UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
October 15, 1997 (September 30, 1997)
HENLEY HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Commission File Number 0-28566
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)
281-276-7000
(Registrant's telephone number, including area code)
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HENLEY HEALTHCARE, INC.
FORM 8-K
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1997 Henley Healthcare, Inc., a Texas corporation (the
"Company"), entered into an agreement with Cybex International, Inc., a New York
corporation ("Cybex"), whereby the Company purchased certain assets of (and
assumed certain liabilities associated with) the isokinetic rehabilitation
product line (the "Product Line") of Cybex for an estimated purchase price of
approximately $3.2 million. The assets acquired consist of tangible personal
property including machinery, equipment, furniture and fixtures; general
intangibles; contracts; intellectual property; business licenses; inventory; and
prepaid expenses.
The purchase price was paid in cash which the Company obtained pursuant to
an amendment to its Amended and Restated Loan Agreement (the "Amended Loan
Agreement") entered into with Comerica Bank - Texas, a Texas banking corporation
("Comerica"). The Amended Loan Agreement with Comerica provides for a revolving
loan which permits borrowings up to $8,000,000 pursuant to a borrowing base
calculation derived from the Company's accounts receivable and inventory. In
connection with the Amended Loan Agreement, the Company paid off its Term Note A
with Comerica in the amount of $893,000 and issued a substitute Term Note A in
the amount of $1,430,000. The revolving loan's maturity date is February 1,
1999, while the maturity date of the $1,430,000 Term Note A is September 30,
2002. All of the borrowings from Comerica are secured by substantially all of
the assets of the Company including the assets acquired from Cybex. The Amended
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.
In connection with the Amended Loan Agreement with Comerica relating to
the acquisition of the Product Line from Cybex, the Company entered into an
amendment to the Subordination Agreement (the "Subordination Amendment") by and
among Maxxim Medical, Inc. ("Maxxim"), Comerica and the Company. Pursuant to the
Subordination Amendment, the maximum amount of the Company's debt with Comerica
that can be issued senior to Maxxim's Convertible Subordinated Promissory Note
from the Company (the "Maxxim Note) was increased from $10,000,000 to
$12,000,000. In exchange for Maxxim's execution of the Subordination Amendment,
the Company entered into a note modification agreement with Maxxim in which the
Conversion Price (as defined in the Maxxim Note) was reduced from $3.00 to
$2.00. The modification of the Maxxim Note increases the number of shares of the
Company's common stock, par value $.01 per share ("Common Stock"), beneficially
owned by Maxxim from 2,333,333 to 3,500,000 which upon conversion would
represent approximately 53% (compared to approximately 43% prior to the
adjustment of the conversion price) of the currently issued and outstanding
Common Stock. The Maxxim Note is convertible into Common Stock at any time at
Maxxim's option.
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The Company intends to continue the manufacturing and marketing of the Product
Line and, after a short transition period, will move the manufacturing activity
from the Cybex facilities in Ronkonkoma, New York to the Company's manufacturing
plants in Sugar Land and Belton, Texas.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
(a) and (b) Financial Statements of Business Acquired and Pro Forma Financial
Information.
At this time it is impractical to provide the required financial
statements of Henley and the pro forma financial information that are required
to be furnished with this Form 8-K. The Company anticipates filing this
information under cover of Form 8-K/A as soon as practicable within the next 60
days.
(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:
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Asset Purchase Agreement by and between the Company and Cybex dated
September 30, 1997.
4.1 Amended and Restated Loan Agreement between Comerica and the Company dated
June 30, 1997 (the "Amended Loan Agreement").
4.2 First Amendment to the Amended Loan Agreement between Comerica and the
Company dated September 30, 1997.
4.3 Term Note A in the principal amount of $1,430,000 issued by the Company to
Comerica dated September 30, 1997.
4.4 Revolving Note in the principal amount of $8,000,000 issued by the Company
to Comerica dated September 30, 1997.
4.5 First Modification to the Convertible Subordinated Promissory Note between
the Company and Maxxim dated September 30, 1997.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
HENLEY HEALTHCARE, INC.
Date: October 15, 1997 By: /s/ DAN D. SUDDUTH
Dan D. Sudduth
Executive Vice President &
Chief Financial Officer
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
HENLEY HEALTHCARE, INC.
AND
CYBEX INTERNATIONAL, INC.
DATED SEPTEMBER 30, 1997
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is entered into on this 30th day of
September, 1997 by and between Henley Healthcare, Inc., a Texas corporation (the
"Buyer"), and CYBEX International, Inc., a New York corporation (the "Seller").
WITNESSETH
WHEREAS, one segment of Seller's business is the manufacture,
distribution, sales, marketing and service of its isokenetic rehabilitation
product line, as more fully defined in Section 6.1.14 (the "Product Line"); and
WHEREAS, the Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller the Product Line and certain related assets of Seller on
the terms and conditions herein set forth.
NOW, THEREFORE, for and in consideration of the premises, and the mutual
and dependent promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, each parenthetically
capitalized term in the introduction, recitals and other Sections of this
Agreement has the meaning so ascribed to it, and other capitalized terms have
the meaning given them in Section 6.1.
1.2 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions set
forth in this Agreement, Seller, at the Closing hereinafter referred to, hereby
agrees to sell, convey, transfer, assign and deliver to Buyer the following
assets of Seller (all such assets being sold hereunder are referred to
collectively herein as the "Assets"):
1.2.1 the tangible personal property of Seller used or useful in the
operation of the Product Line (such as machinery, equipment, tools,
replacement parts, molds and furniture and fixtures) as described on
SCHEDULE 1.2.1 attached hereto but excluding the Inventory (as defined in
Section 1.2.2 hereof) (collectively, the "Tangible Personal Property");
1.2.2 all of Seller's inventories of supplies, raw materials,
work-in-process and finished goods relating to the Product Line as of the
Closing Date, including, without limitation, that which is described on
SCHEDULE 1.2.2 attached hereto (the "Inventory");
1.2.3 (i) Seller's rights to the patents, patent applications,
copyrights, trademarks and service marks (including registrations and
applications therefor), trade names, licenses or sublicenses and written
know-how, trade secrets and other similar proprietary data and the
goodwill associated therewith used or held in connection with the Product
Line (collectively, the "Seller's Intellectual Property") as described on
SCHEDULE 1.2.3, and (ii) Seller's sales
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and promotional literature, copies of books, records, files and data
(including customer and supplier lists), copies of contracts and documents
evidencing accounts and contracts receivable and payable, and certain
other records of Seller relating to the Assets or the Product Line (items
(i) and (ii) collectively, the "Intangibles"), as described on SCHEDULE
1.2.3 attached hereto;
1.2.4 the leases, subleases, contracts, contract rights, licenses
and agreements relating to the Assets or the operation of the Product Line
as described on SCHEDULE 1.2.4 attached hereto (collectively, the
"Contracts");
1.2.5 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 Product Line as described on
SCHEDULE 1.2.5 attached hereto (collectively, the "Business Licenses") to
the extent assignable;
1.2.6 the goodwill and going concern value of the Product Line; and
1.2.7 all of Seller's backlog of orders for products manufactured or
sold by Seller included in the Product Line, which were accepted by Seller
in the ordinary course of business prior to the date hereof and not
invoiced or shipped (or canceled) prior to the date hereof (collectively,
the "Backlog Orders").
1.3 CONSIDERATION. As consideration for the sale of the Assets to Buyer
and for the other covenants and agreements of Seller contained herein, Buyer
agrees to:
1.3.1 pay to Seller the amount of $3,200,000 in cash (the "Cash
Consideration") at Closing by wire transfer on the Closing Date to the
account designated by Seller by written notice delivered to Buyer before
the Closing Date; and
1.3.2 assume only those liabilities of Seller related to the
Contracts and the Outstanding Warranty Obligations subject to the
conditions and limitations as set forth in Section 1.10 (collectively, the
"Assumed Liabilities"). Seller shall be responsible for all other
liabilities of Seller (collectively, the "Retained Liabilities"),
including, without limitation, any product liability relating to products
in the Product Line sold prior to or on the Closing Date, and any sales
taxes which are payable as a result of the consummation of the
transactions contemplated hereby.
1.4 NO OTHER LIABILITIES ASSUMED. Except for the Assumed Liabilities as
described in Section 1.3.2, Buyer shall not assume or be obligated to pay,
perform, or discharge any debt, obligation, expense or liability of Seller,
whether absolute or contingent, and whether known or unknown.
1.5 ALLOCATION OF CONSIDERATION. The total consideration for the Assets,
including the Assumed Liabilities, shall be allocated among the Assets and the
Seller's non-competition agreement pursuant to Article 5 in accordance with
SCHEDULE 1.5. The Buyer and Seller affirm that said allocation is fair and
equitable and that the parties shall adhere to such allocation for the purposes
of all tax returns filed by them on or after the Closing Date.
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1.6 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of CYBEX
International, Inc., located at 10 Trotter Drive, Medway, Massachusetts 02053,
at 10:00 a.m. on September 30, 1997 (the "Closing Date"), unless
another time, place or date is agreed to by the Seller and the Buyer.
1.7 BUYER'S CLOSING DELIVERIES. At the Closing, Buyer shall deliver to the
Seller: (i) the Cash Consideration described in Section 1.3; (ii) a duly
executed copy of each of the Ancillary Agreements (as defined in Section 1.9);
(iii) a duly executed copy of an assignment and assumption agreement pertaining
to the Contracts and the Assumed Liabilities; and (iv) a favorable opinion of
counsel, dated the Closing Date, from Porter & Hedges, L.L.P., counsel to the
Buyer, in form and substance satisfactory to the Seller, to the effect that (a)
Buyer has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Texas; (b) this Agreement and the
Ancillary Agreements have been duly authorized, executed and delivered by, and
are the legal, valid and binding obligation of the Buyer and are enforceable
against the Buyer in accordance with their terms, except as the enforceability
may be limited by (x) equitable principles of general applicability or (y)
bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally; and (c) the execution, delivery and
performance of this Agreement and the Ancillary Agreements by the Buyer, and the
consummation of the transactions contemplated in the Agreement and the Ancillary
Agreements, will not constitute a breach or violation of, or default under, the
Articles of Incorporation or bylaws of the Buyer or any Law applicable to the
Buyer, or violate or conflict with or result in breach of, or constitute a
default under (or an event which, with notice or lapse of time or both, would
constitute a default under), any contract, indenture, loan agreement, order,
decree or instrument known to such counsel to which the Buyer is a party or by
which it or its assets are bound known to such counsel. In rendering such
opinion, such counsel may rely upon certificates of public officials and of
officers of the Buyer as to matters of fact.
1.8 SELLER'S CLOSING DELIVERIES. At the Closing, Seller shall deliver to
the Buyer: (i) a duly executed bill of sale relating to the Assets, reasonably
satisfactory in form and substance to Buyer; (ii) a duly executed copy of each
of the Ancillary Agreements (as defined in Section 1.9); (iii) a duly executed
copy of the Forza Release (as defined below); (iv) a duly executed copy of an
assignment and assumption agreement pertaining to the Contracts and the Assumed
Liabilities; (v) any consents necessary pursuant to SCHEDULE 2.2; (vi) all such
other instruments as shall be reasonably requested by the Buyer to vest fully in
the Buyer good and indefeasible title to the Assets, including, but not limited
to, patent and patent license transfers and trademark assignments; and (vii) a
favorable opinion of counsel, dated the Closing Date, from Archer & Greiner, a
Professional Corporation, counsel to the Seller, in form and substance
satisfactory to the Buyer, to the effect that (a) Seller has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of New York; (b) this Agreement and the Ancillary Agreements
have been duly authorized, executed and delivered by all necessary corporate
actions, and are the legal, valid and binding obligation of the Seller and are
enforceable against the Seller in accordance with their terms, except as the
enforceability may be limited by (x) equitable principles of general
applicability or (y) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally; (c)
Seller is not required to obtain shareholder approval of the consummation of the
transactions contemplated under this Agreement and the Ancillary Agreements
under any applicable Laws; (d) the Forza Release is a full and complete release
of any obligation on the part of Seller or Buyer as successor owner to the
Assets to sell the Assets to Forza or any right by Forza to purchase the Assets
known to such counsel; and (e) the execution, delivery and performance of
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this Agreement and the Ancillary Agreements by the Seller, and the consummation
of the transactions contemplated in the Agreement and the Ancillary Agreements,
will not constitute a breach or violation of, or default under, the Articles of
Incorporation or bylaws of the Seller or any Law applicable to the Seller, or
violate or conflict with or result in breach of, or constitute a default under
(or an event which, with notice or lapse of time or both, would constitute a
default under), any contract, indenture, loan agreement, order, decree or
instrument to which the Seller is a party or by which it or its assets are bound
known to such counsel. In rendering such opinion, such counsel may rely upon
certificates of public officials and of officers of the Seller as to matters of
fact.
1.9 ANCILLARY AGREEMENTS. At the Closing, the Buyer and Seller will enter
into the following agreements (collectively with any and all other ancillary
documents or agreements necessary to effect the consummation of the transactions
contemplated herein, the "Ancillary Agreements"):
1.9.1 TRANSITION AGREEMENT. The Buyer and Seller will enter into a
Transition Agreement (the "Transition Agreement") of even date herewith,
and in substantially the form as attached hereto as EXHIBIT A, whereby the
Product Line will continue to be manufactured at the Seller's Ronkonkoma,
New York facility for a period of 60 days following the Closing Date;
1.9.2 DISTRIBUTION AGREEMENTS. The Buyer and Seller will enter into
(a) a Distribution Agreement (the "Buyer Distribution Agreement") of even
date herewith and in substantially the form as attached hereto as EXHIBIT
B, whereby the Buyer will become a non-exclusive distributor of Seller's
fitness equipment in the Territory (as defined therein), and (b) a
Distribution Agreement (the "Seller Distribution Agreement") of even date
herewith and in substantially the form as attached hereto as EXHIBIT C,
whereby the Seller will become a non-exclusive distributor of Buyer's
rehabilitation equipment in the Territory (as defined therein); and
1.9.3 TRADEMARK LICENSE AGREEMENT. The Buyer and Seller will enter
into a Trademark License Agreement (the "Trademark License Agreement:) of
even date herewith, and substantially in the form as attached hereto as
EXHIBIT D, through which the Buyer will obtain the right to use the trade
name and trademark "CYBEX(R)" in connection with the manufacture, sale,
distribution and service of the Product Line.
1.10 OUTSTANDING WARRANTY OBLIGATIONS. Buyer hereby assumes, as of the
Closing Date, all of Seller's Outstanding Warranty Obligations. Buyer further
agrees to respond to and fulfill the Outstanding Warranty Obligations in a
timely manner and in accordance with the terms and provisions of Seller's
standard product warranty (the "Standard Product Warranty," a copy of which is
attached hereto as SCHEDULE 1.10), and the unwritten warranty with regard to the
6000 (the "Unwritten Warranty," a complete description of which is included as
part of SCHEDULE 1.10). In addition, Buyer agrees to continue to provide
replacement parts and/or repair services with respect to the Product Line, at
Buyer's standard rates, following the expiration of any warranty period for a
commercially reasonable length of time. Seller acknowledges that it is
retaining, as a Retained Liability, responsibility with respect to product
liability claims pertaining to products in the Product Line sold prior to the
Closing Date. Buyer agrees to cooperate with Seller with regard to its defense
of any product liability Claims brought against Seller involving products in the
Product Line sold
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prior to the Closing Date, and Seller agrees to so cooperate with Buyer
concerning Claims brought against Buyer involving products in the Product Line
sold after to the Closing Date.
1.11 WARRANTY SERVICE AGREEMENT. As a condition precedent to the Buyer's
obligations under this Agreement, the Buyer, on or before the Closing Date,
shall have entered into a new warranty service agreement (the "Warranty Service
Agreement") to replace the Statement of Work to Technical Support Agreement
between Seller and Technology Service Solutions ("TSS") with TSS on terms
acceptable to the Buyer.
1.12 PRODUCT LINE DISTRIBUTORS. As a condition precedent to the Buyer's
obligations under this Agreement, the Buyer, on or before the Closing Date,
shall have entered into new distribution agreements with the current
distributors of the Product Line (the "Product Line Distributors") on terms
acceptable to the Buyer, including, without limitation, Forza Fitness Equipment
Ltd. ("Forza"), Sakai Medical Co., Ltd., and Proxomed Hess Medizintechnik GMBH.
1.13 FORZA PURCHASE RIGHT RELEASE. As a condition precedent to the Buyer's
obligations under this Agreement, Seller agrees to obtain a complete release of
any right which Forza may have to purchase or acquire the Product Line from
Seller (the "Forza Release"). Seller will obtain and deliver the Forza Release
to Buyer in form and substance reasonably agreeable to Buyer.
1.14 ACCOUNTS RECEIVABLE. Buyer hereby agrees that it will act as Seller's
agent for collection with respect to the accounts receivable attributable to
sales of the Product Line prior to the Closing Date (the "Accounts Receivable")
for a period of 120 days following the Closing Date. Seller shall attach, as
SCHEDULE 1.14 hereto, a complete and accurate list of the Accounts Receivable
that the Buyer shall attempt to collect. Buyer shall remit any such collections
on the Accounts Receivable every second Friday following the Closing Date
accompanied with a detailed ledger of all such collections during that period to
date. On the 150th day following the Closing Date, Buyer shall provide Seller
with its final accounting of the then outstanding Accounts Receivable. Buyer
shall apply any payments to the receivables of each debtor in the order such
receivables were booked. Buyer agrees to use commercially practicable efforts in
collecting the Accounts Receivable; PROVIDED, HOWEVER, that Buyer shall not in
any way be responsible or liable to Seller for any nonpayment of or failure to
collect the Accounts Receivable.
1.15 OFFSET. If Buyer is entitled to indemnification pursuant to the
provisions of Article 4, Buyer at its option shall be entitled to offset the
amount of any such expenses or Claims, respectively, against any payments
otherwise due to Seller under this Agreement or any payments due under the
Trademark License Agreement. The rightful exercise of the right of offset
hereunder shall not constitute a breach or default of any provision requiring
payment of sums so offset, or relieve the party against whom such right of
offset is exercised from performing its obligations thereunder.
1.16 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, any other party hereto shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
effectuate the transactions contemplated hereby, including, without limitation,
the transfer to Buyer of all of the Assets, free and clear of all Encumbrances.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As material inducements to the execution, delivery and performance of this
Agreement by Buyer, Seller hereby represents and warrants to Buyer as follows
except as otherwise described in the attached Exception Schedule attached
hereto. The Exception Schedule shall identify each exception by the section
number(s) of this Article 2 to which it relates; Buyer shall be deemed to have
knowledge of all matters described on the Exception Schedule.
2.1 ORGANIZATION AND STANDING. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
Seller has all necessary statutory and corporate power and authority to own,
operate, and lease its properties and to carry on its business as now owned or
leased and operated by it. Seller is duly qualified or licensed to do business
and is in good standing as a foreign corporation authorized to do business in
all jurisdictions in which the character of the properties owned or the nature
of the business conducted by it would make such qualification or license
necessary, except where such failure to qualify or license would not have
material adverse effect on either the Seller, its Assets or the operation of the
Product Line. True, correct and complete copies of Seller's Articles of
Incorporation and Bylaws, as each may have been amended, are attached to the
Exception Schedule.
2.2 AUTHORITY. Seller has the absolute and unrestricted right, power,
legal capacity, and authority to enter into, and perform such Seller obligations
under this Agreement and the Ancillary Agreements.
2.3 AGREEMENT AUTHORIZED AND ENFORCEABLE. The execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby has been duly and validly
authorized by all necessary corporate action on the part of the Seller. No
Shareholder approval of the transactions contemplated in this Agreement and the
Ancillary Agreements is required under any Laws to which the Seller is subject.
This Agreement and the Ancillary Agreements constitute valid and binding
obligations of Seller, enforceable against it in accordance with their terms,
except as may be limited by applicable bankruptcy laws, insolvency laws and
other similar laws affecting the rights of creditors generally.
2.4 NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery of this
Agreement and the Ancillary Agreements by Seller nor the consummation of the
transactions contemplated hereby and thereby will: (a) violate or conflict with
any provision of Seller's Articles of Incorporation or Bylaws, as amended to
date; (b) violate or conflict with any provision of any Laws applicable to the
Seller, or its business or assets; (c) result in a breach of, or constitute a
default (or with notice or lapse of time or both result in a breach of or
constitute a default) under or otherwise give any Person the right to terminate
or accelerate payment under or performance of any note, bond, loan agreement,
contract, lease, license, franchise, permit, trust agreement or declaration of
trust, or other agreement or instrument to which the Seller is a party or to
which its assets are subject; (d) result in the creation or imposition of any
Encumbrance of any nature upon or with respect to any of the assets of Seller;
or (e) be an event that would permit any party to terminate any of the
Contracts; provided, that, with respect to clauses (c), (d) and (e), all
required consents are first obtained.
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2.5 TITLE TO AND CONDITION OF ASSETS. Seller has and will convey to Buyer
good, indefeasible and marketable title to the Assets, free and clear of any
Encumbrance except liens for current taxes not yet due and payable and except as
set forth in SCHEDULE 2.5 of the Exception Schedule attached hereto. Seller is
in possession of any and all of the Assets which are leased to it from others.
The Assets and the assets and rights transferred or assigned to Buyer pursuant
to the Ancillary Agreements constitute all of the material property, whether
real, personal, mixed, tangible or intangible, that is used in the Product Line
by Seller and that is necessary for the continued conduct of the Product Line as
conducted by Seller prior to the date hereof. SCHEDULE 2.5 of the Exception
Schedule attached hereto contains a description of all of the Assets leased
pursuant to the Contracts, which are the only Assets which are not owned by
Seller. Except for such conditions and defects which do not materially impact on
the conduct of the business related to the Product Line, all of the Assets are
in good condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, and are free from any known defects, except as may be
repaired by routine maintenance.
2.6 TANGIBLE PERSONAL PROPERTY AND INVENTORY. The items listed on SCHEDULE
1.2.1 attached hereto constitute all of the material personal property which is
used by Seller in connection with the ownership and operation of the Product
Line. SCHEDULE 1.2.2 attached hereto is believed by Seller to be a materially
correct list of all of the Inventory owned or used by Seller in connection with
the ownership and operation of the Product Line. Said SCHEDULE 1.2.2 is not
based upon a physical inventory count, and was prepared by Seller consistent
with prior practice. Except as disclosed on SCHEDULE 2.5 of the Exception
Schedule attached hereto, no material Tangible Personal Property (i) is held
under any lease, security agreement, conditional sales contract, or other title
retention or security arrangement, or (ii) is located other than in the
possession of Seller. No material items included in the Inventory have been
pledged as collateral or are held by Seller on consignment from others, except
for such Encumbrances as will be released at Closing.
2.7 INTELLECTUAL PROPERTY. The Intellectual Property described on SCHEDULE
1.2.3 attached hereto and the intellectual property transferred or licensed to
Buyer pursuant to the Ancillary Agreements constitutes all of the material
Intellectual Property owned or licensed by Seller and used in the Product Line.
To Seller's knowledge, Seller owns or possesses licenses to use all Intellectual
Property that is material to or necessary for the continued conduct of the
Product Line. Except as listed on the Exception Schedule, the Seller's
Intellectual Property is owned or licensed by Seller free and clear of any
Encumbrance. Seller has not granted to any other Person any license to use any
of the Seller's Intellectual Property, except for non-exclusive licenses granted
in the normal course of business pursuant to the distribution agreements listed
on Schedules 1.2.4 and 2.8 hereto. To Seller's knowledge, the use of the
Seller's Intellectual Property will not, and the conduct of the Product Line
prior to the date hereof did not, infringe, misappropriate or conflict with the
intellectual property rights of others. Except as indicated on the Exception
Schedule, Seller has not received any notice of infringement, misappropriation,
or conflict with the intellectual property rights of others in connection with
the use by Seller of the Seller's Intellectual Property.
2.8 CONTRACTS. The Contracts contained on SCHEDULE 1.2.4 attached hereto
together with those other contracts, agreements, and other written arrangements
(the "Other Agreements") as listed on SCHEDULE 2.8 attached hereto constitute
all of the material contracts, agreements, and other written arrangements
relating to the Assets or Product Line to which Seller is a party, or by which
the Assets are bound. To Seller's knowledge, each of the Contracts is valid and
in full force and effect. There has not been any material default by Seller, or
to Seller's knowledge, any other party
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to any of the Contracts, or any event that with notice or lapse of time or both,
would constitute a material default by Seller, or to Seller's knowledge, any
other party to any of the Contracts. Seller has not received notice that any
party to any of the Contracts intends to cancel or terminate any of the material
Contracts or exercise or not exercise any options that they might have under any
of the Contracts which might have a material adverse effect on the Assets or the
rights under such Contract.
2.9 BUSINESS LICENSES. SCHEDULE 1.2.5 attached hereto, is a schedule of
all material Business Licenses owned by Seller or in which Seller has any rights
or licenses in connection with the Product Line, together with a brief
description of each. Seller is in compliance in all material respects with the
terms of the Business Licenses, except for such violations which, alone or in
the aggregate, do not and will not have a material adverse effect on the ability
to conduct the business associated with the Product Line. None of the Business
Licenses have been, or, to the knowledge of Seller, are threatened to be,
revoked, canceled, suspended or modified.
2.10 LITIGATION. Except as set forth in the Exception Schedule, there is
no suit, action, or legal, administrative, arbitration, or other proceeding or
governmental investigation pending or threatened to which Seller is a party or,
to the knowledge of Seller, might become a party, and which might have a
material adverse effect on the Assets or the Product Line.
2.11 ENVIRONMENTAL MATTERS. Except as described on the Exception Schedule,
none of the current or past operations of the Product Line or the Assets is
being or has been conducted or used in such a manner as to constitute a
violation of any Applicable Environmental Laws, Seller has not received any
notice (whether formal or informal, written or oral) from any entity,
governmental agency or individual regarding any existing, pending or threatened
investigation or inquiry related to violations of any Applicable Environmental
Laws or regarding any claims for remedial obligations or contribution for
removal costs or damages under any Applicable Environmental Laws, and there are
no writs, injunction decrees, orders or judgments outstanding, or lawsuits,
claims, proceedings or investigations pending or threatened relating to the
ownership, use, maintenance or operation of the Assets or the conduct of the
Product Line, nor, to Seller's knowledge, is there any basis for any of the
foregoing. No Hazardous Substances have been or are currently being used by
Seller in its operations in violation of any Applicable Environmental Laws. No
Hazardous Substances are or have ever been situated on or under Seller's
properties, whether owned or leased, or incorporated into any of the Assets in
violation of any Applicable Environmental Laws.
2.12 COMPLIANCE WITH OTHER LAWS. Seller is not in violation of or in
default with respect to, or in alleged violation of or alleged default with
respect to, any other applicable law or any applicable rule, regulation, or any
writ or decree of any court or any governmental commission, board, bureau,
agency, or instrumentality, and Seller is not delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality, except for such violations or delinquencies which,
alone or in the aggregate, do not have a material adverse effect on the ability
to conduct the business associated with the Product Line.
2.13 SOLVENCY. Seller is not now Insolvent, nor will Seller be rendered
Insolvent by the occurrence of the transactions contemplated by this Agreement.
2.14 ERISA PLANS, LABOR ISSUES AND AFFILIATE PAYMENTS. Except as
identified in SCHEDULE 2.14, Seller does not currently sponsor, maintain or
contribute to, and has not at any time sponsored, maintained or contributed to
any employee benefit plan which is or was subject to any
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of the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), in which any of its Employees are or were participants
(whether or not on an active or frozen basis). Each benefit plan set forth in
SCHEDULE 2.14 hereto (collectively the "Benefit Plans") complies currently, and
has complied in the past, in form and operation, with the applicable provisions
of ERISA, the Code and other applicable Laws. All contributions required to be
made to each Benefit Plan under the terms of such Benefit Plans, ERISA or other
applicable Laws have been timely made. None of the Benefit Plans (i) is a
"MULTIEMPLOYER PLAN" (as defined in Section 3(37) of ERISA), or (ii) provides
for medical or other insurance benefits to current or future retired Employees
or former Employees of the Seller (other than as required for group health plan
continuation coverage under Code Section 4980B or applicable state law). During
the five years preceding the Closing Date, (i) no under funded pension plan
subject to Section 412 of the Code has been transferred out of the Seller and
(ii) the Seller has not participated in or contributed to, or had an obligation
to contribute to, any multiemployer plan (as defined in ERISA Section 3(37)) and
has no withdrawal liability with respect to any multiemployer plan. There are no
claims or lawsuits which have been asserted, instituted or threatened against
the Assets by the trustees under the Benefit Plans. Seller has not engaged in
any unfair labor practices which could have a material adverse effect on the
Assets or the operations of the Business. Except as described on the Exception
Schedule, (i) Seller has no collective bargaining agreements with any labor
union or other representative of Employees, (ii) Seller has no pending or
threatened, dispute with any of its existing or former Employees, (iii) there
are no labor disputes pending or threatened by Seller's current or former
Employees, and (iv) since January 1, 1997, Seller has not made any payments to
any of its Affiliates, and has not granted or agreed to grant any bonus to any
current Employee, any general increase in the rates of salaries or compensation
of its Employees or any specific increase to any current Employee, except in
accordance with past practice, regularly scheduled periodic bonuses and other
increases, and has not provided for any new pension, retirement or other
employee benefits to any of its current Employees or any increases in any
existing benefits. Seller has complied and will comply with the Worker
Adjustment and Retraining Notification Act ("WARN") with respect to any
Employees which may be terminated or laid off or any "plant closing" which may
occur as a result of the consummation of the transactions contemplated by this
Agreement. The term "Employees" refers to those of Seller's employees whose
principal duties pertain to the manufacture, sale or marketing of the Product
Line.
2.15 OUTSTANDING WARRANTY OBLIGATIONS. Seller's Standard Product Warranty
and the Unwritten Warranty are the only warranties that Seller has given with
respect to the products sold in the Product Line on or before the Closing Date,
and are currently in full force and effect. TSS has performed substantially all
of the third-party warranty obligation work necessary pursuant to the Standard
Product Warranty and the Unwritten Warranty during the last three years up to
and including the Closing Date.
2.16 FDA REGULATIONS. Attached hereto as SCHEDULE 2.16 is a complete list
of any and all warning letters, Form FDA 483s or other correspondence received
by Seller which pertain to the Product Line copies of which have been previously
provided to Buyer. To Seller's knowledge, the Seller is currently in full
compliance with all U.S. Food and Drug Administration ("FDA") regulations
pertaining to the operation of the Product Line, including, without limitation,
the Medical Device Reporting Regulations as specified in 21 C.F.R. ss. 803, and
any FDA registrations or reports are current.
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2.17 BROKERS. Neither Seller nor any of its Affiliates has employed any
broker, agent or finder, or incurred by any liability for any brokerage fees,
agent's fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
2.18 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by Seller or any of its representatives to Buyer and its
representatives pursuant hereto or in connection with the transactions
contemplated by this Agreement do not include any untrue statement of a material
fact or, to Seller's knowledge, omit to state any material fact necessary to
make the statements made herein and therein not materially misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As material inducements for the execution, delivery and performance of
this Agreement by Seller, Buyer hereby represents and warrants to Seller that as
of the Closing Date:
3.1 ORGANIZATION. 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 powers to own its business as now owned and operated by it.
3.2 AUTHORITY. Buyer has the absolute and unrestricted right, power, legal
capacity, and authority to enter into, and perform such Buyer obligations under
this Agreement and the Ancillary Agreements.
3.3 AGREEMENTS AUTHORIZED AND ENFORCEABLE. The execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby (i) are within the corporate power
and authority of the Buyer, and (ii) have been duly and validly authorized by
all necessary corporate action on the part of Buyer. This Agreement and the
Ancillary Agreements constitute valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, except as may be
limited by applicable bankruptcy laws, insolvency laws and other similar laws
affecting the rights of creditors generally.
3.4 NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery of this
Agreement and the Ancillary Agreements by Buyer nor the consummation of the
transactions contemplated hereby and thereby will: (a) violate or conflict with
any provision of Buyer's Articles of Incorporation or Bylaws, as amended to
date; (b) violate or conflict with any provision of any Laws applicable to the
Buyer, or its business or assets; or (c) result in a breach of, or constitute a
default (or with notice or lapse of time or both result in a breach of or
constitute a default) under or otherwise give any Person the right to terminate
or accelerate payment under or performance of any note, bond, loan agreement,
contract, lease, license, franchise, permit, trust agreement or declaration of
trust, or other agreement or instrument to which the Buyer is a party or to
which its assets are subject.
3.5 BROKERS. Except for its agreement with Principal Financial Securities,
Inc., neither Buyer nor any of its Affiliates have 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.
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3.6 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by Buyer or its representatives to Seller and any of its
representatives pursuant hereto or in connection with the transactions
contemplated by this Agreement do not include any untrue statement of a material
fact or, to Buyer's knowledge, omit to state any material fact necessary to make
the statements made herein and therein not materially misleading.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY SELLER. Seller shall indemnify, defend and hold
harmless Buyer and its officers, directors, employees, agents and shareholders,
against and with respect to any and all Claims that such indemnitees shall incur
or suffer, which arise, result from or relate to (i) any breach of, or failure
by Seller to perform, any of Seller's representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished to Buyer by Seller under this Agreement ("Breach Claims"),
and (ii) any and all Retained Liabilities of Seller, including, without
limitation, any tax liabilities, with respect to which Seller or any other
Person at any time asserts a Claim therefor against the Buyer ("Liability
Claims"). Unless otherwise indicated, the term "Claims" when used herein
includes Breach Claims, Liability Claims and Warranty Claims (as defined below).
4.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold
harmless Seller and its officers, directors, employees, agents and shareholders,
against and with respect to any and all Claims that such indemnitees shall incur
or suffer, which arise, result from or relate to (i) any breach of, or failure
by Buyer to perform, any of its representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit or other
instrument furnished to Seller by Buyer under this Agreement ("Breach Claims"),
and (ii) any and all liabilities of Buyer relating to the Outstanding Warranty
Obligations with respect to which any other Person at any time asserts a Claim
therefor against the Seller ("Warranty Claims").
4.3 INDEMNIFICATION PROCEDURE.
4.3.1 Promptly upon the receipt of notice of any third-party (I.E.,
one who is not a party to this Agreement) Claim, judicial or otherwise,
with respect to any matter as to which indemnification may be claimed
under this Article 4, the indemnified party shall give written notice
thereof to the indemnifying party together with such information
respecting such matter as the indemnifying party shall then have; PROVIDED
HOWEVER, that the failure of the indemnified party to give notice as
provided herein shall not relieve the indemnifying party of any
obligations, to the extent the indemnifying party is not materially
prejudiced thereby. If indemnification is sought with respect to a
third-party Claim asserted or brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party. After such notice from the
indemnifying party to such indemnified party of its election to so assume
the defense of such a third-party Claim, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof, other than reasonable and necessary costs of investigation,
unless the indemnifying party has failed to assume and diligently
prosecute the
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defense of such third-party Claim and to employ counsel reasonably
satisfactory to such indemnified Person. An indemnifying party who elects
not to assume the defense of a third-party Claim shall not be liable for
the fees and expenses of more than one counsel in any single jurisdiction
for all parties indemnified by such indemnifying party with respect to
such Claim or with respect to Claims separate but similar or related in
the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified
party will be entitled to select its own counsel and assume the defense of
any action brought against it if the indemnifying party fails to select
counsel reasonably satisfactory to the indemnified party or if counsel
fails to diligently prosecute, the expenses of such defense to be paid by
the indemnifying party. No indemnifying party shall consent to entry of
any judgment or enter into any settlement with respect to a claim without
the consent of the indemnified party, which consent shall not be
unreasonably withheld. No indemnified party shall consent to entry of any
judgment or enter into any settlement of any such action the defense of
which has been assumed by an indemnifying party without the consent of
such indemnifying party, which consent shall not be unreasonably withheld.
4.3.2 If any party becomes aware of a fact, circumstance, claim,
situation, demand or other matter (other than a third-party Claim) for
which it or any other indemnified party has been indemnified under this
Article 4 and which has resulted or could result in a Claim being owed to
the indemnified party by the indemnifying party, the indemnified party
shall give prompt written notice to the indemnifying party of the Claim,
stating the nature and basis of the Claim and the amount claimed
thereunder, together with supporting information to the Claim, if any. If
the indemnifying party does not notify the indemnified party within 30
days from the date such Claim notice is given that it disputes the Claim,
the amount of the Claim shall conclusively be deemed to be a liability of
the indemnifying party hereunder.
4.3.3 Payments of all amounts owing hereunder with respect to any
Claim shall be made immediately after the settlement between the parties
of the third party Claim.
4.4 INDEMNIFICATION THRESHOLD AND LIMITATIONS. Any request for
indemnification by an indemnified party under the indemnification procedures of
this Article 4 regarding the breach of any representation or warranty under this
Agreement must be asserted by such indemnified party prior to the expiration of
the applicable survival period as set forth in Section 6.5. Notwithstanding any
provision to the contrary contained in this Agreement, neither Buyer nor Seller
shall make any request for indemnification against the other party for any
Breach Claim under this Agreement until the dollar amount of all losses to such
other party for such Breach Claims suffered after the Closing, shall exceed in
the aggregate the amount of $300,000, and, if such amount is exceeded, Buyer or
Seller, as the case may be, shall be required to pay the entire amount of such
aggregate loss to the other party for all such Breach Claims; PROVIDED, HOWEVER,
that a party's obligation and liability for any and all Breach Claims shall not
exceed in the aggregate an amount equal to the purchase price set forth in
Section 1.3. Without regard to the above-mentioned $300,000 aggregate Claim
threshold: (i) Seller shall reimburse Buyer for any and all Liability Claims,
and (ii) Buyer shall reimburse Seller for any and all Warranty Claims.
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ARTICLE 5
NON-COMPETITION AGREEMENT
As used in this Article 5, any reference to "Buyer" or "Seller" shall mean
and include their respective Affiliates.
5.1 SELLER COVENANT NOT TO COMPETE. For a two-year period beginning on the
Closing Date, Seller shall not directly or indirectly, engage or invest in,
finance, own, manage, operate, control or participate in the ownership,
management, operation or control of, be employed by, associated or in any manner
connected with, render services or advice to, or assist (whether or not for
compensation), any Competing Business (as defined below); PROVIDED HOWEVER, that
this Section 5.1 shall not preclude the Seller or its Affiliates from (a)
investing in up to an aggregate of 5% of the securities of any enterprise
engaged in a Competing Business (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any United
States national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, provided that the Seller
and its Affiliates combined do not purchase or hold (directly or indirectly) an
aggregate equity interest of more than 5% in any such enterprise, or (b)
pursuant to Seller's Distributor Agreement.
5.2 COVENANTS NOT TO INTERFERE OR HIRE. For a two-year period beginning on
the Closing Date, neither Seller nor Buyer shall directly or indirectly, either
as principal, agent, independent contractor, consultant, director, officer,
employee, employer, advisor (whether paid or unpaid), stockholder, partner or in
any other individual or representative capacity whatsoever, either for their own
benefit or for the benefit of any other Person, either (i) hire, attempt to
hire, contact or solicit with respect to hiring any employee (not including
independent sales representatives) of the other party hereto as of the Closing
Date, (ii) induce or otherwise counsel, advise or encourage any employee of the
other party as of the Closing Date to leave the employment of that party, or
(iii) induce any distributor, vendor, supplier, representative or agent of or to
the other party to terminate or modify its relationship with that party;
PROVIDED, HOWEVER, that the covenants in this Section shall not prohibit the
Buyer from hiring any of the employees listed on SCHEDULE 5.2, nor shall the
hiring of any such employees constitute a breach of such covenants.
5.3 NECESSITY AND REASONABLENESS. The parties hereto hereby specifically
acknowledge, agree and represent to each other as a material inducement for
their entering into this Agreement:
5.3.1 the covenants and agreements of the parties in this Article 5
are necessary and essential to the protection of the business which will
be conducted by the parties after the Closing Date, and to enable the
parties to realize and derive all of the benefits, rights and expectations
associated with this Agreement;
5.3.2 Buyer will suffer great loss and irreparable harm if the
Seller directly or indirectly enters into a Competing Business;
5.3.3 the temporal and other restrictions contained in this Article
5 are in all respects reasonable and necessary to protect the business
goodwill, trade secrets, prospects and other business interests of Buyer
in respect of the Seller;
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5.3.4 the enforcement of this Agreement in general, and of this
Article 5 in particular, will not work an undue or unfair hardship on
either party or otherwise be oppressive to it, it being specifically
acknowledged and agreed by the Seller that it has other business interests
and opportunities which will provide it adequate means of support if the
provisions of this Article 5 are enforced;
5.3.5 the enforcement of this Agreement in general, and of this
Article 5 in particular, will neither deprive the public of needed goods
or services nor otherwise be injurious to the public; and
5.3.6 good, independent and valuable consideration exists for the
agreement of the parties to be bound by the covenants and agreements
contained in this Article 5.
5.4 ENFORCEMENT. Because of the unique nature of the Assets and the
Product Line, the business to be conducted and further developed by Buyer
therewith, and the confidential and proprietary information relating thereto,
the Seller acknowledges, understands and agrees that Buyer will suffer immediate
and irreparable harm if the Seller or its Affiliates fail to comply with any of
their respective obligations under this Article 5 and that monetary damages will
be inadequate to compensate Buyer for such breach. Accordingly, the Seller
agrees that Buyer shall, in addition to any other remedies available to it at
law or in equity, be entitled to temporary, preliminary, and permanent
injunctive relief and specific performance to enforce the terms of this Article
5 without the necessity of proving inadequacy of legal remedies or irreparable
harm, or posting bond.
ARTICLE 6
MISCELLANEOUS
6.1 CERTAIN DEFINITIONS. As used in this Agreement, each of the following
terms has the meaning ascribed to it in this Section 6.1:
6.1.1 "AFFILIATE" when used to indicate a relationship with any
Person, means: (i) any corporation or organization of which such Person is
an officer, director or partner or is directly or indirectly the
beneficial owner of at least 20% of the outstanding shares of any class of
equity securities or financial interest therein; (ii) any trust or other
estate in which such Person has a beneficial interest or as to which such
Person serves as trustee or in any similar fiduciary capacity; or (iii)
any Person that 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,
such 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 the power to
direct, cause the direction of or influence the 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.
6.1.2 "AGREEMENT" means and includes this Agreement and the
schedules and exhibits hereto.
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6.1.3 "ANCILLARY AGREEMENTS" means the Transition Agreement, the
Buyer Distribution Agreement, Seller Distribution Agreement and the
Trademark License Agreement, all between the Buyer and Seller and all of
even date herewith, and any and all other ancillary documents or
agreements entered into among or executed by the parties hereto in order
to effect the consummation of the transactions contemplated herein.
6.1.4 "APPLICABLE ENVIRONMENTAL LAWS" mean all Laws relating to
protection of the environment, including, without limitation, land use,
zoning, health, chemical use, safety and sanitation Laws, and Laws
governing the on or off-site use, storage, treatment, recycling,
generation, transportation, processing, handling, production or disposal
of Hazardous Substances or sanitary (non-hazardous) substances or waste,
including, without limitation, garbage, refuse or other similar
substances, including, without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
ss.ss. 9601 ET SEQ.), as amended from time to time, including, without
limitation, as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986 ("CERCLA"), and regulations promulgated
thereunder, (ii) the Resources Conservation and Recovery Act of 1976 (42
U.S.C. ss.ss. 6901 ET SEQ.), as amended from time to time ("RCRA"), and
regulations promulgated thereunder, (iii) the Federal Water Pollution
Control Act (U.S.C.A. ss. 9601 ET SEQ.), as amended, and regulations
promulgated thereunder, and (iv) any applicable state laws or regulations
relating to the environment.
6.1.5 "CLAIMS" mean any claims, demands, actions, costs, damages,
losses, expenses, obligations, liabilities, recoveries, judgments,
settlements, suits, proceedings, or causes of action, including interest,
penalties (including civil and criminal penalties) and reasonable
attorneys' fees.
6.1.6 "COMPETING BUSINESS" means any Person who engages in the sale
or distribution of the Product Line or any competing product line in the
geographic area in which Seller conducts Product Line operations as of the
date of this Agreement. Notwithstanding the foregoing, the term "Competing
Business" specifically excludes the current business activities of the
Seller and all natural extensions thereof, other than the manufacture,
sale and marketing of the Product Line.
6.1.7 "ENCUMBRANCE" means and includes (i) any security interest,
mortgage, deed of trust, pledge, lien (including unpaid debts for which a
lien arising under Laws may be asserted if such debts remain unpaid),
encumbrance, charge, defect, option, right of first refusal, preferential
purchase right, proxy or voting trust or agreement, preemptive right,
adverse Claim, equity, power of attorney, equitable interest or servitude,
other right or interest of any other Person, or restriction of any kind,
including but not limited to, any restriction or servitude on the use,
transfer, receipt of income, or other exercise of any attributes of
ownership, and (ii) any Uniform Commercial Code financing statement or
other public filing, notice, or record that by its terms purports to
evidence or notify interested parties of any of the matters referred to in
clause (i) that has not been terminated or released by another proper
public filing, notice, or record.
6.1.8 "GOVERNMENTAL AUTHORITY" means any federal, state, county,
municipal, or other local governmental body, legislature, agency,
commission, board, department, court or other authority, or any
subdivision thereof, or private body exercising any regulatory,
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judicial or taxing authority, and includes, without limitation, the
Federal Trade Commission, the Food and Drug Administration, the
Environmental Protection Agency, the Occupational Safety and Health
Administration, and the Internal Revenue Service.
6.1.9 "HAZARDOUS SUBSTANCE" means, without limitation, (i) any
flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulations, polychlorinated biphenyls, benzene,
petroleum and petroleum products, methane, or (ii) hazardous materials,
hazardous wastes, biomedical wastes, hazardous or toxic substances or
related materials defined as such in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601 ET SEQ.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901 ET SEQ.), or any other Applicable
Environmental Laws.
6.1.10 "INSOLVENT" means, for any Person or entity, 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 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.
6.1.11 "LAWS" mean any statute, law, code, ordinance, rule,
regulation, policy, guideline interpretation, order, permit, license,
certificate, writ, judgment, injunction, decree, determination, award or
other decision or directive of, or promulgated, issued or declared by any
Governmental Authority.
6.1.12 "OUTSTANDING WARRANTY OBLIGATIONS" means Seller's outstanding
service duties and warranty obligations from time to time arising under
Seller's Standard Product Warranty and Unwritten Warranty, both as
attached hereto as SCHEDULE 1.10, with respect to the products sold under
the Product Line which were manufactured and/or sold by the Seller on or
before the Closing Date, whether such obligations arise prior to or after
the Closing Date.
6.1.13 "PERSON" means an individual, corporation, limited liability
company, partnership, limited partnership, joint venture, joint stock
company, firm, company, syndicate, trust, estate, association,
Governmental Authority, business, organization or any other incorporated
or unincorporated entity.
6.1.14 "PRODUCT LINE" means the manufacture, distribution, sales,
marketing and service of the following isokinetic products: (i) NORM
(extremity testing), (ii) TMC (back testing), (iii) Kinetron (Iso Rehab),
(iv) TEF, 300, ETC. (refurbished equipment), (v) All ORTHOTRON and KT
products, (vi) FITRON, and (vii) UBE.
6.2 PUBLIC ANNOUNCEMENTS. Except as mutually agreed, neither Buyer nor
Seller nor any of their respective Affiliates or agents shall issue any press
release or public announcement regarding the execution of this Agreement or the
transactions contemplated thereby.
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6.3 EXPENSES. Except as otherwise explicitly provided in this Agreement,
each of Seller and Buyer shall bear their own respective legal and accounting
fees, and other costs and expenses with respect to the negotiation, execution
and delivery of this Agreement, and consummation of the transactions
contemplated hereby. Buyer hereby agrees to reimburse Seller for all reasonable
direct expenses, not including any portion of the salary or hourly rates of any
employees for time spent, incurred by Seller as a result of providing any
requested assistance to Buyer in the preparation of Buyers Form 8-K, if any,
which will be filed as a result of the consummation of the transactions
contemplated herein.
6.4 NOTICES AND WAIVERS. Any notice, instruction, authorization, request,
demand or waiver hereunder shall be in writing, and shall be delivered either by
personal delivery, by telegram, telex, telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by courier or
delivery service, addressed to the parties hereto at the address indicated
below, or at such other address and number as a party shall have previously
designated by written notice given to the other parties in the manner
hereinabove set forth:
If to Buyer:
Henley Healthcare, Inc.
120 Industrial Boulevard
Sugar Land, Texas 77478
Attention: President
Facsimile No.: (281) 276-7047
With a required copy to:
Porter & Hedges, L.L.P.
700 Louisiana
Houston, Texas 77002-2764
Attention: Robert G. Reedy, Esq.
Facsimile No.: (713) 226-0274
If to Seller:
CYBEX International, Inc.
10 Trotter Drive
Medway, Massachusetts 02053
Attn: William Hurley
Facsimile No.: (508) 533-5500
With a required copy to:
Archer & Greiner,
A Professional Corporation
One Centennial Square
Haddonfield, New Jersey 08033
Attention: James H. Carll, Esq.
Facsimile No.: (609) 795-0574
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Notices shall be deemed given when received, if sent by facsimile means
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communications sent by facsimile means); and when delivered and
receipted for (or upon the date of attempted delivery where delivery is
refused), if hand-delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.
6.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement shall survive the Closing regardless of
any investigation made by a party hereto, and, except for those representations
and warranties in Sections 2.2, 2.3, 2.4, 2.5, 3.2, 3.3, 3.4 and 2.7(with regard
to title), which will survive indefinitely, all representations and warranties
will expire on June 1, 1999.
6.6 KNOWLEDGE, GENDER AND CERTAIN REFERENCES. Unless otherwise provided
for herein, a representation or statement made herein to the knowledge of Seller
or Buyer shall mean the actual knowledge of Seller or Buyer. Unless otherwise
specified, all references herein to days, weeks, months or years shall be to
calendar days, weeks, months or years. Capitalized terms defined in this
Agreement are equally applicable to both their singular and plural forms.
Whenever the context requires, the gender of all words used herein shall include
the masculine, feminine and neuter. References to Articles or Sections shall be
to Articles or Sections of this Agreement unless otherwise specified. The
headings and captions used in this Agreement are solely for convenient reference
and shall not affect the meaning or interpretation of any article, section or
paragraph herein, or this Agreement. The terms "hereof," "herein" or "hereunder"
shall refer to this Agreement as a whole and not to any particular article,
section or paragraph. The terms "including" or "include" are used herein in an
illustrative sense and not to limit a more general statement. When computing
time periods described by a number of days before or after a stated date or
event, the stated date or date on which the specified event occurs shall not be
counted and the last day of the period shall be counted.
6.7 SUCCESSOR AND ASSIGNS. This Agreement shall bind, inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
permitted assigns, and if an individual, by his executors, administrators, and
beneficiaries of his estate by will or the laws of descent and distribution.
This Agreement and the rights and obligations hereunder shall not be assignable
or delegable by any party; provided, however, that Buyer shall be entitled to
assign its rights and delegate its duties hereunder to any corporate Affiliate,
but any such assignment shall not have the effect of terminating Buyer's duties
or obligations as provided herein.
6.8 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and of the United States
applicable in Texas, excluding, however, any rule of conflict-of-laws that would
direct or refer the resolution of any issue to the laws of any other
jurisdiction. Each party hereto hereby acknowledges and agrees that it has
consulted legal counsel in connection with the negotiation of this Agreement and
that it has bargaining power equal to that of the other parties hereto in
connection with the negotiation and execution of this Agreement. Accordingly,
the parties hereto agree that the rule that an agreement shall be construed
against the draftsman shall have no application in the construction or
interpretation of this Agreement.
6.9 SEVERABILITY; JUDICIAL MODIFICATION. If any term, provision, covenant,
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect
18
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and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed this Agreement had the terms, provisions, covenants and restrictions
which may be hereafter declared invalid, void, or unenforceable not initially
been included herein. If a court of competent jurisdiction determines that the
length of time or any other restriction, or portion thereof, set forth in
Article 5 is overly restrictive and unenforceable, the court may reduce or
modify such restrictions to those which it deems reasonable and enforceable
under the circumstances, and the parties agree to request the court to exercise
such power, and, as so reduced or modified, the parties hereto agree that the
restrictions of Article 5 shall remain in full force and effect, shall be
enforceable and shall be enforced.
6.10 AMENDMENT AND ENTIRETY. This Agreement, the Ancillary Agreements, and
any exhibits hereto or thereto, may be amended, modified, or superseded only by
written instrument executed by all parties hereto. This Agreement sets forth the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements, and understandings relating to the subject matter hereof. In the
event of any conflict or inconsistency between the provisions of this Agreement
and the contents or provisions of any schedule or exhibit hereto, the provisions
of this Agreement shall control. Except as expressly permitted by this
Agreement, the contents of schedules and exhibits hereto shall not be deemed to
negate or modify any representation, warranty, covenant or agreement contained
in this Agreement. Without limiting the generality of the preceding sentence,
any representation, warranty, covenant or other agreement contained in any
document, instrument or agreement delivered pursuant hereto or entered into in
connection herewith is made in addition to, and not in lieu of, any
representation, warranty, covenant or other agreement contained herein.
6.11 RIGHTS OF PARTIES. 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 hereto and their respective
successors and assigns, nor shall any provision give any third Persons any right
of subrogation or action over against any party to this Agreement. Without
limiting the generality of the foregoing, it is expressly understood that this
Agreement does not create any third party beneficiary rights.
6.12 TIME OF ESSENCE. Time is of the essence in the performance of this
Agreement.
6.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by facsimile signature, each of which shall be deemed an
original and all which together shall constitute one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Asset Purchase Agreement is executed and
delivered on and as of the day first above written.
BUYER: SELLER:
HENLEY HEALTHCARE, INC. CYBEX INTERNATIONAL, INC.
/S/ MICHAEL M. BARBOUR /S/ PETER C. HAINES
Michael M. Barbour, Peter C. Haines,
PRESIDENT AND CHIEF EXECUTIVE OFFICER PRESIDENT
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EXHIBIT 4.1
AMENDED AND RESTATED
LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
HENLEY HEALTHCARE, INC.
DATED
JUNE 30, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS......................................................1
1.1. DEFINED TERMS............................................1
1.2. ACCOUNTING TERMS........................................16
1.3. SINGULAR AND PLURAL.....................................16
SECTION 2. LOANS, INTEREST AND FEES........................................16
2.1. LOANS...........................................................16
2.1.1. REVOLVING LOANS.........................................16
2.2. BORROWING PROCEDURES............................................16
2.2.1. NOTICE..................................................16
2.2.2. BANK OBLIGATIONS........................................16
2.3. NOTES...........................................................17
2.3.1. REVOLVING NOTE..........................................17
2.3.2. TERM NOTE A.............................................17
2.3.3. TERM NOTE B.............................................17
2.4. INTEREST; PAYMENTS..............................................17
2.4.1. REVOLVING NOTE..........................................17
2.4.2. TERM NOTE A.............................................18
2.4.3. TERM NOTE B.............................................18
2.4.4. TERM NOTE B ANNUAL CALL PROVISIONS......................18
2.5. MAXIMUM RATE....................................................18
2.6. FEES............................................................20
2.7. BASIS OF COMPUTATION............................................20
2.8. MANDATORY PREPAYMENTS...........................................21
2.9. BASIS OF PAYMENTS; APPLICATION..................................21
SECTION 3. SECURITY.......................................................21
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.....................21
4.1. CONDITIONS TO FIRST DISBURSEMENT................................21
4.1.1. DOCUMENTS EXECUTED AND FILED............................21
4.1.2. BORROWING AUTHORIZATIONS................................22
4.1.3. CERTIFIED ARTICLES AND BYLAWS...........................22
4.1.4. CERTIFICATES OF EXISTENCE, GOOD STANDING AND
QUALIFICATION...........................................22
4.1.5. UCC, PATENT AND TRADEMARK LIEN SEARCHES.................22
4.1.6. HAZARD INSURANCE........................................22
4.1.7. PURCHASE AGREEMENT AND SUBORDINATED DEBT DOCUMENTS......23
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4.1.8. APPROVAL OF BANK COUNSEL................................23
4.1.9. FINANCIAL STATEMENTS....................................23
4.1.10. OTHER INFORMATION AND DOCUMENTATION.....................23
4.2. CONDITIONS TO ALL DISBURSEMENTS AND ISSUANCES...................23
4.2.1. CERTIFICATE.............................................23
4.2.2. LETTERS OF CREDIT.......................................23
4.2.3. BANK SATISFACTION.......................................24
SECTION 5. WARRANTIES AND REPRESENTATIONS..................................24
5.1. CORPORATE EXISTENCE AND POWER...................................24
5.2. AUTHORIZATION AND APPROVALS.....................................24
5.3. VALID AND BINDING AGREEMENT.....................................25
5.4. ACTIONS, SUITS OR PROCEEDINGS...................................25
5.5. SUBSIDIARIES....................................................25
5.6. NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS..............25
5.7. ACCOUNTING PRINCIPLES...........................................25
5.8. NO ADVERSE CHANGES..............................................25
5.9. CONDITIONS PRECEDENT............................................25
5.10. TAXES...........................................................25
5.11. COMPLIANCE WITH LAWS............................................26
5.12. INDEBTEDNESS....................................................26
5.13. MATERIAL AGREEMENTS.............................................26
5.14. MARGIN STOCK....................................................26
5.15. PENSION FUNDING.................................................26
5.16. MISREPRESENTATION...............................................27
5.17. BORROWING BASE COMPONENTS.......................................27
5.18. ASSUMED NAMES; OTHER NAMES......................................29
SECTION 6. AFFIRMATIVE COVENANTS...........................................29
6.1. FINANCIAL AND OTHER INFORMATION.................................29
6.1.1. ANNUAL FINANCIAL REPORTS................................29
6.1.2. MONTHLY FINANCIAL STATEMENTS............................30
6.1.3. NO DEFAULT CERTIFICATE..................................30
6.1.4. AGING AND BORROWING BASE CERTIFICATE....................30
6.1.5. SEC REPORTS.............................................31
6.1.6. INVENTORY NOT IN WAREHOUSE..............................31
6.1.7. ADVERSE EVENTS..........................................31
6.1.8. MANAGEMENT LETTERS......................................31
6.1.9. AUDITS..................................................31
6.1.10. TAX RETURNS.............................................31
6.1.11. OTHER INFORMATION AS REQUESTED..........................31
6.2. INSURANCE.......................................................32
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6.3. TAXES...........................................................32
6.4. MAINTAIN CORPORATION AND BUSINESS...............................32
6.5. MAINTAIN EFFECTIVE TANGIBLE NET WORTH...........................33
6.6. MAINTAIN LEVERAGE RATIO.........................................33
6.7. FIXED CHARGE COVERAGE RATIO.....................................33
6.8. CURRENT RATIO...................................................33
6.9. ERISA...........................................................33
6.10. USE OF LOAN PROCEEDS............................................33
6.11. KEY AGREEMENTS..................................................33
6.12. LOCKBOX DEPOSITS................................................33
6.13. NOTICE OF EVENTS................................................33
6.14. TITLE INSURANCE POLICY..........................................34
6.15. CERTIFICATE OF TITLE............................................34
6.16. CERTIFICATES OF GOOD STANDING AND QUALIFICATION.................34
6.17. EQUIPMENT AUDITS................................................34
6.18. REAL ESTATE AUDITS..............................................34
6.19. ADDITIONAL GUARANTIES AND SECURITY..............................35
SECTION 7. NEGATIVE COVENANTS..............................................36
7.1. CAPITAL EXPENDITURES; FDA EXPENDITURES..........................36
7.2. STOCK ACQUISITION...............................................36
7.3. LIENS AND ENCUMBRANCES..........................................36
7.4. INDEBTEDNESS....................................................36
7.5. EXTENSION OF CREDIT.............................................36
7.6. GUARANTEE OBLIGATIONS...........................................37
7.7. SUBORDINATE INDEBTEDNESS........................................37
7.8. PROPERTY TRANSFER, MERGER AND FORMATION OF SUBSIDIARIES.........37
7.9. ................................................................37
ACQUIRE SECURITIES....................................................37
7.10. PENSION PLANS...................................................37
7.11. MISREPRESENTATION...............................................38
7.12. MARGIN STOCK....................................................38
7.13. COMPLIANCE WITH ENVIRONMENTAL LAWS..............................38
7.14. DIVIDENDS.......................................................38
7.15. PURCHASE AGREEMENT; SUBORDINATED DEBT DOCUMENTS.................38
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.......38
8.1. EVENTS OF DEFAULT...............................................38
8.1.1. FAILURE TO PAY MONIES DUE...............................38
8.1.2. MISREPRESENTATION.......................................39
8.1.3. NONCOMPLIANCE WITH BANK AGREEMENTS......................39
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8.1.4. OTHER DEFAULTS..........................................39
8.1.5. JUDGMENTS...............................................39
8.1.6. BUSINESS SUSPENSION, BANKRUPTCY, ETC....................39
8.1.7. CHANGE OF CONTROL OR MANAGEMENT.........................39
8.1.8. INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT
PLAN(S).................................................40
8.1.9. OCCURRENCE OF CERTAIN REPORTABLE EVENTS.................40
8.1.10. LOSS OR DAMAGE.........................................40
8.1.11. ADVERSE CHANGE.........................................40
8.1.12. PBGC...................................................40
8.2. REMEDIES........................................................40
8.3. APPLICATION OF PROCEEDS.........................................41
8.4. CUMULATIVE REMEDIES.............................................41
SECTION 9. MISCELLANEOUS...................................................41
9.1. INDEPENDENT RIGHTS......................................41
9.2. COVENANT INDEPENDENCE...................................41
9.3. WAIVERS AND AMENDMENTS..................................41
9.4. GOVERNING LAW...........................................42
9.5. SURVIVAL OF WARRANTIES, ETC.............................42
9.6. ATTORNEYS' FEES.........................................42
9.7. PAYMENTS ON SATURDAYS, ETC..............................42
9.8. BINDING EFFECT..........................................42
9.9. MAINTENANCE OF RECORDS..................................42
9.10. NOTICES.................................................42
9.11. COUNTERPARTS............................................43
9.12. HEADINGS................................................43
9.13. CAPITAL ADEQUACY........................................43
9.14. COSTS AND ATTORNEYS' FEES...............................43
9.15. GENDER..................................................44
9.16. JOINT AND SEVERAL OBLIGATIONS...........................44
9.17. SEVERABILITY OF PROVISIONS..............................44
9.18. ASSIGNMENT..............................................45
9.19. WAIVER OF JURY TRIAL....................................45
9.20. AMENDED AND RESTATED LOAN AGREEMENT; WAIVER OF DEFAULTS.45
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AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT is made and delivered this 30th
day of June, 1997, by and between HENLEY HEALTHCARE, 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 $5,000,000 for the working capital
needs of the Borrower and establish a sublimit under such facility for the
issuance of letters of credit, (b) ratify and confirm a $893,000 term loan to
the Borrower and (c) ratify and confirm another $1,616,000 term loan to the
Borrower; 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.
"ADDITIONAL SECURITY DOCUMENTS" shall mean, with respect to any Guarantor,
(a) a security agreement substantially in the form of EXHIBIT A hereof and
otherwise in Proper Form, in favor of the Bank covering the Accounts, Inventory,
patents and trademarks and other General Intangibles, Documents, Equipment,
Fixtures, Goods, Instruments and Inventory, wherever located and whether now
owned or hereafter acquired of such Guarantor, as security for such Guarantor's
obligations under a Guaranty, and (b) a deed of trust, mortgage or similar
instrument in favor of or for the benefit of the Bank covering any real property
and related improvements located thereon, to be acquired from an Approved Seller
or owned by an Approved Subsidiary (together with a mortgagee's policy of title
insurance covering such real property in an amount acceptable to the Bank
insuring title to said real property is vested in such Guarantor subject only to
the Permitted Liens); together with all related Financing Statements as the Bank
may reasonably require.
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"AGREEMENT" shall mean this Amended and Restated 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.
"APPROVED SELLER" shall mean any Person a party to an asset purchase
agreement or similar agreement, as seller, transferor, assignor or conveyor (as
the case may be) with an Obligor, as buyer, whereby the applicable Obligor
acquires all or substantially all the properties or assets of such seller, with
respect to which the Bank has received the following:
(a) as soon as practicable and in any event within seven days prior to
the completion of any acquisition, a copy of the form of asset
purchase agreement or similar agreement with all applicable annexes,
schedules and other attachments, substantially in the form to be
executed by such seller and such Obligor;
(b) a Uniform Commercial Code search covering such seller in each
jurisdiction where such seller conducts its business together with
copies of all filings of record in such jurisdictions and together
with all releases of liens and termination statements duly executed
by the secured party under any such filings except for Permitted
Liens and those otherwise approved in writing by the Bank in
advance;
(c) if real property is to be acquired in connection with any such
acquisition, a title commitment in favor of the Bank, issued by a
title insurance company acceptable to the Bank in its sole and
absolute discretion, pursuant to which said title company will agree
to insure the title to said real property subject to no liens other
than Permitted Liens and other liens and security interests approved
by the Bank in writing in advance immediately upon the consummation
of the acquisition (and the Bank subsequently receives a mortgagee's
policy of title insurance covering such real property subject only
to the above described liens and security interests);
(d) a survey of said real property meeting the Bank's standard survey
requirements;
(e) if real property is to be acquired in connection with any such
acquisition, an environmental assessment report prepared by an
independent engineering firm or environmental consultant
(appropriately licensed and insured) acceptable to the Bank stating
that after due investigation (including test borings as appropriate)
of said real property, there is no evidence that there is any
hazardous waste, toxic substance, pollutant or other contaminant
contained in, on, above or under said real property;
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(f) an appraisal by an appraiser selected and engaged by the Bank in
form and substance satisfactory to the Bank;
(g) such financial information with respect to Person to be required or
any Obligor as the Bank may reasonably request confirming that
neither immediately prior to the proposed acquisition nor
immediately following the completion of such proposed acquisition,
no Default or Event of Default shall have occurred; and
(h) the Bank shall have given its prior written consent to the
applicable Obligor to the acquisition.
"APPROVED SUBSIDIARY" shall mean a Person all of the stock of which is to
be acquired by an Obligor, with respect to which the Bank has received the
following:
(a) as soon as practicable and in any event within seven days prior to
the completion of any acquisition, a copy of the stock purchase
agreement or similar agreement with all applicable annexes,
schedules and other attachments, substantially in the form to be
executed by the seller of said stock, such Person to be acquired (if
applicable) and such Obligor, together with the Organizational
Documents to the Person to be acquired and of any Subsidiary of an
Obligor formed to acquire the stock of the Person to be acquired;
(b) a Uniform Commercial Code search covering the Person to be acquired
and the seller of said stock in each jurisdiction where the Person
to be acquired and the seller of said stock conduct their businesses
together with copies of all filings of record in such jurisdictions
and together with all releases of liens and termination statements
duly executed by the secured party under any such filings except for
Permitted Liens and those otherwise approved in writing by the Bank
in advance;
(c) if the Person to be acquired owns any real property, a title
commitment in favor of the Bank, issued by a title insurance company
acceptable to the Bank in its sole and absolute discretion, pursuant
to which said title company will agree to insure the title to said
real property subject to no liens other than Permitted Liens and
other liens and security interests approved by the Bank in writing
in advance immediately upon the consummation of the acquisition (and
the Bank subsequently receives a mortgagee's policy of title
insurance covering such real property subject only to the above
described liens and security interests);
(d) a survey of said real property meeting the Bank's standard survey
requirements;
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(e) if the Person to be acquired owns any real property, an
environmental assessment report prepared by an independent
engineering firm or environmental consultant (appropriately licensed
and insured) acceptable to the Bank stating that after due
investigation (including test borings as appropriate) of said real
property, there is no evidence that there is any hazardous waste,
toxic substance, pollutant or other contaminant contained in, on,
above or under said real property;
(f) an appraisal by an appraiser selected and engaged by the Bank in
form and substance satisfactory to the Bank;
(g) such financial information with respect to Person to be required or
any Obligor as the Bank may reasonably request confirming that
neither immediately prior to the proposed acquisition nor
immediately following the completion of such proposed acquisition,
no Default or Event of Default shall have occurred;
(h) such other financial information regarding the Person to be acquired
as the Bank in its sole reasonable discretion shall request from the
Borrower; and
(i) the Bank shall have given its prior written consent to the
applicable Obligor to the acquisition.
"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 Henley Healthcare, 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 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:
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(a) eighty percent (80%) of the aggregate outstanding principal balance of
the Obligors' Eligible Accounts (other than Home Care Receivables) PLUS
(b) sixty percent (60%) of the aggregate outstanding principal balance of
the Obligors' 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 Obligors' 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 aggregate of the
Obligors' Eligible Inventory component of the Borrowing Base exceed at any
time fifty percent (50%) of the Borrowing Base.
"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.
"CASH FLOW" shall mean (without duplication), as to any Person and for any
period, the sum of (a) Net Income AND (b) the sum of (1) depreciation,
amortization, depletion, obsolescence of property, (2) interest expense, and (3)
non-cash addbacks of compensatory stock issued by the Borrower and stock issued
by the Borrower in lieu of interest, all determined in accordance with GAAP."
"COLLATERAL" shall mean any property of any Obligor in the possession of
the Bank, any amount in any deposit account of any Obligor with the Bank and all
of Obligors' Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments and Inventory,
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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 $5,000,000.
"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.
"CONTRIBUTION AGREEMENT" shall mean that certain Contribution Agreement of
even date herewith, by and among the Borrower and the Current Guarantors, as the
same may be amended, modified, supplemented, restated and joined in pursuant to
a Joinder Agreement, from time to time.
"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 GUARANTORS" shall mean Health Career Learning Systems, Inc., a
Michigan corporation, Med-Quip, Inc., a Georgia corporation, and any and all of
their respective successors and assigns.
"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.
"EFFECTIVE TANGIBLE NET WORTH" shall mean as of any day the consolidated
Tangible Net Worth of the Obligors as of such day PLUS the Debt evidenced by the
Subordinated Debt Documents as of such day."
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Obligors 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 Obligors 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 Obligor) which have been
furnished to the Bank for the purpose of, or in connection with, this Agreement
and the transactions contemplated hereby.
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"FINANCING STATEMENTS" shall mean, as to any Obligor, UCC financing
statements describing the Bank as secured party and the applicable Obligor as
debtor covering the Collateral owned by such Obligor and otherwise in such form,
for filing in such jurisdictions and with such filing offices as the Bank shall
reasonably deem necessary or advisable.
"FIXED CHARGE COVERAGE RATIO" shall mean, as of any day and for any
Person, (a) if such day is prior to July 31, 1997, the RATIO OF (i) Cash Flow
for the period beginning on July 1, 1996 through and including the most recently
ended calendar month as of such day TO (ii) an amount equal to the sum of (1)
Current Maturities of Long Term Debt as of the end of such period, (2) interest
actually paid during such period, and (3) non-financed Capital Expenditures for
such period, and (b) if such day is on or after July 31, 1997, the RATIO OF (x)
an amount equal to Cash Flow for the most recently ended 12 month period as of
such day TO (y) an amount equal to the sum of (1) Current Maturities of Long
Term Debt as of the end of such period, (2) interest actually paid during for
such period, and (3) non-financed Capital Expenditures for such 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.
"GUARANTIES" shall mean that certain Master Guaranty of even date herewith
in favor of the Bank, by and among the Current Guarantors, as amended,
supplemented, modified, joined in pursuant to a Joinder Agreement and restated
from time to time, and each and every other guaranty executed from time to time
in respect of this Agreement.
"GUARANTORS" shall mean each and every Person executing a guaranty from
time to time guaranteeing the Indebtedness of the Borrower owing from time to
time to the Bank pursuant to this Agreement or the Notes, including the Current
Guarantors.
"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.
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"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.
"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.
"LETTER OF CREDIT" shall have the meaning ascribed to such term in the
Letter of Credit Agreement.
"LETTER OF CREDIT AGREEMENT" shall mean the Amended and Restated 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.
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"LOANS" shall mean the Revolving Loans, Term Loan A and Term Loan B.
"LOCKBOX" shall mean, collectively, post office box number 4890 and 4160,
each established by one or more Obligors with the Bank to which all payments by
the Obligors' Account debtors are to made.
"LOCKBOX AGREEMENT" shall mean collectively, any and all agreements
between the Borrower and the Bank establishing the 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.
"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 as of
April 30, 1996, 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, including as supplemented pursuant to that certain
Supplemental Deed of Trust and Security Agreement of even date herewith.
"MQI-FLORIDA" shall mean MQI-Florida, Inc., a Florida corporation.
"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.
"OBLIGORS" shall mean the Borrower and all of its Guarantors, and
"OBLIGOR" shall mean any one of them.
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"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 as of April 30, 1996, executed by the Borrower and the
Bank, and all additional Patent security agreements executed by the Borrower or
any other Obligor 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.
"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;
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(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;
(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; and
(i) stock of Approved Subsidiaries.
"PERMITTED LIENS" shall mean:
(a) Liens and encumbrances in favor of the Bank;
(b) 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 appropriate proceedings and, if requested by
the Bank, bonded in a manner satisfactory to the Bank;
(c) Liens not delinquent created by statute in connection with
worker's compensation, unemployment insurance, social security and similar
statutory obligations;
(d) 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;
(e) 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 Obligor 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;
(f) the Subordinated Liens;
(g) purchase money Debt to acquire Equipment not exceeding, in the
aggregate, $500,000 outstanding at any one time; and
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(h) 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 April 30, 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.
"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 May 1, 1999, 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 Obligors in favor of the Bank pursuant to which each Obligor
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, of such
Obligor, and securing such Obligor's obligations for the indebtedness arising
either as a maker (in the case of the Borrower) or as a Guarantor (in the case
of a Guarantor), together with all replacements thereof, substitutions therefor
and all proceeds and products thereof, (b) the Financing
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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, (i) the Additional Security Agreements, (j) the
Guaranties, (k) the Joinder Agreements, and (l) 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.
"SUBORDINATED NOTE" shall mean, collectively, that certain Subordinated
Convertible Promissory Note in the original principal sum of $7,000,000 dated as
of April 30, 1996, 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 dated as of April 30, 1996, 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 as of April 30, 1996, by and among the
Borrower, the Bank and Maxxim, as the same may be amended, restated and modified
from time to time.
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"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, an
amount equal to seventy-five percent of the aggregate amount of Net Income of
the Companies earned during each calendar month which has ended as of such date
of determination, beginning with the calendar month ending September 30, 1996.
"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, dated as of April 30, 1996, 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 April 30, 2001, 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.
"TERM NOTE B" shall mean a promissory note, in the original principal sum
of $1,616,000, dated as of April 30, 1996, 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 April 30, 2011, or such earlier
date as may be designated by the Bank pursuant to SECTION 8.2 hereof or SECTION
2.4.4 hereof.
"TEXAS T.E.N.S." shall mean Texas T.E.N.S., Inc., a Texas corporation.
"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 Obligor 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
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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.
"TRADEMARK SECURITY AGREEMENT" shall mean, collectively, that certain
Trademark Security Agreement dated as of April 30, 1996, executed by the
Borrower and the Bank, and all additional Trademark security agreements executed
by Borrower or any other Obligor 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.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
Texas and as amended from time to time.
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 2.2 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 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 has made a loan to the
Borrower on April 30, 1996, 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 has made a loan to the
Borrower on April 30, 1996, in an amount equal to $1,616,000.
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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 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.
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2.3.2. TERM NOTE A. Term Loan A shall continue to be evidenced by
Term Note A.
2.3.3. TERM NOTE B. Term Loan B shall continue to 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 August 1,
1997, 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 continue to be payable in
monthly principal installments of $14,883.34 each, one each due and payable on
the first day of each succeeding calendar month after its date 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 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 continue to be payable in
monthly principal installments of $8,977.78 each, one each due and payable on
the first day of each succeeding calendar month after its date 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
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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 April 30, 2001, and
with respect to each April 30 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 April 30 date by giving written
notice to the Borrower of such election no later than 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 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 Obligor 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,
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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 Obligor 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 recomputed by the Borrower or any
other Obligor, 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.
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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.
2.6.3. FACILITY FEES. Simultaneously with the execution of this
Agreement, the Borrower shall pay to the Bank its facility fee in the
amount of $15,000.
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 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 (and agrees to cause each other Obligor 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.
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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 and the Current
Guarantors (as applicable) 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 Copyright Security Agreement;
(e) The Trademark Security Agreement;
(f) The Subordination Agreement;
(g) The Financing Statements;
(h) An initial Borrowing Base Certificate;
(i) A landlord's consent in form and substance satisfactory
to the Bank, executed by the landlord of the Borrower's Ohio
location;
(j) A legal opinion of Porter & Hedges, L.L.P., counsel for
the Obligors, in Proper Form;
(k) The Letter of Credit Documents; and
(l) 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
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borrowing hereunder, the Notes and the other Loan Documents, which shall
have been certified by the Secretary or Assistant Secretary of each
Obligor 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 Obligors.
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. 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.
4.1.6. 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.
4.1.7. 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.
4.1.8. 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.
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4.1.9. 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.
4.1.10. 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
(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.
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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 30 days from the date
hereof be, qualified to do business and in good standing in every jurisdiction
(including, without limitation, Ohio, Michigan, Georgia and Florida) 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
Obligor 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 Obligor, any provision of any indenture,
agreement or other instrument to which any Obligor 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 Obligor 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 Obligors is a party will be, when delivered, valid and
binding obligations of such Obligor, enforceable in accordance with their
respective terms except for laws and equitable principles affecting the
enforcement of creditors' rights generally.
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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 Obligor, or any properties
or rights of any Obligor which, if adversely determined, could reasonably be
expected to materially impair the right of any Obligor 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 Obligor.
5.5. SUBSIDIARIES. The Borrower has no Subsidiaries as of the date hereof
other than the Current Guarantors, Texas T.E.N.S. and MQI-Florida.
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 Obligor'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 Obligor 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 Obligor's knowledge and belief, no Obligor 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.
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
Obligors 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 Obligor 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 Obligor 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.
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5.11. COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 5.11, each
Obligor 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
Obligors.
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.
5.14. MARGIN STOCK. No Obligor 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 Obligor 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 Obligor
contained herein or in any certificate or other document furnished by any
Obligor pursuant hereto contains any untrue
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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 an Obligor out of either a bona fide sale of Inventory by such
Obligor, 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 such Obligor 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 an Obligor by such account debtor and for
such amount as is represented by such Obligor to the Bank on such
Borrowing Base Certificate, such Account is due and payable not more than
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 90 days from the date of invoice.
(c) The unpaid balance of such Account as represented by an
Obligor 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 such Obligor in the ordinary course of business for prompt payment, and
there is no agreement between such Obligor, 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) An Obligor 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 such Obligor to any
person, other than the Bank.
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(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 an Obligor to the
Bank on or prior to such Account's inclusion on such Borrowing Base
Certificate.
(g) An Obligor 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 an Obligor,
(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
such Obligor has received a letter of credit in an
amount equal to or greater than such Account
issued by a financial institution 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 90 days past the date of invoice (or, in
the case of Home Care Receivables, are not more
than 120 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
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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 an Obligor in the ordinary course of
such Obligor's business, and is not obsolete.
(b) An Obligor 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 such
Obligor 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 an Obligor at
one of the locations described on SCHEDULE 5.17.2 attached hereto.
5.18. ASSUMED NAMES; OTHER NAMES. Neither the Borrower nor any parties to
the Purchase Agreement has changed its name during the last five (5) years
except as described on SCHEDULE I attached hereto and incorporated herein by
reference for purposes. 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." The only assumed names
used by any other party to an acquisition of a Subsidiary in the last five (5)
years are described in SCHEDULE I attached hereto.
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 Obligor to):
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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 90 days after the close of each
fiscal year of the Borrower beginning with its 1996 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 Obligors' financial position and results of operations
in all material respects.
6.1.2. MONTHLY FINANCIAL STATEMENTS. Furnish to the Bank not later
than 20 days after the close of each month of each fiscal year of the
Obligors, beginning with February 1996, financial statements containing
the balance sheet of the Obligors as of the end of each such period,
statements of income and statements of cash flows of the Obligors 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 Obligors.
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 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 Obligors' Accounts in a form
satisfactory to the Bank, a summary of the Obligors' 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
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the Obligors' 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 days after the
filing with the Securities and Exchange Commission by any Obligor, true,
correct and complete copies of all such filings, of any financial
statements, registration statements, reports and proxy statements.
6.1.6. INVENTORY NOT IN WAREHOUSE. Furnish to the Bank not later
than 20 days after the close of each fiscal quarter of the Obligors,
beginning with March 31, 1996, a listing of all Inventory of the Obligors
held by third parties on a consignment basis or otherwise not in the
possession of the Obligors at one of the locations described on SCHEDULE
5.17.2 hereof (as said Schedule may be updated in writing from time to
time with 30 days advance written notice to the Bank), 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.
6.1.7. 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 any
Obligor's business, properties, financial condition or ability to comply
with its obligations hereunder.
6.1.8. 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 Obligors.
6.1.9. 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
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continuing, the Obligors 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.
6.1.10. TAX RETURNS. As soon as it has been filed with the United
States Internal Revenue Service, each Obligor's federal tax return.
6.1.11. 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 Obligors 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 Obligors at any reasonable time.
6.2. INSURANCE. Keep its (and cause the other Obligors 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 other Obligors, 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 Obligor as may be satisfactory to the Bank. All such policies
shall contain a provision whereby they may not be canceled except upon 30 days'
prior written notice to the Bank. The Obligors will deliver to the Bank, at the
Bank's request, 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 any Obligor fails to maintain
satisfactory insurance as herein provided, the Bank shall have the option to do
so, and such Obligor agrees to repay the Bank, with interest at the Past Due
Rate, all amounts so expended by the Bank. Each Obligor hereby appoints the Bank
as such Obligor's attorney-in-fact, which appointment is coupled with an
interest and irrevocable, to endorse any check or draft payable to such Obligor
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 Obligors 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
any Obligor shall fail to pay such taxes and assessments by their due date, the
Bank shall
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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 each Obligor's 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 such Obligor 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 EFFECTIVE TANGIBLE NET WORTH. Maintain on a consolidated
statement basis, an Effective Tangible Net Worth of not less than THE SUM OF (a)
$6,950,000 at all times PLUS (b) (beginning with the calendar month ending
April, 1997) 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) Effective Tangible Net Worth of not more than 1.25 to 1.00 at all times.
6.7. FIXED CHARGE COVERAGE RATIO. Maintain on a consolidated statement
basis, a Fixed Charge Coverage Ratio of not less than 1.20 to 1.00 and at all
times.
6.8. 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 1.50 to 1.00 at all times.
6.9. ERISA. At all times meet and cause each of the Obligors to meet the
minimum funding requirements of ERISA with respect to the Obligors' employee
benefit plans subject to ERISA; promptly after any Obligor 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 any Obligor has
instituted or will institute proceedings to terminate an employee pension plan,
deliver to the Bank a certificate of the chief financial officer of such Obligor
setting forth details as to such event or proceedings and the action which such
Obligor 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
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return (including all schedules and attachments) for each plan covered by ERISA,
and filed with the Internal Revenue Service by such Obligor, not later than ten
days after such report has been so filed.
6.10. USE OF LOAN PROCEEDS. Use the proceeds of any Revolving Loan for the
purpose set forth in the recitals to this Agreement.
6.11. KEY AGREEMENTS. Promptly upon entering into any Key Agreement,
provide true, correct and complete copies thereof to the Bank.
6.12. LOCKBOX DEPOSITS. Direct all Account debtors to make remittance to
the Lockbox.
6.13. NOTICE OF EVENTS. Notify the Bank immediately upon acquiring
knowledge of the occurrence of, or if any Obligor causes or intends to cause, as
the case may be: (1) the institution of any lawsuit or administrative proceeding
affecting any Obligor involving monetary claims in excess of $250,000 or the
institution of any lawsuit or administrative proceeding affecting any Obligor,
the adverse determination under which could have a material adverse effect on
the business, condition (financial or otherwise), operations, property or
prospects of any Obligor or on its ability to perform any of its 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
Obligors 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 on behalf of the Obligor 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 any Obligor 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 any Obligor in this Agreement
or any other Loan Document. Each Obligor will notify the Bank in writing within
30 days prior to the date that any Obligor 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.
6.14. TITLE INSURANCE POLICY. Deliver to the Bank the Title Insurance
Policy within ten days from the date hereof.
6.15. CERTIFICATE OF TITLE. Have any assets subject to certificate of
title laws which is greater than in the aggregate at any time $100,000 unless
the certificates of title thereto have been delivered to the Bank.
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6.16. CERTIFICATES OF GOOD STANDING AND QUALIFICATION. Furnish to the Bank
within 30 days from the date hereof a certificate from the appropriate public
official of each jurisdiction (including, without limitation, Ohio, Michigan,
Georgia and Florida) as to the due qualification to do business and good
standing of each Obligor where such qualification is necessary to conduct such
Obligor's business in such jurisdiction.
6.17. 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 Obligors' Equipment. So long
as no Event of Default has occurred which is then continuing, no Obligor will 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.
6.18. 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,
no Obligor will 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.
6.19. ADDITIONAL GUARANTIES AND SECURITY. Promptly, but in any event no
later than 30 days from the date of completion of an acquisition, cause each
Person which becomes an Approved Subsidiary after the date hereof to execute and
deliver to the Bank a Guaranty or a Joinder Agreement and the Additional
Security Documents (as applicable) (each enforceable under the laws of such
jurisdiction and in the jurisdictions in which the assets of such Subsidiary are
located and otherwise in Proper Form), together with:
(a) a certificate of the Secretary or any Assistant Secretary of
Approved Subsidiary (or other officer or director of Approved
Subsidiary which is authorized in Approved Subsidiary's
Organizational Documents to keep the minute book or similar record
of Approved Subsidiary), in Proper Form, dated as of the date
hereof, as to (i) the resolutions of the Board of Directors (or
similar governing body) of Approved Subsidiary authorizing the
execution, delivery and performance of a Joinder Agreement and the
Additional Security Documents and of all instruments contemplated
herein to be executed and delivered by Approved Subsidiary in
connection herewith (a copy of such resolutions to be incorporated
into such certificate), such certificate to state that said copy is
a true and correct copy of such resolutions and that such
resolutions were duly adopted and have not been amended, superseded,
revoked or modified in any respect and remain in full force and
effect as of the date of such certificate; (ii) the election,
incumbency and signatures of the
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officer or officers (or other official) of Approved Subsidiary
executing and delivering such Joinder Agreement, the Additional
Security Documents and each other instrument or document furnished
in connection herewith; (iii) Approved Subsidiary's Organizational
Documents (a copy of such charter to be attached to the
certificate), and (iv) such other documents and information as Bank
shall reasonably request;
(b) a legal opinion from the legal counsel for Approved Subsidiary
reasonably acceptable to Bank, in Proper Form;
(c) a Uniform Commercial Code search prepared by the appropriate
governmental authority for each jurisdiction (both county and
central offices) where Approved Subsidiary has any assets reflecting
no liens or security interests in favor of any party other than Bank
which have not been approved by Bank in writing;
(d) a copy of the executed stock purchase agreement, if applicable,
together with any and all exhibits, schedules and attachments
thereto, pursuant to which Approved Subsidiary is to become a
Subsidiary of Borrower, and such other financial information
regarding Approved Subsidiary and the acquisition of Approved
Subsidiary by Borrower or other Obligor as Bank in its sole
reasonable discretion shall request delivered;
(e) such related certificates, opinions and documents as the Bank may
reasonably require.
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 other Obligor to:
7.1. CAPITAL EXPENDITURES; FDA EXPENDITURES. Make (a) Capital Expenditures
on a consolidated basis during any fiscal year of the Obligors in excess of
$500,000, or (b) FDA Expenditures on a consolidated basis during any fiscal year
of the Obligors 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
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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 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, except for (a) normal and reasonable advances in the ordinary course
of business to officers and employees of the Borrower not to exceed in the
aggregate at any time outstanding $150,000, (b) sales on open account and
otherwise in the ordinary course of business, and (c) 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 an Obligor 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 which is not an Approved Seller, enter into any
reorganization or recapitalization or reclassify its capital stock, enter into
any
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sale-leaseback transaction, or form, acquire or permit to exist any Subsidiary
which is not an Approved Subsidiary (other than Texas T.E.N.S., so long as it is
merged into the Borrower by no later than July 31, 1997, and MQI-Florida, so
long as it is merged into an Obligor or dissolved by no later than July 31,
1997) 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 which is not a Guarantor. Any Guarantor wholly owned by the Borrower
may be merged into, or consolidated with, the Borrower or another Obligor wholly
owned by the Borrower, and such Obligor may sell, lease or transfer all or a
substantial part of its assets to the Borrower or another Obligor wholly owned
by the Borrower, and the Borrower or such Obligor 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, so
long as prior written notice of such action has been given to the Bank and the
applicable Obligor has executed and delivered to the Bank such Financing
Statements and Additional Security Agreement.
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 Obligors 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 Obligor 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
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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 Obligor 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.
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 any Note
shall not be paid when due, whether by acceleration or otherwise, or, if
any accrued interest, any fees under SECTION 2.6 of this Agreement or any
other Indebtedness (exclusive of principal of any Note) shall not be paid
when due, whether by acceleration or otherwise, unless the Bank declares
the default fully cured to the Bank's satisfaction within 3 calendar days
after such due date.
8.1.2. MISREPRESENTATION. If any warranty or representation of any
of the Obligors 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 Obligor shall prove to be false or misleading
in any material respect.
8.1.3. NONCOMPLIANCE WITH BANK AGREEMENTS. If any Obligor 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, which does not involve
the failure to make a payment when due (be it principal, interest, taxes,
insurance or otherwise) and which is not cured by the Obligors within 15
days after the earlier of the date of notice to the Borrower by the Bank
of such Default or the date the Bank is notified, or should have been
notified pursuant to the Borrower's obligation under SECTION 6.13 hereof,
of such Default.
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8.1.4. OTHER DEFAULTS. If any Obligor shall default in the due
payment of any of its Debt (other than the Indebtedness) involving
obligations in excess of $100,000 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 such 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 Obligor
one or more judgments or decrees involving an aggregate liability of
$100,000 or more, which has or have become nonappealable and shall remain
undischarged, unsatisfied by insurance and unstayed for more than 30 days,
whether or not consecutive; or of a writ of attachment or garnishment
against the property of any Obligor shall be issued and levied in an
action claiming $100,000 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 any Obligor shall
voluntarily suspend transaction of its business; or if any Obligor 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 Obligor under the Bankruptcy Code
or under any other state or federal law for the relief of debtors shall be
commenced by any Obligor or shall be commenced against any Obligor and
shall not be discharged within 60 days of commencement; or a receiver,
trustee or custodian shall be appointed for any Obligor or for any
substantial portion of its respective properties or assets.
8.1.7. CHANGE OF CONTROL OR MANAGEMENT. If Michael M. Barbour or
Daniel Sudduth shall cease to serve as officers of the Borrower in
substantially the same capacity as they currently serve or if Michael M.
Barbour or Daniel Sudduth 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 Obligor shall fail to meet its minimum funding
requirements under ERISA with respect to any employee benefit plan
established or maintained by such Obligor, 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 Obligor 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 Obligor.
8.1.9. OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there shall
occur, with respect to any pension plan maintained by any Obligor, any
reportable event (within the meaning of
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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
Obligors, 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 Obligor.
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 Obligors 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 Obligor
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 Obligor 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 any Obligor.
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 Joinder Agreements,
the Security 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 Joinder Agreements, the Security 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.
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<PAGE>
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.
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 other Obligor 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.
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<PAGE>
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 Obligor 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 Obligor 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 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 and the
other Obligors' 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:
120 Industrial Boulevard, Sugar Land, Texas 77478, 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,
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<PAGE>
Houston, Texas 77210-4167, Attn: Margaret Wolford, 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
Obligor's reasonable allocation among all affected customers of the aggregate of
such increases or reductions resulting from such event), then, within ten 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.
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
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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 Section 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.
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 Loan.
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<PAGE>
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.
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 TRIAL 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.
9.20. AMENDED AND RESTATED LOAN AGREEMENT; WAIVER OF DEFAULTS. This
Agreement amends and restates that certain Loan Agreement dated as of April 30,
1996, between the Bank and the Borrower, as the same has heretofore been amended
(the "ORIGINAL LOAN AGREEMENT"), in its entirety. All liens securing the
Original Loan Agreement are hereby ratified and confirmed as security for the
Loans. Unless the provisions would otherwise require, any reference to "Loan
Agreement" contained in any Loan Document shall be deemed to refer to this
Agreement, as it may be amended, restated, modified and supplemented from time
to time. The Bank hereby waives the occurrence of any Default or Event of
Default (as those terms are defined in the Original Loan Agreement) which may or
may not have occurred under the provisions of Section 6.7 of the Original Loan
Agreement (the "Fixed Charge Coverage Ratio") prior to the date of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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.
HENLEY HEALTHCARE, INC., a Texas corporation
By:/s/ MICHAEL M. BARBOUR
MICHAEL M. BARBOUR, PRESIDENT
COMERICA BANK-TEXAS, a Texas banking
corporation
By: /s/ JAMES R. MCNUTT
JAMES R. McNUTT, VICE PRESIDENT
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<PAGE>
EXHIBITS:
EXHIBIT A - Form of Security Agreement
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 I - Assumed Names 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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EXHIBIT 4.2
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (the
"AMENDMENT"), dated effective as of September 30, 1997, is made by and between
HENLEY HEALTHCARE, INC. ("BORROWER"), a Texas corporation formerly known as
Lasermedics, Inc., and COMERICA BANK-TEXAS ("LENDER"), a Texas banking
association.
RECITALS:
A. Borrower and Lender entered into that certain Amended and Restated Loan
Agreement dated as of June 30, 1997 (as the same may have heretofore been
amended, modified, restated or supplemented from time to time, the "LOAN
AGREEMENT").
B. Borrower and Lender now desire to (1) increase the Commitment Amount to
$8,000,000, (2) evidence the execution and delivery of new promissory notes in
replacement of the Revolving Note and Term Note A, (3) modify certain financial
covenants, (4) modify, delete, and add certain definitions, and (5) make certain
other changes to the Loan Agreement, all of which is more fully described
hereinbelow, which such provisions contained below shall control over any
inconsistencies with the foregoing recitals.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. DEFINITION OF BORROWING BASE AMENDED. The definition of "Borrowing
Base" contained in Section 1.1 of the Loan Agreement is hereby amended in its
entirety to be and read as follows:
"'BORROWING BASE' shall mean, on any day the sum of:
(a) eighty percent (80%) of the aggregate outstanding principal
balance of the Obligors' Eligible Accounts (other than Home Care
Receivables) PLUS
(b) sixty percent (60%) of the aggregate outstanding principal
balance of the Obligors' Home Care Receivables; PROVIDED, that in no
event may the Medicare Receivables component of Home Care
Receivables exceed $500,000, PLUS
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(c) (i) prior to April 1, 1998, fifty percent (50%) of the book
value of the Obligors' Eligible Inventory (exclusive of Tens Units),
and (ii) on April 1, 1997 and at all times thereafter, forty percent
(40%) of the book value of the Obligors' 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 PLUS
(e) the Permitted Overage, if any, as of the day of any
determination of the Borrowing Base.
Notwithstanding the foregoing, in no event may the aggregate of the
Obligors' Eligible Inventory component of the Borrowing Base exceed (y) at
any time prior to January 1, 1998, seventy-five percent (75%) of the
Borrowing Base, and (z) on January 1, 1998 and at all times thereafter,
fifty (50%) of the Borrowing Base."
2. PERMITTED OVERAGE DEFINITION ADDED. Section 1.1 of the Loan Agreement
is hereby amended by adding thereto in the appropriate alphabetical order, a new
definition of "Permitted Overage," which shall be and read as follows:
"'PERMITTED OVERAGE' shall mean (a) from September 30, 1997 through
and including December 31, 1997, $900,000, and (b) on January 1, 1998
through and including March 31, 1998, $400,000. After March 31, 1998, the
"Permitted Overage" shall be $-0-."
3. REVOLVING NOTE DEFINITION AMENDED. The definition of "Revolving Note"
is hereby amended in its entirety to be and read as follows:
"'REVOLVING NOTE' shall mean a promissory note, in the original
principal sum of $8,000,000, dated as of September 30, 1997, and otherwise
in the form of EXHIBIT B to this Agreement, and any and all renewals,
extensions, modifications, rearrangements and/or replacements thereof."
4. REVOLVING NOTE MATURITY DATE AMENDED. The definition of Revolving Note
Maturity Date contained in Section 1.1 of the Loan Agreement is hereby amended
in its entirety to be and read as follows:
"'REVOLVING NOTE MATURITY DATE' shall mean February 1, 1999, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof."
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<PAGE>
5. TERM NOTE A DEFINITION AMENDED. The definition of "Term Note A"
contained in Section 1.1 of the Loan Agreement is hereby amended in its entirety
to be and read as follows:
"'TERM NOTE A' shall mean a promissory note, in the original
principal sum of $1,430,000, dated as of September 30, 1997, and otherwise
in the form of EXHIBIT C to this Agreement, and any and all renewals,
extensions, modifications, rearrangements and/or replacements thereof."
6. TERM NOTE A MATURITY DATE AMENDED. The definition of Term Note A
Maturity Date contained in Section 1.1 of the Loan Agreement is hereby amended
in its entirety to be and read as follows:
"'TERM NOTE A MATURITY DATE' shall mean September 30, 2002, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof."
7. TERM NOTE A PAYMENTS AMENDED. The second sentence of Section 2.4.2 of
the Loan Agreement is hereby amended in its entirety to be and read as follows:
"Term Note A shall be payable in monthly installments of $23,833
each, one each due and payable on the first day of each succeeding
calendar month after its date 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 accrued and
unpaid interest thereon shall be finally due and payable."
8. ELIGIBLE ACCOUNT REQUIREMENTS AMENDED. Section 5.17.1(h)(iv) of the
Loan Agreement is hereby deleted in its entirety and the succeeding clauses in
subsection (h) are renumbered accordingly.
9. EFFECTIVE TANGIBLE NET WORTH COVENANT AMENDED. Section 6.5 of the Loan
Agreement is hereby amended in its entirety to be and read as follows:
"6.5. MAINTAIN EFFECTIVE TANGIBLE NET WORTH. Maintain on a
consolidated statement basis, an Effective Tangible Net Worth at all times
of not less than THE SUM OF (a) $6,950,000 PLUS (b) (beginning with the
calendar month ending April, 1997) the Tangible Net Worth Step-Up."
10. LEVERAGE RATIO AMENDED. Section 6.6 of the Loan Agreement is hereby
amended in its entirety to be and read as follows:
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"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) Effective Tangible Net Worth of not more than 2.00
to 1.00 at all times."
11. CURRENT RATIO COVENANT AMENDED. The Current Ratio Covenant in Section
6.8 of the Loan Agreement is hereby amended in its entirety to be and read as
follows:
"6.8. 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 1.25 to 1.00
at all times."
12. WAIVER OF CERTAIN DEFAULTS. The Lender hereby waives the occurrence of
any Default or Event of Default which has occurred through the effective date
hereof (but not thereafter) and of which the Lender has received written notice
from the Borrower, under any or all of the provisions of Sections 6.5 through
6.8 of the Loan Agreement.
13. NEW EXHIBITS ATTACHED. Exhibit B to the Loan Agreement (which is the
form of Revolving Note) is hereby deleted in its entirety and there is hereby
substituted therefor a new Exhibit B, which shall be in the form of EXHIBIT A
attached hereto and incorporated herein by reference. Exhibit C to the Loan
Agreement (which is the form of Term Note A) is hereby deleted in its entirety
and there is hereby substituted therefor a new Exhibit C, which shall be in the
form of EXHIBIT B attached hereto and incorporated herein by reference. Exhibit
G to the Loan Agreement (which is the Compliance Certificate) is hereby deleted
in its entirety and there is hereby substituted therefor a new Exhibit G, which
shall be in the form of EXHIBIT F attached hereto and incorporated herein by
reference.
14. CONDITIONS. No part of this Amendment shall become effective until the
Borrower shall have delivered (or shall have caused to be delivered) to Bank
(unless otherwise waived or deferred by Bank) each of the following, in Proper
Form:
(1) certificates dated as of the date hereof of the Secretary or any
Assistant Secretary of Borrower and each Guarantor authorizing the
execution, delivery and performance of this Amendment, and such
other related documents and information as Lender may request;
(2) a Notice of Entire Agreement executed by Borrower and Lender as of
the date hereof;
(3) Lender's facility fee in the amount of $25,000;
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<PAGE>
(4) evidence of the payment of any and all legal fees and expenses
incurred to date by Lender in connection with this Amendment
(including, without limitation, the negotiation and preparation of
this Amendment and the related Loan Documents).
(5) the replacement Revolving Note in the form attached hereto as
EXHIBIT A, duly executed by Borrower;
(6) the replacement Term Note A in the form attached hereto as EXHIBIT
B, duly executed by Borrower;
(7) a Second Supplemental Deed of Trust in the form attached hereto as
EXHIBIT C attached hereto and incorporated herein by reference for
all purposes, duly executed by Borrower;
(8) a Trademark Security Agreement covering the trademarks being
acquired from Cybex International, Inc. pursuant to the terms and
conditions of the Asset Purchase Agreement dated as of , 1997,
between Borrower and Cybex International, Inc.;
(9) a First Amendment to Subordination Agreement dated as of , 1997, by
and among the Borrower, Maxxim and Lender, in the form attached
hereto as EXHIBIT D attached hereto and incorporated herein by
reference for all purposes;
(10) Financing Statements executed by Borrower for filing in the offices
of the appropriate Governmental Authorities in the States of New
York and Minnesota;
(11) a new Borrowing Base Certificate duly executed by Borrower and
Guarantors;
(12) A landlord's consent executed by Cybex International, Inc. in favor
of Lender, covering the New York and Minnesota locations where any
assets of Borrower or any Guarantor are located;
(13) a legal opinion of Porter & Hedges, L.L.P., counsel for the
Obligors, in Proper Form;
(14) certificates of existence, good standing and qualification to do
business with respect to the Borrower and each Guarantor in each
jurisdiction where the applicable Obligor does business;
(15) UCC record and copy searches for each of Borrower and Guarantors,
disclosing no notice of any liens or encumbrances filed against any
of the Collateral in any relevant
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jurisdiction other than as relate to Permitted Liens (but exclusive
of the Subordinated Liens);
(16) searches of the records of the United States Patent & Trademark
Office reflecting title to the patents and trademarks covered by
said Trademark Security Agreement is in the Borrower (or, where an
express assignment of such patents and trademarks pursuant to the
Asset Purchase Agreement, in Cybex International, Inc.) and
disclosing no notice of any liens or encumbrances filed against any
of such Collateral in any relevant jurisdiction other than said
Trademark Security Agreement and other than as relate to Permitted
Liens.
(17) evidence of hazard insurance policies naming the Bank as
"loss/payee", and relating to the assets and properties of the
Borrower (including, but not limited to, the new Collateral being
acquired from Cybex International, Inc.), in form and amounts and
with companies satisfactory to Bank;
(18) a fully executed copy of the Purchase Agreement, together with all
schedules, annexes and other attachments contemplated therein and
together with the financial statements generated by Cybex
International, Inc. and delivered to Borrower in connection with the
pending asset acquisition, and, further, together with all financial
statements required by Bank relating to said acquisition.
(19) a Certificate in the form attached hereto as EXHIBIT E and
incorporated herein by reference for all purposes, signed by an
authorized officer of Borrower and of Cybex International, Inc.,
certifying that the transactions contemplated in said Asset Purchase
Agreement have been consummated accompanied by a copy of the duly
executed and delivered bill of sale and other conveyance documents
contemplated in said Purchase Agreement.
(20) All actions, proceedings, instruments and documents required to
carry out the transactions contemplated by this Amendment 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 Bank.
(21) copies of consolidated (if applicable) annual audited financial
statements for the Borrower and for Maxxim for their respective most
recently ended fiscal year.
15. CERTAIN DEFINITIONS AND REFERENCES. Terms used but not defined herein,
but which are defined in the Loan Agreement or in the other Loan Documents,
shall have the meanings herein ascribed to them therein. The term "Agreement" as
used in the Loan Agreement and the term "Loan Agreement," as used in the other
Loan Documents or any other instrument, document or writing
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furnished to Lender by Borrower shall mean the Loan Agreement as hereby amended.
The term "Revolving Note" as used in the Loan Agreement and the other Loan
Documents or any other instrument, document or writing furnished to Lender by
Borrower shall mean the Revolving Note as substituted for pursuant to this
Amendment. The term "Term Note A" as used in the Loan Agreement and the other
Loan Documents or any other instrument, document or writing furnished to Lender
by Borrower shall mean Term Note A as substituted for pursuant to this
Amendment.
16. EXPENSES; INDEMNIFICATION. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW, BORROWER WILL PAY ALL COSTS AND EXPENSES AND REIMBURSE LENDER FOR ANY AND
ALL EXPENDITURES OF EVERY CHARACTER INCURRED OR EXPENDED FROM TIME TO TIME,
REGARDLESS OF WHETHER A DEFAULT HAS OCCURRED, IN CONNECTION WITH THE
PREPARATION, NEGOTIATION, DOCUMENTATION, RECORDING, CLOSING, RENEWAL, REVISION,
MODIFICATION, INCREASE, REVIEW OR RESTRUCTURING OF THIS AMENDMENT.
17. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in this Amendment, the Notes 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 the Notes, accrued or paid from the
date hereof and (ii) the aggregate of any other amounts accrued or paid pursuant
to the Notes or any of the other Loan Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by the
Notes ever exceed the Maximum Legal Rate. In this connection, the parties hereto
expressly stipulate and agree that it is their common and overriding intent to
contract in strict compliance with the applicable usury laws. In furtherance
thereof, none of the terms of the Notes 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. No Borrower nor any other parties now or hereafter becoming liable
for payment of the indebtedness evidenced by the Notes shall ever be liable for
interest in excess of the Maximum Legal Rate. If, for any reason whatever, the
interest paid or received on the Notes during its full term produces a rate
which exceeds the Maximum Legal Rate, the holder of the Notes shall credit
against the principal of the Notes (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 the Notes to
produce a rate equal to the Maximum Legal Rate. All sums paid or agreed to be
paid to the holder of the Notes for the use, forbearance or detention of the
indebtedness evidenced thereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of the Notes, so that the interest rate is uniform throughout the full term
of the Notes. The provisions of this paragraph shall control all agreements,
whether now or hereafter existing and whether written or oral, between Borrower
and Lender.
18. BUSINESS LOANS. Borrower warrants and represents to Lender and all
other holders of the Notes that all loans evidenced by the Notes 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.
7
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19. WAIVER OF JURY TRIAL. BORROWER AND LENDER 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 LENDER ARE PARTIES ARISING OUT OF THIS AMENDMENT,
THE LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
20. LIEN CONTINUATION; MISCELLANEOUS. Borrower and Lender hereby
acknowledge, confirm and agree that the Security Documents secure and shall
continue to secure the obligations of Borrower and any other party to any of the
Loan Documents (other than Lender) under the Loan Documents, including, without
limitation, this Amendment, the Notes, the Letter of Credit Liabilities and the
Security Documents are hereby deemed modified to the extent necessary to
evidence the foregoing acknowledgments, agreements and confirmations. Nothing
contained in this Amendment or the Notes or any other document, instrument or
other writing executed in connection with this Amendment shall be construed as a
release or impairment of any of the liens, assignments and security interests
created or granted pursuant to the Security Documents and such liens,
assignments and security interests are hereby ratified and confirmed. The Liens
are not waived. To the extent of any conflict between the Loan Agreement or any
of the other Loan Documents (or any earlier modification of any of them) and
this Amendment, this Amendment shall control. Except as hereby expressly
modified, all terms of the Loan Agreement and the other Loan Documents (as any
of them may have been previously modified by any written agreement) remain in
full force and effect. This Amendment (a) shall bind and benefit Borrower and,
except as herein expressly limited, Lender, and their respective receivers,
trustees, successors and assigns (PROVIDED, that Borrower may not assign its
rights hereunder without the prior written consent of Lender); (b) may be
modified or amended only by a writing signed by each party; (c) 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; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Borrower acknowledges and agrees that there are no oral agreements among
the parties with respect to the transactions contemplated by the Loan Documents
which have not been incorporated in this Amendment or in the Loan Documents. If
any provision of this Amendment should be determined by any court of competent
jurisdiction to be illegal, invalid or unenforceable under present or future
laws, the legality, validity and enforceability of the remaining provisions of
this Amendment shall not be affected thereby. Each waiver in this Amendment 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 Lender for having bargained for and obtained it. Wherever
8
<PAGE>
the term "including" or a similar term is used in this Amendment, it shall be
read as if it were "including by way of example only and without in any way
limiting the generality of the clause or concept referred to." Any exhibits,
appendices and annexes described in this Amendment as being attached to it are
hereby incorporated into it. The headings in this Amendment shall be accorded no
significance in interpreting it. BORROWER HEREBY RELEASES, DISCHARGES AND
ACQUITS FOREVER LENDER AND ITS OFFICERS, DIRECTORS, TRUSTEES, AGENTS, EMPLOYEES
AND COUNSEL (IN EACH CASE, PAST, PRESENT AND FUTURE) FROM ANY AND ALL CLAIMS
EXISTING AS OF THE DATE HEREOF (OR THE DATE OF ACTUAL EXECUTION HEREOF BY THE
APPLICABLE PERSON OR ENTITY, IF LATER). AS USED HEREIN, THE TERM "CLAIM" SHALL
MEAN ANY AND ALL LIABILITIES, CLAIMS, DEFENSES, DEMANDS, ACTIONS, CAUSES OF
ACTION, JUDGMENTS, DEFICIENCIES, INTEREST, LIENS, COSTS OR EXPENSES (INCLUDING
BUT NOT LIMITED TO COURT COSTS, PENALTIES, ATTORNEYS' FEES AND DISBURSEMENTS,
AND AMOUNTS PAID IN SETTLEMENT) OF ANY KIND AND CHARACTER WHATSOEVER, INCLUDING
BUT NOT LIMITED TO CLAIMS FOR USURY, BREACH OF CONTRACT, BREACH OF COMMITMENT,
NEGLIGENT MISREPRESENTATION OR FAILURE TO ACT IN GOOD FAITH, IN EACH CASE
WHETHER NOW KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED
OR PRIMARY OR CONTINGENT, AND WHETHER ARISING OUT OF WRITTEN DOCUMENTS,
UNWRITTEN UNDERTAKINGS, COURSE OF CONDUCT, TORT, VIOLATIONS OF LAWS OR
REGULATIONS OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER HEREBY WAIVES ALL RIGHTS, REMEDIES, CLAIMS AND DEFENSES BASED UPON OR
RELATED TO SECTIONS 51.003, 51.004 AND 51.005 OF THE TEXAS PROPERTY CODE, TO THE
EXTENT THE SAME PERTAIN OR MAY PERTAIN TO ANY ENFORCEMENT OF ANY OF THE LOAN
DOCUMENTS.
9
<PAGE>
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED effective as of the date first set forth above.
HENLEY HEALTHCARE, INC., a Texas corporation
By: /s/ MICHAEL M. BARBOUR
Name: MICHAEL M. BARBOUR
Title: PRESIDENT
COMERICA BANK-TEXAS, a Texas banking
association
By: /s/ JAMES R. MCNUTT
Name: JAMES R. MCNUTT
Title: VICE PRESIDENT
10
EXHIBIT 4.3
TERM NOTE A
Houston, Texas
$1,430,000 September 30, 1997
FOR VALUE RECEIVED, HENLEY HEALTHCARE, INC., a Texas 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
Four Hundred Thirty Thousand Dollars ($1,430,000) (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 Amended and Restated Loan Agreement dated
as of June 30, 1997, between Maker and Payee, as the same may be amended,
supplemented, restated or replaced from time to time.
(c) "MAKER" means HENLEY HEALTHCARE, 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.
Page 1 of 6 Pages
<PAGE>
(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, 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.
Page 2 of 6 Pages
<PAGE>
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
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
Page 3 of 6 Pages
<PAGE>
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.
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
Page 4 of 6 Pages
<PAGE>
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 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.
Page 5 of 6 Pages
<PAGE>
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.
19. RENEWAL NOTE. This note is given in renewal, extension and
rearrangement, and not in extinguishment, of the unpaid principal balance of
that certain promissory note dated April 30, 1996, in the original principal
amount of Eight Hundred Ninety- Three Thousand Dollars ($893,000) executed by
Maker payable to the order of Payee. All liens, assignments and security
interests securing the payment of said promissory note (including without
limitation that certain Deed of Trust and Security Agreement dated as of April
30, 1996, executed by Maker in favor of Gary W. Orr Trustee, upon and covering
certain property situated in Fort Bend County, Texas, more fully described
therein) are hereby ratified, confirmed, brought forward, renewed, extended and
rearranged, as security for the payment of this note, in addition to and
cumulative of all other security for this note.
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.
HENLEY HEALTHCARE, INC., a Texas corporation
(formerly known as Lasermedics, Inc.)
By:/s/ MICHAEL M. BARBOUR
Michael M. Barbour, President
Page 6 of 6 Pages
EXHIBIT 4.4
REVOLVING NOTE
Houston, Texas
$8,000,000 September 30, 1997
FOR VALUE RECEIVED, HENLEY HEALTHCARE, 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 Eight Million
Dollars ($8,000,000) (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 Amended and Restated Loan Agreement dated
June 30, 1997, between Maker and Payee, as the same may be amended,
supplemented, restated or replaced from time to time.
(c) "MAKER" means HENLEY HEALTHCARE, 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.
Page 1 of 7
<PAGE>
(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, 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
Page 2 of 7
<PAGE>
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 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
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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 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
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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 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.
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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. 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. RENEWAL NOTE. This note is given in renewal, extension and
rearrangement, and not in extinguishment, of the unpaid principal balance of
that certain promissory note dated June 30, 1997, in the original principal
amount of Five Million Dollars ($5,000,000) executed by Maker payable to the
order of Payee. All liens, assignments and security interests securing the
payment of said promissory note (including without limitation that certain Deed
of Trust and Security Agreement dated as of April 30, 1996, executed by Maker in
favor of Gary W. Orr Trustee, upon and covering certain property situated in
Fort Bend County, Texas, more fully described therein) are hereby ratified,
confirmed, brought forward, renewed, extended and rearranged, as security for
the payment of this note, in addition to and cumulative of all other security
for this note.
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21. 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.
HENLEY HEALTHCARE, INC.,
a Texas corporation
By: /s/ MICHAEL M. BARBOUR
Michael M. Barbour, President
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EXHIBIT 4.5
FIRST MODIFICATION TO CONVERTIBLE
SUBORDINATED PROMISSORY NOTE
THIS FIRST MODIFICATION TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE (this
"Modification") dated as of September 30, 1997, between Henley Healthcare, Inc.,
a Texas corporation (the "Company"), and Maxxim Medical, Inc., a Delaware
corporation (the "Holder"). Hereinafter, capitalized words and phrases used
herein which are defined in the Note (as such term is hereinafter defined) are
used herein as therein defined, unless otherwise indicated.
WITNESSETH
WHEREAS, the Company issued to the Holder a $7,000,000 Convertible
Subordinated Promissory Note dated as of April 30, 1996 (the "Note");
WHEREAS, the Company intends to enter into that certain Asset Purchase
Agreement on September 30, 1997, between the Company and CYBEX International,
Inc., a New York corporation ("CYBEX"), whereby the Company will acquire certain
of the assets of CYBEX;
WHEREAS, in connection with the CYBEX acquisition, the Company has
requested that the Holder execute an amendment (the "Subordination Amendment")
to that certain Subordination Agreement, dated as of April 30, 1996, by and
among the Holder, the Company and Comerica Bank - Texas (the "Subordination
Agreement") increasing the amount of allowable indebtedness under the Senior
Loan Documents (as defined in the Subordination Agreement) from $10,000,000 to
12,000,000;
WHEREAS, the Holder has agreed to execute the Subordination Amendment in
exchange for the reduction of its Conversion Price (as defined in the Note) from
$3.00 to $2.00; and
WHEREAS, the parties hereto desire to modify the applicable provisions of
the Note.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. MODIFICATION OF THE NOTE.
1.1 Section 4.1 of the Note is hereby deleted and the following
section is substituted therefor:
"4.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article IV, at the option of the
Holder, all or any portion of the amounts owed and outstanding under this
Note may be converted at any time and from time to time into fully paid
and nonassessable shares of Common Stock (the "Shares"), calculated as to
each conversion to the nearest 1/100 of a share at the Conversion Price,
determined as hereinafter provided, in effect at the
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time of conversion. Unless and until the occurrence of an Event of
Default, the Conversion Price shall be $2.00 per share of Common Stock,
subject to adjustment in accordance with Article 5 hereof. Upon the
occurrence of an Event of Default, the Conversion Price shall be
automatically adjusted to an amount equal to the lesser of (i) the
Conversion Price in effect as of the date of the Event of Default and (ii)
80% of the average Market Price for the 30 trading days immediately
preceding the date of the Event of Default, which amount shall be subject
to further adjustment in accordance with Article 5 hereof. All amounts so
converted shall be applied first to pay any accrued and unpaid interest
and second to reduce the principal amount of this Note as of the date of
such conversion as if payment or prepayment in such amount has occurred,
with any reduction in principal to be applied to satisfy the Company's
redemption obligations under Section 2.3.2 hereof in accordance with
Section 2.3.4 hereof. This right of conversion must be exercised by
delivery of a written notice to the Company setting forth the amount to be
converted to be effective upon the Company's receipt of such notice (the
"Conversion Notice"). Notwithstanding the foregoing, in the event the
Company provides notice to the Holder of its intention to redeem all or
any portion of the outstanding principal balance of this Note pursuant to
Section 2.3.1 hereof, the Company must receive the Conversion Notice on or
before the last Business Day prior to the effective date of such
redemption to the extent that the Holder desires to convert all or any
portion of the amount to be redeemed by the Company."
1.2 Section 6.7(b) of the Note is hereby deleted and the following
section is substituted therefor:
"(b) Funded Debt of the Company under the Senior Indebtedness
not exceeding $12,000,000 in aggregate principal amount at any one time
outstanding;"
2. NO FURTHER EFFECT. Except as expressly modified hereby, the Note shall
remain in full force and effect.
3. GOVERNING LAW. This Modification shall be governed by and construed in
accordance with the laws of the State of Texas.
4. COUNTERPARTS; EFFECTIVENESS. This Modification may be signed in any
number of counterparts, each of which shall be an original, and with the effect
as if the signatures thereto and hereto were upon the same instrument. This
Modification shall be effective as of the date hereof when each of the parties
hereto shall have executed counterparts hereof.
5. ORAL AGREEMENTS. This Modification represents the final expression
between the parties with respect to the subject matter hereof, and may not be
contradicted by evidence of prior or contemporaneous oral agreement of the
parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Modification to be
executed as of the date first written above.
HENLEY HEALTHCARE, INC.
a Texas corporation
By: /s/ MICHAEL M. BARBOUR
Michael M. Barbour,
President and Chief Executive Officer
MAXXIM MEDICAL, INC.
a Delaware corporation
By: /s/ KENNETH W. DAVIDSON
Name: KENNETH W. DAVIDSON
Title: CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
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