AMENDED AND RESTATED SECURED CONVERTIBLE CREDIT FACILITY
AND SECURITY AGREEMENT
By and Between
CARECENTRIC, INC.,
SC HOLDING, INC.
CARECENTRIC NATIONAL, LLC
and
▇▇▇▇ ▇. ▇▇▇▇
Dated as of July 1, 2002
AMENDED AND RESTATED SECURED CONVERTIBLE CREDIT FACILITY
AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURED CONVERTIBLE CREDIT FACILITY AND
SECURITY AGREEMENT (this "Agreement"), dated as of July 1, 2002, is made and
entered into by and between CareCentric, Inc. ("CareCentric"), SC Holding, Inc.
("SCH"), and CareCentric National, LLC ("CCN") (CareCentric, SCH, and CCN,
collectively, referred to hereinafter as "Borrower"), and ▇▇▇▇ ▇. ▇▇▇▇
("Lender").
Reference is made to a Secured Convertible Credit Facility and
Security Agreement dated June 12, 2000 entered into by and among ▇▇▇▇▇▇▇ Central
Holdings, Inc. (now known as CareCentric, Inc.), ▇▇▇▇▇▇▇ Central National, LLC
(now known as CareCentric National, LLC), ▇▇▇▇▇▇▇ Central Consulting, Inc. (now
known as CareCentric Central Consulting, Inc.) and ▇▇▇▇ ▇. ▇▇▇▇ (the "Original
Agreement"). In consideration of the Lender waiving certain Events of Defaults
or Incipient Defaults, as defined in the Original Agreement, and in
consideration of the Lender making certain advances to the Borrower, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Original Agreement is hereby amended and restated in its
entirety.
WITNESSETH:
WHEREAS, Lender has agreed to provide a secured convertible term loan
facility for five years in a principal amount of three million, five hundred
fifty five thousand, five hundred fifty five dollars ($3,555,555) (the
"Facility") to Borrower to refinance existing debt and 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 (including accrued but unpaid interest), in whole
or in part, into common stock of CareCentric;
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 Loan (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 deemed to be an
Affiliate of the other party.
"Agreement" or "Loan Agreement" means this Amended and Restated
Secured Convertible Credit Facility and Security Agreement, as amended from time
to time.
"Assigned Agreements" means all significant agreements of Borrower.
"Bank" means the ▇▇▇▇▇▇▇▇▇▇ Bank & Trust Company, Boston,
Massachusetts.
"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 effective date of this Agreement.
"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 CareCentric.
"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 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 ▇▇▇ 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 ▇▇▇▇ 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, 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).
"Loan" shall have the meaning set forth in Section 2.1 hereof.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations or financial condition of Borrower, (ii) the
ability of Borrower to pay the Obligations in accordance with their terms, or
(iii) Lender's perfected first priority lien on the Collateral (as defined in
this Agreement) or the value of such Collateral.
"Maturity" means any date on which the Loan or any portion thereof
becomes due and payable, whether as stated or by virtue of mandatory prepayment,
by Acceleration or otherwise.
"Maturity Date" means June 30, 2007.
"Mestek Facility" means the $4,000,000 Secured Convertible Credit
Facility provided by Mestek, Inc. to the Borrower of even date herewith.
"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.
"▇'▇▇▇▇▇▇▇ Facility" means a $600,000 credit facility provided by
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇ to the Borrower on August 8, 2000.
"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 ▇▇▇ 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 ▇▇▇ for past, present and future infringements of any of the foregoing; (e)
all rights corresponding to any of the foregoing throughout the world; and (f)
all goodwill associated with or symbolized by any of the foregoing.
"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.
"▇▇▇▇▇▇▇▇▇▇ Facility" means the $6,000,000 Line of Credit facility
provided by the Bank to the Borrower, or any modification, renewal, replacement
or refinancing thereof.
"▇▇▇▇▇▇▇▇▇▇ Guaranty" means the guaranty provided to the Bank by the
Lender, and any payments or performance made by the Lender on behalf of the
Borrower thereunder.
Any accounting term not defined herein shall have the meaning given
to it under GAAP.
ARTICLE 2
Term Loan
2.1 Term Loan . 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 a term loan (the "Loan") to Borrower in the
principal amount (excluding accrued interest added to principal as provided in
2.4(a)) of $3,555,555. Borrower's obligation to repay the Loan shall be
evidenced by a promissory note of Borrower (the "Note") in the form attached
hereto as Exhibit A.
2.2 (Intentionally omitted)
2.3 Interest .
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(a) Interest. The 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 simple rate per annum
equal to six and 25/100ths percent (6.25%), deferred until July 1, 2004 as set
forth in Section 2.4(a) below.
(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 Loan, the Loan shall bear interest, payable
on demand, at a rate per annum equal to nine and one quarter percent (9.25%).
(d) Maximum Interest Rate. Nothing in this Agreement shall
require Borrower to pay interest at a rate exceeding the maximum amount
permitted by applicable law to be charged by Lender (the "Maximum Rate").
If the amount of interest payable for the account of Lender on any day in
respect of the immediately preceding interest computation period, computed
pursuant to this Article 2, would exceed the Maximum Rate, the amount of
interest payable for its account on such interest payment date shall
automatically be reduced to the Maximum Rate.
2.4 Payments .
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(a) Payments of Loan. The payment of interest under the
loan shall be deferred until June 30, 2004, at which time the accrued, but
unpaid interest shall be capitalized and the face amount of the Note shall be
increased to $4,000,000. During the deferral period, interest shall not be
compounded quarter to quarter (thus the total amount of interest to be
capitalized and added to the principal as of June 30, 2004 shall be $444,445).
At the end of each calendar quarter (beginning on September 30, 2004) Borrower
shall pay all interest accrued with respect to the preceding calendar quarter.
On the Maturity Date, Borrower shall pay (i) all accrued and unpaid interest on
the Loan and (ii) the unpaid principal on the Loan.
(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 Loan:
(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 twenty-five
percent (25%) 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 twelve and one half percent (12.5%) 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, the ▇'▇▇▇▇▇▇▇ Facility
and the Mestek Facility) in an aggregate principal amount in excess of one
million dollars ($1,000,000), a payment in an amount equal to twelve and one
half percent (12.5%) 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 Loan, 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 Loan into
fully paid and nonassessable shares of Common Stock of CareCentric. The price
at which shares of Common Stock shall be delivered to Lender (the "Conversion
Price") shall be determined in accordance with Article 9 of this Agreement.
The conversion of all or any portion of a Loan shall, upon the issuance of
certificates representing the shares of capital stock issuable upon such
conversion, represent the full payment and satisfaction of that portion of the
Loan which has been converted.
ARTICLE 3
Conditions Precedent
3.1 Initial Loan . The obligation of Lender to make the 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) (Intentionally Omitted)
(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) (Intentionally Omitted)
(g) the net worth (assets less liabilities, calculated in
accordance with GAAP consistently applied) of CareCentric shall not have
declined by more than twenty percent (20%) since December 31, 2001;
(h) (Intentionally Omitted);
(i) Lender shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Lender.
3.2 Subsequent Loan . The Lender has no obligation to make any
subsequent Loan. If the Lender elects to do so, such subsequent Loan shall be
subject to the terms, conditions and benefits of this Agreement and shall be
subject to satisfaction or waiver of the same conditions precedent as are set
forth in Section 3.
ARTICLE 4
[INTENTIONALLY OMITTED]
ARTICLE 5
Covenants
Unless Lender shall agree in writing otherwise, Borrower shall comply
with the following provisions so long as any Loan is outstanding:
5.1 Accounting Records; Financial Statements . Borrower shall
maintain adequate books and accounts in accordance with GAAP consistently
applied. Borrower shall deliver to Lender any information regarding the
Business or the finances of Borrower as Lender may reasonably request. On or
before the ninetieth (90th) day after the end of Borrower's fiscal year,
Borrower shall deliver to Lender annual audited financial statements, to include
a balance sheet, an income statement, and a statement of cash flows. On or
before the 45th day following the end of each fiscal quarter, Borrower shall
provide Lender with the financial information filed with the Securities Exchange
Commission on it Form 10-Q. On a monthly basis within 5 business days following
the end of each month Borrower shall provide Lender with a statement of cash
flows, including a pro forma projection for the 13 weeks following the date of
each projection and the actual cash flows for the 4 weeks prior thereto.
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, naming the Lender as additional insured as its interests
may appear, 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 Loan shall be used only
for working capital for the Business and refinancing of debt.
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 (and in any event within there Business Days) 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.
Specifically, Borrower 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 the purpose of
effecting such conversions of debt, preferred stock or other convertible
instruments, or issuing common stock upon the exercise of outstanding warrants
or options or other such instruments, including, without limitation, engaging in
best efforts to obtain the requisite stockholder approval or any necessary
amendments to its Certificate of Incorporation or other action.
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.
5.16 Reduction of ▇▇▇▇▇▇▇▇▇▇ Facility. Borrower will pay down the
present $6,000,000 ▇▇▇▇▇▇▇▇▇▇ Facility to $5,900,000 or less on or before July
31, 2002 and continue to reduce the ▇▇▇▇▇▇▇▇▇▇ Facility by no less than $100,000
each month thereafter such that by December 31, 2002 there is no more than
$5,400,000 outstanding, on December 31, 2003 there is no more than $4,200,000
outstanding, etc. until all amounts have been repaid to the Bank.
ARTICLE 6
Negative Covenants
Borrower covenants and agrees that, unless the Lender otherwise
agrees in writing, as long as any of the Loan remains outstanding, Borrower will
not:
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) the ▇▇▇▇▇▇▇▇▇▇ Facility (vi) the ▇'▇▇▇▇▇▇▇
Facility (vii) the subordinated Mestek Facility and (viii) any indebtedness
incurred to repay the Loan 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 or
Section 5.7, (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 ▇▇▇▇▇▇▇▇▇▇ Bank or its successors pursuant to the indebtedness
described on Schedule 6.1, and (vi) subordinated Liens in favor of Mestek, Inc.
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 SCH and/or CCN may merge or consolidate into
CareCentric, or any wholly-owned subsidiary of CareCentric.
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 SCH and/or CCN may sell, exchange, lease, assign, transfer or
otherwise dispose of all or substantially all of its property to CareCentric, or
any wholly-owned subsidiary of CareCentric.
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
▇▇▇▇▇'▇ Investors Services, Inc.; and
(d) Loans to Borrower's employees from 401(k) employee
benefit plan funds for which Borrower is deemed by law to be the lender.
6.7 Fundamental Business Changes . Make any fundamental change in its
business activities.
6.8 Restricted Payments . Make any distributions to its
shareholders, declare or pay any dividends or apply any of its property to the
voluntary purchase, redemption or other retirement of, or set apart any sum for
the voluntary payment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of its present or
future issues of stock (each a "Restricted Payment").
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) (Intentionally Omitted)
(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) Borrower shall default in the payment when due of any
monetary obligation (other than the Loan) 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 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
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 and additional insured as its interests may appear, in
reasonable form and amounts, with companies reasonably acceptable to Lender, and
against normal risks and liabilities. Borrower shall deliver copies of such
policies to Lender at its request. In the event of loss of insured Collateral,
Lender may make any claim thereunder, and until the Collateral is promptly
replaced by Borrower from the segregated proceeds of the insurance, Lender may
collect and receive payment of and endorse any instrument in payment of loss,
and apply such amounts received, at Lender's election, to replacement of
Collateral or to the Obligations. Lender shall not by the fact of approving,
disapproving, accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the amount of insurance
carried, the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment or defense of lawsuits; Borrower hereby
expressly assumes full responsibility therefor and all liability, if any, with
respect thereto.
8.5 Perfection . Borrower represents and warrants this Agreement
creates a valid, perfected and first priority security interest in the
Collateral, subject only to the prior security interests identified on Schedule
5.14, securing the payment of the Obligations, and all filings and other actions
necessary or desirable to perfect and protect such interest have been duly
taken.
8.6 Expenses . Lender may incur expenses in connection with the
retaking, holding or preparing for sale of the Collateral including, with
limitation, reasonable attorneys' fees, appraisal fees, auction fees and
advertising costs, and in connection with protecting or enforcing its rights
under this Agreement including, but not limited to, reasonable attorneys' fees,
which expenses Borrower shall pay and are Obligations secured hereby.
8.7 Waivers . Borrower waives any right to require Lender to
proceed against any person or to exhaust any Collateral or to pursue any remedy
available to Lender. Borrower waives any defenses it may have arising from
Lender's failure to perfect or maintain a perfected security interest in the
Collateral.
8.8 Termination of Security Interests; Release of Collateral .
Upon payment in full of all Obligations, the security interest created hereby
shall terminate. Upon such termination of the security interest or release of
any Collateral, Lender will, at the expense of Borrower, execute and deliver to
Borrower such documents as Borrower shall reasonably request to evidence the
termination of the security interest or the release of such Collateral which has
not yet theretofore been sold or otherwise applied or released. Such release
shall be without warranty or recourse to Lender, except as to the absence of
any prior assignments by Lender on behalf of its interest in the Collateral,
as the case may be.
8.9 Cumulative Rights . All rights and remedies of Lender under
this Agreement are in addition to all rights and remedies given to Lender
contained in any other agreement, instrument or document or available to
Lender at law or in equity. All such rights and remedies are cumulative and not
exclusive and may be exercised successively or concurrently. No exercise of any
right or remedy shall be deemed an election of remedies and preclude exercise of
any other right or remedy.
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 Loan
pursuant to Section 2.5 above, CareCentric 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 Loan 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 one dollar
($1.00) 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 the Loan into shares of Common Stock, he shall give
written notice to CareCentric 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. CareCentric 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 CareCentric after the date of this Agreement, and all
shares of Common Stock issuable pursuant to Options and Convertible Securities
issued by CareCentric after the date of this Agreement, other than (i) shares of
Common Stock for which adjustment of the Conversion Price is made pursuant to
Section 9.3(d) or 9.3(e) below and (ii) shares of Common Stock that may be
issuable upon conversion of CareCentric's Series E Preferred Stock and not held
or issuable to ▇▇▇▇ ▇. ▇▇▇▇▇ pursuant to that certain Stock Grant Agreement
dated January 23, 2002 between CareCentric and ▇▇▇▇ ▇ ▇▇▇▇▇..
(b) Adjustments. If CareCentric 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 CareCentric 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 CareCentric 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 CareCentric'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
CareCentric 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 CareCentric'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 CareCentric 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 CareCentric 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 CareCentric 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 CareCentric
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 CareCentric shall declare or pay
any dividend on the Common Stock payable in any right to acquire Common Stock
for no consideration, then CareCentric 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
Loan 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 Loan immediately before that change.
(f) No Impairment. CareCentric 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 CareCentric, 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, CareCentric 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 CareCentric's Chief Executive Officer or Chief
Financial Officer setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based.
CareCentric 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 Loan.
(h) Notices of Record Date. In the event that CareCentric
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, CareCentric 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. CareCentric 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
CareCentric 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.
CareCentric 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 the Loan hereunder, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of the Loan
hereunder, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the Loan
hereunder, CareCentric 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 the Loan hereunder. All shares of Common Stock
(including fractions thereof) issuable upon conversion of the Loan 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, CareCentric 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
Registration Rights
10.1 Registration Rights . CareCentric 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 CareCentric 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 CareCentric 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,
CareCentric 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. CareCentric 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 CareCentric Registration . If CareCentric at any
time proposes to register an offering of its securities under the Securities
Act, either for its own account or for the account of or at the request of one
or more Persons holding securities of CareCentric, CareCentric will:
(a) give written notice thereof to the Lender (which shall
include a list of the jurisdictions in which CareCentric 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 CareCentric 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 CareCentric, 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 CareCentric . If and whenever pursuant
to the provisions of this Section 10 CareCentric effects registration of
Registrable Shares under the Securities Act of 1933 and state securities laws,
CareCentric 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 CareCentric 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) CareCentric 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) CareCentric 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 CareCentric be required
to be disclosed in the Filing; or (2) in the opinion of counsel for
CareCentric, the Filing would require the inclusion therein of certified
financial statements other than those in respect of CareCentric's most recently
ended full fiscal year and any preceding full fiscal year, and CareCentric 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 CareCentric has deferred a
requested Filing, pursuant to the preceding paragraph, such deferral period
shall end if CareCentric registers shares for resale by another stockholder of
CareCentric. In the event CareCentric undertakes an underwritten public
offering to issue CareCentric securities for cash during any period in which a
requested Filing has been deferred or if the registration of which CareCentric
gives notice under Section 10.4(a) is for an underwritten public offering to
issue the CareCentric securities for cash, CareCentric 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 CareCentric 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 CareCentric (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) CareCentric 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
CareCentric, the underwriters (if any), their respective counsel and
CareCentric'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, CareCentric 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, CareCentric will indemnify and hold harmless Lender, his legal
counsel and accountants (each a "Representative"), and any underwriter (as
defined in the Act) for Lender and any controlling Person of such underwriter
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such expenses, losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein, offering circular or other document or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required or allegedly required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or alleged
violation by CareCentric 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 CareCentric 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 CareCentric (which consent shall
not be unreasonably withheld), nor shall CareCentric 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 CareCentric, each of CareCentric's directors, each of
CareCentric's officers who has signed the registration statement, each Person,
if any, who controls CareCentric 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 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 CareCentric 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 shall furnish
to CareCentric such information regarding the Lender and the distribution
proposed by him as CareCentric 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 CareCentric to the public without registration or pursuant to a registration
on Form S-3 or its successor, CareCentric 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 CareCentric 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 CareCentric 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 CareCentric 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
CareCentric 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 CareCentric for an offering of the
securities to the general public), the Act and the 1934 Act (at any time after
it has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 or its successor
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of CareCentric and such other reports and documents so filed by
CareCentric (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 CareCentric 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) CareCentric
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 CareCentric) and certain
shareholders of CareCentric 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., CareCentric, the Lender, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and E. ▇▇▇▇▇▇▇ ▇▇▇▇ (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., ▇▇▇▇▇▇▇ Acquisition Corporation and CareCentric
(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), CareCentric 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
CareCentric on a fully diluted basis, and except as expressly set forth in this
Section 10.11, no other Person, other than Mestek, Inc., 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 Mestek Facility and any other warrant held by
Mestek, Inc. to purchase common stock of CareCentric.
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 Loan is transferred, in the name of Lender.
11.3 Lost Promissory Note . Upon receipt of evidence
reasonably satisfactory to Borrower of the ownership of and the loss, theft,
destruction or mutilation of the Note and indemnification reasonably
satisfactory to Borrower or, in the case of any mutilation, upon the surrender
of such Note for cancellation to Borrower at its principal office, Borrower at
its expense (except as provided below) will execute and deliver to Lender, in
lieu thereof a new Note of like tenor, dated so that there will be no loss of
interest on such lost, stolen, destroyed or mutilated Note. Borrower may
require payment by Lender of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such replacement. Any Note in
lieu of which any such new Note has been so executed and delivered by Borrower
shall not be deemed to be an outstanding Note for any purpose of this Agreement.
11.4 No Implied Waiver . No delay or omission to exercise any
right, power or remedy accruing to Lender upon any breach or default of Borrower
under this Agreement shall impair any such right, power or remedy of Lender, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default occurring
thereafter, nor shall any waiver of any single breach or default be deemed a
wavier of any other breach or default occurring theretofore or thereafter.
11.5 Amendments; Waivers . No amendment, modification, or
waiver of or consent with respect to, any provision of this Agreement, shall be
effective unless the same shall be in writing and signed and delivered by Lender
and Borrower. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
11.6 Severability . Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of this Agreement shall remain valid.
11.7 Notices . Any notice which Lender or Borrower may be
required or may desire to give to the other party under any provision of this
Agreement shall be in writing by overnight delivery service, certified mail,
telex or electronic facsimile transmission and shall be deemed to have been
given or made when received and addressed as follows:
To Lender:
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
J. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President, Corporate and Legal Affairs
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower, at:
CareCentric, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President and CEO
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
2800 One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
11.8 Interpretation . This Agreement, together with the
Exhibit to this Agreement, is intended by Lender and Borrower as a final
expression of their agreement with respect to the subject matter hereof and is
intended as a complete statement of the terms and conditions of such agreement.
11.9 No Right of Set Off . Borrower will not be entitled to
offset against any of its financial obligations to Lender under this Agreement,
any obligation owed to it or any of its Affiliates by or for Lender or any
Affiliates of Lender.
11.10 Attorneys' Fees and Other Expenses . Borrower further agrees to
pay or reimburse Lender for all costs and expenses, including, without
limitation, attorneys' fees (including costs of settlement) incurred by Lender
after the occurrence of an Event of Default (i) in enforcing the Loan 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.
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11.12 WAIVER OF JURY TRIAL . TO THE EXTENT PERMITTED BY APPLICABLE
LAW, 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 LOAN. 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 Loan
(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 Loan or in foreclosing against the Collateral or exercising or enforcing any
other right or remedy available by reason of such Event of Default; (ii) in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or in any insolvency
or bankruptcy proceeding; (iii) in commencing, defending or intervening in any
litigation or in filing a petition, complaint, answer, motion or other pleadings
in any legal proceeding relating to Borrower and related to or arising out of
the transactions contemplated hereby; (iv) in taking any other action in or with
respect to any suit or proceeding arising out of this Agreement (bankruptcy or
otherwise); (v) in protecting, preserving, collecting, leasing, selling, taking
possession of, or liquidation of any of the Collateral; or (vi) attempting to
enforce or enforcing any security interest in any of the Collateral or any other
rights relating to the Obligations.
11.14 PROTECTION OF LENDER'S INTEREST AS LENDER . NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN OR
AMONG THE PARTIES AND/OR THEIR AFFILIATES, IN TAKING OR REFRAINING FROM ANY
ACTION WITH RESPECT TO THE LOAN 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 CareCentric, SCH,
and CCN hereunder shall be joint and several. CareCentric, SCH, and CCN
acknowledge that the Loan 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 CareCentric, SCH, and CCN
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: ▇▇▇▇ ▇. Reed_______________________
/S/ ▇▇▇▇ ▇. ▇▇▇▇
BORROWER: CareCentric, Inc.
By: ▇▇▇▇ Festa______________________
/S/ ▇▇▇▇ ▇▇▇▇▇
Its: President
SC Holding, Inc.
By: ▇▇▇▇ Festa_____________________
/S/ ▇▇▇▇ ▇▇▇▇▇
Its: President
CareCentric National, LLC
By: ▇▇▇▇ Festa_____________________
/S/ ▇▇▇▇ ▇▇▇▇▇
Its: President