTRARY, the Subordinate Creditor may, PROVIDED that the Subordinate
Creditor has given said 30-day notice as described above, (y) 360 days after the
maturity date of the Subordinated Term Note (as originally scheduled) or (z) at
any time other than during a Blockage Period (provided that such Blockage Period
is not terminated by a Reinstatement Notice) either (1) institute an involuntary
Proceedings against the Borrower or (2) foreclose, or
-2-
attempt to foreclose, on any Lien held by the Subordinate Creditor, or take any
other action. ADDITIONALLY AND NOTWITHSTANDING ANY OTHER PROVISION HEREOF TO THE
CONTRARY, 45 days after the following defaults on the Junior Claims; (a) a
distribution of dividends by the Borrower outside the ordinary course of
business, (b) sale by the Borrower of all or substantially all of its assets, or
(c) the further encumbrances by the Borrower of its assets to a creditor other
than the Senior Creditor and in an amount outside the ordinary course of
business, the Subordinate Creditor may pursue either of the two remedies
described in the preceding sentence. Thirty (30) days prior to taking either of
the actions permitted by the immediately preceding sentences the Subordinate
Creditor shall give written notice to the Senior Creditor of its intent to take
such action and such notice shall specify the action intended to be taken. A
Conversion shall always be a Permitted Action hereunder.
PERSON means any individual, trust, estate, association, joint
venture, partnership, corporation, unincorporated business entity, government
(or any agency, instrumentality or political subdivision thereof), or other
entity.
PROCEEDING means any (a) insolvency, bankruptcy, receivership,
custodianship, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Borrower or its property, whether under any
bankruptcy, reorganization or insolvency law or laws, federal or state, or any
law, federal or state, relating to relief of debtors, readjustment of
indebtedness, reorganization, composition or extension, (b) proceeding for any
liquidation, liquidating distribution, dissolution or other winding up of the
Borrower, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (c) assignment for the benefit of creditors of the
Borrower or (d) other marshalling of the assets of the Borrower.
PROPERTY means all types of real, person or mixed property and
all types of tangible and intangible property, including, without limitation,
the real property described on EXHIBIT A attached hereto and incorporated herein
by reference for all purposes.
REINSTATEMENT NOTICE means a notice delivered by the Senior
Creditor to the Subordinate Creditor and the Borrower at any time during a
Suspension Period or a Blockage Period, notifying the Subordinate Creditor and
the Borrower that the Senior Event of Default which gave rise to the giving of a
Suspension Notice or Stop Payment Notice (as applicable) has been waived by or
cured to the sole and absolute satisfaction of the Senior Creditor and otherwise
permitting the Borrower to pay and the Subordinate Creditor to accept the
scheduled payments which should have been made during the applicable Suspension
Period or Blockage Period under the Subordinated Term Note plus the Delay
Penalty.
SENIOR CLAIMS means (i) all principal of and interest (including
interest accrued subsequent to the filing of any petition under any bankruptcy,
insolvency or similar law and all interest that would have accrued but for the
filing of such a petition) on the loans or other indebtedness evidenced by, or
arising under, the Senior Loan Documents and any of the documents or instruments
executed pursuant thereto or in connection therewith, and all amendments,
modifications, supplements, restatements, renewals, increases of commitments,
-3-
extensions, rearrangements and refinancings thereof (subject to the provisions
of CLAUSE [III] of this definition), (ii) all other obligations, now existing or
hereafter arising, under the Senior Loan Documents, including without
limitation, premiums, commitment, facility, agent and other fees, expenses
(including reasonable attorney's fees and disbursements payable thereunder or in
connection therewith) and indemnities payable thereunder; and (iii) future
advances to the Borrower, the principal sum of which, when aggregated with the
indebtedness outstanding under the Senior Loan Documents, does not exceed
$10,000,000 at any time, plus all accrued and unpaid interest, unpaid commitment
fees, and other fees and expenses (including reasonable attorneys' fees and
disbursements payable in connection with such future advances).
SENIOR CREDITOR means Comerica Bank - Texas, and its respective
successors and assigns.
SENIOR EVENT OF DEFAULT means any Default or Event of Default, as
those terms are defined in the Senior Loan Agreement.
SENIOR LOAN AGREEMENT means that certain Loan Agreement dated of
even date herewith, by and between the Senior Creditor and the Borrower, as the
same may be amended, modified, supplemented, renewed, extended or rearranged
from time to time, and any other debt agreement, the process of which are used
to refinance any Senior Claims or any previous refinancing thereof.
SENIOR LOAN DOCUMENTS means the Senior Loan Agreement, the Senior
Notes and the other documents and instruments referred to as "Loan Documents" in
the Senior Loan Agreement, as the same may be amended, modified, supplemented,
renewed, extended or rearranged from time to time, and any other Loan Documents,
the proceeds of which are used to refinance any Senior Claims or any previous
refinancing thereof.
SENIOR NOTES means the Revolving Note (as that term is defined in
the Senior Loan Agreement), Term Note A (as that term is defined in the Senior
Loan Agreement), and Term Note B (as that term is defined in the Senior Loan
Agreement).
STOP PAYMENT NOTICE means a notice delivered by the Senior
Creditor to the Subordinate Creditor and the Borrower after a Senior Event of
Default has occurred, the effect of which is to commence a Blockage Period.
SUBORDINATED TERM NOTE means the $7,000,000 Convertible
Subordinated Promissory Note dated of even date herewith, payable to the
Subordinate Creditor by the Borrower, in the form attached hereto as EXHIBIT B
and incorporated herein by reference for all purposes.
SUSPENSION NOTICE means a notice delivered by the Senior Creditor
to the Subordinate Creditor and the Borrower after a Senior Event of Default has
occurred, the effect of which is to commence a Suspension Period.
-4-
SUSPENSION PERIOD means a forty-five (45) day period commencing
on the date the Subordinate Creditor received a Suspension Notice.
2. SUBORDINATION PRIOR TO PROCEEDING OR SENIOR EVENT OF DEFAULT. Unless
and until the Senior Claims shall have been Paid in Full, the Borrower will not,
without the express prior written consent of the Senior Creditor, make, give or
permit, directly or indirectly, by set-up, redemption, purchase or in any other
manner, nor will the Subordinate Creditor (except in the case of a Conversion)
receive or be entitled to receive, directly, or indirectly, any payment, monies,
property or security, and, without the express prior written consent of the
Senior Creditor, the Subordinate Creditor will not take any Action (other than
Permitted Action); amend the scheduled payment or maturity dates of Junior
Claims to dates earlier than currently scheduled or increase the interest rate
thereon by more than the scheduled increases provided for in the Subordinated
Term Note or to cause interest payments to occur more frequently than
SEMI-ANNUALLY; change any subordination terms; or otherwise amend, modify or
release any document or instrument evidencing or otherwise relating to the
Junior Claims or any guaranty or security therefor or any rights thereunder in
effect on the date of this Agreement; PROVIDED, HOWEVER, that (a) at any time
other than during a Suspension Period or a Blockage Period, the Borrower may pay
the scheduled payments and mandatory redemptions of principal and interest on
the Subordinated Term Note in accordance with the terms of Article II (other
than Section 2.3.1) of the Subordinated Term Note, and (b) the Subordinate
Creditor may receive payments resulting from Permitted Action so long as the
Borrower has not commenced any Proceedings, and no Senior Event of Default has
occurred and is continuing.
Nothing herein prohibits (1) the accrual of interest on the Junior
Claims at a default rate of interest; but no such default interest shall be paid
until the Senior Claims have been Paid in Full or (2) a Conversion under any
circumstances.
3. SUBORDINATION IN THE EVENT OF INSOLVENCY, ETC. In the event of any
Proceedings:
(a) All Senior Claims shall first be Paid in Full before any
payment or distribution, whether in cash, securities (other than those issued
pursuant to a Conversion) or other property, shall be made to the Junior Claims.
(b) Any payment or distribution of any kind or character, whether
in cash, securities or other property which would otherwise (but for these
subordination provisions) be payable or deliverable in respect to any Junior
Claims shall be paid or delivered by the Person making such distribution or
payment, whether a trustee in bankruptcy, receiver, assignee for the benefit of
creditors, liquidating trustee or agent, or otherwise, directly to the Senior
Creditor, for application in payment of the Senior Claims, to the extent
necessary for all Senior Claims then remaining unpaid to be Paid in Full, after
giving effect to any concurrent payment or distribution to the Senior Creditor.
(c) The Subordinate Creditor shall file proofs of claim, proofs
of interest and other instruments of similar character necessary to enforce the
obligations of the Borrower in
-5-
respect to the Junior Claims and any collateral held therefor and the
Subordinate Creditor agrees that it shall hold all payments on and proceeds from
such Junior Claims (except for common stock of the Borrower received by the
Subordinate Creditor pursuant to a Conversion) or collateral in trust for the
benefit of the Senior Creditor and shall pay the same over to the Senior
Creditor in accordance with the priorities then existing for the Senior Claims
to be Paid in Full, after giving effect to any concurrent payment or
distribution to the Senior Creditor. In the event that the Subordinate Creditor
shall fail to take the aforesaid actions, the Senior Creditor may, as
attorney-in-fact for the Subordinate Creditor, take such action on behalf of the
Subordinate Creditor, and the Subordinate Creditor in any such instance to
demand, sue for, collect and receive any and all such monies, dividends or other
assets and give acquittance therefor and to file any claim, proof of claim,
proof of interest or other instrument of similar character if the Subordinate
Creditor fails to do so timely and to take such other action in Proceedings
(including, without limitation, the voting of the Junior Claims [other than
those which have been converted to common stock of the Borrower pursuant to a
Conversion] in the event the Senior Creditor deems such vote necessary to
protect its interests and receive the fullest benefit of this Agreement) in the
name of the Senior Creditor or in the name of the Subordinate Creditor as the
Senior Creditor may deem necessary or advisable for the enforcement of this
Agreement, such appointment to be irrevocable and to be deemed coupled with an
interest.
4. SUBORDINATION IN THE EVENT OF A SENIOR EVENT OF DEFAULT - SUSPENSION
PERIOD. Upon the occurrence and during the continuance of any Senior Event of
Default (other than in respect of a Proceeding, the effect of which is covered
by SECTION 3 above) and delivery by the Senior Creditor to the Subordinate
Creditor of a Suspension Notice, no payment or distribution, principal,
interest, or otherwise, whether in cash, securities (other than in the case of a
Conversion) or other property, shall be made to the Subordinate Creditor and no
Action (whether Permitted Action or not) shall be taken by the Subordinate
Creditor during the Suspension Period applicable to such Suspension Notice
unless the Senior Claims are Paid in Full. At any time during the Suspension
Period, the Senior Creditor may give the Subordinate Creditor a Reinstatement
Notice, whereupon, all scheduled payments and mandatory redemptions of principal
and accrued interest which should have been made under the Subordinated Term
Note during such Suspension Period shall be paid by the Borrower to the
Subordinate Creditor together with the Delay Penalty owing thereon.
Notwithstanding anything contained in the Subordinated Term Note to the
contrary, during the Suspension Period the failure of the Borrower to make any
scheduled payments due under the Subordinated Term Note shall not constitute a
default or event of default under the Subordinated Term Note. If any Suspension
Period shall end without the giving of a Reinstatement Notice by the Senior
Creditor, then (subject to the satisfaction of the notice periods required in
the definition of Permitted Action hereinabove) the Subordinate Creditor may
take Permitted Action.
5. SUBORDINATION IN THE EVENT OF A SENIOR EVENT OF DEFAULT-BLOCKAGE
PERIOD. Upon the occurrence and during the continuance of any Senior Event of
Default (other than in respect of a Proceeding, the effect of which is covered
by SECTION 3 above) and delivery to the Subordinate Creditor of a Stop Payment
Notice, no payment or distribution, principal, interest, or otherwise, whether
in cash, securities or other property, shall be made to the Subordinate
-6-
Creditor and no Action shall be taken by the Subordinate Creditor during the
Blockage Period unless the Senior Claims are Paid in Full (unless such Blockage
Period shall be terminated by written notice to the Subordinate Creditor from
the Senior Creditor or the Action shall be permitted herein). At any time during
the Blockage Period, the Senior Creditor may give the Subordinate Creditor a
Reinstatement Notice, whereupon, all scheduled payments of principal and accrued
interest which should have been made under the Subordinated Term Note during
such Blockage Period shall be paid by the Borrower to the Subordinate Creditor
together with the Delay Penalty owing thereon. Notwithstanding anything
contained in the Subordinated Term Note to the contrary, during the Blockage
Period the failure of the Borrower to make any scheduled payments due under the
Subordinated Term Note shall not constitute a default or event of default under
the Subordinated Term Note. If any Blockage Period shall end without the giving
of a Reinstatement Notice by the Senior Creditor, then (subject to the
satisfaction of the notice periods required in the definition of Permitted
Action hereinabove) the Subordinate Creditor may take Permitted Action.
6. NO ACCELERATION OF THE JUNIOR CLAIMS. Subordinate Creditor will not
take any Action other than Permitted Action until the Senior Claims are Paid
in Full.
7. TURNOVER; NO PAYMENTS EXCEPT AS AGREED. If any payment or
distribution of any character, whether in cash, property or securities (other
than those issued pursuant to a Conversion), shall be received by the
Subordinate Creditor in contravention of any of the terms of this Agreement,
such payment or distribution or security shall be received in trust for the
benefit of, and shall be promptly paid over or delivered and transferred to, the
Senior Creditor for application to the payment of all Senior Claims remaining
unpaid, to the extent necessary to pay all such Senior Claims in full. All
proceeds of insurance and foreclosure in respect of collateral will be turned
over to the Senior Creditor and the Senior Creditor is hereby granted a power of
attorney, which shall be irrevocable and deemed coupled with an interest, to
endorse any instruments evidencing the same and give any instructions with
respect to proceeds of such insurance. The Borrower agrees not to make any
payments on the Junior Claims in violation of this Agreement or to prepay Junior
Claims (unless the Senior Creditor otherwise agrees in writing or the same is
permitted in the Senior Loan Documents) and the Subordinate Creditor agrees that
it will not accept any such payments or prepayments (without regard to any such
terms permitting prepayment, if any).
8. THE BORROWER'S OBLIGATION ABSOLUTE. Nothing contained herein shall
impair, as between the Borrower and the Subordinate Creditor, the obligations of
the Borrower, which are absolute and unconditional, to pay to the Subordinate
Creditor thereof all amounts payable in respect of such Junior Claims as and
when the same shall become due and payable in accordance with the terms thereof,
or is intended to or shall affect the relative rights of the Subordinate
Creditor and any other creditor of the Borrower OTHER THAN the Senior Creditor.
9. SUBROGATION. Subject to all Senior Claims being Paid in Full, the
Subordinate Creditor shall be subrogated to the rights of the Senior Creditor to
receive payments or distributions of assets of the Borrower, whether in cash,
property or securities, applicable to the
-7-
Senior Claims until all amounts owing on the Junior Claims shall be paid in full
in cash of cash equivalents, and for the purpose of such subrogation NO payments
or distributions to the Senior Creditor by or on behalf of the Borrower or by or
on behalf of the Subordinate Creditor by virtue of this Agreement which
otherwise would have been made to the Subordinate Creditor ("SUBROGATED CLAIMS")
shall as between the Borrower, its creditors other than Senior Creditor and the
Subordinate Creditor be deemed to be payment by the Borrower to or on account of
the Senior Claims.
10. SUBORDINATED AND PERMITTED LIENS. The Subordinate Creditor hereby
agrees that it shall not have any Liens except Liens (HEREIN CALLED THE
"SUBORDINATED LIENS") arising pursuant to the security instruments attached
hereto as EXHIBIT C and incorporated herein by reference for all purposes,
granted in the same collateral of the Borrower that the Senior Creditor holds
Liens in. Unless and until (a) the Senior Claims have been Paid in Full or (b)
the Subordinate Creditor is authorized to take Permitted Action, the
Subordinated Liens may not be foreclosed by the Subordinate Creditor. Without
regard to the date that the Subordinated Liens are perfected or granted, or
without any requirement that the Senior Creditor's Liens remain perfected, it is
expressly agreed and acknowledged by the parties hereto that the Subordinated
Liens shall at all times be and remain subject to and inferior to the Liens
securing the repayment of the Senior Claims. In the event that the scope of the
Liens acquired by the Subordinate Creditor is broader than the scope of the
Senior Creditor's Liens, the Subordinate Creditor agrees that any proceeds
received as a result of the Subordinated Liens shall, if the Senior Claims have
not yet been Paid in Full, be tendered to the Senior Creditor.
11. FURTHER ASSURANCES. All instruments evidencing, and documents
relating to, the Junior Claims shall be permanently marked with a legend
indicating that the instrument is subject to this Agreement. Subordinate
Creditor further agrees from time to time to execute such financing statements,
and other amendments and other documents and instruments as the Senior Creditor
reasonably may request to subordinate and evidence the subordination of the
Junior Claims pursuant to this Agreement.
12. NO PREJUDICE OR IMPAIRMENT. The Subordinate Creditor agrees that the
Senior Creditor shall have uncontrolled power and discretion, without notice to
the Subordinate Creditor, to deal in any manner with the Senior Claims
including, without limitation, those for interest, costs and expenses payable by
the Borrower to the Senior Creditor, and any security and guarantees therefor,
including, but not by way of limitation, release, surrender, extension or
contemplated herein, renewal, acceleration, increase as contemplated herein,
release, compromise or substitution. The Senior Creditor, may at any time and
from time to time and in its absolute discretion, change the manner, place or
terms of payment, change or extend the time of payment of, as contemplated
herein, or renew, increase as contemplated herein, or alter, any Senior Claim or
security or guaranty therefor, or release, sell or exchange such security, or
amend, restate, modify otherwise change or supplement any document or instrument
pursuant to which any Senior Claim is issued or secured or exercise or refrain
from exercising any of its rights in respect of the Senior Claims, including, by
way of example and without limitation, the waiver of default thereunder, all
without notice to or assent from the Subordinate Creditor, and
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all without impairing, abridging, releasing or affecting the subordination
provisions hereof. The Subordinate Creditor hereby waives and agrees not to
assert against the Senior Creditor any right which a guarantor or surety could
exercise (other than as found in SECTION 8 hereof), but nothing in this
Agreement shall make or constitute the Subordinate Creditor a guarantor or
surety, and the Subordinate Creditor hereby waives the right, if any, to require
that the Senior Creditor marshal or otherwise require the Senior Creditor to
proceed to dispose of or foreclose upon collateral in any manner or order. The
Senior Claims are senior and superior in right of payment to the Junior Claims
even if advances are made after the Senior Creditor has notice of default in the
Junior Claims and/or irrespective of whether any such advance is objected to by
the Subordinate Creditor.
13. PAYMENT IN FULL. For the purpose of this Agreement, a Senior Claim
shall not be deemed to have been "PAID IN FULL" until any obligation under a
particular Senior Claim to advance funds to, for or on behalf of the Borrower
has terminated and such Senior Claim, including any contingent obligations of
the Borrower in respect thereof, has been Paid in Full. Subject to SECTION 14
and the other provisions hereof, if the Senior Creditor received full payment,
the Subordinate Creditor may, notwithstanding prohibitions herein to the
contrary, take Action, but in the event the Senior Creditor has not been Paid in
Full, the provisions of SECTION 14 shall apply with respect to all monies,
securities (other than those received in connection with a Conversion) and
properties received by the Subordinate Creditor between the dates of full
payment and reinstatement, other than payments or redemptions under Article II
of the Subordinated Term Note (except for those made under Section 2.3.1
thereof).
14. REINSTATEMENT IN CERTAIN EVENTS. The provisions of this Agreement
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Senior Claims is rescinded or must otherwise be
returned by the Senior Creditor upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
15. NOTICE. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received on the earlier to
occur of actual delivery or three days after the same are deposited in the
United States mails, certified or registered mail, return receipt requested,
postage prepaid, addressed as set forth in ANNEX I.
Any addressee may alter the address to which communications are
to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
16. REPRESENTATIONS AND WARRANTIES OF SUBORDINATE CREDITOR. Subordinate
Creditor represents and warrants (a) that such Subordinate Creditor has not
relied and will not rely on any representation or information of any nature made
by or received from the Senior Creditor relative to the Borrower in deciding to
extend credit to the Borrower or to execute this Agreement; (b) that, as of the
date hereof, the outstanding amount of the Junior Claims is
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$7,000,000; (c) that no part of Junior Claims is evidenced by any instrument,
security or other writing which does not bear the legend required hereunder; (d)
that the Subordinate Creditor is the legal and beneficial owner of the Junior
Claims and no part thereof is, to the knowledge of the Subordinate Creditor,
subject to any defense, offset or counterclaim; (e) that the Subordinate
Creditor has not heretofore assigned or transferred any of the Junior Claims
held by the Subordinate Creditor, any interest therein or any collateral or
security pertaining thereto; (f) that the Subordinate Creditor has not
heretofore given, and will not give hereafter, any subordination to any other
Person in respect to the Junior Claims if the effect thereof would be to alter,
limit or otherwise impair the benefits of this Agreement conferred on the Senior
Creditor; and (g) that this Agreement has been authorized by all necessary
corporate action to be taken by the Subordinate Creditor and constitutes its
legal, valid, binding and enforceable agreement.
17. CERTAIN CONFIRMATIONS BY SUBORDINATE CREDITOR. the Subordinate
Creditor confirms and agrees that:
(a) it has no right to compel action by the Senior Creditor;
(b) the Senior Creditor has full authority to deal with its
collateral and to release the same without the consent of the Subordinate
Creditor; and
(c) the Senior Creditor may take additional collateral and/or add
additional guarantors (and thereinafter release or impair the same).
18. RECEIPTS IN EXCESS OF SENIOR CLAIMS. The parties hereto agree, for
the benefit of the Senior Creditor and the Subordinate Creditor, that any monies
received by the Senior Creditor on account of its Liens on collateral or by
virtue of this Agreement in excess of that necessary to cause such Senior
Creditor to be Paid in Full and any monies received, directly or constructively,
from foreclosure of its Liens by the Subordinate Creditor will be distributed as
follows:
(a) FIRST, to the Senior Claims that have not been Paid in Full;
(b) SECOND, to the Subordinate Creditor until the Junior Claims
have been paid in full in cash or cash equivalents; and
(c) THIRD, the balance, if any, to the Borrower or otherwise as a
court of competent jurisdiction shall direct.
Application of distributed monies shall be in accordance with the
written agreements of the Person receiving the same and the Borrower.
19. ASSIGNMENT; BINDING EFFECT. The Subordinate Creditor will not assign
or transfer to others any claim the Subordinate Creditor has or may have against
the Borrower so long as any of the Senior Claims remains outstanding, unless
such assignment or transfer is expressly
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made subject to this Agreement and the transferee ratifies and confirms this
Agreement and the subordination of Junior Claims to the satisfaction of the
Senior Creditor. This Agreement may be assigned by the Senior Creditor in
connection with any assignment or transfer of Senior Claims. This Agreement
shall be binding upon the heirs, administrators, personal representatives,
successors and assigns of the parties hereto (the "ASSIGNS") and shall inure to
the benefit of the Assigns. Nothing in this Agreement or in the Junior Claims,
express or implied, shall give to any Person, other than the parties hereto and
their Assigns, any benefit or any legal or equitable right, remedy or claim
under this Agreement.
20. ASSIGNMENT TO SUBORDINATE CREDITOR. Notwithstanding anything
contained in the foregoing to the contrary, the Subordinate Creditor shall have
the right at any time AFTER the expiration of ninety (90) days from the date
either a Suspension Notice or a Stop Payment Notice has been sent to the
Subordinate Creditor by the Senior Creditor, to give written notice (the
"EXERCISE NOTICE") to the then holder of the Senior Claims of the Subordinate
Creditor's intent to tender to such holder an amount equal to the unpaid balance
of the Senior Claims (including, without limitation, all unpaid principal and
accrued interest on the Senior Notes as of such time) and upon receipt by such
holder of such amount in cash or cash equivalents, such holder shall execute an
assignment of the Senior Claims, the Senior Loan Documents and the Liens then
securing the Senior Claims, in favor of the Subordinate Creditor.
Notwithstanding the foregoing, in the event that the Subordinate Creditor
receives from the Senior Creditor a Reinstatement Notice pertaining to any such
Suspension Notice or Stop Payment Notice before the Subordinate Creditor has
given the Exercise Notice, then the Subordinate Creditor may not require the
then holder of the Senior Claims to execute and deliver any such assignment. Any
such assignment shall be delivered and accepted on the express understanding and
agreement, which shall bind the Subordinate Creditor and each person or entity
claiming by, through or under the Subordinate Creditor, that (a) the Senior
Claims, the Senior Notes, and the other Senior Loan Documents are assigned
absolutely WITHOUT REPRESENTATION OR WARRANTY as to any matter, including, but
not limited to, the existence, validity, perfection or priority of any of the
liens, assignments, security interests, pledges or other security devices
securing or purporting to secure the Senior Claims or any part thereof, (b) the
Subordinate Creditor has, independently and without reliance upon the Senior
Creditor, and based on such documents and information as it has deemed
sufficient, made its own analysis of the creditworthiness of the Borrower and
the sufficiency of the related documentation and any collateral, and (c) the
Senior Creditor makes and has made no warranty or representation as to, and
shall not in any way be responsible for, (i) the accuracy or completeness of any
statement, appraisal, warranty or representation from any source made in or in
connection with the Senior Claims the Senior Notes or the other Senior Loan
Documents; (ii) the financial condition of the Borrower or any other person or
entity which may be obligated, directly or indirectly, upon the Senior Claims;
(iii) the value, sufficiency, or description of, or title to, any collateral for
the Senior Claims or any property covered or purported to be covered by the
Senior Loan Documents; (iv) the performance or observance of any of the terms,
covenants or conditions of any agreement relating to the Senior Claims; (v) the
due execution, legality, validity, enforceability, genuineness, sufficiency or
collectibility of the Senior Claims the Senior Notes or any of the other Senior
Loan Documents or any of the property covered or purported to be
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covered by the Senior Loan Documents; (vi) any inspection of any of the
property, books or records of the Borrower or any other Party; or (vii) any
action at any time taken or omitted to be taken by Lender in connection with the
Senior Claims, the Senior Notes or any of the other Senior Loan Documents.
21. BORROWER'S CONSENT, AGREEMENT AND ACKNOWLEDGMENT ASSIGNMENT OF
SENIOR CLAIMS TO SUBORDINATE CREDITOR. The Borrower hereby acknowledges and
agrees and consents to the provisions of the immediately preceding Section, and,
further, agrees that if an assignment of the Senior Claims as contemplated in
such Section should occur, the Senior Creditor shall have no liability, and the
Borrower hereby agrees to INDEMNIFY AND HOLD HARMLESS the Senior Creditor and
any and all officers, directors, employees, counsel and their respective heirs,
successors and assigns, for any damages or losses which the Senior Creditor
incurs, in each case, as a result of any actions taken or omitted by the
Subordinate Creditor or any or all of the Subordinate Creditor's officers,
directors, employees or counsel or any of their respective heirs, successors and
assigns in their capacities as the holder(s) of the Senior Claims or the Liens
securing them.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
23. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement or any other documents executed in connection herewith should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and shall not be
affected in any way thereby.
24. AMENDMENT. This Agreement may not be amended except in writing
signed by the parties hereto.
25. NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER DOCUMENTS
AND INSTRUMENTS CONTEMPLATED HEREBY OR THEREBY, OR PERTAINING HERETO OR THERETO,
REPRESENT THE FINAL AGREEMENT AMONG 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 AMONG THE PARTIES.
26. DESCRIPTIVE HEADINGS. Descriptive headings of the several sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
27. GOVERNING LAW. THIS AGREEMENT AND ALL RIGHTS AND LIABILITIES OF THE
PARTIES SHALL BE GOVERNED AS TO VALIDITY, INTERPRETATIONS, ENFORCEMENT AND
EFFECT BY THE LAWS OF THE STATE OF TEXAS.
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28. SUBMISSION TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, ANY NOTE AND ANY DOCUMENT TO WHICH IT IS
A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF ANY
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
TEXAS, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
TEXAS, AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT
IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION
OR PROCEEDING WAS BROUGHT IN ANY INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM AND MAIL), POSTAGE PREPAID, TO IT AT ITS
ADDRESS SPECIFIED ON THE SIGNATURE PAGE HEREOF; AND
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.
29. TRIAL BY JURY. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW THE
PARTIES HERETO IRREVOCABLY WAIVE THEIR RIGHT TO A TRIAL BY JURY FOR ANY DISPUTE
ARISING OUT OF THE SUBJECT MATTER HEREOF.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement effective as of the date first above-written.
"SUBORDINATE CREDITOR"
MAXXIM MEDICAL, INC., a Delaware
corporation
By:
Name:
Title:
"BORROWER"
LASERMEDICS, INC., a Texas corporation
By: Michael M. Barbour, President
"SENIOR CREDITOR"
COMERICA BANK - TEXAS, a Texas
banking corporation
By: Mitchell Schulman, Vice President
ATTACHMENTS:
Exhibit A - Property Description
Exhibit B - Instruments Evidencing Subordinated Indebtedness
Exhibit C - Subordinated Security Documents
Annex I - Addresses for Notice
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on _________________________,
1996, by ____________________________________________________,
_______________________ of MAXXIM MEDICAL, INC., a Delaware corporation, on
behalf of said corporation.
Notary Public in and for
the State of T E X A S
Printed Name:
My Commission Expires:
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on _________________________,
1996, by ___________________________________________________ ,
_______________________ of LASERMEDICS, INC., a Texas corporation, on behalf of
said corporation.
Notary Public in and for
the State of T E X A S
Printed Name:
My Commission Expires:
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on _________________________,
1996, by _____________________________, _________________________________ of
COMERICA BANK - TEXAS, a Texas banking association, on behalf of said
association.
Notary Public in and for
the State of T E X A S
Printed Name:
My Commission Expires:
<PAGE>
ANNEX I
IF TO BORROWER: IF TO SENIOR CREDITOR:
Mr. Mike Barbour Comerica Bank - Texas
President 1601 Elm
Lasermedics, Inc. Dallas, Texas 75201
2427 FM 1097 Attention: Mr. Gary W. Orr
Missouri City, Texas 77459
with a copy to:
IF TO SUBORDINATE CREDITOR: Comerica Bank - Texas
P.O. Box 4167
Maxxim Medical, Inc. Houston, Texas 77210-4167
104 Industrial Boulevard Attention: Mr. Michael G. Turner
Sugar Land, Texas 77478
Attention:
