EXHIBIT 10.46
CONVERTIBLE NOTE AGREEMENT
This Convertible Note Agreement is made and entered into as of the 8th day
of August, 2000 by and between XXXXXXX CENTRAL HOLDINGS, INC., a Delaware
corporation ("SCHI") and XXXXXXX X. X'XXXXXXX ("X'Xxxxxxx").
WITNESSETH:
WHEREAS, X'Xxxxxxx served as Chief Executive Officer of SCHI from July 15,
1998 through September 9, 1999 and agreed to defer a portion of his salary that
would otherwise have been payable to him during that period, which amount the
parties agree is $100,000 (the "Deferred Salary");
WHEREAS, on November 11, 1999 X'Xxxxxxx extended a $500,000 loan to SCHI
evidenced by a promissory note from SCHI to X'Xxxxxxx (the "Old Note");
WHEREAS, SCHI was recapitalized in June 2000 pursuant to convertible debt
and equity investments by Xxxx X. Xxxx ("Xxxx");
WHEREAS, SCHI and X'Xxxxxxx desire to convert the indebtedness evidenced by
the Old Note and the Deferred Salary into a new Convertible Promissory Note on
terms substantially similar to the terms of Xxxx'x $6.0 million Convertible Note
from SCHI.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Convertible Promissory Note. The Old Note shall be terminated as of the
date hereof. In lieu of the Old Note and the payment by SCHI of the Deferred
Salary to X'Xxxxxxx, SCHI is executing and delivering to X'Xxxxxxx
simultaneously herewith a Convertible Promissory Note in the principal amount of
$600,000, a copy of which is attached hereto as Exhibit A (the "Convertible
Note").
2. Conversion Right. X'Xxxxxxx may at any time at his option convert all or
a portion of the unpaid interest and principal on the Convertible Note into
fully paid and nonassessable shares of Common Stock of SCHI. The price at which
shares of Common Stock shall be delivered to X'Xxxxxxx (the "Conversion Price")
shall be determined in accordance with Section 3 of this Agreement. The
conversion of all or any portion of the Convertible Note shall, upon the
issuance of certificates representing the shares of capital stock issuable upon
such conversion, represent the full payment and satisfaction of that portion of
the Convertible Note which has been converted.
3. Conversion.
3.1 Shares to be Issued. In the event X'Xxxxxxx makes an election to
convert all or a portion of the unpaid interest and principal on the Convertible
Note pursuant to Section 2 above, SCHI shall issue to X'Xxxxxxx such number of
fully paid and nonassessable shares of Common Stock as is determined by dividing
the dollar amount of the Convertible Note designated by X'Xxxxxxx to be
converted by the Conversion Price applicable to each such share, determined as
hereinafter provided, in effect on the date that X'Xxxxxxx makes his election to
convert. The Conversion Price shall initially be equal to two dollars and fifty
one cents ($2.51) per share of Common Stock. Such initial Conversion Price shall
be subject to adjustment as hereinafter provided.
3.2 Mechanics of Conversion. Before X'Xxxxxxx shall be entitled
voluntarily to convert the Convertible Note into shares of Common Stock, he
shall give written notice to SCHI at its office that he elects to convert the
same and shall state therein the number of shares to be converted and the name
or names in which he wishes the certificate or certificates for shares of Common
Stock to be issued. SCHI shall, as soon as practicable thereafter, issue and
deliver at such office to X'Xxxxxxx, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of X'Xxxxxxx'x notice of conversion, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
3.3 Adjustments to Conversion Price for Certain Diluting Issuances,
Splits and Combinations. The Conversion Price shall be subject to adjustment
from time to time as follows:
(a) Special Definitions. For purposes of this Section 3, the
following definitions apply:
(1) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities (defined below).
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities convertible
into or exchangeable for Common Stock.
(3) "Additional Stock" shall mean all shares of Common Stock
issued by SCHI after the date of this Agreement, and all shares of Common Stock
issuable pursuant to Options and Convertible Securities issued by SCHI after the
date of this Agreement, other than (i) up to 606,904 shares of Common Stock that
may be issuable to the former preferred shareholders and noteholders of
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CareCentric Solutions, Inc. ("CareCentric") pursuant to that certain Agreement
and Plan of Merger by and among CareCentric, Xxxxxxx Acquisition Corporation and
the Corporation, dated July 12, 1999, (ii) all shares of Common Stock issuable
by SCHI upon conversion of Xxxx'x Series D Preferred Stock of SCHI and $6.0
million convertible preferred note; (iii) all shares of Common Stock issuable
upon exercise of the warrants issued by SCHI to Mestek, Inc. on June 12, 2000
and July 12, 2000; and (iv) shares of Common Stock for which adjustment of the
Conversion Price is made pursuant to Section 3(d) or 3(e) below.
(b) Adjustments. If SCHI shall issue, after the date of this
Agreement, any Additional Stock without consideration or for a consideration per
share less than the Conversion Price in effect immediately prior to the issuance
of such Additional Stock, the Conversion Price in effect immediately prior to
each such issuance shall forthwith be adjusted downward to a price equal to the
price paid per share for such Additional Stock.
(c) Determination of Consideration. For purposes of this Section
3.3, the consideration received by SCHI for the issuance of any Additional Stock
shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by SCHI excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as mutually
determined in good faith by SCHI's Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of SCHI for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as mutually
determined in good faith by SCHI's Board of Directors;
(2) Options and Convertible Securities. The consideration
per share received by SCHI for Additional Stock deemed to have been issued
pursuant to this Section 3.3, relating to Options and Convertible Securities
shall be determined by dividing:
(A) the total amount, if any, received or receivable by SCHI
as consideration for the issuance of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any provision contained
therein designed to protect against dilution) payable to SCHI upon the exercise
of such Options or the conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, upon the exercise of such
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Options for Convertible Securities and the conversion or exchange of such
Convertible Securities by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, upon the
exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities.
(d) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that SCHI at any time
or from time to time after the date of this Agreement shall declare or pay any
dividend on the Common Stock payable in Common Stock or in any right to acquire
Common Stock for no consideration, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or in the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Conversion Price in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. In the event that SCHI shall declare or pay any
dividend on the Common Stock payable in any right to acquire Common Stock for no
consideration, then SCHI shall be deemed to have made a dividend payable in
Common Stock in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
(e) Adjustments for Reclassification and Reorganization. If the
Common Stock issuable hereunder shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for in Section 3(d) above), the applicable
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted so that the
Convertible Note under this Agreement shall be convertible into, in lieu of the
number of shares of Common Stock which X'Xxxxxxx would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by X'Xxxxxxx upon conversion of the Convertible Note immediately
before that change.
(f) No Impairment. SCHI will not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by SCHI, but will at all times
in good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of X'Xxxxxxx against impairment.
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(g) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 3,
SCHI at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to X'Xxxxxxx a
certificate executed by SCHI's Chief Executive Officer or Chief Financial
Officer setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. SCHI shall, upon the
written request at any time of X'Xxxxxxx, furnish or cause to be furnished to
X'Xxxxxxx a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price in effect immediately before and after
such adjustments and readjustments, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of each dollar of the Convertible Note.
(h) Notices of Record Date. In the event that SCHI shall propose
at any time: (i) to declare any dividend or distribution upon its Common Stock,
whether in cash, property, stock or other securities, whether or not a regular
cash dividend and whether or not out of earnings or earned surplus; (ii) to
offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up; then, in
connection with each such event, SCHI shall send to X'Xxxxxxx:
(1) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and (iv)
above, at least twenty (20) days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
(i) Issue Taxes. SCHI shall pay any and all issue and other taxes
that may be payable in respect of any issue or delivery of shares of Common
Stock on conversion hereunder; provided, however, that SCHI shall not be
obligated to pay any transfer taxes resulting from any transfer requested by
X'Xxxxxxx in connection with any such conversion.
(j) Reservation of Stock Issuable Upon Conversion. SCHI shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of any of
the Convertible Note hereunder, such number of its shares of Common Stock as
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shall from time to time be sufficient to effect the conversion of the
Convertible Note hereunder, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of the Convertible Note hereunder, SCHI will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to SCHI's
certificate of incorporation.
(k) Fractional Shares. No fractional share shall be issued upon
the conversion of the Convertible Note hereunder. All shares of Common Stock
(including fractions thereof) issuable upon conversion of the Convertible Note
hereunder, shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, SCHI shall, in lieu of issuing any
fractional share, either (i) pay X'Xxxxxxx a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined by the
closing price of the Common Stock on the Nasdaq market on the day prior to
conversion), or (ii) round such fractional share up to a whole share.
4. Registration Rights
4.1 Registration Rights. SCHI covenants and agrees as follows:
4.2 Definitions. For purposes of this Section 4:
(a) The terms "Act" and "Securities Act" mean the Securities Act
of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by SCHI with the SEC.
(c) The term "Form S-4" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC for corporate combinations and exchange offers which permits
inclusion or incorporation of substantial information by reference to other
documents filed by SCHI with the SEC.
(d) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any permitted transferee or assignee
thereof.
(e) The terms "Exchange Act" and "1934 Act" mean the Securities
Exchange Act of 1934, as amended.
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(f) The term "Person" means an individual, corporation, limited
liability company, limited partnership, trust, joint venture, association or
unincorporated organization.
(g) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(h) The term "Registrable Shares" means (i) the Common Stock
issuable or issued upon conversion pursuant to Section 2 of this Agreement, and
(ii) any Common Stock or other securities issued or issuable in respect of
shares referenced in (i) above, upon any stock split, stock dividend,
recapitalization, or similar event; excluding in all cases, however, any
Registrable Securities sold by a Person in a transaction in which such Person's
rights under this Section 4 are not assigned.
(i) The term "SEC" means the Securities and Exchange Commission.
(j) The term "Subsidiary" means, with respect to any Person, any
corporation, limited liability company, or partnership of which such Person
owns, either directly or through its subsidiaries or affiliates, more than fifty
percent (50%) of (i) the total combined voting power of all classes of voting
securities in the case of a corporation or (ii) the capital or profit interests
therein in the case of a partnership.
4.3 Request for Registration. Upon request of X'Xxxxxxx, SCHI will use
its best efforts to file within 45 days of a request from X'Xxxxxxx a
registration statement with the SEC (utilizing Form S-3 or a successor form
thereto and Rule 415 to the extent available) to register Registrable Shares as
requested by X'Xxxxxxx. SCHI shall not be required to file more than three such
registration statements (excluding any registration statement which is delayed
pursuant to Section 4.5(e) below and through which X'Xxxxxxx is unable to
register eighty percent (80%) or more of the amount of Registrable Shares that
X'Xxxxxxx originally requested to register in such registration statement), and
no such filing shall be made prior to the date which is six months after the
date of this Agreement.
4.4 SCHI Registration. If SCHI at any time proposes to register an
offering of its securities under the Securities Act, either for its own account
or for the account of or at the request of one or more Persons holding
securities of SCHI, SCHI will:
(a) give written notice thereof to X'Xxxxxxx (which shall include
a list of the jurisdictions in which SCHI intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws) within
10 days of its receipt of a request from one or more Persons holding securities
of SCHI to register securities, or from its decision to effect a registration of
securities for its own account, whichever first occurs; and
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(b) use its best efforts to include in such registration and in
any underwriting involved therein, all the Registrable Shares specified in a
written request by X'Xxxxxxx made within 30 days after receipt of such written
notice from SCHI, except as set forth in Section 4.5(e) below and subject to the
currently existing piggyback rights referenced in Section 4.11.
4.5 Obligations of SCHI. If and whenever pursuant to the provisions of
this Section 4 SCHI effects registration of Registrable Shares under the
Securities Act of 1933 and state securities laws, SCHI shall:
(a) Prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for a period not to exceed two years
after the filing (but which period shall be extended by the duration of any
delay periods under clause (e) below);
(b) Use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as X'Xxxxxxx shall reasonably request, and do any and all
other acts and things which may be necessary or advisable (in the reasonable
opinion of X'Xxxxxxx) to enable X'Xxxxxxx to consummate the disposition thereof;
provided, however, that in no event shall SCHI be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by such
registration statement in any jurisdictions where it is not now so subject;
(c) As promptly as practicable prepare and file with the SEC such
amendments and supplements to any registration statement and prospectus used
pursuant to or in connection with this Agreement as may be necessary to keep
such registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement or for such shorter
period as may be required herein; and
(d) Furnish to X'Xxxxxxx such number of conformed copies of its
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits, such number of copies of the prospectus
comprised in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act), and such other related documents as X'Xxxxxxx may reasonably
request in order to facilitate the disposition of the Registrable Shares to be
registered.
(e) Anything in this Agreement to the contrary notwithstanding:
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(i) SCHI may defer the filing ("Filing") of any registration
statement or suspend the use of a prospectus under a currently effective
registration statement under this Agreement at its discretion for "Good Cause."
"Good Cause" means either if (1) SCHI is engaged in active negotiations with
respect to the acquisition of a "significant subsidiary" as defined in
Regulation S-X promulgated by the SEC under the Exchange Act and the Securities
Act which would in the opinion of counsel for SCHI be required to be disclosed
in the Filing; or (2) in the opinion of counsel for SCHI, the Filing would
require the inclusion therein of certified financial statements other than those
in respect of SCHI's most recently ended full fiscal year and any preceding full
fiscal year, and SCHI may then, at its option, delay the imposition of its
registration obligations hereof until the earlier of (A) the conclusion or
termination of such negotiations, or the date of availability of such certified
financial statements, whichever is applicable, or (B) 60 days from the date of
the registration request.
(ii) In the event SCHI has deferred a requested Filing,
pursuant to the preceding paragraph, such deferral period shall end if SCHI
registers shares for resale by another stockholder of SCHI. In the event SCHI
undertakes an underwritten public offering to issue SCHI securities for cash
during any period in which a requested Filing has been deferred or if the
registration of which SCHI gives notice under Section 4.4(a) is for an
underwritten public offering to issue the SCHI securities for cash, SCHI shall
include the Registrable Securities in such underwritten offering subject to (A)
the right of the managing underwriters to object to including such shares, (B)
Section 4.11, and (C) the condition that X'Xxxxxxx shall cooperate in the
registration process in all material respects, including execution by X'Xxxxxxx
of the underwriting agreement agreed to by SCHI and the underwriters.
(iii) If the managing underwriter elects to limit the number
or amount of securities to be included in any registration referenced in the
preceding paragraph or in Section 4.4(a), all Persons holding securities of SCHI
(including X'Xxxxxxx) who hold registration rights and who have requested
registration (collectively, the "Security Holders") shall, subject to Section
4.11 hereof, participate in the underwritten public offering pro rata based upon
the ratio of the total number or amount of securities to be offered in the
offering to the total number or amount of securities held by each Security
Holder (including the number or amount of securities which each such Security
Holder may then be entitled to receive upon the exercise of any option or
warrant, or the exchange or conversion of any security, held by such Security
Holder). If any such Security Holder would thus be entitled to include more
securities than such Security Holder requested to be registered, the excess
shall be allocated among the other Security Holders pro rata in a manner similar
to that described in the previous sentence.
(iv) SCHI may amend any registration statement to withdraw
registration of X'Xxxxxxx'x Registrable Shares if X'Xxxxxxx fails or refuses to
cooperate in full and in a timely manner with all reasonable requests relating
to such registration and the public offering generally made by SCHI, the
underwriters (if any), their respective counsel and SCHI's auditors.
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4.6 Expenses. Without regard to whether the registration statement
relating to the proposed sale of the Registrable Shares is made effective or the
proposed sale of such shares is carried out, SCHI shall pay the fees and
expenses in connection with any such registration including, without limitation,
legal, accounting and printing fees and expenses in connection with such
registration statements, the registration filing and examination fees paid under
the Securities Act and state securities laws and the filing fees paid to the
National Association of Securities Dealers, Inc. Notwithstanding the foregoing,
X'Xxxxxxx shall be responsible for the payment of underwriting discounts and
commissions, if any, and applicable transfer taxes relating to the Registrable
Shares sold by X'Xxxxxxx and for the fees and charges of any attorneys or other
advisers retained by X'Xxxxxxx.
4.7 Indemnification. In the event any Registrable Shares are included
in a registration statement under this Section 4:
(a) To the extent permitted by law, with respect to each
registration, qualification, or compliance that has been effected pursuant to
this Agreement, SCHI will indemnify and hold harmless X'Xxxxxxx, his legal
counsel and accountants (each a "Representative"), and any underwriter (as
defined in the Act) for X'Xxxxxxx and any controlling Person of such underwriter
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such expenses, losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein, offering circular or other document or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required or allegedly required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or alleged
violation by SCHI of the Act, the 1934 Act, any other federal or state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any other federal or state securities law; and SCHI will pay X'Xxxxxxx,
X'Xxxxxxx'x Representative, underwriter and any controlling Person of such
underwriter or controlling Person any legal or other expenses reasonably
incurred by such Person in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of SCHI (which consent shall not be
unreasonably withheld), nor shall SCHI be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out of or
is based upon a Violation that occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by X'Xxxxxxx.
(b) To the extent permitted by law, X'Xxxxxxx will indemnify and
hold harmless SCHI, each of SCHI's directors, each of SCHI's officers who has
signed the registration statement, each Person, if any, who controls SCHI within
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the meaning of the Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling Person of any such underwriter
or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing Persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, 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 X'Xxxxxxx expressly for use in connection with such
registration; and X'Xxxxxxx will pay any legal or other expenses reasonably
incurred by any Person intended to be indemnified pursuant to this subsection,
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of X'Xxxxxxx, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection exceed the
net proceeds after unreimbursed expenses and commissions from the offering
received by X'Xxxxxxx.
(c) Promptly after receipt by an indemnified party under this
Section 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, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense of such action, with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses 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 differing
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, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of its liability to the indemnified party under this Section
4.7 only to the extent that the indemnifying party has been injured by the
delay. The omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section.
(d) If the indemnification provided for in this Section is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
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connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) No indemnifying party, in defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnifying party of a release from all liability in respect to such claim or
litigation.
(f) To the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with any underwritten public offering are in conflict with the foregoing
provisions, the provisions in this Agreement shall control.
(g) The obligations of X'Xxxxxxx and SCHI under this Section 4.7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 4.7, and otherwise.
4.8 Information by X'Xxxxxxx. X'Xxxxxxx shall furnish to SCHI such
information regarding X'Xxxxxxx and the distribution proposed by him as SCHI may
reasonably request in writing and as shall reasonably be required in connection
with any registration or qualification referred to in this Section 4.
4.9 SEC Rule 144 Reporting and Reports Under Securities Exchange Act
of 1934. With a view to making available to X'Xxxxxxx the benefits of SEC Rule
144 promulgated under the Act and any other rule or regulation of the SEC that
may at any time permit X'Xxxxxxx to sell securities of SCHI to the public
without registration or pursuant to a registration on Form S-3 or its successor,
SCHI agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times from and after ninety (90)
days following the effective date of the first registration statement filed by
SCHI for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable
X'Xxxxxxx to utilize Form S-3 or its successor for the sale of his Registrable
Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by SCHI for the
offering of its securities to the general public is declared effective;
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(c) file with the SEC in a timely manner all reports and other
documents required of SCHI under the Act and the 1934 Act after it has become
subject to such reporting requirements; and
(d) furnish to X'Xxxxxxx, so long as X'Xxxxxxx owns any
Registrable Securities, forthwith upon request (i) a written statement by SCHI
that it has complied with the reporting requirements of SEC Rule 144 (at any
time from and after ninety (90) days following the effective date of the first
registration statement filed by SCHI for an offering of the securities to the
general public), the Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 or its successor (at any
time after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of SCHI and such other reports and documents so filed by SCHI (at any
time after it has become subject to such reporting requirements), and (iii) such
other information as may be reasonably requested in availing X'Xxxxxxx of any
rule or regulation of the SEC which permits the selling of any such securities
without registration or pursuant to such Form S-3 or its successor.
4.10 Transfer or Assignment of Registration Rights. The rights to
cause SCHI to register Registrable Securities pursuant to this Section 4 may be
transferred or assigned (but only with all related obligations) by X'Xxxxxxx to
a transferee or assignee of such securities, provided: (a) SCHI is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and of the securities with respect to
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement; (c) 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 Act; and (d) such
assignment shall be effective only if it complies with all applicable federal
and state securities laws. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership.
4.11 Priority and Limitation on Subsequent Registration Rights.
(a) The parties hereto acknowledge that the rights to
registration contained herein shall be subject to (i) the registration rights
contained in Section 2(k) of those certain Registration Rights Agreements
("Registration Rights Agreements") dated October 6, 1996 by and among InfoMed
Holdings, Inc. (as predecessor in interest to SCHI) and certain shareholders of
SCHI named therein, (ii) the registration rights granted pursuant to that
certain Second Amended and Restated Agreement and Plan of Merger and Investment
Agreement dated as of October 25, 1999 among MCS, Inc., Mestek, Inc., SCHI,
X'Xxxxxxx, Xxxxxxx X. Xxxx and E. Xxxxxxx Xxxx (the "MCS Merger Agreement"),
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(iii) the registration rights granted pursuant to that certain Agreement and
Plan of Merger dated as of July 12, 1999 among CareCentric Solutions, Inc.,
Xxxxxxx Acquisition Corporation and SCHI (the "CareCentric Merger Agreement"),
(iv) the registration rights granted to Xxxx pursuant to the Secured Convertible
Credit Facility and Security Agreement dated June 12, 2000 between Xxxx, SCHI
and certain of SCHI's subsidiaries and the Series D Convertible Preferred Stock
Purchase Agreement dated June 12, 2000 between SCHI and Xxxx (collectively, the
"Xxxx Agreements"), and (v) the registration rights granted to Mestek, Inc.
pursuant to warrants issued by SCHI to Mestek, Inc. on June 12, 2000 and July
12, 2000 (the "Mestek Warrants"); provided that the registration rights set
forth in the Registration Rights Agreements, the MCS Merger Agreement, the
CareCentric Merger Agreement, the Xxxx Agreements and the Mestek Warrants shall
have priority only over the registration rights granted pursuant to this
Agreement to the extent required in such agreements and to the extent that any
such prior rights have not been waived or amended.
(b) SCHI will not grant any right of registration under the
Securities Act relating to any of its equity securities to any person or entity
other than pursuant to this Agreement unless X'Xxxxxxx shall be entitled to have
included in such registration all Registrable Shares requested by X'Xxxxxxx to
be so included prior to the inclusion of any securities requested to be
registered by the persons or entities entitled to any such other registration
rights, other than securities subject to the Registration Rights Agreements, the
MCS Merger Agreement, the CareCentric Merger Agreement, the Xxxx Agreements and
the Mestek Warrants, all of which shall have priority over the registration
rights granted to X'Xxxxxxx under this Agreement (but only to the extent that
such prior rights have not been waived or amended).
4.12 Suspension of Registration Rights. The right of any Holder to
request registration of shares as provided in this Section 4 shall be suspended
during any period of time that all of the Registrable Securities held and
entitled to be held (as a result of conversion pursuant to Section 2 of this
Agreement) by X'Xxxxxxx may immediately be sold under SEC Rule 144.
5. Acknowledgement Regarding Old Note and Prior Employment. In
consideration of SCHI's execution and delivery of this Agreement and the
Convertible Note, X'Xxxxxxx hereby acknowledges that he has no claims against
SCHI, or its officers, directors, employees or agents under the Old Note or in
connection with his past employment by SCHI.
6. Miscellaneous.
6.1 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon, and the benefits thereof shall inure to, the parties
hereto and their respective permitted successors and assigns. Neither this
Agreement nor any rights or obligations hereunder may be assigned by SCHI
without the prior written consent of X'Xxxxxxx.
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6.2 Lost Promissory Note. Upon receipt of evidence reasonably
satisfactory to SCHI of the ownership of and the loss, theft, destruction or
mutilation of the Convertible Note and indemnification reasonably satisfactory
to SCHI or, in the case of any mutilation, upon the surrender of such
Convertible Note for cancellation to SCHI at its principal office, SCHI at its
expense (except as provided below) will execute and deliver to X'Xxxxxxx, in
lieu thereof a new Convertible Note of like tenor, dated so that there will be
no loss of interest on such lost, stolen, destroyed or mutilated Convertible
Note. SCHI may require payment by X'Xxxxxxx of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such replacement.
6.3 No Implied Waiver. No delay or omission to exercise any right,
power or remedy accruing to X'Xxxxxxx upon any breach or default of SCHI under
this Agreement shall impair any such right, power or remedy of X'Xxxxxxx, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default occurring
thereafter, nor shall any waiver of any single breach or default be deemed a
wavier of any other breach or default occurring theretofore or thereafter.
6.4 Amendments; Waivers. No amendment, modification, or waiver of or
consent with respect to, any provision of this Agreement, shall be effective
unless the same shall be in writing and signed and delivered by X'Xxxxxxx and
SCHI. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
6.5 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall be, only as to such jurisdiction,
ineffective to the extent of such prohibition or unenforceability, but all the
remaining provisions of this Agreement shall remain valid.
6.6 Notices. Any notice which X'Xxxxxxx or SCHI may be required or may
desire to give to the other party under any provision of this Agreement shall be
in writing by overnight delivery service, certified mail, telex or electronic
facsimile transmission and shall be deemed to have been given or made when
received and addressed as follows:
If to X'Xxxxxxx:
Xxxxxxx X. X'Xxxxxxx
000 Xxxxxxxx-Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Fax: ________________
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If to SCHI:
Xxxxxxx Central Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: President and CEO
Fax: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxx
Arnall Golden & Xxxxxxx, LLP
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Fax: (000) 000-0000
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
6.7 Interpretation. This Agreement, together with the Exhibit to this
Agreement, is intended by X'Xxxxxxx and SCHI as a final expression of their
agreement with respect to the subject matter hereof and is intended as a
complete statement of the terms and conditions of such agreement.
6.8 Governing Law. THE VALIDITY, CONSTRUCTION AND EFFECT OF THIS
AGREEMENT AND THE NOTE WILL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. AT THE OPTION OF LENDER, AN
ACTION MAY BE BROUGHT TO ENFORCE THE OBLIGATIONS, THIS AGREEMENT, AND/OR THE
CONVERTIBLE NOTE IN ANY COURT LOCATED IN THE STATE OF DELAWARE, U.S.A. OR IN ANY
OTHER COURT IN WHICH VENUE AND JURISDICTION ARE PROPER.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
6.10 Headings and Sections. Captions, headings and the table of
contents in this Agreement are for convenience only, and are not to be deemed
part of this Agreement. Unless otherwise specified, references in this Agreement
to Sections, Articles, Exhibits or Schedules are references to sections and
articles of and exhibits and schedules to, this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
X'Xxxxxxx:
/s/ Xxxxxxx X. X'Xxxxxxx
----------------------------------
Xxxxxxx X. X'Xxxxxxx
SCHI:
Xxxxxxx Central Holdings, Inc.
By: /s/ R. Xxxxx Xxxxx
--------------------------------
Title: President & CEO
-----------------------------
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