SECOND AMENDED AND RESTATED LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
HENLEY HEALTHCARE, INC.
DATED
AS OF
MARCH 3, 2000
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS......................................................1
1.1 DEFINED TERMS....................................................1
1.2 ACCOUNTING TERMS................................................13
1.3 SINGULAR AND PLURAL.............................................14
SECTION 2. LOANS, INTEREST AND FEES........................................14
2.1 LOANS...........................................................14
2.2 BORROWING PROCEDURES............................................14
2.3 NOTES...........................................................15
2.4 INTEREST PAYMENTS...............................................15
2.5 MAXIMUM RATE....................................................17
2.6 FEES............................................................18
2.7 BASIS OF COMPUTATION............................................18
2.8 MANDATORY PREPAYMENTS...........................................19
2.9 BASIS OF PAYMENTS; APPLICATION..................................19
2.10 SALE OF COLLATERAL..............................................19
SECTION 3. SECURITY........................................................19
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.....................20
4.1 CONDITIONS TO THE DELIVERY OF THE SECOND AMENDED AND RESTATED
LOAN AGREEMENT.................................................20
4.2 CONDITIONS TO ALL DISBURSEMENTS.................................21
SECTION 5. WARRANTIES AND REPRESENTATIONS..................................22
5.1 CORPORATE EXISTENCE AND POWER...................................22
5.2 AUTHORIZATION AND APPROVALS.....................................22
5.3 VALID AND BINDING AGREEMENT.....................................23
5.4 ACTIONS, SUITS OR PROCEEDINGS...................................23
5.5 SUBSIDIARIES....................................................23
5.6 NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS..............23
5.7 ACCOUNTING PRINCIPLES...........................................23
5.8 NO ADVERSE CHANGES..............................................23
5.9 CONDITIONS PRECEDENT............................................24
5.10 TAXES...........................................................24
5.11 COMPLIANCE WITH LAWS............................................24
5.12 INDEBTEDNESS....................................................24
5.13 MATERIAL AGREEMENTS.............................................24
5.14 MARGIN STOCK....................................................24
5.15 PENSION FUNDING.................................................25
5.16 MISREPRESENTATION...............................................25
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TABLE OF CONTENTS
(Continued)
PAGE
5.17 BORROWING BASE COMPONENTS.......................................25
5.18 ASSUMED NAMES: OTHER NAMES......................................27
SECTION 6. AFFIRMATIVE COVENANTS...........................................27
6.1 FINANCIAL AND OTHER INFORMATION.................................27
6.2 INSURANCE.......................................................29
6.3 TAXES...........................................................30
6.4 MAINTAIN CORPORATION AND BUSINESS...............................30
6.5 MAINTAIN EFFECTIVE TANGIBLE NET WORTH...........................30
6.6 MAINTAIN LEVERAGE RATIO.........................................30
6.7 FIXED CHARGE COVERAGE RATIO.....................................30
6.8 CURRENT RATIO...................................................30
6.9 ERISA...........................................................30
6.10 USE OF LOAN PROCEEDS............................................31
6.11 KEY AGREEMENTS..................................................31
6.12 LOCKBOX DEPOSITS................................................31
6.13 NOTICE OF EVENTS................................................31
INTENTIONALLY OMITTED...........................................31
6.15 CERTIFICATE OF TITLE............................................31
6.16 CERTIFICATE OF GOOD STANDING AND QUALIFICATION..................32
6.17 EQUIPMENT AUDITS................................................32
6.18 REAL ESTATE AUDITS..............................................32
6.19 ADDITIONAL SECURITY.............................................32
6.20 ACHIEVE NET INCOME..............................................32
6.21 RIGHT TO RECEIVE OUTSTANDING CAPITAL STOCK IN THE BORROWER......32
6.22 REGISTRATION OF NEW OFFERING AND PROSECUTION OF THAT
REGISTRATION...................................................33
6.23 HENLEY ACQUISITION CORP.........................................33
SECTION 7. NEGATIVE COVENANTS..............................................33
7.1 CAPITAL EXPENDITURES; FDA EXPENDITURES..........................33
7.2 STOCK ACQUISITION...............................................33
7.3 LIENS AND ENCUMBRANCES..........................................33
7.4 INDEBTEDNESS....................................................33
7.5 EXTENSION OF CREDIT.............................................34
7.6 GUARANTEE OBLIGATIONS...........................................34
7.7 SUBORDINATE INDEBTEDNESS........................................34
7.8 PROPERTY TRANSFER, MERGER OR LEASE-BACK.........................34
7.9 ACQUIRE SECURITIES..............................................35
7.10 PENSION PLANS...................................................35
7.11 MISREPRESENTATION...............................................35
7.12 MARGIN STOCK...................................................35
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TABLE OF CONTENTS
(Continued)
PAGE
7.13 COMPLIANCE WITH ENVIRONMENTAL LAWS..............................35
7.14 DIVIDENDS.......................................................35
7.15 PURCHASE AGREEMENT; SUBORDINATED DEBT DOCUMENTS.................35
7.16 HENLEY ACQUISITION CORP.........................................36
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.......36
8.1 EVENTS OF DEFAULT...............................................36
8.2 REMEDIES........................................................38
8.3 APPLICATION OF PROCEEDS.........................................38
8.4 CUMULATIVE REMEDIES.............................................38
SECTION 9. MISCELLANEOUS...................................................39
9.1 INDEPENDENT RIGHTS..............................................39
9.2 COVENANT INDEPENDENCE...........................................39
9.3 WAIVERS AND AMENDMENTS..........................................39
9.4 GOVERNING LAW...................................................39
9.5 SURVIVAL OF WARRANTIES, ETC.....................................39
9.6 ATTORNEYS' FEES.................................................39
9.7 PAYMENTS ON SATURDAYS, ETC......................................39
9.8 BINDING EFFECT..................................................40
9.9 MAINTENANCE OF RECORDS..........................................40
9.10 NOTICES.........................................................40
9.11 COUNTERPARTS....................................................40
9.12 HEADINGS........................................................40
9.13 CAPITAL ADEQUACY................................................40
9.14 COSTS AND ATTORNEYS' FEES.......................................41
9.15 GENDER..........................................................42
9.16 JOINT AND SEVERAL OBLIGATIONS...................................42
9.17 SEVERABILITY OF PROVISIONS......................................42
9.18 ASSIGNMENT......................................................42
9.19 WAIVER OF JURY TRIAL............................................42
9.20 AMENDED AND RESTATED LOAN AGREEMENT; WAIVER OF DEFAULTS.........42
9.21 WAIVER OF DEFAULTS..............................................42
9.22 VERIFICATION OF BALANCE OWING...................................43
9.23 GUARANTORS' CONSENT AND RATIFICATION............................43
9.24 RELEASE AND COVENANT NOT TO SUE.................................43
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SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT is made and delivered as
of this 3rd day of March, 2000, by and between HENLEY HEALTHCARE, INC., a Texas
corporation ("Borrower"), and COMERICA BANK-TEXAS, a Texas banking association
("Bank").
WITNESSETH:
WHEREAS, the Borrower and Bank on June 30, 1997 entered into that certain
Amended and Restated Loan Agreement (herein "Original Loan Agreement"); and
WHEREAS, that Original Loan Agreement has previously been modified and
amended eleven (11) times, the last of which being the Eleventh Amendment dated
as of December 15, 1999; and
WHEREAS, the Bank and the Borrower desire to again modify and amend the
Original Loan Agreement and have elected to evidence their agreement by
restating, for a second time, and amending, for a twelfth time, the Original
Loan Agreement all as more fully provided hereinafter:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following respective meanings:
"AMC" means American Medical Corporation.
"ACCEPTABLE CREDIT INSURANCE" means credit insurance (i) issued by
an insurance company which the Bank has notified the Borrower in writing
is acceptable to the Bank and (ii) issued pursuant to a credit insurance
policy the Bank has notified the Borrower in writing is acceptable to the
Bank.
"ACCEPTABLE LETTER OF CREDIT" means a letter of credit issued by a
bank acceptable to the Bank and containing terms and conditions which are
acceptable to the Bank.
"ACCOUNTS," "CHATTEL PAPER," "DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" and "INVENTORY" shall have
the meanings assigned to them in the UCC on the date of this Agreement.
"ADDITIONAL SECURITY DOCUMENTS" shall mean, with respect to any
Guarantor, (a) a security agreement in Proper Form, in favor of the Bank
covering the Accounts, Inventory, patents and trademarks and other General
Intangibles, Documents, Equipment, Fixtures, Goods, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired of
such Guarantor, as security for such Guarantor's obligations under a
Guaranty, and (b) a deed of trust, mortgage or similar instrument in favor
of or for the benefit of the Bank covering any real property and related
improvements located thereon, whether now owned or hereinafter acquired of
such Guarantor, as security for such Guarantor's
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obligations under a Guaranty (together with a mortgagee's policy of title
insurance covering such real property in an amount acceptable to the Bank
insuring title to said real property is vested in such Guarantor subject
only to the Permitted Liens); together with all related Financing
Statements as the Bank may reasonably require.
"AGREEMENT" shall mean this Second Amended and Restated Loan
Agreement, as the same may be amended, restated and modified from time to
time.
"BANK" shall mean Comerica Bank-Texas, a Texas banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWER" shall mean Henley Healthcare, Inc., a Texas corporation.
"BORROWING AUTHORIZATION" shall mean (i) with respect to a
corporation, a certificate of the Secretary or an Assistant Secretary of a
corporation as to the resolutions of the Board of Directors of such
corporation authorizing the execution, delivery and performance of the
documents to be executed by such corporation; the incumbency and signature
of the officer of such corporation executing such documents on behalf of
such corporation, and the Organizational Documents of such corporation and
(ii) with respect to a partnership, joint venture or other non-individual
Person, such written instruments as shall be required by the Bank
authorizing the execution, delivery and performance of the documents to be
executed by such Person; the incumbency and signature of the
representative of such Person executing such documents on behalf of such
Person, and the Organizational Documents of such Person.
"BORROWING BASE" means, on any day, the sum of:
(a) EIGHTY PERCENT (80%) of the aggregate principal balance of
Eligible Accounts;
(b) EIGHTY PERCENT (80%) of the aggregate principal balance of all
Foreign Accounts which, but for the fact that they are foreign accounts,
would otherwise be Eligible Accounts but WITHOUT eliminating accounts
which are more than 90 days past the invoice date, (i) LESS, in the case
of Foreign Accounts which are subject to Acceptable Credit Insurance, the
total annual policy deductible plus any coinsurance deductible; (ii) LESS,
in the case of Foreign Accounts supported by an Acceptable Letter of
Credit, all Foreign Accounts whose Acceptable Letter of Credit will expire
within the next seven (7) days or which Acceptable Letter of Credit is
otherwise no longer enforceable; and (iii) LESS, in the case of Foreign
Accounts which are supported by credit insurance, all Foreign Accounts
which are no longer eligible for credit insurance.
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(c) EIGHTY PERCENT (80%) of AMC Eligible Accounts which are more
than 90 days and less than 120 days past the date of invoice shall be
included as Eligible Accounts; and
(d) TWENTY-SIX PERCENT (26%) of Eligible Inventory.
Notwithstanding the foregoing, in no event may the aggregate of the
Eligible Inventory component of the Borrowing Base, prior to the Cybex
Sale, exceed FIFTY PERCENT (50%) of the Borrowing Base, and after the
Cybex Sale, exceed THIRTY-FIVE PERCENT (35%) of the Borrowing Base.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
EXHIBIT A to this Agreement, completed in all appropriate respects and
executed by the chief executive officer, chief financial officer, or
treasurer of Borrower or by any other officer of Borrower designated in
writing by any of the chief executive officer, chief financial officer or
treasurer, such designation to be acceptable to Lender in its sole
discretion, and setting forth Borrower's computation of the Borrowing Base
as of the date of such certificate.
"BUSINESS DAY" shall mean a day on which the Bank is open to carry
on its normal commercial lending business.
"CAPITAL EXPENDITURES" shall mean, as to any Person and as of the
date of determination, expenditures for fixed or capital assets all
determined in accordance with GAAP.
"CASH FLOW" shall mean (without duplication), as to any Person and
for any period, the sum of (a) Net Income AND (b) the sum of (1)
depreciation, amortization, depletion, obsolescence of property, (2)
interest expense, (3) non-cash addbacks of compensatory stock issued by
the Borrower and stock issued by the Borrower in lieu of interest, all
determined in accordance with GAAP, and (4) non-financed Capital
Expenditures.
"COLLATERAL" shall mean any property of any Obligor in the
possession of the Bank, any amount in any deposit account of any Obligor
with the Bank and all of Obligors' Accounts, Chattel Paper, Documents,
Equipment, Fixtures, General Intangibles, Goods, Instruments and
Inventory, wherever located and whether now owned or hereafter acquired,
together with all replacements thereof, substitutions therefor and all
proceeds and products thereof.
"COMMITMENT AMOUNT" shall mean $5,200,000.00.
"CONTRACT RATE" shall mean, as of any date of determination, the
annual rate of interest which, pursuant to SECTION 2.4 of this Agreement
would be applicable to each of the Notes if the annual rate of interest
were determined without the Maximum Legal Rate limitation.
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"CONTRIBUTION AGREEMENT" shall mean that certain Contribution
Agreement with an effective date of June 30, 1997, by and among the
Borrower and Med-Quip, Inc. and Health Career Learning Systems, Inc., as
the same may be amended, modified, supplemented, restated and joined in
pursuant to a Joinder Agreement, from time to time.
"CURRENT ASSETS" shall mean, as of any applicable date of
determination, all cash, non-affiliated customer receivables, and United
States government securities and inventories of a Person that should be
classified as current in accordance with GAAP.
"CURRENT GUARANTORS" shall mean Garvey Company, a Minnesota
corporation, Health Career Learning Systems, Inc., a Michigan corporation,
Henley Acquisition Corp., a Texas corporation, Med-Quip, Inc., a Georgia
corporation, NCI, Inc., a Michigan corporation, and any and all of their
respective successors and assigns.
"CURRENT LIABILITIES" shall mean, as of any applicable date of
determination, all liabilities of a Person that should be classified as
current in accordance with GAAP.
"CURRENT MATURITIES OF CAPITAL LEASES" shall mean, as of any date of
determination, all current maturities of capital leases of a Person as
determined in accordance with GAAP.
"CURRENT MATURITIES OF LONG TERM DEBT" shall mean, as of any date of
determination, all current maturities of long term debt of a Person as
determined in accordance with GAAP.
"CYBEX SALE" means any sale by the Borrower of its Cybex division,
the terms and conditions of which have been approved by the Bank.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether
matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
"DISBURSEMENT DATE" shall mean each date upon which the Bank makes a
loan to the Borrower under SECTION 2.1 of this Agreement.
"EFFECTIVE TANGIBLE NET WORTH" shall mean as of any day the
consolidated Tangible Net Worth of the Borrower and its Subsidiaries as of
such day PLUS the Debt evidenced by the Subordinated Debt Documents as of
such day.
"ELIGIBLE ACCOUNTS" shall mean those Accounts of the Obligors for
which each of the warranties set forth in SECTION 5.17.1 of this Agreement
shall be true (as of any
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applicable date of determination) and which has been represented by the
Borrower to be an "ELIGIBLE ACCOUNT" on the Borrowing Base Certificate.
"ELIGIBLE INVENTORY" shall mean that Inventory of the Obligors for
which each of the warranties set forth in SECTION 5.17.2 of this Agreement
shall be true (as of any applicable date of determination) and which has
been represented by the Borrower to be an item of "ELIGIBLE INVENTORY" on
a Borrowing Base Certificate.
"ENVIRONMENTAL LAWS" shall mean all requirements imposed by any law
(including The Resource Conservation and Recovery Act and The
Comprehensive Environmental Response, Compensation, and Liability Act),
rule, regulation or order of any governmental authority in effect at the
applicable time which relate to (i) noise, (ii) pollution, protection or
clean-up of the air, surface water, ground water or land; (iii) solid,
gaseous or liquid waste generation, recycling, reclamation, treatment,
storage, disposal or transportation; (iv) exposure to Hazardous
Substances; (v) the safety or health of employees or (vi) regulation of
the manufacture, processing, distribution in commerce, use, discharge,
release, threatened release, emission or storage of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"EVENT OF DEFAULT" shall mean any of those conditions or events
listed in SECTION 8.1 of this Agreement.
"FDA EXPENDITURES" shall mean any and all costs ane expenses
(including, without limitation, expenses for travel, outside consultants
and engineers, expert witnesses, attorneys and other outside
professionals) associated with seeking approval of laser-related products
from the United States Food and Drug Administration.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of any Obligor) which have
been furnished to the Bank for the purpose of, or in connection with, this
Agreement and the transactions contemplated hereby.
"FINANCING STATEMENTS" shall mean, as to any Obligor, UCC financing
statements describing the Bank as secured party and the applicable Obligor
as debtor covering the Collateral owned by such Obligor and otherwise in
such form, for filing in such jurisdictions and with such filing offices
as the Bank shall reasonably deem necessary or advisable.
"FIRST PORTION" shall mean the Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00) capital injection described in clause (i)
of Section 4.1.10 hereof.
"FOREIGN ACCOUNTS" means accounts receivable the full payment and
performance of which are governed or subject to an Acceptable Letter of
Credit or Acceptable Credit Insurance.
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"GAAP" shall mean those principles and practices (a) which are
recognized as such by the Financial Accounting Standards Board, (b) which
are applied for all periods after the date hereof in a manner consistent
with the manner in which such principles and practices were applied to the
most recent audited financial statements of the relevant Person furnished
to the Bank, and (c) which are consistently applied for all periods after
the date hereof so as to reflect properly the financial condition, and
results of operations and changes in financial position, of such Person.
If any change in any accounting principle or practice is required by the
Financial Accounting Standards Board in order for such principle or
practice to continue as a GAAP or practice, all reports and financial
statements required hereunder may be prepared in accordance with such
change only after written notice of such change is given to the Bank.
"GUARANTIES" shall mean that certain Master Guaranty dated June 30,
1997 herewith in favor of the Bank, by Med-Quip, Inc. and Health Career
Learning Systems, Inc., as amended, supplemented, modified, joined in
pursuant to a Joinder Agreement and restated from time to time, and each
and every other guaranty executed from time to time in respect of this
Agreement.
"GUARANTORS" shall mean each and every Person executing a guaranty
from time to time guaranteeing the Indebtedness of the Borrower owing from
time to time to the Bank pursuant to this Agreement or the Notes,
including the Current Guarantors.
"HCLS" means Health Career Learning Systems, Inc.
"HAZARDOUS SUBSTANCE" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other material
which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum, and
polychlorinated biphenyls.
"HOME CARE RECEIVABLES" shall mean those Eligible Accounts arising
in connection with the sale, lease or other form of rental of Inventory of
the Borrower to or for use by home facility patients and users, including,
without limitation, the Medicare Receivables.
"INDEBTEDNESS" shall mean all loans, advances and indebtedness of
the Borrower to the Bank under this Agreement, all Letter of Credit
Liabilities, and all other indebtedness, obligations and liabilities
whatsoever of the Borrower to the Bank, whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent,
joint or several, due or to become due, now existing or hereafter arising
pursuant to the Loan Documents.
"JOINDER AGREEMENT" shall mean that certain Joinder Agreement of
even date herewith executed by Garvey Company, Henley Acquisition Corp.
and NCI, Inc.
"KEY AGREEMENTS" shall mean any contracts or agreements between the
Borrower and customers of the Borrower under which or pursuant to which
the Borrower is reasonably
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expected to derive five percent (5%) or more of its gross revenues during
any 12-month period, and any and all renewals, extensions and
modifications thereof.
"LIEN" means any mortgage, pledge collateral assignment or other
lien or restriction of any kind, whether based on common law,
constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions.
"LOAN DOCUMENTS" shall mean any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to
all or any part of the Indebtedness, including, without limitation, the
Notes, this Agreement, the Security Documents, all instruments,
certificates and agreements now or hereafter executed or delivered to the
Bank pursuant to any of the foregoing or in connection with the Loans or
any commitment regarding the Loans and all amendments, modifications,
renewals, extensions, increases and rearrangements of, and substitutions
for, any of the foregoing.
"LOANS" shall mean the Revolving Loans, Term Loan A, Term Loan B and
Term Loan C, and "LOAN" shall mean all or any one of the Loans.
"LOCKBOX" shall mean, collectively, post office boxes established by
one or more Obligors with the Bank to which all payments by the Obligors'
Account debtors are to be made.
"LOCKBOX AGREEMENT" shall mean collectively, any and all agreements
between the Borrower and the Bank establishing the Lockbox, as the same
may be amended, restated, replaced, substituted for or supplemented from
time to time.
"MAXIMUM AVAILABLE AMOUNT" shall mean the lesser of (1) the
Commitment Amount and (2) the Borrowing Base.
"MAXIMUM LEGAL RATE" shall have the meaning set forth in SECTION 2.5
of this Agreement.
"MAXXIM" shall mean Maxxim Medical, Inc., a Delaware corporation.
"MEDICARE RECEIVABLES" shall mean those Eligible Accounts of which
the Account debtor is a governmental authority or any agency thereof and
which are governed by the United States Social Security Act, as amended,
and/or the Texas Human Resources Act, as amended, and which such Eligible
Accounts are not subject to the Federal Assignment of Claims Act or of a
type which applicable federal or Texas law prohibits the taking of a
security interest therein.
"MORTGAGE" shall mean the Deed of Trust and Security Agreement dated
as of April 30, 1996, executed by the Borrower in favor of Gary W. Orr,
Trustee for the benefit of the Bank, as the same may from time to time be
amended, modified, restated or
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supplemented, including as supplemented pursuant to that certain
Supplemental Deed of Trust and Security Agreement dated as of June 30,
1997.
"NET INCOME" shall mean, for any Person and as of any date of
determination, gross revenues and other proper income credits, less all
proper income charges, including taxes on income, all determined in
accordance with GAAP.
"NET PROCEEDS" means, (i) in the case of the Term Note A Selected
Collateral, cash proceeds remaining after the Term Note A Selected
Collateral has been sold and Term Note A has been paid in full; (ii) in
the case of the Term Note B Selected Collateral, cash proceeds remaining
after the Term Note A Selected Collateral has been sold and Term Note B
has been paid in full; and (iii) in the case of the Term Note C Selected
Collateral, cash proceeds remaining after the Term Note C Selected
Collateral has been sold and Term Note C has been paid in full.
"NOTES" shall mean the Revolving Notes, Term Note A, Term Note B,
Term Note C and "NOTE" shall mean all or any one of the Notes.
"OBLIGORS" shall mean the Borrower and all of its Guarantors, and
"OBLIGOR" shall mean any one of them.
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a
corporation, the certificate of incorporation, articles of incorporation
and bylaws of such corporation; with respect to a partnership, the
partnership agreement establishing such partnership; with respect to a
joint venture, the joint venture agreement establishing such joint
venture, and with respect to a trust, the instrument establishing such
trust; in each case including any and all modifications thereof as of the
date of the Loan Document referring to such Organizational Document and
any and all future modifications thereof which are consented to by the
Bank.
"OVER FORMULA" means the amount that the principal balance on the
Revolving Note exceeds the Borrowing Base.
"OVER FORMULA ALLOWANCE" means:
(a) $1,500,000.00 through April 30, 2000;
(b) $1,400,000 from May 1, 2000 through May 31, 2000;
(c) $1,300,000 from June 1, 2000 through June 30, 2000;
(d) $1,200,000 from July 1, 2000 through July 31, 2000;
(e) $1,100,000 from August 1, 2000 through August 31, 2000;
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(f) $1,000,000 from September 1, 2000 through September 30, 2000;
(g) $900,000 from October 1, 2000 through October 31, 2000;
(h) $800,000 from November 1, 2000 through the Revolving Note
Maturity Date.
Notwithstanding the foregoing, the Over Formula Allowance shall not
apply. and the Borrower has no right to be Over Formula, after the closing
of the Cybex Sale.
"PAST DUE RATE" shall mean the Maximum Legal Rate on such day.
"PATENT SECURITY AGREEMENT" shall mean, collectively, that certain
Patent Security Agreement dated as of April 30, 1996, executed by the
Borrower and the Bank, and all additional Patent security agreements
executed by the Borrower or any other Obligor as security for the
Indebtedness and all related recordation form cover sheets and any and all
amendments, modifications, renewals, extensions and supplements thereof or
thereto from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
person succeeding to the present powers and functions of the Pension
Benefit Guaranty Corporation.
"PERMITTED INVESTMENTS" shall mean:
(a) expense accounts for and other advances to directors, officers
and employees in the ordinary course of business up to an aggregate amount
of $25,000 outstanding at any time;
(b) marketable obligations issued or unconditionally guaranteed by
the United States Government or issued by any of its agencies and backed
by the full faith and credit of the United States of America, in each case
maturing within one year from the date of acquisition (and investments in
mutual funds investing primarily in those obligations);
(c) short-term investment grade domestic and eurodollar certificates
of deposit or time deposits that are fully insured by the Federal Deposit
Insurance Corporation or are issued by commercial banks whether domestic
or foreign having combined capital, surplus, and undivided profits of not
less than $100,000,000 (as shown on its most recently published statement
of condition);
(d) commercial paper and similar obligations rated "P-1" or better
by Moody's Investors Service, Inc., or "A-1" or better by Standard & Poors
Corporation;
(e) readily marketable tax-free municipal bonds of a domestic issuer
rated "AAA" or better by Moody's Investors Service, Inc., or "AAA" or
better by Standard & Poors
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Corporation, and maturing within one year from the date of issuance (and
investments in mutual funds investing primarily in those bonds);
(f) readily marketable shares of any money market fund having total
assets in excess of $250,000,000, unless the Bank has disapproved such
fund in writing;
(g) demand deposit accounts maintained in the ordinary course of
business; and
(h) extensions of credit in connection with trade receivables and
overpayments of trade payables, in each case resulting from transactions
in the ordinary course of business;
"PERMITTED LIENS" shall mean:
(a) Liens and encumbrances in favor of the Bank;
(b) Liens for taxes, assessments or other governmental charges
incurred in the ordinary course of business and not yet past due or being
contested in good faith by appropriate proceedings and, if requested by
the Bank, bonded in a manner satisfactory to the Bank;
(c) Liens not delinquent created by statute in connection with
worker's compensation, unemployment insurance, social security and similar
statutory obligations;
(d) Liens of mechanics, materialmen, carriers, warehousemen or other
like statutory or common law liens securing obligations incurred in good
faith in the ordinary course of business that are not yet due and payable;
(e) Encumbrances consisting of zoning restrictions, rights-of-way,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property by any Obligor in the
operation of the business for which it is used and none of which is
violated in any material respect by any existing or proposed structure or
land use;
(f) the Subordinated Liens; and
(g) Existing liens described in SCHEDULE 5.6 attached hereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock
company, government, municipality, political subdivision or agency or
other entity.
"PRIME RATE" shall mean that annual rate of interest designated and
announced by the Bank as its prime rate and which is changed by the Bank
from time to time. The Prime Rate may not necessarily be the lowest rate
charged by the Bank.
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"PROPER FORM" shall mean in form and substance acceptable to the
Bank, in the exercise of its sole but reasonable judgment.
"PURCHASE AGREEMENT" shall mean that certain Agreement of Purchase
and Sale of Assets dated as of April 30, 1996, executed by and between the
Borrower and Maxxim.
"REVOLVING LOAN" shall mean an advance made by the Bank to the
Borrower under SECTION 2.1 of this Agreement on a Disbursement Date.
"REVOLVING NOTE" shall mean a promissory note, in the original
principal sum of $9,000,000, dated as of May 29, 1998, a true and correct
copy of which is attached as EXHIBIT B to this Agreement, and any and all
renewals, extensions, modifications, rearrangements and/or replacements
thereof.
"REVOLVING NOTE MATURITY DATE" shall mean April 1, 2002, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof.
"SECOND PORTION" shall mean the One Million Dollar ($1,000,000)
capital injection described in Clause (ii) of Section 4.1.10 hereof.
"SECURITIES OFFERING" shall mean any offering or issuance of a
"security" (as that term is defined in the Securities Act of 1933),
whether or not subject or required to be registered with the Securities
and Exchange Commission or any other governmental authority or agency
thereof.
"SECURITY DOCUMENTS" shall mean (a) one or more security agreements
executed by the Obligors in favor of the Bank pursuant to which each
Obligor grants to the Bank a security interest in the Accounts, Chattel
Paper, Documents, Equipment, Fixtures, General Intangibles, Goods,
Instruments and Inventory, wherever located and whether now owned or
hereafter acquired, of such Obligor, and securing such Obligor's
obligations for the indebtedness arising either as a maker (in the case of
the Borrower) or as a Guarantor (in the case of a Guarantor), together
with all replacements thereof, substitutions therefor and all proceeds and
products thereof, (b) the Financing Statements, (c) the Mortgage, (d) the
Title Insurance Policy, (e) the Lockbox Agreement and any and all other
documentation reasonably required by Bank to establish a Lockbox with Bank
any and all other security agreements, assignments, collateral
assignments, pledges, mortgages, deeds of trust and guaranties from time
to time securing the Indebtedness or any thereof, (f) the Trademark
Security Agreements, (g) the Patent Security Agreements, (h) the
Subordination Agreement, (i) the Additional Security Agreements, (j) the
Guaranties, (k) the Joinder Agreements, and (l) any and all renewals,
extensions, amendments, modifications, replacements, supplements,
substitutions and rearrangements thereof, thereto or therefor.
"SUBORDINATED DEBT DOCUMENTS" shall mean the Subordinated Note, the
Subordinated Security Agreement, the Subordinated Financing Statement and
any and all other documents, instruments, and any and all other papers now
or hereafter governing,
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evidencing, guaranteeing or securing or otherwise relating to all or any
part of the indebtedness evidenced by the Subordinated Note, and all
amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing permitted
herein or in the Subordination Agreement.
"SUBORDINATED FINANCING STATEMENT" shall mean UCC financing
statements describing Maxxim as secured party and the Borrower as debtor
covering the property described in the Subordinated Security Agreement and
otherwise.
"SUBORDINATED LIENS" shall mean the Liens arising pursuant to the
Subordinated Security Agreement and expressly made subordinate to the
Liens of the Bank in and to the Collateral pursuant to the Subordination
Agreement.
"SUBORDINATED NOTE" shall mean, collectively, that certain
Subordinated Convertible Promissory Note in the original principal sum of
$7,000,000 dated as of April 30, 1996, executed by the Borrower, payable
to the order of Maxxim, with a final stated maturity of March 1, 2003,
together with the "Substitute Note" (as that term is defined in the
Purchase Agreement),as the same may be amended, restated and modified from
time to time.
"SUBORDINATED SECURITY AGREEMENT" shall mean that certain Commercial
Security Agreement dated as of April 30, 1996, executed by the Borrower,
as debtor, and Maxxim, as secured party, covering all or a portion of the
Collateral.
"SUBORDINATION AGREEMENT" shall mean that certain Subordination
Agreement by and among the Borrower, the Bank and Maxxim, as the same may
be amended, restated and modified from time to time.
"SUBSIDIARIES" shall mean any corporation of which more than fifty
percent (50%) of the outstanding voting securities shall, as of any
applicable date of determination, be owned directly, or indirectly through
one or more intermediaries, by the Borrower.
"TANGIBLE NET WORTH" shall mean, for any Person and as of any
applicable date of determination, tangible net worth of a Person as
determined in accordance with GAAP.
"TERM LOAN A" shall mean the loan described in SECTION 2.1.2 hereof.
"TERM NOTE A" shall mean a promissory note, in the original
principal sum of $1,430,000, dated as of September 30, 1997, a true and
correct copy of which is attached hereto as EXHIBIT C to this Agreement,
and any and all renewals, extensions, modifications, rearrangements and/or
replacements thereof.
"TERM NOTE A MATURITY DATE" shall mean September 30, 2002, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof.
"TERM LOAN B" shall mean the loan described in SECTION 2.1.3 hereof.
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"TERM NOTE B" shall mean a promissory note, in the original
principal sum of $1,616,000, dated as of April 30, 1996, a true and
correct copy of which is attached hereto as EXHIBIT D to this Agreement,
and any and all renewals, extensions, modifications, rearrangements and/or
replacements thereof.
"TERM NOTE B MATURITY DATE" shall mean April 30, 2011, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof or SECTION 2.4.4 hereof.
"TERM NOTE C" shall mean a promissory note, in the original
principal sum of $1,260,000, dated as of February 12, 1998, a true and
correct copy of which is attached hereto as EXHIBIT E and any and all
renewals, extensions, modifications, rearrangements and/or replacements
thereof.
"TERM NOTE C MATURITY DATE" shall mean February 12, 2013, or such
earlier date as may be designated by the Bank pursuant to SECTION 8.2
hereof or SECTION 2.4.4 hereof.
"TITLE INSURANCE POLICY" shall mean the policy of title insurance in
a face amounts reasonably satisfactory to the Bank, issued in favor of the
Bank by a title insurance Obligor satisfactory to the Bank and insuring
that title to the property covered by the Mortgage is vested in the
Borrower free and clear of any lien, security interest or any other
objection, exception or requirement other than those permitted hereunder,
and that the Mortgage creates a valid first and prior lien on all such
property, subject only to such exceptions as may be approved in writing by
the Bank. The Title Insurance Policy shall contain a complete and accurate
description of the Mortgage, shall specify the recording and filing
information applicable to it and shall describe the property covered by
the Mortgage identically to the description thereof in the Mortgage.
"TRADEMARK SECURITY AGREEMENT" shall mean, collectively, that
certain Trademark Security Agreement dated as of April 30, 1996, executed
by the Borrower and the Bank, and all additional Trademark security
agreements executed by Borrower or any other Obligor as security for the
Indebtedness and all related recordation form cover sheets and all and all
amendments, modification, renewals, extensions and supplements thereof or
thereto from time to time.
"TERM NOTE A SELECTED COLLATERAL" means all machinery and equipment
owned by the Borrower located at the Belton, Texas plant.
"TERM NOTE B SELECTED COLLATERAL" means the real estate and
improvements located at 140 Industrial Boulevard, Sugar Land, Texas.
"TERM NOTE C SELECTED COLLATERAL" means the real property and
improvements thereon located at 2121 Industrial Park Road, Belton, Texas
and at 120 Industrial Boulevard, Sugar Land, Texas.
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"UCC" shall mean the Uniform Commercial Code as in effect in the
State of Texas and as amended from time to time.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP.
1.3 SINGULAR AND PLURAL. Where the context herein requires, the singular
number shall be deemed to include the plural, and vice versa.
SECTION 2. LOANS, INTEREST AND FEES.
2.1 LOANS.
2.1.1 REVOLVING LOANS. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank agrees to make loans to
the Borrower on a revolving basis of such amount as the Borrower shall
request pursuant to SECTION 2.2 of this Agreement at any time from the
date of this Agreement until (but not including) the Revolving Note
Maturity Date, up to an aggregate principal amount outstanding at any time
not to exceed the difference of the Maximum Available Amount then in
effect MINUS the Letter of Credit Liabilities as of such time, provided
that each Disbursement Date for the Revolving Loan under this Agreement
must be a Business Day.
2.1.2 TERM LOAN A. The Bank has previously made and fully funded a
loan to the Borrower in the form of Term Note A.
2.1.3 TERM LOAN B. The Bank has previously made and fully funded a
loan to the Borrower in the form of Term Note B.
2.1.4 TERM LOAN C. The Bank has previously made and fully funded a
loan to the Borrower in the form of Term Note C.
2.2 BORROWING PROCEDURES.
2.2.1 NOTICE. The Borrower shall give the Bank notice of the
Borrower's desire for a Revolving Loan by 2:00 p.m. (Houston, Texas time)
on the day of the requested Revolving Loan. Such notice shall be in
writing from an officer of the Borrower to the Bank and in form and
substance acceptable to the Bank. Such notice shall specify the proposed
Disbursement Date and the principal amount of the proposed Revolving Loan.
2.2.2 BANK OBLIGATIONS. The Bank agrees to make the Revolving Loan
on the Disbursement Date as set forth in a notice to the Bank from the
Borrower conforming to the requirements of SECTION 2.2.1 by crediting the
Borrower's general deposit account with the Bank in the amount of such
Revolving Loan, provided, however, that the Bank shall not be so obligated
if:
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(a) Any of the conditions precedent set forth in SECTION 4 of
this Agreement shall not have been satisfied or waived by the Bank
in accordance with SECTION 9.3 of this Agreement; or
(b) Such proposed Revolving Loan would cause the aggregate
unpaid principal amount of the Revolving Loans outstanding under
this Agreement to exceed the lesser of the Commitment Amount or the
Borrowing Base, on the Disbursement Date.
2.3 NOTES.
2.3.1 REVOLVING NOTE. The Revolving Loans shall be evidenced by the
Revolving Note, executed by the Borrower, dated the date of this
Agreement, payable to the Bank on the Revolving Note Maturity Date (unless
sooner accelerated pursuant to the term of this Agreement), and in the
principal amount of the original Commitment Amount. The date and amount of
each Revolving Loan made by the Bank and of each repayment of principal
thereon received by the Bank shall be recorded by the Bank in its records
or, at the option of the Bank, on a schedule attached to the Note. The
aggregate unpaid principal amount so recorded by the Bank shall constitute
the best evidence of the principal amount owing and unpaid on the Note,
PROVIDED, HOWEVER, that the failure by the Bank so to record any such
amount or any error in so recording any such amount (whether on the
schedule attached to the Revolving Note or otherwise) shall not limit or
otherwise affect the obligations of the Borrower under this Agreement or
the Revolving Note to repay the principal amount of all the Revolving
Loans together with all interest accrued or accruing thereon.
2.3.2 TERM NOTE A. Term Loan A is evidenced by Term Note A.
2.3.3 TERM NOTE B. Term Loan B is evidenced by Term Note B.
2.3.4 TERM NOTE C. Term Loan C is evidenced by Term Note C.
2.4 INTEREST PAYMENTS.
2.4.1 REVOLVING NOTE. Subject to the provisions of SECTION 2.5
below, and commencing March 3, 2000, and until the Revolving Note Maturity
Date, the Revolving Note shall bear interest on the outstanding principal
balance from time to time outstanding at a rate equal to the lesser of (a)
the Maximum Legal Rate, or (b) the Prime Rate in effect from time to time
plus one and one-half of one percent (1 1/2%) per annum until the
Revolving Note Maturity Date, and after the Revolving Loan Maturity Date,
at the Past Due Rate. Interest shall be payable to the extent then accrued
on the first day of each week, beginning May 1, 2000, until the Revolving
Note Maturity Date and from and after such maturity on demand. Without
notice to the Borrower or any other Person, the rate of interest
applicable to the Revolving Credit Note will change as and when the Prime
Rate changes.
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2.4.2 TERM NOTE A. Subject to the provisions of SECTION 2.5 below,
Term Note A shall bear interest on the outstanding principal balance from
and after May 1, 2000 and from time to time outstanding, under Term Note A
at a rate equal to the lesser of (a) the Maximum Legal Rate, or (b) the
Prime Rate plus one and one-half percent (1 1/2%) per annum until the Term
Note A Maturity Date, and after the Term Note A Maturity Date, at the Past
Due rate. Term Note A shall continue to be payable in monthly installments
of $23,833.00 each, beginning March 1, 2000 and payable on the first day
of each succeeding calendar month thereafter until Term Note A (including
all accrued interest thereon) has been fully paid and satisfied; provided,
that on the Term Note A Maturity Date, all principal of Term Note A and
all accrued unpaid interest thereon shall be finally due and payable.
Accrued interest on Term Note A shall be due and payable concurrently with
and in addition to the principal installments provided for herein above.
Without notice to the Borrower, or any other Person, the rate of interest
applicable to Term Note A shall change as and when the Prime Rate changes.
2.4.3 TERM NOTE B. Subject to the provisions of SECTION 2.5 below,
Term Note B shall bear interest on the outstanding principal balance from
and after May 1, 2000 and from time to time outstanding, under Term Note B
at a rate equal to the lesser of (a) the Maximum Legal Rate, or (b) the
Prime Rate plus one and one-half percent (1 1/2%) per annum until the Term
Note B Maturity Date, and after the Term Note B Maturity Date, at the Past
Due rate. Term Note B shall continue to be payable in monthly installments
of $7,000.00 each, beginning March 1, 2000 and payable on the first day of
each succeeding calendar month beginning March 1, 2000 until Term Note B
(including all accrued interest thereon) has been fully paid and
satisfied; provided, that on the Term Note B Maturity Date, all principal
of Term Note B and all accrued unpaid interest thereon shall be finally
due and payable. Accrued interest on Term Note B shall be due and payable
concurrently with and in addition to the principal installments provided
for herein above. Without notice to the Borrower, or any other Person, the
rate of interest applicable to Term Note B shall change as and when the
Prime Rate changes.
2.4.4 TERM NOTE B ANNUAL CALL PROVISIONS. Notwithstanding anything
contained in this Agreement. Term Note B or any of the Loan Documents (and
without limiting any other provision contained in any of them for the
acceleration of the maturity of Term Note B), beginning with April 1,
2002, and with respect to each April 1st occurring thereafter, the Bank,
in its sole and absolute discretion, with or without cause, may elect to
accelerate the final stated maturity of Term Note B to any such April 1st
date by giving written notice to the Borrower of such election no later
than 30 days prior to the applicable anniversary date.
2.4.5 TERM NOTE C. Subject to the provisions of SECTION 2.5 below,
Term Note C shall bear interest on the outstanding principal balance from
and after May 1, 2000 and from time to time outstanding, under Term Note C
at a rate equal to the lesser of (a) the Maximum Legal Rate, or (b) the
Prime Rate plus one and one-half percent (1 1/2%) per annum until the Term
Note C Maturity Date, and after the Term Note C Maturity Date, at the Past
Due rate. Term Note C shall continue to be payable in monthly installments
of
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$8,977.78 each, beginning March 1, 2000 and payable on the first day of
each succeeding calendar month beginning March 1, 2000 until Term Note C
(including all accrued interest thereon) has been fully paid and
satisfied; provided, that on the Term Note C Maturity Date, all principal
of Term Note C and all accrued unpaid interest thereon shall be finally
due and payable. Accrued interest on Term Note C shall be due and payable
concurrently with and in addition to the principal installments provided
for herein above. Without notice to the Borrower, or any other Person, the
rate of interest applicable to Term Note C shall change as and when the
Prime Rate changes.
2.4.6 TERM NOTE C ANNUAL CALL PROVISIONS. Notwithstanding anything
contained in this Agreement, Term Note C or any of the Loan Documents (and
without limiting any other provision contained in any of them for the
acceleration of the maturity of Term Note C), beginning with February 12,
2003, and with respect to each February 12, and occurring thereafter, the
Bank, in its sole and absolute discretion, with or without cause, may
elect to accelerate the final stated maturity of Term Note C to any such
February 12 date by giving written notice to the Borrower of such election
no later than 30 days prior to the applicable anniversary date.
2.5 MAXIMUM RATE. The following provisions shall control this Agreement
and the Notes:
(a) No agreements, conditions, provision or stipulations contained
in this Agreement, any Note, any of the other Loan Documents or in any
other agreement between the Borrower and the Bank, or the occurrence of an
Event of Default, or the exercise by the Bank of the right to accelerate
the payment of the maturity of principal and interest, or to exercise any
option whatsoever contained in this Agreement or any other agreement
between the Borrower and the Bank, or the arising of any contingency
whatsoever, shall entitle the Bank to collect, in any event, interest
exceeding the maximum rate of nonusurious interest allowed from time to
time by applicable state or federal laws as now or as may hereinafter be
in effect (the "MAXIMUM LEGAL RATE") and in no event shall the Borrower be
obligated to pay interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel any Obligor to
pay a rate of interest exceeding the Maximum Legal Rate shall be without
binding force or effect, at law or in equity, to the extent only of the
excess of interest over such Maximum Legal Rate. In the event any interest
is charged in excess of the Maximum Legal Rate (the "EXCESS"), the
Borrower acknowledges and stipulates that any such charge shall be the
result of an accidental and bona fide error, and such Excess shall be,
first, applied to reduce the principal of any obligations due, and,
second, returned to the Borrower, it being the intention of the parties
hereto not to enter at any time into an usurious or otherwise illegal
relationship. The parties hereto recognize that with fluctuations in the
prime commercial interest rate from time to time announced by the Bank
such an unintentional result could inadvertently occur. By the execution
of this Agreement, the Borrower covenants that (a) the credit or return of
any Excess shall constitute the acceptance by the Borrower of such Excess,
and (b) the Borrower shall not seek or pursue any other remedy, legal or
equitable, against the Bank based, in whole or in part, upon the charging
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or receiving of any interest in excess of the Maximum Legal Rate. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by the Bank, all interest at any time contracted for,
charged or received by the Bank in connection with the Borrower's
obligations shall be amortized, prorated, allocated and spread in equal
parts during the entire term of this Agreement. If at any time the rate of
interest payable hereunder shall be computed on the basis of the Maximum
Legal Rate, any subsequent reduction in the Contract Rate shall not reduce
such interest thereafter payable hereunder with respect to such Note below
the amount computed on the basis of the Maximum Legal Rate until the
aggregate amount of such interest accrued and payable under this Agreement
equals the total amount of interest which would have accrued if such
interest had been at all times computed solely on the basis of the
Contract Rate for such Note.
(b) Unless preempted by federal law, the rate of interest from time
to time in effect hereunder shall not exceed the weekly "INDICATED RATE
CEILING" from time to time in effect under Chapter 303 of the Texas
Finance Code.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the
Indebtedness which sets forth or prescribes any account, right or claims
or alleged account, right or claim of the Bank with respect to the
Borrower (or any other Obligor in respect of the Indebtedness), whether or
not any provisions of this Section is referred to therein. All such
documents and communications and all figures set forth therein shall, for
the sole purpose of computing the extent of the obligations asserted by
the Bank thereunder, be automatically recomputed by the Borrower or any
other Obligor, and by any court considering the same, to give effect to
the adjustments or credits required by this Section.
(d) If the applicable state or federal law is amended in the future
to allow a greater rate of interest to be charged under this Agreement
than is presently allowed by applicable state or federal law, then the
limitation of interest hereunder shall be increased to the maximum rate of
interest allowed by applicable state or federal law, as amended, which
increase shall be effective hereunder on the effective date of such
amendment, and all interest charges owing to the Bank by reason thereof
shall be payable upon demand.
(e) The provisions of Chapter 346 of the Texas Finance Code are
specifically declared by the parties hereto not to be applicable to this
Agreement or any of the other agreements executed in connection herewith
or therewith or to the transactions contemplated hereby or thereby.
2.6 FEES.
2.6.1 PREPARATION FEES. Simultaneously with the execution of this
Agreement, the Borrower shall pay to the Bank the amount of the Bank's
expenses (including attorney's fees and disbursements) incurred by the
Bank in connection with the preparation of this Agreement and the other
Loan Documents.
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2.6.2 EXTENSION FEE. The Borrower agrees to pay the Bank upon the
execution hereof an Extension Fee in the amount of $10,000.00 and to pay
to the Bank, upon the execution hereof, the prior Extension Fee of
$7,500.00.
2.7 BASIS OF COMPUTATION. The amount of all accrued interest and fees
hereunder and under the Notes shall be computed for the actual number of days
elapsed in a year consisting of 360 days, unless the Ceiling Rate would thereby
be exceeded, in which event, to the extent necessary to avoid exceeding the
Ceiling Rate, interest shall be computed on the basis of the actual number of
days elapsed in the applicable calendar year in which accrued.
2.8 MANDATORY PREPAYMENTS. The Borrower shall pay to the Bank the amount,
if any, by which the aggregate on paid principal amount of all Revolving Loans
from time to time exceeds the Borrowing Base (plus any applicable Over Formula
Allowance), together with all interest accrued and unpaid on the amount of such
excess, but without other premium or penalty. Such prepayments shall be
immediately due and payable upon the occurrence of any such excess. The Borrower
shall also pay to the Bank upon receipt all Net Proceeds for application to the
Revolving Credit Note in the manner described in SECTION 2.10
2.9 BASIS OF PAYMENTS; APPLICATION. All sums payable by the Borrower to
the Bank under this agreement shall be paid directly to the Bank at its
principal office in immediately available funds, without set-off, deduction or
counterclaim. All payments and prepayments shall be applied first to interest,
the balance to principal.
2.10 SALE OF COLLATERAL. Other than the sale of inventory, made in the
ordinary course of the Borrower's business, the Borrower shall seek the written
approval of the Bank for the sale of Collateral. The Borrower has advised the
Bank that it intends to sell certain of its assets. Such request shall include a
detailed explanation of the proposed terms of such sale. All Net Proceeds
arising from the sale of such items of Collateral shall be applied to the
Revolving Credit Note and represent a permanent reduction in the Commitment
Amount. Provided, however, when the Revolving Credit Note has been reduced to
$2,500,000, all future Net Proceeds shall continue to be applied to the
Revolving Credit Note, but will no longer represent permanent reductions in the
Commitment Amount. While the Bank reserves the right to review and approve the
exact terms of any sale, the Bank is willing to favorably consider any sale of
the Cybex Division that is a cash sale which results in net cash proceeds
received by the Bank of at least $4,000,000.00 provided the proceeds are
received by not later than November 1, 2000. Any such sale may include the Term
Note A Selected Collateral. Additionally the Bank understands that the Borrower
intends to offer for sale certain real property it owns. The mere offering for
sale of such property shall not constitute a Default hereunder. However, the
Bank reserves the right to approve the terms and conditions of any sale.
SECTION 3. SECURITY.
To secure full and timely performance of the Borrower's covenants set out
in this Agreement and to secure the repayment of the Notes and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower agrees to (and
agrees to cause each other Obligor to) grant and assign a lien
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upon and security interest in the Collateral pursuant to the Security Documents
and other instruments and agreements satisfactory to the Bank.
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
4.1 CONDITIONS TO THE DELIVERY OF THE SECOND AMENDED AND RESTATED LOAN
AGREEMENT. The obligations of the Bank under this Agreement are subject to the
occurrence, prior to or on the delivery date of the Second Amended and Restated
Loan Agreement of each of the following conditions, any or all of which may be
waived in whole or in part by the Bank in writing:
4.1.1 DOCUMENTS EXECUTED AND FILED. The Borrower and the Current
Guarantors (as applicable) shall have executed (or caused to be executed)
and delivered to the Bank, the following, all in form satisfactory to the
Bank:
(a) Either an acceptable ratification of the prior
Contribution Agreement, or a new Contribution Agreement.
(b) Either a confirmation of the prior Guaranty or an
acceptable Guaranty Agreement from the Current Guarantors.
(c) A legal opinion of Porter & Hedges, L.L.P., counsel for
the Obligors, in Proper Form; and
(d) Such other documents as counsel for the Bank shall
reasonably require.
4.1.2 BORROWING AUTHORIZATIONS. The Borrower shall have furnished to
the Bank a copy of resolutions of the Borrowing Authorizations for the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of this Agreement, the borrowing hereunder, and the other Loan
Documents being delivered contemporaneously herewith, which shall have
been certified by the Secretary or Assistant Secretary of the Borrower as
of the Disbursement Date first occurring.
4.1.3 CERTIFIED ARTICLES AND BYLAWS. The Borrower shall have
furnished to the Bank a copy of the Organizational Documents of each of
the Obligors.
4.1.4 CERTIFICATES OF EXISTENCE, GOOD STANDING AND QUALIFICATION.
The Borrower shall have furnished to the Bank a certificate of existence
and good standing with respect to the Borrower, which shall have been
certified by the state agencies issuing the same as of a date reasonably
near the Disbursement Date first occurring.
4.1.5 UCC, PATENT AND TRADEMARK LIEN SEARCHES. Should the Bank
elect, the Bank shall have received (a) UCC, record and copy search,
disclosing no notice of any liens or encumbrances filed against any of the
Collateral in any relevant jurisdiction other than as relate to Permitted
Liens (but exclusive of the Subordinated Liens). In addition, should the
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Bank elect, the Bank shall receive searches of the records of the United
States Patent & Trademark Office reflecting title to the patents and
trademarks covered by the Patent Security Agreement and the Trademark
Security Agreement is in the Borrower (or, where an express assignment of
such patents and trademarks pursuant to the Asset Purchase Agreement, in
Maxxim) and disclosing no notice of any liens or encumbrances filed
against any of such Collateral in any relevant jurisdiction other than the
Patent Security Agreement, the Trademark Security Agreement and other than
as relate to Permitted Liens.
4.1.6 HAZARD INSURANCE. The Borrower shall have furnished to the
Bank, in form and amounts and with companies satisfactory to the Bank,
evidence of hazard insurance policies naming the Bank as "loss/payee", and
relating to the assets and properties (including, but not limited to, the
Collateral) of the Borrower.
4.1.7 SUBORDINATED DEBT DOCUMENTS. The Bank shall have received a
fully executed copy of the Fourth Amendment to the Subordinated Debt
Documents, together with all schedules, annexes and other attachments
contemplated therein, and shall have received evidence satisfactory to the
Bank that the transactions contemplated therein have been consummated.
4.1.8 APPROVAL OF BANK COUNSEL. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been satisfactory to and approved by Winstead
Sechrest & Minick P.C., legal counsel for the Bank.
4.1.9 FINANCIAL STATEMENTS. The Borrower shall have furnished to the
Bank consolidated (if applicable) annual audited financial statements for
the Borrower for the most recently ended fiscal year.
4.1.10 CAPITAL INJECTION. The Borrower shall have received (i) a
capital injection of at least TWO MILLION FIVE HUNDRED THOUSAND AND NO/100
DOLLARS ($2,500,000.00) on terms and conditions satisfactory to the Bank
and (ii) a commitment, on terms and conditions satisfactory to the Bank,
of an additional ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) capital
injection.
4.1.11 EXTENSION FEES. As a precondition to the effectiveness of
this Agreement the Borrower shall pay to the Bank an Extension Fee in the
amount of $10,000.00 and the past Extension Fee in the amount of
$7,500.00.
4.1.12 OTHER INFORMATION AND DOCUMENTATION. The Bank shall have
received such other information, certificates and executed documents as
they shall have reasonably requested.
4.2 CONDITIONS TO ALL DISBURSEMENTS. The obligation of the Bank to make
any Revolving Loan on any Disbursement Date, is subject to the occurrence, prior
to or on the Disbursement Date
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related to such Revolving Loan, of each of the following conditions, any or all
of which may be waived in whole or in part by the Bank in writing.
4.2.1 CERTIFICATE. If such Loan is to made after the date hereof and
is not being made pursuant to an automated advance and repayment mechanism
provided to the Borrower by the Bank, the Bank shall have received a
certificate substantially in the form of EXHIBIT F attached hereto and
incorporated herein by reference for all purposes, executed by the chief
executive or chief financial officer of the Borrower, certified as of such
Disbursement Date, and confirming that, as of such Disbursement Date:
(a) No Default or Event of Default has occurred and is
continuing; and
(b) The warranties and representations set forth in SECTION 5
of this Agreement are true and correct on and as of such
Disbursement Date.
4.2.2 BANK SATISFACTION. The Bank does not have actual knowledge
that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred and is
continuing; and
(b) Any provision of law, any order of any court or other
agency of government or any regulation, rule or interpretation
thereof has had a material adverse effect on the validity or
enforceability of any Loan Document.
SECTION 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
5.1 CORPORATE EXISTENCE AND POWER. (a) Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, (b) each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the law of its state of incorporation, (c)
the Borrower and each of the Subsidiaries have the corporate power and authority
to own their respective properties and assets and to carry out their respective
business as now being conducted and are, or will within 30 days from the date
hereof be, qualified to do business and in good standing in every jurisdiction
wherein the failure to be so qualified could have a material adverse affect on
the Borrower or any Subsidiary and (d) the Borrower has the corporate power and
authority to execute and perform this Agreement, to borrow money in accordance
with its terms, to execute and deliver the Notes and other Loan Documents, to
grant to the Bank liens and security interest in the Collateral as hereby
contemplated and to do any and all other things required of it hereunder.
5.2 AUTHORIZATION AND APPROVALS. The execution, delivery and performance
of this Agreement, the borrowing hereunder and the execution and delivery of the
Notes and other Loan Documents to which any Obligor is a party have been duly
authorized by all requisite corporate action, do not require registration with
or consent or approval of, or other action by, any federal,
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state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Bank or will be completed and obtained concurrently
with the execution and delivery of this Agreement, will not violate any
provision of law, any order of any court or other agency of government, the
Organizational Documents of any Obligor, any provision of any indenture,
agreement or other instrument to which any Obligor is a party, or by which it or
any of its properties or assets are bound, will not be in conflict with, result
in a breach of or constitute (with or without notice or passage of time) a
default under any such indenture, agreement or other instrument, and will not
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Obligor other than
in favor of the Bank and as contemplated hereby.
5.3 VALID AND BINDING AGREEMENT. This Agreement is, and the Notes, the
Security Documents and all other Loan Documents to which any of the Obligors is
a party will be, when delivered, valid and binding obligations of such Obligor,
enforceable in accordance with their respective terms except for laws and
equitable principles affecting the enforcement of creditors' rights generally.
5.4 ACTIONS, SUITS OR PROCEEDINGS. Except as disclosed on SCHEDULE 5.4,
there are no actions, suits or proceedings, at law or in equity, and no
proceedings before any arbitrator or by or before any governmental commission,
board, bureau or other administrative agency, pending, or, to the best knowledge
of the Borrower, threatened against or affecting any Obligor, or any properties
or rights of any Obligor, which, if adversely determined, could reasonably be
expected to materially impair the right of any Obligor to carry on business
substantially as now conducted or could reasonably be expected to have a
material adverse effect upon the financial condition of any Obligor.
5.5 SUBSIDIARIES. As of the date hereof, the Borrower has no subsidiaries
other than Garvey Company, Health Career Learning Systems, Inc., Henley
Acquisition Corp., Med-Quip Inc., NCI, Inc., Enraf-Nonius, B.V., Enraf-Nonius
Medizinelektronik GMBH and Enraf-Nonius S.A. France.
5.6 NO LIENS, PLEDGES, MORTGAGES OR SECURITY INTERESTS. Except for
Permitted Liens and the liens and security interests securing indebtedness to be
satisfied in full with proceeds from the initial loan hereunder (and which such
liens and security interests are to be released simultaneously with such
satisfaction), no Obligor's assets and properties, including, without
limitation, the Collateral, is subject to any mortgage, pledge, lien, security
interest or other encumbrance of any kind or character.
5.7 ACCOUNTING PRINCIPLES. The Financial Statements have been prepared in
accordance with GAAP and fully and fairly present in all material respects the
financial condition of each Obligor as of the dates, and the results of their
operations for the periods, for which the same are furnished to the Bank. To the
best of any Obligor's knowledge and belief, no Obligor has any material
contingent obligations, liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, the
Financial Statements.
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5.8 NO ADVERSE CHANGES. There has been no material adverse change in the
business, properties or condition (financial or otherwise) of any of the
Obligors since the date of the latest of the Financial Statements.
5.9 CONDITIONS PRECEDENT. As of each Disbursement Date, all appropriate
conditions precedent referred to in SECTION 4 hereof shall have been satisfied
(or waived in writing by the Bank).
5.10 TAXES. Except as provided on SCHEDULE 5.10, each Obligor has filed by
the due date therefor all federal, state and local tax returns and other reports
they are required by law to file and which are material to the conduct of their
respective businesses, have paid or caused to be paid all taxes, assessments and
other governmental charges that are shown to be due and payable under such
returns, and have made adequate provision for the payment of such taxes,
assessments or other governmental charges which have accrued but are not yet
payable. No Obligor has any knowledge of any deficiency or assessment in a
material amount in connection with any taxes, assessments or other governmental
charges not adequately disclosed in the Financial Statements.
5.11 COMPLIANCE WITH LAWS. Except as disclosed on SCHEDULE 5.11, each
Obligor has complied with all applicable laws, to the extent that failure to
comply would materially interfere with the conduct of the business of any of the
Obligors.
5.12 INDEBTEDNESS. Except as permitted by SECTIONS 7.5, 7.6 and 7.7 of
this Agreement, and as otherwise disclosed on SCHEDULE 5.12, neither the
Borrower nor any of the Subsidiaries has any indebtedness for money borrowed or
any agreements of guarantee or surety except for the endorsement of negotiable
instruments by the Borrower and the Subsidiaries in the ordinary course of
business for deposit or collection.
5.13 MATERIAL AGREEMENTS. Except as disclosed on SCHEDULE 5.13, neither
the Borrower nor any of the Subsidiaries has any material leases, contracts or
commitments of any kind (including, without limitation, employment agreements,
collective bargaining agreements, powers of attorney, distribution contracts,
patent or trademark licenses, contracts for future purchase or delivery of goods
or rendering of services, bonus, pension and retirement plans, or accrued
vacation pay, insurance and welfare agreements); to the best knowledge of the
Borrower, other than with respect to consents to the assignment of such material
leases, contracts or commitments required by the terms thereof disclosed on
SCHEDULE 5.13, all parties to such agreements (including, without limitation,
the Borrower and the Subsidiaries) have complied with the provisions of such
leases, contracts or commitments; and to the best knowledge of the Borrower, no
party to such agreements (including, without limitation, the Borrower and the
Subsidiaries) is in default thereunder, nor has there occurred any event which
with notice or the passage of time, or both, would constitute such a default.
The Borrower has no Key Agreements as of the date hereof.
5.14 MARGIN STOCK. No Obligor is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any "MARGIN STOCK" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any loan hereunder will be used, directly or indirectly, to
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purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or for any other purpose which might
violate the provisions of Regulation G, T, U or X of the said Board of
Governors. The Borrower does not own any margin stock.
5.15 PENSION FUNDING. No Obligor has incurred any material accumulated
funding deficiency within the meaning of ERISA and has not incurred any material
liability to the PBGC in connection with any employee benefit plan established
or maintained by the Borrower or any of the Subsidiaries and no reportable event
or prohibited transaction, as defined in ERISA, has occurred with respect to
such plans.
5.16 MISREPRESENTATION. No warranty or representation by any Obligor
contained herein or in any certificate or other document furnished by any
Obligor pursuant hereto contains any untrue statement of material fact or omits
to state a material fact necessary to make such warranty or representation not
misleading in light of the circumstances under which it was made.
5.17 BORROWING BASE COMPONENTS.
5.17.1 ELIGIBLE ACCOUNTS. As to each Account represented by the
Borrower to be an "Eligible Account" on a Borrowing Base Certificate, as
of the date of each such Borrowing Base Certificate:
(a) Such Account arose in the ordinary course of the business
of an Obligor out of either a bona fide sale of Inventory by such
Obligor, and in such case such Inventory has in fact been shipped
to, and accepted and retained by, the appropriate account debtor or
the sale has otherwise been consummated in accordance with such
order, or services performed by such Obligor under an enforceable
contract (other than those relating to training), and in such case
such services have in fact been performed for the appropriate
account debtor in accordance with such contract.
(b) Such Account represents a legally valid and enforceable
claim which is due and owing to an Obligor by such account debtor
and for such amount as is represented by such Obligor to the Bank on
such Borrowing Base Certificate, such Account is due and payable not
more than 30 days from the delivery of the related Inventory, or the
performance of the related services, giving rise to such Account and
such Account has not been due for more than 90 days from the date of
invoice.
(c) The unpaid balance of such Account as represented by an
Obligor to the Bank on such Borrowing Base Certificate is not
subject to any defense, counterclaim, setoff, credit, allowance or
adjustment by the account debtor because of returned, inferior or
damaged Inventory or services, or for any other reason, except for
customary discounts allowed by such Obligor in the ordinary course
of business for prompt payment, and there is no agreement between
such Obligor, the related account debtor and any other person for
any rebate, discount, concession or release of liability, in whole
or in part.
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(d) The transactions leading to the creation of such Account
comply with all applicable state and federal laws and regulations.
(e) An Obligor has granted to the Bank a perfected security
interest in such Account (as an item of the Collateral) prior in
right to all other persons (other than Permitted Liens), and such
Account has not been sold, transferred or otherwise assigned by such
Obligor to any person, other than the Bank.
(f) Such Account is not represented by any note, trade
acceptance, draft or other negotiable instrument or by any chattel
paper, except any such as have been endorsed and delivered by an
Obligor to the Bank on or prior to such Account's inclusion on such
Borrowing Base Certificate.
(g) An Obligor has not received, with respect to such Account,
any notice of the death of the related account debtor or any partner
thereof, nor of the dissolution, liquidation, termination of
existence, insolvency, business failure, appointment of a receiver
for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against, such account debtor.
(h) The account debtor on such Account is not:
(i) an affiliate of an Obligor,
(ii) the United States of America or any department,
agency or instrumentality thereof, in any case other than (i)
a Medicare Receivable or (ii) a receivable for which the
Assignment of Federal Claims Act of 1940 has been complied
with,
(iii) a citizen or resident of any jurisdiction other
than one of the United States or Canada, unless such Obligor
has received a letter of credit in an amount equal to or
greater than such Account issued by a financial institution
acceptable to the Bank and otherwise in form and substance
satisfactory to the Bank, or
(iv) an account debtor whom the Bank has, in the
exercise of such Bank's sole discretion, determined to be
(based on such factors as the Bank deems appropriate) an
ineligible account debtor and as to which the Bank has
notified the Borrower, PROVIDED, HOWEVER, that any such notice
shall not apply as to any Account of such account debtor which
has been included on a Borrowing Base Certificate by the
Borrower prior to the giving of such notice by the Bank and
which meets each and every other requirement under this
Agreement for the denomination of such Account as an "Eligible
Account."
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5.17.2 ELIGIBLE INVENTORY. As to each item of Inventory represented
by the Borrower to be "ELIGIBLE INVENTORY" on a Borrowing Base
Certificate, as of the date of each such Borrowing Base Certificate:
(a) Such item of Inventory is of good and merchantable quality
and is usable or salable by an Obligor in the ordinary course of
such Obligor's business, and is not obsolete.
(b) An Obligor has granted to the Bank a perfected security
interest in such item of Inventory (as an item of the Collateral)
prior in right to all other persons (other than Permitted Liens),
and such item of Inventory has not been sold, transferred or
otherwise assigned by such Obligor to any person, other than the
Bank and other than sales in the ordinary course of business
occurring after the date of such Borrowing Base Certificate.
(c) Such item of Inventory is located within the United States
of America and is in the possession and control of an Obligor at one
of the locations described on SCHEDULE 5.17.2 attached hereto.
5.18 ASSUMED NAMES: OTHER NAMES. The Borrower has not changed its name
during the last five (5) years except as described on SCHEDULE 5.18 attached
hereto and incorporated herein by reference for purposes. The only assumed names
used by Maxxim in connection with its Henley Healthcare division in the last
five (5) years are "Henley Operating Company, Henley International and Henley
Healthcare." The only assumed names used by any other party to an acquisition of
a Subsidiary in the last five (5) years are described in SCHEDULE 5.18 attached
hereto.
SECTION 6. AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on each Note and
other Indebtedness is paid in full and the ability, if any, of the Borrower to
obtain Revolving Loans has irrevocably terminated, the Borrower covenants and
agrees that it will (or will cause each other Obligor to):
6.1 FINANCIAL AND OTHER INFORMATION.
6.1.1 ANNUAL FINANCIAL REPORTS. Furnish to the Bank in form
satisfactory to the Bank not later than ninety (90) days after the close
of each fiscal year of the Borrower, beginning with the Borrower's 1999
fiscal year, on a consolidated and consolidating basis, a balance sheet as
at the close of each such fiscal year, statements of income and statements
of cash flows for each such fiscal year, and such other comments and
financial details as are usually included in similar reports. Such reports
shall be prepared in accordance with GAAP by independent certified public
accountants of recognized standing selected by the Borrower and acceptable
to the Bank and shall contain unqualified opinions that the financial
statements present fairly the Obligor's financial position and results of
operations in all material respects.
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6.1.2 MONTHLY FINANCIAL STATEMENTS. Furnish to the Bank not later
than twenty (20) days after the close of each fiscal year of the Obligors,
beginning with May, 2000, financial statements containing the consolidated
and consolidating balance sheet of the Obligors as of the end of each such
period, consolidated and consolidating statements of income and statements
of cash flows of the Obligors up to the end of such period. These
statements shall be prepared on substantially the same accounting basis as
the statements required in SECTION 6.1.1 of this Agreement and shall be in
such detail as the Bank may reasonably require, and the accuracy of the
statements shall be certified by the chief executive or financial officer
of the Obligors.
6.1.3 NO DEFAULT CERTIFICATE. Together with each delivery of the
financial statements required by SECTIONS 6.1.1 and 6.1.2 of this
Agreement, furnish to the Bank a compliance certificate substantially in
the form of EXHIBIT G attached hereto and incorporated herein by reference
for all purposes, duly executed by its chief executive or financial
officer stating, among other things, that no Event of Default or Default
has occurred, or if any such Event of Default or Default exists, stating
the nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto accompanied by such
supporting calculations contained in such certificate as the Lender may
request.
6.1.4 AGING AND BORROWING BASE CERTIFICATE. Furnish to the Bank
daily and beginning as of the execution date hereof, and not later than
10:00 a.m. on the Business Day following the as of date of the
certificate, a Borrowing Base Certificate confirming that the sum of the
aggregate unpaid principal balance of all the Revolving Loans does not
exceed the Maximum Available Amount as then in effect (or if such is not
the case, accompanied by a prepayment of the Revolving Note, in accordance
with SECTION 2.8 of this Agreement) and further furnish to the Bank, (y)
an aging as of the end of the preceding month of the Borrower's Accounts
in a form satisfactory to the Bank, a summary of the Obligors' Inventory
as of the end of such calendar month, prepared in reasonable detail and
containing such other information as the Bank may request, and an aging as
of the end of the preceding month of the Obligors' accounts payable in a
form satisfactory to the Bank in its sole and absolute discretion and (z)
to provide the same report weekly, as of the last business day of such
week and by the first business day of the following week, a similar aging
of the Obligors' Accounts in each case as of the end of such preceding
week and again prepared in such reasonable detail and containing such
other information as the Bank may require to be accompanied by an aging as
of the end of the preceding week of the Obligors' accounts payable, also
in a form satisfactory to the Bank in its sole and absolute discretion.
6.1.5 SEC REPORTS. Furnish to the Bank within five days after the
filing with the Securities and Exchange Commission by any Obligor, true,
correct and complete copies of all such filings, of any financial
statements, registration statements, reports and proxy statements.
6.1.6 INVENTORY NOT IN WAREHOUSE. Furnish to the Bank not later than
20 days after the close of each fiscal quarter of the Obligors, beginning
with June 30, 2000, a listing of
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all Inventory of the Obligors held by third parties on a consignment basis
or otherwise not in the possession of the Obligors at one of the locations
described on SCHEDULE 5.17.2 hereof (as said Schedule may be updated in
writing from time to time with 30 days advance written notice to the
Bank), including, without limitation, a description of its value and the
location and the name, address and telephone number of each such third
party and otherwise containing such other information as the Bank may
request.
6.1.7 ADVERSE EVENTS. Promptly inform the Bank of the occurrence of
any Event of Default or Default, or of any occurrence which has or could
reasonably be expected to have a materially adverse effect upon any
Obligor's business, properties, financial condition or ability to comply
with its obligations hereunder.
6.1.8 MANAGEMENT LETTERS. Furnish to the Bank, promptly upon receipt
thereof, copies of all management letters and other reports of substance
submitted to the Borrower by independent certified public accountants in
connection with any annual or interim audit of the books of the Obligors.
6.1.9 AUDITS. From time to time, at any time upon the request of the
Bank, a report of an independent collateral field examiner which may or
may not be affiliated with the Bank, with respect to the Accounts and
Inventory component included in the Borrowing Base. So long as no Event of
Default exists hereunder, the Borrower will promptly reimburse the Bank
for the cost of up to four (4) such audits during each twelve (12) month
period. Upon the occurrence of an Event of Default, all such audits shall
be conducted at the sole cost and expense of the Borrower.
6.1.10 TAX RETURNS. As soon as it has been filed with the United
States Internal Revenue Service, each Obligor's federal tax return.
6.1.11 OTHER INFORMATION AS REQUESTED. Promptly furnish (or cause to
be furnished) to the Bank such other information regarding the operations,
business affairs and financial condition of the Obligors as the Bank may
reasonably request from time to time and permit the Bank, its employees,
attorneys and agents, to inspect all of the books, records and properties
of the Obligors at any reasonable time.
6.2 INSURANCE. Keep its (and cause the other Obligors to keep their
respective) insurable properties (including, but not limited to, the Collateral)
adequately insured and maintain (a) insurance against fire and other risks
customarily insured against by companies engaged in the same or a similar
business to that of the Borrower or the other Obligors, whichever is applicable,
(b) necessary worker's compensation insurance, (c) public liability and product
liability insurance, and (d) such other insurance as may be required by law or
as may be reasonably required in writing by the Bank, all of which insurance
shall be in such amounts, containing such terms, in such form, for such purposes
and written by such companies as may be satisfactory to the Bank. All such
policies shall contain a provision whereby they may not be canceled except upon
thirty days' prior written notice to the Bank. The Obligors will deliver to the
Bank, at the Bank's request, evidence satisfactory to the Bank that such
insurance has been so procured and, with respect to casualty
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insurance, names the Bank as "mortgagee" and provides for payment to the Bank
even if no Obligor would be entitled to receive payment of any proceeds. If any
Obligor fails to maintain satisfactory insurance as herein provided, the Bank
shall have the option to do so, and such Obligor agrees to repay the Bank, with
interest at the Past Due Rate, all amounts so expended by the Bank. Each Obligor
hereby appoints the Bank as such Obligor's attorney-in-fact, which appointment
is coupled with an interest and irrevocable, to endorse any check or draft
payable to such Obligor in connection with returned or unearned premiums on said
insurance or the proceeds of said insurance, and any amount so collected may be
applied toward satisfaction of the Indebtedness, PROVIDED, HOWEVER, that the
Bank shall not be required hereunder so to act. The provisions of this Section
are in addition to and cumulative of the insurance provisions set forth in the
Mortgage.
6.3 TAXES. With regard to all 1999 taxes, to pay the same within 10
Business Days of the receipt of the First Portion and to pay promptly and within
the time that they can be paid without interest or penalty all future taxes,
assessments and similar imposts and charges of every kind and nature lawfully
levied, assessed or imposed upon the Obligor and their respective property,
except to the extent being contested in good faith and, if requested by the
Bank, bonded in a manner satisfactory to the Bank. If any Obligor shall fail to
pay such taxes and assessments by their due date, the Bank shall have the option
to do so, and the Borrower agrees to repay the Bank, with interest at the Past
Due Rate, all amounts so expended by the Bank.
6.4 MAINTAIN CORPORATION AND BUSINESS. Do or cause to be done all things
necessary to preserve and keep in full force and effect each Obligor's corporate
existence, rights and franchises, if any, and comply with all applicable laws
unless the failure to do so could not reasonably be expected to have a material
adverse effect on such Obligor or any of its property or business; continue to
conduct and operate their respective businesses substantially as conducted and
operated during the present and preceding calendar year; at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of their respective property used or useful in the conduct of their
respective business and keep the same in good repair, working order and
condition; and from time to time make, or cause to be made, all needed and
proper repairs, renewals, replacements, betterments and improvements thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
6.5 MAINTAIN EFFECTIVE TANGIBLE NET WORTH. Maintain on a consolidated
statement basis, at all times on or after the execution hereof, an Effective
Tangible Net Worth of not less than the effective Tangible Net Worth existing on
the execution date hereof after taking into account the capital investment
required by SECTION 4.1.11 hereof.
6.6 MAINTAIN LEVERAGE RATIO. Intentionally Omitted.
6.7 FIXED CHARGE COVERAGE RATIO. Intentionally Omitted.
6.8 CURRENT RATIO. Intentionally Omitted.
6.9 ERISA. With regard to all past due ERISA obligations to pay and
perform the same within 10 Business Days of the receipt of the First Portion and
thereafter to at all times meet and
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cause each of the Obligors to meet the minimum funding requirements of ERISA
with respect to the Obligor's employee benefit plans subject to ERISA; promptly
after any Obligor knows or has reason to know of the occurrence of any event,
which would constitute a reportable event or prohibited transaction under ERISA,
or that the PBGC or any Obligor has instituted or will institute proceedings to
terminate an employee pension plan, deliver to the Bank a certificate of the
chief financial officer of such Obligor setting forth details as to such event
or proceedings and the action which such Obligor proposes to take with respect
thereto, together with a copy of any notice of such event which may be required
to be filed with the PBGC; and furnish to the Bank (or cause the plan
administrator to furnish the Bank) a copy of the annual return (including all
schedules and attachments) for each plan covered by ERISA, and filed with the
Internal Revenue Service by such Obligor, not later than ten (10) days after
such report has been so filed.
6.10 USE OF LOAN PROCEEDS. Use the proceeds of any Revolving Loan to meet
the general working capital needs of the Borrower.
6.11 KEY AGREEMENTS. Promptly upon entering into any Key Agreement,
provide true, correct and complete copies thereof to the Bank.
6.12 LOCKBOX DEPOSITS. Direct all Account debtors to make remittance to
the Lockbox.
6.13 NOTICE OF EVENTS. Notify the Bank immediately upon acquiring
knowledge of the occurrence of or if any Obligor causes or intends to cause, as
the case may be: (1) the institution of any lawsuit or administrative proceeding
affecting any Obligor involving monetary claims in excess of $50,000.00 or the
institution of any lawsuit or administrative proceeding affecting any Obligor,
the adverse determination under which could have a material adverse effect on
the business, condition (financial or otherwise), operations, property or
prospects of any Obligor or on its ability to perform any of its obligations
under any Loan Document to which it is a party; (2) any material adverse change,
either in any case or in the aggregate, in the assets, liabilities, business,
condition (financial or otherwise), operations, property or prospects of the
Obligors on a consolidated basis; (3) any Event of Default or any Default,
together with a detailed statement by an appropriate officer or other
responsible party acceptable to the Bank on behalf of the Obligor of the steps
being taken to cure the effect of such Event of Default or Default; (4) the
occurrence of a default or event of default by any Obligor under any agreement
or series of related agreements to which it is a party where such default could
result in monetary damages in excess of $50,000, and (5) any change in the
accuracy of the representations and warranties of any Obligor in this Agreement
or any other Loan Document. Each Obligor will notify the Bank in writing within
30 days prior to the date that any Obligor changes its name or the location of
its chief executive office or principal place of business or the place where it
keeps its books and records. Any notice of a name change delivered to the Bank
shall be accompanied by such certificates of governmental authorities as the
Bank may require substantiating such name change.
6.14 INTENTIONALLY OMITTED.
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6.15 CERTIFICATE OF TITLE. Have any assets subject to certificate of title
laws which is greater than in the aggregate at any time $50,000 unless the
certificates of title thereto have been delivered to the Bank.
6.16 CERTIFICATE OF GOOD STANDING AND QUALIFICATION. Furnish to the Bank
within 30 days from the date hereof a certificate from the appropriate public
official of each jurisdiction (including, without limitation, Ohio, Michigan,
and Georgia) as to the due qualification to do business and good standing of
each Obligor where such qualification is necessary to conduct such Obligor's
business in such jurisdiction.
6.17 EQUIPMENT AUDITS. From time to time, at any time upon the request of
the Bank, a report of an independent collateral field examiner (which may be, or
be affiliated with, the Bank) with respect to the Obligors' Equipment. So long
as no Event of Default has occurred which is then continuing, no Obligor will be
responsible for the cost of any such audit. Upon the occurrence of an Event of
Default, the Borrower shall promptly pay to the Bank upon demand, the costs of
all such audits occurring after such occurrence of an Event of Default.
6.18 REAL ESTATE AUDITS. From time to time, at any time upon the request
of the Bank, a report of an independent collateral field examiner (which may be,
or be affiliated with, the Bank) with respect to the Collateral covered by the
Mortgage. So long as no Event of Default has occurred which is then continuing,
no Obligor will be responsible for the cost of any such audit. Upon the
occurrence of an Event of Default, the Borrower shall promptly pay to the Bank
upon demand, the costs of all such audits occurring after such occurrence of an
Event of Default.
6.19 ADDITIONAL SECURITY. Provided the Bank determines, or redetermines
from time to time, in the exercise of its sole but reasonable judgment that the
cost of obtaining a lien in and to the outstanding capital stock of all of the
Borrower's foreign subsidiaries, is reasonably worth the benefit to be received
by the Bank in connection with obtaining a lien in that stock, the Borrower
shall cause to be promptly pledged to the Bank a security interest in and to the
outstanding capital stock of the Borrower's foreign subsidiaries. The Borrower
shall promptly provide the Bank and its counsel a written analysis examining the
cost and complications associated with such a pledge.
6.20 ACHIEVE NET INCOME. Beginning with the month ending January 31, 2001,
and for each month thereafter have Net Income equal to or greater than
$10,000.00.
6.21 RIGHT TO RECEIVE OUTSTANDING CAPITAL STOCK IN THE BORROWER. In the
event that the Borrower has not "Closed" by November 1, 2000 the sale of its
Cybex Division in the manner and for a price at least equal to the amount set
forth in SECTION 2.10 hereof, the Bank shall be entitled to immediately receive,
and without the payment of any additional consideration, 200,000 shares of the
Borrower's common stock. Beginning December 1, 2000 and on the first day of each
succeeding month thereafter through and including the date that the Borrower
actually "Closes" the sale of its Cybex Division in accordance with the terms
set forth in SECTION 2.10 hereof, the Bank shall be entitled to immediately
receive, monthly, an additional 25,000 shares of the Borrower's common stock
again, all without the payment of any additional consideration. As used herein
the term "Closed" and/or "Closes" shall mean when title to the Borrower's Cybex
Division has been
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conveyed and the Borrower has received cash consideration in an amount at least
equal to that set forth in SECTION 2.10 hereof. However, so long as the Borrower
has contracted, prior to November 1, 2000, to sell the Cybex Division in
accordance with the terms set forth in SECTION 2.1 hereof, the Borrower shall
have until November 30, 2000 to get the sale Closed. Should the Bank be notified
of any such pending sale, its right to receive the first 200,000 shares of stock
shall not come into existence unless and until the earlier of the date the
Borrower informs the Bank that the sale will not be Closed or the close of
business on November 30, 2000. The right to receive the 25,000 shares of stock
on December 1, 2000 will not be effected by the grant of this grace period. The
Borrower acknowledges that the Bank may transfer and assign either its right to
receive the stock described herein or the stock itself upon the issuance
thereof. The Borrower may deliver the stock to the Bank in a restricted form. In
the event that the stock is delivered to the Bank in a restricted form, the
Borrower hereby warrants, agrees and covenants to include the Bank's stock in
any subsequent registration statement that it files so as to provide the Bank or
its assignee with what is generally referred to as "piggy-back registration"
rights. The Borrower further agrees that if it declares any stock dividend to
holders of its common stock between now and the date the Bank becomes entitled
to its right to receive the stock described above, the amount of stock the Bank
is entitled to receive will be increased by the amount of any such stock
dividend declared.
6.22 REGISTRATION OF NEW OFFERING AND PROSECUTION OF THAT REGISTRATION.
The Borrower is in the process of registering a new securities offering to cover
the $3,500,000.00 capital investment described in Section 4.1.10 hereof. The
Borrower hereby agrees to register that offering within thirty (30) days of the
execution date hereof and to prosecute, in a prompt and efficient manner, that
registration offering with the Securities and Exchange Commission.
6.23 HENLEY ACQUISITION CORP. The Borrower shall dissolve Henley
Acquisition Corp. within 30 days of the date hereof.
SECTION 7. NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on each Note and
other Indebtedness is paid in full, the Borrower covenants and agrees that it
will not, and will not permit any other Obligor to:
7.1 CAPITAL EXPENDITURES; FDA EXPENDITURES. Make (a) Capital Expenditures
on a consolidated basis during any fiscal year of the Obligors in excess of
$200,000.00, or (b) FDA Expenditures on a consolidated basis during any fiscal
year of the Obligors in excess of $100,000.00.
7.2 STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire any
of the shares of its capital stock, or make any commitment to do so.
7.3 LIENS AND ENCUMBRANCES. Create, incur, assume or suffer to exist any
mortgage, pledge, encumbrance, security interest, lien or charge of any kind
(including any charge upon property purchased or acquired under a conditional
sales or other title-retaining agreement or lease
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required to be capitalized under GAAP) upon any of its property or assets,
whether now owned or hereafter acquired, other than Permitted Liens.
7.4 INDEBTEDNESS. Incur, create, assume or permit to exist any
indebtedness or liability on account of deposits or advances or any indebtedness
or liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any other
indebtedness whatsoever, except for (1) the Indebtedness, (2) the Subordinated
Debt, (3) other indebtedness subordinated to the prior payment in full of the
Indebtedness upon terms and conditions approved in writing by the Bank, (4)
existing indebtedness to the extent set forth on SCHEDULE 5.12, (5) other Debt
not to exceed in the aggregate $50,000.00 at any time, and (6) renewals and
extensions thereof (but not increases therein), trade indebtedness incurred and
paid in the ordinary course of business, contingent indebtedness to the extent
permitted by SECTION 7.7 of this Agreement, indebtedness secured by Permitted
Liens, and obligations to the extent permitted by SECTION 7.11 of this
Agreement.
7.5 EXTENSION OF CREDIT. Make loans, advances or extensions of credit to
any Person, except for (a) normal and reasonable advances in the ordinary course
of business to officers and employees of the Borrower not to exceed in the
aggregate at any time outstanding $10,000.00, and (b) sales on open account and
otherwise in the ordinary course of business.
7.6 GUARANTEE OBLIGATIONS. Guarantee or otherwise, directly or indirectly,
in any way be or become responsible for obligations of any other Person, whether
by agreement to purchase the indebtedness of any other Person, agreement for the
furnishing of funds to any other Person through the furnishing of goods,
supplies or services, by way of stock purchase, capital contribution, advance or
loan, for the purpose of paying or discharging (or causing the payment or
discharge of) the indebtedness of any other Person, or otherwise, except for the
endorsement of negotiable instruments by an Obligor in the ordinary course of
business for deposit or collection.
7.7 SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it from
a Person to indebtedness of other creditors of such Person.
7.8 PROPERTY TRANSFER, MERGER OR LEASE-BACK. Other than as permitted
pursuant to SECTION 2.10, sell, lease, transfer or otherwise dispose of all or,
except as to the sale of Inventory in the ordinary course of business, any
material part (and in any event more than five percent [5%]) of its properties
and assets (whether in one transaction or in a series of transactions), change
its name, consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all the properties or
assets of any other Person enter into any reorganization or recapitalization or
reclassify its capital stock, enter into any sale-leaseback transaction, or
form, acquire or permit to exist any Subsidiary without the express written
consent of the Bank given in its sole and absolute discretion. Nothing contained
in this Agreement or any of the other Loan Documents (including without
limitation, the references to Subsidiaries or consolidated and consolidating
financial statements) shall be deemed or construed as a consent to the
Borrower's creation or acquisition of any Subsidiary which is not a Guarantor.
Any Guarantor wholly owned by the Borrower may be merged into, or consolidated
with, the Borrower or another Obligor wholly owned by the Borrower, and such
Obligor may sell, lease or transfer all or a
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substantial part of its assets to the Borrower or another Obligor wholly owned
by the Borrower, and the Borrower or such Obligor may acquire all or
substantially all of the properties and assets of the Subsidiary so to be merged
into, or consolidated with, it or so to be sold, leased or transferred to it, so
long as prior written notice of such action has been given to the Bank and the
applicable Obligor has executed and delivered to the Bank such Financing
Statements and Additional Security Agreement. NOTWITHSTANDING THE FOREGOING, the
Bank understands the Borrower intends to change its name. Provided the Borrower
delivers to the Bank a copy, simultaneous with the delivery thereof to its
stockholders, of any proxy statement concerning a name change that the Borrower
provides to its stockholders, and prompt written notice of the results of any
vote relating to a name change, and all prior to the effective date of its name
change, the Borrower may changes its name once without being in violation of the
provisions of this Section of the Agreement.
7.9 ACQUIRE SECURITIES. Purchase or hold beneficially any stock or other
securities of, or make any investment or acquire any interest whatsoever in, any
other Person except for Permitted Investments.
7.10 PENSION PLANS. Other than as set forth on SCHEDULE 7.10 hereto, allow
any fact, condition or event to occur or exist with respect to an employee
pension or profit sharing plan which might constitute grounds for termination of
any such plan or for the appointment by a United States District Court of a
trustee to administer any such plan, or permit any such plan to be the subject
of termination proceedings (whether voluntary or involuntary) from which
termination proceedings there may result a liability of the Borrower or any of
the Obligors to the PBGC which in the opinion of the Bank, will have a
materially adverse effect upon the operations, business, property, assets,
financial condition or credit of the Borrower.
7.11 MISREPRESENTATION. Furnish (or permit any other Obligor to furnish)
the Bank with any certificate or other document that contains any untrue
statement of a material fact or omits to state a material fact necessary to make
such certificate or document not misleading in light of the circumstances under
which it was furnished.
7.12 MARGIN STOCK. Apply any of the proceeds of any Note to the purchase
of carrying of any "MARGIN STOCK" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
7.13 COMPLIANCE WITH ENVIRONMENTAL LAWS. Use (or permit any tenant to use)
any of its respective properties or assets for the handling, processing,
storage, transportation, or disposal of any Hazardous Substance except in all
respects in compliance with Environmental Laws, generate any Hazardous Substance
except in all respects in compliance with Environmental Laws, conduct any
activity which is likely to cause a release of any Hazardous Substance, or
otherwise conduct any activity or use any of its respective properties or assets
in any manner that is likely to violate any Environmental Law.
7.14 DIVIDENDS. Declare or pay any dividend (other than dividends payable
solely in shares of its capital stock) (or permit any other Obligor to do so)
on, or make any other distribution
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with respect to (whether by reduction of capital or otherwise), any shares of
its capital stock except dividends from a Subsidiary to the Borrower.
7.15 PURCHASE AGREEMENT; SUBORDINATED DEBT DOCUMENTS. Terminate or agree
to the termination of any of the Subordinated Debt Documents or amend, modify or
obtain or grant a waiver of any provision of any of the Subordinated Debt
Documents, unless the same shall be consented to in writing by the Bank or pay
in cash any portion of the Deferred Interest or Deferred Redemption Payments now
or herein after owing on the Subordinated Note if, after taking into account
such payment the Borrower's Cash Flow Ratio is less than 1.5 to 1.0. Capitalized
terms used in this Section not otherwise defined in this Agreement shall have
the meaning given to them in the Fourth Amendment to the Subordinated Note.
7.16 HENLEY ACQUISITION CORP. From and after the date hereof, the Borrower
shall not transfer any assets to, nor conduct any business in, Henley
Acquisition Corp.
SECTION 8. EVENTS OF DEFAULT - ENFORCEMENT - APPLICATION OF PROCEEDS.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an Event of Default (herein so called) hereunder:
8.1.1 FAILURE TO PAY MONIES DUE. If any principal of any Note shall
not be paid when due, whether by acceleration or otherwise, or, if any
accrued interest, any fees under SECTION 2.6 of this Agreement or any
other Indebtedness (exclusive of principal of any Note) shall not be paid
when due, whether by acceleration or otherwise.
8.1.2 MISREPRESENTATION. If any warranty or representation of any of
the Obligors in connection with or contained in this Agreement, or if any
financial data or other information now or hereafter furnished to the Bank
by or on behalf of any Obligor, shall prove to be false or misleading in
any material respect.
8.1.3 NONCOMPLIANCE WITH BANK AGREEMENT. If any Obligor shall fail
to perform any of its Debt and covenants under, or shall fail to comply
with any of the provisions of, this Agreement or any other agreement with
the Bank to which it may be a party, which does not involve the failure to
make a payment when due (be it principal, interest, taxes, insurance or
otherwise) and which is not cured by the Obligors within 15 days after the
earlier of the date of notice to the Borrower by the Bank of such Default
or the date the Bank is notified, or should have been notified pursuant to
the Borrower's obligation under SECTION 6.13 hereof, of such Default.
8.1.4 OTHER DEFAULTS. If any Obligor shall default in the due
payment of any of its Debt (other than the Indebtedness) involving
obligations in excess of $100,000 or in the observance or performance of
any term, covenant or condition in any agreement or instrument evidencing,
securing or relating to such indebtedness and such default results in the
acceleration of such Debt, irrespective of whether any such default shall
be forgiven or
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waived by the holder thereof, unless such payment is being contested in
good faith and adequate reserves for the payment thereof have been
established.
8.1.5 JUDGMENTS. If there shall be rendered against any Obligor, one
or more judgments or decrees involving an aggregate liability of
$100,000.00 or more, which has or have become nonappealable and shall
remain undischarged, unsatisfied by insurance and unstayed for more than
30 days, whether or not consecutive; or of a writ of attachment or
garnishment against the property of any Obligor shall be issued and levied
in an action claiming $100,000.00 or more and not released or appealed and
bonded in a manner satisfactory to the Bank within 30 days thereafter.
8.1.6 BUSINESS SUSPENSION, BANKRUPTCY, ETC. If any Obligor shall
voluntarily suspend transaction of its business; or if any Obligor shall
not pay its debts, generally, as they mature or shall make a general
assignment for the benefit of creditors; or proceedings in bankruptcy, or
for reorganization or liquidation of any Obligor, under the Bankruptcy
Code or under any other state or federal law for the relief of debtors
shall be commenced by any Obligor or shall be commenced against any
Obligor and shall not be discharged within sixty (60) days of
commencement; or a receiver, trustee or custodian shall be appointed for
any Obligor or for any substantial portion of its respective properties or
assets.
8.1.7 CHANGE OF CONTROL OR MANAGEMENT. If Michael M. Barbour or
James L. Sturgeon shall cease to serve as officers of the Borrower in
substantially the same capacity as they currently serve or if Michael M.
Barbour shall cease to serve as a member of the Borrower's board of
directors and if elected, James L. Sturgeon shall cease to serve as a
member of the Borrower's board of directors.
8.1.8 INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE/BENEFIT PLAN(S).
Other than as it may relate to any current failure, which shall be cured
in the manner provided in SECTION 6.9, if any Obligor shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan established or maintained by such Obligor, or if any such
plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of any Obligor to the PBGC which in the opinion of the Bank will
have a materially adverse effect upon the operations, business, property,
assets, financial condition or credit of any Obligor.
8.1.9 OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there shall occur,
with respect to any pension plan maintained by any Obligor, any reportable
event (within the meaning of section 4043(b) of ERISA) which the Bank
shall determine in good faith constitutes a ground for the termination of
any such plan, and if such event continues for 30 days after the Bank
gives written notice to the Obligors, provided that termination of such
plan or appointment of such trustee would, in the opinion of the Bank,
have a materially adverse effect upon the operations, business, property,
assets, financial condition or credit of any Obligor.
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8.1.10 LOSS OR DAMAGE. If any loss, theft, substantial damage or
destruction to or of any material portion of the Collateral occurs which
is not fully covered by insurance after the payment of industry standard
deductibles by the Obligors under applicable insurance policies.
8.1.11 ADVERSE CHANGE. If any material and adverse change in the
business operations and condition, financial or otherwise, of any Obligor
occurs.
8.1.12 PBGC. Except as expressly permitted herein, if a notice of
lien, levy or assessment is filed of record with respect to all or any of
the assets of any Obligor by the United States of America, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal or other governmental agency, including, without limitation, the
PBGC, or if any taxes or debts owing at any time or times hereafter to any
one of them becomes a lien or encumbrance upon the Collateral or any other
assets of any Obligor.
8.1.13 SECOND PORTION. Should the Borrower fail to receive the
Second Portion within EIGHTY-FIVE (85) days after the "Effective Date" of
the registration of the securities to be issued in connection with the
capital to be contributed pursuant to Section 4.1.10 hereof. As used in
this Section, the term "Effective Date" shall have the meaning ascribed to
it in that certain Security Purchase Agreement draft no. 2 dated May 10,
2000 between the Borrower as Company and certain to be named buyers.
8.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter, the obligation, if any, to make a Revolving Loan shall cease and
terminate, and the Bank shall have the right, at its option, to declare the
unpaid balance of the Indebtedness to be immediately due and payable without
further notice (including notice of intent to accelerate and notice of
acceleration), protest or demand or presentment for payment, all of which are
hereby expressly waived by the Borrower, to require Borrower to pay to the Bank,
in immediately available funds, an amount equal to the Indebtedness and to
enforce or avail itself of any and all powers, rights, and remedies available at
law or provided in this Agreement, the Notes, the Joinder Agreements, the
Security Documents, the other Loan Documents or any other document executed
pursuant hereto or in connection herewith. Notwithstanding any provision in this
Section to the contrary, upon the occurrence of any Event of Default, the Bank
shall have the right, immediately and without notice, to take possession of and
exercise possessory rights with regard to any Collateral. Every power, right or
remedy of the Bank set forth in this Agreement, the Notes, the Joinder
Agreements, the Security Documents, the other Loan Documents or any other
document executed pursuant hereto or in connection herewith, or afforded by law
may be exercised from time to time, and as often as may be deemed expedient by
the Bank.
8.3 APPLICATION OF PROCEEDS. The proceeds of any sale or other disposition
of the Collateral authorized by this Agreement shall be applied by the Bank,
first upon all expenses authorized by the Uniform Commercial Code and all
reasonable attorneys' fees and legal expenses incurred by the Bank; the balance
of the proceeds of such sale or other disposition shall be applied to the
payment of the Indebtedness, first to interest, then to principal; and the
surplus, if any, shall be paid over to the Borrower or to such other person or
persons as may be entitled thereto under
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applicable law. The Borrower shall remain jointly and severally liable for any
deficiency, which the Borrower shall pay to the Bank immediately upon demand.
8.4 CUMULATIVE REMEDIES. The remedies provided for herein are cumulative
to the remedies for collection of the Indebtedness as provided by law or by any
mortgage, security agreement or other document contemplated hereby. Nothing
herein contained is intended, nor should it be construed, to preclude the Bank
from pursuing any other remedy for the recovery of any other sum to which the
Bank may be or become entitled for the breach of this Agreement by the Borrower.
SECTION 9. MISCELLANEOUS.
9.1 INDEPENDENT RIGHTS. No single or partial exercise of any right, power
or privilege hereunder, or any delay in the exercise thereof, shall preclude
other or further exercise of the rights of the parties to this Agreement.
9.2 COVENANT INDEPENDENCE. Each covenant in this Agreement shall be deemed
to be independent of any other covenant, and an exception in one covenant shall
not create an exception in another covenant.
9.3 WAIVERS AND AMENDMENTS. No forbearance on the part of the Bank in
enforcing any of its rights under this Agreement, nor any renewal, extension or
rearrangement of any payment or covenant to be made or performed by the Borrower
hereunder or by any other Obligor under any of the other Loan Documents, shall
constitute a waiver of any of the terms of this Agreement or of any such right.
No Default or Event of Default shall be waived by the Bank except in writing
signed and delivered by an officer of the Bank, and no waiver of any Default or
Event of Default shall operate as a waiver of any other Default or Event of
Default or of the same Default or Event of Default on a future occasion. No
other amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or any Note or other documents contemplated hereby
shall be effective unless the same shall be in writing and signed and delivered
by an officer of the Bank.
9.4 GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND PROVISION
HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF
TEXAS.
9.5 SURVIVAL OF WARRANTIES, ETC. All of the covenants, agreements,
representations and warranties made by any Obligor in connection with this
Agreement and any document contemplated hereby shall survive the borrowing and
the delivery of the Notes hereunder and shall be deemed to have been relied upon
by the Bank, notwithstanding any investigation heretofore or hereafter made by
the Bank. All statements contained in any certificate or other document
delivered to the Bank at any time by or on behalf of any Obligor pursuant hereto
or in connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower in connection with this
Agreement.
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9.6 ATTORNEYS' FEES. The Borrower agrees that it will pay all reasonable
costs and expenses of the Bank in connection with the enforcement of the Bank's
rights and remedies under this Agreement and in connection with the preparation
or making of any amendments, modifications, waivers or consents with respect to
this Agreement.
9.7 PAYMENTS ON SATURDAYS, ETC. Whenever any payment to be made hereunder
or under any Note shall be stated to be due on a Saturday, Sunday or any other
day which is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension, if any, shall be included in computing
interest in connection with such payment.
9.8 BINDING EFFECT. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Bank.
9.9 MAINTENANCE OF RECORDS. The Borrower will keep all of its and the
other Obligors' records concerning the Collateral at its principal place of
business. The Borrower will give the Bank prompt written notice of any change in
its principal place of business, or in the location of said records.
9.10 NOTICES. Except as expressly provided herein, all notices and
communications provided for herein or in any other Loan Document contemplated
hereby or required by law to be given shall be effective when received or, in
the case of notices sent by mail from the Bank to the Borrower, upon sending by
first class mail, postage prepaid, addressed as follows: if to the Borrower, to
120 Industrial Boulevard, Sugar Land, Texas 77478, Attn: James L. Sturgeon, and
if to the Bank, to Gary W. Orr, 1601 Elm Street, Dallas, Texas 75201, with a
copy to P.O. Box 650282-MC6510, Dallas, Texas 75265-0282, Attention: Robin M.
Kain, or to such other address as a party shall have designated to the other in
writing.
9.11 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
9.12 HEADINGS. Article and section headings in this Agreement are included
for the convenience of reference only and shall not constitute a part of this
Agreement for any purpose.
9.13 CAPITAL ADEQUACY. If as a result of any regulatory change directly or
indirectly affecting the Bank or any of the Bank's affiliates there shall be
imposed, modified or deemed applicable any tax, reserve, special deposit,
minimum capital, capital ratio, or similar requirement against or with respect
to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the Bank
or any of the Bank's affiliates of making or maintaining any loan hereunder or
to any other party maintaining any participation therein, or reduce any amount
receivable in respect of any such loan (which increase in cost, or reduction in
amount receivable, shall be the result of the Bank's or the Bank's affiliated
Obligor's reasonable allocation among all affected customers of the aggregate of
such increases or reductions resulting from such event), then, within ten (10)
days after receipt by the Borrower of
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a certificate from the Bank containing the information described in this Section
below which shall be delivered to the Borrower, the Borrower agrees from time to
time to pay the Bank such additional amounts as shall be sufficient to
compensate the Bank or any of the Bank's affiliates (for as long as such
increased costs or reductions in amount receivable exist) for such increased
costs or reductions in amount receivable which the Bank determines in the Bank's
sole discretion are material. The certificate requesting compensation under this
Section shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the amount
of such additional cost or reduction in amount receivable and the way in which
such amount has been calculated.
9.14 COSTS AND ATTORNEYS' FEES. If the Bank retains an attorney in
connection with any default or to collect, enforce or defend this Agreement, any
of the Notes or any of the Loan Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if the Borrower sues the Bank
in connection with this Agreement, any of the Notes or any of the Loan Documents
and does not prevail, then the Borrower agrees to pay to the Bank, in addition
to principal and interest, all reasonable costs and expenses incurred by the
Bank in trying to collect this note or in any such suit or proceeding, including
reasonable attorneys' fees. To the extent not prohibited by applicable law, the
Borrower will pay all costs and expenses and reimburse the Bank for any and all
expenditures of every character incurred or expended from time to time,
regardless of whether or not a default has occurred, in connection with (a) the
preparation, negotiation, documentation, closing, renewal, revision,
modification, increase, review or restructuring of this Agreement or any of the
other Loan Documents including, without limitation, legal, accounting, auditing,
architectural engineering and inspection services and disbursements, or in
connection with collecting or attempting to enforce or collect this Agreement,
any of the Notes or any of the other Loan Documents, (b) the Bank's evaluating,
monitoring, administrating and protecting any Collateral now or hereafter
securing payment of any part of the Indebtedness and (c) the Bank's creating,
perfecting and realizing upon Payee's security interests in and liens on any
Collateral, and all costs and expenses relating to the Bank's exercising any of
is rights and remedies hereunder or under any other Loan Document or at law,
including, without limitation, all appraisal fees, consulting fees, filing fees,
taxes, brokerage fees and commissions, title review and abstract fees, UCC
search fees, other fees and expenses incident to title searches, reports and
security interests, escrow fees, attorneys' fees, legal expenses, court costs,
other fees and expenses incurred in connection with any complete or partial
liquidation of any Collateral and all fees and expenses for any professional
services relating to the Collateral or any operations conducted in connection
with it; PROVIDED, that no right or option granted by the Borrower to the Bank
or otherwise arising pursuant to any provision of this or any other instrument
shall be deemed to impose or admit a duty on the Bank to supervise, monitor or
control any aspect of the character or condition of the Collateral or any
operations conducted in connection with it for the benefit of the Borrower or
any other Person other than the Bank. The Borrower agrees to indemnify, defend
and hold the Bank, its shareholders, directors, officers, agents and employees
(collectively "INDEMNIFIED PARTIES") harmless from and against any and all loss,
liability, obligation, damage, penalty, judgment, claim, deficiency, expense,
action, suit, cost and disbursement of any kind or nature whatsoever (including
interest, penalties, attorneys' fees and amounts paid in settlement), REGARDLESS
OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE
INDEMNIFIED PARTIES, imposed on, incurred by or asserted against the Indemnified
Parties
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growing out of or resulting from this note, any Loan Document or any transaction
or event contemplated herein or therein (except that such indemnity shall not be
paid to any Indemnified Party to the extent that such loss, etc. results from
the gross negligence or willful misconduct of that Indemnified Party). Any
amount to be paid under this Section by the Borrower to Payee shall be a demand
obligation owing by such Borrower to Payee and shall bear interest from the date
of expenditure until paid at the Past Due Rate.
9.15 GENDER. Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
9.16 JOINT AND SEVERAL OBLIGATIONS. The Borrower shall be jointly and
severally liable for the payment and performance of the Indebtedness without
regard to which the Borrower receives the proceeds hereof. The Borrower hereby
acknowledges that it expects to derive economic advantage from each Loan.
9.17 SEVERABILITY OF PROVISIONS. Any provision of this Agreement, any Note
or any other Loan Documents relating thereto that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, such Notes or such other documents or affecting
the validity or enforceability of such provision in any other jurisdiction.
9.18 ASSIGNMENT. The Bank shall have the absolute and unrestricted right
to sell, assign, transfer, or grant participation in, all or any portion of the
loans and any collateral, guaranties or other security relating thereto without
the consent of the Borrower; provided, however, no such action on the part of
the Bank shall have the effect of changing any of the Borrower's obligations
hereunder without the written consent of the Borrower. The Bank shall give the
Borrower written notice of any absolute assignment of any of the loans if the
result thereof will be to cause the Borrower to deal directly with another
financial institution which is not the successor in interest by merger to the
Bank.
9.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER, THE GUARANTORS HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
PRIMED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
9.20 AMENDED AND RESTATED LOAN AGREEMENT; WAIVER OF DEFAULTS. This
Agreement amends and restates that certain Amended and Restated Loan Agreement
dated as of June 30, 1997, between the Bank and the Borrower, as the same has
heretofore been amended (the "ORIGINAL LOAN AGREEMENT"), in its entirety. All
liens securing the Original Loan Agreement are hereby ratified and confirmed as
security for the Loans. Unless the provisions would otherwise require, any
reference
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to "Loan Agreement" contained in any Loan Document shall be deemed to refer to
this Agreement, as it may be amended, restated, modified and supplemented from
time to time.
9.21 WAIVER OF DEFAULTS. The Bank hereby waives the occurrence of any
Default or Event of Default which they are aware of and which occurred prior to
the date of this Agreement under the Original Loan agreement or any prior
amendment thereto.
9.22 VERIFICATION OF BALANCE OWING. The Bank, Borrower and Guarantors
hereby agree that as of April ___, 2000, the outstanding principal balance due
and owing on (i) the Revolving Note was Five Million Nine Hundred Ninety-Nine
Thousand Nine Hundred Ninety-Nine and 45/100 Dollars ($5,999,999.45); (ii) Term
Note A was Seven Hundred Sixty-Two Thousand Six Hundred Seventy-Six Dollars and
No/100 ($762,676.00) and (iii) Term Note B was One Million Ninety-Nine Thousand
and No/100 Dollars ($1,099,000.00) and (iv) Term Note C was One Million Two
Hundred Eleven Thousand Nine Hundred Ninety-Nine and 90/100 Dollars
($1,211,999.90).
9.23 GUARANTORS' CONSENT AND RATIFICATION Repayment of the Indebtedness is
guaranteed by Henley Career Learning Systems, Inc., Med-Quip, Inc., Henley
Acquisition Corp., NCI, Inc. and Garvey Company as a result of various guarantee
agreements and/or master guarantee agreements which have previously been
executed and delivered by such companies. The repayment of the Indebtedness is
also secured by certain security agreements executed by Henley Career Learning
Systems, Inc., Med-Quip, Inc., Henley Acquisition Corp., NCI, Inc. and Garvey
Company pursuant to various security agreements executed and delivered by such
companies. Such companies are hereinafter collectively referred to as the
"Guarantors" and individually as "Guarantor." The Guarantors join herein to (i)
acknowledge and consent to each of the terms and provisions of this Agreement;
(ii) ratify and confirm the guarantees or security agreements they previously
executed in favor of the Bank; (iii) agree that each of their guarantees and
security agreements are in full force and effect and that the terms and
provisions of those guarantees and security agreement continue to apply to the
Indebtedness and; (iv) acknowledge that there are no claims or offsets against,
or defenses or counterclaims to, the terms and provisions of their guarantees or
security agreements or the obligations evidenced thereby; (v) certify that their
representations and warranties contained in their guarantees or security
agreements remain true and correct as of the date hereof; and (vi) acknowledge
that the Bank has satisfied and performed its covenants and obligations under
the guarantees and security agreements and under the other Loan Documents
executed in connection therewith and that no prior action or failure to act by
or on behalf of the Bank has, or will, give rise to any cause of action or a
claim against the Bank for breach of the guarantees, security agreements or
other Loan documents executed in connection therewith.
9.24 RELEASE AND COVENANT NOT TO SUE. THE BORROWER (IN ITS OWN RIGHT AND
ON BEHALF OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT
CONTRACTORS, ATTORNEYS AND AGENTS) AND PLEDGORS AND GUARANTORS (IN THEIR OWN
RIGHT AND ON BEHALF OF THEIR RESPECTIVE ATTORNEYS AND AGENTS) (THE "RELEASING
PARTIES") JOINTLY AND SEVERALLY RELEASE, ACQUIT, AND FOREVER DISCHARGE BANK AND
ITS DIRECTORS, OFFICERS, EMPLOYEES, INDEPENDENT CONTRACTORS, ATTORNEYS AND
AGENTS, AND ATTORNEYS (THE "RELEASED PARTIES"), TO
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THE FULLEST EXTENT PERMITTED BY APPLICABLE STATE AND FEDERAL LAW, FROM ANY AND
ALL ACTS AND OMISSIONS OF THE RELEASED PARTIES, AND FROM ANY AND ALL CLAIMS,
CAUSES OF ACTION, COUNTERCLAIMS, DEMANDS, CONTROVERSIES, COSTS, DEBTS, SUMS OF
MONEY, ACCOUNTS, RECKONINGS, BONDS, BILLS, DAMAGES, OBLIGATIONS, LIABILITIES,
OBJECTIONS, AND EXECUTIONS OF ANY NATURE, TYPE, OR DESCRIPTION WHICH THE
RELEASING PARTIES HAVE AGAINST THE RELEASED PARTIES, INCLUDING, BUT NOT LIMITED
TO, NEGLIGENCE, GROSS NEGLIGENCE, USURY, FRAUD, DECEIT, MISREPRESENTATION,
CONSPIRACY, UNCONSCIONABILITY, DURESS, ECONOMIC DURESS, DEFAMATION, CONTROL,
INTERFERENCE WITH CONTRACTUAL AND BUSINESS RELATIONSHIPS, CONFLICTS OF INTEREST,
MISUSE OF INSIDER INFORMATION, CONCEALMENT, DISCLOSURE, SECRECY, MISUSE OF
COLLATERAL, WRONGFUL RELEASE OF COLLATERAL, FAILURE TO INSPECT, ENVIRONMENTAL
DUE DILIGENCE, NEGLIGENT LOAN PROCESSING AND ADMINISTRATION, WRONGFUL SETOFF,
VIOLATIONS OF STATUTES AND REGULATIONS OF GOVERNMENTAL ENTITIES,
INSTRUMENTALITIES AND AGENCIES (BOTH CIVIL AND CRIMINAL), RACKETEERING
ACTIVITIES, SECURITIES AND ANTITRUST LAWS VIOLATIONS, TYING ARRANGEMENTS,
DECEPTIVE TRADE PRACTICES, BREACH OR ABUSE OF ANY ALLEGED FIDUCIARY DUTY, BREACH
OF ANY ALLEGED SPECIAL RELATIONSHIP, COURSE OF CONDUCT OR DEALING, ALLEGED
OBLIGATION OF FAIR DEALING, ALLEGED OBLIGATION OF GOOD FAITH, AND ALLEGED
OBLIGATION OF GOOD FAITH AND FAIR DEALING, WHETHER OR NOT IN CONNECTION WITH OR
RELATED TO THE LOAN PAPERS AND THIS AGREEMENT, AT LAW OR IN EQUITY, IN CONTRACT
IN TORT, OR OTHERWISE, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED (THE "RELEASED
CLAIMS"). THE RELEASING PARTIES FURTHER AGREE TO LIMIT ANY DAMAGES THEY MAY SEEK
IN CONNECTION WITH ANY CLAIM OR CAUSE OF ACTION, IF ANY, TO EXCLUDE ALL PUNITIVE
AND EXEMPLARY DAMAGES, DAMAGES ATTRIBUTABLE TO LOST PROFITS OR OPPORTUNITY,
DAMAGES ATTRIBUTABLE TO MENTAL ANGUISH, AND DAMAGES ATTRIBUTABLE TO PAIN AND
SUFFERING, AND THE RELEASING PARTIES DO HEREBY WAIVE AND RELEASE ALL SUCH
DAMAGES WITH RESPECT TO ANY AND ALL CLAIMS OR CAUSES OF ACTION WHICH MAY ARISE
AT ANY TIME AGAINST ANY OF THE RELEASED PARTIES. THE RELEASING PARTIES REPRESENT
AND WARRANT THAT NO FACTS EXIST WHICH COULD PRESENTLY OR IN THE FUTURE COULD
SUPPORT THE ASSERTION OF ANY OF THE RELEASED CLAIMS AGAINST THE RELEASED
PARTIES. THE RELEASING PARTIES FURTHER COVENANT NOT TO SUE THE RELEASED PARTIES
ON ACCOUNT OF ANY OF THE RELEASED CLAIMS, AND EXPRESSLY WAIVE ANY AND ALL
DEFENSES THEY MAY HAVE IN CONNECTION WITH THEIR DEBTS AND OBLIGATIONS UNDER THE
LOAN PAPERS AND THIS AGREEMENT. THIS PARAGRAPH IS IN ADDITION TO AND SHALL NOT
IN ANY WAY LIMIT ANY OTHER RELEASE, COVENANT NOT TO SUE, OR WAIVER BY THE
RELEASING PARTIES IN FAVOR OF THE RELEASED PARTIES. THE BANK HEREBY RELEASES ANY
CLAIM, INCLUDING THE RIGHT TO BRING ANY CIVIL ACTION FOR DAMAGES IT IS NOW AWARE
OF AND NOW HAS
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AGAINST ANY PERSON (OTHER THAN DAN SUDDUTH OR TRACY MATHEWS)WHO, AS OF THE DATE
HEREOF, IS AN OFFICER OR DIRECTOR OF THE BORROWER. HOWEVER, THIS RELEASE IS NOT
INTENDED TO RELEASE, NOR DOES IT RELEASE, ANY CLAIM THE BANK NOW HAS AGAINST ANY
SUCH PARTY AS A GUARANTOR OF THE INDEBTEDNESS.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
written above.
EXECUTED this ___ day of May, 2000, but to be effective as of March 3,
2000.
HENLEY HEALTHCARE, INC.,
a Texas corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President and Chief Accounting
Officer
HEALTH CAREER LEARNING SYSTEMS,
INC., a Michigan corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President
MED-QUIP, INC., a Georgia corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President
GARVEY COMPANY, a Minnesota corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President
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HENLEY ACQUISITION CORP.,
a Texas corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President
NCI, INC., a Michigan corporation
By: /S/ JAMES L. STURGEON
Name: James L. Sturgeon
Title: Executive Vice President
COMERICA BANK-TEXAS, a Texas banking
corporation
By: /s/ ROBIN KAIN
ROBIN KAIN, VICE PRESIDENT
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