ACCUHEALTH, INC.
and Subsidiary Borrowers
14% SENIOR SECURED NOTE AND WARRANT PURCHASE AGREEMENT
February 22, 2001
TABLE OF CONTENTS
SECTION 1
CLOSING DATE; DELIVERY
1.1...............................................AUTHORIZATION 2
1.2......................................SALE OF THE SECURITIES 2
1.3.........................................SEVERAL OBLIGATIONS 2
SECTION 2
CLOSING DATE; DELIVERY
2.1.....................................................CLOSING 2
2.2....................................................DELIVERY 2
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
3.1.............................................CORPORATE POWER 3
3.2................................................SUBSIDIARIES 3
3.3..............................................CAPITALIZATION 3
3.4...............................................AUTHORIZATION 3
3.5.................................................LIABILITIES 4
3.6..........................................MATERIAL CONTRACTS 4
3.7...........................COMPLIANCE WITH OTHER INSTRUMENTS 4
3.8..........................................BROKERS OR FINDERS 5
3.9..................................................DISCLOSURE 5
3.10.............................................SECURITIES ACT 5
3.11.............................................ISSUANCE TAXES 5
3.12.....................................SMALL BUSINESS MATTERS 5
3.13.........................................SECURITIES REPORTS 6
3.14....................................CHIEF EXECUTIVE OFFICES 6
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
4.1..................................................EXPERIENCE 6
4.2..................................................INVESTMENT 6
4.3....................................................RULE 144 6
4.4..............................................ACCESS TO DATA 6
4.5...............................................AUTHORIZATION 6
4.6................................STATE SECURITIES LAW MATTERS 7
4.7..........................................BROKERS OR FINDERS 7
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
5.1..............................REPRESENTATIONS AND WARRANTIES 7
5.2...................................................COVENANTS 7
5.3......................................COMPLIANCE CERTIFICATE 7
5.4................................................BLUE SKY LAW 7
5.5...................................PROCEEDINGS AND DOCUMENTS 7
5.6.....................................STOCKHOLDERS' AGREEMENT 7
5.7...............................REGISTRATION RIGHTS AGREEMENT 7
5.8................................LEGAL AND INVESTIGATIVE FEES 7
5.9...........................................NO ADVERSE CHANGE 8
5.10.....................................CONSENTS AND APPROVALS 8
5.11...........................SMALL BUSINESS CONCERN DOCUMENTS 8
5.12......................................RELIANCE CERTIFICATES 8
5.13..........................................CLOSING DOCUMENTS 8
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SECTION 5.A
CONDITIONS FOR SUBSEQUENT ADVANCE(S)
5.A.1.........................SUBSEQUENT ADVANCE(S); CONDITIONS 8
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
6.1..............................REPRESENTATIONS AND WARRANTIES 9
6.2................................................BLUE SKY LAW 9
6.3..........................................MINIMUM INVESTMENT 9
6.4...................................................COVENANTS 9
6.5........................................ANCILLARY AGREEMENTS 9
6.6.....................................STOCKHOLDERS' AGREEMENT 9
SECTION 7
COVENANTS OF THE COMPANY
7.1.....................................PROMPT PAYMENT OF TAXES 9
7.2........................MAINTENANCE OF PROPERTIES AND LEASES 10
7.3...................................................INSURANCE 10
7.4........................................ACCOUNTS AND RECORDS 10
7.5....COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES 10
7.6.....................MAINTENANCE OF CORPORATE EXISTENCE, ETC 10
7.7..................................CERTAIN NEGATIVE COVENANTS 10
7.8.......................................FINANCIAL INFORMATION 11
7.9.....................STOCK FULLY PAID; RESERVATION OF SHARES 12
7.10.................................SBIC REGULATORY PROVISIONS 12
7.11...COMMITTEES OF THE BOARD OF DIRECTORS; OBSERVATION RIGHTS 14
7.12................................................SETTLEMENTS 14
SECTION 8
EVENTS OF DEFAULT; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1...........................................EVENTS OF DEFAULT 14
8.2....................................................REMEDIES 16
8.3..................SURVIVAL OF REPRESENTATIONS AND WARRANTIES 16
8.4............................INDEMNIFICATION BY THE BORROWERS 16
SECTION 9
GENERAL PROVISIONS
9.1...............................................GOVERNING LAW 17
9.2..................................SUBMISSION TO JURISDICTION 17
9.3...........SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES 17
9.4......................ENTIRE AGREEMENT; AMENDMENT AND WAIVER 17
9.5................................................NOTICES, ETC 17
9.6.........................................DELAYS OR OMISSIONS 17
9.7..................................................REFERENCES 18
9.8................................................SEVERABILITY 18
9.9...........................................FEES AND EXPENSES 18
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9.10...................................................PRONOUNS 18
9.11...............................................COUNTERPARTS 18
9.12...................................................REMEDIES 18
9.13........................................CERTAIN DEFINITIONS 18
9.14.................................................XXXXX NOTE 21
EXHIBIT A - Form of Senior Secured Note
EXHIBIT B - Form of Warrant
EXHIBIT C - Disclosure Schedule
EXHIBIT D - Form of Registration Rights Agreement
EXHIBIT E - Form of Stockholders' Agreement
EXHIBIT F - Form of Compliance Certificate
EXHIBIT G - Form of Reliance Certificate
EXHIBIT H - Closing Checklist
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ACCUHEALTH, INC.
and Subsidiary Borrowers
14% SENIOR SECURED NOTE AND WARRANT PURCHASE AGREEMENT
This 14% Senior Note and Warrant Purchase Agreement (this "Agreement")
is made effective as of February 22, 2001, among ACCUHEALTH, INC., a New York
corporation (the "Company") MIDVIEW DRUG, INC. a corporation organized under the
laws of the State of New York ("Midview"), ACCUHEALTH HOME CARE, INC., a
corporation organized under the laws of the State of Delaware ("AHC"), CITIVIEW
DRUG CO., INC., a corporation organized under the laws of the State of New York
("Citiview"), PROHEALTHCARE INFUSION SERVICES, INC., a corporation organized
under the laws of the State of New Jersey ("PHCIS"), HEALIX HEALTHCARE, INC., a
corporation organized under the laws of the State of Delaware ("HHI"), PRN
HOMECARE AGENCY, INC., a corporation organized under the laws of the State of
New Jersey ("PRN"), AMERIX NURSING HOLDINGS, INC., a corporation organized under
the laws of the State of Delaware ("AMERIX"), HEALIX HEALTHCARE, INC., a
corporation organized under the laws of the State of New York ("Healthcare"),
HEALIX HEALTHCARE OF NEW YORK, INC., a corporation organized under the laws of
the State of New York ("Healix NY"), RYE BEACH HEALTHCARE, INC., a corporation
organized under the laws of the State of New York ("Rye Beach"), HEALIX
HEALTHCARE OF NEW JERSEY, INC., a corporation organized under the laws of the
State of New York ("Healix NJ") and AMERICARE HOME NURSING SERVICES, INC., a
corporation organized under the laws of the State of New Jersey ("Americare"),
(the Company, Midview, AHC, Citiview, PHCIS, HHI, PRN, Amerix, Healthcare,
Healix NY, Rye Beach, Healix NJ and Americare, each a "Borrower" and, jointly
and severally, the "Borrowers"), and RFE INVESTMENT PARTNERS V, L.P., a Delaware
limited partnership ("RFE"), and the additional purchasers identified on
SCHEDULE 1 attached hereto (the "Purchasers" and each, a "Purchaser").
The Borrowers desire to raise up to $925,000 (subject to increase
pursuant to Section 9.14 below) in debt financing through the sale of 14% Senior
Secured Notes due February 23, 2004 (the "Senior Notes" or "Senior Secured
Notes") and Common Stock Purchase Warrants to purchase an aggregate of 1,364,378
shares of Common Stock, representing 20% of the fully-diluted Common Stock of
the Company, and each of the Purchasers is willing to purchase such Senior
Secured Notes in such principal amounts, and the Common Stock Warrants in such
denominations, as are set forth on SCHEDULE 1 hereto in connection therewith,
all on the terms and subject to the conditions set forth herein. The Senior
Secured Notes and the Warrants are referred to herein as the "Securities."
In connection with the issuance of the Senior Secured Notes, an
Intercreditor Agreement (as in effect from time to time, the "Intercreditor
Agreement) is to be executed by the initial holders of the Senior Second Notes,
Xxxxxxxxx & Xxxxxxxxx, Inc. as lender, the Subordinated Creditors (as defined
therein), the Collateral Agent (as defined therein), and the Subordinated
Creditor Collateral Agent (as defined therein).
Accordingly, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, the parties hereto hereby agree as follows:
SECTION 1
CLOSING DATE; DELIVERY
1.1 AUTHORIZATION. The Borrowers will have authorized before the Closing
(as defined below) the sale and issuance to the Purchasers of the Securities.
The Senior Secured Notes and Common Stock Warrants shall be dated the Closing
Date and shall be in the forms attached hereto as EXHIBITS A and B,
respectively.
1.2 SALE OF THE SECURITIES. Subject to the terms and conditions hereof, on
the Closing Date, the Borrowers shall sell and issue to the Purchasers, and the
Purchasers shall purchase from the Company, the Securities for the purchase
price of up to a maximum amount of $925,000 (subject to increase pursuant to
Section 9.14 below), in the amounts set forth opposite their respective names on
Schedule 1. As set forth in more detail in Section 5.A below, a portion of the
maximum purchase price equal to the Specified Vendor Amount is not to be paid by
the Purchasers at the Closing and will, if certain conditions are met, be paid
at a subsequent date(s). To the extent that the maximum purchase price of
$925,000 (subject to said increase) is not eventually paid, the obligation of
the Borrowers under the Senior Secured Notes, with respect to the repayment of
principal thereunder, shall be to repay that amount which is actually loaned
(i.e., $925,000 (subject to said increase) less that portion of the purchase
price not paid) and the fact that the maximum purchase price is not paid shall
not impair the obligations of the Borrowers to repay the amount actually loaned
or otherwise impair the Borrowers' obligations hereunder, the Senior Notes or
under any other applicable document and the Senior Secured Notes shall be
considered fully paid for. All of the Common Stock Warrants that are part of the
Securities shall be fully effective and considered fully issued and paid for
whether or not the maximum purchase price is paid.
1.3 SEVERAL OBLIGATIONS. Each of the Purchasers' obligations hereunder are
several and not joint. The Borrower's agreement with each of the Purchasers is a
separate agreement, and the sale of the Securities to each of the Purchasers is
a separate sale.
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING. The closing of the purchase and sale of the Securities
hereunder (the "Closing") shall take place at the offices of Xxxx Xxxxx &
Xxxxxxx LLP, Stamford, Connecticut on February 22, 2001, or at such other place
and time upon which the Company and all Purchasers shall agree, as evidenced by
the completion of the transactions contemplated hereby (provided, it is
understood that subsequent advances can occur pursuant to Section 5.A below).
The date of the Closing is referred to as the "Closing Date."
2.2 DELIVERY. At the Closing the Borrowers shall deliver to each Purchaser
the Securities which such Purchaser is purchasing, which shall be delivered
against payment of the applicable portion of the maximum purchase price therefor
by wire transfer.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
The Borrowers, jointly and severally, represent and warrant (and for
purposes of this Section, each reference to the "Company" shall include each
Subsidiary of the Company) to each Purchaser that, except as set forth on the
Disclosure Schedule attached hereto as EXHIBIT C, specifically identifying the
relevant subparagraph(s) hereof, which Disclosure Schedule shall be deemed to be
part of the representations and warranties as if made hereunder:
3.1 CORPORATE POWER. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements (as
defined in Section 3.4 below) to which it is a party, and the Company has all
requisite corporate power and authority to sell and issue the Securities
hereunder, to make the borrowings evidenced by the Senior Secured Notes, and to
carry out and perform its obligations under the terms of this Agreement, the
Securities and each of the Ancillary Agreements to which it is a party.
3.2 SUBSIDIARIES. The Company has no direct or indirect Subsidiaries other
than the Borrowers.
3.3 CAPITALIZATION. The authorized capital stock of the Company consists of
15,000,000 shares of common stock, par value $.01 per share, of which 5,297,513
shares are issued and outstanding, 1,364,378 shares are reserved for issuance
upon exercise of the Common Stock Warrants and 2,173,913 shares are reserved for
issuance pursuant to the Subordinated Notes and any warrants issued in
connection therewith, and 5,000,000 shares of preferred stock, par value $.01
per share, of which 1,485,000 shares are designated as the 6% Cumulative
Convertible Preferred Stock, of which 1,350,000 shares are issued and
outstanding.
3.4 AUTHORIZATION. All corporate action on the part of each of the
Borrowers and their respective officers, directors, and stockholders necessary
for the authorization, execution, delivery, and performance of this Agreement,
the Security Documents, the Common Stock Warrants, the Senior Secured Notes, the
Amended and Restated Registration Rights Agreement, to be dated as of the
Closing Date, by and among the Company, the Purchasers, and the other parties
thereto and substantially in the form of EXHIBIT D hereto (the "Registration
Rights Agreement"), the Amended and Restated Stockholders' Agreement, to be
dated as of the Closing Date, among the Company, the Purchasers and certain
other parties thereto, substantially in the form of EXHIBIT E hereto (the
"Stockholders' Agreement") and all other agreements executed by the Company in
connection with the transactions contemplated hereby (the Security Documents,
the Registration Rights Agreement, the Common Stock Warrants, the Senior Secured
Notes, the Stockholders' Agreement, the Intercreditor Agreement, and such other
agreements contemplated hereby to which the Company is a party being sometimes
hereinafter referred to individually as an "Ancillary Agreement" and
collectively as the "Ancillary Agreements"), the authorization, sale, issuance
and delivery of the Senior Secured Notes at the Closing, the authorization of
the borrowings evidenced by the Securities, and the performance of all of the
Company's obligations hereunder and thereunder have been taken or will be taken
prior to the Closing. This Agreement constitutes, and each of the Ancillary
Agreements, when executed and delivered by the Borrowers will constitute, a
valid and binding obligation of the Borrowers enforceable against the Borrowers
in accordance with its terms,. The Common Stock Warrants and the Warrant Stock,
when issued, will be duly authorized, validly issued, fully paid, and
nonassessable, will have the rights, preferences, privileges, and restrictions
3
as set forth in the Certificate of Incorporation, and will be free of any liens,
claims, encumbrances or restrictions on transfer (collectively, "Liens"), except
as set forth in the Stockholders' Agreement.
3.5 LIABILITIES. As of the Closing Date and except for Liabilities not,
individually or in the aggregate, Material to the Business, none of the Company
or any of its Subsidiaries has any direct or indirect Liability which, pursuant
to GAAP, is required to be reflected or reserved against on a balance sheet and
was not fully and adequately reflected or reserved against on the consolidated
balance sheet of the Company as of December 31, 1999, as included in the SEC
Reports (the "Balance Sheet") (excluding Liabilities that have been discharged
in the Ordinary Course of Business since December 31, 1999 (the "Balance Sheet
Date") or that are not otherwise specifically disclosed in this Agreement or in
Section 3.5 of the Disclosure Schedule. Except as set forth in Section 3.5 of
the Disclosure Schedule, the Company has no knowledge of any circumstances,
conditions, events or arrangements which would be reasonably expected to
hereafter give rise to any Liabilities, individually or in the aggregate,
Material to the Business of the Company other than those arising under
contracts, commitments or obligations entered into in the Ordinary Course of
Business (and not as a result of any breach or default by the Company
thereunder). Except as set forth is Section 3.5 of the Disclosure Schedule,
neither the Company nor any Subsidiary is liable with respect to any
indebtedness for borrowed money.
3.6 MATERIAL CONTRACTS. Section 3.6 of the Disclosure Schedule hereto sets
forth all of the following contracts and other agreements to which the Company
or any of its Subsidiaries is a party or by or to which any of their respective
assets, properties or businesses are bound or subject:
(i) contracts and other agreements with any current or former
officer, director, employee, consultant, agent or stockholder who owns 5% or
more of the issued and outstanding Common Stock;
(ii) contracts and other agreements under which the Company has
guaranteed the obligations of any person;
(iii) contracts or other agreements (other than as endorser of
checks in the Ordinary Course of Business) relating to any indebtedness or
deferred purchase obligation of the Company, involving more than $25,000 in any
one case or $100,000 in the aggregate; and
(iv) contracts and other agreements under which the Company
agrees to indemnify any person or to share Tax Liability with any person.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth in Section
3.7 of the Disclosure Schedule, and after giving effect to Amendment No. 5 to
the Xxxxxxxxx Loan Agreement, the execution, delivery, and performance of, and
compliance with, this Agreement and the Ancillary Agreements, the issuance of
the Securities, the borrowings evidenced by the Senior Secured Notes and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (i) violate, or result in a breach of any provision of or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a creation of any Security Interest upon
any of the assets, properties or business of the Company or any Subsidiary under
any of the terms, conditions or provisions of (x) the certificate of
incorporation or the by-laws of the Company or any Subsidiary or (y) any
Contract identified in Section 3.6 of the Disclosure Schedule or any other
Contract to which any of the Borrowers is a party; or (ii) violate any judgment,
ruling, order, writ, injunction, award, decree, or law of any court or foreign,
federal, state, county or local government or any other governmental, regulatory
or administrative agency or authority which is applicable to the Company or any
Subsidiary or any of their respective assets, properties or businesses; or (iii)
result in the suspension, revocation, impairment, forfeiture, or non-renewal of
4
any Permit material to the Company or any Subsidiary, except, with respect to
clause (ii) above, violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 3.6 of the Disclosure Schedule, neither the Company nor any Subsidiary
needs to give any notice to, make any filing with, or obtain any permit,
authorization, consent or approval of any government or governmental agency in
order for the Company to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements or to continue the effectiveness of any
Permit or similar grant of authority relating to the Business following the
Closing (except for the filing of financing statements and except for those
required under applicable "Blue Sky" laws which are permitted to be made
following the Closing and which will be timely made following the Closing and
those relating to Permits in the Ordinary Course of Business which would be
required regardless of the transactions contemplated hereby).
3.8 BROKERS OR FINDERS. Except as set forth in Section 3.8 of the
Disclosure Schedule, the Company has not incurred, nor will it incur, directly
or indirectly, as a result of any action taken by the Company, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.9 DISCLOSURE. No representation or warranty of the Company contained in
this Agreement, the Ancillary Agreements, in the Disclosure Schedule, in the
exhibits attached hereto or in any written statement or certificate furnished to
the Purchasers pursuant hereto or thereto, when read together, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. As of the date hereof,
each of the representations and warranties given by the Company and its
Subsidiaries to Xxxxxxxxx in the Xxxxxxxxx Agreements is true and correct in all
respects and is incorporated herein by reference.
3.10 SECURITIES ACT. Subject to the accuracy of the Purchasers'
representations in Section 4, the offer, sale, and issuance of the Securities in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act.
3.11 ISSUANCE TAXES. All taxes, if any, imposed by law in connection with
the issuance, sale and delivery of the Securities shall have been fully paid by
the Company, and all laws imposing such taxes shall have been fully complied
with, prior to the Closing Date.
3.12 SMALL BUSINESS MATTERS. The Company, together with its "affiliates" (as
that term is defined in Title 13, Code of Federal Regulations, ss.121.103) is a
"small business concern" within the meaning of the Small Business Investment Act
of 1958 and the regulations thereunder, including Title 13, Code of Federal
Regulations, ss.121.103. The information set forth in the Small Business
Administration Forms 480, 652 and Parts A and B of Form 1031 regarding the
Company is accurate and complete. Copies of such forms shall have been completed
and executed by the Company and delivered to Purchasers at the Closing. Neither
the Company nor any Subsidiary presently engages in any business, and it shall
not hereafter use directly or indirectly the proceeds from the sale of the
Securities for any purpose, for which a Small Business Investment Company is
prohibited from providing funds by the Small Business Investment Act of 1958 and
the regulations thereunder, including Title 13, Code of Federal Regulations,
ss.107.720. The use of proceeds from the Company's sale of Securities to the
Purchasers will be only for those purposes described in Section 7.10.1 hereof.
If the Company breaches this representation in any material respect, then in
addition to all other remedies available to Purchasers, any Purchaser may demand
that the Company repurchase all Securities acquired by such Purchaser at the
aggregate purchase price paid, plus declared but unpaid dividends and accrued
and unpaid interest, as applicable. Upon the request of any Purchaser, the
Company will furnish to Purchasers promptly (and in any event within 20 days of
such request) all information necessary in order for such Purchaser to prepare
and file SBA Form 468 and any other information requested or required by any
governmental authority asserting jurisdiction over such Purchaser. Compliance
with this Section 3.12 cannot be waived, nor can this Section be amended,
without the written consent of RFE.
5
3.13 SECURITIES REPORTS. Since July 14,1998, the Company has filed all
forms, reports, statements and other documents required to be filed with (a) the
Securities and Exchange Commission (the "SEC") including, without limitation,
(i) all annual reports on Form 10-K, (ii) all quarterly reports on Form 10-Q,
(iii) all proxy statements relating to meetings of shareholders (whether annual
or special), (iv) all reports on Form 8-K, (v) all other reports or registration
statements and (vi) all amendments and supplements to all such reports and
registration statements (collectively, the "SEC Reports") and (b) any other
applicable state securities authorities. The SEC Reports, (a) were or will be
prepared in all material respects in accordance with the requirements of all
applicable laws and the rules and regulations promulgated thereunder and (b) did
not at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3.14 CHIEF EXECUTIVE OFFICES. The chief executive offices and principal
place of business of each of the Borrowers is located at Xxxxx Xxxx, Xxxxxxx,
Xxx Xxxx 00000. Borrowers shall give the Purchasers prior written notice of any
change in any chief executive office of any Borrower.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally (and not jointly) represents and
warrants to the Company with respect to the purchase of the Securities as
follows:
4.1 EXPERIENCE. Such Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act, and has substantial experience
and sophistication in evaluating and investing in private placement transactions
of securities in companies similar to the Company so that such Purchaser is
capable of evaluating the merits and risks of such Purchaser's investment in the
Company and has the capacity to protect such Purchaser's own interests.
4.2 INVESTMENT. Such Purchaser is acquiring the Securities for investment
for such Purchaser's own account, not as a nominee or agent, and, except for
transfers of the Securities by RFE to members of its advisory board, not with
the view to, or for resale in connection with, any distribution thereof. Such
Purchaser understands that the Securities have not been, and will not be,
registered under the Securities Act or the securities laws of any state by
reason of exemptions from the registration provisions of the Securities Act and
such laws which depend upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 RULE 144. Such Purchaser acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit the
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, (i) the
existence of a public market for the shares, (ii) the availability of certain
current public information about the Company, (iii) the resale occurring not
less than a specified period of time after a party (who is not an "affiliate")
has purchased and fully paid for the shares to be sold, (iv) the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and (v) the number of shares being
sold during any three-month period not exceeding specified limitations. Such
Purchaser is aware that the provisions of Rule 144 may not be available for any
resale of the Securities in the future.
4.4 ACCESS TO DATA. Such Purchaser has had an opportunity to discuss the
Company's business, management, and financial affairs with the Company's
management and the opportunity to review the Company's facilities and business
plan.
4.5 AUTHORIZATION. This Agreement and the Ancillary Agreements, when
executed and delivered by such Purchaser, will constitute valid and legally
binding obligations of such Purchaser, enforceable in accordance with their
6
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
Such Purchaser, if not a natural person, has full corporate or partnership, as
the case may be, power and authority to enter into and to perform its
obligations under this Agreement and the Ancillary Agreements in accordance with
their respective terms. Such Purchaser has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company.
4.6 STATE SECURITIES LAW MATTERS. The principal place of business (or
residence, in the case of an individual) of each Purchaser is set forth in
SCHEDULE 1. The Company may conclusively rely thereupon in complying with the
obligation in Section 5.4.
4.7 BROKERS OR FINDERS. Except as set forth in Section 4.7 of the
Disclosure Schedule, neither such Purchaser nor the Company has incurred, or
will incur, directly or indirectly, as a result of any action taken by such
Purchaser, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligations of each Purchaser to purchase Securities at the Closing
is subject to the fulfillment on or prior to the Closing Date of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made
by the Company in Section 3 of this Agreement shall have been true and correct
in all respects when made, and shall be true and correct in all respects as of
the Closing Date.
5.2 COVENANTS. All covenants, agreements, and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing shall have
been performed or complied with in all respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a Compliance Certificate in substantially the form attached hereto as
EXHIBIT F, executed by the chief executive officer of the Company, dated the
Closing Date, and certifying to the fulfillment of the conditions specified
thereon.
5.4 BLUE SKY LAW. The Company shall have obtained, or shall obtain within
the time periods required by applicable law, all necessary blue sky law permits
and qualifications, or secured exemptions therefrom, required by any state
identified in Section 4.7 of the Disclosure Schedule for the offer and sale of
the Securities at the Closing.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers, and they shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
5.6 STOCKHOLDERS' AGREEMENT. The Company, each Purchaser, and the other
parties thereto shall have entered into the Stockholders' Agreement.
5.7 REGISTRATION RIGHTS AGREEMENT. The Company and each Purchaser shall
have entered into the Registration Rights Agreement.
5.8 LEGAL AND INVESTIGATIVE FEES. At the Closing, the Company will pay (a)
the legal fees and out-of-pocket expenses of Xxxx Xxxxx & Xxxxxxx LLP, special
counsel to RFE, with respect to this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby, and (b) each Purchaser's
reasonable out-of-pocket expenses for due diligence with respect to this
Agreement and the transactions contemplated hereby.
7
5.9 NO ADVERSE CHANGE. No event or condition of any character shall have
occurred that is reasonably likely to have a Material Adverse Effect.
5.10 CONSENTS AND APPROVALS. The Company shall have procured all required
governmental and third party consents and approvals required in connection with
the issuance and sale of the Securities and the consummation of the transactions
contemplated hereby and by the Ancillary Agreements, and all filings referred to
in the Disclosure Schedule shall have been made to the satisfaction of the
Purchasers.
5.11 SMALL BUSINESS CONCERN DOCUMENTS. The Company shall have executed and
delivered to each of the Purchasers, (i) a Size Status Declaration on SBA Form
480, an Assurance of Compliance on SBA Form 652D and (ii) a written
certification from the Company regarding its intended use of the proceeds of
this financing, and shall have provided to each of the Purchasers (i)
information necessary for the preparation of a Portfolio Financing Report on SBA
Form 1031 and (ii) a list, after giving effect to the transactions contemplated
by this Agreement, of (a) the name of each of the Company's directors, and (b)
the name and title of each of the Company's officers.
5.12 RELIANCE CERTIFICATES. Each of the chief executive officer, chief
operating officer and chief financial officer of the Company shall have executed
and delivered to the Purchasers a certificate in the form of EXHIBIT G,
certifying that such officer has reviewed the representations and warranties
contained in Section 3 of this Agreement and that, to the best of such officer's
knowledge, such representations and warranties are true and correct in all
material respects as of the Closing Date.
5.13 CLOSING DOCUMENTS. The Purchasers shall have received each of the
agreements, instruments and other documents set forth in the Closing Checklist
attached hereto as EXHIBIT H attached hereto, including, but not limited to (i)
the Security Agreement and (ii) documentation, in form and substance
satisfactory to the Purchasers, with respect to settlement arrangements between
the Borrowers and their vendors representing at least $5,500,000 of the
Borrowers' accounts payable (the "Vendor Arrangements") except that the
Borrowers shall not have to deliver at the Closing such documentation with
respect to the Specified Vendors.
SECTION 5.A
CONDITIONS FOR SUBSEQUENT ADVANCE(S)
5.A.1 SUBSEQUENT ADVANCE(S); CONDITIONS. On the Closing Date (and assuming
the conditions set forth in Section 5 are satisfied) $904,785.17 (the "Initial
Advance") of the Senior Note Amount is to be advanced (i.e., the Purchasers
shall pay the $925,000 maximum purchase price less the Specified Vendor Amount).
In the event that after the Closing Date, and prior to December 31, 2001, the
following conditions are met (or waived in writing by the Purchasers): (i) the
Borrowers deliver to the Purchasers settlement documentation satisfactory to the
Purchasers with respect to any Specified Vendor, and (ii) no acceleration shall
have occurred under Section 8.2 and no Event of Default (or event which with the
giving of notice and passage of time, or both, would become an Event of Default)
under Sections 8.1(a), 8.1(i), or 8.1(h) hereof shall then exist or would result
therefrom and (iii) the proceeds of the applicable advance are to be used
towards payment of such settlement (or other purpose approved by the Purchasers
at such time) and (iv) the Borrowers shall deliver such documentation with
respect to the satisfaction of the conditions set forth in clauses (i)-(iii) as
may be reasonably requested by the Purchasers, then the Purchasers (other than
Xxxxx) shall (on a several and pro-rata basis in accordance with the respective
proportion of the purchase price paid at the Closing Date) pay an additional
portion of the maximum purchase price (i.e., make a subsequent advance) up to
the allocated amount set forth with respect to such Specified Vendor in the
definition of Specified Vendor Amount. The obligation of the Borrowers under the
Senior Secured Notes shall, with respect to the repayment of principal, be to
repay that portion of the Senior Note Amount advanced (i.e., repay the Initial
Advance plus any subsequent advances). The books and records of the Purchasers
shall constitute prima facie evidence of the making of any such subsequent
advance.
8
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligation to sell and issue any Securities at the
Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made
by each Purchaser in Section 4 of this Agreement shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects as of the Closing Date.
6.2 BLUE SKY LAW. The Company shall have obtained all necessary blue sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Securities at the Closing.
6.3 MINIMUM INVESTMENT. The Purchasers shall purchase all the Securities at
the Closing for an aggregate purchase price equal to $925,000 less the Specified
Vendor Amount.
6.4 COVENANTS. All covenants, agreements, and conditions contained in this
Agreement to be performed by Purchasers on or prior to the Closing shall have
been performed or complied with in all material respects.
6.5 ANCILLARY AGREEMENTS. Each Purchaser shall have executed and delivered
each of the Ancillary Agreements to which it is a party.
6.6 STOCKHOLDERS' AGREEMENT. Each Purchaser and certain other parties
thereto shall have entered into the Stockholders' Agreement.
SECTION 7
COVENANTS OF THE COMPANY
7.1 PROMPT PAYMENT OF TAXES.
7.1.1 The Company and each Subsidiary shall pay (or the Company shall
cause them to pay) when due all FICA Taxes and withhold federal, state and/or
city income Taxes for which the Company and each Subsidiary is obligated, and
notify the Purchasers promptly in the event of its failure to make any such
payments when due other than Taxes being contested in good faith by appropriate
proceedings; provided, that, with respect to certain unpaid federal payroll
taxes which the Borrowers have not heretofore paid (the "Unpaid Payroll Taxes"),
which Unpaid Payroll Taxes the Borrowers hereby represents to be in the
approximate amount of $300,000, the Borrowers shall, pursuant to Section 7.12
below, use their best efforts to reach a settlement for the payment of same and
then, if such settlement is reached, shall abide by the terms of such
settlement.
7.1.2 The Company and each Subsidiary shall pay (or the Company shall
cause them to pay) all other taxes, levies, assessments, liens, claims of
lien(s) which if unpaid would result in a lien, and other governmental charges
to which the Company, each Subsidiary or any of their property is or shall be
subject, before such charges become delinquent, except that no such charge need
be paid so long as its validity or amount is being contested in good faith by
appropriate proceedings and the Company shall have established such reserve with
respect thereto as shall be required by generally accepted accounting
principles. Notwithstanding the foregoing, any such tax, assessment, charge or
levy shall be paid forthwith (under protest) upon the commencement of
proceedings to foreclose any liens securing the same or upon institution of
distraint proceedings.
9
7.2 MAINTENANCE OF PROPERTIES AND LEASES. The Company and each Subsidiary
will keep, or cause to be kept, its properties in good repair, working order and
condition, reasonable wear and tear excepted, and shall from time to time make
all reasonably necessary repairs and replacements thereto; and the Company and
each Subsidiary will at all times comply with each provision of all leases to
which any of them is a party or under which any of them occupies property if the
breach of such provision would reasonably be expected to have a Material Adverse
Effect.
7.3 INSURANCE. The Company and each Subsidiary will (a) maintain such
insurance as may be required by law, or otherwise to such extent and against
such hazards and liabilities, as is customarily maintained by prudent companies
similarly situated, and (b) maintain a sufficient amount of insurance so that it
will not be considered a co-insurer.
7.4 ACCOUNTS AND RECORDS. The Company and each Subsidiary will keep true
records and books of account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a consistent
basis. The Company and each Subsidiary will employ certified public accountants
selected by the Company's Board of Directors and have annual audits performed by
such independent public accountants in the course of which such accountants
shall make such examinations, in accordance with the standards established by
the American Institute of Certified Public Accountants.
7.5 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The Company
and each Subsidiary will not in any material respect violate any law, ordinance
or governmental rule or regulation to which they are subject, nor fail to obtain
any license, permit, franchise or other governmental authorization necessary to
the ownership of its properties or to the conduct of its business, which
violation or failure to obtain would reasonably be expected to have a Material
Adverse Effect. The Company shall notify the Purchasers of any such violations
or failures to obtain which could have a Material Adverse Effect promptly upon
the Company becoming aware of the circumstances. The Company shall notify the
Purchasers of the institution of any actions, suits, proceedings, or
governmental investigations against the Company which, if adversely determined
could have a Material Adverse Effect.
7.6 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company and each
Subsidiary shall maintain in full force and effect its corporate existences,
rights and franchises and such licenses and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed by
them and deemed by the Company to be reasonably necessary for the conduct of
their business. The Company shall not conduct, or permit to be conducted, any
business activities through those Subsidiaries marked as "inactive" in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000,
nor shall the Company or any of it s Subsidiaries transfer any assets to, or
make any payments to or investments in, such inactive Subsidiaries. The Company
shall not create any direct or indirect Subsidiary.
7.7 CERTAIN NEGATIVE COVENANTS. Neither the Company nor any Subsidiary
shall, without the consent of holders of at least 50.1% in interest of the
aggregate outstanding principal of the Senior Secured Notes:
(i) enter into any new transaction or agreement (other than
any employment agreement, stock option agreement or other employment-related
arrangement) or series of transactions or agreements including but not limited
to, a loan (except as contemplated by clause (ii)(A) or (B) below), lease,
royalty, purchase or sale agreement, directly or indirectly with any Key
Employee, officer, stockholder who owns more than 5% of the issued and
outstanding Common Stock, director, or any person known by the Company to be a
member of their immediate family or any corporation or other entity or person
which is known by the Company to directly or indirectly control, be controlled
by or be under common control with such Key Employee, officer, director, or
stockholder or person known by the Company to be a member of their immediate
family;
10
(ii) make any loan, advance or capital contribution to, or
investment, in any of the officers, directors, consultants or employees, of the
Company, other than (A) travel or salary advances in the Ordinary Course of
Business, and (B) loans evidenced by promissory notes in connection with the
purchase of Common Stock under restrictive stock purchase agreements;
(iii) enter into any acquisitions, by way of asset acquisition,
stock acquisition, merger or similar transaction, of another business enterprise
(each, an "Acquisition") which acquisitions, individually exceed $3,000,000 in
consideration therefor, or which, in the aggregate with all other such
transactions exceeds $5,000,000 in consideration therefor; or
(iv) sell all or substantially all of the assets of the
Company;
(v) engage in a Sale Transaction or other form of merger in
which the Company is not the surviving entity or in which the shareholders of
the Company prior to such merger own less than a majority of the common stock of
the surviving entity immediately following such merger, in each case in which
the Senior Secured Notes are not paid in full;
(vi) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any share or shares of
the Common Stock, or any other equity securities of the Company, or apply any of
the Company's assets to the redemption, retirement, purchase or acquisition,
directly or indirectly, through subsidiaries or otherwise, of any of the Common
Stock, or other equity securities of the Company;
(vii) amend or repeal any provision of, add any provision to, or
waive any provision of the Company's certificate of incorporation or by-laws in
a manner which adversely affects the Purchasers or alter or change the rights,
preferences, privileges or powers of, or the restrictions provided for the
benefit of, the Senior Secured Notes or the Common Stock Warrants;
(viii) issue, from the Closing Date, any shares of capital stock
of the Company senior to the Common Stock;
(ix) create an employee stock ownership plan or issue thereto
any shares of Common Stock or other equity securities of the Company;
(x) declare or pay any dividend or distributions on the Common
Stock or other equity securities of the Company other than dividends in respect
of the Company's Preferred Stock and dividends payable in Common Stock; or
(xi) incur, assume or permit any indebtedness of the Company
for borrowed money other than the Subordinated Notes, the Xxxxxxxxx Revolving
Indebtedness, the Vendor Arrangements or indebtedness incurred pursuant to an
Acquisition which has been approved pursuant to Section 7.7(iii).
7.8 FINANCIAL INFORMATION. (a) The Company shall furnish to each Purchaser
such financial reports as are currently prepared by the Company.
(b) On and after the first anniversary of the Closing Date, the
Company shall furnish the following reports to each Purchaser who holds
Securities:
11
(i) within 30 days after the end of each month or within 50
days after the end of each fiscal quarter, as applicable, an unaudited monthly
income statement, statement of cash flows and balance sheet, in each case
prepared, to the extent consolidation is required under generally accepted
accounting principles applied on a consistent basis, on a consolidated and a
consolidating basis for the Company and any Subsidiaries, subject to normal,
non-recurring year-end adjustments; and, 30 days prior to the beginning of each
fiscal year, an annual budget and operating plan (including projected monthly
consolidated and consolidating income statements, balance sheets and statements
of cash flow). The monthly financial statements shall include year-to-date
financial information, and comparisons to the then applicable annual budget and
to the corresponding period in the prior fiscal year.
(ii) as soon as practicable after the end of each fiscal year,
and in any event within 105 days thereafter, an income statement and statement
of cash flows for such fiscal year, a balance sheet of the Company and its
Subsidiaries prepared on a consolidated basis as of the end of such fiscal year,
and a statement of changes in financial condition for such fiscal year, all
examined by a nationally recognized independent public accountant selected by
the Company.
(iii) as soon as available, but in any event no later than 15
days prior to the beginning of each fiscal year of the Company and any
Subsidiaries, a copy of the plan and forecast (including projected monthly
consolidated and consolidating balance sheets, income statements and funds flow
statements) of the Company and any Subsidiaries for such fiscal year.
(iv) Promptly upon the filing or making thereof, copies of each
filing and report made by the Company with or to any securities exchange or to
the SEC and of each written communication from the Company to its shareholders
generally.
All financial statements provided for above shall be prepared in
accordance with generally accepted accounting principles, applied on a
consistent basis (except that such unaudited financial statements may be
prepared without footnotes and will be subject to normal, non-recurring year-end
audit adjustments).
(b) Upon reasonable notice, the Company will permit any Purchaser to
visit and inspect any of the properties of the Company and its Subsidiaries,
including its books of account and other records (and make copies thereof and
take extracts therefrom), and to discuss its affairs, finances and accounts with
the officers and its independent public accountants of the Company and its
Subsidiaries, all at such reasonable times as such person may reasonably
request.
7.9 STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all Warrant Stock that may be issued upon the exercise of the Common
Stock Warrants will, upon issuance in accordance with the terms of the
Certificate of Incorporation, be fully paid and nonassessable and that the
issuance thereof shall not give rise to any preemptive rights on the part of any
person. The Company further covenants and agrees that the Company will at all
times have authorized and reserved a sufficient number of shares of its Common
Stock for issuance upon exercise of the Common Stock Warrants and will increase
the authorized number of shares of the applicable class of Common Stock, if at
any time the number of shares of such class of Common Stock authorized and
unissued shall be insufficient to permit the exercise of the Common Stock
Warrants.
7.10 SBIC REGULATORY PROVISIONS.
7.10.1 USE OF PROCEEDS. At the same time the Company delivers its
unaudited financials hereunder for the quarters ended December 31, 2000 and
March 31, 2001 (or, if applicable, with respect to any subsequent advance, the
applicable subsequent fiscal quarter), and at such other times as any Purchaser
may reasonably request upon reasonable prior notice, the Company shall deliver
to such Purchaser a written statement certified by the Company's president or
12
chief financial officer describing in reasonable detail the use of the proceeds
of the financing hereunder by the Company. In addition to any other rights
granted hereunder, the Company shall grant each Purchaser and the SBA access to
the Company's books and records for the purpose of verifying the use of such
proceeds and verifying the certifications made by the Company in SBA Forms 480
and 652 delivered pursuant to Section 5.14 hereof and for the purpose of
determining whether the principal business activity of the Company and its
Subsidiaries continues to constitute an eligible business activity (within the
meaning of the SBIC Regulations).
7.10.2 REGULATORY VIOLATION. Upon the occurrence of a Regulatory
Violation (as defined below) or in the event that any Purchaser determines in
its reasonable good faith judgment that a Regulatory Violation has occurred, in
addition to any other rights and remedies to which it may be entitled (whether
under this Agreement or any other agreement, the Certificate of Incorporation or
otherwise), each Purchaser shall have the right, to the extent required under
SBIC Regulations, to demand in writing that the Company shall cure such
Regulatory Violation, and if such Regulatory Violation cannot be cured in a
timely manner, the immediate repurchase of all of the outstanding Securities
owned by such Purchaser at a price equal to the aggregate purchase price paid
for such Securities hereunder plus all declared and unpaid dividends and/or
accrued and unpaid interest thereon by delivering written notice of such demand
to the Company. The Company shall pay the purchase price for such Securities by
a cashier's or certified check or by wire transfer of immediately available
funds to such Purchaser within 30 days after the Company's receipt of the demand
notice, and, upon such payment, such Purchaser shall deliver the certificates or
other instruments evidencing the Securities being repurchased duly endorsed for
transfer or accompanied by duly executed forms of assignment free of any adverse
claims.
For purposes of this Agreement, "REGULATORY VIOLATION" means a change
in the principal business activity of the Company and its Subsidiaries to an
ineligible business activity (within the meaning of the SBIC Regulations), if
such change occurs within one year after the date of the initial financing
hereunder.
7.10.3 ECONOMIC IMPACT INFORMATION. Promptly after the end of each
fiscal year, the Company shall deliver to each Purchaser a written assessment of
the economic impact of such Purchaser's investment in the Company, specifying
the full-time equivalent jobs created or retained in connection with the
investment, the impact of such Purchaser's financing on the revenues and profits
of the Company and its Subsidiaries and on taxes paid by the Company and its
employees.
7.10.4 REGULATORY COMPLIANCE COOPERATION.
(a) In the event that any Purchaser reasonably determines that
it has a Regulatory Problem (as defined below), such Purchaser shall have the
right to transfer its Securities without regard to any restriction on transfer
set forth in this Agreement or any Ancillary Agreement (provided that the
transferee agrees to become a party to this Agreement and Ancillary Agreements
and the transfer is in conformity with applicable law), and the Company shall
take all such actions as are reasonably requested by such Purchaser in order to
(a) effectuate and facilitate any such transfer by such Purchaser of any
Securities then held by such Purchaser to any Person designated by such
Purchaser, (b) permit such Purchaser (or any of its affiliates) to exchange all
or any portion of any voting security then held by it on a share-for-share basis
for shares of a nonvoting security of the Company, which nonvoting security
shall be identical in all respects to the voting security exchanged for it,
except that it shall be nonvoting and shall be convertible into a voting
security on such terms as are reasonably requested by such Purchaser in light of
regulatory considerations then prevailing, (c) continue and preserve the
respective allocations of the voting interests with respect to the Company
13
arising out of such Purchaser's ownership of voting securities and/or provided
in the Stockholders' Agreement before the transfers and amendments referred to
above (including entering into such additional agreements as are reasonably
requested by such Purchaser to permit any Person(s) designated by such Purchaser
to exercise any voting power which is relinquished by such Purchaser) and (d)
amend this Agreement, the Certificate of Incorporation, the Ancillary
Agreements, the Bylaws and related agreements and instruments to effectuate and
reflect the foregoing. The parties to this Agreement agree to vote their
Securities in favor of such amendments and actions.
(b) For purposes of this Agreement, a "REGULATORY PROBLEM"
means any set of facts or circumstances wherein it has been asserted by any
governmental regulatory agency (or a Purchaser reasonably believes that there is
a substantial risk of such assertion) that such Purchaser is not entitled to
hold, or exercise any significant right with respect to the Securities.
7.11 COMMITTEES OF THE BOARD OF DIRECTORS; OBSERVATION RIGHTS.
The Company shall permit one representative selected by RFE (the
"REPRESENTATIVE") to attend as an observer all meetings of its Board of
Directors (or any meeting of the executive committee or any special committee
thereof), provided that in the case of telephonic meetings conducted in
accordance with the Company's by-laws and applicable law, the Representative
shall be given the opportunity to participate in such telephonic meetings. The
Company shall give written notice of every meeting of its Board of Directors (or
meeting of the executive committee or special committee thereof) at the same
time and in the same manner as notice is given to the directors of the Company.
The Company shall bear the reasonable costs of the Representative associated
with the attendance or participation in any meetings of the Board of Directors.
The Representative shall be entitled to receive all written materials and other
information given to the directors of the Company in connection with such
meetings or otherwise at the same time such materials and information are given
to the directors. The Representative shall be entitled to consult with and
advise the Board of Directors of the Company on significant business issues with
respect to the Company and its Subsidiaries, including management's proposed
annual operation plans for the Company and its Subsidiaries, and management will
meet with the Representative regularly during each year at the Company's
facilities at mutually agreeable times and intervals for such consultation and
advice and to discuss said plans.
7.12 SETTLEMENTS. The Borrowers shall use their best efforts to consummate
settlement agreements with the Specified Vendors on terms the same or
substantially the same as has previously been disclosed in writing by the
Company to the Purchasers (including payment terms of approximately "25 Cents on
the Dollar"). Borrowers shall also keep the Purchasers informed in writing of
the status of the Vendor Arrangements including without limitation if any vendor
who was sent a check and asked to indicate its acceptance of modified settlement
terms by its cashing of the check has not cashed such check and Borrowers shall
use their best efforts to reach settlements (reasonably satisfactory to the
Purchasers) with vendors who have not cashed their respective checks and with
any other unpaid vendors. The Borrowers shall substantially comply with the
various terms and provisions of the Vendor Arrangements and other settlements.
The Borrower shall also use their best efforts to reach a settlement (on terms
reasonably satisfactory to the Purchasers) with the Internal Revenue Service
with respect to the Unpaid Payroll Taxes (as defined in Section 7.1.1 above).
SECTION 8
EVENTS OF DEFAULT; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default":
14
(a) failure to make payment of any of the principal, interest,
penalties, fees, expenses or other obligations under any of the Senior Secured
Notes, this Agreement, the Security Agreement, or the Ancillary Agreements
within five (5) days of when required to be paid hereunder;
(b) failure to pay any taxes when due unless such taxes are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been provided on the Borrowers' books;
(c) (i) failure to perform under and/or committing any breach
of Sections 7.2, 7.3, 7.4, 7.5 or 7.11 of this Agreement which is not cured
within twenty (20) days of the occurrence of such breach; or (ii) failure to
perform under and/or committing any other breach of this Agreement or any
Ancillary Agreement or any other agreement between the Borrowers and the
Purchasers;
(d) occurrence of a default under any agreement to which any
Borrower is a party with third parties which results in an acceleration of any
Borrower's obligations under such agreement including all leases for any
premises where Inventory or Equipment is located;
(e) any representation, warranty or statement made by any
Borrower hereunder, in any Ancillary Agreement, any certificate, statement or
document delivered pursuant to the terms hereof, or in connection with the
transactions contemplated by this Agreement should at any time be false or
misleading in any material respect;
(f) an attachment or levy is made upon any Borrower's assets
having an aggregate value in excess of $50,000 or a judgment is rendered against
a Borrower or any Borrower's property involving a liability of more than $50,000
which shall not have been vacated, discharged, stayed or bonded pending appeal
within thirty (30) days from the entry thereof;
(g) any change in any Borrower's financial condition which, in
the reasonable opinion of the Purchasers, materially and adversely impairs the
Collateral;
(h) any lien created hereunder or under any Ancillary
Agreement for any reason ceases to be or is not a valid and perfected lien
having a first priority interest subject to Permitted Liens;
(i) if any Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) if any Borrower shall admit in writing its inability, or
be generally unable to pay its debts as they become due or cease operations of
its present business;
(k) any Borrower directly or indirectly sells, assigns,
transfers, conveys, or suffers or permits to occur any sale, assignment,
transfer or conveyance of any assets of Borrower or any interest therein, except
as permitted herein;
15
(l) any Borrower ceases to operate its business except for
Citiview;
(m) a default by Borrower in the payment, when due, of any
principal of or interest with respect to any indebtedness for money borrowed in
excess, individually or in aggregate, of $200,000 which default is not cured or
waived within any applicable grace period or any event shall occur under any
agreement or instrument evidencing such indebtedness which shall entitle the
holder(s) thereof to accelerate the maturity thereof;
(n) the occurrence of a default or event of default under any
of the Xxxxxxxxx Agreements and/or the Xxxxxxxxx Credit Facility is in
liquidation or an Other Triggering Event shall occur (as each of those terms is
defined in the Intercreditor Agreement);
(o) any Change of Control shall occur;
(p) any Borrower shall revoke instructions with respect to the
depository accounts established pursuant to the Security Agreement with respect
to payments on account of Medicare/Medicaid Receivables (as defined in the
Security Agreement); or
(q) breach by any Borrower of the terms or provisions of the
Security Agreement or any event of default under the Subordinated Notes.
8.2 REMEDIES. Upon the occurrence of an Event of Default pursuant to
Section 8.1(i) herein, all Obligations shall be immediately due and payable;
upon the occurrence and continuation of any other of the Events of Default, the
Purchasers shall have the right to demand repayment in full of all Obligations,
whether or not otherwise due.
8.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Borrowers shall survive the Closing for the period of 24
months (other than the representations and warranties contained in Sections 3.1
through 3.6, which shall survive for the period of the applicable statute of
limitations) and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of any party or their respective
representatives and agents. The covenants of the Borrowers herein shall survive
the Closing. All statements contained herein or in any certificate, schedule or
other writing delivered in connection with the transactions contemplated hereby
shall be deemed representations and warranties of the respective parties making
them.
8.4 INDEMNIFICATION BY THE BORROWERS. The Borrowers hereby agree to
indemnify, defend and hold each of the Purchasers harmless from or against, for
and in respect of any and all damages, losses, obligations, liabilities, claims,
actions or causes of action, encumbrances, costs, or expenses suffered,
sustained, incurred or required to be paid by any Purchaser arising out of or in
connection with or as a result of the breach by any Borrower of any
representation, warranty, covenant or agreement made by it contained in this
Agreement or any Ancillary Agreement, notice of which breach is given to the
Borrowers prior to the expiration of the applicable survival period set forth in
Section 8.3 above. In addition, the Borrowers jointly and severally hereby agree
to indemnify, defend and hold each Purchaser harmless from or against, for and
in respect of all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, interest and penalties) incurred by any
Purchaser in connection with any action, suit, proceeding, demand, claim,
assessment or judgment incident to any of the matters indemnified against in
this Section 8.4; PROVIDED, HOWEVER, that the Borrowers shall not be responsible
for fees and expenses of more than one counsel for the Purchasers.
16
SECTION 9
GENERAL PROVISIONS
9.1 GOVERNING LAW. This Agreement shall be governed by, and construed
according to the laws of the State of New York.
9.2 SUBMISSION TO JURISDICTION. The Borrowers irrevocably and
unconditionally (i) submit in any legal action or proceeding relating to this
Agreement and the Ancillary Agreements contemplated hereby, or for recognition
and enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of New York, the courts of the United
States of America in the State of New York, and the appellate courts from any
thereof; (ii) consent that any such action or proceeding may be brought in such
courts, and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same; (iii) agree that service of process in any such action or proceeding
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form or method of mail), postage prepaid, to it, at its
address set forth herein for the mailing of notice; and (iv) agree that any
action or proceeding will be commenced in the courts of the State of New York,
the courts of the United States of America in the State of New York, and the
appellate courts from any thereof.
9.3 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. Except as otherwise
expressly limited herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors (including successor trustees, in the case
of a trustee), assigns, heirs, executors, and administrators of the parties
hereto and the provisions of Section 8 shall inure to the benefit of each party
entitled to indemnification hereunder, including each indemnified party.
Notwithstanding the foregoing, the shares of Warrant Stock are subject to
restrictions on transfer specified in the Stockholders' Agreement.
9.4 ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement and the
Ancillary Agreements constitute the full and entire understanding and agreement
between the parties with regard to the subject matters hereof and thereof. Any
term of this Agreement may be amended, and the observance of any term hereof may
be waived (either generally or in a particular instance) only with the written
consent of Purchasers representing fifty and one-tenth percent (50.1%) in
aggregate principal amount of the Senior Secured Notes held by the Purchasers at
the time of the occurrence of such waiver or amendment and the written consent
of the Company. Any amendment or waiver effected in accordance with this Section
9.3 shall be binding upon each of the parties hereto.
9.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be (i) mailed by registered or
certified mail, postage prepaid, (ii) delivered by a nationally recognized
overnight courier service, or (iii) otherwise delivered by hand or by messenger,
addressed (A) if to RFE, to RFE Investment Partners V, L.P., 00 Xxxxx Xxxxxx,
Xxx Xxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx and Xxxxxx X.
Xxxxxx, with a copy to Xxxx Xxxxx & Xxxxxxx LLP, Xxx Xxxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx III, Esq., telecopier no. (203)
348-5777, (B) if to any other Purchaser, to such Purchaser at the address set
forth on SCHEDULE 1, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (C) if to the Borrowers, to them x/x
Xxxxxxxxxx, Xxx., Xxxxx Xxxx, Xxxxxxx Xxx Xxxx, 00000, Attention: Xxxxx Xxxxx,
telecopier no. (000) 000-0000 or at such other address as the Company shall have
furnished to the Purchasers, with a copy to Xxxx Marks & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 Attention: Xxxxxx Xxxxxxxx, Esq., telecopier
no. (000) 000-0000.
9.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right, power,
or remedy accruing to any party upon any breach or default under this Agreement,
shall be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
17
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
9.7 REFERENCES. Unless the context otherwise requires, any reference to a
"Section" refers to a section of this Agreement. Any reference to "this Section"
refers to the whole number section in which such reference is contained.
9.8 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
9.9 FEES AND EXPENSES. The Company shall pay the reasonable fees and
disbursements of the law firm of Xxxx Xxxxx & Xxxxxxx LLP, counsel for RFE,
incurred in connection with the negotiation, execution and delivery of this
Agreement and the Ancillary Agreements. In addition, the Company shall pay all
expenses incurred by the Purchasers in connection with the negotiation,
execution and delivery of this Agreement and the Ancillary Agreements, including
without limitation, travel and lodging expenses, due diligence expenses, fees of
accountants and other advisors and similar items. The Company shall also pay the
reasonable fees and expenses incurred in connection with the enforcement by the
Purchasers of any of their respective rights and benefits arising hereunder or
under any Ancillary Agreement against the Company (unless the Company is the
prevailing party in such matter, in which event the Purchasers shall pay the
Company reasonable fees and expenses incurred in defending such proceeding) or
the waiver, modification or amendment of any provision hereof or of any
Ancillary Agreement, including, without limitation, reasonable fees and
disbursements of one counsel for the Purchasers.
9.10 PRONOUNS. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which, when taken
together, shall constitute one instrument.
9.12 REMEDIES. The parties to this Agreement acknowledge and agree that a
breach of any of the covenants of the Company or the Purchasers set forth in
this Agreement may not be compensable by payment of money damages and,
therefore, that the covenants of the foregoing parties set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
9.13 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
9.13.1 "AFFILIATE" shall mean a person that, directly or indirectly,
controls or is controlled by, or is under common control with, any Person.
9.13.2 "BUSINESS" means the entire business conducted by the Borrowers,
including providing comprehensive home health care services.
9.13.3 "CHANGE IN CONTROL" means the date upon which (I) any person or
"group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as then in effect), other than Payee or any holder of this
Note, shall have acquired beneficial ownership of 50% or more, on a fully
diluted basis, of the voting interest in the Company's capital stock, (II) there
has occurred a sale or other disposition for value of all or substantially all
of the assets of the Company, (III) there has occurred a merger or consolidation
of the Company with or into another corporation where the Company is not the
surviving entity or is no longer a public company, (IV) there has occurred a
sale or other disposition for value by the Company of shares which after
issuance total 50% or more, on a fully diluted basis, of the voting shares of
capital stock of the Company or (V) any event (whether in one or more
transactions) occurs which results in Xxxxx Xxxxx no longer being an officer of
each Borrower.
18
9.13.4 "COMMON STOCK" shall mean the Common Stock of the Company, par
value $0.01 per share.
9.13.5 "COMMON STOCK WARRANTS" shall mean the warrants to purchase
Common Stock issued pursuant to the terms hereof.
9.13.6 "CONTRACTS" means and includes all written contracts, agreements,
instruments, indentures, notes, bonds, leases, mortgages, deeds of trust,
franchises, licenses, commitments or arrangements or understandings.
9.13.7 "CONTROL" (including, with correlative meaning, the terms
"controlled by" and "under common control with") as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through ownership of voting securities or by Contract or otherwise.
9.13.8 "KNOWLEDGE OF THE COMPANY", in whatever context, means the actual
knowledge of the President, Chief Financial Officer or Chief Operating Officer
of the Company.
9.13.9 "LIABILITY" means any indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, known or unknown, fixed or
unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured,
subordinated or unsubordinated, matured or unmatured, accrued, absolute,
contingent or otherwise, including, without limitation, liabilities on account
of Taxes, other governmental, regulatory or administrative charges or lawsuits
brought, whether or not of a kind required by generally accepted accounting
principles to be set forth on a financial statement.
9.13.10 "MATERIAL TO THE BUSINESS" means material to the business,
assets, properties, operations, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
9.13.11 "ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
9.13.12 "PERSON" means any individual, corporation, general or limited
partnership, limited liability company, firm, joint venture, association,
enterprise, joint stock company, trust, unincorporated organization or other
entity.
9.13.13 "XXXXXXXXX AGREEMENTS" means (i) the Loan and Security Agreement
(the "Xxxxxxxxx Loan Agreement") by and between the Borrowers and Xxxxxxxxx and
Xxxxxxxxx, Inc., dated as of April 28, 1994, as amended by Amendment Nos. 1-5,
inclusive, thereto and (ii) all agreements and instruments related thereto.
9.13.14 "XXXXXXXXX REVOLVING INDEBTEDNESS" means any revolving credit
advances and extensions of credit under the Xxxxxxxxx Agreements, as in effect
on the date hereof.
9.13.15 "SBA" means the United States Small Business Administration, and
any successor agency performing the functions thereof.
19
9.13.16 "SBIC" means a Small Business Investment Company licensed by the
SBA under the SBIC Act.
9.13.17 "SBIC ACT" means the Small Business Investment Act of 1958, as
amended.
9.13.18 "SBIC REGULATIONS" means the SBIC Act and the regulations issued
by the SBA thereunder, codified at Title 13 of the Code of Federal Regulations
("13 CFR"), Parts 107 and 121.
9.13.19 "SECURITIES" means, collectively, the Senior Secured Notes and
the Common Stock Warrants.
9.13.20 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
9.13.21 "SECURITY AGREEMENT" means the Security Agreement dated as of the
date hereof, between the Borrowers, the Purchasers and Xxxxxxxxx & Xxxxxxxxx,
Inc, as Collateral Agent.
9.13.22 "SECURITY DOCUMENTS" means the Security Agreement and any
financing statement, mortgage, pledge, guaranty, lien, instrument or document
relating to any security interest or guaranty securing the Senior Secured Notes.
9.13.23 "SENIOR NOTE AMOUNT" means Nine Hundred Twenty-Five Thousand
Dollars ($925,000.00) (subject to increase pursuant to Section 9.14 below).
9.13.24 "SPECIFIED VENDOR AMOUNT" shall mean $20,214.83, apportioned
among the Specified Vendors as follows: $12,705 for Mediq and $7,509.83 for
Xxxxxx Healthcare.
9.13.25 "SPECIFIED VENDORS" shall mean Mediq and Xxxxxx Healthcare.
9.13.26 "SUBORDINATED NOTES" shall mean the "Notes" as defined in that
certain Note Purchase Agreement between the Company and the Purchasers (as
defined therein) made effective as of July 14, 1998 as amended by Amendment No.
1 to the Note Purchase Agreement made effective as of August 21, 1998, Amendment
No. 2 to the Note Purchase Agreement made effective as of October 26, 1998, and
Amendment No. 3 to the Note Purchase Agreement of even or substantially even
date herewith and as same may otherwise be in effect from time to time.
9.13.27 "SUBSIDIARY" shall mean any Person (i) as to which the Company,
directly or indirectly, owns or has the power to vote, or to exercise a
controlling influence with respect to, fifty percent (50%) or more of the
securities of any class of such person, the holders of which class are entitled
to vote for the election of directors (or persons performing similar functions)
of such person and (ii) which has any material assets or liabilities.
9.13.28 "VENDOR ARRANGEMENTS" has the meaning set forth in Section 5.13
hereof.
9.13.29 "WARRANT STOCK" means the Common Stock issued or issuable on
exercise of the Common Stock Warrants.
20
9.14 XXXXX NOTE. Anything contained herein to the contrary notwithstanding,
for a period of up to one year after the date hereof, Xxxxx Xxxxx ("Xxxxx"), as
long as he actively discharges the duties of chief executive officer of the
Company, shall have the right to purchase (the "Xxxxx Purchase") for a purchase
price of, $100,000, a $100,000 promissory note (as in effect from time to time,
the "Xxxxx Note"), with the same terms as the other Senior Secured Notes, and
related Common Stock Purchase Warrants (issued on a similar pro-rata basis with
the Common Stock Purchase Warrants issued to the other Purchasers), and if the
Xxxxx Note is issued by the Borrowers, Xxxxx (as holder of the Xxxxx Note) shall
be considered a Purchaser hereunder and entitled to the benefits and other
rights under, and subject to the obligations under, this Agreement and the Xxxxx
Note shall be one of the Senior Secured Notes. Simultaneously with such issuance
(if any), Xxxxx shall be added as a party to this Agreement pursuant to a
supplement to this Agreement in form and substance reasonably satisfactory to
the parties. If the Xxxxx Purchase occurs, the maximum purchase price for the
Securities shall be $1,025,000.
21
[SIGNATURE PAGE TO ACCUHEALTH SENIOR NOTE PURCHASE AGREEMENT]
Executed effective as of the date first set forth above.
THE COMPANY: ACCUHEALTH, INC.
By:__________________________________
Its Chief Executive Officer
MIDVIEW DRUG, INC.
By:__________________________________
Its Chief Executive Officer
ACCUHEALTH HOME CARE, INC.
By:__________________________________
Its Chief Executive Officer
CITIVIEW DRUG CO., INC.
By:__________________________________
Its Chief Executive Officer
PROHEALTHCARE INFUSION SERVICES, INC.
By:__________________________________
Its Chief Executive Officer
HEALIX HEALTHCARE, INC.
By:__________________________________
Its Chief Executive Officer
22
[SIGNATURE PAGE TO ACCUHEALTH SENIOR NOTE PURCHASE AGREEMENT]
PRN HOMECARE AGENCY, INC.
By:__________________________________
Its Chief Executive Officer
AMERIX NURSING HOLDINGS, INC.
By:__________________________________
Its Chief Executive Officer
HEALIX HEALTHCARE, INC.
By:__________________________________
Its Chief Executive Officer
HEALIX HEALTHCARE OF NEW YORK, INC.
By:__________________________________
Its Chief Executive Officer
RYE BEACH HEALTHCARE, INC.
By:__________________________________
Its Chief Executive Officer
HEALIX HEALTHCARE OF NEW JERSEY, INC.
By:__________________________________
Its Chief Executive Officer
AMERICARE HOME NURSING SERVICES, INC.
By:__________________________________
Its Chief Executive Officer
23
[SIGNATURE PAGE TO ACCUHEALTH SENIOR NOTE PURCHASE AGREEMENT]
PURCHASERS: RFE INVESTMENT PARTNERS V, L.P.
By: RFE ASSOCIATES V, L.P.
Its General Partner
_________________________________
Name:
Title: Managing Member
STERLING/XXXX XXXXX CAPITAL, INC.
By:__________________________________
Name:
Title:
24
SCHEDULE 1
SCHEDULE OF PURCHASERS OF SENIOR SECURED NOTES AND COMMON STOCK WARRANTS
-----------------------------------------------------------------------------
Principal
Amount of No. of Common
Senior Secured Stock Warrants
Purchaser's Name and Address Notes Purchased Purchased
-----------------------------------------------------------------------------
RFE Investment Partners V, L.P. $ 625,000 831,938
00 Xxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx and
Xxxxxx X. Xxxxxx
-----------------------------------------------------------------------------
Sterling/Xxxx Xxxxx Capital, Inc. $ 300,000 399,330
000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
-----------------------------------------------------------------------------
TOTAL $ 925,000 1,231,268
-----------------------------------------------------------------------------
26
