CONVERTIBLE LOAN AGREEMENT
DATED JANUARY 27, 1998
BY AND AMONG
NEWCARE HEALTH CORPORATION
AS BORROWER
AND
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
AND
RENAISSANCE US GROWTH & INCOME TRUST PLC
As Lenders
AND
RENAISSANCE CAPITAL GROUP, INC.
As Agent for the Lenders
TABLE OF CONTENTS
ARTICLE I - DEFINITION OF TERMS
Section 1.01. Definitions
Section 1.02. Other Definition Provisions
ARTICLE II - LOAN PROVISIONS
Section 2.01. The Loan
Section 2.02. Use of Proceeds
Section 2.03. Interest Rate and Interest Payments
Section 2.04. Maturity
Section 2.05. Mandatory Principal Repayment
Section 2.06. Redemption
Section 2.07. Fees and Expenses
Section 2.08. Finder's Fees
Section 2.09. Taxes
Section 2.10. Conversion Rights
ARTICLE III - CONDITIONS PRECEDENT
Section 3.01. Document Requirements
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BORROWER
Section 4.01. Organization and Good Standing
Section 4.02. Authorization and Power
Section 4.03. No Conflicts or Consents
Section 4.04. Enforceable Obligations
Section 4.05. No Liens
Section 4.06. Financial Condition
Section 4.07. No Default
Section 4.08. Material Agreements
Section 4.09. No Litigation
Section 4.10. Taxes
Section 4.11. Capitalization
Section 4.12. Use of Proceeds
Section 4.13. Employee Matters
Section 4.14. Employee Benefit Plans
Section 4.15. Compliance with Laws
Section 4.16. Licenses and Permits
Section 4.17. Contracts
Section 4.18. Shares Issuable Upon Conversion
Section 4.19. Insider
Section 4.20. Subsidiaries
Section 4.21. Casualties
Section 4.22. Investment Company Act
Section 4.23. Sufficiency of Capital
Section 4.24. Corporate Names
Section 4.25. Insurance
Section 4.26. Intellectual Property
Section 4.27. Real Property
Section 4.28. Certain Representations With Respect to Borrower's Business
Section 4.29. Reimbursement Matters
Section 4.30. Xxxx-Xxxxxx Funds
Section 4.31. Environmental
Section 4.32. Survival of Representations and Warranties
Section 4.33. Full Disclosure 26
ARTICLE V - AFFIRMATIVE COVENANTS OF BORROWER
Section 5.01. Financial Statements, Reports and Documents
Section 5.02. Preparation of Budgets
Section 5.03. Payment of Taxes and Other Indebtedness
Section 5.04. Maintenance of Existence and Rights; Conduct of Business
Section 5.05. SEC Filings
Section 5.06. Notice
Section 5.07. Compliance with Loan Documents
Section 5.08. Compliance with Material Agreements
Section 5.09. Operations and Properties
Section 5.10. Books and Records; Access
Section 5.11. Compliance with Law
Section 5.12. Insurance
Section 5.13. Authorizations and Approvals
Section 5.14. ERISA Compliance
Section 5.15. Further Assurances
Section 5.16. Indemnity by Borrower
Section 5.17. Reservation of Shares
Section 5.18. Ownership of Subsidiaries
Section 5.19. Retention of Stock Ownership
Section 5.20. Key Man Life Insurance.
ARTICLE VI - NEGATIVE COVENANTS OF BORROWER
Section 6.01. Limitation on Indebtedness
Section 6.02. Limitation on Liens
Section 6.03. Limitation on Investments
Section 6.04. Alteration of Material Agreements
Section 6.05. Transactions with Affiliates
Section 6.06. Limitations on Acquisition of Nonrelated Business
Section 6.07. Limitation on Sale of Properties
Section 6.08. Fiscal Year and Accounting Method
Section 6.09. Liquidation
Section 6.10. Material Amendments to Articles of Incorporation or Bylaws
Section 6.11. Executive Compensation
Section 6.12. Restricted Payments
Section 6.13. Consolidation or Merger
ARTICLE VII - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
Section 7.01. Financial Ratios
ARTICLE VIII - EVENTS OF DEFAULT
Section 8.01. Events of Default
Section 8.02. Remedies Upon Event of Default
Section 8.03. Performance by the Lenders
Section 8.04. Payment of Expenses Incurred by the Lenders
ARTICLE IX - REGISTRATION RIGHTS
Section 9.01. Demand Registration
Section 9.02. "Piggy-Back" Registration
Section 9.03. Shelf Registration
Section 9.04. Obligations of Borrower
Section 9.05. Furnish Information
Section 9.06. Expenses of Registration
Section 9.07. Indemnification Regarding Registration Rights
Section 9.08. Reports Under the 1934 Act
Section 9.09. Assignment of Registration Rights
Section 9.10. Other Matters
ARTICLE X - BOARD OF DIRECTORS
Section 10.01. Board Representation or Attendance by Observer
Section 10.02. Limitation of Authority of Persons Designated as Director
Nominee
Section 10.03. Nonliability of the Lenders
ARTICLE XI - AGENCY AND INTER-LENDER PROVISIONS
Section 11.01. The Lenders' Representations and Warranties to Other Lenders
Section 11.02. Waiver of Loan Provisions or Interest or Principal Payments
Section 11.03. Agency
ARTICLE XII - MISCELLANEOUS
Section 12.01. Strict Compliance
Section 12.02. Waivers and Modifications
Section 12.03. Limitation on Liability
Section 12.04. Choice of Forum; Consent to Service of Process and Jurisdiction
Section 12.05. Arbitration
Section 12.06. Invalid Provisions
Section 12.07. Maximum Interest Rate
Section 12.08. Participations and Assignments of the Debentures
Section 12.09. Confidentiality
Section 12.10. Binding Effect
Section 12.11. No Third Party Beneficiary
Section 12.12. Entirety
Section 12.13. Headings
Section 12.14. Survival
Section 12.15. Multiple Counterparts
Section 12.16. Knowledge of Borrower
Section 12.17. Notices
Section 12.18. Governing Law
AGREEMENT
THIS AGREEMENT, dated as of January 27, 1998, by and among NewCare Health
Corporation, a Nevada corporation, as borrower ("Borrower"), 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,
and together with any permitted assignees or successors in interest
individually
referred to as each or any "Lender" and collectively referred to as the
"Lenders"), and Renaissance Capital Group, Inc., a Texas corporation, as agent
(the "Agent") for the Lenders. All references herein to Borrower shall include
the Subsidiaries, unless the context otherwise requires.
WITNESSETH:
WHEREAS, Borrower seeks to obtain Five Million Dollars ($5,000,000) from the
Lenders through the issuance of Debentures to be used tor acquisitions,
working
capital and general corporate purposes in accordance with Section 2.02 hereof.
and
WHEREAS, Borrower has requested that the Lenders provide such loan as herein
provided, and that the Lenders are 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 Agreement, the following terms shall have the
respective meanings assigned to them in this Article I or in the section or
recital referred to below:
"Acquisition Indebtedness" shall mean Indebtedness or mandatorily
redeemable preferred stock of Borrower or a Subsidiary incurred in connection
with, or to provide all or any portion of the funds or credit support utilized
to consummate, the transaction or series of related transactions pursuant to
which such Subsidiary became a Subsidiary or was acquired by Borrower.
"Affiliate" with respect to any Person shall mean a person that directly
or indirectly, through one or more intermediaries. controls or is controlled
by,
or is under common control with, such Person.
"Capital Expenditure" shall mean an expenditure for assets that is
properly
classifiable as a capital expenditure in accordance with GAAP.
"Capital Lease" shall mean any lease of property, real or personal, which
would be properly classifiable as a capital lease in accordance with GAAP.
"Common Stock"shall mean Borrower's common stock, $.02 par value.
"Consolidated Current Assets" shall mean, for any Person as of any date,
the assets of such Person and its Consolidated Subsidiaries which would be
reflected as current assets on a consolidated balance sheet for such Person
and
its Subsidiaries prepared as of such date in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, for any Person as of any
date, the liabilities of such Person and its Consolidated Subsidiaries which
would be reflected as current liabilities on a consolidated balance sheet for
such Person and its Subsidiaries prepared as of such date in accordance with
GAAP. For purposes of calculating compliance with any covenant contained in
this
Agreement or any other Loan Document, the principal amount of Consolidated
Current Liabilities shall include any balance under any revolving credit
facility
of Borrower, regardless of whether such revolving credit facility would be
reflected as a current liability in accordance with GAAP.
"Consolidated Net Income" shall mean, for any Person for any period,
consolidated net income of such Person and its Consolidated Subsidiaries for
such
period which would be reflected in accordance with GAAP, but excluding (a) any
gain or loss arising from the sale of capital assets, (b) any gain or loss
arising from any write-up or write-down of assets, (c) income or loss of any
other Person, substantially all of the assets of which have been acquired by
such
Person in any manner, to the extent that such earnings or losses were realized
by such other Person prior to the date of such acquisition, (d) income or loss
of any Person in which the Person has any ownership interest (other than
Consolidated Subsidiaries of such Person), unless such earnings have actually
been received or paid by the Person or its Consolidated Subsidiaries in the
form
of cash distributions or additional cash calls, (e) income or loss of any
other
Person to which assets of the Person or its Consolidated Subsidiaries shall
have
been sold, transferred or disposed of, or into which the Person shall have
merged, to the extent that such earnings or losses of any other Person anse
prior
to the date of such transaction, (f) any gain or loss arising from the
acquisition of any securities of the Person or any of its Consolidated
Subsidiaries, and (g) any extraordinary gain or loss realized by such Person
or
any of its Consolidated Subsidiaries during such period.
"Consolidated Subsidiaries" shall mean those entities whose assets,
liabilities and operations are consolidated with those of Borrower for
purposes
of Borrower's consolidated financial statements.
"Consolidated Trailing Twelve Months EBITDA" shall mean, for any Person
for
the immediately preceding twelve-month period ended on such date, Consolidated
Net Income of such Person for such twelve-month period, plus (a) all income
tax
expense of such Person and its Consolidated Subsidiaries for such twelve-month
period, (b) all interest expense of such Person and its Consolidated
Subsidiaries
for such twelve-month period, (c) all depreciation expense of such Person and
its
Consolidated Subsidiaries for such twelve-month period, and (d) all
amortization
expense of such Person and its Consolidated Subsidiaries for such twelve-month
period.
"Consolidated Trailing Twelve Months Free Cash Flow" shall mean for any
Person, for the immediately preceding twelve-month period ended on such date,
Consolidated Net Income of such Person for such twelve-month period, plus (a)
all
deferred income tax expense of such Person and its Consolidated Subsidiaries
for
such twelve-month period, (b) all depreciation expense of such Person and its
Consolidated Subsidiaries for such twelve-month period, and (c) all
amortization
expense of such Person and its Consolidated Subsidiaries for such twelve-month
period, less Capital Expenditures of such Person and its Consolidated
Subsidiaries for such twelve-month period.
"Conversion " or "Conversion Rights" shall mean exchange of, or the
rights
to exchange, the Principal Amount of the Loan, or any part thereof, for fully
paid and nonassessable Common Stock on the terms and conditions provided in
the
Debenture.
"Current Liabilities" shall mean all liabilities classified in accordance
with GAAP as current liabilities, but specifically including all amounts
outstanding under Borrower's revolving credit loans.
"Current Ratio" shall mean, for any Person as of any date, the ratio of
such Person's (Consolidated Current Assets to Consolidated Current Liabilities
as of such date.
"Debentures" shall mean the Debentures executed by Borrower and delivered
pursuant to the terms of this 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 or
debtors generally.
"Default" or "Event of 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 of 1974,
as
amended, together with all rules and regulations issued pursuant thereto.
"Fixed Charge Coverage Ratio" shall mean for Borrower for the immediately
preceding twelve-month period ended on such date, the ratio of (a)
Consolidated
Trailing Twelve Months Free Cash Flow, to (b) Borrower's total scheduled
payments
of principal on Indebtedness for the same twelve-month period, excluding
Indebtedness under Borrower's revolving credit loans and mandatory redemption
payments as set forth herein.
"GAAP" shall mean United States 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
the
Financial Accounting Standards Board or their successors, which are applicable
in the circumstances as of the date in question. The requirement 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 businesses, 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 to 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, without
duplication,
the following indebtedness, obligations and liabilities of such Person: (i)
indebtedness for borrowed money; (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, but only to
the
extent so secured; and (v) all preferred stock of such Person which is
subject,
at the time of calculation of Indebtedness, to a mandatory redemption
requirement, valued at the greater of its involuntary redemption price or
liquidation preference plus accrued and unpaid dividends, and all extensions,
renewals, modifications and amendments thereto.
"Interest Coverage" shall mean the sum of net income, interest expense,
depreciation and amortization divided by interest expense.
"Investment" in any Person shall mean any investment, whether by means of
share purchase, loan, advance, 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 Internal Revenue Code of 1986, as amended,
together with all rules and 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 Agreement,
along with any accrued. unsaid interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the disbursement of Loan
funds, which shall occur within ten ( 10) days of the execution and delivery
of
this Agreement.
"Loan Documents" shall mean this Agreement, the Debentures and any other
agreements or documents required to be executed or delivered by Borrower
pursuant
to the terms of this Agreement (and any amendments or supplements hereto or
modifications hereof).
"Lock-Up Agreement" shall mean the "lock-up" agreements to be executed by
the
executive officers, directors and principal shareholders of Borrower pursuant
to
Section 5.19 of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" shall mean (i) any
change, factor or event that shall (a) have a material adverse effect upon the
validity or enforceability of any Loan Documents, (b) have a material adverse
effect upon the financial condition, results of operations, business,
properties,
operations or assets of Borrower or its Subsidiaries taken as a whole or (c)
have
a material adverse effect upon the ability of Borrower to fulfill its
obligations
under the Loan Documents, or (ii) any event that causes an Event of Default or
which, with notice or lapse of time or both, could reasonably be expected to
become an Event of Default.
"Material Indebtedness" shall mean any debt incurred by Borrower that
shall
have a Material Adverse Effect.
"Obligation" shall mean: (i) all present and future Indebtedness,
obligations
and liabilities of Borrower to the Lenders arising pursuant to this 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
the
Lenders 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 the Lenders or Agent,
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.
"Permits" shall have the meaning set forth in Section 4. 16.
"Permitted Indebtedness" shall mean Indebtedness outstanding as of the
date
hereof or incurred in compliance with Section 6.01 and the other terms of this
Agreement that constitutes (i) Senior Obligations, (ii) obligations under
Capital
Leases, (iii) letters of credit, (iv) Current Liabilities, (v) debt associated
with Permitted Liens, (vi) any other Subordinated Debt, (vii) Acquisition
Indebtedness, (viii) purchase money Indebtedness, (ix) Indebtedness of foreign
Subsidiaries, (x) intercompany Indebtedness, (xi) Indebtedness under this
Agreement or the Debentures, and (xii) any refunding, refinancing or extension
of any of the above.
"Permitted Liens" shall mean: (i) Liens (if any) granted for the benefit
of
the Lenders; (ii) liens to secure the Permitted Indebtedness: (iii) pledges or
deposits made to secure payment of worker's compensation insurance (or to
participate in any fund in connection with worker's compensation insurance),
unemployment insurance, pensions or social security programs; (iv) Liens
imposed
by mandatory provisions of law such as for carriers', landlord's,
materialmen's,
mechanics', warehousemen's, vendors' and other like Liens arising in the
ordinary
course of business, securing Indebtedness whose payment is made within 30 days
of the date such Lien arises, or that are being contested in good faith by
appropriate proceedings as to which adequate reserves have been established to
the extent required by GAAP; (v) 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; (vi) Liens arising from
good
faith deposits in connection with tenders, leases, 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; (vii) encumbrances consisting of
zoning
restrictions, easements, reservations, licenses, covenants and other minor
irregularities of title or other restrictions on the use of real property
(whether owned or leased), provided that such items do not materially impair
the
intended use of such property, and none of which is violated by Borrower's
existing structures or land use; (viii) 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 (ix) Liens listed in Schedule 4.05.
"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
IRS Code.
"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 the Lenders.
"Registrable Securities" shall mean (i) the Common Stock issuable upon
Conversion of the Debentures, and (ii) any Common Stock issued upon Conversion
of the Debentures or upon exercise of any warrant, right or other security
that
is issued with respect to the Common Stock by way of (a) stock dividend; (b)
any
other distribution with respect to, or in exchange for, or in replacement of
Common Stock; (c) stock split; (d) in connection with a combination of shares,
recapitalization, merger, or consolidation excluding in all cases, however,
any
Common Stock 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
Agreement are not assigned; and (e) up to 200,000 shares of Common Stock
issuable
to the Lenders upon exercise of options granted to them.
"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.
"Renaissance III" shall mean Renaissance Capital Growth & Income Fund
III,
Inc., a Texas corporation.
"Renaissance PLC" shall mean Renaissance US Growth & Income Trust PLC, a
public limited company registered in England and Wales.
"Renaissance Group" shall mean Renaissance Capital Group, Inc., a Texas
corporation.
"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, or any other
federal agency at the time administering the 1933 Act and the 1934 Act
"1933 Act" shall refer to the Securities Act of 1933, as amended, or any
similar federal statute and rules and regulations promulgated thereunder, all
as
the same may be in effect from time to time.
"1934 Act" shall refer to the Securities Exchange Act of 1934, as amended,
or any similar federal statute and rules and regulations promulgated
thereunder,
all as the same may be in effect from time to time.
"1940 Act" shall refer to the Investment Company Act of 1940, as amended,
or
any similar federal statute and rules and regulations promulgated thereunder,
all
as the same may be in effect from time
to' time
"Senior Documents" means all loan documents evidencing the Senior
Obligations, as each may now or hereafter be amended, modified, supplemented,
renewed or extended from time to time.
"Senior Obligations" means one or more senior debt facilities (including
loans and other extensions of credit under the Senior Documents) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, capital expenditure loans, receivables
financings (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, as now existing or hereafter incurred, and
in
each case, as amended, restated, modif~ed, renewed or extended from time to
time.
"Solvent" shall mean, with respect to any Person on a particular date,
that
on such date: (i) the fair value of the assets of such Person is greater than
the
total amount of liabilities of such Person; (ii) the estimated 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 assets 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 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" or "Subsidiaries" shall mean any or all corporations or
entities
whether now existing or hereafter acquired of which over 50% the Voting Shares
or equity interests are owned, directly or indirectly, by Borrower.
"Subsidiary Documents" shall mean the Guaranties, Security Agreements and
any
other agreements or documents required to be executed or delivered by any
Subsidiary pursuant to the terms of this Agreement (and any amendments or
supplements hereto or modifications hereof).
"Total Capitalization" shall mean for any Person, total Indebtedness plus
shareholders' equity as defined in accordance with GAAP.
"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 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 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
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this 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.
(e) Accounting terms not specifically defined above in this Agreement shall be
construed in accordance with GAAP.
ARTICLE II - LOAN PROVISIONS
Section 2.01. The Loan.
(a) Subject to the terms and conditions of this Agreement, and the compliance
with such terms and conditions by all parties, each Lender agrees to lend to
Borrower, and Borrower agrees to borrow from the Lenders, the aggregate sum of
Five Million Dollars ($5,00O,000) as follows:
Renaissance Capital Growth & Income III, Inc. $2,500,000
Renaissance US Growth & Income Trust PLC $2,500,000
(b) The Loan shall be disbursed at Loan Closing, subject to the conditions
provided hereunder, and shall be evidenced by the Debentures, in the Principal
Amounts specified above. The Debentures shall rank pari passu with all
Indebtedness of Borrower, other than the Senior Obligations and the
Subordinated
debt
(c) Unless otherwise mutually agreed, the Loan Closing shall be at the offices
of Renaissance Capital Group, Inc., 0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000,
Xxxxxx, Xxxxx.
(d) If, within 10 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 the Lenders in their sole discretion) or (ii) the Loan
Closing has not occurred (unless the date of such Loan Closing has been
mutually
extended), other than as a result of any failure of Lenders to comply with the
terms of this Agreement, then, in either such case, the obligations of the
Lenders under this Agreement shall terminate; provided, however, that Borrower
shall be obligated for payment of the fees and expenses 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 Loan proceeds for acquisitions, working
capital
and general corporate purposes.
(b) Borrower hereby acknowledges that the proceeds from the Loan shall be of
benefit to Borrower for the growth of its business by providing capital which
will provide additional opportunities for Borrower.
Section 2.03. Interest Rate and Interest Payments.
Interest on the Principal Amount outstanding from time to time shall accrue at
the rate of 8.50% per annum, with the first installment of accrued, unpaid
interest being due and payable on February 1, 1998 and subsequent payments of
accrued, unpaid interest being due and payable on the first day of each month
thereafter. Overdue principal and interest on the Debentures shall bear
interest
at the maximum rate permitted by applicable law. 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.
If not sooner redeemed or converted, the Debentures shall mature on January
27,
2005, at which time all the remaining unpaid principal, interest and any other
charges then due under this Agreement shall be due and payable in full. The
Debentures may be prepaid without premium or penalty and shall be prepaid pro
rata with any prepayments of Indebtedness (other than Senior Obligations)
which
is pari passu with or subordinated to the Debentures.
Section 2.05. Mandatory Principal Repayment.
The Debentures shall be subject to mandatory principal repayment as provided
in
the Debentures.
Section 2.06. Redemption.
The Debentures shall be subject to redemption as provided in the Debentures.
Section 2.07. Fees and Expenses.
(a) Upon Loan Closing:
(i) Borrower shall pay to Agent a closing fee of 1.0% of the amount then
disbursed.
(ii) Borrower shall pay the legal fees and expenses of the Lenders and the
Agent
(which, in no event shall exceed $25,000) in connection with the preparation
and
negotiation of the Loan Documents and the Loan Closing.
(iii) All unpaid fees and expenses required to have been paid by Borrower
under the Preliminary Outline of Terms among the parties.
(b) Borrower shall also pay to the Agent monthly a monitoring fee of $1,000
per
month for consulting and monitoring services, and Borrower shall reimburse
Agent
for its reasonable travel and out-of pocket expenses in monitoring Borrower's
compliance with this Agreement.
Section 2.08. Finder's Fees.
Borrower represents to the Lenders that, except as set forth in Schedule 2.08,
no commissions, broker's or finder's fees were incurred by Borrower in
connection
with this Agreement or the Debentures.
Section 2.09. Taxes.
(a) Each Debenture shall be convertible into shares of Common Stock and on
such
terms as are stated in the Debentures. Such conversion shall be made without
deduction for any present or future taxes, duties, charges or withholdings,
(excluding, in the case of the Lenders, any foreign taxes, any federal, state
or
local income taxes and any franchise taxes or taxes imposed upon them by the
jurisdiction, or any political subdivision thereof, under which the Lenders
are
organized or are 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 the Lenders: (i) the sum payable
shall
be increased so that after making all required deductions, the Lenders shall
receive 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. Borrower shall be entitled to any refunds or
returns from any such taxing authority.
(b) Except as otherwise set forth in this 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 Agreement or the other
Loan
Documents (hereinafter referred to as "Other Taxes").
(c) Borrower shall indemnify the Lenders tor the full amount of Taxes and
Other
Taxes reasonably paid by the Lenders or 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 the Lenders make written demand therefor. The Lenders 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. Conversion Rights.
Each Debenture shall be convertible into shares of Common Stock on such terms
and
in such amounts as are stated in the Debenture. The holders of the shares
issued
upon exercise of the right of conversion as provided in said Debenture shall
be
entitled to all the rights of the Lenders as stated in this Agreement or the
other Loan Documents, to the extent such rights are specifically stated to
survive the surrender of the Debenture for conversion as therein provided.
ARTICLE III - CONDITIONS PRECEDENT
Section 3.01. Document Requirements.
The obligation of the Lenders to advance funds at the Loan Closing Date hereof
is subject to the condition precedent that, on or before the date of such
advance, the Lenders shall have received the following:
(a) Duly executed Debentures from Borrower in the Principal Amount of Loan,
each
in amounts as requested by the Lenders, styled "Compass Bank FBO Renaissance
Capital Growth and Income Fund III, Inc.," and "Compass Bank FBO Renaissance
U.S.
Growth and Income Trust PLC," which shall be in form and substance acceptable
to
the Lenders and their counsel.
(b) Duly executed Continuing Guaranties from each of the Subsidiaries, which
shall be in form and substance acceptable to the Lenders and their counsel.
(c) A true and correct certificate signed by the chairman of the board of
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: (i) all
of the representations and warranties contained in Article IV hereof and the
other Loan Documents are true and correct in all material respects as of the
Loan Closing Date; and (ii) no event has occurred and is continuing, or would
result from the Loan, which constitutes, or with notice or lapse of time or
both wouldbconstitute, a Default or an Event of Default.
(d) A signed certificate of the Secretary of Borrower and each Subsidiary
which
shall certify (i) a copy of the Articles of Incorporation of Borrower and all
amendments thereto, certified by the Secretary of State of the state of
incorporation and dated within ten (10) days prior to Loan Closing, a copy of
the Articles of Incorporation of each Subsidiary and all amendments thereto,
certified by the Secretary of each such Subsidiary as of the date of such
certification; (ii) a copy of the Bylaws of Borrower and each Subsidiary and
all
amendments thereto certified by the Secretary of Borrower and each such
Subsidiary as of the date of such certification; (iii) copies of resolutions,
as
adopted by Borrower's and each Subsidiary's Board of Directors, approving the
execution, delivery and performance, as applicable, of this Agreement, the
Debentures, the Guaranties and the other Loan Documents, including the
transactions contemplated herein, 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; (iv) certificates of good standing (or other similar
instrument) for Borrower issued by the appropriate official of the state of
incorporation of Borrower and certificates of qualification and good standing
for Borrower issued by the appropriate official of each of the states for
which
Borrower is required to be qualified to do business as a foreign corporation,
dated within ten (10) days prior to Loan Closing; and (v) the names of the
officers of Borrower authorized to sign 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 the Lenders may thereafter rely
conclusively
on the validity of this certificate as a representation of the officers of
Borrower and each Subsidiary duly authorized to act with respect to the Loan
Documents until such time as the Lenders shall receive a further certificate
of
the Secretary or Assistant Secretary of Borrower and each Subsidiary canceling
or amending the prior certificate and submitting the signatures of the
officers
thereupon authorized in such further certificate.
(e) A legal opinion from counsel to Borrower, in form and substance
satisfactory
to the Lenders and heir counsel.
(f) "Lock-up" Agreements, in form and substance satisfactory to the Lenders
and
their counsel.
(g) Duly executed Stock Option Agreements from Borrower, which shall be in
form
and substance acceptable to the Lenders and their counsel.
(h) Such other information, documents and agreements as may reasonably be
required by the Lenders and the Lenders' counsel to substantiate Borrower's
compliance with the requirements of this Agreement and the Lenders' compliance
with the 1940 Act.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BORROWER
All references in this Article to Borrower shall include the Subsidiaries,
unless the context otherwise requires. To induce the Lenders to make the Loan
hereunder, Borrower represents and warrants to the Lenders that:
Section 4.01. Organization and Good Standing.
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.
Borrower has the corporate power and requisite authority to execute, deliver
and
perform the Loan Documents to be executed by Borrower. Borrower is duly
authorized to, and has taken all corporate action necessary to authorize,
execute, deliver and perform the Loan Documents executed by Borrower. Borrower
is and will continue to be duly authorized to perform the Loan Documents
executed by Borrower.
Section 4.03. No Conflicts or Consents.
Except as disclosed on Schedule 4.03, 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 or trigger any
preemptive rights or rights of first refusal of any third party. 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.
The Loan Documents have been duly executed and delivered by Borrower and are
the
legal, valid and binding, obligations of Borrower, enforceable in accordance
with their respective terms.
Section 4.05. No Liens.
Except for Permitted Liens, all of the properties and assets owned or leased
by
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 known or recorded liens for borrowed money is
disclosed
on Schedule 4.05.
Section 4.06. Financial Condition.
Borrower has delivered to the Lenders copies of the balance sheet of Borrower
as
of December 31, 1996, and the related statement of income, stockholders'
equity
and statement of cash flow for the year then ended, audited by its independent
certified public accountant. Borrower has also delivered to the Lenders copies
of the balance sheet of Borrower as of December 31, 1997, and the related
statement of income, stockholders' equity and statement of cash flow for the
nine month period ended such date, which financial statements have not been
audited by its independent certified public accountant. Such financial
statements are true and correct in all material respects, fairly present the
financial condition of Borrower as of such dates and have been prepared in
accordance with GAAP (except that 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 or in the Schedules. Since the date of the above-referenced year end
financial statements and quarterly financial statements, there have not been,
except as disclosed in Schedule 4.06: (i) any Material Adverse Change; (ii)
any dividend declared or paid or distribution made on the capital stock of
Borrower or any capital stock thereof redeemed or repurchased; (iii) any
incurrence of long-term debt by Borrower; (iv) any salary, bonus or
compensation increases to any officers, key employees or agents of Borrower,
other than in the ordinary course of business and consistent with past
practice; or (v) any other material transaction entered into by Borrower,
except
in the ordinary course of business and consistent with past practice.
Section 4.07. No Default.
No event has occurred and is continuing which constitutes, or with notice or
lapse of time or both, would constitute a Default or an Event of Default under
this Agreement.
Section 4.08. Material Agreements.
Neither Borrower nor any other party is in default, and no event has occurred
and is continuing which, with notice or lapse of time or both, would
constitute a default, under any material contract, lease, loan agreement,
indenture, mortgage, security agreement, license agreement or other
agreement or obligation to which it is a party or by which any of its
properties is subject, except as described
on Schedule 4.08. To the best knowledge of 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 Borrower.
Section 4.09. No Litigation.
Except as disclosed on Schedule 4.09, there are no actions, suits,
investigations, arbitrations or administrative proceedings pending or, to the
best 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 the Lenders which could reasonably be expected have a
Material Adverse Effect on Borrower or on any transactions contemplated by any
Loan Document. Borrower has not been subject to any formal or informal (of
which
Borrower has received notice) investigations or proceedings of any state
department of health, the United States General Accounting Office, the Health
Care Financing Administration, the United States Department of Justice, the
Federal Trade Commission or other similar governmental agencies (except for
any
investigations being conducted in the ordinary course of business and
applicable
to all health care facilities) with respect to its business. Borrower is not
now,
and has not been, a party to any injunction, order or decree restricting the
method of the conduct of its business or the marketing of any of its services,
nor, except as disclosed on Schedule 4.09, has any governmental agency
investigated or requested (other than on a routine basis) information with
respect to such methods of business or marketing of services. Borrower has not
received any claim that Borrower currently violates any federal, state or
local
law, ordinance, rule or regulation, which could have an adverse effect on its
business and, to the best of Borrower's knowledge, no such claim is or has
been
threatened; and, except as disclosed on Schedule 4.09, there have been no
developments adverse to Borrower with respect to any pending or threatened
claim,
action or proceeding of an administrative or judicial nature, including but
not
limited to those referred to in Schedule 4.09, and including without
limitation
any such pending or threatened claim, action or proceeding arising from or
relating to (i) the assertion by any governmental authority of any retroactive
adjustment of the sums which Borrower was entitled to receive pursuant to
government or third party reimbursement programs such as (but not limited to)
Medicare and Medicaid, or (ii) any allegation by any governmental authority of
fraud or abuse by any current or former officers or employees of Borrower in
connection with the making of any application for reimbursement pursuant to
the
government or third party reimbursement programs referred to in the preceding
clause (i).
Section 4.10. Taxes.
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 now due have been paid, in each case, except where the same are
being contested in good faith by appropriate proceedings, as disclosed on
Schedule 4. 10.
Except as disclosed on Schedule 4. l 0, Borrower has not received any notice
of
deficiency or other adjustment from any taxing authority that is unresolved as
of the Loan Closing. No audit or examination, claim or proposed assessment by
any
taxing authority is pending or, to the best knowledge of Borrower, threatened
against Borrower or any of its properties. All ad valorem and other property
taxes imposed on Borrower, or that may become a lien on Borrower's assets and
that are due and payable, have been paid in full. Borrower has withheld or
collected from each payment made to each of its U.S. employees the amount of
all
taxes (including federal income taxes, Federal Insurance Contributions Act
("FICA") taxes, and state and local income, payroll, and wage taxes, among
others) required to be withheld or collected.
Section 4.11. Capitalization.
The authorized capital stock of Borrower consists of 50,000,000 shares of
Common
Stock, $.02 par value, of which l1,372,575 shares of Common Stock are issued
and
outstanding as of the date hereof. All of such outstanding shares have been
duly
authorized and validly issued are fully paid and nonassessable, and were not
issued in violation of the preemptive rights or rights of first refusal of any
person. Schedule 4.ll sets forth all stock options, warrants, conversion
rights,
subscription rights, preemptive nights, rights of first refusal 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 the date of termination of such rights and the consideration
therefor.
As of the Loan Closing Date, 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. Borrower has, and will continue to have as long as
the
Debentures remain outstanding, authorized and reserved an adequate number of
shares of Common Stock to permit Conversion of the Debentures.
Section 4,12. Use of Proceeds.
Borrower intends to use proceeds from the Loan as disclosed in Section 2.02
hereof.
Section 4.13. Employee Matters.
(a) Except as set forth on Schedule 4. l 3, 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.
(b) Borrower is in compliance with all federal, state and municipal laws
respecting employment and employment practices, occupational health and safety
and wages and hours, except in any case where the failure to be in compliance
would not have a Material Adverse Effect, and is not engaged in any unfair
labor
practice, and there are no arrears in the payment of wages or social security
taxes;
(c) there is no unfair labor practice complaint against Borrower pending
before
the National Labor Relations Board or any state or local agency;
(d) to the best knowledge of Borrower, there is no pending labor strike or
other
material labor trouble affecting Borrower (including, without limitation, any
organizational drive);
(e) to the best knowledge of Borrower, there is no material labor grievance
pending against Borrower:
(f) there is no pending representation question respecting the employees of
Borrower before any local, state or federal agency;
(g) except as set forth on Schedule 4. 13, there are no pending proceedings
arising out of or under any collective bargaining agreement to which Borrower
is
a party, or to the best knowledge of Borrower, any basis for which a claim may
be made under any collective bargaining agreement to which Borrower is a
party;
and
(h) there are no pending proceedings arising out of any employment
discrimination claim or any basis for which any such claim may be made.
Section 4.14. Employee Benefit Plans.
Schedule 4.14 lists (i) any "employee benefit plans" as described in the
Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA") (other than a defined
contribution pension plan not requiring any contribution by Borrower, paid
time-off policy or vacation/holiday/sick leave policy, and employee group
life and health plans that
are fully funded through commercial insurance) and (ii) any defined benefit
"employee pension benefit plans" (as defined in ERISA). Neither Borrower nor,
to
the best knowledge of Borrower, any other person has engaged in a transaction
with respect to any employee benefit plan listed or required to be listed on
Schedule 4.14 which could subject any such plan, Borrower or the Lenders to a
penalty under ERISA or a tax under the Internal Revenue Code of 1986, as
amended
(the "Code"). Each of the employee benefit plans listed or required to be
listed
on Schedule 4.14 has been operated and administered in accordance with
applicable
law, including without limitation ERISA, except for any such failure which
would
not subject Borrower or the Lenders to any penalty or other liability and
except
for any such failure which would not have an adverse effect upon the
applicable
plan or any participant therein. Borrower has not incurred nor presently
expects
to incur any liability under Title IV of ERISA that could result in liability
to
the Lenders or Borrower. Each employee benefit plan listed or required to be
listed on Schedule 4.14 that is a group health plan within the meaning of
Section
5000(b)(1) of the Code is in compliance with the provisions of Section
4980B(f)
of the Code, except for any such non-compliance which would not subject
Borrower
or the Lenders to any penalty or liability and except for any such failure
which
would not have an adverse effect upon the applicable plan or any participant
therein. There is not any pending or, to the best knowledge of Borrower,
threatened claim by or on behalf of any employee benefit plan, by any employee
covered under any such plan, or otherwise involving any employee benefit plan
(other than routine non-contested claims for benefits).
Section 4.15. Compliance with Laws.
Borrower has all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct its business and own and operate its assets
(collectively, the "Permits"). Except as set forth on Schedule 4.15, Borrower
is
not in violation of any law, regulation or ordinance relating to its business,
operations and properties, which individually or in the aggregate would have a
Material Adverse Effect, and the business and operations of Borrower do not
violate, in any material respect, any federal, state, local or foreign laws,
regulations or orders. Except as set forth on Schedule 4. 15, Borrower has not
received any notice or communication from any federal, state or local
governmental or regulatory authority or otherwise of any such violation or
noncompliance. To the best of its knowledge, Borrower has not engaged in any
practices in violation of any antitrust law or regulation of any federal,
state
or local Governmental Authority.
Section 4.16. Licenses and Permits.
Borrower and the Subsidiaries have all licenses and permits relating to the
ownership and lease of their respective facilities and operation of their
respective business as are necessary and required for such ownership and
operation. Schedule 4.16 hereto (which shall be delivered as soon as
practicable
after the date hereof) contains a complete description of all licenses,
permits,
franchises, certificates of need, and certificate of need applications and
their
respective dates of termination or renewal, owned or held by Borrower and the
Subsidiaries relating to the ownership, lease, development or operation of
their
respective facilities or its business, together with any formal and specific
notices or directives received from the agency responsible for such Schedule
4.16
item, for which noncompliance with such notice or directive would likely cause
the revocation, suspension or diminution in term for such item, all of which
are
in good standing and, except as expressly set forth on Schedule 4.16, are not
subject to renewal within less than one (1) year.
Section 4.17. Contracts.
Schedule 4.17 lists all contracts to which Borrower is a party involving
obligations in respect of the business for payment, performance of services or
delivery of goods in excess of $5,000 or which require Borrower to continue to
perform for a period of longer than twelve ( 12) months (the "Scheduled
Contracts"). Borrower has delivered to the Lenders true and correct copies of
all the Scheduled Contracts. All of such Scheduled Contracts are valid and
binding obligations of the parties thereto, are in full force and effect,
and, to the best knowledge of Borrower, are enforceable against the parties
thereto in accordance with their respective terms. Borrower has not received
any notice that the other parties to the Scheduled Contracts are (i) in
default under such Scheduled Contracts or (ii) consider Borrower to be in
default thereunder. Except as expressly noted in Schedule 4. 17, to the best
knowledge of Borrower, no party to any of the Scheduled Contracts intends to
terminate or adversely modify its agreement(s) with respect thereto or
adversely change the volume of business done thereunder.
Section 4.18. Shares Issuable Upon Conversion.
The shares of Common Stock of Borrower when issued to the Lenders 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, rights of first refusal or
similar rights by any other security holder of Borrower.
Section 4.19. Insider.
(a) Neither Borrower, nor any Person having "control" (as that term is defined
in the 1940 Act or in the regulations promulgated pursuant thereto) of
Borrower
is an "executive officer," "director," or "principal shareholder" (as those
terms are defined in the 0000 Xxx) of any Lender.
(b) Borrower's 1996 Annual Report on Form 10-K discloses all material
transactions required to be disclosed therein pursuant to Item 404 of
Regulation
S-K promulgated under the 1933 Act.
(c) All agreements between Borrower and any of its officers, directors, and
principal shareholders, including employment agreements, are disclosed in
reports and filings made with the SEC or listed on Schedule 4.19.
Section 4.20. Subsidiaries.
(a) All of the Subsidiaries of Borrower are listed on Schedule 4.20. Except as
disclosed on Schedule 4.20, Borrower owns all of the outstanding capital stock
or other equity interests of the Subsidiaries, free and clear of all adverse
claims, other than Liens securing the Senior Obligations. All of such
outstanding capital stock of each Subsidiary has been duly and validly
authorized and issued and is fully paid and nonassessable. All such
Subsidiaries are duly organized and existing in good standing under the laws
of the respective jurisdictions of their incorporation or organization, are
duly qualified as foreign corporations and in good standing in all
jurisdictions in which failure to qualify would have a Material Adverse
Effect, and have the corporate power and authority to own their respective
properties and assets and to transact the business in which they are engaged
and are or will be qualified in those jurisdictions wherein they propose
to transact material business operations in the future.
(b) Except as disclosed on Schedule 4.20, Borrower does not own any equity or
long-term debt interest in any other Person, or any right or option to acquire
any such interest in any such Person.
(c) There are no restrictions on the payment of dividends by or advances from
any Subsidiary to Borrower.
Section 4.21. Casualties.
Except as disclosed on Schedule 4.21, 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).
Section 4.22. Investment Company Act.
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.
Borrower is, and after consummation of this Agreement and giving effect to all
Indebtedness incurred and transactions contemplated in connection herewith
will
be, Solvent.
Section 4.24. Corporate Names.
Borrower has not, during the preceding five (5) years, done business under or
used any assumed, fictitious or trade names.
Section 4.25. Insurance.
All of the insurable properties of 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 Borrower's
industry. Schedule 4.25 sets forth all of Borrower's property insurance
policies.
Section 4.26. Intellectual Property.
Borrower owns or is licensed to use all material trademarks, service marks,
trade names, patents and copyrights presently used to conduct its business.
To the best of its knowledge, Borrower has the right to use such intellectual
property rights without infringing 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 rights or challenging or questioning the validity or
effectiveness of any such license
or agreement. Borrower is not in default of any such license agreements in any
material respect, and no event has occurred and is continuing which, with
notice
or lapse of time or both, would constitute a material default. Each license
agreement is enforceable in accordance with its terms and has not been
canceled,
abandoned or terminated, nor has Borrower received notice thereof. There are
no
claims for trademark or copyright infringement pending against Borrower or the
Subsidiaries or, to the best knowledge of Borrower, their respective officers
or
directors. Neither Borrower nor any Subsidiary is currently using
copyrightable
material for which Borrower or any Subsidiary needs, but does not have, a
license to conduct its existing business. Neither Borrower nor any Subsidiary
needs, but does not have, a valid character or trademark license to conduct
its existing business.
Section 4.27. Real Property.
(a) Set forth on Schedule 4.27 is an accurate description of each parcel of
real
property owned by or leased to Borrower.
(b) Borrower has delivered to the Lenders true and correct copies of all of
its
leases or subleases and all related amendments, supplements and modifications
and related documents (the "Scheduled Lease Documents"). There are no other
agreements, written or oral, between Borrower and any third parties claiming
an
interest in Borrower's interest in the Scheduled Leases or otherwise relating
to
Borrower's use and occupancy of any leased real property. All such leases are
valid and binding obligations of the parties thereto, are in full force and
effect and enforceable against the parties thereto in accordance with their
terms; and no event has occurred including, but not limited to, the executed,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby which (whether with or without notice, lapse
of
time or both) would constitute a default thereunder. No property leased under
any lease which the Lenders have agreed to assume is subject to any lien,
encumbrance, easement, right-of-way, building or use restriction, exception,
variance, reservation or limitation as might in any respect interfere with or
impair the present and continued use thereof in the usual and normal conduct
of
Borrower's business.
(c) On the Loan Closing Date, Borrower will hold of record good, marketable
and
insurable title to the property described in Schedule 4.27 free and clear of
all
title defects, liens, pledges, claims, charges, rights of first refusal,
security interests or other encumbrances and not, in the case of the real
property, subject to any rights-of-way, building or use restrictions,
exceptions, variances, reservations or limitations of any nature whatsoever,
except with respect to all such properties, (i) matters set forth in
Schedule 4.27, and (ii) liens for current taxes and assessments not in
default (collectively, the "Permitted Encumbrances"). Notwithstanding the
foregoing, Borrower's
representations and warranties regarding title defects with respect to the
real
property is limited to defects arising by, through or under Borrower, but not
otherwise. Copies of the most current title insurance policies, commitments or
binders issued to or in the possession of Borrower with respect to any of the
real property or any portion thereof, are set forth as part of Schedule 4.27.
All real property and structures owned or leased by Borrower, and all
equipment owned
or leased by Borrower, are in good operating condition and repair (ordinary
wear
and tear excepted), taking into account their respective ages and consistent
with
their past uses, and are adequate for the uses to which they are being put.
Except as set forth on Schedule 4.27, to Borrower's best knowledge, the
buildings
and improvements owned or leased by Borrower are structurally sound. Borrower
has not received any notice of any violation of any building, zoning or other
law, ordinance or regulation in respect of such property or structures or
their use by Borrower. To Borrower's best knowledge, there is no existing,
proposed or
contemplated plan to modify or realign any street or highway or any existing,
proposed or contemplated eminent domain proceeding that would result in the
taking of all or any part of the real property or that would materially
adversely
affect the current or planned use of the real property or any part thereof.
The
facilities consisting of owned personal property are subject to no liens or
encumbrances except the security interests of record set forth on Schedule
4.27,
which Schedule is a copy of a Uniform Commercial Code ("UCC") search duly
obtained by Borrower in the last thirty (30) days and which search shows
security
interests of record relating to such facilities in the State of Georgia.
Borrower
agrees to remove security interests reflected on such UCC search, if any,
prior
to the Loan Closing (except those approved by the Lenders in writing) and to
remove any other security interests filed with respect to such facilities
between
the date of such UCC search and the date of the Loan Closing. Schedule 4.27
also
describes all construction work, if any, which Borrower has contracted for and
which is presently in progress in respect of the business, and also contains a
good faith estimate, as of the date of this Agreement, of the cost and
timetable
to complete each such project. Copies of the architect's, and the
contractor's,
if any, plans and specifications with respect to such construction in progress
have been delivered to the Lenders.
Section 4.28. Certain Representations With Respect to Borrower's Business.
(a) As set forth on Schedule 4.28, Borrower's facilities are qualified for
participation in the Medicare program. Complete and accurate copies of all
such
existing Medicare contracts have been furnished to the Lenders. Borrower's
facilities are presently in compliance with all of the terms, conditions and
provisions of such contracts.
(b) As set forth on Schedule 4.28, Borrower's facilities are qualified for
participation in the Medicaid program. Complete and accurate copies of
Borrower's existing Medicaid contracts have been furnished to the Lenders.
Borrower's
facilities are presently in compliance with all of the terms, conditions and
provisions of such contracts.
(c) As set forth on Schedule 4.28, Borrower's facilities are qualified for
participation in the Champus program. Complete and accurate copies of
Borrower's
existing Champus contracts have been furnished to the Lenders. Borrower's
facilities are presently in compliance with all of the terms, conditions and
provisions of such contracts.
(d) To the best of Borrower's knowledge and belief, Borrower's facilities are
not in violation of any applicable fire code in any material respect.
(e) Except as set forth in Schedule 4.28, Borrower has not received any
written
notification that Borrower's facilities are in violation of local building
codes, ordinances or zoning laws. To the best of Borrower's knowledge and
belief, the building or buildings in which Borrower's facilities are located
comply with all
local building codes, ordinances and zoning laws and are in a state of good
condition and repair, normal wear and tear excepted.
(f) Included in Schedule 4.28 is a copy of all licensure survey reports of
Borrower's facilities by the applicable state department of health issued from
and after January 1, 1996.
(g) Complete and accurate copies of all appraisals, if any, obtained by
Borrower
since January 1, 1996 relating to any of the property described on Schedule
4.27
have been furnished to the Lenders.
(h) Borrower's facilities have been licensed by all applicable state and local
agencies. Except as set forth in Schedule 4.28, Borrower's facilities are
presently in compliance with all the terms, conditions and provisions of such
licenses. Borrower's facilities, equipment, staffing and operations satisfy,
without exception, applicable licensing requirements.
(i) At Closing or within ten ( 10) days thereafter Borrower shall provide to
Lender an amended Schedule 4.28 which shall be in full compliance with the
representations made by Borrower under this Section 4.28.
Section 4.29. Reimbursement Matters.
To the best of knowledge and belief of Borrower, the amounts set up as
provisions
for the Medicaid or Medicare adjustments and adjustments by any other third
party
payors on the audited and unaudited financial statements are sufficient to pay
any amounts for which Borrower may be liable. Borrower has not received any
written notices that either Medicare or Medicaid has any claims against it
which
may reasonably be expected to result in consolidated net offsets against
future
reimbursement in excess of that provided for in such financial statements.
Neither Borrower nor, to the best knowledge and belief of Borrower, any of its
employees has been convicted of, charged with or is the subject of an
investigation with respect to a violation of the Medicare and Medicaid fraud
and
abuse provisions of the federal Social Security Act or the physician ownership
and referral provisions of federal law.
Section 4.30. Xxxx-Xxxxxx Funds.
No funds have been received by or on behalf of Borrower or, to the best
knowledge of Borrower, any predecessor of Borrower to construct, improve or
acquire any of the facilities under the "Xxxx-Xxxxxx" Act as a result of
which Borrower may be required to pay, or otherwise satisfy, any amounts for
which there shall be any "recovery" as a result of the consummation of the
transactions contemplated by this Agreement.
Section 4.31. Environmental.
(a) Borrower is currently in compliance with all Environmental Laws (as
defined
below) which compliance includes, but is not limited to, the possession by
Borrower of all permits and other governmental authorization required under
applicable Environmental Laws, and compliance in all material respects with
the
terms and conditions thereof, except in any case where the failure to be in
compliance would not have a Material Adverse Effect;
(b) Borrower has not stored, disposed of or arranged for disposal of any
Materials of Environmental Concern (as defined below) on any of the real
property, except in compliance with applicable Environmental Laws;
(c) Borrower has not received any communication (written or oral), whether
from
a governmental authority, citizens group, employee or otherwise, that alleges
that Borrower is not in full compliance with Environmental Laws, and there are
no circumstances that may prevent or interfere with such full compliance in
the
future. There is no Environmental Claim (as defined below) pending or, to
Borrower's best knowledge, threatened against, or which has been made known
to,
Borrower.
(d) during the period the facilities have been held by Borrower, its
affiliates
or, to Borrower's best knowledge, its predecessors in interest, there have
been
no actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the generation, handling, transportation,
treatment, storage, release, emission, discharge, presence or disposal of any
Hazardous Substance (as defined below), that could form the basis of any
Environmental Claim against Borrower under any Environmental Law or Medical
Waste
Law (as defined below) in effect at, or at any time prior to, the Loan
Closing.
(e) Without in any way limiting the generality of the foregoing, to Borrower's
best knowledge, (i) there are no underground storage tanks located on the
property owned or leased by Borrower or the Subsidiaries, (ii) there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by Borrower or the Subsidiaries, and
(iii) no polychlorinated biphenyls ("PCBs") are used or stored at any property
owned or leased by Borrower or the Subsidiaries.
(f) With respect to the generation, transportation, treatment, storage and
disposal or other handling or tracking of Medical Waste (as defined below),
Borrower is in compliance with all Medical Waste Laws, except in any case
where
the failure to be in compliance would not have a Material Adverse Effect.
The following terms shall have the following meanings:
"Environmental Claim" means any claim, action, cause of action,
investigation
or notice (written or oral) by any person or entity alleging potential
liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages,
property
damages, personal injuries or penalties) arising out of, based on or resulting
from (a) the presence, or release into the environment, of any Hazardous
Substances or Medical Wastes at any location, whether or not owned or operated
by Borrower or (b) circumstances forming the basis of any violation, or
alleged
violation of any Environmental Law or Medical Waste Law.
"Environmental Laws" means the federal, state and local environmental,
health
or safety laws, regulations, ordinances, rules and policies and common law in
effect on the date hereof and the Loan Closing Date relating to the use,
refinement, handling, treatment, removal, storage, production, manufacture,
transportation or disposal, emissions, discharges, releases or threatened
releases of materials of environmental concern, or otherwise relating to
protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), as the same
may
be amended or modified to the date hereof and the Loan Closing Date,
including,
without limitation, the statutes listed herewith:
Federal Resources Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901, et seq.
Federal Comprehensive Environmental Response, Compensation and Liability Act
of
1980, 42 U.S.C. ~ 9601, et seq.
Federal Clean Air Act, 42 U.S.C. ~ 7401, et seq.
Federal Water Pollution Control Act, Federal Clean Water Act of 1977, 33
U.S.C.
Section 1251, _ seq.
Federal Insecticide, Fungicide and Rodenticide Act, Federal Pesticide Act of
1978, Section U.S.C. ~ 136, et seq.
Federal Hazardous Materials Transportation Act, 48 U.S.C. Section 1801, et
seq.
Federal Toxic Substances Control Act, 15 U.S.C. Section 2601, seq.
Federal Safe Drinking Water Act, 42 U.S.C. Section 300f, _ seq.
"Hazardous Substances" means any toxic or hazardous waste, pollutants or
substances, including, without limitation, asbestos, PCBs, petroleum products
and byproducts, substances deemed or listed as "hazardous substance," "toxic
substance," "toxic pollutant" or similarly identified substance or mixture, in
or pursuant to any Environmental Law.
"Medical Waste" includes any substance, pollutant, materials or
containment
listed or regulated under the Medical Waste Tracking Act of 1988,42 U.S.C.
Section
6992, et seq. ("MWTA"), 42 Part 72 and 49 C.F.R. Sections 173, 386.
"Medical Waste Laws" means the following, including regulations
promulgated
and orders issued thereunder, to the extent such Medical Waste Laws regulate
Medical Waste, all as may be amended from time to time: the MWTA, the Resource
Reservation and Recovery Act, 42 U.S.C.A. ~ 6901 _ seq., the Air Pollution
Prevention and Control Act, 42 U.S.C.A. Section 7401 et seq., the Federal
Water
Pollution Control Act, 33 U.S.C.A. Section 1251 _ seq., the Marine
Protection, Research and Sanctuaries Act of 1972, 33 U.S.C.A. ~ 1401 _ 5~.,
Nuclear Regulatory Commission regulations contained in 10 C.F.R. Part 20, and
10 C.F.R. Part 61, Occupational Health Act, 29 U.S.C.A. Section 651 et seq.,
Public Health Service regulations contained in 42 C.F.R. Part 72, Food and
Drug Administration regulations contained in 21 C.F.R. Parts 58 and 211, U.S.
Department of Transportation regulations contained in 49 C.F.R. Parts 171 -
179, the Act to Prevent Pollution from Ships, 33 U.S.C.A. Section 1901 _
seq., United States Department of Agriculture regulations contained in
9 C.F.R. Parts 50 through 56, United States Postal Service regulations
contained in 39 C.F.R. Part 111, state and local environmental and safety
laws, rules, regulations and other legally binding requirements, and any
other federal, state, regional, county, municipal or other
local laws, regulations and ordinances insofar as they purport to regulate
Medical Waste, or impose requirements relating to Medical Waste.
Section 4.32. Survival of Representations and Warranties.
All representations and warranties of Borrower herein shall survive the Loan
Closing and the delivery of the Debentures, and any investigation at any time
made by or on behalf of the Lenders shall not diminish the Lenders' right to
rely on Borrower's representations and warranties as herein set forth.
Section 4.33. Full Disclosure.
Neither the representations, warranties, schedules, financial statements
referenced in Section 4.06, nor any business plan, offering memorandum,
prospectus, SEC registration statement, report or proxy statement,
certificate,
document or written statement to be delivered or caused to be delivered by
Borrower or any of its agents or representatives to the Lenders in connection
with this Agreement, contains or will contain, as of the date thereon, any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to keep the statements contained herein or therein
from being misleading in any material respect.
ARTICLE V - AFFIRMATIVE COVENANTS OF BORROWER
So long as any part of the Debentures remains unpaid or has not been redeemed
or
converted hereunder, and until such payment, redemption or conversion in full,
unless the Lenders shall otherwise consent in writing. Borrower agrees that:
Section 5.01. Financial Statements! Reports and Documents.
(a) Borrower shall accurately and fairly maintain its books of account in
accordance with GAAP, retain Xxxxx Bateler & Xxxxxxxxx, or other such firm of
independent certified public accountants, requested by Borrower and approved
by
the Lenders, to make annual audits of its accounts in accordance with
generally
accepted auditing standards.
(b) Borrower shall provide the following reports and information to each
Lender:
(i) As soon as available, and in any event within forty-five (45) days
after
the close of each fiscal quarter, Borrower's quarterly reports on Form 10-Q
with
exhibits for said period. As soon as available. Borrower's reports on Form 8-K
with any exhibits.
(ii) As soon as available, and in any event within ninety (90) days after
the close of each fiscal year, Borrower's annual report on Form 10-K with
exhibits for said period.
(iii) Each fiscal quarter, concurrent with the periodic report required
above, a certificate executed by the Chief Financial Officer or Chief
Executive
Officer of Borrower, (A) stating that a review of the activities of Borrower
during such fiscal period has been made under his supervision and that
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)
stating that Borrower and the Subsidiaries are in compliance as of the end of
such fiscal quarter with the agreed minimum financial ratios and standards set
forth in Schedule 7.01 to this Agreement.
(iv) Promptly (but in any event within five (5) business days) upon
becoming
aware of the existence of any condition or event which constitutes a Default
or
which, with notice or the passage of time or both would 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.
(v) Promptly (but in any event within five (5) business days) upon the
receipt thereof by Borrower or the Board of Directors of Borrower, copies of
all
reports, all management letters and other detailed information submitted to
Borrower or the Board by independent accountants in connection with each
annual
or interim audit or review of the accounts or affairs of Borrower made by such
accountants.
(vi) Promptly (but in any event within five (5) business days), such other
information relating to the finances, budgets, properties, business and
affairs
of Borrower and each Subsidiary, as the Lenders or the Agent 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 Borrower is a party.
Section 5.02. Preparation of Budgets.
(a) Prior to the beginning of Borrower's fiscal year Borrower agrees to
prepare
and submit to the Board and furnish to each 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 statements and balance sheet projections, itemized
in such detail as the Board may request.
(b) Borrower shall furnish to the Lenders monthly financial reports, including
budgets (as currently used by management in the conduct of business) within 30
days of the end of each month.
(c) Borrower agrees that it will review its operations with Agent. Such
operations reviews will be in such depth and detail as Agent shall reasonably
request and will be held as reasonably necessary, generally once a fiscal
quarter.
Section 5.03. Payment of Taxes and Other Indebtedness.
Borrower shall, and shall cause its Subsidiaries 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, will give rise to a Lien upon any of its property, other than a
Permitted Lien, and (iii) all of its other Indebtedness in accordance with
their
respective terms, except as prohibited hereunder; provided, however, that
Borrower and its Subsidiaries, if any, shall not be required to pay any such
tax,
assessment, charge, levy or other claim 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 5.04. Maintenance of Existence and Rights: Conduct of Business.
Subject to Section 6.13, Borrower shall, and shall cause its operating
Subsidiaries to, preserve and maintain their respective corporate existence
and
all of their respective material rights, privileges and franchises necessary
in
the normal conduct of its business, except where the failure to maintain such
rights, privileges and franchises could reasonably be expected not to have a
Material Adverse Effect, and conduct their respective businesses 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 5.05, SEC Filings.
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 proxy
statements required of a company whose securities are registered for public
trading under and pursuant to the 1934 Act and any rules and regulations
issued
thereunder, and to preserve and maintain its registration thereunder.
Section 5.06. Notice.
Borrower shall promptly notify the Lenders of (i) any Material Adverse Change,
(ii) any default under any Senior Obligations, other Indebtedness having an
aggregate principal amount in excess of $50,000, 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 having an
aggregate principal amount in excess of $50,000, if any, (iii) any material
adverse claim against or affecting Borrower or its Subsidiaries, if any, or
any
of its properties, and (iv) the commencement of, and any determination in, any
material litigation with any third party or any proceeding before any
Governmental Authority.
Section 5.07. Compliance with Loan Documents.
Borrower shall, and shall cause each of its Subsidiaries to, promptly comply
with any and all covenants and provisions of the Loan Documents.
Section 5.08, Compliance with Material Agreements.
Borrower shall, and shall cause each of its Subsidiaries to, comply in all
material respects with all material agreements, indentures, mortgages or
documents binding on it or affecting its properties or business.
Section 5.09. Operations and Properties.
Borrower shall, and shall cause each of its Subsidiaries 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 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 5.10. Books and Records: Access.
Borrower shall, and shall cause each of its Subsidiaries 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
the Lenders access during all normal business hours, upon reasonable notice,
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; provided that the Lender agrees that any
such
inspection will be performed so as not to interfere with Borrower's normal
business operations. Borrower shall make a copy of this Agreement, along with
any waivers, consents, modifications or amendments, available for review at
its
principal office by the Lenders or the Lenders' representatives.
Section 5.11. Compliance with Law.
Borrower shall, and shall cause each of its Subsidiaries to, comply in all
material respects with all applicable laws, rules, regulations, ordinances and
all orders and decrees of any Governmental Authority applicable to it or any
of
its properties, businesses, or operations.
Section 5.12. Insurance.
Borrower shall, and shall cause each of its Subsidiaries to, maintain such
worker's compensation insurance, liability insurance and insurance on its
properties, assets and business, now owned 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 5.13. Authorizations and Approvals.
Borrower shall, and shall cause each of its Subsidiaries 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 5.14. ERISA Compliance.
Borrower shall (i) at all times, make prompt payment of all contributions
required under all Plans, if any, and shall meet the minimum funding standards
set forth in ERISA with respect to its Plans subject to ERISA, if any, (ii)
notify the Lenders immediately of any fact in connection with any of its
Plans,
which might constitute grounds for termination thereof by the Pension Benefit
Guaranty Corporation 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 the Lenders, as to the reason therefor and the action, if any,
proposed to be taken with respect thereto, and (iii) furnish to the Lenders,
upon their request, such additional information concerning any of its Plans
as may be reasonably requested.
Section 5.15. Further Assurances.
Borrower shall, and shall cause each of its Subsidiaries 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 the Lenders 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 the Lenders may
request from time to time.
Section 5.16. Indemnity by Borrower.
Borrower shall indemnify, save, and hold harmless the Lenders and their
directors, officers, lenders, attorneys, and employees (singularly or
collectively, the "Indemnitee") 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 relates to
this
Agreement and the other Loan Documents issued pursuant thereto, the use of
proceeds of the Loans, or the relationship of Borrower and the Lenders under
this
Agreement or any transaction contemplated pursuant to this 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 5.16 to the Lenders with
respect to any of the foregoing arising out of the gross negligence or willful
misconduct of the Lenders or their assignees or the breach by any Lender or
their
assignees of this Agreement or any other Loan Document or other document
executed
in connection with any of the aforesaid, the breach by the Lenders or their
assignees of any intercreditor or participation agreement or commitment with
other parties, the violation or alleged violation of any law, rule or
regulation
by the Lenders or their assignees, or from the transfer or disposition by the
Lenders of any Debenture or the Common Stock issued upon conversion of the
Debenture. 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 or ability
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 Borrower materially prejudices Borrower's right or ability to
participate
in the contest of such claim, demand, action, or cause of action, then said
Indemnitee 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 fails 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, which counsel shall be reasonably
acceptable
to Borrower, in enforcing its rights hereunder and in defending against any
claim, demand, action, or cause of action covered by this Section 5. 16;
provided, however, that each Indemnitee shall endeavor in connection with any
matter covered by this Section 5.16 which also involves any other Indemnitee,
use
reasonable efforts to avoid unnecessary duplication of effort by counsel for
all
Indemnitees, 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. l 6 shall survive the expiration or
termination of this Agreement and the repayment of the Debentures.
Section 5.17. Reservation of Shares.
Borrower shall at all times reserve and keep available sufficient
authorized and unissued shares of Common Stock to effect the conversion of
the Debentures.
Section 5.18. Ownership of Subsidiaries.
Borrower shall own at all times all of the capital stock, or other equity
interests in, of the Subsidiaries.
Section 5.19. Retention of Stock Ownership.
(a) Borrower shall not offer, sell or otherwise dispose of any shares of
Common Stock or securities exercisable or convertible into shares of Common
Stock for a period of twelve (12) months following the Loan Closing, other
than except (i) Common Stock issued upon the conversion of any of the
Debentures; (ii) Common Stock issued upon exercise of any outstanding
warrants or options; (iii) Common Stock issued upon exercise of employee
stock options; and (iv) up to 200,000 shares of Common Stock issued upon
exercise of options granted to the Lenders.
(b) All executive officers, directors and principal shareholders of
Borrower will execute and deliver Lock-Up Agreements at the Loan Closing
which shall
provide that they will not offer, sell or otherwise dispose of the shares of
Common Stock beneficially owned or controlled by them (including subsequently
acquired shares or securities exercisable or convertible into shares), except
for intra-family transfers or estate planning purposes, for a period of twelve
(12) months following the Loan Closing. Thereafter, each such person shall
only
sell such securities pursuant to Rule 144, without the consent of the Lenders.
until the Debentures have been paid in full.
Section 5.20. Kev Man Life Insurance.
Borrower shall obtain and maintain key man life insurance on Xx.
Xxxxxxxxxxx X. Xxxxxxx in the amount of $5,000,000 payable to Borrower.
ARTICLE VI - NEGATIVE COVENANTS OF BORROWER
So long as any part of the Debentures has not been redeemed or converted
hereunder, and until such redemption or conversion in full, unless the Lenders
shall otherwise consent in writing, Borrower agrees that
Section 6.01. Limitation on Indebtedness.
At Loan Closing, Borrower and its Subsidiaries shall not have any
outstanding
Indebtedness, except Indebtedness arising under this Agreement, the
Debentures,
the Guaranties, Permitted Indebtedness or as set forth in Schedule 6.01.
Borrower
and its Subsidiaries will not incur or guarantee any Indebtedness senior to or
pari passu with the Debentures, without the consent of the Lenders, except for
bank debt and asset-based loans for Borrower's operations and acquisitions.
Section 6.02. Limitation on Liens.
Borrower shall not, and shall not permit its Subsidiaries to, create,
cause,
incur, permit, suffer to exist any Lien upon any of its properties or assets,
other than Permitted Liens
Section 6.03. Limitation on Investments.
Borrower shall not, and shall not permit its Subsidiaries to, make or
have
outstanding any Investments in any Person, except for Borrower's or any
Subsidiary's acquisition or ownership of stock of or other equity interests in
Subsidiaries (including Persons that will be Subsidiaries after giving effect
to
such Investments), mortgages or guarantees of mortgages, loans and other
transactions between Borrower and any Subsidiaries, short term bank deposits,
money market investments, debt instruments relating to health care facilities
in
connection with Borrower's or any Subsidiary's potential acquisition of such
facility, investment-grade commercial paper, government securities and such
other
"cash equivalent" investments as the Lenders may from time to time approve,
and
customer obligations and receivables arising out of sales or leases made or
the
rendering of services in the ordinary course of business.
Section 6.04. Alteration of Material Agreements.
Borrower shall not, and shall not permit its Subsidiaries to, consent to
or
permit any alteration, amendment, modification, release, waiver or termination
of any material agreement to which it is party, other than in the ordinary
course
of business.
Section 6.05. Transactions with Affiliates.
Except as disclosed in Schedule 6 05, Borrower shall not, and shall not
permit its Subsidiaries to, enter into any transaction not in the ordinary
course
of business with, or pay any management fees to, any Affiliate, except for
intercompany transactions, without the consent of the Lenders, unless the
terms
thereof (i) are no less favorable to Borrower or such Subsidiary than those
that
could be obtained at the time of such transaction in arm's-length dealings
with
a Person who is not an Affiliate, or (ii) if such transaction involves an
amount
less than $50.000. are set forth in writing and have been approved by a
majority
of the members of the Board of Directors having no personal stake in the
transaction, or (iii) if such transaction is approved by the requisite vote of
the shareholders of the Company.
Section 6.06. Limitations on Acquisition of Nonrelated Business.
Borrower shall not, and shall not permit its Subsidiaries 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 Borrower acquired is
humanly involved in, or substantially similar or related to, Borrower's
current
lines of business.
Section 6.07. Limitation on Sale of Properties.
Borrower shall not, and shall not permit its Subsidiaries to, (i) sell,
assign, convey, exchange, lease or otherwise dispose of any of its properties,
rights, assets or business (including the capital stock of its operating
Subsidiaries), whether now owned or hereafter acquired not constituting more
than
20% in any single transaction or series of related transactions without the
consent of the Lenders, or (ii) sell, assign or discount any accounts
receivable,
except in the ordinary course of business (which shall include receivable
financing or securitization), in each case without the consent of the Lenders;
provided, however, that Borrower may sell its securities to unaffiliated third
parties for fair market value and to employees under its existing stock option
plan.
Section 6.08. Fiscal Year and Accounting Method.
Borrower shall not, and shall not permit its Subsidiaries to, change its
fiscal year or method of accounting, except as permitted by GAAP.
Section 6.09. Liquidation.
Borrower shall not, and shall not permit its Subsidiaries to, (i) dissolve
or liquidate (except for dissolution or liquidation of inactive Subsidiaries
in
the ordinary course of business) or (ii) enter into any other transaction that
has a similar effect.
PNTG to Articles of Incorporation or Bylaws.
Section 6.10. Material Amendments
Borrower shall not, and shall not permit its Subsidiaries to, amend its
Certificate or Articles of Incorporation (or other charter document) or bylaws
in any material respect, without the consent of the Lenders.
Section 6.11. Executive Compensation.
(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 five most senior executive officers, unless such
compensation increase is approved by a majority of the Board or a Compensation
Committee of the Board, a majority of whom shall be nonemployee Directors.
(b) Borrower shall not implement any bonus, profit sharing or other
incentive plans, until such plans are formally adopted by the majority of the
Board or a Compensation Committee of the Board of Directors, a majority of
whom
shall be nonemployee Directors. Borrower's executive compensation shall be
consistent with the general compensation policies adopted by the Compensation
Committee of the Board of Directors.
Section 6.12. Restricted Payments.
Borrower shall not (i) without the consent of the Lenders, declare or pay
any
dividend (other than stock dividends) or make any other cash distribution on
(a)
any Common Stock, (b) any Preferred Stock, if at the time of such declaration
or
payment, Borrower is in Default with respect to the Loan, (ii) purchase,
redeem,
or otherwise acquire any shares of Common Stock in excess of 5% of the shares
then outstanding in any twelve (12)-month period or any shares of Preferred
Stock, without the consent of the Lenders, (iii) make any payments of
Indebtedness (other than Senior Obligations) which are pari passu or
subordinated
to the Debentures, if at the time of such payment, Borrower is in Default with
respect to the Loan, or (iv) make any prepayments of Indebtedness (other than
Senior Obligations) which are pari passu or subordinated to the Debentures,
except mortgages and accounts receivable financings or securitizations, unless
the Debentures are prepaid on a pro rata basis, without the consent of the
Lenders. Borrower shall not permit its Subsidiaries to enter into any
agreements
restricting the payment of dividends from the Subsidiaries to Borrower without
the consent of the Lenders.
Section 6.13. Consolidation or Merger.
Borrower shall not consolidate with or merge into any other corporation,
unless the surviving corporation after such merger or consolidation will not
be
in Default and the surviving corporation becomes a party to this Agreement.
Subsidiaries shall only consolidate with or merge into Borrower or another
Subsidiary; provided, however, that a Subsidiary may merge or consolidate with
any other entity as long as such Subsidiary is the surviving corporation of
such
merger or consolidation, and Borrower is not in Default.
ARTICLE VII - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
Section 7.01. Financial Ratios.
So long as any of the Debentures have not been redeemed or converted
hereunder, and until such redemption or conversion has been made in full, or
unless the Lenders shall otherwise consent in writing, Borrower, on a
consolidated basis, shall be in compliance with the covenants contained in its
Senior Documents and with the agreed minimum financial ratios and standards
provided in Schedule 7.01, as of the end of each fiscal quarter of Borrower
and
as set forth in its most recent quarterly compliance certificates delivered
pursuant to Section 5.01.
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 when due (or shall state in writing an
intention not to pay or its inability to pay) any installment of interest on
or
principal of, any Debenture or any fee, expense or other payment required
hereunder and such failure to pay shall continue unremedied for a period three
(3) days;
(ii) Any representation or warranty made under this Agreement, or any
of the other Loan Documents, or in any certificate or statement furnished or
made
to Agent pursuant hereto or in connection herewith or with the Loans
hereunder,
or in any Subsidiary Document shall prove to be untrue or inaccurate in any
material respect as of the date on which such representation or warranty was
made, provided that if the same is curable by Borrower or its Subsidiaries
through the exercise of their reasonable efforts and if Borrower or its
Subsidiaries exercise such reasonable efforts, then the Lenders may not
exercise
any nights or remedies provided in Section 8.02 hereof or in any of the Loan
Documents for a period of thirty (30) days;
(iii) Default shall occur in the performance of any of the covenants
or
agreements of Borrower or of its Subsidiaries contained herein, or in any of
the
other Loan Documents or in any Subsidiary Document, which Default is not
remedied
within ten (l0) days after the occurrence of such breach or failure to
perform;
(iv) Default shall occur in the payment of any Senior Obligations or
in
the payment of any other indebtedness having an aggregate principal amount in
excess of $50, 000, or nonmonetary default shall occur in respect of any note,
loan agreement or credit agreement relating to any Indebtedness having an
aggregate principal amount in excess of $50,000, and such default continues
for
more than the period of grace, if any, specified therein or any Indebtedness
having an aggregate principal amount in excess of $50,000, shall become due
before its stated maturity by acceleration of the maturity, or any
indebtedness
having an aggregate principal amount in excess of $50,000, 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 Borrower in accordance with the
respective terms,
or shall in any way be terminated or become or be declared by any court or by
Borrower or any Subsidiary in any legal proceeding to be ineffective or
inoperative, or shall in any way whatsoever cease to give or provide the
respective nights, titles, interests, remedies, powers or privileges stated
therein to be created thereby;
(vi) Borrower or its Subsidiaries shall (A) apply for or consent to
the
appointment of a receiver, trustee, custodian, intervenor 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 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 or appointing a receiver, custodian, trustee, intervenor or
liquidator of such Person, or of all or substantially all of such Person's
assets;
(viii) Any final judgment(s) for the payment of money in excess of
the
sum of $100,000 in the aggregate shall be rendered against Borrower or any
Subsidiary and such judgment or judgments shall not be satisfied or discharged
prior to the date on which any of its assets could be lawfully sold to satisfy
such judgment; or
(ix) Borrower shall fail to issue and deliver shares of Common Stock
as
provided herein upon conversion of the Debentures.
Section 8.02. Remedies Upon Event of Default.
(a) If an Event of Default shall have occurred and be continuing, then
the
Lenders may exercise any one or more of the following nights and remedies, and
any other remedies provided in any of the Loan Documents, as the Lenders in
their
sole discretion may deem necessary or appropriate:
(i) declare the unpaid Principal Amount (after application of any
payments or installments received by the Lenders) 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
the
Lenders' rights and remedies under the Loan Documents and the Subsidiary
Documents, or otherwise provided under or pursuant to any applicable law or
agreement, all of which rights may be specifically enforced.
(b) In the event of a violation by Borrower of the covenants set forth in
Article VI, the Lenders may, in their sole discretion, (i) waive compliance
with
the covenants provided Borrower is in compliance with Section 7.01 hereof; or
(ii) require Borrower to redeem the Debentures at the higher of market value
or
the unpaid principal amount of the Debentures, together with an amount equal
to
an 18% annual yield on the principal amount through the Redemption Date,
whichever is greater.
Section 8.03. Performance by the Lenders.
Should Borrower or any Subsidiary fail to perform any covenant, duty or
agreement contained herein or in any of the other Loan Documents or in any
Subsidiary Document, any Lender or Agent may perform or attempt to perform
such
covenant, duty or agreement on behalf of Borrower. In such event, Borrower
shall,
at the request of any Lender or Agent, promptly pay any amount reasonably
expended by any Lender or Agent in such performance or attempted performance
to
any Lender or Agent at its principal office, 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 any
Lender or Agent assumes no liability or responsibility for the performance of
any
duties of Borrower or any Subsidiary hereunder or under any of the other Loan
Documents or under any Subsidiary Document.
Section 8.04. Payment of Expenses Incurred by the Lenders.
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 reasonable attorneys'
fees
and expenses) incurred by any Lender or Agent in connection with the
preservation
and enforcement of the Lenders' nights under this Agreement, the Debentures or
any other Loan Document.
ARTICLE LY - REGISTRATION RIGHTS
Section 9.01. Demand Registration.
(a) Borrower hereby agrees to register all or any portion of the
Registrable
Securities on two occasions (but no more than one per year) within 18 months
after Loan Closing, if, and only if, it shall receive a written request from a
Holder (the Initiating Holder) that Borrower file a registration statement
under
the 1933 Act covering the registration of at least 25% of the Registrable
Securities Then Outstanding. 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 Borrower to request
that
all or a portion of their respective Registrable Securities be included in
said
registration.
(b) If the Holders intend to distribute the Registrable Securities
covered
by their request by means of an underwriting, they shall so advise Borrower as
a part of their request made pursuant to this Agreement, and 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 its 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 Borrower, the underwriter, the Initiating Holder
and such Holder) is limited to the extent provided herein. All Holders
proposing
to distribute their securities through such underwriting shall (together with
Borrower as provided in Section 9.04(e)) enter into an underwriting agreement
in
customary form with the underwriter or underwriters selected for such
underwriting by mutual agreement of Borrower and the Initiating Holder, which
agreement shall not be unreasonably withheld. Notwithstanding any other
provision
of this Section 9.01, if the underwriter advises the Initiating Holder and
Borrower in writing that marketing factors require a limitation of the number
of
shares to be underwritten, then the Initiating Holder 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. The nights of the Holders shall
be senior to those of any Persons subsequently granted demand registration
nights.
(c) Each such registration shall remain effective for a period of 180
days,
unless the Initiating Holder otherwise determines.
Section 9.02. "Pig-Back" Registration.
If 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
Borrower's stock plans or employee benefit plans or (ii) a registration
relating
solely to an transaction for which Form S4 may be used, then:
(a) 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 Borrower within 15 days of the date that such
written
notice was mailed by 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
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 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
materially 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 pace obtainable therefor, the aggregate number of Registrable
Securities
that may be sold by the Holders shall be limited 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
Borrower for its own account and for the account of other stockholders (other
than Holders of Registrable Securities), 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 forth above and the Piggy-Back Registration Statement is a
result of public offering by 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 Borrower for its own account and second, as to the
balance, if any, securities to be sold for the account of Borrower's
stockholders
(both the Holders of Registrable Securities requested and such other
stockholders
of Borrower requested to be included therein) on a pro rata basis;
(e) Holders of Registrable Securities shall have the night to withdraw
their
Registrable Securities from the 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; and
(f) The exercise of the registration nights of the Holders with respect
to
any specific underwritten offering shall be subject to a 90-day delay at the
request of the managing underwriter.
Section9.03. Shelf Registration.
Borrower shall file a "shelf' registration statement under the 1933 Act
(the
"Shelf registration") covering all of the Registrable Securities within 60
days
of the earlier of one (1) year from the Loan Closing Date or the date on which
the price per share of Common Stock is twice the initial conversion once set
forth in the Debentures, provided that the Company is eligible to use Form
S-3,
and the Company shall use its best efforts to cause the Shelf Registration to
be
declared effective and to keep the Shelf Registration continuously effective
until all of the Registrable Securities registered therein cease to be
Registrable Securities. The securities shall cease to be Registrable
Securities
(a) when the Shelf Registration shall have become effective under the 1933 Act
and such securities shall have been disposed of pursuant to the Shelf
Registration, or (b) such securities shall have been sold as permitted by Rule
144 under the 1933 Act or the date on which the Registrable Securities may be
sold pursuant to Rule 144(k), whichever is the first to occur. The holders of
the
Debentures shall utilize Rule 144 in their sole discretion to the extent it
meets
their distribution requirements. Borrower agrees, if necessary, to supplement
or
amend the Shelf Registration, as required by the registration form utilized by
Borrower or by the instructions applicable to such registration form or by the
1933 Act, and Borrower agrees to furnish to the holders of the Registrable
Securities copies of any such supplement or amendment prior to its being used.
Section 9.04. Obligations of Borrower.
Whenever required to effect the registration of any Registrable Securities
pursuant to this Agreement, 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 all reasonable efforts to cause such
registration statement to become effective, and keep such registration
statement
effective until the sooner of all such Registrable Securities having 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 all reasonable 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 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 andcustomary form reasonably satisfactory to 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 9.04(f)
above,
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 9.04(f) above
cannot
be used and the time period prior to the use of the amended prospectus
referred
to in this Section 9.04(g) shall not be counted in the 120 day period of this
Section 9.04.
Section 9.05. Furnish Information.
(a) It shall be a condition precedent to the obligations of Borrower to
take
any action pursuant to this Article IX that the selling Holders shall furnish
to
Borrower any and all information reasonably requested by 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.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the 1933 Act, Borrower
shall
give the Holders of Registrable Securities on whose behalf such Registrable
Securities are to be registered and their underwriters, if any, and their
respective counsel and accountants, at such Holders' sole cost and expense
(except as otherwise set forth herein), such access to copies of Borrower's
records and documents and such opportunities to discuss the business of
Borrower
with its officers and the independent public accountants who have certified
its
financial statements as shall be reasonably necessary in the opinion of such
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act.
Section 9.06. Expenses of Registration.
All expenses, other than underwriting discounts and commissions applicable
to the Registrable Securities sold by selling Holders, incurred in connection
with the registration of the Registerable Securities pursuant to this Article,
including, without limitation, all registration, filing and qualification
fees,
printer's expenses, and accounting and legal fees and expenses of Borrower,
shall
be bome by Borrower; provided, however, selling Holders shall be responsible
for
all costs of their due diligence and legal counsel in connection with a
registration of Registrable Securities.
Section 9.07. Indemnification Regarding Registration Rights.
If any Registrable Securities are included in a registration statement under
this
Article:
(a) To the extent permitted by law, 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 (each a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact with
respect
to 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 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 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 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
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 Agreement shall
indemnify and hold harmless Borrower, each of its directors and officers who
have signed the registration statement, each Person, if any, who controls
Borrower within the meaning of the 1933 Act or the 1934 Act, each of
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 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 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 night to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to
assume
the defense thereof with counsel mutually satisfactory to the parties;
provided,
however, that an indemnified party shall have the night 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 party 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 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 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 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) Borrower, on the one hand, and the Holders, on the other, 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, claims, 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 Borrower nor the Holders shall be required to contribute any amount in
excess of the amount by which the total pace at which the securities were
offered
to the public exceeds the amount of any damages which 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 l I(f)
of
the 1933 Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
Section 9.08. Reports Under the 1934 Act.
So long as 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
Borrower to the public without registration or pursuant to a registration on
Form
S-3, if applicable, Borrower agrees to use its reasonable efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other documents
required of 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 all 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 Borrower, listed
on
a national securities exchange; and
(d) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, (i) forthwith upon request a copy of the most recent annual or
quarterly report of Borrower and such other SEC reports and documents so filed
by 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.
Subject to the terms and conditions of this Agreement, and the
Debentures,
the night to cause Borrower to register Registrable Securities pursuant to
this
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
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 nights 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 night
to
registration and piggy-back registration nights 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 Agreement shall be deemed null and void
and
of no effect.
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 nonunderwritten offering, such Holder will
comply with Rules I Xx-0, 0 Xx-0 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 nonunderwritten offering, in writing will
inform Borrower, any other Holders who are selling shareholders, and any
national
securities exchange upon which the securities of Borrower are listed, that the
Registrable Securities have been sold and will, upon Borrower's request,
furnish
the distribution list of the Registrable Securities. In addition, upon the
request of Borrower, each Holder will supply Borrower with such documents and
information as 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 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 will 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
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.
ARTICLE X - BOARD OF DIRECTORS
Section 10.01. Board Representation or Attendance by Observer.
(a) Borrower herewith agrees that Agent shall have the night from time to
time to designate a nominee to serve as a member of the Board of Directors of
Borrower. In the event of a monetary Default under Section 8.01 hereof, the
Agent shall have the night to designate one (1) additional nominee to serve
as a member of the Board of Directors of Borrower. Borrower will nominate
and use its best efforts to secure the election of such designee(s) as
Director(s) of Borrower. During such time as Agent has not exercised such
rights, the Agent shall have the night to designate an observer, who shall
be entitled to attend and participate (but not vote) in all meetings of the
Board of Directors and to receive all notices, information, correspondence
and communications sent by Borrower to
members of the Board of Directors. All costs and expenses incurred in
connection
therewith by any such designated Director or observer, or by Agent on behalf
of
such Director of observer, shall be reimbursed by Borrower.
(b) Any such Director or observer 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 nights or
obligations of Borrower or the Lender under this Agreement, the Debentures,
the
other Loan Documents or the Subsidiary Documents.
Section 10.02. Limitation of Authority of Persons Designated as a Director
Nominee.
It is provided and agreed that the actions and advice of any person while
serving pursuant to Section 10.01 as a Director or an observer 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 Agreement, the
Debentures, the other
Loan Documents or the Subsidiary 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
Agreement.
Section 10,03. Nonliability of the Lenders.
The relationship between Borrower and the Lenders is, and shall at all
times
remain, solely that of borrower and lender. The Lenders neither undertake nor
assume any responsibility or duty to 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 the Lenders, or any representative or agent of the Lenders, in
connection with any such matter is for the protection of the Lenders, and
neither Borrower nor any third party is entitled to rely therein.
ARTICLE XI - AGENCY AND INTER-LENDER PROVISIONS
Section 11.01. The Lenders' Representations and Warranties to Other Lenders.
Each Lender represents and warrants to the other Lenders 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 Lenders, its own
independent review (including any desired investigations and inspections) of,
and
it accepts and approves, the Loan, this Agreement and the associated documents
and all other matters and information which it deems pertinent. It
acknowledges
that the Loan Documents and the Subsidiary Documents are a complete statement
of
all understandings and respective rights and obligations between and among the
Lenders, Subsidiaries and Borrowers regarding the Loan.
(c) None of the Lenders have 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
Documents, the Subsidiary Documents, 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 each Lender is, and shall at all times remain,
solely that of each Lender of its respective Loan. The Lenders are not
partners
or joint venturers in connection with the Loan.
Section 11.02. Waiver of Loan Provisions or Interest or Principal Payments.
A waiver of an interest or principal payment, a declaration of a Default
or
any amendment, modification or waiver of this Agreement or the Debentures will
require the consent of the Lender
Section 11.03. Agency.
(a) Each of the Lenders hereby designates and appoints 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 the Subsidiary 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
Borrower. The Agent may perform any of its duties under this Agreement, or
under
the other Loan Documents or the Subsidiary 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, in the other Loan Documents or in the Subsidiary
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,
the
other Loan Documents and the Subsidiary Documents. The Agent shall not have by
reason of this Agreement a fiduciary relationship with respect to the Lenders.
Nothing in this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents, express or implied, is intended to or shall be construed
to impose upon the Agent any obligations in respect of this Agreement, any of
the
other Loan Documents or any of the Subsidiary Documents except as expressly
set
forth herein or therein. If the Agent seeks the consent or approval of the
Lenders to the taking or refraining from taking any action hereunder, the
Agent
shall send notice thereof to the Lenders. The Agent may employ agents,
co-agents
and attorney-in-fact and shall not be responsible to the Lenders or Borrower,
except as to money or securities received by it or its authorized agents, for
the negligence or misconduct of any such agents or attorney-in-fact selected
by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees or
agents shall be liable to the Lenders for any action taken or omitted by it
or any of them under this Agreement, any of the other Loan Documents or any of
the
Subsidiary 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 not be responsible to the Lenders for
any recitals, statements, representations or warranties contained in this
Agreement or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, or sufficiency of this Agreement, any of the
other Loan Documents or any of the Subsidiary Documents or any of the
transactions contemplated thereby, or for the financial condition of any of
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, any of the other Loan Documents or any of the Subsidiary
Documents or the financial condition of Borrower, or the existence or possible
existence of any Default or Event of Default. Agent shall give the Lenders
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, of any of the other Loan
Documents or of any of the Subsidiary 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 refraining from any action or withholding any approval under any of
the Loan Documents or any of the Subsidiary Documents until it shall have
received such instructions from the Lenders. Without limiting the foregoing,
the
Lenders shall not have any night of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting under this Agreement, any
of the other Loan Documents or any of the Subsidiary Documents in accordance
with
the instructions of the Lenders.
(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,
any of the other Loan Documents or any of the Subsidiary Documents and its
duties
hereunder or thereunder, upon advice of counsel selected by it.
(e) To the extent that the Agent is not reimbursed and indemnified by
Borrower, 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, any of the other Loan
Documents, or any of the Subsidiary Documents or any action taken or omitted
by
the Agent under this Agreement, any of the other Loan Documents or any of the
Subsidiary Documents. The obligations of the Lenders under this
indemnification
provision shall survive the payment in full of the Loans and the termination
of
this Agreement.
ARTICLE XII - MISCELLANEOUS
Section 12.01. Strict Compliance.
Any waiver by the Lenders of any breach or any term or condition of this
Agreement, the other Loan Documents or the Subsidiary Documents shall not be
deemed a waiver of any other breach, nor shall any failure to enforce any
provision of this Agreement, the other Loan Documents or the Subsidiary
Documents
operate as a waiver of such provision or of any other provision, nor
constitute
nor be deemed a waiver or release of Borrower for anything arising out of,
connected with or based upon this Agreement, the other Loan Documents or the
Subsidiary Documents.
Section 12.02. Waivers and Modifications.
All modifications, consents, amendments or waivers (herein "Waivers") of
any
provision of this Agreement, the Debentures, any other Loan Documents or any
Subsidiary Documents, and any consent to departure therefrom, shall be
effective
only if the same shall be in writing by the Lenders 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 Agent or any
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 any other night. The nights of any Lender hereunder, under the
other Loan Documents and under the Subsidiary Documents shall be in addition
to
all other nights provided by law.
Section 12.03. Limitation on Liability.
The duties, warranties, covenants and promises arising from the Loan
Documents and the Subsidiary Documents of each Lender to Borrower shall be
several and not joint, and Borrower shall have no legal or equitable cause of
action against any Lender (or its successors or assigns) for any liability of
any other Lender (or its successors or assigns).
Section 12.04. Choice of Forum: Consent to Service of Process and
Jurisdiction.
Any suit, action or proceeding against Borrower with respect to this
Agreement or 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 federal courts located in the State of Texas, as each
Lender 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 writs, 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 System, Dallas, Texas, as its true and lawful attorney-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 Agreement or
any Debenture brought in such
courts, 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 Lenders 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, cross-claim 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 three (3) days
after
the due date, any installment of interest on or principal of, any Debenture or
any fee, expense or other payment required hereunder, the Lenders may, at
their
option, enforce their 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 party shall bear all costs and
expenses, including reasonable attorneys' 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 set off 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 nights 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 nights 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 five (5) years practice in commercial 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 a guaranty of the Indebtedness, then the Arbitration Panel
shall
be one which meets the criteria set forth between the Lenders 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 Borrower, and (ii)
administer multiple
arbitration claims as class actions in accordance with Rule 23 of the Federal
Rules of Civil Procedure. The arbitrator(s) shall be empowered to resolve any
dispute regarding the terms of this Agreement or 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 reasonably 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 related to the Loan Documents which does not
require
the presence of a third party which could not be joined as a party in the
proceeding. The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of the Loan Documents and repayment in
full
of sums owed to the Lenders by Borrower unless the parties otherwise expressly
agree 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.
If any provision of any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the term of this 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 remaining 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, invalid or unenforceable
provision shall be added as part of such Loan Document a provision mutually
agreeable to Borrower and the Lenders 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 the Lenders 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 with 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,
the
Lenders 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 the Lenders shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal 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, the Lenders 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, the Lenders 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 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 laws of any other jurisdiction
which are or may be applicable to the holders of the Debentures and such
Indebtedness or, to the extent permitted by law, under such applicable laws of
the United States of America and the laws of any other jurisdiction 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 Lenders and the Agent shall have the right to enter into a
participation agreement with any other party or its Affiliates 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 any such
Lender or the Agent
hereunder vis-a-vis Borrower. In the event that all or any portion of the 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 any Lender or the Agent hereunder (herein "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 Borrower and represented by the Agent as described in subsection (b)
below.
(b) Assignment or sale of the Debentures shall be effective on the books
of
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 Borrower for issue of a replacement
Debenture,
or Debentures, in the name of the new holder; and (ii) 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) The Debentures may be sold, transferred or assigned only to Affiliates
of the Lenders or permitted transferees in multiples of $100,000.
Section 12.09. Confidentiality.
(a) All financial reports or information that are furnished to the Lenders
or Holders, or their respective director designees or other representatives,
pursuant to this Agreement or pursuant to the Debentures, the other Loan
Documents or the Subsidiary Documents shall be treated as confidential unless
and to the extent that such information has been otherwise disclosed by
Borrower, but
nothing herein contained shall limit or impair the Lenders' or Holders' 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 Agreement, or to take
any lawful action which the Lenders or Holders deem necessary to protect their
respective interests under this Agreement.
(b) The Lenders and the Agent shall use their reasonable efforts to
protect
and preserve the confidentiality of such information, except for such
disclosure
as shall be required for compliance by the Lenders or their respective
director
designees with SEC reporting requirements or any administrative or judicial
proceeding or otherwise as a matter of law. The provisions of Section 5.01
notwithstanding, Borrower may refuse to provide information as required
pursuant
thereto to an assignee or successor in interest to the Lenders, 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.
The Loan Documents shall be binding upon and inure to the benefit of
Borrower and the Lenders and their respective successors, assigns and legal
representatives; provided, however, that Borrower may not, without the prior
written consent of the Lenders, assign any nights, powers, duties or
obligations
thereunder.
Section 12.11. No Third Party Beneficiary.
The parties do not intend the benefits of this Agreement to inure to any
third party, nor shall this Agreement be construed to make or render the
Lenders
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, in
the
Debentures, in any other Loan Document or in any Subsidiary Document, no
conduct
by any or all of the parties hereto, before or after signing this Agreement,
any
other Loan Document nor any Subsidiary Document, shall be construed as
creating
any night, claim or cause of action against the Lenders, or any of their
respective officers, directors, agents or employees, in favor of any
materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower nor to any other person or entity other than Borrower.
Section 12.12. Entirety.
This Agreement and the Debentures, the other Loan Documents, the
Subsidiary
Documents and any other documents or instruments issued or entered into
pursuant
hereto and thereto contain the entire agreement between the parties and
supersede
all prior agreements and understandings, written or oral (if any), relating to
the subject matter hereof and thereof.
Section 12.13. Headings.
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 Agreement.
Section 12.14. Survival.
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,
This 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 Agreement by signing any such counterpart.
Section 12.16. Knowledge of Borrower.
As used herein or in any of the other Loan Documents, all references "to
Borrower's best knowledge" or "to the knowledge of Borrower" or words or
phrases
of similar import (whether or not modified by any additional phrase) shall in
each case mean the knowledge of Borrower, the Subsidiaries or their respective
executive officers, directors and principal shareholders.
Section 12.17. Notices.
(a) Any notices or other communications required or permitted to be given
by this Agreement or any other documents and instruments referred to herein
must
be (i) given in writing and personally delivered, mailed by prepaid certified
or
registered mail or sent by overnight service, such as FedEx, or (ii) made by
telex or facsimile transmission delivered or transmitted to the party to whom
such notice or communication is directed, 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 below. 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 the Lenders 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 business day. Any party may change
its
address for purposes of this Agreement by giving notice of such change to the
other parties.
If to Borrower to:
NewCare Health Corporation 0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000 Xxxxxxx, XX 00000
404/000-0000 000/000-0000 (fax)
with a copy to:
Xxxxxx X. Xxx, Esq. Xxxxxx & Xxxxxx LLP 2700 International Tower Peachtree
Center 000, Xxxxxxxxx Xxxxxx, X.X. Xxxxxxx, Xxxxxxx 00000-0000
If to the Lenders to:
Renaissance Capital Growth & Income Fund III, Inc.
Renaissance US Growth & Income Trust PLC
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
214/000-0000
214/000-0000 (fax)
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxxx & Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
214/000-0000
214/0000000 (fax)
If to Agent to:
Renaissance Capital Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 000-XX00
Xxxxxx, Xxxxx 00000
214/000-0000
214/000-0000 (fax)
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx, Xxxxxx & Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
214/000-0000
214/000-0000 (fax)
Any notice delivered personally in the manner provided herein will be
deemed
given to the party to whom it is directed upon the party's (or its agent's)
actual receipt. Any notice addressed and mailed in the manner provided here
will
be deemed given to the party to whom it is addressed at the close of business,
local time of the recipient, on the fourth business day after the day it is
placed in the mail, or, if earlier, the time of actual receipt.
Section 12.18. Governing Law.
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.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed
and delivered, as of the date and year first above written.
BORROWER
NEWCARE CORPORATION
By: /s/ Xxxxx Xxxxxxx
Chairman of the Board
LENDERS
RENAISSANCE CAPITAL GROWTH & INCOME FUND m, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx, President
RENAISSANCE US GROWTH & INCOME TRUST PLC
By: Renaissance Capital Group, Inc., Investment Manager
By: /s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx, President
AGENT
RENAISSANCE CAPITAL GROUP, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxxxxx, President
SCHEDULES TO CONVERTIBLE LOAN AGREEMENT
Schedule 2.08 Schedule of Brokers/Finders
Schedule 4.03 Schedule of Conflicts or Consents
Schedule 4.05 Schedule of Permitted Liens
Schedule 4.06 Schedule of Any Material Adverse Change
Schedule 4.08 Schedule of Material Agreements
Schedule 4.09 Schedule of Litigation
Schedule 4.10 Schedule of Unpaid Taxes
Schedule 4.11 Schedule of Capitalization
Schedule 4.13 Schedule of Employee Matters
Schedule 4.14 Schedule of Employee Benefit Plans
Schedule 4.15 Schedule of Compliance with Laws Matters
Schedule 4.16 Schedule of Licenses and Permits
Schedule 4.17 Schedule of Contracts
Schedule 4.19 Schedule of Agreements between Borrower and any of its
officers, directors, and principal shareholders, including
employment agreements
Schedule 4.20 Schedule of Subsidiaries
Schedule 4.21 Schedule of Casualties
Schedule 4.25 Schedule of Insurance
Schedule 4.27 Schedule of Real Property
Schedule 4.28 Schedule of Representations with Respect to Borrower's
Business
Schedule 6.01 Schedule of Limitation on Indebtedness
Schedule 6.05 Schedule of Transactions with Affiliates
Schedule 7.01 Schedule of Financial Ratios
Schedule 2.08
Schedule of Brokers/Finders
Bathgate/XxXxxxxx - Associates 53SO S. Xxxxxx Xxxxx Xxxxx 000 Xxxxxxxxx, XX
00000-0000
Schedule 4.03
Schedule of Conflicts or Consents
No known conflicts or consents.
Schedule 4.05
Schedule of Permitted Liens
All permitted liens listed in the title policies for facilities, owned, leased
or managed:
1. Chicago Title Insurance Company Policy Number FL 5097 02 19602, dated May
23,1997
(Central Tampa Nursing Home Facility)
2. Chicago Title Insurance Company Policy Number FL 5097 02 19601, dated
Ivlay
28,1997
(Dania Nursing Facility)
3. Chicago Title Insurance Company Policy Number FL S097 02 19603, dated May
23, 1997
(Oak Manor Facility)
4. Chicago Title Insurance Company Policy Number I 1 0435 lO7 00000280, May
23,
1997
(Windward Facility)
5. Chicago Title Insurance Commitment Humber 509741600JM, dated August 20,
0000
(Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxxx, Xxxxxxx Facility)
6. Chicago Title Insurance Company Policy Number 3097-106~02519, May 1, 1997
(Remington House, Pompano Bcach, Florida Facility)
7. Chicago Title Insurance Company Policy Number FL 5097 106 31800, September
l8, 1997. (Walkulla Facility)
8. Xxxxxxx Title Guaranty Company Policy Number ~9901424458, August 1, 1988
(Suncoast Facility)
9. Xxxxxxx Title Guaranty Company Policy Number ~9922-85720, August 23, 1988
(Xxxxxxxx Xxxxxx Facility)
10. Chicago Title Insurance Company Commitment dated March 22, 1995
(Emory Facility)
l1. Chicago Title Insurance Company Commitment dated April 3, 1995
(Xxxxxxxxxx Facility)
12. Chicago Title Insurance Company Commitment dated April 12, 1995
(Ft. Vellcy Facility)
13. Any and all other title policies on various properties not listed but
owned
by NewCare
Health Corporation listed in the Corporations lO-K's and lO-Q's
Schedule 4.06
Schedule of Any Material Adverse Change
None
Schedule 4.08
Schedule of Material Agreements
No material agreements
The securities represented by this Debenture have not been registered under
the
Securities Act of 1933, as amended ("Act"), or applicable state securities
laws
("State Acts") and shall not be sold, hypothecated, donated or otherwise
transferred unless the Company shall have received an opinion of legal counsel
for the Company, or such other evidence as may be satisfactory to legal
counsel
for the Company, to the effect that any such transfer shall not require
registration under the Act and the State Acts.
NewCare Health Corporation
8.50% Convertible Debenture
$2,500,000 No.
1
Date of Issue: January 27, 1998
NewCare Health Corporation, a Nevada corporation (the "Company" or
"Borrower"), for value received, promises to pay to
Compass Bank, Custodian FBO
Renaissance Capital Growth & Income Fund III, Inc.
or to its order, (together with any assignee, jointly or severally, the
"Holder"
or "Lender") on or before January 27, 2005 (the "Due Date") (unless this
Debenture shall have been sooner called for redemption or presented for
conversion as herein provided), the sum of Two Million Five Hundred Thousand
Dollars ($2,500,000) (the "Principal Amount") and to pay interest on the
unpaid
Principal Amount at the rate of 8.50% per annum. All payments of both
principal
and interest shall be made at the address of the Holder hereof as it appears
in
the books and records of the Borrower, or at such other place as may be
designated by the Holder hereof.
1. Interest: Interest on the Principal Amount outstanding from time to
time shall be payable in monthly installments commencing February 1, 1998, and
subsequent payments shall be made on the first day of each month thereafter
until
the Principal Amount and all accrued and unpaid interest shall have been paid
in
full. Overdue principal and interest on the Debenture shall bear interest at
the
maximum rate permitted by applicable law.
2. Maturity: If not sooner paid, redeemed or converted, this Debenture
shall mature on January 27, 2005 at which time the remaining unpaid Principal
Amount, and all accrued and unpaid interest and any other charges then due
under
the Loan Agreement, shall be due and payable in full. This Debenture may be
prepaid without premium or penalty and shall be prepaid pro rata with any
prepayments of indebtedness (other than Senior Obligations) which is pari
passu
with or subordinated to this Debenture.
3. Mandatory Principal Installments: If this Debenture is not sooner
redeemed or converted as provided hereunder, Borrower shall pay to Holder,
commending on January 27, 2001 and continuing on the first day of each
successive
month thereafter prior to maturity, mandatory principal redemption
installments,
each of such installments to be in the amount of Ten Dollars ($10) per
Thousand
Dollars ($1,000) of the then remaining Principal Amount, and further, at
maturity, Borrower shall pay to Holder a final installment of the remaining
unpaid Principal Amount, and all accrued and unpaid interest and any other
charges then due under the Loan Agreement.
4. Optional Redemption by Holder: (a) If at any time after the date
hereof (i) the Company's Common Stock, $.02 par value ("Common Stock"), is not
listed on the NASDAQ National Market System ("National Market"), the New York
Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), or quoted on
the
NASDAQ Small Cap System ("Small Cap System"), (ii) any Person acquires more
than
a majority of the Common Stock without the written consent of the Lenders,
(iii)
there is a change of at least two-thirds of the members of the Company's Board
of Directors in any two (2) year period without the written consent of the
Lenders, (iv) all or substantially all of the assets or capital stock of the
Company or its subsidiaries are sold, or (v) the Company or its subsidiaries
are
merged or consolidated with or into unaffiliated entities, without the written
consent of Holder, the Holder shall have the right to require this Debenture
to
be redeemed by the Company at the sum equal to the Principal Amount, together
with an amount equal to an 18% annual yield on the Principal Amount through
the
date of redemption ("Redemption Date").
(b) If Xx. Xxxxxxxxxxx X. Xxxxxxx is not elected or appointed Chief
Executive Officer of the Company by April 30, 1998, and, thereafter, does not
continue to serve the Company in such capacity, then the Holder shall have the
right to require this Debenture to be redeemed by the Company at the sum equal
to the Principal Amount, together with an amount equal to 18% annual yield on
the
Principal Amount through the Redemption Date.
(c) The Holder may exercise its right to require that the Company redeem
this Debenture pursuant to Section 4(a) or Section 4(b) prior to maturity by
giving notice thereof to the Company, which notice shall specify the terms of
redemption (including the place at which the Holder may obtain payment), the
total redemption payment and the Redemption Date, which date shall not be less
than 30 days nor more than 60 days after the date of the notice.
5. Optional Redemption by Company: (a)On any interest payment date, and
after prior irrevocable notice as provided for below, this Debenture is
redeemable, in while but not in part, at 101% of par, together with accrued
and
unpaid interest through the Redemption Date, by the Company, if all of the
following conditions are satisfied: (i) the closing bid price for the Common
Stock averages at least $9.53 per share for the 20 consecutive trading days
prior
to the irrevocable notice and the Common Stock is listed or quoted on the
National Market, the Small Cap System, XXXX or NYSE; (ii) the market price at
the
date or irrevocable notice is supported by a price to earnings ratio of no
greater than 30 times fully diluted net earnings per share of Common Stock for
the trailing twelve months, determined in accordance with generally accepted
accounting principles, excluding any extraordinary gains or losses of the
Borrower; (iii) the average (20 days) daily trading volume shall be no less
than
40,000 shares, or 20,000 shares if the Common Stock trades on the AMEX or
NYSE;
and (iv) the Company shall have filed a registration statement covering the
shares of Common Stock issuable upon conversion of this Debenture, which shall
have become effective. The foregoing earnings per share and bid price tests
shall be duly adjusted for stock splits, stock dividends, subdivisions,
combinations, mergers, consolidations, and other recapitalizations. The
Company's right of redemption is subject to the Holder's prior right of
conversion of the Debenture.
(b) In the event that the conditions for an adjustment in the Conversion
Price pursuant to Section 6(b) and (c) hereof are satisfied, this Debenture is
redeemable by the Company, in whole but not in part, at the sum equal to the
Principal Amount, together with an amount equal to an 18% annual yield on the
Principal Amount through the Redemption Date.
(c) The Company may exercise its right to redeem this Debenture pursuant
to Section 5(a) or (b) prior to maturity by giving notice thereof to the
Holder
of this Debenture as such name appears on the books of the Borrower, which
notice
shall specify the terms of redemption (including the place at which the Holder
may obtain payment), the total redemption payments and the Redemption Date,
which
date shall not be less than 30 days nor more than 60 days after the date of
the
notice.
6. Conversion Right: (a) The Holder of this Debenture shall have the
right, at Holder's option, at any time, to convert all, or, in multiples of
$100,000, any part of the Debenture into such number of fully paid and
nonassessable shares of Common Stock as provided herein. The Holder of this
Debenture may exercise the conversion right by giving written notice (the
"Conversion Notice") to Borrower of the exercise of such right and stating the
name or names in which the stock certificate or stock certificates for the
shares
of Common Stock are to be issued and the address to which such certificates
shall
be delivered. The Conversion Notice shall be accompanied by the Debenture.
The
number of shares of Common Stock that shall be issuable upon conversion of the
Debenture shall equal the face amount of the Debenture divided by the
Conversion
Price (as defined below) and in effect on the date the Conversion Notice is
given; provided, however, that in the event that this Debenture shall have
been
partially redeemed, shares of Common Stock shall be issued pro rata, rounded
to
the nearest whole share. Conversion shall be deemed to have been effected on
the
date the Conversion Notice is received (the "Conversion Date"). In the case
of
any Debenture called for redemption, the conversion rights will expire at the
close of business on the Redemption Date. Within 20 business days after
receipt
of the Conversion Notice, Borrower shall issue and deliver by hand against a
signed receipt therefor or by United States registered mail, return receipt
requested, to the address designated in the Conversion Notice, a stock
certificate or stock certificates of Borrower representing the number of
shares
of Common Stock to which Holder is entitled and a check or cash in payment of
all interest accrued and unpaid on the Debenture up to and including the
Conversion Date. The conversion rights will be governed by the following
provisions:
(b) Conversion Price. On the issue date hereof and until such time as
an
adjustment shall occur, the Conversion Price shall be $3.81 per share;
provided,
however, that the Conversion Price shall be subject to adjustment at the times
and in accordance with the provisions set forth below. Any such adjustment
shall
be subject to the Company's optional right to redeem this Debenture as set
forth
in Section 5(b) hereof, upon notice given in the manner set forth in Section
5(c)
hereof.
(i) Adjustment for Issuance of Shares at Less Than the Conversion
Price. If and whenever any Additional Common Stock shall be issued by
Borrower
(the "Stock Issue Date") for a consideration per share less than the
Conversion
Price, then in each such case the initial Conversion Price shall be reduced to
a new Conversion Price in an amount equal to the price per share for the
Additional Common Stock then issued, if issued in connection with a sale of
shares, or the value of the Additional Common Stock then issued, as determined
in accordance with generally accepted accounting principles, if issued other
than
for cash, and the number of shares issuable to Holder upon conversion shall be
proportionately increased; and, in the case of Additional Common Stock issued
without consideration, the initial Conversion Price shall be reduced in amount
and the number of shares issued upon conversion shall be increased in an
amount
so as to maintain for the Holder the right to convert the Debenture into
shares
equal in amount to the same percentage interest in the Common Stock of the
Company as existed for the Holder immediately preceding the Stock Issue Date.
(ii) Sale of Shares. In case of the issuance of Additional Common
Stock for a consideration part or all of which shall be cash, the amount of
the
cash consideration therefor shall be deemed to be the gross amount of the cash
paid to Borrower for such shares, before deducting any underwriting
compensation
or discount in the sale, underwriting or purchase thereof by underwriters or
dealers or others performing similar services or for any expenses incurred in
connection therewith. In case of the issuance of any shares of Additional
Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor, other than cash, shall be deemed to be
the
then fair market value of the property received.
(iii) Reclassification of Shares. In case of the reclassification
of securities into shares of Common Stock, the shares of Common Stock issued
in
such reclassification shall be deemed to have been issued for a consideration
other than cash. Shares of Additional Common Stock issued by way of dividend
or
other distribution on any class of stock of Borrower shall be deemed to have
been
issued without consideration.
(iv) Stock Dividends, Stock Splits, Subdivisions or Combinations.
In the event of a stock dividend, stock split or subdivision of shares of
Common
Stock into a greater number of shares, the Conversion Price shall be
proportionately decreased, and in the event of a combination of shares of
Common
Stock into a smaller number of shares, the Conversion Price shall be
proportionately increased, such increase or decrease, as the case may be,
becoming effective at the record date.
(v) Exceptions. The term "Additional Common Stock" herein shall
mean all shares of Common Stock hereafter issued by Borrower (including Common
Stock held in the treasury of Borrower), except (A) Common Stock issued upon
the
conversion of any of the Debentures; (B) Common Stock issued upon exercise of
any
outstanding warrants or options; (C) Common Stock issued upon exercise of
outstanding employee stock options; (D) up to 300,000 shares of Common Stock
issued upon exercise of stock options to be granted subsequent to the date
hereof
to persons currently employed by Borrower or its subsidiaries; (E) up to
200,000
shares of Common Stock issued upon exercise of stock options to be granted
subsequent to the date hereof to persons subsequently employed by Borrower or
its subsidiaries; and (F) Common Stock issued upon exercise of stock options
granted to the Holders.
(c) Adjustment for Mergers and Consolidations.
(i) In the event of distribution to all Common Stock holders of any
stock, indebtedness of Borrower or assets (excluding cash dividends or
distributions from retained earnings) or other rights to purchase securities
or
assets, then, after such event, the Debenture will be convertible into the
kind
and amount of securities, cash and other property which the holder of the
Debenture would have been entitled to receive if the holder owned the Common
Stock issuable upon conversion of the Debenture immediately prior to the
occurrence of such event.
(ii) In case of any capital reorganization, reclassification of the
stock of Borrower (other than a change in par value or as a result of a stock
dividend, subdivision, split up or combination of shares), this Debenture
shall
be convertible into the kind and number of shares of stock or other securities
or property of Borrower to which the holder of the Debenture would have been
entitled to receive if the holder owned the Common Stock issuable upon
conversion
of the Debenture immediately prior to the occurrence of such event. The
provisions of the immediately foregoing sentence shall similarly apply to
successive reorganizations, reclassifications, consolidations, exchanges,
leases,
transfers or other dispositions or other share exchanges.
(iii) The term "Fair Market Value," as used herein, is the value
ascribed to consideration other than cash as determined by the Board of
Directors
of Borrower in good faith, which determination shall be final, conclusive and
binding. If the Board of Directors shall be unable to agree as to such fair
market value, then the issue of fair market value shall be submitted to
arbitration under and pursuant to the rules and regulations of the American
Arbitration Association, and the decision of the arbitrators shall be final,
conclusive and binding, and a final judgment may be entered thereon; provided,
however, that such arbitration shall be limited to determination of the fair
market value of assets tendered in consideration for the issue of Common
Stock.
(iv) In the event Borrower shall propose to take any action which
shall result in an adjustment in the Conversion Price, Borrower shall give
notice
to the Holder of this Debenture, which notice shall specify the record date,
if
any, with respect to such action and the date on which such action is to take
place. Such notice shall be given on or before the earlier of 10 days before
the
record date or the date which such action shall be taken. Such notice shall
also
set forth all facts (to the extent known) material to the effect of such
action
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of this Debenture.
(d) Certificate. Following completion of an event which results in an
adjustment to the Conversion Price, Borrower shall furnish to the holder of
this
Debenture a statement, signed by the Chief Executive Officer and the Secretary
of the Borrower, of the facts creating such adjustment and specifying the
resultant adjusted Conversion Price then in effect, which statement shall
constitute an amendment to this Debenture.
7. One-Time Adjustment to Conversion Price. Notwithstanding the
provisions of Section 6 hereof, if the volume-weighted average closing bid
price
of the Common Stock, as determined by Bloomberg Financial Markets Commodities
News, for the 21 consecutive trading days following Borrower's public press
release of its December 31, 1998 fiscal year-end financial results (such
volume-weighted average closing bid price herein referred to as the "1998
Conversion
Price Adjustment") is a price less than the initial Conversion Price, then the
Conversion Price shall be adjusted downward to an amount equal to 100% of the
1998 Conversion Price Adjustment. If an adjustment is required pursuant to
this
Section 7, then the Borrower shall furnish to the holder of this Debenture a
statement, within ten days of the occurrence thereof, signed by the Chief
Financial Officer and the Secretary of Borrower, of the facts creating such
adjustment and specifying the resultant adjusted Conversion Price then in
effect,
which statement shall constitute an amendment to the Debenture. Such one-time
adjustment to the Conversion Price shall be subject to the Holder's optional
right to require the Company to redeem this Debenture at the sum equal to the
Principal Amount, together with an amount equal to an 18% annual yield on the
Principal Amount through the Redemption Date, upon notice given in the manner
set
forth in Section 4(b) hereof, if the Company reports pre-tax income of
$2,000,000, excluding extraordinary gains, for the December 31, 1998 fiscal
year.
8. Reservation of Shares: Borrower warrants and agrees that it shall at
all times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued shares of Common Stock or treasury shares of Common
Stock
necessary to effect conversion of this Debenture.
9. Registration Rights: The shares of Common Stock issued upon
conversion
of the Debenture shall be restricted from transfer by the holder, unless the
shares are duly registered for sale pursuant to the Securities Act of 1933, as
amended, or the transfer is exempt from registration. The Holder has certain
rights with respect to the registration of shares of Common Stock issued upon
the conversion of this Debenture pursuant to the terms of the Loan Agreement.
In the event the Company fails (unless prevented by events outside its
control) to register the shares of Common Stock issuable upon conversion of
this Debenture within 90 days from the date on which the shelf registration
statement is
required to be filed pursuant to Section 9.03 of the Loan Agreement, the
Conversion Price shall decrease by 2.00% per month until such registration is
declared effective. Borrower agrees that a copy of the executed Loan
Agreement
and all amendments shall be available to the Holder at the offices of the
Company.
10. Taxes: The Company shall pay any documentary or other transactional
taxes attributable to the issuance or delivery of this Debenture or the shares
of Common Stock issued upon conversion by the Holder (excluding any federal,
state or local income taxes and any franchise taxes or taxes imposed upon the
Holder by the jurisdiction, or any political subdivision thereof, under which
such Holder is organized or is qualified to do business.)
11. Default:
(a) Event of Default: An "Event of Default" shall exist if an "Event of
Default" (as defined in the Loan Agreement) shall occur and be continuing.
(b) Remedies Upon Event of Default: If an Event of Default shall have
occurred and be continuing, then the Holder or Agent may exercise any one or
more of the rights and remedies provided in the Loan Documents, as the Holder
or
Agent, in its sole discretion, may deem necessary or appropriate.
(c) Remedies Nonexclusive: Each right, power or remedy of the holder
hereof upon the occurrence of any Event of Default as provided for in this
Debenture or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Debenture or now or hereafter existing
at law or n equity or by statute, and the exercise or beginning of the
exercise
by the holder or transferee hereof of any one or more of such rights, powers
or
remedies shall not preclude the simultaneous or later exercise by the holder
of
any or all such other rights, powers or remedies.
(d) Expenses: Upon the occurrence of a Default of an Event of Default,
which occurrence is not cured within the notice provisions, if any provided
therefore, Borrower agrees to pay and shall pay all costs and expenses
(includ-
ing attorneys' fees and expenses) incurred by the Holder or Agent in con-
nection with the preservation and enforcement of Holder's rights under the
Loan Agreement, the Debenture, or any other Loan Document.
12. Failure to Act and Waiver: No failure or delay by the holder hereof
to require the performance of any term or terms of this Debenture or not to
exercise any right or any remedy shall constitute a waiver of any such term or
of any right or of any default, nor shall such delay or failure preclude the
holder hereof from exercising any such right, power or remedy at any later
time
or times. By accepting payment after the due date of any amount payable under
this Debenture, the holder hereof shall not be deemed to waive the right
either
to require payment when due of all other amounts payable, or to later declare
a
default for failure to effect such payment of any such other amount. The
failure of the holder of this Debenture to give notice of any failure or
breach of the Borrower under this Debenture shall not constitute a waiver of
any right or remedy in respect of such continuing failure or breach or any
subsequent failure or any subsequent failure or breach.
13. Consent to Jurisdiction: The Company hereby agrees and consents
that
any action, suit or proceeding arising out of this Debenture may be brought in
any appropriate court in the State of Texas, including the United States
District Court for the Norther District of Texas, or in any other court having
jurisdiction over the subject matter, all at the sole election of the Holder
hereof, and by the issuance and execution of this Debenture the Borrower
irrevocably consents to the jurisdiction of each such court. The Company
hereby
irrevocably appoints CT Corporation System, Dallas, Texas, as agent for the
Borrower to accept service of process for and on behalf of the Borrower in any
action, suit or proceeding arising out of this Debenture. Except for default
in
payment of interest or principal when and as they become due, and except as
otherwise specifically set forth herein or otherwise agreed to in writing by
the
parties, any action dispute, claim or controversy (all such herein called
"Dispute") between or among the parties as to the facts or the interpretation
of
the Debenture shall be resolved by arbitration as set forth in the Loan
Agreement.
14. Holder's Right to Request Multiple Debentures: The Holder shall,
upon
written request and presentation of the Debenture, have the right, at any
interest payment date, to request division of this Debenture into two or more
instruments, each of such to be in such amounts as shall be requested;
provided
however that no Debenture shall be issued in denominations of face amount less
than $100,000.
15. Transfer: Subject to Section 12.08 of the Loan Agreement, this
Debenture may be transferred on the books of the Borrower by the registered
Holder hereof, or by Holder's attorney duly authorized in writing, in
multiples
of $100,000 only upon (i) delivery to the Borrower of a duly executed
assignment
of the Debenture, or part thereof, to the proposed new Holder, along with a
current notation of the amount of payments received and net Principal Amount
yet
unfunded, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new Holder, (ii) the
designation by the new Holder of the Lender's agent for notice, such agent to
be
the sole party to whom Borrower shall 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 any action, consent or waiver,
(other than a compromise of principal and interest), when given or taken by
Lender's agent for notice, shall be deemed to be the action of the holders of
a
majority in amount of the Principal Amount of the Debenture, as such holders
are
recorded on the books of the Borrower, and (iii) in compliance with the legend
to read as follows:
"The Securities represented by this Debenture have not been registered under
the
Securities Act of 1933, as amended ("Act"), or applicable state securities
laws
("State Acts") and shall not be sold, hypothecated, donated or otherwise
transferred unless the Company shall have received an opinion of Legal Counsel
for the Company, or such other evidence as may be satisfactory to Legal
Counsel
for the Company, to the effect that any such transfer shall not require
registration under the Act and the State Acts."
The Company shall be entitled to treat any holder of record of the
Debenture as the Holder in fact thereof and of the Debenture and shall not be
bound to recognize any equitable or other claim to or interest in this
Debenture
in the name of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
16. Notices: All notices and communications under this Debenture shall
be in writing and shall be either delivered in person or by overnight service
such as FedEx and accompanied by a signed receipt therefor; or mailed first-
class
United States certified mail, return receipt requested, postage prepaid, and
addressed as follows: (i) if to the Borrower at its address for notice as
stated
in the Loan Agreement; and (ii) if to the Holder of this Debenture, to the
address (a) of such Holder as it appears on the books of the Borrower or (b)
in
the case of a partial assignment to one or more Holders, to the Lender's agent
for notice, as the case may be. Any notice of communication shall be deemed
given and received as of the date of such delivery if delivered; or if mailed,
then three days after the date of mailing.
17. Maximum Interest Rate: (a) Regardless of any provision contained in
this Debenture, Lender shall never be entitled to receive, collect or apply as
interest on the Debenture any amount in excess of interest calculated at the
Maximum Rate, and in the event that 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 Debenture 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 Debenture; provided that, if the Debenture is 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 Debenture 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 Debenture under the laws which are
presently
in effect of the United States of America or by the laws of any other
jurisdiction which are or may be applicable to the holders of the Debenture
and
such Indebtedness or, to the extent permitted by law, under such applicable
laws
of the United States of America or by the laws of any other jurisdiction which
are or may be applicable to the holder of the Debenture and which may
hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
18. Rights Under Loan Agreement. This Debenture is issued pursuant to
the
Convertible Loan Agreement dated of even date herewith among the Company,
Renaissance III and Renaissance PLC, as Lenders, and Agent, and the holders
hereof are entitled to all the rights and benefits. Both Borrower and Lenders
have participated in the negotiation and preparation of the Loan Agreement and
of the Debenture. Borrower agrees that a copy of the Loan Agreement with all
amendments, additions and substitutions therefor shall be available to the
Holders at the offices of Borrower.
19. Defined Terms: Capitalized terms used but not defined herein shall
have the meaning given them in the Loan Agreement.
20. Governing Law: This Debenture shall be governed by and construed
and
enforced in accordance with the substantive laws of the State of Texas,
without
regard to the conflicts of laws provisions thereof, and the applicable laws of
the United States.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
issued, executed and delivered on the date and year above stated.
NEWCARE HEALTH CORPORATION
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
Xxxxxxxxxxx X. Xxxxxxx, Chairman of the Board
The securities represented by this Debenture have not been registered under
the
Securities Act of 1933, as amended ("Act"), or applicable state securities
laws
("State Acts") and shall not be sold, hypothecated, donated or otherwise
transferred unless the Company shall have received an opinion of legal counsel
for the Company, or such other evidence as may be satisfactory to legal
counsel
for the Company, to the effect that any such transfer shall not require
registration under the Act and the State Acts.
NewCare Health Corporation
8.50% Convertible Debenture
$2,500,000 No.
2
Date of Issue: January 27, 1998
NewCare Health Corporation, a Nevada corporation (the "Company" or
"Borrower"), for value received, promises to pay to
Compass Bank, Custodian FBO
Renaissance US Growth & Income Trust PLC
or to its order, (together with any assignee, jointly or severally, the
"Holder"
or "Lender") on or before January 27, 2005 (the "Due Date") (unless this
Debenture shall have been sooner called for redemption or presented for
conversion as herein provided), the sum of Two Million Five Hundred Thousand
Dollars ($2,500,000) (the "Principal Amount") and to pay interest on the
unpaid
Principal Amount at the rate of 8.50% per annum. All payments of both
principal
and interest shall be made at the address of the Holder hereof as it appears
in
the books and records of the Borrower, or at such other place as may be
designated by the Holder hereof.
1. Interest: Interest on the Principal Amount outstanding from time to
time shall be payable in monthly installments commencing February 1, 1998, and
subsequent payments shall be made on the first day of each month thereafter
until the Principal Amount and all accrued and unpaid interest shall have
been paid in full. Overdue principal and interest on the Debenture shall
bear interest at the maximum rate permitted by applicable law.
2. Maturity: If not sooner paid, redeemed or converted, this Debenture
shall mature on January 27, 2005 at which time the remaining unpaid Principal
Amount, and all accrued and unpaid interest and any other charges then due
under
the Loan Agreement, shall be due and payable in full. This Debenture may be
prepaid without premium or penalty and shall be prepaid pro rata with any
prepayments of indebtedness (other than Senior Obligations) which is pari
passu
with or subordinated to this Debenture.
3. Mandatory Principal Installments: If this Debenture is not sooner
redeemed or converted as provided hereunder, Borrower shall pay to Holder,
commending on January 27, 2001 and continuing on the first day of each
successive month thereafter prior to maturity, mandatory principal
redemption installments, each of such installments to be in the amount of
Ten Dollars ($10) per Thousand Dollars ($1,000) of the then remaining
Principal Amount, and further, at maturity, Borrower shall pay to Holder a
final installment of the remaining unpaid Principal Amount, and all accrued
and unpaid interest and any other charges then due under the Loan Agreement.
4. Optional Redemption by Holder: (a) If at any time after the date
hereof (i) the Company's Common Stock, $.02 par value ("Common Stock"), is not
listed on the NASDAQ National Market System ("National Market"), the New York
Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), or quoted on
the
NASDAQ Small Cap System ("Small Cap System"), (ii) any Person acquires more
than
a majority of the Common Stock without the written consent of the Lenders,
(iii)
there is a change of at least two-thirds of the members of the Company's Board
of Directors in any two (2) year period without the written consent of the
Lenders, (iv) all or substantially all of the assets or capital stock of the
Company or its subsidiaries are sold, or (v) the Company or its subsidiaries
are
merged or consolidated with or into unaffiliated entities, without the written
consent of Holder, the Holder shall have the right to require this Debenture
to
be redeemed by the Company at the sum equal to the Principal Amount, together
with an amount equal to an 18% annual yield on the Principal Amount through
the
date of redemption ("Redemption Date").
(b) If Xx. Xxxxxxxxxxx X. Xxxxxxx is not elected or appointed Chief
Executive Officer of the Company by April 30, 1998, and, thereafter, does not
continue to serve the Company in such capacity, then the Holder shall have the
right to require this Debenture to be redeemed by the Company at the sum equal
to the Principal Amount, together with an amount equal to 18% annual yield on
the Principal Amount through the Redemption Date.
(c) The Holder may exercise its right to require that the Company redeem
this Debenture pursuant to Section 4(a) or Section 4(b) prior to maturity by
giving notice thereof to the Company, which notice shall specify the terms of
redemption (including the place at which the Holder may obtain payment), the
total redemption payment and the Redemption Date, which date shall not be less
than 30 days nor more than 60 days after the date of the notice.
5. Optional Redemption by Company: (a)On any interest payment date, and
after prior irrevocable notice as provided for below, this Debenture is
redeemable, in while but not in part, at 101% of par, together with accrued
and
unpaid interest through the Redemption Date, by the Company, if all of the
following conditions are satisfied: (i) the closing bid price for the Common
Stock averages at least $9.53 per share for the 20 consecutive trading days
prior to the irrevocable notice and the Common Stock is listed or quoted on
the
National Market, the Small Cap System, XXXX or NYSE; (ii) the market price at
the date or irrevocable notice is supported by a price to earnings ratio of no
greater than 30 times fully diluted net earnings per share of Common Stock for
the trailing twelve months, determined in accordance with generally accepted
accounting principles, excluding any extraordinary gains or losses of the
Borrower; (iii) the average (20 days) daily trading volume shall be no less
than
40,000 shares, or 20,000 shares if the Common Stock trades on the AMEX or
NYSE;
and (iv) the Company shall have filed a registration statement covering the
shares of Common Stock issuable upon conversion of this Debenture, which shall
have become effective. The foregoing earnings per share and bid price tests
shall be duly adjusted for stock splits, stock dividends, subdivisions,
combinations, mergers, consolidations, and other recapitalizations. The
Company's right of redemption is subject to the Holder's prior right of
conversion of the Debenture.
(b) In the event that the conditions for an adjustment in the Conversion
Price pursuant to Section 6(b) and (c) hereof are satisfied, this Debenture is
redeemable by the Company, in whole but not in part, at the sum equal to the
Principal Amount, together with an amount equal to an 18% annual yield on the
Principal Amount through the Redemption Date.
(c) The Company may exercise its right to redeem this Debenture pursuant
to Section 5(a) or (b) prior to maturity by giving notice thereof to the
Holder
of this Debenture as such name appears on the books of the Borrower, which
notice shall specify the terms of redemption (including the place at which
the Holder may obtain payment), the total redemption payments and the
Redemption Date, which date shall not be less than 30 days nor more than 60
days after the date of the notice.
6. Conversion Right: (a) The Holder of this Debenture shall have the
right, at Holder's option, at any time, to convert all, or, in multiples of
$100,000, any part of the Debenture into such number of fully paid and
nonassessable shares of Common Stock as provided herein. The Holder of this
Debenture may exercise the conversion right by giving written notice (the
"Conversion Notice") to Borrower of the exercise of such right and stating the
name or names in which the stock certificate or stock certificates for the
shares of Common Stock are to be issued and the address to which such
certificates shall be delivered. The Conversion Notice shall be accompanied
by the Debenture. The number of shares of Common Stock that shall be
issuable upon conversion of the Debenture shall equal the face amount of the
Debenture divided by the Conversion Price (as defined below) and in effect on
the date the Conversion Notice is given; provided, however, that in the event
that this Debenture shall have been partially redeemed, shares of Common
Stock shall be issued pro rata, rounded to the nearest whole share.
Conversion shall be deemed to have been effected on the date the Conversion
Notice is received (the "Conversion Date"). In the case of any Debenture
called for redemption, the conversion rights will expire at the close of
business on the Redemption Date. Within 20 business days after receipt of
the Conversion Notice, Borrower shall issue and deliver by hand against a
signed receipt therefor or by United States registered mail, return receipt
requested, to the address designated in the Conversion Notice, a stock
certificate or stock certificates of Borrower representing the number of
shares
of Common Stock to which Holder is entitled and a check or cash in payment of
all
interest accrued and unpaid on the Debenture up to and including the
Conversion
Date. The conversion rights will be governed by the following provisions:
(b) Conversion Price. On the issue date hereof and until such time as
an
adjustment shall occur, the Conversion Price shall be $3.81 per share;
provided,
however, that the Conversion Price shall be subject to adjustment at the times
and in accordance with the provisions set forth below. Any such adjustment
shall
be subject to the Company's optional right to redeem this Debenture as set
forth
in Section 5(b) hereof, upon notice given in the manner set forth in Section
5(c) hereof.
(i) Adjustment for Issuance of Shares at Less Than the Conversion
Price. If and whenever any Additional Common Stock shall be issued by
Borrower
(the "Stock Issue Date") for a consideration per share less than the
Conversion
Price, then in each such case the initial Conversion Price shall be reduced to
a new Conversion Price in an amount equal to the price per share for the
Additional Common Stock then issued, if issued in connection with a sale of
shares, or the value of the Additional Common Stock then issued, as determined
in accordance with generally accepted accounting principles, if issued other
than
for cash, and the number of shares issuable to Holder upon conversion shall be
proportionately increased; and, in the case of Additional Common Stock issued
without consideration, the initial Conversion Price shall be reduced in amount
and the number of shares issued upon conversion shall be increased in an
amount
so as to maintain for the Holder the right to convert the Debenture into
shares
equal in amount to the same percentage interest in the Common Stock of the
Company as existed for the Holder immediately preceding the Stock Issue Date.
(ii) Sale of Shares. In case of the issuance of Additional Common
Stock for a consideration part or all of which shall be cash, the amount of
the
cash consideration therefor shall be deemed to be the gross amount of the cash
paid to Borrower for such shares, before deducting any underwriting
compensation
or discount in the sale, underwriting or purchase thereof by underwriters or
dealers or others performing similar services or for any expenses incurred in
connection therewith. In case of the issuance of any shares of Additional
Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor, other than cash, shall be deemed to be
the
then fair market value of the property received.
(iii) Reclassification of Shares. In case of the reclassification
of securities into shares of Common Stock, the shares of Common Stock issued
in
such reclassification shall be deemed to have been issued for a consideration
other than cash. Shares of Additional Common Stock issued by way of dividend
or
other distribution on any class of stock of Borrower shall be deemed to have
been
issued without consideration.
(iv) Stock Dividends, Stock Splits, Subdivisions or Combinations.
In the event of a stock dividend, stock split or subdivision of shares of
Common
Stock into a greater number of shares, the Conversion Price shall be
proportionately decreased, and in the event of a combination of shares of
Common
Stock into a smaller number of shares, the Conversion Price shall be
proportionately increased, such increase or decrease, as the case may be,
becoming effective at the record date.
(v) Exceptions. The term "Additional Common Stock" herein shall
mean all shares of Common Stock hereafter issued by Borrower (including Common
Stock held in the treasury of Borrower), except (A) Common Stock issued upon
the
conversion of any of the Debentures; (B) Common Stock issued upon exercise of
any
outstanding warrants or options; (C) Common Stock issued upon exercise of
outstanding employee stock options; (D) up to 300,000 shares of Common Stock
issued upon exercise of stock options to be granted subsequent to the date
hereof
to persons currently employed by Borrower or its subsidiaries; (E) up to
200,000
shares of Common Stock issued upon exercise of stock options to be granted
subsequent to the date hereof to persons subsequently employed by Borrower or
its subsidiaries; and (F) Common Stock issued upon exercise of stock options
granted to the Holders.
(c) Adjustment for Mergers and Consolidations.
(i) In the event of distribution to all Common Stock holders of any
stock, indebtedness of Borrower or assets (excluding cash dividends or
distributions from retained earnings) or other rights to purchase securities
or
assets, then, after such event, the Debenture will be convertible into the
kind
and amount of securities, cash and other property which the holder of the
Debenture would have been entitled to receive if the holder owned the Common
Stock issuable upon conversion of the Debenture immediately prior to the
occurrence of such event.
(ii) In case of any capital reorganization, reclassification of the
stock of Borrower (other than a change in par value or as a result of a stock
dividend, subdivision, split up or combination of shares), this Debenture
shall
be convertible into the kind and number of shares of stock or other securities
or property of Borrower to which the holder of the Debenture would have been
entitled to receive if the holder owned the Common Stock issuable upon
conversion of the Debenture immediately prior to the occurrence of such
event. The provisions of the immediately foregoing sentence shall similarly
apply to successive reorganizations, reclassifications, consolidations,
exchanges, leases, transfers or other dispositions or other share exchanges.
(iii) The term "Fair Market Value," as used herein, is the value
ascribed to consideration other than cash as determined by the Board of
Directors of Borrower in good faith, which determination shall be final,
conclusive and binding. If the Board of Directors shall be unable to agree
as to such fair
market value, then the issue of fair market value shall be submitted to
arbitration under and pursuant to the rules and regulations of the American
Arbitration Association, and the decision of the arbitrators shall be final,
conclusive and binding, and a final judgment may be entered thereon; provided,
however, that such arbitration shall be limited to determination of the fair
market value of assets tendered in consideration for the issue of Common
Stock.
(iv) In the event Borrower shall propose to take any action which
shall result in an adjustment in the Conversion Price, Borrower shall give
notice
to the Holder of this Debenture, which notice shall specify the record date,
if
any, with respect to such action and the date on which such action is to take
place. Such notice shall be given on or before the earlier of 10 days before
the
record date or the date which such action shall be taken. Such notice shall
also
set forth all facts (to the extent known) material to the effect of such
action
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of this Debenture.
(d) Certificate. Following completion of an event which results in an
adjustment to the Conversion Price, Borrower shall furnish to the holder of
this
Debenture a statement, signed by the Chief Executive Officer and the Secretary
of the Borrower, of the facts creating such adjustment and specifying the
resultant adjusted Conversion Price then in effect, which statement shall
constitute an amendment to this Debenture.
7. One-Time Adjustment to Conversion Price. Notwithstanding the
provisions of Section 6 hereof, if the volume-weighted average closing bid
price
of the Common Stock, as determined by Bloomberg Financial Markets Commodities
News, for the 21 consecutive trading days following Borrower's public press
release of its December 31, 1998 fiscal year-end financial results (such
volume-weighted average closing bid price herein referred to as the "1998
Conversion
Price Adjustment") is a price less than the initial Conversion Price, then the
Conversion Price shall be adjusted downward to an amount equal to 100% of the
1998 Conversion Price Adjustment. If an adjustment is required pursuant to
this
Section 7, then the Borrower shall furnish to the holder of this Debenture a
statement, within ten days of the occurrence thereof, signed by the Chief
Financial Officer and the Secretary of Borrower, of the facts creating such
adjustment and specifying the resultant adjusted Conversion Price then in
effect, which statement shall constitute an amendment to the Debenture.
Such one-time adjustment to the Conversion Price shall be subject to the
Holder's optional right to require the Company to redeem this Debenture at
the sum equal to the Principal Amount, together with an amount equal to an
18% annual yield on the Principal Amount through the Redemption Date, upon
notice given in the manner set forth in Section 4(b) hereof, if the Company
reports pre-tax income of $2,000,000, excluding extraordinary gains, for the
December 31, 1998 fiscal year.
8. Reservation of Shares: Borrower warrants and agrees that it shall at
all times reserve and keep available, free from preemptive rights, sufficient
authorized and unissued shares of Common Stock or treasury shares of Common
Stock necessary to effect conversion of this Debenture.
9. Registration Rights: The shares of Common Stock issued upon
conversion
of the Debenture shall be restricted from transfer by the holder, unless the
shares are duly registered for sale pursuant to the Securities Act of 1933, as
amended, or the transfer is exempt from registration. The Holder has certain
rights with respect to the registration of shares of Common Stock issued upon
the conversion of this Debenture pursuant to the terms of the Loan Agreement.
In the event the Company fails (unless prevented by events outside its
control) to
register the shares of Common Stock issuable upon conversion of this Debenture
within 90 days from the date on which the shelf registration statement is
required to be filed pursuant to Section 9.03 of the Loan Agreement, the
Conversion Price shall decrease by 2.00% per month until such registration is
declared effective. Borrower agrees that a copy of the executed Loan
Agreement
and all amendments shall be available to the Holder at the offices of the
Company.
10. Taxes: The Company shall pay any documentary or other transactional
taxes attributable to the issuance or delivery of this Debenture or the shares
of Common Stock issued upon conversion by the Holder (excluding any federal,
state or local income taxes and any franchise taxes or taxes imposed upon the
Holder by the jurisdiction, or any political subdivision thereof, under which
such Holder is organized or is qualified to do business.)
11. Default:
(a) Event of Default: An "Event of Default" shall exist if an "Event of
Default" (as defined in the Loan Agreement) shall occur and be continuing.
(b) Remedies Upon Event of Default: If an Event of Default shall have
occurred and be continuing, then the Holder or Agent may exercise any one or
more of the rights and remedies provided in the Loan Documents, as the Holder
or
Agent, in its sole discretion, may deem necessary or appropriate.
(c) Remedies Nonexclusive: Each right, power or remedy of the holder
hereof upon the occurrence of any Event of Default as provided for in this
Debenture or now or hereafter existing at law or in equity or by statute shall
be cumulative and concurrent and shall be in addition to every other right,
power or remedy provided for in this Debenture or now or hereafter existing
at law or in equity or by statute, and the exercise or beginning of the
exercise by the holder or transferee hereof of any one or more of such
rights, powers or remedies shall not preclude the simultaneous or later
exercise by the holder of any or all such other rights, powers or remedies.
(d) Expenses: Upon the occurrence of a Default of an Event of Default,
which occurrence is not cured within the notice provisions, if any provided
therefore, Borrower agrees to pay and shall pay all costs and expenses
(including attorneys' fees and expenses) incurred by the Holder or Agent in
connection with the preservation and enforcement of Holder's rights under
the Loan Agreement, the Debenture, or any other Loan Document.
12. Failure to Act and Waiver: No failure or delay by the holder hereof
to require the performance of any term or terms of this Debenture or not to
exercise any right or any remedy shall constitute a waiver of any such term or
of any right or of any default, nor shall such delay or failure preclude the
holder hereof from exercising any such right, power or remedy at any later
time
or times. By accepting payment after the due date of any amount payable under
this Debenture, the holder hereof shall not be deemed to waive the right
either
to require payment when due of all other amounts payable, or to later declare
a
default for failure to effect such payment of any such other amount. The
failure of the holder of this Debenture to give notice of any failure or
breach of the Borrower under this Debenture shall not constitute a waiver of
any right or remedy in respect of such continuing failure or breach or any
subsequent failure or any subsequent failure or breach.
13. Consent to Jurisdiction: The Company hereby agrees and consents
that
any action, suit or proceeding arising out of this Debenture may be brought in
any appropriate court in the State of Texas, including the United States
District
Court for the Norther District of Texas, or in any other court having
jurisdiction over the subject matter, all at the sole election of the Holder
hereof, and by the issuance and execution of this Debenture the Borrower
irrevocably consents to the jurisdiction of each such court. The Company
hereby
irrevocably appoints CT Corporation System, Dallas, Texas, as agent for the
Borrower to accept service of process for and on behalf of the Borrower in any
action, suit or proceeding arising out of this Debenture. Except for default
in
payment of interest or principal when and as they become due, and except as
otherwise specifically set forth herein or otherwise agreed to in writing by
the
parties, any action dispute, claim or controversy (all such herein called
"Dispute") between or among the parties as to the facts or the interpretation
of
the Debenture shall be resolved by arbitration as set forth in the Loan
Agreement.
14. Holder's Right to Request Multiple Debentures: The Holder shall,
upon
written request and presentation of the Debenture, have the right, at any
interest payment date, to request division of this Debenture into two or more
instruments, each of such to be in such amounts as shall be requested;
provided
however that no Debenture shall be issued in denominations of face amount less
than $100,000.
15. Transfer: Subject to Section 12.08 of the Loan Agreement, this
Debenture may be transferred on the books of the Borrower by the registered
Holder hereof, or by Holder's attorney duly authorized in writing, in
multiples
of $100,000 only upon (i) delivery to the Borrower of a duly executed
assignment
of the Debenture, or part thereof, to the proposed new Holder, along with a
current notation of the amount of payments received and net Principal Amount
yet
unfunded, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new Holder, (ii) the
designation by the new Holder of the Lender's agent for notice, such agent to
be
the sole party to whom Borrower shall 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 any action, consent or waiver,
(other than a compromise of principal and interest), when given or taken by
Lender's agent for notice, shall be deemed to be the action of the holders of
a
majority in amount of the Principal Amount of the Debenture, as such holders
are
recorded on the books of the Borrower, and (iii) in compliance with the legend
to read as follows:
"The Securities represented by this Debenture have not been registered under
the
Securities Act of 1933, as amended ("Act"), or applicable state securities
laws
("State Acts") and shall not be sold, hypothecated, donated or otherwise
transferred unless the Company shall have received an opinion of Legal Counsel
for the Company, or such other evidence as may be satisfactory to Legal
Counsel
for the Company, to the effect that any such transfer shall not require
registration under the Act and the State Acts."
The Company shall be entitled to treat any holder of record of the
Debenture as the Holder in fact thereof and of the Debenture and shall not be
bound to recognize any equitable or other claim to or interest in this
Debenture
in the name of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by applicable law.
16. Notices: All notices and communications under this Debenture shall
be in writing and shall be either delivered in person or by overnight service
such as FedEx and accompanied by a signed receipt therefor; or mailed first-
class
United States certified mail, return receipt requested, postage prepaid, and
addressed as follows: (i) if to the Borrower at its address for notice as
stated in the Loan Agreement; and (ii) if to the Holder of this Debenture, to
the address (a) of such Holder as it appears on the books of the Borrower or
(b) in the case of a partial assignment to one or more Holders, to the
Lender's agent for notice, as the case may be. Any notice of communication
shall be deemed given and received as of the date of such delivery if
delivered; or if mailed, then three days after the date of mailing.
17. Maximum Interest Rate: (a) Regardless of any provision contained in
this Debenture, Lender shall never be entitled to receive, collect or apply as
interest on the Debenture any amount in excess of interest calculated at the
Maximum Rate, and in the event that 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 Debenture 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 Debenture; provided that, if the Debenture is 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 Debenture 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 Debenture under the laws which
are presently in effect of the United States of America or by the laws of any
other jurisdiction which are or may be applicable to the holders of the
Debenture and such Indebtedness or, to the extent permitted by law, under
such applicable laws
of the United States of America or by the laws of any other jurisdiction which
are or may be applicable to the holder of the Debenture and which may
hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
18. Rights Under Loan Agreement. This Debenture is issued pursuant to
the
Convertible Loan Agreement dated of even date herewith among the Company,
Renaissance III and Renaissance PLC, as Lenders, and Agent, and the holders
hereof are entitled to all the rights and benefits. Both Borrower and Lenders
have participated in the negotiation and preparation of the Loan Agreement and
of the Debenture. Borrower agrees that a copy of the Loan Agreement with all
amendments, additions and substitutions therefor shall be available to the
Holders at the offices of Borrower.
19. Defined Terms: Capitalized terms used but not defined herein shall
have the meaning given them in the Loan Agreement.
20. Governing Law: This Debenture shall be governed by and construed
and
enforced in accordance with the substantive laws of the State of Texas,
without
regard to the conflicts of laws provisions thereof, and the applicable laws of
the United States.
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
issued, executed and delivered on the date and year above stated.
NEWCARE HEALTH CORPORATION
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
Xxxxxxxxxxx X. Xxxxxxx, Chairman of the Board
