UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-QSB
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JUNE 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 0-28566
HENLEY HEALTHCARE, INC.
(Exact name of small business issuer as specified in its charter)
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
120 Industrial Boulevard, Sugar Land, Texas 77478
(Address of principal executive offices)
281-276-7000
(Issuer's telephone number)
LASERMEDICS, INC.
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (i) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (ii)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 12, 1997, Henley Healthcare, Inc. had 3,093,556 shares of common
stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
INCLUDED IN THIS REPORT ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS WILL PROVE TO HAVE BEEN CORRECT. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS INCLUDING THOSE SET FORTH UNDER PART 1
ITEM 2 "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information required hereunder is included in this
report as set forth in the "Index to Financial Statements."
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4-5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
2
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30,
1997
------------
ASSETS
Current Assets:
Cash and cash equivalents .................................... $ 470,127
Accounts receivable, net of allowance for doubtful accounts .. 6,400,828
Inventory .................................................... 5,281,320
Prepaid expenses ............................................. 246,704
Other current assets ......................................... 91,456
------------
Total current assets .................................. 12,490,435
Property, plant and equipment, net of
accumulated depreciation of $396,719 ......................... 3,406,566
Goodwill and other intangibles, net of accumulated
amortization of $176,702 ..................................... 3,927,656
Other assets ................................................... 216,411
------------
Total Assets .......................................... $ 20,041,068
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit - bank ........................................ $ 3,706,533
Accounts payable ............................................. 1,639,210
Accrued expenses and other current liabilities ............... 581,640
Current maturities of long-term debt ......................... 526,367
------------
Total current liabilities ............................. 6,453,750
Interest payable ............................................... 417,667
Long-term debt, net of current maturities ...................... 9,064,641
------------
Total liabilities .................................... 15,936,058
Stockholders' Equity:
Preferred stock - $.10 par value; authorized
2,500,000 shares; none issued and outstanding
Common stock - $.01 par value; authorized
20,000,000 shares; issued 3,372,556
shares at June 30, 1997 ................................... 33,725
Additional paid-in-capital ................................... 12,308,394
Accumulated deficit .......................................... (8,010,930)
------------
4,331,189
Treasury stock, at cost, 279,000 common shares ............... (226,179)
------------
Stockholders' equity ................................... 4,105,010
Total Liabilities and Stockholders' Equity ............ $ 20,041,068
============
See notes to consolidated financial statements.
3
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HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three months ended June 30, 1997 1996
----------- -----------
Net sales ...................................... $ 5,545,031 $ 2,717,546
Cost of sales .................................. 2,602,276 1,315,953
----------- -----------
Gross profit ................................... 2,942,755 1,401,593
Operating expenses ............................. 2,541,636 1,615,819
----------- -----------
Income (loss) from operations .................. 401,119 (214,226)
Interest expense ............................... (264,244) (293,838)
Other income (expense), net .................... (43,177) (10,892)
----------- -----------
Net income (loss) .............................. $ 93,698 $ (518,956)
=========== ===========
Net income (loss) per common share ............. $ 0.03 $ (0.33)
=========== ===========
Weighted average common shares outstanding ..... 2,988,061 1,569,236
=========== ===========
See notes to consolidated financial statements.
4
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HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six months ended June 30, 1997 1996
------------ -----------
Net sales ..................................... $ 10,411,657 $ 2,865,293
Cost of sales ................................. 4,569,813 1,413,748
------------ -----------
Gross profit .................................. 5,841,844 1,451,545
Operating expenses ............................ 5,010,877 2,079,706
------------ -----------
Income (loss) from operations ................. 830,967 (628,161)
Interest expense .............................. (507,012) (324,713)
Other income (expense), net ................... (77,078) (9,991)
------------ -----------
Net income (loss) ............................. $ 246,877 $ (962,865)
============ ===========
Net income (loss) per common share ............ $ 0.09 $ (0.63)
============ ===========
Weighted average common shares outstanding .... 2,884,851 1,525,280
============ ===========
See notes to consolidated financial statements.
5
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HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................. $ 246,877 $ (962,865)
----------- -----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization expense .......... 273,119 70,595
Amortization of discount on notes payable ...... -- 151,667
Interest expense ............................... 165,667 --
Bad debt expense ............................... 690,441 405,080
Shares issued for public relations agreement ... -- 8,000
Changes in operating assets and liabilities:
Increase in accounts receivable .............. (1,270,555) (618,995)
(Increase) decrease in inventory ............. (360,923) 320,943
(Increase) decrease in prepaid expenses
and other current .......................... 80 (116,695)
Increase in other assets ..................... (97,084) --
(Increase) decrease in accounts payable
and accrued liabities ...................... (107,449) 612,572
----------- -----------
Total adjustments ..................... (706,704) 833,167
----------- -----------
Net cash used in operating
activities .......................... (459,827) (129,698)
----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired of $68,600 and
$1,909, resp .................................... (439,641) (6,496,613)
Intangible assets expenditures .................... (2,001) --
Capital expenditures .............................. (59,366) (18,583)
----------- -----------
Net cash used in investing activities .. (501,008) (6,515,196)
----------- -----------
Cash flows from financing activities:
Net proceeds from line of credit .................. 1,519,462 2,533,455
Net proceeds from issuance of common stock ........ -- 1,907,025
Proceeds from long-term debt ...................... -- 2,508,998
Principal payments of long-term debt .............. (596,392) (23,861)
Net cash provided by financing activities 923,070 6,925,617
Net increase (decrease) in cash and cash equivalents (37,765) 280,723
Cash and cash equivalents at beginning of period .... 507,892 203,364
----------- -----------
Cash and cash equivalents at end of period .......... $ 470,127 $ 484,087
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid year-to-date for:
Interest .......................................... $ 325,335 --
----------- -----------
</TABLE>
See notes to consolidated financial statements.
6
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HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements of
Henley Healthcare, Inc. (formerly Lasermedics, Inc.) and Subsidiaries
(collectively, the "Company"), have been prepared in accordance with
generally accepted accounting principles and the rules of the Securities
and Exchange Commission (the "SEC"), and should be read in conjunction
with the audited consolidated financial statements and notes thereto
contained in the Company's latest Annual Report filed with the SEC on
Form 10-KSB/A. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be
expected for the full year. Notes to the consolidated financial
statements which would substantially duplicate the disclosure contained
in the audited consolidated financial statements for the most recent
fiscal year, 1996, as reported in the Form 10-KSB/A, have been omitted.
2. NAME CHANGE:
Effective June 1997 the Company's shareholders approved an amendment to
the Company's Articles of Incorporation that changed the name of the
Company to Henley Healthcare, Inc.
3. NET INCOME (LOSS) PER SHARE:
Net income (loss) per common share is calculated on the basis of the
weighted average number of common shares outstanding during the period.
The dilutive effect of common stock equivalents is not material.
The Company plans to adopt Financial Accounting Standards No. 128,
"Earnings per Share" on December 15, 1997. Management believes this will
not have a material effect on the consolidated financial statements for
the six months ended June 30, 1997 and 1996.
4. ACQUISITIONS:
In January 1997, the Company entered into an agreement pursuant to which
it acquired all of the issued and outstanding common stock of Texas
T.E.N.S., Inc., a privately-owned Texas corporation, for an estimated
purchase price of approximately $850,000 including related acquisition
costs of approximately $50,000. The purchase price was paid by the
issuance of the Company's subordinated promissory note in the principal
amount of $400,000 (the "Tens Note") with the balance of the purchase
price being paid in cash. The principal balance of the Tens Note is due
and payable on the first day of each calendar month beginning on
February 1, 1997, and ending on January 1, 1999, in equal installment
payments of principal plus all accrued and unpaid interest due on the
Tens Note on the date of each such payment. Interest on the Tens Note is
calculated at the Prime Rate.
7
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In January 1997, the Company also purchased substantially all of the
inventory, distribution systems and customers associated with the
Homecare (third-party billing) division of Gatti Medical Supply, Inc., a
privately-owned Pennsylvania corporation, for an estimated purchase
price of approximately $350,000 including related acquisition costs of
approximately $50,000 and up to an additional $300,000 subject to the
achievement of specific terms and conditions. Under the terms of the
purchase agreement, the Company issued to the sellers a total of 51,117
shares of common stock and will issue up to an aggregate 50,117
additional shares of common stock subject to the achievement of specific
terms and conditions in the agreement.
In March 1997, the Company entered into new agreements with CB Svendsen
a/s ("CBS"), the Danish company with whom the Company has worked on the
development and marketing of the Microlight 830(TM) since June 1991.
Pursuant to the new agreements, the Company paid $100,000 to CBS and
obtained unto perpetuity the sole and exclusive world-wide distribution
rights to all low level laser devices manufactured by or for CBS. Also
pursuant to the agreements, the Company obtained unto perpetuity the
exclusive world-wide manufacturing rights to all low level laser devices
manufactured by or for CBS subject to the payment to CBS by June 15,
1998, of $175,000.
On May 2, 1997, the Company entered into an agreement pursuant to which
it acquired all of the issued and outstanding shares of common stock of
Med-Quip, Inc. ("Medquip"), a privately-owned Georgia corporation, for
an estimated purchase price of approximately $1,450,000 including
related acquisition costs of approximately $50,000. The purchase price
was paid by the issuance of an aggregate of 300,000 shares of the
Company's common stock and the payment of approximately $40,000 in cash.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto and other detailed
information contained in the Company's Annual Report for fiscal year 1996 filed
with the SEC on Form 10-KSB/A.
RESULTS OF OPERATIONS
The Company reported consolidated net income of approximately $247,000
for the six months ended June 30, 1997 compared to a net loss of approximately
$963,000 reported for the same period in 1996. The Company's profitability has
resulted primarily from the operations of the acquired entities including the
achievement of comparatively larger sales. During the quarter ended March 31,
1996, the Company was still in the development stage and had limited operating
revenues.
Sales revenue was approximately $5,545,000 for the quarter ended June
30, 1997, representing an increase of approximately $2.8 million over the amount
reported for the same period in 1996. For the six months ended June 30, 1997
sales revenue was approximately $10,412,000, representing an increase of
approximately $7.5 million over the amount reported for the same period in 1996.
The increases are attributable primarily to additional sales generated by the
businesses that have been acquired since the end of April 1996. Also
contributing to the increases are the effects of expanded distribution outlets
during this period.
Gross margin as a percentage of sales for the quarter ended June 30,
1997 increased to approximately 53% from approximately 52% reported for the same
period in 1996. For the six months ended June 30, 1997 gross margin as a
percentage of sales increased to approximately 56% compared to approximately 51%
reported for the same period in 1996. The increases resulted primarily from
sales of many higher-margin products sold by the recently acquired businesses.
Operating expenses for the quarter ended June 30, 1997 increased
approximately $926,000 over the approximately $1.6 million reported for the same
period in 1996. For the six months ended June 30, 1997 operating expenses
increased approximately $3 million over the approximately $2 million reported
for the same period in 1996. The increases in operating expenses are due to the
increased relative costs of operating the newly acquired businesses. However, as
a percent of sales, operating expenses for the quarter and six months ended June
30, 1997 decreased to approximately 46% and 48%, respectively, compared to
approximately 59% and 73% reported for the same periods in 1996. The decreased
operating expenses as a percentage of sales reflect the effects of larger
overall sales volume from the acquired operations.
Interest charges for the quarter and six months ended June 30, 1997 were
$264,244 and $507,012, respectively, compared to $293,838 and $324,713 reported
for the same periods in 1996. The overall increase in interest expense was
primarily due to the interest-bearing notes issued to finance certain of the
Company's acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents in the
amount of $470,127 compared with cash and cash equivalents of $507,892 at
December 31, 1996. The decrease in cash and cash equivalents resulted primarily
from expenses incurred in pursuing the Company's overall growth strategy.
The Company's current sources of liquidity consist primarily of (i)
funds held at the end of fiscal year 1996 and (ii) the amounts, if any,
available under its financing arrangements with Comerica Bank-Texas
("Comerica"). The financing arrangements with Comerica (the "Financing")
provides for (i) a two-year revolving loan ("Line of Credit"), which permits
borrowings up to $4,000,000 through April 1998 and (ii) two term loans in the
amounts of $893,000 ("Term Note A") and $1,616,000 ("Term Note B"). Term Note A
and Term Note B are payable in monthly installments of $14,883 and $8,978,
respectively, plus interest through May 2001 and 2011, respectively. The Line of
Credit also includes a $250,000 letter of credit facility. Interest on the Line
of Credit and the two term loans is payable monthly and is calculated at a rate
equal to the Prime Rate plus one-half of one percent per annum. Term Note B is
callable by Comerica beginning on the fifth anniversary of the Financing. All of
the borrowings from Comerica are secured by substantially all of the assets of
the Company. As of June 30, 1997, the Company had approximately $293,000
available for borrowing under the Line of Credit. The total amount available for
borrowing under the Line of Credit is the lesser of (i) $4,000,000 and (ii) a
variable borrowing base calculated based on the amount and type of outstanding
accounts receivable and the value of certain items of inventory. At June 30,
1997, the Company had working capital of approximately $6,037,000 and its
current ratio was 1.94 to 1 as compared to $5,563,000 and 2.2 to 1 at June 30,
1996.
In connection with an agreement entered into in April 1996, with Maxxim
Medical, Inc., ("Maxxim") the Company issued to Maxxim a convertible
subordinated promissory note in the principal amount of $7 million (the "Note").
The Note is due and payable on March 1, 2003 with interest payable semi-annually
on November 1 and May 1 of each calendar year and calculated at a rate equal to
2% per annum and increasing annually 2% per annum. The Company may redeem all or
any portion of the outstanding principal amount of the Note at redemption prices
ranging from 104% to 110% of the principal amount being redeemed, depending on
when the redemption occurs as set forth in the Note. In addition, the Note is
subject to mandatory redemption in annual installments of $1.4 million
commencing on March 1, 1999 at premiums starting at 7% and decreasing 1% each
year. The Company is also required to redeem 40% of the Note upon the completion
of a public offering. The Note is convertible into common stock at an initial
conversion price of $3 per share, provided that upon the occurrence of any
default under the Note, the conversion price will be automatically adjusted to
an amount equal to the lesser of the conversion price then in effect or 80% of
the average market price for the Company's common stock for the 30 trading days
immediately preceding the event of default. The conversion price is also subject
to adjustment upon the occurrence of certain events (including certain issuances
of common stock for less than the conversion price) to provide anti-dilution
protection.
In connection with the acquisition of Texas T.E.N.S., Inc. in January
1997, the Company issued a note payable to the seller in the amount of
approximately $400,000. The note is payable in monthly principal installments of
$16,667 plus interest at the Prime Rate per annum through January 1999. Pursuant
to an agreement entered in July 1997 with the note-holder, the Company will pay
the entire principal balance plus accrued interest in August 1997.
Management believes that the funds generated from operations, along with
the Company's current working capital position and bank credit, will be
sufficient to satisfy the Company's capital requirements for the existing
operations for the foreseeable future. If the Company's operating cash flows are
inadequate, the Company may require new sources of liquidity to (i) make the
required payments under its promissory notes and other financial commitments,
(ii) pursue additional acquisitions, (iii) expand the operations of the acquired
entities, (iv) fund future activities that may be required to obtain Food and
Drug Administration ("FDA") marketing clearance for the Microlight 830(TM), (v)
make the payments required to obtain the exclusive manufacturing rights to the
Microlight 830(TM) and (vi) begin full-scale manufacturing of the Microlight
830(TM). The Company believes that its success in obtaining the necessary
financing will depend on, among other factors, successfully operating the
recently acquired businesses and successfully marketing the Microlight 830(TM)
if it is cleared for commercial distribution by
9
<PAGE>
the FDA. Sources of additional financing may include additional bank debt or the
public or private sale of equity or debt securities. There can be no assurance
that the Company will be successful in arranging such financing on terms
commercially acceptable to the Company.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
In connection with the acquisition of Medquip as described in Footnote 4
to the Financial Statements, the Company issued to Medquip's former shareholders
an aggregate of 300,000 shares of the Company's common stock in a private
transaction in which the Company relied on the exemption from registration
available under Section 4(2) of the Securities Act of 1993, as amended, and Rule
506 promulgated thereunder.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on June 6, 1997.
The holders of 2,390,308 shares of the Company's common stock were present at
the meeting in person or by proxy and took the following actions:
(A) Election of Directors
The shareholders voted as follows and elected the following persons to
serve as directors of the Company until the next annual meeting of
stockholders and until their successors are duly elected and qualified:
NUMBER OF NUMBER OF NUMBER OF
VOTES FOR VOTES WITHHELD VOTES NOT CAST
--------- -------------- --------------
Michael M. Barbour 2,383,253 600 409,703
Chadwick F. Smith, M 2,363,153 20,700 409,703
Dan D. Sudduth 2,383,353 600 409,603
Pedro A. Rubio, MD, Ph.D 2,383,153 300 410,103
Kenneth W. Davidson 2,363,253 20,200 410,103
Ernest J. Henley, Ph.D 2,363,053 20,800 409,703
(B) Approval of Amendment to the Company's Articles of Incorporation
The shareholders voted as follows and approved an amendment to the
Company's Articles of Incorporation that changed the name of the Company
to Henley Healthcare, Inc.:
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
VOTES FOR VOTES AGAINST VOTES ABSTAINED VOTES NOT CAST
--------- ------------- --------------- --------------
2,346,893 41,410 2,005 403,248
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See "Index of Exhibits" below which lists the documents required
to be filed as exhibits by Item 601 of Regulation S-B.
(b) REPORTS ON FORM 8-K
None.
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
HENLEY HEALTHCARE, INC.
(Registrant)
By: /s/ MICHAEL M. BARBOUR
Date: August 12, 1997 Michael M. Barbour
(President and Chief
Executive Officer)
By: /s/ DAN D. SUDDUTH
Date: August 12, 1997 Dan D. Sudduth
(Executive Vice President
and Chief Financial Officer)
By: /s/ CHIKE J. OGBOENYIYA
Date: August 12, 1997 Chike J. Ogboenyiya
(Vice President and Chief
Accounting Officer)
11
<PAGE>
HENLEY HEALTHCARE, INC.
EXHIBITS TO FORM 10-QSB
For the quarter ended June 30, 1997
INDEX OF EXHIBITS
Exhibits incorporated by reference to a prior filing are designated by
an asterisk (*); all exhibits not so designated are documents required to be
filed as exhibits to this report.
EXHIBIT
NO. DESCRIPTION
- ------- ----------
3.1 Amended and Restated Articles of Incorporation
10.1 Stock Purchase Agreement with Vicki C. Belcher, James V. Warren and
J. L. (Skip) Moore dated May 2, 1997
10.2 Registration Rights Agreement with Vicki C. Belcher, James V. Warren and
J. L. (Skip) Moore dated May 2, 1997
27.1 Financial Data Schedule for the quarter ended June 30, 1997.
12
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LASERMEDICS, INC.
ARTICLE ONE
Lasermedics, Inc. (the "Corporation"), pursuant to the provisions of
Article 4.07 of the Texas Business Corporation Act, hereby adopts these Amended
and Restated Articles of Incorporation which accurately copy the articles of
incorporation and all amendments thereto that are in effect to date and as
further amended by such Amended and Restated Articles of Incorporation as
hereinafter set forth and which contain no other changes in any provision
thereof:
ARTICLE TWO
The articles of incorporation of the Corporation are amended by the
Amended and Restated Articles of Incorporation as follows:
Article One is amended and restated in its entirety as follows:
"ARTICLE ONE
The name of the corporation is Henley Healthcare, Inc. (the
"Corporation")."
ARTICLE THREE
The amendment made by these Amended and Restated Articles of Incorporation
was effected in conformity with the provisions of the Texas Business Corporation
Act and such Amendment made by these Amended and Restated Articles of
Incorporation was duly adopted by the shareholders of the Corporation on the 6th
day of June 1997.
ARTICLE FOUR
The number of shares of the Corporation outstanding at the time of such
adoption was 2,793,556; the number of shares entitled to vote thereon was
2,793,556. The number of shares of the Corporation voted for the amendment was
2,346,893 and the number of shares of the Corporation voted against the
amendment was 41,410.
ARTICLE FIVE
The articles of incorporation and all amendments and supplements thereto
are hereby superseded by the Amended and Restated Articles of Incorporation
attached hereto as Exhibit A which accurately copy the entire text thereof as
amended as above set forth.
Dated June 25, 1997 LASERMEDICS, INC.
By: /S/ CHIKE J. OGBOENYIYA
Chike J. Ogboenyiya,
VICE PRESIDENT -- FINANCE AND SECRETARY
1
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EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HENLEY HEALTHCARE, INC.
ARTICLE ONE
The name of the corporation is Henley Healthcare, Inc. (the
"Corporation").
ARTICLE TWO
The Corporation shall have perpetual existence.
ARTICLE THREE
The purposes for which the Corporation is organized are transactions of
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation shall have the authority to issue two classes of shares,
to be designated respectively, "Preferred Stock" and "Common Stock." The total
number of shares which the Corporation is authorized to issue is 22,500,000. The
number of Preferred shares authorized is 2,500,000 and the par value of each
such share is Ten Cents ($.10). The number of Common shares authorized is
20,000,000, and the par value of each such share is One Cent ($.01).
The Preferred Stock may be issued in one or more series. The Board of
Directors is hereby authorized to fix or alter by resolution or resolutions, the
designations, preferences, and relative participating, optional or other special
rights of the shares of each such series and the qualifications, limitations or
restrictions thereon, including, but not limited to, determination of the
dividend rights, dividend rates, conversion rights, voting rights and rights in
terms of redemption.
ARTICLE FIVE
The Corporation shall not commence business until it shall have received
for the issuance of its shares consideration of the value of One Thousand
($1,000.00) Dollars consisting of money, labor done or property actually
received, which sum is not less that One Thousand ($1,000.00) Dollars.
ARTICLE SIX
The Corporation may enter into contracts or transact business with one or
more of its directors, officers or stockholders, or with any firm of which one
or more of its directors, officers or stockholders are members, or with any
corporation, association, trust company, organization or entity in which any one
or more of its directors, officers or stockholders are directors, officers,
trustees, shareholders or beneficiaries, or are otherwise interested, and in the
absence of fraud such contract or transaction shall not be invalidated or in
anywise affected by the fact that such directors,
1
<PAGE>
officers or stockholders of the Corporation have or may have interests which are
or might be adverse to the interests of the Corporation, even though the vote or
action of the directors, officers or stockholders having such adverse interests
may have been necessary to obligate the Corporation upon such contract or
transaction.
At any meeting of the Board of Directors of the Corporation (or any duly
authorized committee thereof) which shall authorize or ratify any such contract
or transaction, any such director or directors may vote or act thereat with like
force and effect as if he had not such adverse interest provided that in such
case such interest shall be disclosed or shall have been known to the Board of
Directors or a majority thereof. No director or officer shall be disqualified
from holding office as director or officer of the Corporation by reason of any
such adverse interest. In the absence of fraud, no director, officer or
stockholder having such adverse interest shall be liable to the Corporation or
to any stockholder or creditor thereof, or to any other person, for any loss
incurred by it under or by reason of such contract or transaction, nor shall any
such director, officer or stockholder be accountable for any gains or profits
realized thereon. Cumulative voting of shares in the election of directors is
expressly denied.
A director of the Corporation is not liable to the Corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except that this article does not eliminate or limit the
liability of a director for:
(1) a breach of a director's duty of loyalty to the Corporation or its
shareholders;
(2) an act or omission not in good faith or that involves intentional
misconduct or a knowing violation of the law;
(3) a transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the director's office;
(4) an act or omission for which the liability of a director is
expressly provided for by statute; or
(5) an act related to an unlawful payment of a dividend.
If the Texas Miscellaneous Corporation Laws Act or any other statute is
amended subsequently to the filing of these Articles of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the full extent permitted by such statute, as
so amended.
Any repeal or modification of the foregoing paragraph by the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
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ARTICLE SEVEN
The Corporation may purchase or reacquire its own shares and may reissue
same as provided by law. No holder of shares of any class of the Corporation
shall have any preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class, whether such shares shall be
hereby or hereafter authorized, and no holder of shares of any class of the
Corporation shall have any right to acquire any shares which may be held in the
treasury of the Corporation; all such additional or treasury shares may be sold
for such consideration, at such time, and to such person or persons, as the
Board of Directors may from time to time determine.
ARTICLE EIGHT
The post office address of the registered office of the Corporation is 120
Industrial Boulevard, Sugar Land, Texas 77478, and the name of its registered
agent at such address is Michael M. Barbour.
ARTICLE NINE
The number of directors shall be as fixed by the Bylaws of the
Corporation, and until changed in accordance with the Bylaws the number shall be
six (6); and the names and addresses of the persons constituting the current
Board of Directors, to serve until the next annual meeting of shareholders or
until their successors are duly elected and qualified, are
Michael M. Barbour............... 120 Industrial Boulevard
Sugar Land, Texas 77478
Chadwick F. Smith, M.D........... 1127 Wilshire Boulevard
Los Angeles, CA 90017
Dan D. Sudduth................... 120 Industrial Boulevard
Sugar Land, Texas 77478
Pedro A. Rubio, M.D., Ph.D....... 120 Industrial Boulevard
Sugar Land, Texas 77478
Kenneth W. Davidson.............. 104 Industrial Boulevard
Sugar Land, Texas 77478
Ernest J. Henley, Ph.D........... 120 Industrial Boulevard
Sugar Land, Texas 77478
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STOCK PURCHASE AGREEMENT
BY AND AMONG
LASERMEDICS, INC.,
VICKI C. BELCHER,
JAMES V. WARREN
AND
J. L. (SKIP) MOORE
DATED MAY 2, 1997
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into on this 2nd day of May, 1997
by and among Vicki C. Belcher ("Belcher"), James V. Warren ("Warren") and J. L.
(Skip) Moore ("Moore") (Belcher, Warren and Moore each being referred to
individually as a "Seller" and collectively as the "Sellers"), and Lasermedics,
Inc., a Texas corporation (the "Buyer").
WITNESSETH :
WHEREAS, Med-Quip, Inc., a Georgia corporation ("MQI"), is principally
engaged in the business of selling or distributing certain rehabilitation
related medical equipment and associated materials to chiropractors, physical
therapy clinics, athletic trainers, hospital, school and university physical
therapy departments, athletic teams and other customers (the "Business");
WHEREAS, Sellers collectively own all of the issued and outstanding
capital stock of MQI; and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers all of the issued and outstanding capital stock of MQI 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
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 8.1.
1.2 PURCHASE AND SALE OF MQI STOCK. Subject to the terms and conditions of
this Agreement, at the Closing each Seller agrees to sell and convey to Buyer,
free and clear of all Encumbrances, and Buyer agrees to purchase and accept from
each Seller all shares of MQI Stock owned beneficially or of record by such
Seller. The aggregate purchase price for such shares of MQI Stock shall be
$1,350,000 payable by Buyer at the Closing by the issuance by Buyer of 300,000
shares (the "Shares") of its common stock, par value $.01 per share (the "Common
Stock") to be allocated among them as set forth on Schedule 1.2 hereto.
1.3 CLOSING. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of counsel to Buyer,
Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas 77002-2764 at 9:00 a.m.
on May 2, 1997 (the "Closing Date"), unless another time, place or date is
agreed to by the Sellers and the Buyer.
<PAGE>
1.4 CLOSING DELIVERIES. At the Closing, (a) Sellers shall deliver to Buyer
duly and validly issued certificate(s) representing all shares of MQI Stock
owned beneficially or of record by them, each such certificate to be duly
endorsed in blank and in good form for transfer, or accompanied by stock powers
duly executed in blank sufficient and in good form to properly transfer such
shares to Buyer, (b) Sellers and Buyer shall have delivered to one another all
other documents, instruments and agreements as required under this Agreement,
and (c) Buyer shall deliver to Sellers the Shares issuable at Closing as
provided in Section 1.2.
1.5 RESIGNATIONS; CONSULTING AGREEMENT. At the Closing, each of the
officers and directors of MQI will resign, and the Buyer will enter into a
Consulting Agreement with Belcher in the form attached hereto as Exhibit A (the
"Consulting Agreement").
1.6 RESTRICTIONS ON RESALE; REGISTRATION RIGHTS. The Shares issued will be
"restricted securities" as that term is defined under the Securities Act of
1933, as amended (the "Securities Act"), and the Sellers may not offer for sale,
sell, transfer, hypothecate, assign, or otherwise dispose of the Shares except
pursuant to an effective and current registration statement under the Securities
Act or a valid exemption therefrom, and the certificates representing the Shares
shall bear a legend setting forth such restrictions in the form presented in
Section 3.4(h). In addition, in the event that the Buyer files a registration
statement pursuant to the Securities Act in connection with an underwritten
public offering of its securities prior to May 2, 1999, the Sellers agree that
they will not offer for sale, sell, transfer, hypothecate, assign, or otherwise
dispose of the Shares for a period beginning on the filing of such registration
statement and ending upon the earlier of (i) 270 days after the effective date
of such registration statement, or (ii) August 2, 1999. The certificates
representing the Shares will bear a legend setting forth such restrictions in
the form presented in Section 3.4(h). At Closing and as part of the
consideration for the purchase and sale of the MQI Stock, the Buyer will enter
into a registration rights agreement with Sellers in the form attached hereto as
Exhibit B (the "Registration Rights Agreement"). Pursuant to the Registration
Rights Agreement, Buyer has granted Seller certain piggyback registration rights
as more fully described therein.
1.7 SUNTRUST LINE OF CREDIT. As soon as practicable after the Closing, the
Buyer will pay off the outstanding balance of the line of credit with SunTrust
Bank, Atlanta, and obtain a release of Belcher's personal guarantee. Buyer
further agrees that it will not make any future borrowings under this credit
facility, unless and until Buyer shall have obtained the release of Belcher's
personal guarantee.
1.8 TAX-FREE REORGANIZATION. The parties hereto intend the transaction to
qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal
Revenue Code. The parties hereto agree to take such actions as are necessary to
qualify for such tax-free treatment.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF VICKI C. BELCHER
As material inducements to the execution, delivery and performance of this
Agreement by Buyer, Belcher hereby represents and warrants to Buyer as follows,
except as otherwise described in the Exception Schedule attached hereto. The
Exception Schedule shall identify each exception by the section number(s) of
this Article 2 to which it relates.
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2.1 ORGANIZATION. MQI is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Georgia. MQI 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. MQI is not, nor is it required to be, qualified to do business under the
laws of any foreign jurisdiction. MQI does not own, directly or indirectly, any
interest or investment (whether debt or equity) in any other Person. True,
correct and complete copies of MQI's Articles of Incorporation and Bylaws, as
each may have been amended, are attached to the Exception Schedule.
2.2 NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery of this
Agreement by any Seller nor the consummation of the transactions contemplated
hereby will: (a) violate or conflict with any provision of MQI's Articles of
Incorporation or Bylaws, as amended to date; (b) violate or conflict with any
provision of any Laws applicable to MQI or its 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 MQI is a party
or to which its assets are subject; or (d) result in the creation or imposition
of any Encumbrance of any nature upon or with respect to any of the assets of
MQI.
2.3 CAPITALIZATION. The authorized capital stock of MQI consists of
100,000 shares of common stock, $.01 par value, of which 15,000 are issued and
outstanding, and 10,000 shares of preferred stock, $.01 par value, of which
10,000 are issued and outstanding. All issued and outstanding shares of MQI
Stock are validly issued, fully paid and non-assessable, and are owned
beneficially and of record by Sellers as set forth on the Exception Schedule. No
shares of MQI Stock have been issued in violation of MQI's Articles of
Incorporation or Bylaws, the preemptive or other rights of any shareholder or
former shareholder of MQI, or of any other Person, or any Laws. Neither Sellers
nor MQI have any liability to any former owner of any of MQI's securities by
reason of any failure by them to comply with any Laws, MQI's Articles of
Incorporation or Bylaws, or any agreements. There are no outstanding
subscriptions, options, rights, warrants, calls, preemptive rights, convertible
securities, or other agreements or commitments of any kind obligating MQI to
sell, convey, issue, transfer from treasury, or otherwise dispose of, any
additional shares of its capital stock of any class, or any other equity or debt
security. Since March 31, 1997, MQI has not declared, set aside, paid or made,
or agreed, arranged or committed to declare, set aside, pay or make any dividend
or other distribution in respect of its capital stock, and has not directly or
indirectly redeemed, purchased or otherwise acquired its capital stock.
2.4 FINANCIAL INFORMATION. MQI has delivered to Buyer its unaudited
financial statements, consisting of a balance sheet as of March 31, 1997, and
income statements for the twelve months ended December 31, 1996 and the three
months ended March 31, 1997, true and correct copies of which will be attached
to the Exception Schedule (such financial statements referenced above are herein
collectively referred to as the "Financial Information"). Except for customary
year-end audit adjustments to unaudited statements, the Financial Information
(a) is in accordance with MQI's books and records, (b) to the knowledge of
Belcher, has been prepared in accordance with generally accepted accounting
principals consistently applied with prior periods, except that all such
financial statements exclude footnotes, (c) fairly presents and is a true and
complete statement of the financial position of MQI as of and for the periods
indicated, and (d) does not include or omit any material asset or liability
(whether fixed, accrued, contingent or other) the inclusion or omission of
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which renders such financial statements misleading or incomplete. Since March
31, 1997, MQI has not changed any accounting method or practice, or experienced
any material adverse change in its financial condition, operations, assets,
liabilities (fixed, accrued, contingent, or other), revenues, expenses, or
business prospects, or experienced any event or condition that is likely to
result in such a material adverse change in its business or assets.
2.5 TAXES. MQI has timely filed all federal, state, county, local and
other excise, franchise, property, severance, payroll, income, capital stock,
sales and use, fuel and other tax returns for all fiscal years ended on or
before December 31, 1996, and for any periods thereafter for which returns are
due, and all such returns are true and correct in all material respects. MQI has
not filed an extension for any tax return otherwise due. MQI has timely paid all
taxes which are shown on such returns to be due or have been assessed against it
and all taxes, penalties and interest which any Governmental Authority has
proposed or asserted to be owing (except for those being contested in good faith
as set forth on the Exception Schedule). MQI has made all withholding payments
of tax required to be made under all tax Laws. Provisions and accruals for
income taxes, payroll taxes payable, ad valorem property taxes, sales taxes and
all other taxes and governmental charges required to be paid by MQI as of March
31, 1997 have been set forth in the Financial Information and conform in all
material respects with federal income tax principles and are adequate to cover
MQI's liability for all periods before March 31, 1997. There is no pending audit
of MQI, and MQI has not received any oral or written notice of any proposed
audit, by any Governmental Authority. All tax liabilities to which the
properties of MQI may have been subjected have been discharged, except for taxes
assessed but not yet payable. There are no tax Claims presently being asserted
against MQI, and to the knowledge of MQI and Belcher there is no basis for any
such Claim. MQI has not granted any extension to any taxing authority of the
limitation period during which any tax liability may be asserted thereby.
Neither MQI nor Belcher have received notice or have knowledge of any proposal
for increasing the assessed value of any of MQI's properties for tax purposes,
or of any pending proceedings or public improvements which would result in the
levy of any special tax or assessment against any of MQI's properties.
2.6 LIABILITIES. MQI has no liabilities or obligations, whether absolute,
accrued, contingent or otherwise, and neither MQI nor Belcher has any knowledge
of any potential liabilities or obligations of MQI except (a) as reflected or
reserved against in MQI's unaudited March 31, 1997 balance sheet referred in
Section 2.4 above, (b) obligations to perform services or deliver merchandise in
the Ordinary Course of Business that are not delinquent, (c) obligations for
services or goods received by MQI in the Ordinary Course of Business with
respect to which invoices have not been received, and (d) liabilities accrued or
to be accrued through the Closing Date and set forth on the Exception Schedule.
Without limiting the generality of the foregoing, MQI has no liability as a
guarantor, endorser, co-maker, surety, accommodation maker or in any other
capacity for any indebtedness, liability, obligation or commitment of any other
Person.
2.7 DEFAULTS. MQI is not in default under, or in breach or violation of,
and to the knowledge of MQI and Belcher no reason exists and no event has
occurred which, with notice or lapse of time or action by a third party, will
result in a default under, breach or violation of, or conflict with: (a) MQI's
Articles of Incorporation or Bylaws, as amended to date; (b) any lease, license,
permit, Encumbrance, trust agreement or declaration of trust, or other agreement
or instrument to which MQI is a party, or to which any of its assets is subject;
or (c) any Laws applicable to MQI or its business or assets, including, without
limitation, Business Laws, Environmental Laws and Laws respecting labor,
employment and employment practices, except for
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<PAGE>
any such defaults, breaches, violations or conflicts which individually or in
the aggregate would not constitute a material adverse effect. MQI has all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of its business.
2.8 LITIGATION. There is no lawsuit, action, arbitration, mediation,
administrative proceeding, investigation by a Governmental Authority, or other
legal proceeding pending or, to the knowledge of MQI or Belcher, threatened
against Belcher or MQI or affecting their respective assets or financial
condition, and to the knowledge of MQI and Belcher, no facts are in existence on
which an action, lawsuit or other legal or administrative proceeding might be
brought. Neither Belcher nor MQI is subject to any court order, writ,
injunction, court decree, settlement agreement, or judgment that contain or
order any ongoing obligations (whether prohibitory or mandatory in nature) on
the part of any of them.
2.9 ADDITIONAL INFORMATION. Attached to the Exception Schedule are true,
complete and correct lists and summaries of the following items, including,
without limitation, a description of all Encumbrances to which any such item is
subject, and MQI and Belcher have delivered to Buyer true, complete and correct
copies of any documents, instruments or agreements referred to below or in such
lists and summaries, or underlying any item described therein:
(A) REAL PROPERTY [SCHEDULE 2.9(A)]. A legal description of all real
property owned or leased by MQI or for which it has an option to purchase,
which schedule includes, with respect to each property, (i) the use to
which such property is put, and (ii) whether such property is owned or
leased and, if leased, the name of the lessor and a copy of any agreement
pursuant to which the property is leased;
(B) INVENTORY, EQUIPMENT, MACHINERY AND FURNITURE [SCHEDULE 2.9(B)].
All of MQI's inventory, equipment, machinery, office equipment and
furniture, indicating such item's location and whether such item is owned
or leased, and if leased, the name of the lessor and copy of the lease and
payment status;
(C) INTELLECTUAL PROPERTY [SCHEDULE 2.9(C)]. All patents,
trademarks, service marks, copyrights and other intellectual property
rights, and applications therefor or registrations thereof, wherever
issued or pending; all trade names, assumed or fictitious names, logos,
labels and other trade rights, whether or not registered, where registered
and where used; all inventions, discoveries, improvements, processes,
formulae, trade secrets, ideas and other knowhow, whether patentable or
not; all shop rights; and all other agreements (including agreements with
MQI's employees) relating in whole or in part to any of the foregoing, and
with respect to each of the foregoing, whether owned, licensed or used by
MQI;
(D) LICENSES AND PERMITS [SCHEDULE 2.9(D)]. All licenses, permits,
franchises, and similar rights relating to MQI's business;
(E) CONTRACTS [SCHEDULE 2.9(E)]. Each contract, agreement or
commitment to which MQI is a party, by which it is bound or to which it or
its properties are subject, which involves at least $10,000 or is not
terminable on fewer than 30 days' notice;
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(F) RECEIVABLES [SCHEDULE 2.9(F)]. All accounts, notes and contracts
receivables of MQI in a 30, 60, 90 and over-90 day aged receivables format
and separately listing all amounts receivable from any Seller or any
Affiliate of a Seller;
(G) PAYABLES [SCHEDULE 2.9(G)]. All accounts and notes payable by
MQI in a 30, 60, 90 and over 90 day aged payables format and separately
listing all amounts payable to any Seller or any Affiliate of a Seller;
(H) INDEBTEDNESS [SCHEDULE 2.9(H)]. All indebtedness owed by MQI or
to which any of its assets are subject, summarizing for each item of
indebtedness the material terms thereof and specifying all assets
collateralizing such indebtedness;
(I) INSURANCE [SCHEDULE 2.9(I)]. All insurance policies or bonds
carried by MQI for its benefit or for the benefit of its employees,
including, without limitation, property, title, casualty, liability,
workers compensation and auto policies, as well as a listing of any
premiums, audit adjustments or retroactive adjustments due or pending on
such policies or any predecessor policies;
(J) PERSONNEL [SCHEDULE 2.9(J)]. The name, current salary or wage
rate, last raise date and amount, current bonus arrangements, last bonus
date and amount, and any other compensation arrangements (excluding
employee insurance and benefit plans described in SCHEDULE 2.9(K)) of each
director, officer and employee of MQI, together with a description of any
licenses held by such person that are germane to MQI's business; the name
and address of any other Person who is authorized to bind MQI
contractually, including, without limitation, independent drivers or
independent contractors, and all written or oral arrangements of MQI with
any employee, agent, consultant or independent contractor, specifically
identifying any arrangement which cannot be terminated on notice of 14 or
fewer days without liability to MQI or that entitles the beneficiary
thereof to receive any compensation continuation or severance payment or
retain any position with MQI;
(K) EMPLOYEE PLANS [SCHEDULE 2.9(K)]. All bonus, incentive
compensation, deferred compensation, profit-sharing, retirement, pension,
welfare, group insurance, death benefit, or other fringe benefit plans,
arrangements or trust agreements of MQI, together with copies of the most
recent reports with respect to such plans, arrangements, or trust
agreements filed with any Governmental Authority; and
(L) BANK ACCOUNTS [SCHEDULE 2.9(L)]. The name, address and contact
person of each bank or other financial institution in which MQI has an
account or safe deposit box, the account number, account name and type of
account, the names of all persons authorized to draw thereon or have
access thereto, and the names of all persons, if any, holding powers of
attorney to act for MQI.
2.10 TITLE TO AND QUIET POSSESSION OF ASSETS. MQI has good and marketable
title to all of its respective assets and interests in assets, whether real,
personal, mixed, tangible or intangible, that are reflected in its balance sheet
as of March 31, 1997, or that have been acquired since March 31, 1997, except
for inventory items sold or consumed in the Ordinary Course of Business after
March 31, 1997. All such assets are free and clear of all Encumbrances except as
set forth in the Exception Schedule. At the Closing Date, MQI will have full,
free and exclusive use and quiet
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enjoyment of its assets, and all rights pertaining thereto except for
Encumbrances disclosed in the Exception Schedule. There are no Persons other
than MQI in possession of any portion of the assets owned or leased by MQI. To
the knowledge of MQI and Belcher, there are no condemnations or other takings
planned or proposed by any Government Authority or private party which will
affect the assets owned or used by MQI. To the knowledge of MQI and Belcher, the
continued use by MQI of its assets in the same manner previously used by it will
not violate or infringe upon the rights of others. Without limiting the
generality of the foregoing, to the knowledge of MQI and Belcher, MQI has the
exclusive right, title and interest in and to any trademarks, service marks,
trade names, and copyrights currently used, and to the knowledge of MQI and
Belcher, the continued use of any logo, trade name, license, or other intangible
by MQI does not and will not violate or infringe upon the rights of any third
party.
2.11 CONDITION OF ASSETS.
(a) MQI's premises, office equipment, machinery, vehicles,
furnishings and fixtures are in good operating condition and repair
consistent with MQI's normal practices subject only to ordinary wear and
tear. There are no outstanding requirements or recommendations by MQI's
insurers requiring or recommending any repairs or work be done with
respect to MQI's assets or properties.
(b) MQI's accounts receivable are evidenced by valid and enforceable
written invoices, contracts or other agreements. All amounts paid or
collected under such contracts or agreements which are required by
applicable Laws, including the Business Laws, to be deposited in trust or
deposit accounts have been so deposited on a timely basis in accordance
with such Laws. All such trust and deposit accounts have been established,
funded and maintained in accordance with all applicable Laws, including
the Business Laws. Except as set forth in the Exception Schedule, MQI's
accounts receivable are fully collectible without resort to legal
proceedings or collection agencies, and are not subject to any refunds or
other adjustments, or any defenses, rights of set-off, assignments,
Encumbrances, or conditions enforceable by third parties, except to the
extent reserved against in the Financial Information.
(c) MQI's inventories consist of items held for sale of a quality
and quantity usable in the Ordinary Course of Business, and the cost of
such inventories as of March 31, 1997 was $109,143.78 in the aggregate.
(d) All contracts, leases, plans or other arrangements to which MQI
is a party, by which it is bound or to which it or its assets are subject
are in good standing, in full force and effect, comply in all material
respects with applicable Laws, and constitute valid and binding
obligations of the respective parties thereto. To the knowledge of MQI and
Belcher, no party (other than MQI) to any such contract, lease, plan or
other arrangement is in default thereunder, and no event has occurred
which (with or without notice, lapse of time, or the happening of any
other event) would constitute a default thereunder.
(e) All accounting records, tax records, operating and legal
records, and all other records pertaining to MQI and its business,
properties and affairs, are located at the business office of MQI. No such
records are stored by or in the possession of Sellers or their Affiliates.
MQI's corporate record books (including stock records) are complete,
accurate
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and up to date with all necessary signatures; set forth all meetings and
actions taken by MQI's shareholders and directors, and all transactions
involving MQI's capital stock; and contain all canceled stock
certificates.
2.12 HAZARDOUS SUBSTANCES. During MQI's ownership, lease or use of
property owned, leased or used by it (the "Property"), (a) to the knowledge of
MQI and Belcher, the Property is not being and has not been used by MQI for the
storage, treatment, generation, transportation, processing, handling, burial or
disposal of any Hazardous Substance in material violation of any Laws, (b) no
release of a Hazardous Substance has occurred by MQI on or about the property in
quantities which individually or in the aggregate would require reporting to any
Governmental Authority; (c) no underground storage tanks are or have been
located on the Property; (d) there are not and have not been any Hazardous
Substances resulting from MQI's ownership, lease or use of the Property in
concentrations which exceed amounts permitted by applicable Laws on the
Property; (e) all environmental permits and authorizations necessary to the
continued use of the Property by MQI and the operation of the facilities located
thereon by MQI have been obtained, are being complied with, and all fees and
assessments in association therewith have been timely paid; (f) the Property is
not being and has not been used by MQI as a site for burial of sanitary waste or
other non-hazardous waste; (g) the off-site transportation, storage, treatment,
recycling or disposal of Hazardous Substances and non-hazardous substances
existing on, generated or removed from the Property by MQI have been and are in
compliance with applicable Laws; and (h) there are no capital improvements
requiring any expenditures by MQI in order to comply with any current or
proposed Environmental Laws. To the knowledge of MQI and Belcher, each of (a)
through (g) of the immediately preceding sentence is true with respect to the
Property prior to its ownership or lease by MQI, and with respect to properties
adjacent to the Property.
2.13 OPERATION OF BUSINESS. MQI is in compliance in all material respects
with all Business Laws applicable to MQI or the Business.
2.14 ERISA PLANS, LABOR ISSUES AND AFFILIATE PAYMENTS.
(a) MQI does not currently sponsor, maintain or contribute to, and
has not at any time sponsored, maintained or contributed to any employee
benefit plan (within the meaning of Section 3(3) 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) other than those identified on SCHEDULE 2.9(K) (the
"Employee Benefit Plans"). Each of the Employee Benefit Plans can be
terminated or amended at will by MQI. MQI has no collective bargaining
agreements with any labor union or other representative of employees. MQI
has not engaged in any unfair labor practices which could have a material
adverse effect. MQI has no pending or, to the knowledge of MQI or Belcher,
threatened, dispute with any of its existing or former employees. Since
March 31, 1997, MQI 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 regularly scheduled periodic bonuses and increases
identified on SCHEDULE 2.9(K), 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.
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(b) Each Employee Benefit Plan has been administered and maintained
in compliance with all applicable laws, rules and regulations, except
where the failure to be in compliance would not, individually or in the
aggregate, result in a material adverse effect.
(c) MQI has not received any notice that any Employee Benefit Plan
is currently the subject of an audit, investigation, enforcement action or
other similar proceeding conducted by any state or federal agency.
(d) No pending or, to the knowledge of MQI or Belcher, threatened,
claims, suits or other proceedings exist with respect to an Employee
Benefit Plan, other than normal benefit claims filed by participants or
beneficiaries.
(e) MQI has no obligation or commitment to provide medical, dental
or life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired, except as may be
required pursuant to the continuation of coverage provisions of Section
4980B of the Code and the applicable provisions of ERISA.
(f) MQI has been and is in compliance with all applicable laws,
rules, regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and hours, except
for any such failures to be in compliance that, individually or in the
aggregate, would not result in a material adverse effect, and MQI is not
liable for any arrears of wages or penalties for failure to comply with
any of the foregoing. To the knowledge of MQI or Belcher, MQI has not
engaged in any unfair labor practice or discriminated on the basis of
race, color, religion, sex, national origin, age, disability or handicap
in its employment conditions or practices, and there are no complaints or
racial, color, religious, sex, national origin, age, disability or
handicap discrimination charges or complaints pending or, to the knowledge
of MQI or Belcher, threatened against MQI before any federal, state or
local court, board, department, commission or agency (nor, to the
knowledge of MQI or Belcher, does any valid basis therefor exist).
(g) MQI has never been a party to any agreement with any union,
labor organization or collective bargaining unit. No employees of MQI are
represented by any union, labor organization or collective bargaining
unit. To the knowledge of MQI or Belcher, none of the employees of MQI has
threatened or organize or join in union, labor organization or collective
bargaining unit.
(h) To the knowledge of MQI or Belcher, all employees of MQI are
citizens of, or are authorized in accordance with federal immigration laws
to be employed in, the United States.
2.15 INSURANCE. MQI has at all times carried insurance which MQI and
Belcher believe to be adequate in character and amount and consistent with good
industry practices, with reputable insurers, in respect of its properties,
assets and business and has provided all required performance bonds, and has
complied with all applicable terms and conditions, including payment of
premiums, with respect to such insurance policies and performance bonds. MQI has
received no notification from any insurance carrier denying or disputing any
claim made by MQI, denying or disputing any coverage for any such claim, denying
or disputing the amount of any claim, or regarding the possible cancellation of
or premium increases with respect to any policies. MQI has no claim pending or
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anticipated against any of the insurance carriers under any of such policies and
there has been no actual or alleged occurrence of any kind which may give rise
to any such claim.
2.16 RELATED-PARTY TRANSACTIONS. Except as set forth on the Exception
Schedule, no employee, officer, or director of MQI or member of his or her
immediate family is indebted to MQI, nor is MQI indebted (or committed to make
loans or extend or guarantee credit) to any of them. No officer or director of
MQI, nor member of his or her immediate family, has any direct or indirect
ownership interest in any firm or corporation with which MQI is affiliated or
with which MQI has a business relationship, or any firm or corporation that
competes with MQI, except Sellers may own stock in publicly traded companies
that may compete with MQI. No member of the immediate family of any employee,
officer or director of MQI is directly or indirectly interested in any material
contract, lease or other agreement of any type (oral or written) with MQI.
2.17 DISTRIBUTIONS. MQI has not made any redemptions or distributions
other than regular, normal dividends prior to the Closing Date.
2.18 BROKERS. Neither MQI, nor any of its Affiliates, has employed any
broker, agent or finder, or incurred any liability for any brokerage fees,
agent's fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
2.19 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by Sellers or any of their respective 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 omit to state any material fact necessary to make the
statements made herein and therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
As material inducements to the execution, delivery and performance of this
Agreement by Buyer, the Sellers hereby severally represent and warrant 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 3 to which it relates.
3.1 AUTHORITY AND CONSENT. Each Seller has the absolute and unrestricted
right, power, legal capacity, and authority to enter into, and perform such
Seller's obligations under this Agreement, and no approval or consent of any
Person is necessary in connection therewith. This Agreement, together with all
other agreements, documents and instruments executed in connection herewith,
constitute valid and legally-binding obligations of each Seller, and are
enforceable against such Seller in accordance with their terms.
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3.2 NO VIOLATIONS OR CONFLICTS. Neither the execution and delivery of this
Agreement by any Seller nor the consummation of the transactions contemplated
hereby will: (a) violate or conflict with any provision of any Laws applicable
to any of Sellers or their assets; (b) 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 any of Sellers are a party or
to which its assets are subject; or (c) result in the creation or imposition of
any Encumbrance of any nature upon or with respect to any of the assets of
Sellers.
3.3 TITLE TO STOCK. All of the issued and outstanding shares of MQI Stock
are owned beneficially or of record by Sellers. Each Seller holds good, valid
and marketable title to all shares of MQI Stock so owned by him or her, free and
clear of all Encumbrances. Each Seller possesses full authority and legal right
to sell, transfer and assign to Buyer the entire legal and beneficial ownership
of the MQI Stock owned by such Seller, free and clear of all Encumbrances. Upon
transfer to Buyer by Sellers of their MQI Stock, Buyer will own the entire legal
and beneficial interest in such MQI Stock free and clear of all Encumbrances and
subject to no legal, equitable, transfer or other restrictions of any kind,
except transfer restrictions imposed by operation of applicable securities Laws,
and any Encumbrances imposed or created by Buyer. There are no Claims pending
or, to any Seller's knowledge, threatened against MQI or any Seller that concern
or affect title to any of MQI's capital stock, or that seek to compel the
issuance of capital stock or other securities of MQI. Each of the Sellers
acquired their MQI Stock in transactions that fully complied with the provisions
of all applicable Laws.
3.4 INVESTMENT REPRESENTATIONS. Each of Sellers acknowledges, represents
and agrees that:
(a) the Shares have not been and will not be registered under the
Securities Act or registered or qualified under any applicable state
securities laws, and will be "restricted securities" as that term is
defined under Rule 144 promulgated under the Securities Act;
(b) the Shares will be issued in reliance upon exemptions from such
registration or qualification requirements, and the availability of such
exemptions depends in part upon Sellers' bona fide investment intent with
respect to the Shares;
(c) Sellers' acquisition of the Shares will be solely for their own
account for investment, and they are not acquiring the Shares for the
account of any other person or with a view toward resale, assignment,
fractionalization, or distribution thereof;
(d) Sellers shall not offer for sale, sell, transfer, pledge,
hypothecate or otherwise dispose of any of the Shares except in accordance
with the restrictions set forth herein (including Section 1.6 hereof) and
the requirements of Rule 144 promulgated under the Securities Act, or
pursuant to a valid registration statement under the Securities Act;
(e) Sellers have such knowledge and experience in financial and
business matters that they are capable of evaluating the merits and risks
of an investment in the Shares, and to make an informed investment
decision;
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(f) Sellers have received from Buyer its Form 10-K for the fiscal
year ended December 31, 1996 and related materials regarding the Buyer;
they have had the opportunity to ask questions of, and receive answers
from Buyer's officers and directors concerning the acquisition of the
Shares and to obtain such other information concerning Buyer and the
Shares, to the extent they possessed the same or could acquire it without
unreasonable effort or expense, as they deemed necessary in connection
with making an informed investment decision;
(g) since the Shares have not been registered under the Securities
Act or applicable state securities laws, Sellers must bear the economic
risk of holding the Shares for an indefinite period of time, and are
capable of bearing such risk; and
(h) each certificate evidencing the Shares will bear a conspicuous
restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH
OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN OPINION
OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO A STOCK PURCHASE
AGREEMENT AND A REGISTRATION RIGHTS AGREEMENT BOTH BETWEEN THIS
CORPORATION AND CERTAIN PURCHASERS (THE "PURCHASERS"), DATED MAY 2,
1997 (THE "AGREEMENTS"). THE AGREEMENTS PROVIDE, AMONG OTHER THINGS,
THAT IN THE EVENT THIS CORPORATION FILES A REGISTRATION STATEMENT
UNDER THE ACT IN CONNECTION WITH AN UNDERWRITTEN PUBLIC OFFERING ON
OR BEFORE MAY 2, 1999, THE PURCHASERS WILL NOT OFFER FOR SALE, SELL,
TRANSFER, HYPOTHECATE, ASSIGN OR OTHERWISE DISPOSE OF THE SECURITIES
EVIDENCED HEREBY FOR A PERIOD BEGINNING ON THE FILING OF SUCH
REGISTRATION STATEMENT AND ENDING UPON THE EARLIER OF (i) 270 DAYS
AFTER THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT OR (ii)
AUGUST 2, 1999. THE CORPORATION WILL FURNISH WITHOUT CHARGE A COPY
OF SUCH AGREEMENTS TO THE RECORD HOLDER OF THIS CERTIFICATE ON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTERED OFFICE.
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3.5 RELATED-PARTY TRANSACTIONS. Except as set forth on the Exception
Schedule, none of the Sellers, nor any member of their immediate families is
indebted to MQI, nor is MQI indebted (or committed to make loans or extend or
guarantee credit) to any of them. None of the Sellers has any direct or indirect
ownership interest in any firm or corporation with which MQI is affiliated or
with which MQI has a business relationship, or any firm or corporation that
competes with MQI, except Sellers may own stock in publicly traded companies
that may compete with MQI. No member of the immediate family of any Seller is
directly or indirectly interested in any material contract, lease or other
agreement of any type (oral or written) with MQI.
3.6 CONTINUITY OF INTEREST. There is no plan or intention on the part of
the Sellers to sell, exchange or otherwise dispose of a number of shares of
Buyer's Common Stock received pursuant to this Agreement that would reduce the
Seller's ownership of shares of Buyer's Common Stock received pursuant to this
Agreement in exchange for MQI Stock owned by the Sellers, to a number of shares
having a value, as of the Closing Date, of less than 50% of the value of all
shares of MQI Stock issued and outstanding immediately prior to the Closing
Date. For the purposes of this representation, shares of MQI Stock exchanged for
cash or other property, surrendered by dissenters, or exchanged for cash in lieu
of fractional shares of Buyer's Common Stock will be treated as outstanding MQI
Stock as of the Closing Date. Moreover, shares of MQI Stock and shares of
Buyer's Common Stock held by Sellers and otherwise sold, redeemed or disposed of
prior or subsequent to the Closing Date will be considered in making this
representation.
3.7 BROKERS. Neither Sellers nor any of their respective 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 by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As material inducements for the execution, delivery and performance of
this Agreement by Sellers, Buyer hereby represents and warrants to Sellers 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 4 to which it relates.
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Texas, and has all the necessary powers
to own its business as now owned and operated by it.
4.2 AGREEMENTS AUTHORIZED AND ENFORCEABLE. The execution and delivery of
this Agreement and the Employment Agreement (the "Transaction Documents"), the
issuance of the Shares and the consummation of the transactions contemplated
hereby (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. Each of the Transaction Documents constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as may be limited by applicable bankruptcy laws, insolvency laws and
other similar laws affecting the rights of creditors generally.
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4.3 SEC DOCUMENTS. Buyer has made all filings with the United States
Securities and Exchange Commission (the "SEC") that it has been required to make
under the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Buyer shall have attached hereto as SCHEDULE 4.3 its Form
10-K filed for the period ending December 31, 1996. As of December 31, 1996, the
Form 10-K complied in all material respects with the requirements of the
Securities Act and the Exchange Act and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statement therein, in light of the circumstances under
which it was made, not misleading. Further, Buyer hereby covenants and agrees to
file all reports required under the Securities Act or Exchange Act.
4.4 FINANCIAL INFORMATION. To Buyer's knowledge, the financial information
included in the Form 10-K is true and accurate in all material respects and was
prepared in all material respects in accordance with generally accepted
accounting principles ("GAAP"). Except as disclosed on SCHEDULE 4.4 or as
otherwise specifically contemplated by the terms and provisions of this
Agreement, since December 31, 1996, (i) there has been no material adverse
change in the consolidated net worth of the Buyer, (ii) there has been no
physical damage, destruction or loss suffered by Buyer that would, after taking
into account any insurance recoveries payable in respect thereof, have a
material adverse effect on the Buyer, and (iii) no event has occurred and no
condition exists which, individually or in the aggregate, would have a material
adverse effect on this Agreement, the Buyer, or the transactions contemplated by
this Agreement.
4.5 CAPITALIZATION. The authorized capital stock of Buyer consists of
20,000,000 shares of Common Stock, of which 2,793,556 were issued and
outstanding as of December 31, 1996, and 2,500,000 shares of preferred stock,
$.10 par value, none of which are issued and outstanding. All issued and
outstanding shares of the capital stock of Buyer, including the Shares issuable
hereunder, are validly issued, fully paid and non-assessable and free and clear
of all liens, encumbrances and adverse claims other than restrictions on
transfer under this Agreement and applicable federal and state securities laws.
No shares of the capital stock of Buyer have been issued in violation of Buyer's
Articles of Incorporation or Bylaws, the preemptive or other rights of any
shareholder or former shareholder of Buyer, or of any other Person, or any Laws.
Buyer has no liability to any former owner of any of Buyers's securities by
reason of any failure by them to comply with any Laws, Buyer's Articles of
Incorporation or Bylaws, or any agreements. Except as disclosed in the Form 10-K
or the Exception Schedule attached hereto, there are no outstanding
subscriptions, options, rights, warrants, calls, preemptive rights, convertible
securities, or other agreements or commitments of any kind obligating Buyer to
sell, convey, issue, transfer from treasury, or otherwise dispose of, any
additional shares of its capital stock of any class, or any other equity or debt
security. Since December 31, 1996, Buyer has not declared, set aside, paid or
made, or agreed, arranged or committed to declare, set aside, pay or make any
dividend or other distribution in respect of its capital stock, and has not
directly or indirectly redeemed, purchased or otherwise acquired its capital
stock.
4.6 TAX FREE REORGANIZATION. Buyer has not taken any action and does not
know of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the transaction from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
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4.7 BROKERS. 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.
4.8 UNTRUE STATEMENTS. This Agreement and all schedules, documents and
information furnished by Buyer or its representatives to Seller and any of their
respective representatives pursuant hereto or in connection with the
transactions contemplated by this Agreement do not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading.
ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION BY SELLERS. In addition to any other remedies
available to Buyer under this Agreement, or at law or in equity, each of Sellers
shall indemnify, defend and hold harmless Buyer, and its officers, directors,
employees, agents and shareholders, against and with respect to any and all
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 attorneys' fees (collectively, any "Claims") that such
indemnitees shall incur or suffer, which arise, result from or relate to any
breach of, or failure by such Seller to perform, any of such Seller's
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished to Buyer by Sellers
under this Agreement and any claims against MQI by any Seller.
5.2 INDEMNIFICATION BY BUYER. In addition to any other remedies available
to Sellers under this Agreement, or at law or in equity, Buyer shall indemnify,
defend and hold harmless each of Sellers against and with respect to any and all
Claims that such indemnitees shall incur or suffer, which arise, result from or
relate to 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 Sellers by Buyer
under this Agreement.
5.3 INDEMNIFICATION PROCEDURE.
(a) Promptly upon the receipt of notice of any third-party Claim,
judicial or otherwise, with respect to any matter as to which
indemnification may be claimed under this Article 5, the indemnified party
shall give written notice thereof to the indemnifying party together with
such information respecting such matter as the indemnified 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 (I.E., one who is not a party to this Agreement) 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
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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 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; however, consent shall not be required if such entry of judgment
or settlement includes a complete release of the indemnified party. 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.
(b) 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 5 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 of the Claim to the indemnifying party,
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.
(c) If an indemnified party and an indemnifying party cannot reach
agreement with respect to the validity and amount of any Claim within 30
days after notice thereof is first given, the validity and amount thereof,
as the case may be, shall be finally settled pursuant to the dispute
resolution procedure set forth in Section 8.10 below.
(d) Payments of all amounts owing hereunder with respect to any
Claim shall be made immediately after (i) the settlement between the
parties of the third party Claim, or (ii) the final resolution of the
dispute pursuant to Section 8.10 below.
5.4 INDEMNIFICATION THRESHOLD. Notwithstanding any provision to the
contrary contained in this Agreement, neither Buyer nor Sellers shall make any
Claim against the other party for any breach of representation, warranty,
covenant or agreement under this Agreement until the dollar amount of all loss
to such party for such breaches suffered after the Closing, shall exceed in the
aggregate the amount of $25,000, and, to the extent such amount is exceeded,
Buyer or Sellers, as the case may be, shall be required to pay the amount of
such excess loss to the other party for all such breaches; provided, however,
that any Claim arising out of the UCC-1 security interests referred to on
SCHEDULE 5.4 shall not be subject to the $25,000 indemnification threshold.
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5.5 PAYMENT IN KIND. Any indemnification obligation of the Sellers under
this Article 5 may be satisfied by payment to the Buyer in the Buyer's Common
Stock valued at $4.50 per share.
ARTICLE 6
OBLIGATIONS PENDING CLOSING DATE
6.1 AGREEMENTS OF BUYER AND THE SELLERS. Except as expressly contemplated
elsewhere in this Agreement, the Buyer and the Sellers agree that from the date
hereof until the Closing Date, the Buyers and the Sellers will and the Sellers
will cause MQI to (and unless otherwise indicated by the context, since March
31, 1997, it has):
(A) MAINTENANCE OF PRESENT BUSINESS. Operate its business only in
the usual, regular, and ordinary manner so as to maintain the goodwill it
now enjoys and, to the extent consistent with such operation, use all
reasonable efforts to preserve intact its present business organization,
keep available the services of its present officers and employees, and
preserve its relationships with customers, suppliers, jobbers,
distributors, and others having business dealings with it;
(B) MAINTENANCE OF PROPERTIES. At its expense, maintain all of its
property and assets in customary repair, order, and condition, reasonable
wear and tear excepted;
(C) MAINTENANCE OF BOOKS AND RECORDS. Maintain its books of account
and records in the usual, regular, and ordinary manner, in accordance with
GAAP applied on a consistent basis;
(D) COMPLIANCE WITH LAW. Duly comply in all material respects with
all laws applicable to it and to the conduct of its business;
(E) INSPECTION. Permit Buyer and its authorized representatives,
during normal business hours, to inspect MQI's records and to consult with
its officers, employees, attorneys, and agents for the purpose of
determining the accuracy of the representations and warranties herein made
and the compliance with covenants contained in this Agreement. The Buyer
agrees that, at all times prior to and after the Closing Date, it will and
will cause its representatives to hold all data and information obtained
with respect to MQI, in confidence and further agrees that it will not use
such data or information or disclose the same to others, except to the
extent such data or information either are, or become, published or a
matter of public knowledge through no fault of its own; and
(F) NOTICE OF MATERIAL DEVELOPMENTS. Promptly notify the other party
in writing of any material adverse change in, or any changes which, in the
aggregate, could result in a material adverse change in, the consolidated
financial condition, business or affairs of such party, whether or not
occurring in the Ordinary Course of Business.
6.2 ADDITIONAL AGREEMENTS OF THE SELLERS. Except as expressly contemplated
elsewhere in this Agreement, each of the Sellers agrees that since March 31,
1997, MQI has not, and from the date hereof until the Closing Date, they will
not cause or permit MQI to:
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(A) PROHIBITION OF CERTAIN EMPLOYMENT CONTRACTS. Enter into any
contracts of employment which cannot be terminated on notice of 30 days or
less or which provide for any severance payments or benefits covering a
period beyond the earlier of the termination date or notice thereof;
(B) PROHIBITION OF CERTAIN LOANS. Incur any borrowings which would
exceed $10,000, in the aggregate, for any purpose except (i) the refunding
of indebtedness now outstanding, (ii) the prepayment by customers of
amounts due or to become due for services rendered or to be rendered in
the future, or (iii) as is otherwise approved in writing by the Buyer;
(C) PROHIBITION OF CERTAIN COMMITMENTS. Enter into commitments of a
capital expenditure nature or incur any contingent liabilities which would
exceed $10,000 in the aggregate except (i) as may be necessary for the
maintenance of existing facilities, machinery and equipment in good
operating condition and repair in the Ordinary Course of Business, or (ii)
as is otherwise approved in writing by the Buyer;
(D) DISPOSAL OF ASSETS. Sell, dispose of, or encumber, any property
or assets, except (i) in the usual and Ordinary Course of Business, (ii)
property or assets which individually have a value of less than $1,000; or
(iii) as may be approved in writing by the Buyer;
(E) MAINTENANCE OF INSURANCE. Discontinue its current level of
insurance; PROVIDED, that if during the period from the date hereof to and
including the Closing Date any of its property or assets are damaged or
destroyed by fire or other casualty, the obligations of the Buyer and the
Sellers under this Agreement shall not be affected thereby, and upon the
Closing Date all proceeds of insurance and claims of every kind arising as
a result of any such damage or destruction shall remain the property of
MQI;
(F) ACQUISITION PROPOSALS. Directly or indirectly (i) solicit,
initiate or encourage any inquiry or Acquisition Proposal from any person
or (ii) participate in any discussions or negotiations regarding, or
furnish to any person other than the Buyer or its representatives any
information with respect to, or otherwise facilitate or encourage any
Acquisition Proposal by any other person. As used herein "Acquisition
Proposal" means any proposal for a merger, consolidation or other business
combination involving MQI or for the acquisition or purchase of any equity
interest in, or a material portion of the assets of, MQI, other than the
transactions with the Buyer and the Sellers contemplated by this
Agreement. MQI shall promptly communicate to the Buyer the terms of any
such written Acquisition Proposals which it may receive or any written
inquiries made to it or any of its directors, officers, representatives or
agents;
(G) NO AMENDMENT TO ARTICLES OF INCORPORATION. Amend its Articles of
Incorporation or merge or consolidate with or into any other corporation
or change in any manner the rights of its common stock or the character of
its business;
(H) NO ISSUANCE, SALE, OR PURCHASE OF SECURITIES. Issue or sell, or
issue options or rights to subscribe to, or enter into any contract or
commitment to issue or sell (upon conversion or otherwise), any shares of
MQI Common Stock, or subdivide or in any way
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reclassify any shares of MQI Common Stock, or acquire, or agree to
acquire, any shares of MQI Common Stock; or
(I) PROHIBITION ON DIVIDENDS. Declare or pay any dividend on shares
of MQI Common Stock or make any other distribution of assets to the
holders thereof.
6.3 TAX TREATMENT. Each of Buyer and Sellers will use their best efforts
to cause the transaction to qualify as a reorganization under the provisions of
Section 368(a) of the Code. Neither party nor any affiliate shall take any
action that would cause the transaction not to qualify as a reorganization under
Section 368(a).
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligations of
Sellers to consummate and effect the transactions contemplated hereunder shall
be subject to the satisfaction of the following conditions, or to the waiver
thereof by Sellers before the Closing Date:
(A) REPRESENTATIONS AND WARRANTIES OF THE BUYER TRUE AT CLOSING
DATE. The representations and warranties of the Buyer herein contained
shall be, in all material respects, true as of and at the Closing Date
with the same effect as though made at such date, except as affected by
transactions permitted or contemplated by this Agreement; the Buyer shall
have performed and complied, in all material respects, with all covenants
required by this Agreement to be performed or complied with by the Buyer
before the Closing Date; and the Buyer shall have delivered to the Sellers
a certificate, dated the Closing Date and signed by its president to such
effect;
(B) OPINION OF COUNSEL. The Sellers shall have received a favorable
opinion, dated the Closing Date, from Porter & Hedges, L.L.P., counsel to
the Buyer, in form and substance satisfactory to the Sellers, to the
effect that (i) Buyer has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Texas;
(ii) this Agreement and the other Transaction Documents have been duly
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 (a) equitable
principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights
of creditors generally; and (iii) the Shares have been duly authorized and
validly issued and are fully paid and non-assessable. In rendering such
opinion, such counsel may rely upon certificates of public officials and
of officers of the Buyer as to matters of fact;
(C) NO MATERIAL LITIGATION. No suit, action, or other proceeding
shall be pending, or to the Buyer's knowledge, threatened, before any
court or governmental agency in which it will be, or it is, sought to
restrain or prohibit or to obtain damages or provide other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby or which might result in a material adverse change in
the value of the consolidated assets and business of Buyer; and
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(D) CONSENT OF CERTAIN PARTIES IN PRIVITY WITH MQI OR THE SELLERS.
The holders of any material indebtedness of MQI or the Sellers, the
lessors of any material property leased by MQI or the Sellers, and the
other parties to any other material agreements to which MQI or the Sellers
are a party shall, when and to the extent necessary in the reasonable
opinion of the Sellers, have consented to the transaction contemplated
hereby.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The obligation of
the Buyer to consummate and effect the transactions contemplated hereunder shall
be subject to the satisfaction of the following conditions, or to the waiver
thereof by the Buyer before the Closing Date:
(A) REPRESENTATIONS AND WARRANTIES OF SELLERS TRUE AT CLOSING DATE.
The representations and warranties of the Sellers herein contained shall
be, in all material respects, true as of and at the Closing Date with the
same effect as though made at such date, except as affected by
transactions permitted or contemplated by this Agreement; MQI and the
Sellers shall have performed and complied in all material respects, with
all covenants required by this Agreement to be performed or complied with
by them before the Closing Date; and MQI and the Sellers each shall have
delivered to the Buyer a certificate, dated the Closing Date and signed by
each of the Sellers and by MQI's president to such effect;
(B) OPINION OF COUNSEL. The Buyer shall have received a favorable
opinion, dated the Closing Date, from Ellis, Funk, Goldberg, Labovitz &
Dokson, P.C., counsel to the Sellers, in form and substance satisfactory
to the Buyer, to the effect that (i) MQI has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Georgia, (ii) all outstanding shares of the MQI Common Stock have
been validly issued and are fully paid and nonassessable; (iii) this
Agreement and the other Transaction Documents have been duly executed and
delivered by, and are the legal, valid and binding obligation of the
Sellers and are enforceable against the Sellers in accordance with their
terms, except as the enforceability may be limited by (a) equitable
principles of general applicability or (b) bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the rights
of creditors generally; and (iv) all issued and outstanding shares of MQI
Stock are owned beneficially or of record by the Sellers. In rendering
such opinion, such counsel may rely upon certificates of public officials
and of officers of MQI or the Sellers as to matters of fact;
(C) NO MATERIAL LITIGATION. No suit, action, or other proceeding
shall be pending, or to the Sellers' knowledge, threatened, before any
court or governmental agency in which it will be, or it is, sought to
restrain or prohibit or to obtain damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated
hereby or which might result in a material adverse change in the value of
the assets and business of the MQI;
(D) CONSENT OF CERTAIN PARTIES IN PRIVITY WITH THE BUYER. The
holders of any material indebtedness of the Buyer, the lessors of any
material property leased by the Buyer, and the other parties to any other
material agreements to which the Buyer is a party shall, when and to the
extent necessary in the reasonable opinion of the Buyer, have consented to
the transactions contemplated hereby including, but not limited to, the
consent of (i) Comerica Bank-Texas, and (ii) Maxxim Medical, Inc.;
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(E) GOODWILL WRITE-OFF. Sellers shall have caused MQI to write off
the goodwill and organization cost for MQI-Florida in the amount of
$187,668, less any accumulated amortization; and
(F) CAPITALIZATION OF NOTES PAYABLE. Belcher (as transferee from the
David Belcher Irrevocable Life Insurance Trust) shall have contributed
notes payable by MQI in the amount of $250,000 to the capital of MQI, and
shall have delivered to Buyer such canceled note(s) and confirmation of
transfer in form reasonably acceptable to Buyer.
ARTICLE 8
MISCELLANEOUS
8.1 CERTAIN DEFINITIONS. As used in this Agreement, each of the following
terms has the meaning ascribed to it in this Section 8.1:
(a) "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 10% 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.
(b) "AGREEMENT" means and includes this Agreement and the schedules
and exhibits hereto.
(c) "BUSINESS LAWS" means all Laws relating to establishing, owning,
operating, managing, maintaining, improving or conducting the Business.
(d) "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 attorneys' fees.
(e) "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
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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.
(f) "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.
(g) "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, 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.
(h) "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 Environmental
Laws.
(i) "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.
(j) "MARKET PRICE" means the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market for the thirty
consecutive trading days ending two days prior to the Closing Date, as
furnished by any NASD member firm selected from time to time by the
Company for such purpose; provided, however, that the Market Price shall
never be less than $4.00 per share, nor more than $5.00 per share.
(k) "MQI STOCK" means the capital stock of Med-Quip, Inc., a Georgia
corporation, authorized by its Articles of Incorporation, as amended.
(l) "ORDINARY COURSE OF BUSINESS" means an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business"
only if: (i) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; (ii) such action is not required to be
authorized by the board of directors of such Person (or by any Person or
group of Persons exercising similar authority); and (iii) such action is
similar in nature and magnitude to actions
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customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
(m) "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.
(n) "SUBSIDIARY," with respect to any Person, shall mean any
corporation of which more than fifty percent of the outstanding voting
securities shall, as of any applicable date of determination, be owned
directly, or indirectly through one or more intermediaries, by that
Person.
8.2 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 the entire legal and beneficial ownership of the MQI
Stock, free and clear of all Encumbrances.
8.3 PUBLIC ANNOUNCEMENTS. Except as mutually agreed, neither Buyer,
Sellers 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.
8.4 EXPENSES. Each of Sellers and Buyer shall bear their own respective
legal and accounting fees. Except as otherwise explicitly provided in this
Agreement, any other costs and expenses with respect to the negotiation,
execution and delivery of this Agreement and consummation of the transactions
contemplated hereby shall be borne by the respective party incurring such costs
and expenses.
8.5 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 on
Schedule 8.5 attached hereto, 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. 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.
8.6 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 will expire on May 2, 1999, except
for the representations and warranties in Article 3, which shall survive
indefinitely.
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8.7 KNOWLEDGE, GENDER AND CERTAIN REFERENCES. Unless otherwise provided
for herein, a representation or statement made herein to the knowledge of MQI or
Sellers shall mean the actual knowledge of Sellers. Unless otherwise specified,
all references herein to days, weeks, months or years shall be to calendar days,
weeks, months or years. 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.
8.8 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 Subsidiary, but any
such assignment shall not have the effect of terminating Buyer's duties or
obligations as provided herein, including the obligation to deliver Common Stock
pursuant to Section 1.4 hereof.
8.9 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, (i) any provision of such laws that
would render invalid any provision of this Agreement, and (ii) 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.
8.10 DISPUTE RESOLUTION. Any dispute or controversy between the parties
hereto arising from or relating to this Agreement or the construction, validity,
interpretation, meaning, performance, non-performance, enforcement, operation or
breach of this Agreement shall be submitted to mediation, and if such mediation
is unsuccessful then to mandatory, final and binding arbitration. Any mediation
or arbitration under this Agreement shall take place pursuant to the following
procedures:
(a) If a dispute or controversy arises either party will request
that Judicial Arbitration and Mediation Service ("JAMS") (or similar
mediation service of a similar national scope if JAMS no longer then
exists) appoint an independent mediator, who shall serve as mediator for
all purposes hereof. The Buyer, on the one hand, and the Sellers as a
group on the other hand, shall each pay an equal proportion of the cost of
the mediator's services, in advance upon request by the mediator or any
party.
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(b) Within 10 days after appointment of the mediator, the mediator
shall schedule a meeting among the parties and the mediator for the
purpose of mediating the dispute. If the parties do not resolve the
dispute within 30 days after appointment of the mediator, the dispute
shall be resolved in arbitration.
(c) Within 15 days after the mediation, the parties shall each name
and appoint their own arbitrator. If either party fails to name and
appoint an arbitrator timely, then an arbitrator shall be appointed for
that party by the Senior United States District Judge for the United
States District Court in Houston, Texas. The two arbitrators so appointed
shall appoint a third arbitrator within 15 days, and if they cannot agree,
the appointment of the third arbitrator will he made by the Senior United
States District Judge for the United States District Court in Houston,
Texas.
(d) Each party shall bear its own arbitration fees, costs and
expenses. The arbitration hearing shall be held in Houston, Texas within
15 days of the appointment of the third arbitrator at a location
designated by a majority of the arbitrators within 10 days of the
appointment of the third arbitrator. The Commercial Arbitration Rules of
the American Arbitration Association, as supplemented hereby, shall apply
to the arbitration. The substantive laws of the State of Texas (excluding
conflict of laws provisions) shall also apply to the arbitration.
(e) The arbitration hearing shall be concluded within 10 days unless
otherwise ordered by a majority of the arbitrators, and the award thereon
shall be made within 15 days after the closing of submission of evidence.
An award rendered by a majority of the arbitrators shall be final and
binding on all parties to the proceeding and non-appealable, and judgment
on the award may be entered by any court of competent jurisdiction.
(f) The parties stipulate that the provisions of this Section 8.10
shall be a complete defense to any suit, action or proceeding instituted
in any federal, state or local court or before any administrative tribunal
with respect to any controversy or dispute arising out of this Agreement
between the parties, and the parties waive any right to have the award of
the arbitrators appealed. The arbitration provisions of this Agreement
shall, with respect to such controversy or dispute, survive the
termination or expiration of this Agreement. Should any party institute
judicial proceedings seeking to avoid the mediation or arbitration
provisions of this Agreement, or should any party in judicial proceedings
successfully contest an arbitration award rendered under this Section
8.10, the other parties shall be entitled to recover reasonable attorney's
fees, costs and expenses associated with the judicial proceedings, with
the amount of attorney's fees, costs and expenses to be determined by the
court. If a party fails to comply with the terms of an arbitration award
made under this Agreement, the other parties shall be entitled to recover
reasonable attorney's fees, costs and expenses incurred in seeking
judicial confirmation of the award, with the amount of attorney's fees,
costs and expenses to be determined by the court. Failure to comply with
the terms of an arbitration award shall include without limitation the
failure to pay the full amount due under an arbitration award within the
time specified in the arbitration award.
(g) In determining any award under this Section 8.10, the
arbitrators may award amounts for special damages, consequential damages,
incidental damages, lost profits, damages for lost business opportunity,
punitive damages or exemplary damages.
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Neither any party hereto nor the arbitrators may disclose the existence or
results of any arbitration hereunder without the prior written consent of the
other parties; nor may any party hereto disclose to any party any confidential
information disclosed by any other party hereto in the course of an arbitration
hereunder without the prior written consent of such other party.
8.11 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 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.
8.12 AMENDMENT AND ENTIRETY. This Agreement, the other Transaction
Documents, and any exhibits hereto or thereto, may be amended, modified, or
superseded only by written instrument executed by all parties hereto. This
Agreement and the other Transaction Documents set 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 the schedules or
exhibits shall control.
8.13 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.
8.14 TIME OF ESSENCE. Time is of the essence in the performance of this
Agreement.
8.15 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.
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IN WITNESS WHEREOF, this Stock Purchase Agreement is executed and
delivered on and as of the day first above written.
LASERMEDICS, INC.
/S/ MICHAEL M. BARBOUR
Michael M. Barbour,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
SELLERS:
/S/ VICKI C. BELCHER
Vicki C. Belcher
/S/ JAMES V. WARREN
James V. Warren
/S/ J. L. (SKIP) MOORE
J. L. (Skip) Moore
27
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made effective as
of May 2, 1997 by and between Lasermedics, Inc., a Texas corporation (the
"Company"), Vicki C. Belcher, James V. Warren and J. L. (Skip) Moore (each being
referred to individually as a "Seller" and collectively as the "Sellers").
WHEREAS, the Sellers are the holders of 300,000 shares (the "Shares") of
the Company's common stock, par value $.01 per share ("Common Stock"); and
WHEREAS, the Company wishes to grant the Sellers certain registration
rights with respect to the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.2 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.3 "PUBLIC OFFERING" shall mean an offering in which the Common Stock is
offered to the public whether or not through an underwriter.
1.4 THE TERMS "REGISTER," "REGISTERED," AND "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
1.5 "REGISTERABLE SECURITIES" shall mean (i) the Shares, and (ii) any
Common Stock issued or issuable at any time or from time to time with respect to
Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company until such Shares are sold pursuant to a
Registration Statement or an exemption from registration under the Securities
Act.
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1.6 "REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Agreement, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company and for the Sellers, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
1.7 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.8 "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Sellers.
1.9 "UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which
the Common Stock is offered and sold on a firm commitment basis through one or
more underwriters, all pursuant to an underwriting agreement between the Company
and such underwriters.
ARTICLE 2
REGISTRATION RIGHTS
2.1 PIGGYBACK REGISTRATION RIGHTS.
2.1.1 Subject to the terms hereof, if at any time or from time to
time prior to the second anniversary of the date hereof: (i) the Company
shall determine to register any of its securities for the purpose of
completing a Public Offering; (ii) any selling shareholders other than the
Sellers are included in such offering; and (iii) the Sellers are the
beneficial owners of any Registrable Securities; the Company will promptly
give to the Sellers written notice thereof no less than 20 days prior to
the filing of any registration statement; and include in such registration
(and any related qualification under blue sky laws or other compliance),
and in the underwriting involved therein, if any, such Registrable
Securities as any or all of the Sellers may request in a writing delivered
to the Company within 10 days after Sellers' receipt of Company's written
notice.
2.1.2 Notwithstanding anything to the contrary contained in Section
2.1.1, the Company shall not be required to include Registrable Securities
in any registration statement pursuant to this Section 2.1 if the proposed
registration is: (i) a registration of a stock option or other employee
incentive compensation plan or of securities issued or issuable pursuant
to any such plan; (ii) a registration of securities issued or issuable
pursuant to a stockholder reinvestment plan or other similar plan; (iii) a
registration of securities issued in exchange for any securities or any
assets of, or in connection with a merger or consolidation with, an
unaffiliated company; or (iv) a registration of securities pursuant to a
"rights" or other similar
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plan designed to protect the Company's shareholders from a coercive or
other attempt to take control of the Company.
2.1.3 The Sellers may participate in any number of registrations
until all of the Shares held by the Sellers have been distributed pursuant
to a registration.
2.1.4 The right of the Sellers to registration pursuant to this
Section shall be conditioned upon such Seller's participation in such
reasonable underwriting arrangements, if an Underwritten Public Offering
is being undertaken, as the Company shall make regarding the offering, and
the inclusion of Registrable Securities in the underwriting shall be
limited to the extent provided herein. The Sellers and all other
shareholders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
under writing agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section, if the managing underwriter concludes in its
reasonable judgment that the number of shares to be registered for selling
stockholders (including the Sellers) would materially adversely affect
such offering, the number of Shares to be registered, together with the
number of shares of Common Stock or other securities held by other
stockholders proposed to be registered in such offering, shall be reduced
on a pro rata basis based on the number of Shares proposed to be sold by
the Sellers as compared to the number of shares proposed to be sold by all
stockholders. If any of the Sellers disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the managing underwriter, delivered not less than ten days
before the effective date. The Registrable Securities excluded by the
managing underwriter or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred in a public
distribution prior to 270 days after the effective date of the
registration statement relating thereto, or such other shorter period of
time as the underwriters may require, provided, however, that the lock-up
shall in no event remain in effect past August 2, 1999.
2.1.5 The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness
of such registration whether or not any of the Sellers have elected to
include securities in such registration.
2.2 EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the Sellers shall be borne by the Sellers.
2.3 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep the Sellers advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense, the Company will:
2.3.1 Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable
efforts to cause such registration
3
<PAGE>
statement to become and remain effective until the distribution described
in such registration statement has been completed;
2.3.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such
underwriter may reasonably request in order to facilitate the public sale
of the shares by such underwriter, and promptly furnish to each
underwriter and the Sellers notice of any stop-order or similar notice
issued by the Commission or any state agency charged with the regulation
of securities, and notice of any Nasdaq or securities exchange listing;
and
2.3.3 Cause the Shares to be listed on the Nasdaq Stock Market's OTC
Bulletin Board and any securities exchange or market on which the Common
Stock is approved for listing.
2.4 INDEMNIFICATION.
2.4.1 To the extent permitted by law, the Company will indemnify the
Sellers, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if
any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses,
damages or liabilities (or actions with respect thereto), including any of
the foregoing incurred in settlement of any litigation, commenced or
threatened, to the extent such expenses, claims, losses, damages or
liabilities arise out of or are based on any untrue state ment (or alleged
untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other similar document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading, or any violation by the Company
of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
the Sellers, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
loss, damage, liability or action; provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability or expense if settlement is effected
without the consent of the Company (which consent shall not unreasonably
be withheld); provided, further, that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability
or expense arises out of or is based on any untrue statement or omission
or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Sellers, or such underwriter specifically for use therein or
the violation of the Securities Act or any rule or regulation promulgated
thereunder by any such person. Notwithstanding the foregoing, insofar as
the foregoing indemnity relates to any such untrue statement (or alleged
untrue statement) or omission (or
4
<PAGE>
alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus
filed with the Commission pursuant to the applicable rules of the
Commission or in any supplement or addendum thereto, the indemnity
agreement herein shall not inure to the benefit of any underwriter if a
copy of the final prospectus filed pursuant to such rules, together with
all supplements and addenda thereto, was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to the
time such furnishing is required by the Securities Act.
2.4.2 To the extent permitted by law, the Sellers will, if
securities held by the Sellers are included in the securities as to which
such registration, qualification or compliance is being effected pursuant
to terms hereof, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or
such underwriter within the meaning of Section 15 of the Securities Act,
and each other person selling the Company's securities covered by such
registration statement, each of such person's officers and directors and
each person controlling such persons within the meaning of Section 15 of
the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Sellers of any
rule or regulation promulgated under the Securities Act applicable to the
Sellers and relating to action or inaction required of the Sellers in
connection with any such registration, qualification or compliance, and
will reimburse the Company, such other persons, such directors, officers,
persons, underwriters or control persons for any legal or other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance
upon and in conformity with written information furnished to the Company
by the Sellers specifically for use therein; provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement
of any claim, loss, damage, liability or expense if settlement is effected
without the consent of the Sellers (which consent shall not be
unreasonably withheld). Notwithstanding the foregoing, the liability of
any Seller under this Section 2.4.2 shall be limited in an amount equal to
the net proceeds from the sale of the shares sold by such Seller, unless
such liability arises out of or is based on willful conduct by that
Seller. In addition, insofar as the foregoing indemnity relates to any
such untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus
filed pursuant to applicable rules of the Commission or in any supplement
or addendum thereto, the indemnity agreement herein shall not inure to the
benefit of the Company or any underwriter if a copy of the final
prospectus filed pursuant to such rules, together with all supplements and
addenda thereto, was not furnished to the person or entity
5
<PAGE>
asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act.
2.4.3 Notwithstanding the provisions of Sections 2.4.1 and 2.4.2,
each party entitled to indemnification under this Section 2.4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such
action and provided further, that the Indemnifying Party shall not assume
the defense for matters as to which there is a conflict of interest or as
to which the Indemnifying Party is asserting separate or different
defenses, which defenses are inconsistent with the defenses of the
Indemnified Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. No Indemnified Party shall consent to
entry of any judgment or enter into any settlement without the consent of
each Indemnifying Party.
2.4.4 If the indemnification provided for in this Section 2.4 is
unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and all shareholders offering securities in the offering (the
"Selling Security Holders") on the other from the offering of the
Company's securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one
hand and the Selling Security Holders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Selling
Security Holders on the other shall be the net proceeds from the offering
(before deducting expenses) received by the Company on the one hand and
the Selling Security Holders on the other. The relative fault of the
Company on the one hand and the Selling Security Holders on the other
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company or by the Selling Security Holders and the parties'
relevant intent, knowledge, access to information
6
<PAGE>
and opportunity to correct or prevent such statement or omission. The
Company and the Selling Security Holders agree that it would not be just
and equitable if contribution pursuant to this Section 2.4 were based
solely upon the number of entities from whom contribution was requested or
by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to above in this Section shall be deemed
to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim, subject to the provisions hereof. Notwithstanding the
provisions of this Section, no Selling Security Holder shall be required
to contribute any amount or make any other payments under this Agreement
which in the aggregate exceed the proceeds received by such Selling
Security Holder unless such losses, claims, damages or liabilities are
based on conduct which such Selling Security Holder actually knows to be
in controversion of the Securities Act. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
2.5 CERTAIN INFORMATION. The Sellers agree, with respect to any
Registrable Securities included in any registration, to furnish to the Company
such information regarding the Sellers, the Registrable Securities and the
distribution proposed by the Sellers as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities (used herein as defined in Rule 144 under the
Securities Act) to the public without registration, the Company agrees to use
its best lawful efforts to:
2.6.1 Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
during which the Company is subject to the reporting requirements of the
Exchange Act;
2.6.2 File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such
reporting requirements); and
2.6.3 For as long as any of the Sellers owns any Restricted
Securities (as defined in Rule 144 promulgated under the Securities Act),
furnish to those Sellers forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule
144 and with regard to the Securities Act and the Exchange Act (at all
times during which the Company is subject to such reporting requirements),
a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company and other information in
the possession of or reasonably obtainable by the Company as the Sellers
may reasonably request in availing themselves of any rule or regulation of
the Commission allowing the Sellers to sell any such securities
7
<PAGE>
without registration.
2.7 TRANSFERABILITY. The rights conferred by this Agreement shall not be
transferable to any party other than by will or through the laws of descent and
distribution. Subject to the restrictions on the transferability of the rights
contained herein, this Agreement shall be binding upon and inure to the benefit
of the heirs, legatees, legal representatives, successors and assigns of the
parties hereto.
2.8 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Texas.
2.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Sellers.
2.10 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Sellers: to each of the Sellers individually at the addresses listed on Exhibit
A hereto, or at such other address they shall have furnished to the Company in
writing, or (b) if to the Company: to Lasermedics, Inc., 120 Industrial
Boulevard, Sugar Land, Texas 77478, Attention: President, or at such other
address as the Company shall have furnished to the Sellers. Each such notice or
other communication shall for all purposes of this Agreement be treated as
effective upon receipt.
2.11 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alter native.
2.12 COUNTERPARTS. This Agreement may be executed by facsimile signature
and in any number of counterparts, each of which shall be enforceable against
the parties actually executing such counterparts, and all of which together
shall constitute one instrument.
2.13 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
8
<PAGE>
2.14 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective upon the date first set forth above.
LASERMEDICS, INC.
/S/ MICHAEL M. BARBOUR
Michael M. Barbour,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
SELLERS
/S/ VICKI C. BELCHER
Vicki C. Belcher
/S/ JAMES V. WARREN
James V. Warren
/S/ J. L. (SKIP) MOORE
J. L. (Skip) Moore
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BALANCE SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 470,127
<SECURITIES> 0
<RECEIVABLES> 6,400,828
<ALLOWANCES> 0
<INVENTORY> 5,281,320
<CURRENT-ASSETS> 12,490,435
<PP&E> 3,406,566
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,041,068
<CURRENT-LIABILITIES> 6,453,750
<BONDS> 0
0
0
<COMMON> 33,725
<OTHER-SE> 4,105,010
<TOTAL-LIABILITY-AND-EQUITY> 20,041,068
<SALES> 10,411,657
<TOTAL-REVENUES> 10,411,657
<CGS> 4,569,813
<TOTAL-COSTS> 4,569,813
<OTHER-EXPENSES> 5,010,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (507,012)
<INCOME-PRETAX> 246,877
<INCOME-TAX> 0
<INCOME-CONTINUING> 246,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,877
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
