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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
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$6,000,000
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Table of Contents
Page
ARTICLE 1 Definitions 1
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ARTICLE 2 Credit Facility 7
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2.1 Credit Facility 7
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2.2 Procedure for Loans 7
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2.3 Interest 7
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2.4 Payments 8
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2.5 Conversion Right 9
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ARTICLE 3 Conditions Precedent 9
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3.1 Initial Loan 9
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3.2 Subsequent Loans 10
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ARTICLE 4 [INTENTIONALLY OMITTED] 10
ARTICLE 5 Covenants 10
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5.1 Accounting Records; Financial Statements 10
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5.2 Corporate Existence 10
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5.3 Qualification to Do Business 11
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5.4 Compliance with Laws 11
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5.5 Taxes and Other Liabilities 11
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5.6 Insurance 11
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5.7 Payment of Indebtedness and Performance of Obligations 11
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5.8 Use of Proceeds 11
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5.9 Maintenance of Property 11
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5.10 Conduct of Business 12
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5.11 Authorizations 12
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5.12 Notification of Events of Default and Adverse Developments 12
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5.13 Further Assurances 12
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5.14 Borrower Security Agreement 12
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5.15 Further Identification of Collateral 12
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ARTICLE 6 Negative Covenants 13
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6.1 Indebtedness. 13
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6.2 Liens 13
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6.3 Merger or Acquisition 13
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6.4 Sale and Exchange of Assets 13
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6.5 Contingent Liabilities 13
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6.6 Investments, Loans, Etc 14
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6.7 Fundamental Business Changes 14
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6.8 Restricted Payments 14
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6.9 Transactions with Shareholders and Affiliates 14
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6.10 Changes Relating to Indebtedness 14
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ARTICLE 7
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Events of Default 15
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7.1 Events of Default 15
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7.2 Termination of Obligations and Acceleration 16
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7.3 Other Remedies 16
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7.4 Application of Proceeds 17
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ARTICLE 8 Security Interest 17
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8.1 Grant of Security Interest 17
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8.2 Affirmative Covenants of Borrower 18
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8.3 Negative Covenants of Borrower 18
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8.4 Insurance 19
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8.5 Perfection 19
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8.6 Expenses 19
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8.7 Waivers 19
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8.8 Termination of Security Interests; Release of Collateral 19
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8.9 Cumulative Rights 20
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ARTICLE 9 Conversion 20
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9.1 Shares to be Issued 20
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9.2 Mechanics of Conversion 20
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9.3 Adjustments to Conversion Price for Certain Diluting
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Issuances, Splits and Combinations 20
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ARTICLE 10 Registration Rights 24
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10.1 Registration Rights 24
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10.2 Definitions 24
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10.3 Request for Registration 25
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10.4 SCHI Registration 25
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10.5 Obligations of SCHI 25
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10.6 Expenses 27
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10.7 Indemnification 27
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10.8 Information by the Lender 29
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10.9 SEC Rule 144 Reporting and Reports Under
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Securities Exchange Act of 1934 29
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10.10 Transfer or Assignment of Registration Rights 30
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10.11 Priority and Limitation on Subsequent Registration Rights 31
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10.12 Suspension of Registration Rights 31
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ARTICLE 11 Miscellaneous 31
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11.1 Successors and Assigns 32
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11.2 Sale of Interests 32
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11.3 Lost Promissory Note 32
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11.4 No Implied Waiver 32
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11.5 Amendments; Waivers 32
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11.6 Severability 32
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11.7 Notices 33
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11.8 Interpretation 33
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11.9 No Right of Set Off 34
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11.10 Attorneys' Fees and Other Expenses 34
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11.11 Governing Law 34
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11.12 WAIVER OF JURY TRIAL 34
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11.13 Indemnification 35
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11.14 PROTECTION OF LENDER'S INTEREST AS LENDER 35
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11.15 Counterparts 36
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11.16 Headings and Sections 36
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11.17 Joint and Several Liability 36
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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
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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 1
DEFINITIONS
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.
"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
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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 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
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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 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,
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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.
"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 indorsement 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.
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"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, 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)
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all rights corresponding to any of the foregoing throughout the world; and (f)
all goodwill associated with or symbolized by any of the foregoing.
"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.
(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
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"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 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.
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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;
(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
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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 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.
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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.
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:
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6.1 Indebtedness. Create, incur, assume or suffer to exist any
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:
(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
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(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.
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;
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(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);
(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
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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 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
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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 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.
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
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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.
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
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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 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
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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 .
(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
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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.
(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.
ARTICLE 10
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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.
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
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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 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
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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.
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
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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 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.
(d) If the indemnification provided for in this Section is
held by a court of competent
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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;
(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
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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 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
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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 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.
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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:
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
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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.
11.11 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, 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
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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.
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.
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By:
-----------------------
Its:
-------------------------------------
Xxxxxxx Central National, LLC
By:
-----------------------
Its:
-------------------------------------
Xxxxxxx Central Consulting, Inc.
By:
-----------------------
Its:
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