SECURED CONVERTIBLE CREDIT FACILITY
AND SECURITY AGREEMENT
BY AND BETWEEN
XXXXXXX CENTRAL HOLDINGS, INC.,
XXXXXXX CENTRAL NATIONAL, LLC,
XXXXXXX CENTRAL CONSULTING, INC.,
AND
XXXX X. XXXX
DATED AS OF JUNE 12, 2000
-------------------------
$6,000,000
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS......................................................1
ARTICLE 2 CREDIT FACILITY..................................................7
2.1 Credit Facility..............................................7
2.2 Procedure for Loans..........................................7
2.3 Interest.....................................................7
2.4 Payments.....................................................8
2.5 Conversion Right.............................................9
ARTICLE 3 CONDITIONS PRECEDENT.............................................9
3.1 Initial Loan.................................................9
3.2 Subsequent Loans............................................10
ARTICLE 4 [INTENTIONALLY OMITTED].........................................10
ARTICLE 5 COVENANTS.......................................................10
5.1 Accounting Records; Financial Statements....................10
5.2 Corporate Existence.........................................11
5.3 Qualification to Do Business................................11
5.4 Compliance with Laws........................................11
5.5 Taxes and Other Liabilities.................................11
5.6 Insurance...................................................11
5.7 Payment of Indebtedness and Performance of Obligations......11
5.8 Use of Proceeds.............................................11
5.9 Maintenance of Property.....................................12
5.10 Conduct of Business.........................................12
5.11 Authorizations..............................................12
5.12 Notification of Events of Default and Adverse Developments..12
5.13 Further Assurances..........................................12
5.14 Borrower Security Agreement.................................13
5.15 Further Identification of Collateral........................13
ARTICLE 6 NEGATIVE COVENANTS..............................................13
6.1 Indebtedness................................................13
6.2 Liens.......................................................13
6.3 Merger or Acquisition.......................................13
6.4 Sale and Exchange of Assets.................................14
6.5 Contingent Liabilities......................................14
6.6 Investments, Loans, Etc.....................................14
6.7 Fundamental Business Changes................................14
6.8 Restricted Payments.........................................14
6.9 Transactions with Shareholders and Affiliates...............15
6.10 Changes Relating to Indebtedness............................15
ARTICLE 7 EVENTS OF DEFAULT...............................................15
7.1 Events of Default...........................................15
7.2 Termination of Obligations and Acceleration.................16
7.3 Other Remedies..............................................17
7.4 Application of Proceeds.....................................18
ARTICLE 8 SECURITY INTEREST...............................................18
8.1 Grant of Security Interest..................................18
8.2 Affirmative Covenants of Borrower...........................18
8.3 Negative Covenants of Borrower..............................19
8.4 Insurance...................................................19
8.5 Perfection..................................................20
8.6 Expenses....................................................20
8.7 Waivers.....................................................20
8.8 Termination of Security Interests; Release of Collateral....20
8.9 Cumulative Rights...........................................20
ARTICLE 9 CONVERSION......................................................20
9.1 Shares to be Issued.........................................20
9.2 Mechanics of Conversion.....................................21
9.3 Adjustments to Conversion Price for Certain Diluting Issuanc21
ARTICLE 10 REGISTRATION RIGHTS............................................24
10.1 Registration Rights.........................................24
10.2 Definitions.................................................25
10.3 Request for Registration....................................25
10.4 SCHI Registration..........................................26
10.5 Obligations of SCHI.........................................26
10.6 Expenses....................................................28
10.7 Indemnification.............................................28
10.8 Information by the Lender...................................30
10.9 SEC Rule 144 Reporting and Reports Under Securities Exchange30
10.10 Transfer or Assignment of Registration Rights...............31
10.11 Priority and Limitation on Subsequent Registration Rights...31
10.12 Suspension of Registration Rights...........................32
ARTICLE 11 MISCELLANEOUS..................................................32
11.1 Successors and Assigns......................................32
11.2 Sale of Interests...........................................32
11.3 Lost Promissory Note........................................33
11.4 No Implied Waiver...........................................33
11.5 Amendments; Waivers.........................................33
11.6 Severability................................................33
11.7 Notices.....................................................33
11.8 Interpretation..............................................34
11.9 No Right of Set Off.........................................34
11.10 Attorneys' Fees and Other Expenses..........................34
11.11 Governing Law...............................................35
11.12 WAIVER OF JURY TRIAL........................................35
11.13 Indemnification.............................................35
11.14 PROTECTION OF LENDER'S INTEREST AS LENDER...................36
11.15 Counterparts................................................36
11.16 Headings and Sections.......................................37
11.17 Joint and Several Liability.................................37
EXHIBITS
Exhibit A - Promissory Note
Exhibit B - Form 10Q of SCHI
SCHEDULES
Schedule 5.14 - Liens
Schedule 6.1 - Indebtedness to Xxxxxxxxxx Bank
Schedule 6.9 - Transactions with Affiliates
Schedule 8.2 - Location of Collateral
SECURED CONVERTIBLE CREDIT FACILITY
AND SECURITY AGREEMENT
THIS SECURED CONVERTIBLE CREDIT FACILITY AND SECURITY AGREEMENT (this
"Agreement"), dated June 12, 2000, is made and entered into by and between
Xxxxxxx Central Holdings, Inc. ("SCHI"), Xxxxxxx Central National LLC
("SCHLLC"), and Xxxxxxx Central Consulting, Inc. ("SCCI") (SCHI, SCHLLC, and
SCCI are collectively referred to hereinafter as "Borrower"), and Xxxx X. Xxxx
("Lender").
WITNESSETH:
WHEREAS, Lender has agreed to provide a credit facility for up to five
years in a maximum aggregate principal amount of six million dollars (the
"Facility") to Borrower to fund working capital needs of Borrower; and
WHEREAS, Lender shall have the option at any time prior to payment in full
to convert the Facility, in whole or in part, to common stock of 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:
ARTICLE 1DEFINITIONS
In addition to any terms defined elsewhere in this Agreement, the following
terms have the meanings indicated for purposes of this Agreement (such
definitions being equally applicable to the singular and plural forms of the
defined term):
"Acceleration" means that the Loans (i) shall not have been paid at the
Maturity Date, or (ii) shall have become due and payable prior to the Maturity
Date pursuant to Section 7.2.
"Account" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower including, without limitation, all of
the following now owned or hereafter created or acquired by Borrower: (a)
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to Borrower arising from the sale, lease or
exchange of goods or other property and/or the performance of services; (b)
Borrower's rights in, to and under all purchase orders for goods, services or
other property; (c) Borrower's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid seller's rights of rescission, replevin, reclamation and rights to
stoppage in transit); (d) monies due to or to become due to Borrower under all
contracts for the sale, lease or exchange of goods or other property and/or the
performance of Borrower); and (e) Proceeds of any of the foregoing and all
collateral security and guaranties of any kind given by any person with respect
to any of the foregoing.
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"Accountants" shall mean the Borrower's independent accounting firm
selected by the Borrower's board of directors.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person;
provided, however, that neither party to this Agreement shall be deemed to be an
Affiliate of the other party.
"Agreement" or "Loan Agreement" means this Secured Convertible Credit
Facility and Security Agreement, as amended from time to time.
"Assigned Agreements" means all significant agreements of Borrower.
"Borrowing Date" shall have the meaning set forth in Section 2.2 hereof.
"Business" shall refer to the healthcare information systems and consulting
services operations of Borrower.
"Business Day" means a day when Lender and Borrower are both open for
business.
"Chattel Paper" means a writing or writings which evidence both a monetary
obligation and a security interest in or a lease of specific goods.
"Closing Date" means the first Borrowing Date.
"Collateral" refers to the following: (i) all of Borrower's Inventory,
Equipment and Fixtures now owned or hereafter acquired; (ii) all of Borrower's
Documents of Title now owned or hereafter acquired; (iii) all of Borrower's
Accounts now existing or hereafter arising; (iv) all of Borrower's Contract
Rights now existing or hereafter arising; (v) all of Borrower's General
Intangibles, Chattel Paper and Instruments, now existing or hereafter acquired
or arising; (vi) all suretyships and guarantees of Borrower's existing and
future Accounts, Contract Rights and General Intangibles and all security for
the payment or satisfaction of such suretyships and guarantees; (vii) the goods
or the services the sale or lease or performance of which gave rise to any
Account, Contract Right or General Intangible of Borrower including any returned
goods; (viii) any balance or share belonging to Borrower of any deposit, agency
or other account with any bank and any other amounts which may be owing from
time to time by any bank to Borrower; (ix) all property of any nature whatsoever
of Borrower now or hereafter in the possession of or assigned or hypothecated to
the Lender for any purpose; and (x) all Products and Proceeds of all of the
foregoing, including all Proceeds of other Proceeds.
"Common Stock" means the common stock, par value of $.001 per share, of
SCHI.
"Contract Right" means any right to payment under a contract (including,
but not limited to, contracts for the sale or leasing of goods or for the
rendering of services) not yet earned by performance and not evidenced by an
Instrument or Chattel Paper.
"Contingent Obligation," as applied to any Person, means any direct or
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indirect liability, contingent or otherwise, of that Person: (a) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
hereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings; or (c)
under any foreign exchange contract, currency swap agreement, interest rate swap
or cap agreement or other similar agreement or arrangement designed to protect
that Person against fluctuations in currency values or interest rates.
Contingent Obligations shall include, without limitation, (i) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such person of the obligation of another, (ii) the obligation to
make take-or-pay or similar payments if required regardless of nonperformance by
any other party or parties to an agreement, and (iii) any liability of such
Person for the obligations of another through any agreement to purchase,
repurchase or otherwise acquire such obligation, to provide funds for the
payment or discharge of such obligation or to maintain the solvency, financial
condition or any balance sheet item or level of income of another. The amount of
any Contingent Obligation shall be equal to the amount of the obligation so
guarantied or otherwise supported or, if a fixed and determined amount, the
maximum amount so guarantied.
"Copyright License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Copyright.
"Copyrights" means collectively all of the following: (a) all copyrights,
rights and interests in copyrights, copyright registrations and copyright
applications now owned or hereafter created or acquired by Borrower; (b) all
renewals of any of the foregoing; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the foregoing,
including, without limitation, damages or payments for past or future
infringements of any of the foregoing; (d) the right to xxx for past, present
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"Document of Title" means a xxxx of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of goods, and also any other
document which in the regular course of business or financing is treated as
adequately evidencing that the Person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all machinery,
computers, computer equipment, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"Event of Default" shall have the meaning set forth in Article 7 hereof.
"Financing Statements" shall mean the form of financing statements as shall
be necessary to perfect, upon filing, a security interest in the Collateral in
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each jurisdiction in which such Collateral is located or in which a filing is
required under the UCC to perfect such security interest.
"Fixtures" means all of the following now owned or hereafter acquired by
Borrower: plant fixtures; business fixtures; other fixtures and storage office
facilities, wherever located; and all additions and accessions thereto and
replacements therefor.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Intangibles" means all "general intangibles" (as defined in the
UCC) now owned or hereafter acquired by Borrower including, without limitation,
all right, title and interest of Borrower in and to: (a) the Assigned Agreements
and all other agreements, leases, licenses and contracts to which Borrower is or
may become a party; (b) all obligations or indebtedness owing to Borrower (other
than accounts) from whatever source arising; (c) all tax refunds; (d) all
Intellectual Property; and (e) all trade secrets, know-how and common law
intellectual property rights including, without limitation, rights in computer
software developed by or for Borrower and other confidential information
relating to the business of the Borrower including by way of illustration and
not limitation: the names and addresses of, and credit and other business
information concerning, Borrower's past, present or future customers; the prices
that Borrower obtains for its services or at which it sells merchandise;
estimating and costs procedures; profit margins; policies and procedures
pertaining to the sale and design of equipment, components, devices and services
furnished by Borrower; information concerning suppliers of Borrower and
information concerning the manner of operation, business plans, pledges,
projections, and all other information of any kind or character, whether or not
reduced to writing, with respect to the conduct by Borrower of its business not
generally known by the public.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirements" means all legal requirements in effect from
time to time including all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
consents, notices, demand letters, directions and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials and officers, and all instruments of record, foreseen or unforeseen,
ordinary or extraordinary, including, but not limited to, any change in any law,
regulation or the interpretation thereof by any foreign or domestic governmental
or other authority (whether or not having the force of law), relating now or at
any time heretofore or hereafter to the business or operations of Borrower or to
any of the property owned, leased or used by Borrower, including, without
limitation, the development, design, construction, acquisition, start-up,
ownership and operation and maintenance of property.
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"Incipient Default" shall have the meaning set forth in Section 3.1(e).
"Indebtedness" of any Person means all liabilities, obligations and
reserves, contingent or otherwise of such Person.
"Instrument" means a negotiable instrument or a security or any other
writing which evidences a right to the payment of money and is not itself a
security agreement or lease and is of a type which is in ordinary course of
business transferred by delivery with any necessary endorsement or assignment.
"Intellectual Property" shall mean collectively all of the following:
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses.
"Inventory" means all "goods" (as defined in the UCC) now owned or
hereafter acquired and held by Borrower for sale or lease or to be furnished
under contracts of service, tangible personal property which Borrower has so
leased or furnished, including, without limitation, tangible personal property,
raw materials, work in process and materials used, produced or consumed in
Borrower's business, and shall include tangible personal property held by others
for sale on consignment from Borrower, tangible personal property sold by
Borrower on a sale or return basis, tangible personal property returned to
Borrower by the purchaser following a sale thereof by Borrower and tangible
personal property represented by Documents of Title. All equipment, accessories
and parts at any time attached or added to items of Inventory or used in
connection therewith shall be deemed to be part of the Inventory.
"Liens" shall mean any lien, mortgage, pledge, security interest charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof and any agreement to give any
security interest).
"Loans" shall have the meaning set forth in Section 2.1 hereof.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations or financial condition of Borrower, (ii) the
ability of Borrower to pay the Obligations in accordance with their terms, or
(iii) Lender's perfected first priority lien on the Collateral (as defined in
this Agreement) or the value of such Collateral.
"Maturity" means any date on which the Loans or any portion thereof become
due and payable, whether as stated or by virtue of mandatory prepayment, by
Acceleration or otherwise.
"Maturity Date" means the date which is the fifth anniversary of the date
of this Agreement.
"Note" means the promissory note executed by Borrower in the form of
Exhibit A hereto.
"Obligations" means all loans, advances, debts, liabilities, obligations,
5
covenants and duties owing to Lender by Borrower, of any kind or nature, present
or future, whether or not evidenced by any note, guaranty or other instrument,
arising under this Agreement or the Note, and all extensions, amendments,
modifications, restructurings and refinancings of any of the above.
"Patent License" means any written agreement now or hereafter in existence
granting to Borrower any right to use any invention on which a subsisting Patent
exists.
"Patents" means collectively all of the following: (a) all patents and
patent applications now owned or hereafter created or acquired by Borrower and
the inventions and improvements described and claimed therein, and patentable
inventions; (b) the reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing; (c) all income, royalties,
damages or payments now and hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past of future infringements of any of the
foregoing; (d) the right to xxx for past, present and future infringements of
any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.
"Person" means any individual, corporation, partnership, trust, association
or other entity or organization, including any government, political
subdivision, agency or instrumentality thereof.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims of Borrower against third
parties for loss of, damage to or destruction of, or for proceeds payable for
loss of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance with respect to any Collateral,
and any condemnation or requisition payments with respect to any Collateral, in
each case whether now existing or hereafter arising.
"Restricted Payment" shall have the meaning set forth in Section 6.8
hereof.
"Trademark" means collectively all of the following now owned or hereafter
created or acquired by Borrower: (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on which any
of the foregoing have appeared or appear, all registrations and recordings
thereof, and all applications in connection therewith including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; (c) all income, payable under any of the foregoing or with
respect to any of the foregoing including damages or payments for past or future
infringements of any of the foregoing; (d) the right to xxx for past, present
and future infringements of any of the foregoing; (e) all rights corresponding
to any of the foregoing throughout the world; and (f) all goodwill associated
with or symbolized by any of the foregoing.
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"Trademark License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Trademark.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Delaware, as amended from time to time, and any successor statute;
provided that if by reason of mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of the security interest in any
Collateral is governed by the Uniform Commercial Code, or other applicable
statute, law or provision relating to the perfection or the effect of perfection
or non-perfection of any such security interest, as in effect on or after the
date hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code
or such other statute, law or provision as in effect in such other jurisdiction
for purposes of the provision hereof relating to such perfection or the effect
of perfection or non-perfection.
Any accounting term not defined herein shall have the meaning given to it
under GAAP. Any other capitalized term not defined herein shall have the meaning
given to it in the Series D Convertible Preferred Stock Purchase Agreement of
even date herewith (the "Stock Purchase Agreement").
ARTICLE 2
CREDIT FACILITY
2.1 Credit Facility. Subject to the terms and conditions of this Agreement
and in reliance on the representations and warranties of Borrower set forth
herein, Lender agrees to make loans (the "Loans") to Borrower from time to time
prior to the Maturity Date in an aggregate principal amount (excluding accrued
interest added to principal as provided in 2.3(b)) not to exceed $6,000,000.
Borrower's obligation to repay the Loans shall be evidenced by a promissory note
of Borrower (the "Note") in the form attached hereto as Exhibit A.
2.2 Procedure for Loans. With respect to Loans to be made by Lender,
Borrower may borrow pursuant to this Article 2 by giving Lender not less than
ten Business Days' written notice of its request for a Loan, which shall be in
an increment of $500,000. Such notice shall specify the date of the proposed
borrowing (the "Borrowing Date") and the particular working capital use(s) of
the proceeds of such Loan, and shall include a written resolution of the
Executive Committee of the Board of Directors of SCHI authorizing the proposed
borrowing. Upon satisfaction of the conditions set forth in Article 3 hereof,
Lender shall disburse to Borrower the Loan requested in such notice.
2.3 Interest.
(a) Interest. Each Loan shall bear interest from the date of
disbursement on the unpaid principal amount thereof until such amount is paid
(whether upon Maturity, by Acceleration or otherwise) at a rate per annum equal
to nine percent (9%). Interest will be compounded quarterly at the end of each
calendar quarter.
(b) Computation of Interest. Interest shall accrue daily and shall be
computed for the actual number of days elapsed on the basis of a year consisting
of 360 days.
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(c) Post-Maturity Interest. After Maturity (whether by acceleration or
otherwise) of the Loans, the Loans shall bear interest, payable on demand, at a
rate per annum equal to twelve percent (12%).
(d) Maximum Interest Rate. Nothing in this Agreement shall require
Borrower to pay interest at a rate exceeding the maximum amount permitted by
applicable law to be charged by Lender (the "Maximum Rate"). If the amount of
interest payable for the account of Lender on any day in respect of the
immediately preceding interest computation period, computed pursuant to this
Article 2, would exceed the Maximum Rate, the amount of interest payable for its
account on such interest payment date shall automatically be reduced to the
Maximum Rate.
2.4 Payments.
(a) Payments of Loans. At the end of each calendar quarter (beginning
on June 30, 2000) Borrower shall pay all interest accrued with respect to the
preceding calendar quarter (or, in the case of the first payment, the relevant
portion thereof). On the Maturity Date, Borrower shall pay (i) all accrued and
unpaid interest on the Loans and (ii) the unpaid principal on the Loans.
(b) Additional Payments. In addition to any payments under Section
2.4(a), Borrower shall immediately notify Lender of the occurrence of any of the
following events and, if demanded by Lender, Borrower shall, within three (3)
Business days of such demand make the following payments with respect to the
Loans:
(i) upon the sale, transfer, or other disposition of any asset of
the Borrower or any of its subsidiaries with a value in excess of one million
dollars ($1,000,000) (other than the sale of inventory in the ordinary course of
business), a payment in an amount equal to fifty percent (50%) of the net
proceeds received from such sale, transfer, or other disposition;
(ii) upon the sale of any equity securities issued by Borrower or
any of its subsidiaries (other than equity securities issued to the Borrower or
any of its subsidiaries or issued in the ordinary course of business pursuant to
an employee benefit plan), a payment in an amount equal to twenty-five percent
(25%) of the net proceeds received in exchange for such equity securities; and
(iii) upon issuance by Borrower or any of its subsidiaries of
long-term debt securities (i.e., securities with a maturity date of one year or
more from issuance) in the public or private capital markets, or incurrence by
Borrower or any of its subsidiaries of indebtedness under one or more bank
facilities (other than the Facility) in an aggregate principal amount in excess
of one million dollars ($1,000,000), a payment in an amount equal to twenty-five
percent (25%) of the principal amount.
Notwithstanding the foregoing requirements of this Section 2.4(b), Borrower
8
shall not be required to make any payment under this Section 2.4(b) to the
extent that such payment is prohibited by the terms of any debt of Borrower
senior to the Loans, as listed on Schedule 6.1 hereto. To the extent that
consent of the creditor with respect to any such senior debt is required in
order to make any payment under this Section 2.4(b), Borrower shall make
commercially reasonable efforts to obtain such consent.
(c) Payments. All payments of interest and principal shall be in
United States dollars and immediately available funds to Lender at its address
for notices in this Agreement and shall be made prior to 1:00 P.M. Eastern Time
on the date of the payment. All payments received after such time shall be
credited the next succeeding Business Day, and interest shall continue to
accrue.
2.5 Conversion Right. Lender may at any time at its option convert all or a
portion of the unpaid interest and principal on the Loans into fully paid and
nonassessable shares of Common Stock of SCHI. The price at which shares of
Common Stock shall be delivered to Lender (the "Conversion Price") shall be
determined in accordance with Article 9 of this Agreement. The conversion of all
or any portion of a Loan 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 Loan which has been converted.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 Initial Loan. The obligation of Lender to make the initial Loan
hereunder shall be subject to satisfaction or waiver of the following conditions
precedent:
(a) Lender shall have received the Note, duly executed by Borrower;
(b) Lender shall have received a certificate, signed by an authorized
representative of Borrower, stating (i) that the representations and warranties
contained in the Stock Purchase Agreement are true and accurate in all material
respects as though made on and as of the Borrowing Date, and (ii) that there has
then occurred no Event of Default or Incipient Default which is continuing;
(c) Lender shall have received the Financing Statements, duly executed
by Borrower;
(d) Lender shall have received such other instruments or documents as
Lender may reasonably request relating to the existence and good standing of
Borrower and the authority for execution, delivery and performance of this
Agreement and the granting and/or perfection of security interest in the
Collateral as contemplated herein;
(e) no Event of Default or event which, upon the lapse of time or the
giving of notice or both, would constitute an Event of Default (an "Incipient
Default") shall exist on the Borrowing Date;
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(f) the representations and warranties of Borrower set forth in the
Stock Purchase Agreement shall be true and correct in all material respects as
of the Borrowing Date;
(g) the net worth (assets less liabilities, calculated in accordance
with GAAP consistently applied) of SCHI shall not have declined by more than
twenty percent (20%) since the date of this Agreement;
(h) Lender shall have received the notice of borrowing referred to in
Section 2.2 with such certifications as may reasonably be requested by Lender;
(i) Lender shall have received an opinion of Borrower's counsel in
form and substance satisfactory to Lender.
3.2 Subsequent Loans. The obligation of Lender to make any subsequent Loan
shall be subject to satisfaction or waiver of the same conditions precedent as
are set forth in Section 3.1, except that the conditions precedent set forth in
subsections 3.1(b)(i), (f) and (i), if satisfied or waived with respect to the
initial Loan, shall no longer apply.
ARTICLE 4
[INTENTIONALLY OMITTED]
ARTICLE 5
COVENANTS
Unless Lender shall agree in writing otherwise, Borrower shall comply with
the following provisions so long as any Loan is outstanding:
5.1 Accounting Records; Financial Statements. Borrower shall maintain
adequate books and accounts in accordance with GAAP consistently applied.
Borrower shall deliver to Lender any information regarding the Business or the
finances of Borrower as Lender may reasonably request. On or before the
ninetieth (90th) day after the end of Borrower's fiscal year, Borrower shall
deliver to Lender annual audited financial statements, to include a balance
sheet, an income statement, and a statement of cash flows.
5.2 Corporate Existence. Borrower shall preserve and maintain its corporate
existence in good standing in the jurisdiction of its formation and all of its
licenses, privileges and franchises and other rights necessary or desirable in
the ordinary course of its businesses, except to the extent that the failure to
do so would not have a Material Adverse Effect.
5.3 Qualification to Do Business. Borrower shall qualify to do business and
shall be and remain in good standing in each jurisdiction in which the nature of
its business requires it to be so qualified, except to the extent that the
failure to be so qualified and in good standing would not have a Material
Adverse Effect.
5.4 Compliance with Laws. Borrower will observe and comply in all material
10
respects with all laws, ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Authorities, which now or at any time may be applicable to
Borrower, a violation of which could be reasonably expected to have a Material
Adverse Effect.
5.5 Taxes and Other Liabilities. Borrower will pay and discharge prior to
the date on which penalties attach thereto all taxes, assessments and
governmental charges, license fees and levies upon or with respect to Borrower,
and upon the income, profits and property of Borrower, unless and to the extent
that such taxes, assessments, charges, license fees and levies are being
contested in good faith and by appropriate proceedings diligently conducted by
Borrower, and provided that such reserve or other appropriate provisions as are
required in accordance with GAAP will have been made therefor.
5.6 Insurance. Borrower will maintain insurance with insurance carriers
which Borrower reasonably believes are financially sound on such property,
against such risks, and in such amounts as is customarily maintained by similar
businesses, and file with Lender within five days after Lender's written request
therefor a detailed list of such insurance then in effect, stating the names of
the carriers, the policy numbers, the insureds thereunder, the amounts of
insurance, the dates of expiration thereof and the property and risks covered
thereby.
5.7 Payment of Indebtedness and Performance of Obligations. Borrower will
pay and discharge promptly all lawful Indebtedness, obligations and claims for
labor, materials and supplies or otherwise which, if unpaid, could (i) have a
Material Adverse Effect or (ii) become a Lien on its property (except as
otherwise permitted by this Agreement), provided that Borrower will not be
required to pay and discharge or cause to be paid and discharged any such
Indebtedness, obligation or claim so long as the validity thereof is being
contested in good faith and by appropriate proceedings diligently conducted by
Borrower, and that such reserve or other appropriate provisions as are required
by the Accountants in accordance with GAAP will have been made therefor.
5.8 Use of Proceeds. The proceeds of the Loans shall be used only for
working capital for the Business.
5.9 Maintenance of Property. Borrower shall (i) maintain, keep and preserve
all of its properties in good repair, working order and condition, reasonable
wear and tear excepted, and from time to time make all necessary and proper
repairs, renewals, replacement and improvements thereto, and (ii) maintain,
preserve and protect all franchises, licenses, copyrights, patents and
trademarks material to its Business, so that the Business carried on in
connection therewith may be properly and advantageously conducted at all times.
5.10 Conduct of Business. Borrower shall (i) engage in the Business as its
principal business, (ii) preserve, renew and keep in full force and effect all
of its material contracts, except where it is in Borrower's best interest to
terminate or modify any such contract, and (iii) comply in all material respects
with the terms of all instruments which evidence, secure or govern indebtedness
of Borrower and all Governmental Requirements.
11
5.11 Authorizations. Borrower shall obtain, make and keep in full force and
effect all authorizations from and registrations with Governmental Authorities
that may be required for the validity and enforceability of this Agreement, the
Note, and the documents and instruments executed in connection therewith against
Borrower.
5.12 Notification of Events of Default and Adverse Developments. Borrower
shall promptly notify Lender of the occurrence of (i) any Incipient Default or
Event of Default hereunder; (ii) any event, development or circumstance whereby
any financial statements most recently furnished to Lender fail in any material
respect to present fairly, in accordance with GAAP, the financial condition and
operating results of Borrower as of the date of such financial statements; (iii)
any material litigation or proceedings that are instituted or threatened (to the
knowledge of Borrower) against Borrower, or any of its respective assets; (iv)
each and every event which would be an Event of Default (or an event which with
the giving of notice or lapse of time or both would be an Event of Default)
under any Indebtedness of Borrower exceeding one hundred thousand dollars
($100,000), such notice to include the names and addresses of the holders of
such indebtedness and the amount thereof; and (v) any other development in the
business or affairs of Borrower if the effect thereof involves a significant
risk of a Material Adverse Effect, in each case describing the nature thereof
and the action Borrower proposes to take with respect thereto.
5.13 Further Assurances. Borrower shall execute, acknowledge and deliver
any and all such further assurances and other deeds, agreements or instruments,
and take or cause to be taken all such other action, as shall be requested by
Lender from time to time in order to give full effect to this Agreement and the
Note and to maintain, preserve, safeguard and continue at all times all or any
of the rights, remedies, powers and privileges of Lender under this Agreement
and the Note, all without any cost or expense to Lender.
5.14 Borrower Security Agreement. Borrower will not create, permit or
suffer to exist, and will defend the Collateral against and take such other
action as is necessary to remove, any Lien on the Collateral (other than the
security interests created hereunder or security interests identified on
Schedule 5.14 and in existence as of the date hereof), and will defend the
right, title and interest of Lender in and to any of Borrower's rights under the
Collateral against the claims and demands of all Persons whomsoever.
5.15 Further Identification of Collateral. Borrower will if so requested by
Lender furnish to Lender, as often as Lender reasonably requests, statements and
schedules further identifying and describing the Collateral as Lender may
reasonably request, all in reasonable detail.
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees that, unless the Lender otherwise agrees in
writing, as long as any of the Loans remain outstanding, Borrower will not:
6.1 Indebtedness. Create, incur, assume or suffer to exist any
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liability for Indebtedness except for (i) Indebtedness under this Agreement or
the Note; (ii) Indebtedness constituting account or trade payables incurred in
the ordinary course of business; (iii) Indebtedness outstanding as of the date
hereof, provided, however that the terms of any such Indebtedness may not be
amended or modified following the date hereof; (iv) Indebtedness not to exceed
two hundred fifty thousand dollars ($250,000) in the aggregate at any time
secured by purchase money liens; (v) indebtedness to Xxxxxxxxxx Bank or its
successors in the amount and on the terms described in Schedule 6.1; and (vi)
any indebtedness incurred to repay the Loans in full.
6.2 Liens. Create, incur, assume or suffer to exist any Lien upon any
of its property or assets (including, without limitation, the Collateral),
whether now owned or hereafter acquired except for (i) Liens for taxes,
assessments or similar charges incurred in the ordinary course of business and
not delinquent or being contested in accordance with Section 5.5, (ii)
mechanics', carriers', workmen's, repairmen's or other like statutory liens
incurred by Borrower in the ordinary course of business, provided that the
obligations secured thereby are not past due, (iii) Liens granted to Lender
pursuant to this Agreement; (iv) liens for purchase money obligations not to
exceed two hundred fifty thousand dollars ($250,000); (v) liens in favor of
Xxxxxxxxxx Bank or its successors pursuant to the indebtedness described on
Schedule 6.1 and (vi) Liens identified on Schedule 5.14 hereof, provided,
however, that if the liens in favor of Xxxxxxxxxx Bank referenced in item (v)
above are created, the Liens identified in item 1 of Schedule 5.14 must be fully
discharged by Borrower and released simultaneously with such creation.
6.3 Merger or Acquisition. Consolidate or merge into or with any Person
or acquire all or substantially all of the stock, property or assets of any
Person; provided, however, that SCHLLC and/or SCCI may merge or consolidate into
SCHI, or any wholly-owned subsidiary of SCHI.
6.4 Sale and Exchange of Assets. Sell, exchange, lease, assign,
transfer or otherwise dispose of any asset exceeding one hundred thousand
dollars ($100,000) in value to any Person (except in the ordinary course of
business or to the extent such asset is obsolete or no longer used or useful in
the business of Borrower), or sell, exchange, lease, assign, transfer or
otherwise dispose of all or substantially all of its property; provided,
however, that SCHLLC and/or SCCI may sell, exchange, lease, assign, transfer or
otherwise dispose of all or substantially all of its property to SCHI, or any
wholly-owned subsidiary of SCHI.
6.5 Contingent Liabilities. Directly or indirectly create or become or
be liable with respect to any Contingent Obligation, except Contingent
Obligations arising from the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business.
6.6 Investments, Loans, Etc. At any time purchase or otherwise acquire,
hold or invest in the stock of, or any other equity interest in, any Person, or
make any loan or advance to, or enter into any arrangement for the purpose of
providing funds to, or make any other investment, whether by way of capital
contribution or otherwise, in, to or with any Person (all of which are referred
to as "Investments"), except:
13
(a) Investments in short-term certificates of deposit, time
deposits and bankers' acceptances issued by any U.S. commercial bank having
undivided capital and surplus exceeding $100,000,000;
(b) Investments in short-term direct obligations of the United
States or obligations of agencies of the United States which are guaranteed by
the United States;
(c) Investments in short-term commercial paper and corporate
obligations rated A-l by Standard & Poor's Corporation or P-I by Xxxxx'x
Investors Services, Inc.; and
(d) Loans to Borrower's employees from 401(k) employee benefit
plan funds for which Borrower is deemed by law to be the lender.
6.7 Fundamental Business Changes. Make any fundamental change in its
business activities.
6.8 Restricted Payments. Make any distributions to its shareholders,
declare or pay any dividends or apply any of its property to the voluntary
purchase, redemption or other retirement of, or set apart any sum for the
voluntary payment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of its present or
future issues of stock (each a "Restricted Payment") other than payments of
common stock or cash to the former shareholders and noteholders of CareCentric
Solutions, Inc. ("CareCentric") pursuant to that certain Agreement and Plan of
Merger by and among CareCentric, Xxxxxxx Acquisition Corporation and the
Borrower, dated July 12, 1999.
6.9 Transactions with Shareholders and Affiliates. Except as set forth on
Schedule 6.9, directly or indirectly enter into or permit to exist any material
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
Borrower, except for transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of Borrower and upon fair and reasonable
terms which are fully disclosed to Lender and are no less favorable to Borrower
or such Subsidiary than would be obtained in a comparable arm's length
transaction with a Person that is not an Affiliate of Borrower.
6.10 Changes Relating to Indebtedness. Amend the terms of any Indebtedness
(other than Indebtedness under this Agreement or the Note), if the effect of
such amendment is to: (i) increase the interest rate on such Indebtedness or any
premiums or penalties with respect thereto; (ii) change the dates upon which
payments of principal or interest are due on such Indebtedness; (iii) change any
default or event of default with respect to such Indebtedness; (iv) change the
redemption, defeasance or prepayment provisions of such Indebtedness; (v) change
the subordination provisions thereof (or the subordination terms of any guaranty
thereof); (vi) change the method of payment of interest thereon; or (vii) change
or amend any other term if such change or amendment would materially increase
the obligations of the obligor or confer additional material rights on the
holder of such Indebtedness in a manner adverse to Borrower or Lender.
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ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement
(a) Borrower shall fail to pay when due any payment of principal or
interest or any other sum payable hereunder, provided that, for the first two
such failures only, Borrower shall be entitled to a five (5) day grace period
for the payment of interest;
(b) Borrower shall fail to comply with any agreement contained in
Article 5 or Article 6 (other than Section 6.6 as to which Section 7.l(c) will
apply);
(c) Borrower shall default in the performance of any of its material
agreements under any provision of this Agreement or any other agreement between
Borrower and Lender;
(d) Any warranty or representation made by Borrower in the Stock
Purchase Agreement shall be untrue in any material respect, in any case on any
date as of which the facts set forth are stated or certified;
(e) Borrower or any of its subsidiaries shall institute a voluntary
case seeking liquidation or reorganization under Chapter 7 or Chapter 11,
respectively, of the United States Bankruptcy Code, or shall consent to the
institution of an involuntary case thereunder against it; or Borrower or any of
its subsidiaries shall file a petition initiating or shall otherwise institute
any similar proceeding under any other applicable federal or state law, or shall
consent thereto; or Borrower or any of its subsidiaries shall apply for, or by
consent or acquiescence there shall be an appointment of a receiver, liquidator,
sequestrator, trustee or other officer with similar powers; or Borrower or any
of its subsidiaries shall make an assignment for the benefit of creditors; or
Borrower or any of its subsidiaries shall admit in writing its inability to pay
its debts generally as they become due; or, if an involuntary case shall be
commenced seeking the liquidation or reorganization of Borrower or any of its
subsidiaries under Chapter 7 or Chapter 11, respectively, of the United States
Bankruptcy Code, or any similar proceeding shall be commenced against Borrower
or any of its subsidiaries under any other applicable federal or state law, and
(i) the petition commencing the involuntary case is not timely controverted; or
(ii) the petition commencing the involuntary case is not dismissed within 30
days of its filing; or (iii) an interim trustee is appointed to take possession
of all or a portion of the property, to operate all or any part of the business
of Borrower or any of its subsidiaries, or both; or (iv) an order for relief
shall have been issued or entered therein; or (v) a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee or other officer shall have been entered
therein;
(f) Except as disclosed in the Form 10-Q of SCHI filed with the
Securities and Exchange Commission for the period ended March 31, 2000 and
appended hereto as Exhibit B, Borrower shall default in the payment when due of
any monetary obligation (other than the Loans) in excess of two hundred fifty
thousand dollars ($250,000);
15
(g) One or more judgments against Borrower or attachments against its
property, which in the aggregate exceed two hundred fifty thousand dollars
($250,000), or the operation or result of which could be to interfere materially
and adversely with the conduct of the business of Borrower, remain unpaid,
unstayed on appeal, undischarged, unbonded and undismissed for a period of 30
days;
(h) A change in control of Borrower shall occur. For purposes of this
subsection 7.1(h), "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
Borrower, whether through ownership of voting securities, by contract, or
otherwise; or
(i) Lender does not have or ceases to have a valid and perfected first
priority security interest in the Collateral, subject only to the prior security
interests identified on Schedule 5.14.
7.2 Termination of Obligations and Acceleration. If any Event of Default
described in Section 7.l(a), (e) or (h) shall occur, all Loans shall become
immediately due and payable, all without notice of any kind, and Lender shall
have no obligation to make further Loans hereunder. If any Event of Default
described in Section 7.1 (other than an Event of Default described in Section
7.1(a), (e) or (h)) shall occur, upon ten (10) days notice, and in the case of
7.1(i), upon two (2) days notice, Lender may declare all Loans to be due and
payable, whereupon all Loans shall immediately become due and payable, and
Lender shall have no obligation to make further Loans hereunder. Any such
declaration made pursuant to this Section 7.2 may be rescinded by Lender.
7.3 Other Remedies. If any Event of Default shall have occurred and be
continuing, Lender may exercise in respect of the Collateral, in addition to all
other rights and remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party on default under the UCC (whether or
not the UCC applies to the affected Collateral) and also may: (a) require
Borrower to, and Borrower hereby agrees that it will, at its expense and upon
request of Lender forthwith, assemble all or part of the Collateral as directed
by Lender and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties; (b) with five (5) days written
notice, enter upon any premises of Borrower and take possession of the
Collateral; and (c) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Lender's offices or elsewhere, at such time or times, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as Lender may deem commercially reasonable. Borrower agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice to
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any sale
of the Collateral, if permitted by law, Lender may bid (which bid may be, in
whole or in part, in the form of cancellation of indebtedness) for the purchase
of the Collateral of any portion thereof for the account of Lender (on behalf of
Lender). Lender shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
16
was so adjourned. To the extent permitted by law, Borrower hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter enacted.
If an Event of Default has occurred and is continuing, Borrower hereby
irrevocably authorizes and empowers Lender to assert, either directly or on
behalf of Borrower, any claims Borrower may have, from time to time, against any
other party to the Assigned Agreements or to otherwise exercise any right or
remedy of Borrower under the Assigned Agreements (including, without limitation,
the right to enforce directly against any party to an Assigned Agreement all of
Borrower's rights thereunder, to make all demands and give all notices and to
make all requests required or permitted to be made by Borrower under the
Assigned Agreements).
Beyond the safe custody thereof, Lender shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto. Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property. Lender
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Lender in good faith.
7.4 Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, the proceeds of any sale of, or other realization upon,
all or any part of the Collateral shall be applied: first, to all fees, costs
and expenses incurred by Lender with respect to the Loan Agreement; second, to
all fees due and owing to Lender; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
fifth, to any other indebtedness or obligations of Borrower owing to Lender.
ARTICLE 8
SECURITY INTEREST
8.1 Grant of Security Interest. Borrower hereby grants to Lender a
continuing security interest in and to all right, title and interest of Borrower
in the Collateral, whether now owned or existing or hereafter acquired or
arising regardless of where located, to secure payment and performance of the
Obligations. Anything herein to the contrary notwithstanding: (a) Borrower shall
remain liable under the contracts and agreements included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed; (b)
the exercise by Lender of any of the rights hereunder shall not release Borrower
from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) Lender shall not have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Lender be obligated to perform any of the
obligations or duties of Borrower thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder. The security interest granted
hereby secures the payment and performance of the obligations, liabilities and
indebtedness of every nature of Borrower to Lender now or hereafter existing
17
under this Agreement or the Note and all renewals, extensions, restructurings
and refinancing thereof, including, without limitation, the principal amount of
all debts, claims and indebtedness, accrued and unpaid interest (including,
without limitation, interest which but for the filing of a petition in
bankruptcy, would accrue on such obligations) and all fees, costs and expenses
now or from time to time owing, due or payable.
8.2 Affirmative Covenants of Borrower. Borrower shall: (a) do all acts that
may be necessary to maintain, preserve and protect the Collateral; (b) pay
promptly when due all taxes, assessments, charges, encumbrances and liens now or
hereafter imposed upon or affecting the Collateral; (c) procure, execute and
deliver from time to time any endorsements, assignments, financing statements
and other writings necessary or appropriate to perfect, maintain and protect
Lender's security interest hereunder and the priority thereof and to deliver
promptly to Lender all records of (1) Collateral or (2) insurance proceeds; (d)
appear in and defend any action or proceeding which may affect its title to or
Lender's interest in the Collateral; (e) if Lender gives value to enable
Borrower to acquire rights in or the use of any Collateral, use such value for
such purpose; (f) keep accurate and complete records of the Collateral and
provide Lender with such books, records and such other reports and information
relating to the Collateral as Lender may reasonably request from time to time;
(g) when an event of default under this Agreement has occurred and after demand,
account fully for and immediately deliver to Lender in the form received, all
Collateral and all proceeds, endorsed to Lender as appropriate, and unless so
delivered all Collateral and all such proceeds shall be held by Borrower in
trust for Lender, separate from all other property of Borrower and identified as
the property of Lender; (h) keep the Collateral in good condition and repair;
(i) at any reasonable time, upon demand by Lender, exhibit to and allow
inspection by Lender (or persons designated by Lender) of the Collateral; (j)
keep the Collateral (and books and records concerning the Collateral) at the
locations(s) set forth in Schedule 8.2 and not remove the Collateral from such
location(s) without (1) the prior written consent of Lender or (2) creating a
similar security interest at the new location of the Collateral; (k) give thirty
(30) days prior written notice of any change in Borrower's chief place of
business or trade name(s) or style(s) set forth therein; (l) comply with all
laws, regulations and ordinances relating to the possession, operation,
maintenance and control of the Collateral; (m) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Lender may request, in order to
perfect and preserve the security interest granted or purported to be granted
hereby under the laws of any applicable jurisdiction, and (n) upon Lender's
request, appear in and defend any action or proceeding that may affect
Borrower's title to or Lender's security interest in the Collateral.
8.3 Negative Covenants of Borrower. Borrower shall not, without the prior
written consent of Lender: (a) Use or permit the Collateral to be used
unlawfully or in violation of any provision of this Agreement, or any applicable
statute, regulation or ordinance or any policy of insurance covering the
Collateral; (b) Execute a financing statement covering the Collateral except in
favor of Lender, except as permitted under Sections 6.1 and 6.2; (c) Encumber,
lease, rent, sell or dispose in bulk, the Collateral or any interest therein;
(d) Cause any waste or unusual or unreasonable depreciation of the Collateral;
or (e) After default under this Agreement and upon demand, modify, waive or
release any provisions of any Account, Contract Right, item of Chattel Paper,
Instrument or other right to the payment of money constituting Collateral.
18
8.4 Insurance. Upon execution of this Agreement and all related documents
and agreements, Borrower shall insure the Collateral, with Lender named as a
loss payee, in reasonable form and amounts, with companies reasonably acceptable
to Lender, and against normal risks and liabilities. Borrower shall deliver
copies of such policies to Lender at its request. In the event of loss of
insured Collateral, Lender may make any claim thereunder, and until the
Collateral is promptly replaced by Borrower from the segregated proceeds of the
insurance, Lender may collect and receive payment of and endorse any instrument
in payment of loss, and apply such amounts received, at Lender's election, to
replacement of Collateral or to the Obligations. Lender shall not by the fact of
approving, disapproving, accepting, preventing, obtaining or failing to obtain
any insurance, incur any liability for or with respect to the amount of
insurance carried, the form or legal sufficiency of insurance contracts,
solvency of insurance companies, or payment or defense of lawsuits; Borrower
hereby expressly assumes full responsibility therefor and all liability, if any,
with respect thereto.
8.5 Perfection. Borrower represents and warrants this Agreement creates a
valid, perfected and first priority security interest in the Collateral, subject
only to the prior security interests identified on Schedule 5.14, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such interest have been duly taken.
8.6 Expenses. Lender may incur expenses in connection with the retaking,
holding or preparing for sale of the Collateral including, with limitation,
reasonable attorneys' fees, appraisal fees, auction fees and advertising costs,
and in connection with protecting or enforcing its rights under this Agreement
including, but not limited to, reasonable attorneys' fees, which expenses
Borrower shall pay and are Obligations secured hereby.
8.7 Waivers. Borrower waives any right to require Lender to proceed against
any person or to exhaust any Collateral or to pursue any remedy available to
Lender. Borrower waives any defenses it may have arising from Lender's failure
to perfect or maintain a perfected security interest in the Collateral.
8.8 Termination of Security Interests; Release of Collateral. Upon payment
in full of all Obligations, the security interest created hereby shall
terminate. Upon such termination of the security interest or release of any
Collateral, Lender will, at the expense of Borrower, execute and deliver to
Borrower such documents as Borrower shall reasonably request to evidence the
termination of the security interest or the release of such Collateral which has
not yet theretofore been sold or otherwise applied or released. Such release
shall be without warranty or recourse to Lender, except as to the absence of any
prior assignments by Lender on behalf of its interest in the Collateral, as the
case may be.
8.9 Cumulative Rights. All rights and remedies of Lender under this
Agreement are in addition to all rights and remedies given to Lender contained
in any other agreement, instrument or document or available to Lender at law or
in equity. All such rights and remedies are cumulative and not exclusive and may
be exercised successively or concurrently. No exercise of any right or remedy
shall be deemed an election of remedies and preclude exercise of any other right
or remedy.
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ARTICLE 9
CONVERSION
9.1 Shares to be Issued. In the event Lender makes an election to convert
all or a portion of the unpaid interest and principal on the Loans pursuant to
Section 2.5 above, SCHI shall issue to the Lender such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the dollar
amount of the Loans designated by the Lender to be converted by the Conversion
Price applicable to each such share, determined as hereinafter provided, in
effect on the date that the Lender makes his election to convert. The price at
which shares of Common Stock shall be deliverable upon such conversion (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.
9.2 Mechanics of Conversion. Before Lender shall be entitled voluntarily to
convert any of the Loans into shares of Common Stock, he shall give written
notice to SCHI at such 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 Lender, 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 Lender's
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.
9.3 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 9.3, 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
CareCentric Solutions, Inc. ("CareCentric") pursuant to that certain Agreement
and Plan of Merger by and among CareCentric, Xxxxxxx Acquisition Corporation and
20
the Corporation, dated July 12, 1999, and (ii) shares of Common Stock for which
adjustment of the Conversion Price is made pursuant to Section 9.3(d) or 9.3(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 9.3,
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 the holders of a
majority of the Series D Preferred Stock; 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 and the holders of a
majority of the Series D Preferred Stock;
(2) Options and Convertible Securities. The consideration per
share received by SCHI for Additional Stock deemed to have been issued pursuant
to this Section 9.3, 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
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.
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(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 9.3(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
Loans under this Agreement shall be convertible into, in lieu of the number of
shares of Common Stock which the Lender 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 the Lender upon conversion of the Loans 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 9.3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the Lender against impairment.
(g) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 9.3,
SCHI at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to Lender 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 the Lender, furnish or cause to be furnished to the Lender 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 Loans.
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(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 the Lender:
(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 the Lender 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
Loans hereunder, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all Loans 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 all Loans 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 this Certificate.
(k) Fractional Shares. No fractional share shall be issued upon the
conversion of any Loans hereunder. All shares of Common Stock (including
fractions thereof) issuable upon conversion of any of the Loans 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 the
Lender 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.
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ARTICLE 10
REGISTRATION RIGHTS
10.1 Registration Rights. SCHI covenants and agrees as follows:
10.2 Definitions. For purposes of this Section 10:
(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.
(f) 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.
(g) The term "Registrable Shares" means (i) the Common Stock issuable
or issued upon conversion pursuant to Section 2.5 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 10 are not assigned.
(h) The term "SEC" means the Securities and Exchange Commission.
(i) 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.
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10.3 Request for Registration. Upon request of the Lender, SCHI will use
its best efforts to file within 45 days of a request from Lender 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 the
Lender. SCHI shall not be required to file more than three such registration
statements (excluding any registration statement which is delayed pursuant to
Section 10.5(e) below and through which the Lender is unable to register eighty
percent (80%) or more of the amount of Registrable Shares that Lender 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.
10.4 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 the Lender (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
(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 the Lender made within 30 days after receipt of such written notice
from SCHI, except as set forth in Section 10.5(e) below and subject to the
currently existing piggyback rights referenced in Section 10.11.
10.5 Obligations of SCHI. If and whenever pursuant to the provisions of
this Section 10 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 the Lender shall reasonably request, and do any and all other
acts and things which may be necessary or advisable (in the reasonable opinion
of Lender) to enable Lender 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
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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 Lender 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 Lender 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:
(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 10.4(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 10.11,
and (C) the condition that the Lender shall cooperate in the registration
process in all material respects, including execution by the Lender 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 10.4(a), all Persons holding securities of
SCHI (including the Lender) who hold registration rights and who have requested
registration (collectively, the "Security Holders") shall, subject to Section
10.11 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 the Lender's Registrable Shares if Lender 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.
26
10.6 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,
the Lender shall be responsible for the payment of underwriting discounts and
commissions, if any, and applicable transfer taxes relating to the Registrable
Shares sold by Lender and for the fees and charges of any attorneys or other
advisers retained by Lender.
10.7 Indemnification. In the event any Registrable Shares are included in a
registration statement under this Section 10:
(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 Lender, his legal counsel and accountants
(each a "Representative"), and any underwriter (as defined in the Act) for
Lender 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 Lender, Lender's
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
27
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
Lender.
(b) To the extent permitted by law, Lender 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 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 the Lender expressly for use in connection with such
registration; and the Lender 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 the Lender, 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 Lender.
(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 10.7 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.
28
(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 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 the Company and SCHI under this Section 10.7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 10.7, and otherwise.
10.8 Information by the Lender. The Lender of shall furnish to SCHI such
information regarding the Lender 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
10.
10.9 SEC Rule 144 Reporting and Reports Under Securities Exchange Act of
1934. With a view to making available to the Lender 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 the Lender 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 the
Lender 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;
29
(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 the Lender, so long as the Lender 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 the Lender 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.
10.10 Transfer or Assignment of Registration Rights. The rights to cause
SCHI to register Registrable Securities pursuant to this Section 10 may be
transferred or assigned (but only with all related obligations) by the Lender 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 only be effective 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.
10.11 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
30
therein, 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, the Lender, Xxxxxxx X.
Xxxx and E. Xxxxxxx Xxxx (the "MCS Merger Agreement"), and (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"); provided
that the registration rights set forth in the Registration Rights Agreements,
the MCS Merger Agreement and the CareCentric Merger Agreement shall only have
priority 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) Subject to Section 10.11(d), 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 the Lender
shall be entitled to have included in such registration all Registrable Shares
requested by Lender 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 and the CareCentric Merger Agreement, which
shall have priority (but only to the extent that such prior rights have not been
waived or amended).
(c) Subject to Section 10.11(d), for so long as the Lender owns
securities representing 20% or more of the voting power of SCHI on a fully
diluted basis, and except as expressly set forth in this Section 10.11, no other
Person shall be entitled to "piggyback" or participate in any of the demand
registrations that Lender initiates pursuant to Section 10.3 without such
Lender's prior written consent.
(d) The parties hereto agree that the rights to registration contained
herein shall be pari passu with the rights to registration granted in (i) the
Stock Purchase Agreement, and (ii) that certain warrant of even date herewith,
granted to Mestek, Inc. ("Mestek") in lieu of certain voting rights held by
Mestek, and (iii) that certain warrant, of even date herewith, granted to Mestek
in consideration of its agreement to issue its guaranty on certain indebtedness
of SCHI.
10.12 Suspension of Registration Rights. The right of any Holder to request
registration of shares as provided in this Section 10 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 2.5 of this Agreement) by
the Lender may immediately be sold under SEC Rule 144.
ARTICLE 11
MISCELLANEOUS
11.1 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 Borrower
without the prior written consent of Lender.
11.2 Sale of Interests. Lender is expressly permitted to sell, assign,
transfer, negotiate or grant participation in all or any part of or any interest
31
in, its rights and obligations under this Agreement. Except with respect to a
transfer to an affiliate of Lender, notice of any such sale, assignment,
transfer, negotiation or grant by Lender shall be given to Borrower within a
reasonable time period after such event. Upon surrender of the Note at the
office of the Borrower, the Borrower shall execute and deliver one or more
replacement Notes in the name of the transferee(s) and, if only a part of the
Loans is transferred, in the name of Lender.
11.3 Lost Promissory Note. Upon receipt of evidence reasonably satisfactory
to Borrower of the ownership of and the loss, theft, destruction or mutilation
of the Note and indemnification reasonably satisfactory to Borrower or, in the
case of any mutilation, upon the surrender of such Note for cancellation to
Borrower at its principal office, Borrower at its expense (except as provided
below) will execute and deliver to Lender, in lieu thereof a new Note of like
tenor, dated so that there will be no loss of interest on such lost, stolen,
destroyed or mutilated Note. Borrower may require payment by Lender of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such replacement. Any Note in lieu of which any such new Note has been so
executed and delivered by Borrower shall not be deemed to be an outstanding Note
for any purpose of this Agreement.
11.4 No Implied Waiver. No delay or omission to exercise any right, power
or remedy accruing to Lender upon any breach or default of Borrower under this
Agreement shall impair any such right, power or remedy of Lender, 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.
11.5 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 Lender and
Borrower. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
11.6 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.
11.7 Notices. Any notice which Lender or Borrower 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:
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To Lender:
Xxxx X. Xxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxx X. Xxxx
Xxxxx & XxXxxxxx
000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
If to Borrower, at:
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.
11.8 Interpretation. This Agreement, together with the Exhibit to this
Agreement, is intended by Lender and Borrower 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.
11.9 No Right of Set Off. Borrower will not be entitled to offset against
any of its financial obligations to Lender under this Agreement, any obligation
owed to it or any of its Affiliates by or for Lender or any Affiliates of
Lender.
11.10 Attorneys' Fees and Other Expenses. Borrower further agrees to pay or
reimburse Lender for all costs and expenses, including, without limitation,
33
attorneys' fees (including costs of settlement) incurred by Lender after the
occurrence of an Event of Default (i) in enforcing the Loans or in foreclosing
against the Collateral or exercising or enforcing any other right or remedy
available by reason of such Event of Default; (ii) in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to Borrower and related to or arising out of the
transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding arising out of this Agreement (bankruptcy or
otherwise); (v) in protecting, preserving, collecting, leasing, selling, taking
possession of or liquidation of any of the Collateral; or (vi) attempting to
enforce or enforcing any security interest in any of the Collateral or any other
rights relating to the Obligations.
11.11 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
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.
11.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND/OR THE NOTE. BORROWER AND LENDER ALSO WAIVE
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF LENDER. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this transaction, including without limitation,
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Borrower and Lender each acknowledge that this waiver is a
material inducement to enter into a business relationship, that each has already
relied on the waiver in entering into this Agreement and that each will continue
to rely on the waiver in their related future dealings. Borrower and Lender
further warrant and represent that each has reviewed this waiver with its legal
counsel, and that each knowingly and voluntarily waives it jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF
THIS AGREEMENT, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS.
IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO
A TRIAL BY THE COURT.
11.13 Indemnification. Borrower will indemnify and hold Lender and its
officers, directors, employees, Affiliates, attorneys and agents (collectively,
the "Indemnitees") harmless from and against any and all liabilities,
34
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
without limitation, the reasonable fees and disbursements of counsel) which may
be imposed on, incurred by or asserted against such Indemnitees in any manner
relating to or arising out of this Agreement or the making of the Loans
(collectively, the "Indemnified Matters"); provided, however, that Borrower will
have no obligation to an Indemnitee under this Section 11.13 with respect to
Indemnified Matters to the extent such Indemnified Matters were caused by or
resulted from the gross negligence or willful misconduct of an Indemnitee.
Borrower further agrees to pay or reimburse Lender for all costs and expenses,
including, without limitation, attorneys' fees (including costs of settlement)
incurred by Lender after the occurrence of an Event of Default (i) in enforcing
the Loans or in foreclosing against the Collateral or exercising or enforcing
any other right or remedy available by reason of such Event of Default; (ii) in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or in any insolvency
or bankruptcy proceeding; (iii) in commencing, defending or intervening in any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to Borrower and related to or arising out of
the transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding arising out of this Agreement (bankruptcy or
otherwise); (v) in protecting, preserving, collecting, leasing, selling, taking
possession of, or liquidation of any of the Collateral; or (vi) attempting to
enforce or enforcing any security interest in any of the Collateral or any other
rights relating to the Obligations.
11.14 PROTECTION OF LENDER'S INTEREST AS LENDER. NOTWITHSTANDING ANYTHING
TO THE CONTRARY IN THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN OR AMONG THE
PARTIES AND/OR THEIR AFFILIATES, IN TAKING OR REFRAINING FROM ANY ACTION WITH
RESPECT TO THE LOANS OR ANY COLLATERAL, LENDER WILL BE ENTITLED TO GIVE FULL
CONSIDERATION AND WEIGHT TO ITS BEST INTERESTS IN ITS CAPACITY AS A LENDER TO
BORROWER WITHOUT TAKING INTO ACCOUNT ANY OTHER OBLIGATIONS, IF ANY, OTHERWISE
APPLICABLE TO IT AND BORROWER WAIVES, TO THE FULL EXTENT PERMITTED BY LAW, ANY
OBJECTION TO SUCH ACTION OR DECISION BY LENDER, WHETHER BASED ON CONFLICT OF
INTEREST OR OTHERWISE. BORROWER EXPRESSLY DISCLAIMS THE EXISTENCE OF ANY
FIDUCIARY RELATIONSHIP OR SPECIAL RELATIONSHIP OF TRUST OR CONFIDENCE WITH
LENDER. BORROWER FURTHER ACKNOWLEDGES THAT LENDER HAS MADE NO REPRESENTATIONS,
WARRANTIES OR COVENANTS TO BORROWER OTHER THAN AS SET FORTH IN THIS AGREEMENT
AND LENDER IS NOT OBLIGATED TO AND HAS MADE NO COMMITMENTS WITH RESPECT TO THE
PURCHASE OF ANY EQUITY SECURITIES OF THE BORROWER OR THE CONTRIBUTION OF FUNDS
TO THE CAPITAL OF BORROWER (OTHER THAN AS SET FORTH IN THE STOCK PURCHASE
AGREEMENT OF EVEN DATE HEREWITH) BY VIRTUE OF THIS AGREEMENT.
11.15 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.
35
11.16 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.
11.17 Joint and Several Liability. All obligations of SCHI, SCNLLC, and
SCCI hereunder shall be joint and several. SCHI, SCNLLC, and SCCI acknowledge
that all Loans hereunder shall inure to the benefit of all of them. The
Obligations shall be deemed to include all joint or individual indebtedness or
obligations, contingent or otherwise, of each of SCHI, SCNLLC, and SCCI owed to
Lender, which Obligations shall all be secured by the Collateral.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
LENDER: Xxxx X. Xxxx
__________________________________
BORROWER: Xxxxxxx Central Holdings, Inc.
By:_______________________________
Its:______________________________
Xxxxxxx Central National, LLC
By: ______________________________
Its: _____________________________
Xxxxxxx Central Consulting, Inc.
By:_______________________________
Its:______________________________
