CONVERTIBLE DEBENTURE LOAN AGREEMENT WITH RENAISSANCE CAPITAL GROWTH
& INCOME FUND III, INC., AND RENAISSANCE US GROWTH AND INCOME TRUST PLC
CONVERTIBLE DEBENTURE LOAN AGREEMENT
BY AND BETWEEN
CONTOUR MEDICAL, INC.
AND ITS WHOLLY-OWNED SUBSIDIARIES:
Contour Fabricators, Inc.
Contour Fabricators of Florida, Inc.
AmeriDyne Corporation
All as Co-Borrowers
AND
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
RENAISSANCE US GROWTH & INCOME TRUST PLC
As LENDER
This Convertible Debenture Loan Agreement (the "Loan Agreement") is
entered into as of July 12, 1996, by and between Contour Medical, Inc. (a
Nevada corporation) and its Subsidiaries Contour Fabricators, Inc. (a
Michigan corporation), Contour Fabricators of Florida, Inc. (a Florida
corporation), and AmeriDyne Corporation (a Tennessee corporation), all as
co-Borrowers (collectively hereinafter referred to as "Borrower") and
Renaissance Capital Growth & Income Fund III, Inc. (a Texas corporation)
and Renaissance US Growth & Income Trust PLC (a public limited company
registered in England and Wales) (individually referred to as Renaissance
III and Renaissance PLC, respectively, together with any assignees or
successors in interest collectively referred to as "Lender").
WITNESSETH:
WHEREAS, Borrower seeks to obtain up to Five Million Dollars
($5,000,000) in convertible debenture financing for working capital
purposes, acquisitions, and the repayment of debt; and
WHEREAS, Borrower has requested that Lender provide such funding by
furnishing a loan as herein provided and Lender is willing to furnish such
to Borrower upon the terms and subject to the conditions and for the
considerations hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, receipt and sufficiency of
which is acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITION OF TERMS
Section 1.01. Definitions.
(a) For the purposes of this Loan Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings
assigned to them in this Article I or in the section or recital referred to
below:
"Affiliate" with respect to any Person shall mean (i) any person
directly or indirectly owning, controlling or holding power to vote 10% or
more of the outstanding voting securities of any Person; (ii) any person,
10% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote by any Person;
(iii) any person directly or indirectly controlling, controlled by or under
common control with any Person; (iv) any officer, director or partner of
any Person; and (v) if a Person is an officer, director or partner, any
company for which any Person acts in such capacity. For purposes of this
Agreement, any partnership of which any Person is a general partner, or any
joint venture in which any Person is a joint venturer, is an Affiliate of
each Person.
"Capital Expenditure" shall mean an expenditure for assets that will
be used in years subsequent to the year in which the purchase is made and
which asset is properly classifiable in financial statements as equipment,
real property or improvements, or similar type of capitalized asset.
"Capital Lease" shall mean any lease of property, real or personal,
which is in substance a financing lease and which would be capitalized on a
balance sheet of the lessee, including without limitation, any lease under
which (i) such lessee will have an obligation to purchase the property for
a fixed sum, (ii) an option to purchase the property at an amount less than
a reasonable estimate of the fair market value of such property as of the
date such lease is executed, or (iii) the term of the lease approximates or
exceeds the expect useful life of the property leased thereunder.
"Consolidated Subsidiaries" shall mean those corporations of which
50% or more of the voting stock is owned by Borrower and their financial
statements are consolidated with those of the Borrower.
"Conversion " or "Conversion Rights" shall mean exchange of, or the
rights to exchange, the Principal Amount of the loan, or any part thereof,
for Borrower's fully paid and non-assessable common stock on the terms and
conditions as provided in the Debenture.
"Common Stock" shall mean the Contour Medical, Inc. common stock,
$0.001 par value.
"Debentures" shall mean the Debentures executed by Borrower and
delivered pursuant to the terms of this Loan Agreement, together with any
renewals, extensions or modifications thereof.
"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the
rights of creditors generally.
"Default" shall mean any of the events specified in Article VIII.
"Dividends", in respect of any corporation, shall mean (i) cash
distributions or any other distributions on, or in respect of, any class of
capital stock of such corporation, except for distributions made solely in
shares of stock of the same class, and (ii) any and all funds, cash and
other payments made in respect of the redemption, repurchase or acquisition
of such stock, unless such stock shall be redeemed or acquired through the
exchange of such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act, as
amended, together with all regulations issued pursuant thereto.
"GAAP" shall mean generally accepted accounting principles applied on
a consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, or their
successors, which are applicable in the circumstances as of the date in
question. The requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current
period are comparable in all material respects to those applied in a
preceding period.
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or a Subsidiary or
any of its or their business, operations or properties.
"Guaranty" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person in effect
guarantees the payment of any Indebtedness of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly, including
without limitation agreements: (i) to purchase such Indebtedness or any
property constituting security therefor; (ii) to advance or supply funds
primarily for the purpose of assuring the holder of such Indebtedness of
the ability of the Primary Obligor to make payment; or (iii) otherwise to
assure the holder of the Indebtedness of the Primary Obligor against loss
in respect thereof, except that "Guaranty" shall not include the
endorsement by Borrower or a Subsidiary in the ordinary course of business
of negotiable instruments or documents for deposit or collection.
"Holder" shall mean the owner of Registrable Securities.
"Indebtedness" shall mean, with respect to any Person, the following
indebtedness, obligations and liabilities of such Person: (I) all
"liabilities" that would be reflected on a balance sheet of such Person;
(ii) all obligations of such Person in respect of any Guaranty; (iii) all
obligations of such Person in respect of any Capital Lease, (iv) all
obligations, indebtedness and liabilities secured by any lien or any
security interest on any property or assets of such Person; and (v) any
preferred stock of such Person which is subject to a mandatory redemption
requirement, valued at the greater of its involuntary redemption price or
liquidation preference plus accrued and unpaid dividends.
"Investment" in any Person shall mean any investment, whether by
means of share purchase, loan, advance, extension of credit, capital
contribution or otherwise, in or to such Person, the Guaranty of any
Indebtedness of such Person, or the subordination of any claim against such
Person to other Indebtedness of such Person; provided however, that
"Investment" shall not include (i) any demand deposits in a duly chartered
state or national bank or other cash equivalent investments (ii) any loans
permitted by Section 6.12, or (iii) any acquisitions of equity in any other
Person.
"IRS Code" shall mean the Intemal Revenue Code of 1986, as amended,
together with all regulations issued thereunder.
` "Lien" shall mean any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or
any other interest in property designed to secure the repayment of
Indebtedness, whether arising by Agreement or under any statute or law, or
otherwise.
"Loan" shall mean the money lent to Borrower pursuant to this Loan
Agreement, along with any accrued interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the initial
disbursement of Loan funds which shall occur on a date 30 days from the
date hereof or such earlier date on which Borrower requests, and Lender
approves, as the date at which the initial advance of the Loan funds shall
be consummated, provided that such date may be mutually extended beyond 30
days, but only by written agreement of the parties hereto.
"Loan Documents" shall mean this Loan Agreement, the Debentures
(including any renewals, extensions and refinancings thereof), and any
other agreements or documents (and with respect to this Loan Agreement, and
such other agreements and documents, any amendments or supplements thereto
or modifications thereof) executed or delivered pursuant to the terms of
this Loan Agreement.
"Material Adverse Effect" or "Material Adverse Change" shall mean any
change, factor or event that shall (i) have a material adverse effect upon
the validity, performance or enforceability of any Loan Documents, (ii)
have a material adverse effect upon the financial condition or business
operations of Borrower or any Subsidiaries, (iii) have a material adverse
effect upon the ability of the Borrower to fulfill its obligations under
the Loan Documents, or (iv) any event that causes an Event of Default or
which, with notice or lapse of time or both, could become an Event of
Default.
"Obligation" shall mean: (i) all present and future indebtedness,
obligations and liabilities of Borrower to Lender arising pursuant to this
Loan Agreement, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, joint, several, or
joint and several; (ii) all present and future indebtedness, obligations
and liabilities of Borrower to Lender arising pursuant to or represented by
the Debentures and all interest accruing thereon, and reasonable attorneys'
fees incurred in the enforcement or collection thereof; (iii) all present
and future indebtedness, obligations and liabilities of Borrower and any
Subsidiary evidenced by or arising pursuant to any of the Loan Documents;
(iv) all costs incurred by Lender, including but not limited to reasonable
attorneys' fees and legal expenses related to this transaction; and (v) all
renewals, extensions and modifications of the indebtedness referred to in
the foregoing clauses, or any part thereof.
"Permit Liens" shall mean: (i) Liens (if any) granted to Lender to
secure the Obligation; (ii) pledges or deposits made to secure payment of
worker's compensation insurance (or to participate in any fund in
connection with worker's compensation insurances, unemployment insurance,
pensions or social security programs); (iii) Liens imposed by mandatory
provisions of law such as for landlords, materialmen's, mechanics',
warehousemen's and other like Liens arising in the ordinary course of
business, securing Indebtedness whose payment is not yet due; (iv) Liens
for taxes, assessments and governmental charges or levies imposed upon a
Person or upon such Person's income or profits or property, if the same are
not yet due and payable or if the same are being contested in good faith
and as to which adequate cash reserves have been provided or if an
extension is obtained with respect thereto, (v) Liens arising from good
faith deposits in connection with tenders, leases, real estate bids or
contracts (other than contracts involving the borrowing of money), pledges
or deposits to secure public or statutory obligations and deposits to
secure (or in lieu of) surety, stay, appeal or customs bonds and deposits
to secure the payment of taxes, assessments, customs duties or other
similar charges; (vi) encumbrances consisting of zoning restrictions,
easements, or other restrictions on the use of real property, provided that
such items do not materially impair the use of such property for the
purposes intended, and none of which is violated by existing or proposed
structures or land use; (vii) mortgages, financing statements, equipment
leases or other encumbrances incurred in connection with the acquisition of
property or equipment or the replacement of existing property or equipment,
provided that such liens shall be limited to the property or equipment then
being acquired; and (viii) Liens arising from standard bank revolving
working capital financing secured by inventory, receivables, or general
assets of the Borrower.
"Person" shall include an individual, a corporation, a joint venture,
a general or limited partnership, a trust, an unincorporated organization
or a government or any agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan or other plan maintained
by Borrower for employees of Borrower and/or any Subsidiaries and covered
by Title IV of ERISA, or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code of 1986, as amended.
"Principal Amount" shall mean, as of any time, the then aggregate
outstanding face amount of the Debentures after any conversions or
redemptions and after giving effect to any installment payments received by
Lender.
"Registrable Securities" shall mean (i) the Common Stock issued upon
Conversion of the Debentures, or (ii) any Common Stock issued upon
Conversion of the Debentures or exercise of any warrant, right or other
security which is issued with respect to the Common Stock referred to in
clause (I) and (ii) above by way of stock dividend; any other distribution
with respect to or in exchange for, or in replacement of Common Stock;
stock split; or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; excluding
in all cases, however, any Registrable Security that is not a Restricted
Security and any Registrable Securities sold or transferred by a person in
a transaction in which the rights under this Loan Agreement are not
assigned.
"Registrable Securities Then Outstanding" shall mean an amount equal
to the number of Registrable Securities outstanding which have been issued
pursuant to the Conversion of the Debentures.
"Rentals" of any Person shall mean, as of any date, the aggregate
amount of the obligations and liabilities (including future obligations and
liabilities not yet due and payable) of such Person to make payments under
all leases, subleases and similar arrangements for the use of real,
personal or mixed property, other than leases which are Capital Leases.
"Restricted Security" shall mean a security that has not been (i)
registered under the 1933 Act or (ii) distributed to the public pursuant to
Rule 144 (or any similar provisions that are in force) under the 0000 Xxx.
"SEC" shall mean the Securities and Exchange Commission.
"1933 Act" shall refer to the Securities Act of 1933, as amended.
"1934 Act" shall refer to the Securities Exchange Act of 1934, as
amended.
"Solvent" shall mean, with respect to any Person on a particular
date, that on such date: (i) the fair value of the property of such Person
is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person; (ii) The present fair
salable value, in the ordinary course of business, of the assets of such
Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (iii) such Person is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and other commitments
as they mature in the normal course of business; (iv) such Person does not
intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature,
and (v) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"Subordinated Debt" shall mean any indebtedness of the Borrower or
any Subsidiaries, now existing or hereafter incurred, which indebtedness
is, by its terms, junior in right of repayment to the payment of the
Debentures.
"Subsidiary" shall mean any corporation whether now existing or
hereafter acquired of which fifty percent (50%) or more of the Voting
Shares are owned, directly or indirectly, by Borrower.
"Voting Shares" of any corporation shall mean shares of any class or
classes (however designated) having ordinary voting power for the election
of at least a majority of the members of the Board of Directors (or other
governing bodies) of such corporation, other than shares having such power
only by reason of the happening of a contingency.
Section 1.02. Other Definition Provisions.
(a) All terms defined in this Loan Agreement shall have the above-defined
meanings when used in the Debentures or any other Loan Documents,
certificate, report or other document made or delivered pursuant to this
Loan Agreement, unless the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the plural
and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Loan Agreement shall refer to this Loan Agreement as a whole
and not to any particular provision of this Loan Agreement.
(d) References to financial statements and reports shall be deemed to
be a reference to such statements and reports prepared in accordance with
GAAP recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board which principles are consistently
applied, on the basis used by Borrower in prior years, for all periods
after the date hereof so as to properly reflect the financial condition,
and the results of operations and statement of cash flows, of Borrower and
its Consolidated Subsidiaries, if any.
(e) Accounting terms not specifically defined above, or not defined
in the Loan Agreement, shall be construed in accordance with GAAP as
recognized as of this date by the American Institute of Certified Public
Accountants.
ARTICLE II - LOAN PROVISIONS
Section 2.01. Loan Closing.
(a) Subject to the terms and conditions of this Loan Agreement, and
the compliance with such terms and conditions by all parties, Lender agrees
to lend to Borrower, and Borrower agrees to borrow from Lender, the
aggregate sum of up to Five Million Dollars ($5,000,000) which shall be
disbursed at the Loan Closing.
(b) Such disbursement is to be at such time and subject to the
conditions as provided hereunder and such borrowing shall be evidenced by
Borrower's duly executed Debenture (in one or more counterparts in the
aggregate sum of the Principal Amount advanced substantially in the form of
Exhibit 2.01(b) attached hereto and made a part hereof, with appropriate
insertion of names, dates and amounts. In the event of any differences in
terms between the Loan Agreement and the Debenture, the Debenture will be
controlling; provided, however, that the holder of the Debenture shall be
entitled to all the rights and benefits of the Lender provided in this
Agreement.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at
the offices of Renaissance Capital Group, Inc. in Dallas, Texas.
(d) If, within 30 days of the date of this Agreement (i) Borrower has
failed to comply with the conditions precedent to the Loan Closing as
specified in Article III hereof (unless compliance with such conditions in
whole or in part has been waived or modified by Lender in its sole
discretion) or (ii) the Loan
Closing has not occurred (unless the date of such Loan Closing has been
mutually extended) then, in either such case, the obligations of Lender
under this Loan Agreement shall terminate, provided however that Borrower
shall be obligated for payment of the commitment fees and Lender expenses
as provided in Section 2.07 due and payable as of such date of termination.
Section 2.02. Use of Proceeds.
(a) Borrower intends to use the money advanced hereunder
substantially for the following purposes:
Repayment of Debt $1,300,000
General Working Capital Purposes 3,069,000
Capital Expenditures 306,000
Fees 325,000
Total = $5,000,000
(b) Contour Medical, Inc., Contour Fabricators, Inc., Contour
Fabricators of Florida, Inc., and AmeriDyne Corporation all hereby
acknowledge that the proceeds from the Loan shall be used by each company
individually for the growth of their respective businesses by providing
working capital and capital for acquisitions and the repayment of debt.
Section 2.03. Interest Rate and Interest Payments.
(a) Interest on the Principal Amount outstanding from time to time
shall accrue at the rate of 9.00% per annum, with the first installment
payable on August 1, 1996 and subsequent payments at the first day of each
month thereafter. Overdue principal and interest on the Debentures shall
bear interest, to the extent permitted by applicable law, at a rate of
9.00% per annum. Interest on the Principal Amount of each Debenture shall
be calculated, from time to time, on the basis of the actual days elapsed
in a year consisting of 365 days.
Section 2.04. Maturity.
(a) If not sooner redeemed or convert, the Debentures shall mature on
June 30, 2003, at which time all the remaining unpaid principal, interest
and any other charges then due under the Loan Agreement shall be due and
payable in full.
Section 2.05. Mandatory Principal Redemption Installments.
(a) Mandatory principal redemption installments on each Debenture
shall be as provided for in the Debentures.
Section 2.06. Optional Redemotion.
(a) Optional principal redemption on each Debenture shall be as
provided for in the Debentures.
Section 2.07 Closing Fees and Loan Closing Costs.
(a) Borrower agrees to pay to Lender, or Lender's designee, a Loan
Commitment fee of 1% of the loan amount available under this Loan Agreement
such to be due and payable at Loan Closing or upon termination of this Loan
Agreement.
(b) Borrower agrees to pay to Lender, or Lender's designee, a Loan
Closing Fee of 1% of the amount of Loan funds disbursed at each Loan
Closing, such to be due and payable at Loan Closing.
(c) In addition, at the Loan Closing Borrower agrees to pay Lender's
reasonable costs and expenses (including, without limitation, the
reasonable fees and expenses of Lender's legal counsel) in connection with
the negotiation, preparation, execution and delivery of this Loan
Agreement, the Debentures, the other Loan Documents and the Loan Closing or
Subsequent Loan Closing, provided that such costs and expenses shall not,
in the aggregate, exceed 0.5% of the loan amount available under this Loan
Agreement.
(d) Lender acknowledges the receipt of the payment by the Borrower of
$25,000 to cover Due Diligence expenses.
(e) Lender agrees to a similar fee arrangement on any additional
funds provided under this Loan Agreement or similar Agreement between
Lender and Borrower.
Section 2.08. Placement Fee.
The Borrower shall be responsible for payment of any placement fees
and commissions, brokerage fees or finder's fees in connection with the
Loan. All such placement fee obligations are as listed in Schedule 2.08
attached hereto. The Lender has incurred no placement fee on this
transaction.
Section 2.09. Taxes.
(a) Payments by Borrower hereunder shall be made without deduction
for any present or future taxes, duties, charges or withholdings,
(excluding, in the case of the Lender, any foreign taxes, any federal,
state or local income taxes and any franchise taxes or taxes imposed upon
it by the jurisdiction, or any political subdivision thereof, under which
the Lender is organized or is qualified to do business) and all liabilities
with respect thereto (herein "Taxes") shall be paid by Borrower. If
Borrower shall be required by law to deduct any Taxes for which Borrower is
responsible under the preceding sentence from any sum payable hereunder to
any Lender: (i) the sum payable shall be increased so that after making all
required deductions, such Lender receives an amount equal to the sum it
would have received had no such deductions been made; (ii) Borrower shall
make such deductions; and (iii) Borrower shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law.
(b) Except as otherwise set forth in this Loan Agreement or the other
Loan Documents, Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Loan
Documents or from the execution, delivery or registration of, or otherwise
with respect to, this Loan Agreement or the other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify Lender for the full amount of Taxes and
Other Taxes reasonably paid by Lender on any liability (including any
penalties or interest assessed because of Borrower's defaults) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This Indemnification shall be made
within thirty (30) days from the date Lender made written demand therefor.
Lender shall subrogate any and all rights and claims relating to such Taxes
and Other Taxes to Borrower upon payment of said indemnification.
(d) Without prejudice to the survival of any other Agreement of
Borrower hereunder, the Agreements and obligations of Borrower in this
Section 2.09 shall survive the payment in full of the Obligation.
Section 2.10 Stock Conversion Rights and Registration Rights Agreement.
(a) Each Debenture shall be exchangeable for shares of Borrower's
common stock on such terms and in such amounts as shall be stated in the
Debenture. The holders of the stock issued upon exercise of the right of
conversion as provided in said Debenture shall be entitled to all the
rights of the Lender as stated in this Loan Agreement or the other Loan
Documents to the extent such rights are specifically stated to survive the
surrender of the Debenture for conversion as herein provided.
(b) The holder of shares of common stock of Borrower issued upon
conversion shall be entitled to the rights as provided in Article IX of
this Loan Agreement.
ARTICLE III - CONDITIONS PRECEDENT
Section 3.01. Document Requirements.
(a) The obligation of Lender to advance funds at the Loan Closing
Date hereof is subject to the condition precedent that, on or before the
date of such advance, Lender shall have received the following in form and
substance satisfactory to Lender:
(i) One or more duly executed Debentures aggregating the
Principal Amount of Loan funds then advanced, each in amounts as requested
by Lender, which shall be styled "River Oaks Trust Company, FBO,
Renaissance Capital Growth and Income Fund III, Inc.," and "Renaissance
U.S. Grown and Income Trust, PLC.", and in the form of Exhibit 2.01(a)(1)
with appropriate insertions of date, amount and conversion features.
(ii) An opinion of legal counsel for Borrower dated as of the
Loan Closing Date, satisfactory in form and substance to Lender, as to due
execution by the Borrower of the Loan Agreement, the Debenture and other
Loan Documents and the legal enforceability thereof.
(iii) A true and correct certificate signed by a duly
authorized officer of the Borrower and dated as of the Loan Closing Date
stating that, to the best knowledge and belief of such officer, after
reasonable and due investigation and review of matters pertinent to the
subject matter of such certificate: (A) all of the representations and
warranties contained in Article IV hereof and the other Loan Documents are
true and correct as of the Loan Closing Date and (B) no event has occurred
and is continuing, or would result from the Loan, which constitutes a
Default or an Event of Default.
(iv) Copies of resolutions, as adopted by the Borrower's Board
of Directors, approving the execution, delivery and performance of this
Loan Agreement, the Debentures, and the other Loan Documents, including the
transactions contemplated herein and accompanied by a certificate of the
Secretary or Assistant Secretary of Borrower stating that such resolutions
have been duly adopted, are true and correct, have not been altered or
repealed and are in full force and effect.
(v) A signed certificate of the Secretary or Assistant
Secretary of the Borrower which shall certify the names of the officers of
Borrower authorized to sign each of the Loan Documents to be executed by
such officer, together with the true signatures of each of such officers.
It is herewith stipulated and agreed that Lender may hereafter rely
conclusively on the validity of this certificate as a representation of the
officers of Borrower duly authorized to act with respect to the Loan
Documents until such time as Lender shall receive a further certificate of
the Secretary or Assistant Secretary of Borrower canceling or amending the
prior certificate and submitting the signatures of the officers thereupon
authorized in such further certificate.
(vi) Certificates of good standing (or other similar
instrument) for the Borrower issued by the Secretary of State of the state
of incorporation of Borrower, and certificates of qualification and good
standing for Borrower issued by the Secretary of State of each of the
states wherein such Borrower has operating facilities of such nature so as
to be required to be qualified to do business as a foreign corporation,
dated within ten (10) days of Loan Closing.
(vii) A copy of the Articles of Incorporation of the Borrower
and all amendments thereto, certified by the Secretary of State of the
state of incorporation and dated within ten (1O) days of the date of Loan
Closing and a copy of the bylaws of Borrower and all amendments thereto,
certified by the Secretary or Assistant Secretary of Borrower, as being
true, correct and complete as of the date of such certification.
(viii) Copies of the following financial statements for
Borrower: (A) An audited balance sheet and income statement for Borrower as
of June 30, 1995 and (B) unaudited balance sheet and income statement for
Borrower as of March 31, 1996.
(ix) Such other information and documents as may reasonably be
required by Lender and Lender's counsel to substantiate Borrower's
compliance why the requirements of this Loan Agreement.
Section 3.02. Repayment of Inter-company Debt.
The obligation of Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent that Retirement Care
Associates, Inc., the Borrower's parent corporation, repays any inter-company
balances.
Section 3.03. Inter-company Debts
The obligation of Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent that Retirement Care
Associates, Inc., the Borrower's parent corporation, repays all inter-company
balances owed to Borrower, other than trade payables.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan hereunder, Borrower represents and
warrants to Lender that:
Section 4.01. Organization and Good Standing.
(a) Borrower is duly organized and existing in good standing under
the laws of the state of its incorporation, is duly qualified as a foreign
corporation and in good standing in all states in which failure to qualify
would have a Material Adverse Effect, and has the corporate power and
authority to own its properties and assets and to transact the business in
which it is engaged and is or will be qualified in those states wherein it
proposes to transact material business operations in the future.
Section 4.02. Authorization and Power.
(a) Borrower has the corporate power and requisite authority to
execute, deliver and perform the Loan Documents to be executed by Borrower.
The Borrower is duly authorized to, and has taken all corporate action
necessary to authorize, execute, deliver and perform the Loan Documents
executed by Borrower. The Borrower is and will continue to be duly
authorized to perform the Loan Documents executed by Borrower.
Section 4.03. No Conflicts or Consents.
(a) Except as disclosed to Lender pursuant to Exhibit 4.03 - Schedule
of Conflicts or Consents, neither the execution and delivery of the Loan
Documents, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any judgment, license, order or
permit applicable to Borrower, or any indenture, loan agreement, mortgage,
deed of trust, or other agreement or instrument to which Borrower is a
party or by which Borrower is or becomes bound, or to which Borrower is or
becomes subject, or violate any provision of the charter or bylaws of
Borrower. No consent, approval, authorization or order of any court or
governmental authority or third party is required in connection with the
execution and delivery by Borrower of the Loan Documents or to consummate
the transactions contemplated hereby or thereby except those that have been
obtained.
Section 4.04. Enforceable Obligations.
(a) The Loan Documents have been duly executed and delivered by the
Borrower and are the legal and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except as limited by
any applicable bankruptcy, insolvency or similar laws now or hereafter in
effect affecting creditors rights and debtor's obligations.
Section 4.05. No Liens.
(a) Except for Permitted Liens, all of the properties and assets
owned by the Borrower are free and clear of all Liens and other adverse
claims of any nature, and Borrower has good and marketable title to such
properties and assets. A true and complete list of all liens for borrowed
money is disclosed to Lender pursuant to Exhibit 4.05.
Section 4.06. Financial Condition.
(a) Borrower has delivered to Lender copies of the balance sheet of
Borrower as of June 30, 1995, and the related statements of income,
stockholders' equity and statement of cash flow for the year ended, audited
by its independent Certified Public Accountant. Borrower has also delivered
to Lender copies of the balance sheet of Borrower as of March 31, 1996, and
the related statements of income, stockholders' equity and statement of
cash flow for the period ended such date, which financial statements have
not been certified by its independent Certified Public Accountant. Such
financial statements are true and correct in all material respects, fairly
represent the financial condition of Borrower as of such dates and have
been prepared in accordance with GAAP (except unaudited financial
statements omit certain footnotes); and as of the date hereof, there are no
obligations, liabilities or Indebtedness (including contingent and indirect
liabilities and obligations) of Borrower which are (separately or in the
aggregate) material and are not reflected in such financial statements or
otherwise disclosed herein. Since the date of the above referenced year end
financial statements and quarterly financial statements, there have not
been, except as disclosed in Exhibit 4.06: (i) any Material Adverse Change
in the financial condition, results of operations, business, prospects,
assets or liabilities (contingent or otherwise, whether due or to become
due, known or unknown), of the Borrower; (ii) any dividend declared or paid
or distribution made on the capital stock of the Borrower or any capital
stock thereof redeemed or repurchased; (iii) any incurrence of long-term
debt by the Borrower; (iv) any salary, bonus or compensation increases to
any officers, key employees or agents of the Borrower or; (v) any other
transaction entered into by the Borrower except in the ordinary course of
business and consistent with past practice.
Section 4.07. Full Disclosure.
(a) To the best of Borrower's knowledge and belief after current
investigation, there is no material fact that Borrower has not disclosed to
Lender which could reasonably be expected to have a Material Adverse Effect
on the properties' business, prospects or condition (financial or
otherwise) of Borrower. Neither the financial statements referenced in
Section 4.06 hereof, nor any business plan, offering memorandum or
prospectus, certificate or statement delivered herewith or heretofore by
Borrower to Lender in connection with the negotiations of this Loan
Agreement, contained any untrue statement of a material fact or omitted to
state any material fact necessary to keep the statements contained herein
or therein from being misleading.
Section 4.08. No Default.
(a) No event has occurred and is continuing which constitutes a
Default or an Event of Default under this Loan Agreement.
Section 4.09. Material Agreements.
(a) The Borrower is not in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other material agreement or obligation to which it is a party or by which
any of its properties is bound.
Section 4.10. No Litigation.
(a) Except as disclosed to Lender pursuant to Exhibit 4.10 - Schedule
of Litigation attached hereto, there are no actions, suits, investigations,
arbitrations or administrative proceedings pending, or to the knowledge of
Borrower threatened, against Borrower, and there has been no change in the
status of any of the actions, suits, investigations, litigation or
proceedings disclosed to Lender which could have a materially adverse
effect on Borrower or on any transactions contemplated by any Loan
Document.
Section 4.11. Burdensome Contracts.
(a) To the best knowledge of the Borrower, it is not a party to, or
bound by, any contract or agreement, the faithful performance of which is
so onerous so as to create or to likely create a Material Adverse Effect on
the business, operations or financial condition of the Borrower.
Section 4.12. Taxes.
(a) All tax returns required to be filed by Borrower in any
jurisdiction have been filed and all taxes (including mortgage recording
taxes), assessments, fees and other governmental charges upon Borrower or
upon any of its properties, income or franchises have been paid. To the
best knowledge of Borrower, there is no proposed tax assessment against
Borrower and there is no basis for such assessment.
Section 4.13 Principal Office, Etc.
(a) The principal office and principal place of business of the
Borrower and each of its Subsidiaries is as follows:
Contour Medical, Inc.
0000 Xxxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Contour Fabricators, Inc. and
0000 X. Xxxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Contour Fabricators of Florida, Inc.
0000 Xxxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
AmeriDyne Corporation
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Section 4.14. Use of Proceeds.
(a) The Borrower hereby acknowledges that it intends to use proceeds
from the Loan as disclosed in Section 2.02 hereof.
Section 4.15. Employee Benefit and Incentive Plans; ERISA.
(a) Borrower is not obligated under any Plans.
(b) Borrower is not a party to any collective bargaining agreement
and is not aware of any activities of any labor union that is currently
seeking to represent or organize its employees. Borrower has not
experienced any labor problems, including work stoppages, disputes or
slowdowns with respect to its employees.
Section 4.16. Compliance with Law.
(a) To the best knowledge of Borrower, Borrower is in compliance with
all laws, rules, regulations, orders and decrees which are applicable to
Borrower or its properties by reason of any Governmental Authority which
are material to the conduct of the business of Borrower or any of its
properties.
Section 4.17. Compliance with Environmental Requirements.
(a) To the best knowledge of Borrower, all properties of Borrower are
in compliance with all federal, state or local environmental protection
laws, statutes and regulations which are material to the conduct of the
business of Borrower, or its properties, and the Borrower is currently in
compliance with all material reporting requirements, rules, and regulations
which are applicable to Borrower or its properties by reason of such
governmental environmental protective agencies.
Section 4.18. Schedule of Capital Stock and SEC Requirements.
(a) Set forth on Exhibit 4.18 - Schedule of Capital Stock is a true
and correct schedule of all classes of authorized, issued, and outstanding
Capital Stock of the Borrower, all stock options, warrants, conversion
rights, subscription rights and other rights or agreements to acquire
securities of Borrower and any shares held in treasury or reserved for
issue upon exercise of such stock options, warrants or conversion rights,
subscription rights and other rights or agreements to acquire securities
including date of termination of such right and the consideration therefor.
(b) Except as provided in Exhibit 4.18 - Schedule of Capital Stock,
to the best of the Borrower's knowledge, all securities of Borrower have
been issued in compliance with the requirements of the 1933 Act, and the
rules and regulations promulgated thereunder, or pursuant to an exemption
therefrom.
(c) The shares of common stock of the Borrower when issued to Lender
upon conversion of the Debentures will be duly and validly issued, fully
paid and nonassessable and in compliance with all applicable securities
laws. Such issuance will not give rise to preemptive rights or similar
rights by any other security holder of Borrower. Borrower shall at all
times reserve and keep available sufficient authorized and unissued shares
of common stock to effectuate the conversion of the Debentures.
Section 4.19. Insider.
(a) Neither the Borrower, nor any Person having "control" (as that
term is defined in the Investment Company Act of 1940, as amended, or in
regulations promulgated pursuant thereto (herein the "1940 Act")) of the
Borrower is, an "executive officer," "director," or "principal shareholder"
(as those terms are defined in the 0000 Xxx) of Lender.
(b) Except as set forth in the Borrower's Form 1O-K dated for the
period ending June 30, 1995, there are no transactions between the Borrower
and any affiliates of Borrower.
(c) All agreements between the Borrower and any of its officers,
directors, and principal shareholders, including employment Agreements, are
listed on Exhibit 4.19 - Schedule of Affiliate Transactions.
Section 4.20. Subsidiaries.
(a) As of the date hereof, the Borrower has the following
Subsidiaries: Contour Fabricators, Inc., Contour Fabricators of Florida,
Inc. and AmeriDyne Corporation.
(b) Except as disclosed in the Financial Statements and except for
Subsidiaries, the Borrower does not own any equity or debt interest or any
form of proprietary interest in any entity, or any right or option to
acquire any such interest in any such entity.
Section 4.21. Casualties.
(a) Neither the business nor the properties of Borrower is currently
affected by any environmental hazard, fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or other casualty (whether or not covered by insurance), which
could have a Material Adverse Effect.
Section 4.22 Investment Company Act.
(a) Borrower is not an "investment company" as defined in Section 3
of the 1940 Act nor a company that would be an investment company except
for the exclusions from the definition of an investment company in Section
3(c) of the 1940 Act, and Borrower is not controlled by such a company.
Section 4.23. Sufficiency of Capital.
(a) Borrower is, and after consummation of this Loan Agreement and
giving effect to all Indebtedness incurred and transactions contemplated in
connection herewith will be, Solvent.
Section 4.24. Corporate Names.
(a) The Borrower has not, during the preceding five (5) years, been
known as or used any other corporate, fictitious or tradenames except as
disclosed on Exhibit 4.24 - Schedule of Corporate Names, Mergers and
Consolidations. Except as disclosed on Exhibit 4.24, the Borrower has not,
during the preceding five (5) years, been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets
of any Person.
Section 4.25 Margin Regulation.
(a) As of the Loan Closing Date, the Borrower does not have class of
securities with respect to which a member of a national securities
exchange, broker, or dealer may extend or maintain credit to or for a
customer pursuant to rules or regulation adopted by the Board of Governors
of the Federal Reserve System under Section 7 of the 1934 Act.
Section 4.26 Insurance.
(a) All of the insurable properties of the Borrower are insured for
its benefit under valid and enforceable policies, issued by insurers of
recognized responsibility in amounts and against such risks and losses as
is customary in such industry. Such policies are listed in Exhibit 4.26 -
Schedule of Insurance.
Section 4.27 Patents, Trademarks and Copyrights.
(a) To the best of borrower's knowledge and belief after current
investigation, Borrower owns all patents, trademarks and copyrights, if
any, necessary to conduct its business or possesses licenses or other
rights, if any, therefor. All such intangible property rights are listed in
Exhibit 4.27 - Schedule of Patents, Trademarks and Copyrights. Borrower has
the right to use such proprietary rights without infusing or violating the
rights of any third parties. No claim has been asserted by any person to
the ownership of or right to use any such proprietary right or challenging
or questioning the validity or effectiveness of any such license or
agreement. Each of the proprietary rights is valid and subsisting, and has
not been canceled, abandoned or otherwise terminated.
Section 4.28. Survival of Representations and Warranties.
(a) All representations and warranties by Borrower herein shall
survive the Loan Closing and any subsequent Loan Closings and the delivery
of the Debentures, and any investigation at any time made by or on behalf
of Lender shall not diminish Lender's right to rely on Borrower's
representations and warranties as herein set forth.
ARTICLE V - AFFIRMATIVE COVENANTS
So long as any part of the Debentures remains unpaid or has not been
redeemed or conveyed hereunder, and until such payment, redemption or
conversion in full, unless the Lender shall otherwise consent in writing,
which consent shall not be unreasonably withheld, Borrower agrees that:
(a) The Borrower shall accurately and fairly maintain its books of
account in accordance with GAAP, employ a firm of independent certified
public accountants, which firm is one of the six largest national
accounting firms or which is approved by the Lender, to make annual audits
of its accounts in accordance with generally accepted auditing standards;
permit the Lender and its representatives to have access to and to examine
its properties, books and records (and to copy and make extracts therefrom)
at such reasonable times and intervals as the Lender may request; and to
discuss its affairs, finances and accounts with its officers and auditors,
all to such reasonable extent and at such reasonable times and intervals as
the Lender may request.
(b) The Borrower shall provide the following reports and information
to the Lender and/or the Lender's designee:
(i) As soon as available, and in any event within forty-five
(45) days after the close of each quarter, the Company's report on Form 10-Q
with exhibits for said period. In addition, the Lender may at its sole
discretion request internal monthly reports for specific periods.
(ii) As soon as available, and in any event within ninety (90)
days after the close of each year, the Company's report on Form 1O-K with
exhibits for said period.
(iii) Each quarter, concurrent with the periodic report
required above, a certificate executed by the Chief Financial Officer or
Chief Executive Officer of the Borrower, (A) stating that a review of the
activities of the Borrower during such fiscal period has been made under
his supervision and that the Borrower has observed, performed and fulfilled
each and every obligation and covenant contained herein and is not in
default under any of the same or, if any such default shall have occurred,
specifying the nature and status thereof, and (B) setting forth a
computation in reasonable detail as of the end of the period covered by
such statements, of compliance with the Agreed Minimum Financial Standards
in Exhibit 7.01 as provided therein.
(iv) So long as any Debenture remains outstanding, promptly
(but in any event within five (5) business days) upon learning of the
occurrence of a Default or an Event of Default deliver a certificate signed
by the Chief Executive Officer or Chief Financial Officer of the Borrower
describing such Default, Event of Default and stating what steps are being
taken to remedy or cure the same.
(v) Promptly (but in any event within five (5) business days)
upon the receipt thereof by the Borrower or the Board of Directors of the
Borrower, copies of all reports, all management letters and other detailed
information to the Borrower or the Board by independent accountants in
connection with each annual or interim audit or review of the accounts or
affairs of the Borrower made by such accountants.
(vi) With reasonable promptness, such other information
relating to the finances, properties, business and affairs of the Borrower
and each Subsidiary, as Lender may reasonably request from time to time.
(vii) Promptly upon its becoming available, one copy of each
financial statement, report, press release, notice or proxy statement sent
by Borrower to stockholders generally and of each regular or periodic
report, registration statement or prospectus filed by Borrower with any
securities exchange or the SEC or any successor agency, and of any order
issued by any Governmental Authority in any proceeding to which the
Borrower is a party.
Section 5.02. Preparation of a Budget.
(a) At least thirty (30) days prior to the beginning of Borrower's
fiscal year, Borrower agrees to prepare and submit to the Board, and
furnish to the Lender a copy of an annual plan for such year which shall
include, without limitation, plans for expansion, if any, plans for
incurrences of Indebtedness and projections regarding other sources of
funds, quarterly projected capital and operating expense budgets, cash flow
statements, profit and loss statistics and balance sheet projections,
itemized in such detail as the Board and/or the Lender may request.
Section 5.03. Operation Review.
(a) Borrower agrees that it will review its operations with Lender.
Such operations reviews will be in such depth and detail as Lender shall
reasonably request. Operations reviews, which usually will require a day or
less to complete, will be held as reasonably necessary, generally once a
fiscal quarter.
Section 5.04. Payment of Taxes and Other Indebtedness.
(a) Borrower shall, and shall cause its Subsidiaries, if any, to, pay
and discharge (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its Income or profits, or upon any property
belonging to it, before delinquent, (ii) all lawful claims (including
claims for labor, materials and supplies), which, if unpaid, might give
rise to a Lien upon any of its property, and (iii) all of its other
Indebtedness, except as prohibited hereunder; provided, however, that
Borrower and its Subsidiaries, if any, shall not be required to pay any
such tax, assessment, charge or levy if and so long as the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings and appropriate accruals and reserves
therefor have been established in accordance with GAAP.
Section 5.05. Maintenance of Existence and Rights: Conduct of Business.
(a) Borrower shall, and shall cause its Subsidiaries, if any, to,
preserve and maintain its corporate existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of
its business, and conduct its business in an orderly and efficient manner
consistent with good business practices and in accordance with all valid
regulations and orders of any Governmental Authority. Borrower shall keep
its principal place of business within the United States.
Section 5.06. SEC Filing and Maintenance of SEC Reporting Requirements.
(a) So long as Borrower has a class of securities registered pursuant
to Section 12 of the 1934 Act, Borrower shall duly file, when due, all
reports and statements required of a company whose securities are
registered for public trading under and pursuant to the 1934 Act, as
amended, and any rules and regulations issued thereunder, and to preserve
and maintain its registration thereunder and all of the rights of its
security holders normally associated with a publicly traded stock company.
Section 5.07. Notice of Default.
(a) Borrower shall furnish to Lender, immediately upon becoming aware
of the existence of any condition or event which constitutes a Default or
would with the passage of time become a Default or an Event of Default,
written notice specifying the nature and period of existence thereof and
the action which Borrower is taking or proposes to take with respect
thereto.
Section 5.08. Other Notices.
(a) Borrower shall promptly notify Lender of (i) any Material Adverse
Change in its financial condition or its business, (ii) any default under
any material agreement, contract or other instrument to which it is a party
or by which any of its properties are bound, or any acceleration of the
maturity of any Indebtedness owing by Borrower or its Subsidiaries, if any,
(iii) any material adverse claim against or affecting Borrower or its
Subsidianes, if any, or any of its properties, and (iv) the commencement
of, and any material determination in, any litigation with any third party
or any proceeding before any Governmental Authority, the negative result of
which has a Material Adverse Effect on Borrower and its Subsidiaries, taken
as a whole.
Section 5.09. Compliance with Loan Documents.
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to promptly comply with any and all covenants and provisions of the Loan
Documents.
Section 5.10. Compliance with Material Aereements.
(a) Borrower shall, and shall cause each of its Subsidianes, if any
to comply in all material respects with all material Agreements,
indentures, mortgages or documents binding on it or affecting its
properties or business.
Section 5.11. Operations and Properties.
(a) Borrower shall, and shall cause each of its Subsidianes, if any,
to, act prudently and in accordance with customary industry standards in
managing or operating its assets, properties, business and investments.
Borrower shall, and shall cause each of its Subsidiaries, if any, to, keep
in good working order and condition, ordinary wear and tear excepted, all
of its assets and properties which are necessary to the conduct of its
business.
Section 5.12. Books and Records: Access.
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to, maintain complete and accurate books and records of its transactions in
accordance with good accounting practices. Borrower shall give each duly
authorized representative of Lender access during all normal business hours
to, and shall permit such representative to examine, copy or make excerpts
from, any and all books, records and documents in the possession of
Borrower and its Subsidiaries and relating to its affairs, and to inspect
any of the properties of Borrower and its Subsidiaries, if any. Borrower
shall make a copy of this Loan Agreement, along with any waivers, consents,
modifications or amendments, available for review at its principal office
by Lender or Lender's representatives.
Section 5.13. Compliance with Law.
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to, comply with all applicable laws, rules, regulations, and all orders of
any Governmental Authority applicable to it or any of its property,
business operations or transactions, a breach of which could reasonably be
expected to have a Material Adverse Effect.
Section 5.14. Insurance.
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to, maintain such worker's compensation insurances liability insurance and
insurance on its properties, assets and business, now owns or hereafter
acquired, against such casualties, risks and contingencies, and in such
types and amounts, as are consistent with customary practices and standards
of companies engaged in similar businesses.
Section 5.15. Authorizations and Approvals.
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to, promptly obtain, from time to time at its own expense, all such
governmental licenses, authorizations, consents, permits and approvals as
may be required to enable it to comply with its obligations hereunder and
under the other Loan Documents.
Section 5.16. ERISA Compliance.
(a) Borrower shall (i) at all times, make prompt payment of all
contributions required under all Plans, if any, and required to meet the
minimum funding standards set form in ERISA with respect to its Plans
subject to ERISA, if any, (ii) notify Lender immediately of any fact in
connection with any of its Plans, which might constitute grounds for
termination thereof or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan, together with a
statement, if requested by Lender as to the reason therefor and the action,
if any, proposed to be taken with respect thereto, and (iii) furnish to
Lender upon its request such additional information concerning any of its
Plans as may be reasonably requested.
Section 5.17. Further Assurances
(a) Borrower shall, and shall cause each of its Subsidiaries, if any,
to, make, execute or endorse, and acknowledge and deliver or file or cause
the same to be done, all such notices, certifications and additional
Agreements, undertakings, transfers, assignments, or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper in connection with any of the Loan
Documents, or the obligations of Borrower or its Subsidiaries, if any,
thereunder, which Lender may request from time to time.
Section 5.18. Indemnity by Borrower.
(a) Borrower shall indemnify, save, and hold harmless, Lender and its
directors, officers, agents, attorneys, and employees (collectively, the
"Indemnitees") from and against: (i) any and all claims, demands, actions
or causes of action that are asserted against any Indemnitee if the claim,
demand, action or cause of action directly or indirectly related to the
Loan Agreement and the other Loan Documents issued pursuant thereto, the
use of proceeds of the Loans, or the relationship of Borrower and Lender
under this Loan Agreement or any transaction contemplated pursuant to this
Loan Agreement, (ii) any administrative or investigative proceeding by any
Governmental Authority directly or indirectly related to a claim, demand,
action or cause of action described in clause (i) above, and (iii) any and
all liabilities, losses, costs, or expenses (including reasonable
attorneys' fees and disbursements) that any indemnitee suffers or incurs as
a result of any of the foregoing; provided, however, that Borrower shall
have no obligation under this Section 5.18 to Lender with respect to any of
the foregoing arising out of the negligence or willful misconduct of Lender
or its assignees or the breach by the Lender or its assignees of this Loan
Agreement or any other Loan Document or other document executed in
connection with any of the aforesaid, the breach by Lender or its assignees
of any Agreement or commitment with other parties, the violation or alleged
violation of any law, rule or regulation by Lender or its assignees, or
from the transfer or disposition by Lender of any Debenture or the Common
Stock issued upon conversion. If any claim, demand, action or cause of
action is asserted against any indemnitee, such indemnitee shall promptly
notify Borrower, but the failure to so promptly notify Borrower shall not
affect Borrower's obligations under this Section unless such failure
materially prejudices Borrower's right to participate in the contest of
such claim, demand, action or cause of action, as hereinafter provided. In
the event that such indemnitee's failure to properly notify the Borrower
materially prejudices Borrower's right to participate in the contest of
such claim, demand, action, or cause of action, then said indemnitees shall
have no right to receive, and Borrower shall have no obligation to pay, any
Indemnification amounts hereunder. Borrower may elect to defend any such
claim, demand, action or cause of action (at its own expense) asserted
against said indemnitee and, if requested by Borrower in writing and so
long as no Default or Event of Default shall have occurred and be
continuing, such indemnitee (at Borrower's expense) shall in good faith
contest the validity, applicability and amount of such claim, demand,
action or cause of action and shall permit Borrower to participate in such
contest. Any indemnitee that proposes to settle or compromise any claim or
proceeding for which Borrower may be liable for payment to or on behalf of
an indemnitee hereunder shall give Borrower written notice of the terms of
such proposed settlement or compromise reasonably in advance of settling or
compromising such claim or proceeding and shall obtain Borrower's written
concurrence thereto. In the event that said indemnitee plan's to obtain
Borrower's prior written consent to any such settlement or compromise, said
indemnitee shall have no right to receive and Borrower shall have no
obligation to pay any indemnification amounts hereunder. Each indemnitee
may employ counsel in enforcing its rights hereunder and in defending
against any claim, demand, action, or cause of action covered by this
Section 5.18; provided, however, that each indemnitee shall endeavor, but
shall not be obligated, in connection with any matter covered by this
Section which also involves other indemnitee, to use reasonable efforts to
avoid unnecessary duplication of effort by counsel for all indemnitee,
including by allowing Borrower to select one lawyer for all parties, such
selection to be subject to the approval of such parties, which approval
shall not be unreasonably withheld. Any obligation or liability of Borrower
to any indemnitee under this Section 5.18 shall survive the expiration or
termination of this Loan Agreement and the repayment of the Debentures.
5.19 Payment of Management Fee/Monitoring Fee
Borrower shall pay each of Renaissance III and Renaissance PLC a
financial advisory fee of $500 per month.
ARTICLE VI - NEGATIVE COVENANTS
So long as any part of the Debentures have not been redeemed or
converted hereunder, and until such redemption or conversion in full,
unless the Lender shall otherwise consent in writing, which consent shall
not be unreasonably withheld, Borrower agrees that, unless permitted
otherwise:
Section 6.01. Limitation on Indebtedness.
(a) Borrower and its Subsidianes shall not incur, create, contract,
waive, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness, except:
(i) Indebtedness arising out of this Loan Agreement or
otherwise contemplated herein;
(ii) Indebtedness secured by the Permitted Liens;
(iii) Current liabilities for accounts payable or obligations
accrued (other than for borrowed fiends or purchase money obligations) and
incurred in the ordinary course of business, and for taxes and assessments;
or
(iv) Indebtedness as listed on Exhibit 4.05
Section 6.02. Negative Pledge.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to, create, incur, permit or suffer to exist any Lien upon any of its
property or assets other than Permitted Liens, or payments upon any
Subordinated Debt other than regularly scheduled installments of principal
and interest and shall not directly or indirectly make any payment of any
Subordinated Debt which would violate the terms of the Loan Agreement or of
such Subordinated Debt or any subordination agreement applicable to such
Subordinated Debt.
Section 6.03. Limitation on Investments.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to make or have outstanding any Investments in any Person, except for
Borrower's (and any Subsidiary's) ownership of stock of Subsidiaries, loans
and other transactions between the Borrower and any Subsidiaries, short
term bank deposits or money market investments, and such other "cash
equivalent" investments as Lender may from time to time approve.
Section 6.04. Alteration of Material Agreements.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to, consent to or permit any alteration, amendment, modification,
release, waiver or termination of any material agreement to which it is a
party other than in the ordinary course of business.
Section 6.05. Certain Transactions.
(a) Except as permitted by Section 6.12, Borrower shall not, and
shall not permit its Subsidiaries, if any, to, enter into any transaction
with, or pay any management fees to, any Affiliate; provided, however, that
Borrower and any Subsidiary may enter into transactions with Affiliates
upon terms not less favorable to Borrower and any Subsidiary than would be
obtainable at the time in comparable transactions of Borrower and any
Subsidiaries in arms-length dealings with Persons other than Affiliates.
Section 6.06. Limitations on Acquisition of Non-Related Business.
Borrower shall not, and shall not permit its Subsidiaries, if any,
to, engage in any line of business or acquire any new product lines or
business or acquire any companies unless such new product line or business
of the company acquired is primarily involved in the health-care supply,
manufacturing or services industry.
Section 6.07. Limitation on Sale of Properties.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to: (i) sell, assign, convey, exchange, lease or otherwise dispose of
any of its properties, rights, assets or business, whether now owned or
hereafter acquired, except in the ordinary course of its business and for a
fair consideration, or (ii) sell, assign or discount any accounts
receivable except in the ordinary course of business or to secure bank or
commercial working capital loans in the ordinary course of business.
Section 6.08. Fiscal Year and Accounting Method.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to, change its method of accounting except as permitted by GAAP.
Section 6.09. Liquidation and Dispositions of Substantial Assets.
(a) Borrower shall not permit Subsidiaries to dissolve or liquidate,
(ii) sell, transfer, lease or otherwise dispose of all or any substantial
part of its property or assets or business, or (iii) enter into any other
transaction that has a similar effect.
Section 6.10. No Amendments to Articles of Incorporation or Bylaws.
(a) Borrower shall not, and shall not permit its Subsidiaries, if
any, to materially amend its Articles of Incorporation or bylaws except as
is necessary to fulfill the conditions of this Loan Agreement.
Section 6.11. Limitation on Increased Executive Compensation and Bonus,
Profit Sharing or other Incentive Payments.
(a) Borrower will not increase the salary, bonus, or other
compensation programs (whether in cash, securities, or other property, and
whether payment is deferred or current) of its top five executive officers
unless such compensation increase is approved by a majority of the Board or
a Compensation Committee of the Board of Directors, a majority of whom
shall be non-employee Directors.
(b) Borrower shall not pay any Bonus, Profit Sharing or Other
Incentive Payments until such plans are formally adopted by the majority of
the Board or a Compensation Committee of the Board of Directors, a majority
of which shall be non-employee Directors.
Section 6.12. Limitation on Lending to Parent.
Borrower shall not lend more than $1,000,000 to Retirement Care
Associates, Inc., or any affiliate of Retirement Care Associates, Inc. If
money is loaned, it shall be for a period of less than forty-five (45) days
and have written documentation containing standard commercial terms and
conditions.
Section 6.13. Restricted Payments.
So long as any Debentures are outstanding, Borrower shall not declare
or pay any dividend (other than stock dividends) (i) on any Common Stock,
or purchase, redeem, decrease, or otherwise acquire any shares of Common
Stock, or (ii) on any Preferred Stock issued after the date hereof of which
Retirement Care Associates, Inc., or its affiliates owns in excess of 30%,
if such dividend or purchase in the aggregate exceeds 1.25 times the
cumulative earnings of the Borrower for the previous twelve months.
ARTICLE VII - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
Section 7.01. Financial Ratios.
(a) So long as any part of the Debentures has not been redeemed or
converted hereunder, and until such redemption or conversion in full, or
unless the Lender (or if any portion of the Debentures has been assigned,
the holders of a majority in amount of the outstanding Principal Amount)
shall otherwise consent in writing, the Borrower will at all times maintain
the agreed minimum financial ratios or standards as provided and set forth
in Exhibit 7.01 - Agreed Minimum Financial Standards as attached hereto and
made a part hereof. Borrower shall deliver to Lender a compliance
certificate covering these ratios as required in Section 5.01(b)(iii).
ARTICLE VIII - EVENTS OF DEFAULT
Section 8.01. Events of Default.
(a) An "Event of Default" shall exist if any one or more of the
following events (herein collectively called `Events of Default') shall
occur and be continuing:
(i) Borrower shall fail to pay (or shall state in an intention
not to pay or its inability to pay), not later than ten (10) days after the
due date, any installment of interest on or principal of, any Debenture or
any fee, expense or other payment required hereunder;
(ii) Any representation or warranty made under this Loan
Agreement, or any of the other Loan Documents, or in any certificate or
statement furnished or made to Lender pursuant hereto or in connection
herewith or with the Loans hereunder, shall prove to be untrue or
inaccurate in any material respect as of the date on which such
representation or warranty was made;
(iii) Default shall occur in the performance of any of the
covenants or agreements of Borrower or of its Subsidiaries, if any,
contained herein, or in any of the other Loan Documents, which is not
remedied within thirty (30) days after written notice thereof to Borrower
from Lender;
(iv) Default shall occur in the payment of any material
indebtedness (other than the Obligation) of the Borrower or its
Subsidiaries, if any, or default shall occur in respect of any note, loan
agreement or credit agreement relating to any such indebtedness and such
default shall continue for more than the period of grace, if any, specified
therein and any such indebtedness shall become due before its stated
maturity by acceleration of the maturity thereof or shall become due by its
terms and shall not be promptly paid or extended.
(v) Any of the Loan Documents shall cease to be legal, valid
and binding agreements enforceable against the Borrower in accordance with
the respective terms thereof or shall in any way terminated or become or be
declared ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective rights, titles, interests, remedies, powers
or privileges intended to be created thereby;
(vi) Borrower or its Subsidianes, if any, shall (A) apply for
or consent to the appointment of a receiver, trustee, custodian, intervener
or liquidator of itself, or of all or substantially all of such Person's
assets, (B) file a voluntary petition in bankruptcy, admit in writing that
such Person is unable to pay such Person's debts as they become due or
generally not pay such Person's debts as they become due, (C) make a
general assignment for the benefit of creditors, (D) file a petition or
answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws, (E) file an answer
admitting the material allegations of, or consent to, or default in
answering, a petition filed against such Person in any bankruptcy,
reorganization or insolvency proceeding, or (F) take corporate action for
the purpose of effecting any of the foregoing;
(vii) An involuntary petition or complaint shall be filed
against Borrower or any of its Subsidiaries, if any, seeking bankruptcy or
reorganization of such Person or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of such Person, or all or substantially
all of such Person's assets, and such petition or complaint shall not have
been dismissed within sixty (60) days of the filing thereof or an order,
Order for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition or
complaint seeking reorganization of Borrower or its subsidiary, if any, or
appointing a receiver, custodian, trustee, intervenor or liquidator of such
Person, or of ah or substantially all of such Person's assets;
(viii) Any final judgments, for the payment of money in excess
of the sum of $250,000 in the aggregate shall be rendered against Borrower
or any subsidiary and such judgment or judgments shall not be satisfied or
discharged at least ten (10) days prior to the date on which any of its
assets could be lawfully sold to satisfy such judgment;
(ix) The Borrower shall fail to issue and deliver shares of
Common Stock as provided herein upon conversion of the Debenture; or
(x) The Borrower shall fail to submit Lender's nominee, if any,
for election to the Board of Directors of the Borrower or shall remove
Lender's nominee from the Board of Directors of Borrower other than for
cause.
Section 8.02. Remedies Unon Event of Default.
(a) If an Event of Default shall have occurred and be continuing for
a period of thirty (30) days, then Lender may exercise any one or more of
the following rights and remedies, and any other remedies provided in any
of the Loan Documents, as Lender in its sole discretion may deem necessary
or appropriate:
(i) declare the unpaid Principal Amount (after application of
any payments or installments received by Lender) of, and all interest then
accrued but unpaid on, the Debentures and any other liabilities hereunder
to be forthwith due and payable, whereupon the same shall forthwith become
due and payable without presentment, demand, protest, notice of default,
notice of acceleration or of intention to accelerate or other notice of any
kind, all of which Borrower hereby expressly waives, anything contained
herein or in the Debentures to the contrary notwithstanding;
(ii) reduce any claim to judgment; and
(iii) without notice of default or demand, pursue and enforce
any of Lender's rights and remedies under the Loan Documents, or otherwise
provided under or pursuant to any applicable law or Agreement, all of which
rights may be specifically enforced.
Section 8.03. Performance by Lender.
(a) Should Borrower fail to perform any covenant, duty or agreement
contained herein or in any of the other Loan Documents, Lender may perform
or attempt to perform such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly
pay any amount reasonably expended by Lender in such performance or
attempted performance to Lender at its principal office in Dallas, Texas,
together with interest thereon, at the interest rate specified in the
Debenture, from the date of such expenditure until paid. Notwithstanding
the foregoing, it is expressly understood that Lender assumes no liability
or responsibility for the performance of any duties of Borrower hereunder
or under any of the other Loan Documents.
Section 8.04. Payment of Expenses Incurred by Lender.
(a) Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any, provided
herein, Borrower agrees to pay and shall pay all costs and expenses
(including Lender's attorney's fees and expenses) reasonably incurred by
Lender in connection with the preservation and enforcement of Lender's
rights under the Loan Agreement, the Debentures, or any other Loan
Document.
ARTICLE IX - REGISTRATION RIGHTS
Section 9.01. Demand For Registration.
(a) Subject to the Holder's right to convert the Debenture under the
Loan Agreement, the Borrower hereby agrees to register, subject to the
terms and conditions set forth herein, all or any portion of the
Registrable Securities at any time it shall receive a written request from
the Holders of at least fifty percent (50%) of the Registrable Securities
Then Outstanding (or a lesser percent if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed
$1,000,000) that the Borrower file a registration statement under the 1933
Act covering the registration of at least a majority of the Registrable
Securities Then Outstanding. The Borrower shall, within 20 days of its
receipt thereof, give written notice of such request to all Holders of
record of Registrable Securities. The Holders of said Registrable
Securities shall then have 15 days from the date of mailing of such notice
by the Borrower to request that all or a portion of their respective
Registrable Securities be included In said registration. The Borrower
hereby agrees, subject to the limitations hereof, to use its best lawful
efforts to effect as soon as reasonably possible, and in any event (if
legally possible, and as allowed by the SEC, and if no factor outside the
Borrower's reasonable control prevents it) within 150 days of the receipt
of the initial written registration request, to effect the registration
under the 1933 Act of all Registrable Securities which the Holders thereof
(the "Initiating Holders") have requested.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall
so advise the Borrower as a part of their request made pursuant to this
Loan Agreement, and the Borrower shall include such information in the
written notice to the other Holders of Registrable Securities referred to
in Section 9.01(a). In such event, the right of any Holder to include
his/her Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting (unless otherwise
mutually agreed by the Borrower, the underwriter, a majority in interest of
the Initiating Holders and such Holder) is limited to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Borrower as provided in Section
9.03(e)) enter into an underwriting Agreement in customary form with the
underwriter or underwriters selected for such underwriting by mutual
agreement of the Borrower and a majority in interest of the Initiating
Holders, which Agreement shall not be unreasonably withheld.
Notwithstanding any other provision of this Section 9.01, if the
underwriter advises the Initiating Holders and the Borrower in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated on a pro rata basis among
all Holders that have requested to participate in such registration.
(c) Borrower shall utilize Rule 144 if said exemption, in the
Borrower's sole determination, meets its distribution requirements.
(d) Notwithstanding the foregoing, if the Borrower shall furnish to
the Initiating Holders a certificate signed by the President of the
Borrower stating that in the good faith judgment of the Board of Directors
of the Borrower, it would be materially detrimental to the Borrower and its
shareholders for such registration statement to be filed at that time, and
it is therefore essential to defer the filing of such registration
statement, the Borrower shall have the right to defer the commencement of
such a filing for a period of not more than 180 days after receipt of the
request of the Initiating Holders; provided, however, that at least 12
months must elapse between any two such deferrals.
Section 9.02. "Piggy-Back" Registration.
If, but without any obligation to do so, the Borrower proposes to
register any of its capital stock under the 1933 Act in connection with the
public offering of such securities for its own account or for the account
of its security holders, other than Holders of Registrable Securities
pursuant hereto (a "Piggy-Back Registration Statement"), (except for (i) a
registration relating solely to the sale of securities to participants in
the Borrower's stock plans or employee benefit plans or (ii) a registration
relating solely to an SEC Rule 145 transaction or any rule adopted by the
SEC in substitution thereof or in amendment thereto), then:
(a) The Borrower shall give written notice of such determination to
each Holder of Registrable Securities, and each such Holder shall have the
right to request, by written notice given to the Borrower within 15 days of
the date that such written notice was mailed by the Borrower to such
Holder, that a specific number of Registrable Securities held by such
Holder be included in the Piggy-Back Registration Statement (and related
underwritten offering, if any);
(b) If the Piggy-Back Registration Statement relates to an
underwritten offering, the notice given to each Holder shall specify the
name or names of the managing underwriter or underwriters for such
offering. In addition such notice shall also specify the number of
securities to be registered for the account of the Borrower and for the
account of its shareholders (other than the Holders of Registrable
Securities), if any;
(c) If the Piggy-Back Registration Statement relates to an
underwritten offering, each Holder of Registrable Securities to be included
therein must agree
(I) to sell such Holder's Registrable Securities on the same basis as
provided in the underwriting arrangement approved by the Borrower, and (ii)
to timely complete and execute all questionnaires, powers of attorney,
indemnities, hold-back agreements, underwriting agreements and other
documents required under the terms of such underwriting arrangements or by
the SEC or by any state securities regulatory body;
(d) If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that
inclusion of all or any portion of the Registrable Securities in such
offering would adversely affect the ability of the underwriters for such
offering to sell all of the securities requested to be included for sale in
such offering at the best price obtainable therefor, the aggregate number
of Registrable Securities that may be sold by the Holders shall be
increased to such number of Registrable Securities, if any, that the
managing underwriter or underwriters determine may be included therein
without such adverse effect as provided below. If the number of securities
proposed to be sold in such underwritten offering exceeds the number of
securities that may be sold in such offering, there shall be included in
the offering, first, up to the maximum number of securities to be sold by
the Borrower for its own account and for the account of other stockholders
(other than Holders of Registrable Secunties), as they may agree among
themselves, and second, as to the balance, if any, Registrable Securities
requested to be included therein by the Holders thereof (pro rata as
between such Holders based upon the number of Registrable Securities
initially proposed to be registered by each), or in such other proportions
as the managing underwriter or underwriters for the offering may require;
provided, however, that in the event that the number of securities proposed
to be sold in such underwritten offering exceeds the number of securities
that may be sold in such offering pursuant to the terms and conditions set
form above and the Piggy-Back Registration Statement is a result of public
offering by the Borrower of its securities for its own account, there shall
be included In the offering, first, up to the maximum number of securities
to be sold by the Borrower for its own account and second, as to the
balance, if any, securities to be sold for the account of the Borrower's
stockholders (both the Holders of Registrable Securities request and such
other stockholders of the Borrower requested to be included therein) on a
pro rata basis;
(e) Holders of Registrable Securities shall have the right to
withdraw their Registrable Securities from a Piggy-Back Registration
Statement, but if the same relates to an underwritten offering, they may
only do so during the time period and on the terms agreed upon among the
underwriters for such underwritten offering and the Holders of Registrable
Securities.
Section 9.03. Obligations of the Borrower.
Whenever required to effect the registration of any Registrable
Securities pursuant to this Loan Agreement, the Borrower shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best lawful efforts to
cause such registration statement to become effective, and keep such
registration statement effective until the sooner of all such Registrable
Securities have been distributed, or until 120 days have elapsed since such
registration statement became effective (subject to extension of this
period as provided below);
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by
such registration statement, or 120 days have elapsed since such
registration statement became effective (subject to the extension of this
period as provided below);
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the 1933 Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by
them.
(d) Use its best lawful efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Borrower shall not be required
in connection therewith or as a condition thereto to qualify as a broker-
dealer in any states or jurisdictions or to do business or to file a
general consent to service of process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Borrower and the Holders of a majority of the
Registrable Securities to be included in such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under
the 1933 Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and
(g) In the event of the notification provided for in Section 9.03(f)
above, the Borrower shall use its best efforts to prepare and file with the
SEC (and to provide copies thereof to the Holders) as soon as reasonably
possible an amended prospectus complying with the 1933 Act, and the period
during which the prospectus referred to in the notice provided for in
Section 9.03(f) above cannot be used and the time period prior to the use
of the amended prospectus referred to in this Section 9.03(g) shall not be
counted in the 120 day period of this Section 9.03.
Section 9.04. Furnish Information.
(a) It shall be a condition precedent to the obligations of the
Borrower to take any action pursuant to this Article IX that the selling
Holders shall furnish to the Borrower any and all information reasonably
requested by the Borrower, its officers, directors, employees, counsel,
agents or representatives, the underwriter or underwriters, if any, and the
SEC or any other Governmental Authority, including but not limited to: (I)
such information regarding themselves, the Registrable Securities held by
them, and the intended method of disposition of such securities, as shall
be required to effect the registration of their Registrable Securities, and
(ii) the identity of and compensation to be paid to any proposed
underwriter or broker-dealer to be employed in connection therewith.
Section 9.05. Expenses of Demand Registration.
Except as set forth below, all expenses, other than underwriting
discounts and commissions incurred in connection with not more than two
demand registrations pursuant to Section 9.01 above, including, without
limitation, all registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Borrower, and
the reasonable fees and disbursements of one counsel for the selling
Holders, shall be borne by the Borrower; provided, however, that the
Borrower shall not be required to pay for any expenses of any registration
proceeding which was commenced prior to July 12, 1998, pursuant to Section
9.01, or if the registration request is subsequently withdrawn at the
written request of the Holders of the majority of the Registrable
Securities subject to such registration.
Section 9.06. Expenses of Piggy-Back Registration.
Each Holder shall bear and pay all commissions and discounts
attributable to the inclusion of such Holder's Registrable Securities in
any registration, filing or qualification of Registrable Securities
pursuant to Section 9.02 and the reasonable fees and disbursements of the
counsel for the selling Holders.
Section 9.07. Indemnification Regarding Registration Rights.
If any Registrable Securities are included in a registration
statement under this Article IX:
(a) To the extent permitted by law, the Borrower will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the 0000 Xxx) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages, liabilities
(joint or several) or any legal or other costs and expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, costs, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (I) any
untrue statement or alleged untrue statement of a material fact with
respect to the Borrower or its securities contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements therein; (ii) the
omission or alleged omission to state therein a material fact with respect
to the Borrower or its securities required to be stated therein or
necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Borrower of the 1933 Act, the 1934
Act, any federal or state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law.
Notwithstanding the foregoing, the indemnity agreement contained in this
Section 9.07(a) shall not apply and the Borrower shall not be liable (I) in
any such case for any such loss, claim, damage, costs, expenses, liability
or action to the extent that it arises out of or is based upon a violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder, underwriter or controlling person, or (ii) for amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the prior written consent of the Borrower,
which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Loan Agreement
shall indemnify and hold harmless the Borrower, each of its directors and
officers who have signed the registration statement, each Person, if any,
who controls the Borrower within the meaning of the 1933 Act or the 1934
Act, each of the Borrower's employees, agents, counsel and representatives,
any underwriter and any other Holder selling securities in such
registration statement, or any of its directors or officers, or any person
who controls such Holder, against any losses, claims, damages, costs,
expenses, liabilities (joint or several) to which the Borrower or any such
director, officer, controlling person employee, agent, representative,
underwriter, or other such Holder, or director, officer or controlling
person thereof, may become subject, under the 1933 Act, the 1934 Act or
other federal or state law, only insofar as such losses, claims, damages,
costs, expenses or liabilities or actions in respect thereto arise out of
or are based upon any Violation, in each case to the extent and only to the
extent that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in
connection with such. Each such Holder will indemnify any legal or other
expenses reasonably incurred by the Borrower or any such director, officer,
employee, agent representative, controlling person, underwriter or other
Holder, or officer, director or of any controlling person thereof, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity Agreement
contained in this Section 9.07(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, costs, expenses, liability or
action if such settlement is effected without the prior written consent of
the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
9.07 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
9.07, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assure the
defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain
its own counsel, with the reasonable fees and expenses of such counsel to
be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 9.07,
except to the extent that the failure results in a failure of actual notice
to the indemnifying xxxxx and such indemnifying party is materially
prejudiced in its ability to defend such action solely as a result of the
failure to give such notice.
(d) If the indemnification provided for in this Section 9.07 is
unavailable to an indemnified party under this Section in respect of any
losses, claims, damages, costs, expenses, liabilities or actions referred
to herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, costs,
expenses, liabilities or actions in such proportion as is appropriate to
reflect the relative fault of the Borrower, on the one hand and of the
Holder, on the other, in connection with the Violation that resulted in
such losses, claims, damages, costs, expenses, liabilities or actions. The
relative fault of the Borrower, on the one hand, and of the Holder, on the
other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of the material fact or the omission to
state a material fact relates to information supplied by the Borrower or by
the Holder, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(e) The Borrower, on the one hand, and the Holders, on the other
hand, agree that it would not be just and equitable if contribution
pursuant to this Section 9.07 were determined by a pro rata allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result
of losses, chains, damages, costs, expenses, liabilities and actions
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any reasonable legal
or other expenses incurred by such indemnified party in connection with
defending any such action or claim. Notwithstanding the provisions of this
Section 9.07, neither the Borrower nor the Holders shall be required to
contribute any amount in excess of the amount by which the total price at
which the securities were offered to the public exceeds the amount of any
damages which the Borrower or each such Holder has otherwise been required
to pay by reason of such Violation. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the 0000 Xxx)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
Section 9.08. Reports Under the 0000 Xxx.
So long as the Borrower has a class of securities registered pursuant
to Section 12 of the 1934 Act, with a view to making available to the
Holders the benefits of Rule 144 promulgated under the 1933 Act ("Rule
144") and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Borrower to the public without
registration or pursuant to a registration on Form S-3, if applicable, the
Borrower agrees to use its best lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Borrower under the 1933 Act and the 1934 Act;
(c) Use its best efforts to include all Common Stock covered by such
registration statement on NASDAQ if the Common Stock is then quoted on
NASDAQ; or list any Common Stock covered by such registration statement on
such securities exchange on which any of the Common Stock is then listed;
or, if the Common Stock is not then quoted on NASDAQ or listed on any
national securities exchange, use its best efforts to have such Common
Stock covered by such registration statement quoted on NASDAQ or, at the
option of the Borrower, listed on a national securities exchange; and
(d) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request a copy of the most recent annual or
quarterly report of the Borrower and such other SEC reports and documents
so filed by the Borrower, and (ii) such other information (but not any
opinion of counsel) as may be reasonably requested by any Holder seeking to
avail himself of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such
form.
Section 9.09. Assignment of Registration Rights.
(a) Subject to the terms and conditions of the Loan Agreement and the
Debentures, the right to cause the Borrower to register Registrable
Securities pursuant to this Loan Agreement may be assigned by Holder to any
transferee or assignee of such securities; provided that said transferee or
assignee is a transferee or assignee of at least ten percent (10%) of the
Registrable Securities and provided that the Borrower is, within a
reasonable time after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act; it being the
intention that so long as Holder holds any Registrable Securities
hereunder, either Holder or its transferee or assignee of at least ten
percent may exercise the demand right to registration and piggy-back
registration rights hereunder. Other than as set forth above, the parties
hereto hereby agree that the registration rights hereunder shall not be
transferable or assigned and any contemplated transfer or assignment in
contravention of this Loan Agreement shall be deemed null and void and of
no effect whatsoever.
Section 9.10. Other Matters.
(a) Each Holder of Registrable Securities hereby agrees by
acquisition of such Registrable Securities that, with respect to each
offering of the Registrable Securities, whether each Holder is offering
such Registrable Securities in an underwritten or non-underwritten
offering, such Holder will comply with Rules 10b-2, 10b-6 and 10b-7 of the
1934 Act and such other or additional anti-manipulation rules then in
effect until such offering has been completed, and in respect of any non-
underwritten offering, in writing will inform the Borrower, any other
Holders who are selling shareholders, and any national securities exchange
upon which the securities of the Borrower are listed, that the Registrable
Securities have been sold and will, upon the Borrower's request, furnish
the distribution list of the Registrable Securities. In addition, upon the
request of the Borrower, each Holder will supply the Borrower with such
documents and information as the Borrower may reasonably request with
respect to the subject matter set forth and described in this Section 9.10.
(b) Each Holder of Registrable Securities hereby agrees by
acquisition of such Registrable Securities that, upon receipt of any notice
from the Borrower of the happening of any event which makes any statement
made in the registration statement, the prospectus or any document
incorporated therein by reference, untrue in any material respect or which
requires the making of any changes in the registration statement, the
prospectus or any document incorporated therein by reference, in order to
make the statements therein not misleading in any material respect, such
Holder shall forthwith discontinue disposition of Registrable Securities
under the prospectus related to the applicable registration statement until
such Holder's receipt of the copies of the supplemented or amended
prospectus, or until it is advised in writing by the Borrower that the use
of the prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in the
prospectus.
(c) The Borrower hereby agrees not to effect any public sale or other
distribution of its equity securities, or any securities convertible into
or exchangeable or exercisable for such equity securities, during the
period commencing on the 7th day prior to, and ending on the 120th day
(subject to extension as provided in Section 9.03 hereof) following the
effective date of any underwritten demand registration, other than pursuant
to Form S-8.
Section 9.11 Termination of Rights.
(a) The Holders' right to demand registration and to participate in a
Piggy-Back Registration, as granted to Holders under this Article IX, shall
terminate on June 30, 2006, or after the Holder has exercised two demand
registration rights at the expense of the Borrower as provided in Article
IX of this Loan Agreement, whichever is first to occur.
ARTICLE X - DIRECTORS AND BOARD MEETING ATTENDANCE
Section 10.01. Board Representation or Attendance by Lender Designee.
(a) Borrower herewith agrees that Lender shall have the right from
time to time, at Lender's option and so long as there is $100,000 face
value of Debentures that have not been fully converted or redeemed, to
designate a nominee to the Board of Directors of the Borrower, which
designee is subject to the written approval of Borrower which approval
shall not be unreasonably withheld. Borrower will, at all times, use its
reasonable best efforts to secure the election of such designee as a
Director of the Borrower, provided that such designee may, at his or her
option, elect to serve only as an "Advisory Director" with all the rights
of the Directors in regards to notice and attendance at meetings of the
Board of Directors, or committees thereof, but without voting rights. All
reasonable costs and expenses incurred by such Designee as a Director or
Advisory Director, or by Lender on behalf of such Designee, shall be
reimbursed by Borrower, consistent with payment policies accorded to other
independent directors.
(b) Further, though Lender may waive, from time to time, its right to
require a Board Designee, in such event it shall be entitled, at its own
expense, to have a representative of the Lender attend meetings of the
Board of Directors of the Borrower or of its Subsidiaries and such
representative may serve as an observer but without voice in matters under
discussion except as requested.
(c) Any such Designee or representative of the Lender shall, if
requested to do so, absent himself or herself from the meeting in the event
of, and so long as, the Directors are considering and acting on matters
pertaining to any rights or obligations of the Borrower or the Lender under
the Loan Agreement, the Debenture, or the other Loan Documents. Borrower
may provide Lender's designated representative with the same notice of
Board meetings and information as the Borrower shall provide to its duly
elected Directors.
Section 10.02. Borrower's Right to Request Lender to Provide an Advisor and
a Director Nominee.
(a) Lender herewith agrees that, so long as no Default or Event of
Default exists under the Loan Agreement and so long as the Debentures have
not been fully converted or redeemed, Lender will, at the written request
of Borrower, use its reasonable best efforts to provide, from time to time,
a person or persons, reasonably believed knowledgeable in investor
relations, such person or persons to be available to consult with, and
serve as advisor to, the Borrower about its communications with its
shareholders and with the general investment public. Further, if requested
by Borrower, at least one such person will be available to serve as a
nominee to the Board of Directors of the Borrower provided that such
nominee may, at his or her option, elect to serve only as an "Advisory
Director" with all the rights of the Directors in regards to notice and
attendance at meetings of the Board of Directors, or committees thereof,
but without voting rights. All reasonable costs and expenses incurred by
such person or persons, or by Lender on behalf of such persons, shall be
reimbursed by Borrower, consistent with payment policies accorded to other
independent directors.
Section 10.03. Limitation of Authority of Persons Designated as a Director
Nominee.
(a) It is provided and agreed that the actions and advice of any
person while serving pursuant to Section 10.01 or 10.02 as an advisor to
the Borrower or as a member of Borrower's Board of Directors, or while
serving solely as a representative of Lender in attendance at meetings of
the Board of Directors, shall be construed to be the actions and advice of
that person alone and not be construed as actions of the Lender as to any
notice of requirements or rights of Lender under this Loan Agreement, the
Debenture or the other Loan Documents; nor as actions of the Lender to
approve modifications, consents, amendments or waivers thereof; and all
such actions or notices shall be deemed actions or notices of the Lender
only when duly provided in writing and given in accordance with the
provisions of this Loan Agreement.
Section 10.04. Nonliability of Lender.
(a) The provisions of Section 10.01 and 10.02 notwithstanding, the
relationship between Borrower and Lender is, and shall at all times remain,
solely that of borrower and lender, and except for the Agreement to use its
best efforts to provide a knowledgeable advisor (whose actions and advice
shall be deemed to be solely advised by such person in an individual
capacity and not advice by Lender), Lender neither undertakes nor assumes
any responsibility or duty to the Borrower to review, inspect, supervise,
pass judgment upon, or inform Borrower of any matter in connection with any
phase of Borrower's business, operations, or condition, financial or
otherwise. Borrower shall rely entirely upon its own judgment with respect
to such matters, and any review, inspection, supervision, exercise of
judgment, or information supplied to Borrower by Lender, or any
representative or agent of Lender, in connection with any such matter is
for the protection of Lender, and neither Borrower nor any third party is
entitled to rely thereon.
ARTICLE XI AGENCY AND INTER LENDER PROVISIONS
Section 11.01. Lenders' Representations and Warranties to Other Lenders
Each Lender represents and warrant to the other Lender and the Agent:
(a) It is legal for it to make its portion of the Loan, and the
making of such portion of the Loan complies with laws applicable to it;
(b) It has made, without reliance upon any other Lender, its own
independent review (including any desired investigations and inspections)
of, and it accepts and approves, the loan, the Loan Agreement and the
associated documents and all other matters and information which it deems
pertinent. It acknowledges that the Loan Documents are a complete statement
of all understandings and respective rights and obligations between and
among Lenders and Borrowers regarding the Loan.
(c) No Lender has made any express or implied representation or
warranty to any other Lender with respect to this transaction.
(d) It will, independently and without reliance upon any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this
Agreement, and will make such investigation as it deems necessary to inform
itself as to the Loan, the Loan Document, the Borrower and any collateral;
provided, however, nothing contained in this Section shall limit Agent's
obligation to provide the other Lenders with the information and documents
Agent is expressly required to deliver under this Agreement.
(e) The relationship of Lender is, and shall at all times remain,
solely that of a lender of its respective Loan portion. Lenders are not
partners or joint venturer in connection with the Loan.
Section 11.02. Waiver of Loan Provisions or Interest or Principal Payments
(a) So long as Renaissance III and Renaissance PLC each have not sold
or assigned any of the debentures issued to such Lender pursuant to this
Loan Agreement, consent of both Renaissance III and Renaissance PLC will be
required for the waiver of principal or interest payment and any
alterations thereto.
(b) If either Renaissance III and Renaissance PLC disposes of any
part of their Debentures, a waiver of an interest or principal payment and
any alterations thereto will require the consent of the holders of a
majority by dollar amount of the then outstanding Debentures issued
pursuant to this Loan Agreement.
Section 11.03. Agency
(a) Renaissance III and Renaissance PLC hereby designates and
appoints Renaissance Capital Group, Inc. ("Renaissance Group") as its Agent
under this Agreement and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers as are set forth herein or therein, together
with such other powers as are reasonable incidental thereto. In performing
its functions and duties under this Agreement, the Agent shall act solely
as agent of the Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or
for any of the Borrowers. The Agent may perform any of its duties under
this Agreement, or under the other Loan Documents, by or through its agents
or employees.
(b) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents.
Except as expressly provided herein, the duties of the Agent shall be
mechanical and administrative in nature. The Agent shall have and may use
its sole discretion with respect to exercising or refraining from taking
any actions which the Agent is expressly entitled to take or assert under
this Agreement and the other Loan Documents. The Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any of the other Loan Documents, express or
implied, is intended to or shall be construed to impose upon the Agent any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein. If the Agent seeks the
consent or approval of the Majority in Interest to the taking or refraining
from taking any action hereunder, the Agent shall send notice thereof to
each Lender. The Agent shall promptly notify each Lender any time that the
Majority in Interest have instructed the Agent to act or refrain from
acting pursuant hereto. The Agent may employ agents, co-agents and
attorneys-in-fact and shall not be responsible to the Lenders or the
Borrower, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys
fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees
or agents shall be liable to any Lender for any action taken or omitted by
it or any of them under this Agreement or under any of the other Loan
Documents, or in connection herewith or therewith, except that no Person
shall be relieved of any liability imposed by law, intentional tort or
gross negligence. The Agent shall not be responsible to any Lender for any
recitals, segments, representations or warranties contained in this
Agreement or for the execution, effectiveness, genuiness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of
the other Loan Documents or any of the transactions contemplated thereby,
or for the financial condition of any of the Borrowers. The Agent shall not
be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement
or any of the other Loan Documents or the financial condition of any of the
Borrowers, or the existence or possible existence of any Default or Event
of Default. Agent shall give Lender notice of any Default or Event of
Default of which Agent has actual notice. The Agent may at any time request
instructions from the Lenders with respect to any actions or approvals
which by the terms of this Agreement or of any of the other Loan Documents
the Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Agent shall be absolutely entitled
to refrain from taking any action or to withhold any approval and shall not
be under any liability whatsoever to any Person for remaining from any
action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from the Majority in Interest.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against the Agent as a result of the Agent acting or retraining
from acting under this Agreement or any of the other Loan Documents in
accordance with the instructions of the Majority in Interest.
(d) The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone
message believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and
its duties hereunder or thereunder, upon advice of counsel selected by it.
(e) To the extent the Agent is not reimbursed and indemnified by the
Borrowers, the Lenders will reimburse and indemnify the Agent for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any of the other Loan Documents or any action taken or omitted
by the Agent under this Agreement or any of the other Loan Documents, in
proportion to each Lender's pro rata share. The obligations of the Lenders
under this indemnification provision shall survive the payment of the Loans
and the termination of this Agreement.
(f)(I) The Agent is hereby authorized by each of the Borrowers and
the Lenders, from time to time, before or after the occurrence of an Event
of Default, to make such disbursements and ativances ("Agent Advances")
pursuant to this Agreement and the other Loan Documents which the Agent, in
its sole discretion, deems necessary or desirable to preserve or protect
the collateral, or any portion thereof, in order to enhance the likelihood
of, or maximize the amount of, repayment by the Borrowers, or any guarantor
or other Person, of the Loans and other Obligations or to pay any other
amount chargeable to any of the Borrowers pursuant to the terms of this
Agreement, including, without limitation, costs, fees and expenses. The
Agent Advances shall be repayable on demand and be secured by the
collateral.
(ii) The Loan will initially be unsecured; however, the Lenders
hereby irrevocably authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent for the
benefit of the secured creditors, upon any collateral (i) upon termination
or of the commitments and payments and satisfaction of all Loans, (whether
or not due) and all other Obligations which have matured and which the
Agent has been notified in writing are then due and payable, (ii)
constituting property being sold or disposed of if the applicable Borrower
certifies to the Agent that the sale or disposition is made in compliance
with this Agreement (and the Agent shall rely conclusively on any such
certificate, without further inquiry);
(iii) constituting property in which none of the Borrowers
owned any interest at the time the Lien was granted or at any time
thereafter; (iv) constituting property leased to any of the Borrowers under
a lease which has expired or been terminated in a transaction permitted
under this Agreement or which will expire imminently and which has not
been, and is not intended by such Borrower to be, renewed or extended; or
(v) if approved, authorized or ratified in writing by the Majority in
Interest. Upon request by the Agent or each of the Borrowers at any time,
the Lenders will confirm in writing the Agent's authority to release any
Lien granted or held by the Agent, for the benefit of the secured
creditors, upon particular types or items of collateral pursuant to this
section.
(iii) So long as no Event of Default has occurred and is then
continuing, upon receipt by the Agent of confirmation from the Majority In
Interest of its authority to release any Lien granted to or held by the
Agent, for the benefit of the secured creditors, upon particular types or
items of collateral, and upon at least five (5) business days prior written
request by each of the Borrowers, the Agent shall (and is hereby
irrevocable authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to the Agent, for
the benefit of the secured creditors, herein or pursuant hereto upon such
collateral; provident, however, that (i) the Agent shall not be required to
execute any such document on terms which, in the Agent's opinion, would
expose the Agent to liability or create any obligation or entail any
consequence other than the release shall not in any manner discharge,
affect or impair the Obligations or any Liens other than those expressly
being released, upon (or obligations of any of the Borrowers in respect of)
all interests retained by any Borrower, including (without limitation) the
proceeds of any sale, all of which shall continue to constitute part of the
collateral.
(iv) The Agent shall have no obligation whatsoever to any Lender to
assure the collateral exists or is owned by any Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted to
the Agent, for the benefit of the secured creditors, herein or pursuant
hereto have been properly or sufficiently or lawfullyy created, perfect,
protected or enforced or are entitled to any particular priority, or to
exercise at all or any particular manner or under any duty or care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the pursuant to this section
or pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the collateral, or any act, omission or event related
thereto, the Agent may act in any manner it may deem appropriate, in its
sole discretion, given the Agent's own interest in the collateral in its
capacity as one of the Lenders and that the Agent shall have no duty or
liability whatsoever to any Lender as to any of the foregoing.
ARTICLE XII - MISCELLANEOUS
Section 12.01. Strict Compliance.
(a) Any waiver by Lender of any breach or any term or condition of
this Loan Agreement or the other Loan Documents shall not be deemed a
waiver of any other breach, nor shall any failure to enforce any provision
of this Loan Agreement or the other Loan Documents operate as a waiver of
such provision or of any other provision, nor constitute nor be deemed a
waiver or release of the Borrower for anything arising out of, connect with
or based upon this Loan Agreement or the other Loan Documents.
Section 12.02. Waivers and Modifications.
(a) Any modifications, consents, amendments or waivers (herein
"Waivers") of any provision of this Loan Agreement, the Debentures or any
other Loan Documents, and any consent to departure therefrom, shall be
effective only if the same shall be in writing by Lender and then shall be
effective only in the specific instance and for the purpose for which
given. No notice or demand given in any case shall constitute a waiver of
the right to take other action in the same, similar or other instances
without such notice or demand. No failure to exercise, and no delay in
exercising, on the part of Lender, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right.
The rights of Lender hereunder and under the other Loan Documents shall be
in addition to all other rights provided by law.
Section 12.03. Notices.
(a) Any notices or other communications required or permitted to be
given by this Loan Agreement or any other documents and instruments
referred to herein must be (i) given in writing and personally delivered,
mailed by prepaid certified, registered mail or sent by overnight service
such as Federal Express, or (ii) made by telex or facsimile transmission
delivered or transmitted to the party to whom such notice or communication
is direct, with confirmation thereupon given in writing and personally
delivered or mailed by prepaid certified or registered mail.
(b) Any notice to be mailed, sent or personally delivered shall be
mailed or delivered to the principal offices of the party to whom such
notice is addressed, as that address is specified herein on the signature
page hereof. Any such notice or other communication shall be deemed to
have been given (whether actually received or not) on the day it is mailed,
postage prepaid, or sent by overnight service or personally delivered or,
if transmitted by telex or facsimile transmission, on the day that such
notice is transmitted; provided, however, that any notice by telex or
facsimile transmission, received by any Borrower or Lender after 4:00 p.m.,
Standard Time at the recipient's address, on any day, shall be deemed to
have been given on the next succeeding day. Any party may change its
address for purposes of this Loan Agreement by mailing notice of such
change to the other parties pursuant to this Section 12.03.
Section 12.04. Choice of Forum; Consent to Service of Process and
Jurisdiction.
(a) Any suit, action or proceeding against the Borrower with respect
to this Loan Agreement, the Debentures or any judgment entered by any court
in respect thereof, may be brought in the courts of the State of Texas,
County of Dallas, or in the United States courts located in the State of
Texas as in its sole discretion may elect, and Borrower hereby submits to
the nonexclusive jurisdiction of such courts for the purpose of any such
suit, action or proceeding. Borrower hereby agrees that service of all
suits, process and summonses in any such suit, action or proceeding brought
in the State of Texas may be brought upon, and Borrower hereby irrevocably
appoints, the CT Corporation, Dallas, Texas, as its true and lawful
attorneys in fact in the name, place and stead of Borrower to accept such
service of any and all such writs, process and summonses. Borrower hereby
irrevocably waives any objections which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Loan Agreement or any Debenture brought in the courts
located in the State of Texas, County of Dallas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum.
Section 12.05. Arbitration
(a) Upon the demand of the Lender or Borrower (collectively the
"parties"), made before the institution of any judicial proceeding or not
more than 60 days after service of a complaint, third party complaint,
crossclaim or counterclaim or any answer thereto or any amendment to any of
the above, any Dispute (as defined below) shall be resolved by binding
arbitration in accordance with the terms of this arbitration clause. A
"Dispute" shall include any action, dispute, claim, or controversy of any
kind, whether founded in contract, tort, statutory or common law, equity,
or otherwise, now existing or hereafter occurring between the parties
arising out of, pertaining to or in connection with this Agreement, any
document evidencing, creating, governing, or securing any indebtedness
guaranteed pursuant to the terms hereof, or any related Agreements,
documents, or instruments (the "Documents"). The parties understand that by
this Agreement they have decided that the Disputes may be submitted to
arbitration rather that being decided through litigation in court before a
judge or jury and that once decided by an arbitrator the claims involved
cannot later be brought, filed, or pursued in court. If Borrower shall fail
to pay (or shall state in writing an intention not to pay or its inability
to pay), not later than ten (10) days after the due date, any installment
of interest on or principal of, any Debenture or any fee, expense or other
payment required hereunder, Lender may, at its sole option, enforce its
rights outside the arbitration provision found in this Section 12.05 or any
Debenture.
(b) Arbitrations conducted pursuant to this Agreement, including
selection of arbitrators, shall be administered by the American Arbitration
Association ("Administrator") pursuant to the Commercial Arbitration rules
of the Administrator. Arbitrations conducted pursuant to the terms hereof
shall be governed by the provisions of the Federal Arbitration Act (Title 9
of the United States Code), and to the extent the foregoing are
inapplicable, unenforceable or invalid, the laws of the State of Texas.
Judgment upon any award rendered hereunder may be entered in any court
having jurisdiction; provided, however, that nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. 91 or similar governing state law. Any party
who fails to submit to binding arbitration following a lawful demand by the
opposing xxxxx shall bear all costs and expenses, including reasonable
attorney's fees, incurred by the opposing party in compelling arbitration
of any Dispute.
(c) No provision of, nor the exercise of any rights under, this
arbitration clause shall limit the right of any party to (i) foreclose
against any real or personal property collateral or other security, (ii)
exercise self-help remedies (including repossession and setoff rights) or
(iii) obtain provisional or ancillary remedies such as injunctive relief,
sequestration, attachment, replevin, garnishment, or the appointment of a
receiver from a court having jurisdiction. Such rights can be exercised at
any time except to the extent such action is contrary to a final award or
decision in any arbitration proceeding. The institution and maintenance of
an action as described above shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the Dispute to arbitration,
nor render inapplicable the compulsory arbitration provisions hereof. Any
claim or Dispute related to exercise of any self-help, auxiliary or other
exercise of rights under this section shall be a Dispute hereunder.
(d) Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law of the State of Texas. Arbitrator(s) may make an
award of attorneys' fees and expenses if permitted by law or the Agreement
of the parties. All statutes of limitation applicable to any Dispute shall
apply to any proceeding in accordance with this arbitration clause. Any
arbitrator selected to act as the only arbitrator in a Dispute shall be
required to be a practicing attorney with not less than 5 years practice in
comthercial law in the State of Texas. With respect to a Dispute in which
the claims or amounts in controversy do not exceed five hundred thousand
dollars ($500,000), a single arbitrator shall be chosen and shall resolve
the Dispute. In such case the arbitrator shall have authority to render an
award up to but not to exceed five hundred thousand dollars ($500,000)
including all damages of any kind whatsoever, costs, fees and expenses.
Submission to a single arbitrator shall be a waiver of all parties' claims
to recover more than five hundred thousand dollars ($500,000~. A Dispute
involving claims or amounts in controversy exceeding five hundred thousand
dollars ($500,000) shall be decided by a majority vote of a panel of three
arbitrators ("Arbitration Panel"), one of whom must possess the
qualifications to sit as a single arbitrator in a Dispute decided by one
arbitrator. If the arbitration is consolidated with one conducted pursuant
to the terms of an Agreement between the Lender and the Borrower related to
the indebtedness guaranteed, then the Arbitration Panel shall be one which
theets the crated set forth between the Lender and Borrower. Arbitrator(s)
may, in the exercise of their discretion, at the written request of a
party, (i) consolidate in a single proceeding any multiple party claims
That are substantially identical and all claims arising out of a single
loan or series of loans including claims by or against borrower(s),
guarantors, sureties and/or owners of collateral if different from the
Borrower, and (ii) administer multiple arbitration claims as class actions
in accordance with Rule 23 of the Federal Rules of Civil Procedure. The
arbitrators shall be empowered to resolve any dispute regarding the terms
of this Agreement or the arbitrability of any Dispute or any claim that all
or any part (including this provision) is void or voidable but shall have
no power to change or alter the terms of this Agreement. The award of the
arbitrator(s) shall be in writing and shall specify the factual and legal
basis for the award.
(e) To the maximum extent practicable, the Administrator, the
arbitrator(s) and the parties shall take any action necessary to require
that an arbitration proceeding hereunder be concluded within 180 days of
the filing of the Dispute with the Administrator. The arbitrator(s) shall
be empowered to impose sanctions for any party's failure to proceed within
the times established herein. Arbitration proceedings hereunder shall be
conducted in Texas at a location determined by the Administrator. In any
such proceeding a party shall state as a counterclaim any claim which
arises out of the transaction or occurrence or is in any way relay to the
Documents which does not require the presence of a third party which could
not be joined as a party In We proceeding, The provisions of this
arbitration clause shall survive any termination, amendment, or expiration
of the Documents and repayment in full of sums owed to Lender by Borrower
unless the parties otherwise expressly agreed in writing. Each party agrees
to keep all Disputes and arbitration proceedings strictly confidential,
except for disclosures of information required in the ordinary course of
business of the parties or as required by applicable law or regulation.
Section 12.06. Invalid Provisions.
(a) If any provision of any Loan Document is held to be illegal,
invalid or unenforceable under present or future laws dunng the term of
this Loan Agreement, such provision shall be fully severable; such Loan
Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document;
and the remaking provisions of such Loan Document shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from such Loan Document.
Furthermore, in lieu of each such illegal, mvalid or unenforceable
provision shall be added as part of such Loan Document a provision mutually
agreeable to Borrower and Lender as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid
and enforceable. In the event Borrower and Lender are unable to agree upon
a provision to be added to the Loan Document within a period of ten (10)
business days after a provision of the Loan Document is held to be illegal,
invalid or unenforceable, then a provision acceptable to independent
arbitrators, such to be selected in accordance wit the provisions of the
American Arbitration Association, as similar in terms to the illegal,
invalid or unenforceable provision as is possible and be legal, valid and
enforceable shall be added automatically to such Loan Document. In either
case, the effective date of the added provision shall be the date upon
which the prior provision was held to be illegal, invalid or unenforceable.
Section 12.07. Maximum Interest Rate.
(a) Regardless of any provision contained in any of the Loan
Documents, Lender shall never be entitled to receive, collect or apply as
interest on the Debentures any amount in excess of interest calculated at
the Maximum Rate, and, in the event that any Lender ever receives, collects
or applies as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal and
treated hereunder as such; and, if the principal amount of the Obligation
is paid in full, any remaining excess shall forthwith be paid to Borrower.
In determining whether or not the interest paid or payable under any
specific contingency exceeds interest calculated at the Maximum Rate,
Borrower and Lender shall, to the maximum extent permitted under applicable
law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest; (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, pro rate, allocate and spread, in
equal parts, the total amount of interest throughout the entire
contemplated term of the Debentures; provided that, if the Debentures are
paid and performed in full prior to the end of the full contemplated term
thereof, and if the interest received for the actual period of existence
thereof exceeds interest calculated at the Maximum Rate, Lender shall
refund to Borrower the amount of such excess or credit the amount of such
excess against the principal amount of the Debentures and, in such event,
Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in
excess of interest calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious
rate of interest (if any) permitted by applicable law on such day that at
any time, or from time to time, may be contracted for, taken, reserved,
charged or received on the Indebtedness evidenced by the Debentures under
the laws which are presently in effect of the United States of America and
the State of Texas or by the laws of any other jurisdiction which are or
may be applicable to Be holders of the Debentures and such hndebtedness or,
to the extent permitted by law, under such applicable laws of the United
States of America and the State of Texas or by the laws of any other
junsdiction which are or may be applicable to the holder of the Debentures
and which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
Section 12.08. Participations and Assignments of the Debentures.
(a) The Lender shall have the right to enter into a participation
agreement with any other Lender with respect to the Debentures, or to sell
all or any part of the Debentures, but any participation or sale shall not
affect the rights and duties of such Lender hereunder vis-a-vis Borrower.
In the event that all or any portion of this Loan shall be, at any time,
assigned, transferred or conveyed to other parties, any action, consent or
waiver (except for compromise or extension of maturity), to be given or
taken by Lender hereunder therein "Action"), shall be such action as taken
by the holders of a majority in amount of the Principal Amount of the
Debentures then outstanding, as such holders are recorded on the books of
the Borrower and represented by Lender's Agent as described in subsection
(b) below.
(b) Assignment or sale shall be effective, on the books of the
Borrower, only upon (i) endorsement of the Debenture, or part thereof, to
the proposed new holder, along with a current notation of the amount of
payments or installments received and net Principal Amount yet unfunded or
unpaid, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new holder; (ii) a
designation by the holders of a single Lender's Agent for Notice, such
agent to be the sole party to whom Borrower shah be required to provide
notice when notice to Lender is required hereunder and who shall be the
sole party authorized to represent Lender in regard to modification or
waivers under the Debenture, the Loan Agreement, or other Loan Documents;
and (iii) delivery of an opinion of counsel, reasonably satisfactory to
Borrower, that transfer shall not require registration or qualification
under applicable state or federal securities laws.
(c) So long as the Borrower is not in default hereunder, the Lender
shall not sell or assign an interest in the Debentures or rights under the
Loan Agreement to any Person that the Borrower reasonably identifies to
Lender as being engaged as a competitor.
Section 12.09 Confidentiality..
(a) All financial reports or information which are furnished to
Lender, or its director designee or other representatives, pursuant to this
Loan Agreement or pursuant to the Debentures or other Loan Documents shall
be treated as confidential unless and to the extent that such information
has been otherwise disclosed by the Borrower, but nothing herein contained
shall limit or impair Lender's right to disclose such reports to any
appropriate Governmental Authority, or to use such information to the
extent pertinent to an evaluation of the Obligation, or to enforce
compliance with the terms and conditions of this Loan Agreement, or to take
any lawful action which Lender deems necessary to protect its interests
under this Loan Agreement.
(b) Lender, its director designees, and agents shall use their
reasonable best efforts to protect and preserve the confidentiality of such
information except for such disclosure as shall be required for compliance
by Lender or its director designees with SEC reporting requirements or
otherwise as a matter of law. The provisions of Section 5.01(a)(1) and (6)
notwithstanding, Borrower may refuse to provide information as required
pursuant thereto to an assignee or successor in interest to the Lender
unless and until such assignee or successor shall have executed an
Agreement to maintain the confidentiality of the information as provided
herein.
Section 12.10. Binding Effect.
(a) The Loan Documents shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors, assigns and legal
representatives; provided, however, that Borrower may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
Section 12.11. No Third Party Beneficiary.
(a) The parties do not intend the benefits of this Loan Agreement to
inure to any third party, nor shall is Loan Agreement be construed to make
or render Lender liable to any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrower, or
for debts or claims accruing to any such persons against Borrower.
Notwithstanding anything contained herein or in the Debentures, or any
other Loan Document, no conduct by any or all of the parties hereto, before
or after signing this Loan Agreement nor any other Loan Document, shall be
construed as creating any right, claim or cause of action against Lender,
or any of its officers, directors, agents or employees, in favor of any
materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owed by Borrower, nor to any other person or entity other than
Borrower.
Section 12.12. Entirety.
(a) This Loan Agreement and the Debentures and the other Loan
Documents issued pursuant thereto contain the entire Agreement between the
parties and supersede all prior Agreements and understandings, if any,
relating to the subject matter hereof and thereof.
Section 12.13. Headings.
(a) Section headings are for convenience of reference only and,
except as a means of identification of reference, shall in no way affect
the interpretation of this Loan Agreement.
Section 12.14. Survival.
(a) All representations and warranties made by Borrower herein shall
survive delivery of the Debentures and the making of the Loans.
Section 12.15. Multiple Counterparts.
(a) This Loan Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
Agreement, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
Section 12.16. GOVERNING LAW.
(a) THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND
DELIVERED, AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE
SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT AND INTERPRETATION OF THIS LOAN AGREEMENT AND ALL OF THE OTHER
LOAN DOCUMENTS.
Section 12.17 Reference to Borrower.
(a) The term Borrower shall mean Contour Medical, Inc., Contour
Fabricators, Inc., Contour Fabricators of Florida, Inc., and/or AmeriDyne
Corporation, where the context of the Agreement makes such other reference
appropriate. (signature page follows)
In WITNESS WHEREOF, the undersigned has caused this Loan Agreement to
be executed, sealed, and delivered, as of the day and year first above
written.
Address for Notice: CO-BORROWER
Contour Medical, Inc.
By: /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, President
Attest by:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, Secretary
Address for Notice: CO-BORROWER
Contour Fabricators, Inc.
By: /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, President
Attest by:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, Secretary
Address for Notice: CO-BORROWER
Contour Fabricators of Florida, Inc.
By: /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, President
Attest by:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, Secretary
CO-BORROWER
Address for Notice: AmeriDyne Corporation
By: /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx, President
Attest by:
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, Secretary
LENDER
Address for Notice: Renaissance US Growth & Income Trust
PLC
0000 Xxxx Xxxxxxx Xxxxxxxxxx,
Xxxxx 000/XX00
Xxxxxx, Xxxxx 00000 By:/s/ Xxxxxxx Xxxxxxxxx
(000) 000-0000 Xxxxx X. Angola, Vice President
Fax: (000) 000-0000
Attest by:
/s/ Xxxxx X. Roelby
Title: Assistant Secretary
LENDER
Address for Notice:
80O North Central Expressway, Renaissance Capital Growth & Income
Fund
Suite 210/LB59 III, Inc.
Xxxxxx, Xxxxx 00000
(000) 000-0000 By: /s/ Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000 Xxxxx X. Angola, Vice President
Attest by:
/s/ Xxxxx X. Roelby
Title: Secretary
