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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: DECEMBER 1, 1998
Complete Wellness Centers, Inc.
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(Exact Name of Registrant as specified in its Charter)
Delaware 0-22115 52-1910135
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
or corporation) Identification No.)
666 11th Street, NW, Suite 200
Washington, D.C. 20001
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (202) 639-9700
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(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS
On October 19, 1998, the Company executed the Third Supplement to the
Investment Agreement with Wexford Spectrum Investors LLC and Imprimis Investors
LLC (together the "Investors") in order to permit the Company to meet its
working capital obligations and to acquire additional facilities. The Company
sold to the Investors $475,000 in aggregate principal amount of Senior Secured
Floating Rate Bridge Notes due February 1, 1999. Of the $475,000 in aggregate
principal amount of the Notes, $350,000 represents term loans being made on the
date above to the Company by the Investors and $125,000 represents revolving
loans which may be made by the Investors to the Company pursuant to their
respective revolving loan commitments.
Exhibit I. Third Supplement to the Investment Agreement
Exhibit II. Pledge and Security Agreement
Exhibit III. Imprimis Promissory Note
Exhibit IV. Wexford Promissory Note
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereto duly authorized. Date: December 1, 1998.
Complete Wellness Centers, Inc.
By: /s/ E. EUGENE SHARER
--------------------------------
E. Eugene Sharer,
Vice Chairman
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EXHIBIT I
THIRD SUPPLEMENT TO INVESTMENT AGREEMENT
THIRD SUPPLEMENT TO INVESTMENT AGREEMENT, dated as of October 19, 1998
(this "Third Supplement"), among Complete Wellness Centers, Inc., a Delaware
corporation (the "Company"), Imprimis Investors LLC ("Imprimis") and Wexford
Spectrum Investors LLC ("Wexford" and, together with Imprimis, the "Investors").
WHEREAS, the Company and the Investors are parties to the Investment
Agreement, dated as of December 19, 1997, as previously supplemented by the
Supplement to Investment Agreement, dated as of January 12, 1998 (such
Supplement, the "First Supplement") and the Second Supplement to Investment
Agreement, dated as of July 2, 1998 (such Second Supplement, the "Second
Supplement" and such Investment Agreement, as supplemented by the First
Supplement and the Second Supplement, the "Investment Agreement"). Capitalized
terms used in this Third Supplement without definition shall have the meanings
ascribed to them in the Investment Agreement; and
WHEREAS, in order to permit the Company to meet its working capital
obligations and to acquire additional facilities, the Company and the Investors
desire that the Investors extend to the Company certain secured short term loans
in the manner provided in this Third Supplement.
1. The Company has authorized the issue and sale to the Investors of
$475,000 in aggregate principal amount of Senior Secured Floating Rate Bridge
Notes due February 1, 1999 (such Notes and any such Notes issued in substitution
therefor being, collectively, the "Notes"). Of the $475,000 in aggregate
principal amount of the Notes, $350,0000 represents term loans being made on the
date hereof to the Company by the Investors (collectively, the "Term Loans") and
$125,000 represents revolving loans which may be made by the Investors to the
Company pursuant to their respective revolving loan commitments (the "Revolving
Loan Commitments") under this Third Supplement (collectively, the "Revolving
Loans"). A Note in the principal amount of $380,000 is being issued to Imprimis
and represents a Term Loan of $280,000 being made by Imprimis and up to $100,000
of Revolving
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Loans that may be made by Imprimis. A Note in the principal amount of $95,000
is being issued to Wexford and represents a Term Loan of $70,000 being made by
Wexford and up to $25,000 of Revolving Loans that may be made by Wexford.
2. The Investors' respective obligations to make Revolving Loans shall be
limited to their respective Revolving Loan Commitments, shall be extinguished
upon the earliest to occur of (i) December 31, 1998, (ii) the maturity (which
will be February 1, 1999) of the Notes or (iii) earlier prepayment of the Notes
and shall be subject to (a) the Investors having approved the facility
acquisitions proposed to be made by the Company with the proceeds of such
Revolving Loan (the "Qualifying Acquisitions"), (b) there being no uncured event
of default (or event which with the passage of time could become an event of
default) at the time of the extension of the Revolving Loan, and (c) the
Investors having received a written request from the Company to make such
Revolving Loan not fewer than five business days prior to the proposed borrowing
date in which the Company certifies that there is no then uncured event of
default (or event which with the passage of time could become an event of
default) and that the representations and warranties of the Company contained in
Section 5 of this Third Supplement remain true and correct in all material
respects.
3. The Notes will bear interest and will mature as provided in the Notes.
The Notes will be subject to mandatory redemption by the Company in full at
their then outstanding principal amounts, together with accrued and unpaid
interest thereon to the date of redemption, upon the earlier to occur of a
Change of Control or the redemption in full of the New Preferred Stock (as
defined in the Second Supplement). The Notes will also be subject to voluntary
redemption by the Company, in whole or in part, at their then outstanding
principal amounts, together with accrued and unpaid interest thereon to the date
of redemption, any such partial redemption to be made pro rata to the Investors.
4. The Notes will be secured by the Pledge Agreement (the "Pledge
Agreement") and the various Security Agreements (the "Security Agreements"),
each dated as of the date of this Third Supplement, being delivered by the
Company or subsidiaries of the Company contempora-
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neously with the issuance of the Notes. The Company represents and warrants that
it has ordered current UCC searches (the "Searches") covering the assets of the
various parties to the Security Agreements (the "Covered Assets") and has
provided to the Investors complete and accurate copies of all of such results of
the Searches that it has received through the date hereof. The Company agrees
that it will provide to the Investors complete and accurate copies of all
remaining results of the Searches promptly following receipt by the Company or
its counsel. In the event that the Investors shall fail to receive the results
from all of the Searches on or prior to October 15, 1998 or any Search results
indicate that one or more other creditors have a security interest in any of the
Covered Assets that is prior to the security interest provided by the Security
Agreements, an event of default shall be deemed to have occurred with respect to
the Notes unless within five business days the Company shall have provided
additional collateral to secure the Notes and the other Obligations satisfactory
to the Investors.
5. The Company hereby confirms that (a) the Company's representations and
warranties contained in the Investment Agreement were true and complete in all
material respects when given and that, apart from information contained in SEC
Reports filed prior to the date hereof or other written information that has
been provided by the Company to the Investors prior to the date hereof, there
are no matters that would require any material changes to such representations
and warranties were they being deemed to be given as of the date hereof, with
such representations and warranties deemed to refer to the Notes being issued
pursuant to this Third Supplement and the Pledge Agreement and the Security
Agreements being delivered pursuant to this Third Supplement, and (b) all
information provided by the Company to the Investors since January 12, 1998,
including without limitation all SEC Reports, all historical or projected
financial information, and all information relating to any governmental
investigation of or affecting the Company, its practices or its employees, has
been true and complete in all material respects.
6. The Company hereby represents and warrants that as of August 31, 1998,
the list of receivables of the Company's subsidiaries attached as Annex A hereto
is
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complete and accurate in all respects. Since August 31, 1998, there have been no
changes in the amounts or status of the receivables listed that would,
individually or in the aggregate, be reasonably likely to result in a material
adverse change in the business, financial condition or results of operations or
prospects of the Company or any of its subsidiaries.
7. Notwithstanding anything in either the First Supplement or the Second
Supplement to the contrary, from and after the date hereof and for so long as
any amount remains outstanding under the Notes, (a) all of the "Affirmative
Covenants" provided for in Section VII of the Investment Agreement and all of
the "Negative Covenants" provided for in Section VIII of the Investment
Agreement shall be reinstated and remain in full force and effect, except that
the exercise of the Company's optional redemption right under the New Preferred
Stock shall not be prohibited under Section VIII(E), (b) all of the events of
default provided for in Section IX of the Investment Agreement shall be
reinstated and remain in full force and effect with all references therein to
the "Notes" to be deemed to refer to the Notes being issued under this Third
Supplement and all references to Note Documents or Collateral Documents to be
deemed to refer to the Notes being issued under this Third Supplement and the
Pledge Agreement and the Security Agreements being delivered pursuant to this
Third Supplement, and (c) all of the provisions in Sections X through XVII of
the Investment Agreement shall be reinstated and remain in full force and effect
with all references therein to the "Notes" to be deemed to refer to the Notes
being issued under this Third Supplement and all references to Note Documents or
Collateral Documents to be deemed to refer to the Notes being issued under this
Third Supplement and the Pledge Agreement and the Security Agreements being
delivered pursuant to this Third Supplement.
8. The Company agrees that the proceeds received by it from the Term Loans
and from any Revolving Loans will be used by it in a manner consistent with the
Consolidated Cash Flow Forecast (the "Forecast") annexed as Annex B to this
Third Supplement, which the Company hereby represents and warrants to be
complete and accurate in all respects, and, in the case of proceeds from any
Revolving Loans, only for Qualifying Acquisitions. Not later than Noon, Eastern
Time, on each alternate
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Wednesday, commencing on October 21, 1998, the Company shall provide by telecopy
to the Investors a summary, certified by its Chief Financial Officer as complete
and accurate, of the Company's cash position as of the opening of business on
the immediately preceding Monday as compared to the budgeted cash position for
such date as shown on the Forecast and a certification from the Chief Financial
Officer to the effect that such use of proceeds agreement shall have been
complied with by the Company through the date of such certification. The Company
represents and warrants that each such summary will be complete and accurate in
all respects. Any failure by the Company to timely provide such report and
certification or any $32,500 or greater shortfall of the Company's cash position
(after deducting from such cash position the net proceeds received by the
Company from the Term Notes and the Revolving Loans) as reflected in a report as
compared to the forecasted cash position in the Forecast for the same date shall
be deemed to be an event of default.
9. Matters relating to the issuance and sale of the Notes pursuant to this
Third Supplement and the execution and delivery by the Company or subsidiaries
of this Third Supplement, the Pledge Agreement and the Security Agreements shall
be addressed in opinions from Epstein Becker & Green, P.C. and Jacob &
Weingarten, special counsel to the Company, each dated the date hereof and
substantially in the forms of the opinion of such firms previously provided
under the Investment Agreement and otherwise acceptable to the Investors.
10. The issuance and sale of the Notes shall take place as soon as
practicable after execution of this Third Supplement, subject to (a) the
execution and delivery by the Company and appropriate subsidiaries of the
Company to the Investors of the Notes, the Pledge Agreement, the Security
Agreements and such UCC-ls as are requested by the Investors, (b) the delivery
to the Investors of the opinions referenced in Section 9, (c) the delivery by
the Company of a Secretary's Certificate, a Compliance Certificate, an Officer's
Certificate and a Solvency Certificate, in each case substantially in the forms
of the certificates previously provided under the Investment Agreement and
otherwise acceptable to the Investors, (d) delivery by the Company of good
standing certificates requested by the Investors, (e) delivery by
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the Investors of $309,312, representing the aggregate principal amount of the
Term Loans, net of the fee and expense reimbursement provided for in Section 11
and (f) delivery by the Company to the Investors of evidence satisfactory to the
Investors that the collateral to secure the Notes has not been pledged to any
other party.
11. The Company agrees that a loan/commitment fee of $9,500 is payable by
the Company in connection with the issuance of the Notes pursuant to this Third
Supplement and that such fee and $25,000 for the estimated fees and expenses of
the Investors' legal counsel in connection with this Third Supplement, and
$6,188, representing past due legal fees, will be deducted by the Investors from
the proceeds of the Term Loans. The Company also confirms that it will promptly
reimburse the Investors for any additional reasonable fees and expenses of their
legal counsel in connection with this Third Supplement, the transactions
contemplated hereby and the discussions between the Company and the Investors
through the date hereof arising out of the Investment Agreement.
12. The Company hereby acknowledges and agrees (a) that any and all actions
taken by the Investors in respect of the Company, including without limitation
in respect of their investment therein and their agreements with the Company,
have in all cases been appropriate, have not given the Company any basis for
legal or other objection and will not be asserted by the Company or anyone on
its behalf as giving the Company any claim or right of action and (b) to
indemnify and hold harmless the Investors and their affiliates for any damages
or costs that they may incur by reason of any such claims or causes of action
being asserted. The Company also hereby acknowledges and agrees that, by
entering into this Third Supplement, the Investors have not waived any rights or
claims that they may have, including without limitation their rights in respect
of the New Preferred Stock and any failure by the failure by the Company to
redeem the New Preferred Stock.
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13. The address of the Company, to which all notices should be sent, is:
666 11th Street N.W.
Suite 200
Washington, D.C. 20001
14. Except as modified pursuant to this Third Supplement, all terms and
provision of the Investment Agreement shall remain in full force and effect. Any
approvals required are at the sole and absolute discretion of the Investors.
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IN WITNESS WHEREOF, the parties hereto have caused this Third Supplement to
be duly executed as of the date first written above.
COMPLETE WELLNESS
CENTERS, INC.
BY /s/ C. THOMAS MCMILLEN
--------------------------
Name: C. Thomas McMillen
Title: CEO
IMPRIMIS INVESTORS LLC
BY /s/ FREDERICK SIMON
--------------------------
Name: Frederick Simon
Title: Senior Vice
President
WEXFORD SPECTRUM INVESTORS LLC
BY /s/ FREDERICK SIMON
--------------------------
Name: Frederick Simon
Title: Senior Vice
President
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EXHIBIT II
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of October
19, 1998, made by Complete Wellness Centers, Inc., a Delaware corporation (the
"Grantor"), in favor of Wexford Spectrum Investors LLC ("Wexford"). Imprimis
Investors LLC ("Imprimis") and any subsequent holders (together with Wexford and
Imprimis, the "Investors") of Notes (as defined below).
WITNESSETH:
WHEREAS, Grantor, Wexford and Imprimis are parties to the Investment
Agreement, dated as of December 19, 1997, as supplemented through and including
the date of this Pledge Agreement (as supplemented, amended or otherwise
modified from time to time, the "Investment Agreement"; capitalized terms not
otherwise defined herein have the same meanings as specified in the Investment
Agreement), among the Grantor and the Investors, including without limitation
pursuant to the Third Supplement to Investment Agreement, dated as of the date
of this Pledge Agreement (the "Third Supplement");
WHEREAS, pursuant to the Third Supplement, the Investors have agreed
to purchase certain Floating Rate Bridge Notes due February 1, 1999 (the
"Notes") from the Grantor, the proceeds of which shall be used solely (i) in
accordance with the Third Supplement, in a manner consistent with the Forecast
attached thereto, (ii) for the Qualifying Acquisitions, in the case of the
proceeds from the Revolving Loans, and (iii) for the payment of the
loan/commitment fee and reimbursement of the Investors' legal expenses pursuant
to Section 10 of the Third Supplement; and
WHEREAS, it is a condition precedent to the issuance by Grantor and
purchase of the Notes by the Investors from the Grantor that the Grantor shall
have executed and delivered to the Investors a security agreement providing for
the grant to the Investors of a security interest in certain property of the
Grantor;
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NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Investors to purchase the Notes from the
Grantor pursuant to the Third Supplement, the Grantor hereby agrees with the
Investors as follows:
SECTION 1. Definitions. Reference is hereby made to the Investment
Agreement for a statement of the terms thereof. All terms used in this Agreement
which are defined in the Investment Agreement or in Article 9 of the Uniform
Commercial Code (the "Code") currently in effect in the State of New York, and
which are not otherwise defined herein, shall have the same meanings herein as
set forth therein.
SECTION 2. Grant of Security Interest. As collateral security for all
of the Obligations (as defined in Section 3 hereof), the Grantor hereby pledges
and assigns to the Investors, and grants to the Investors, a continuing security
interest in the collateral set forth below (the "Collateral"):
(a) all of the Grantor's right, title and interest in and to all
shares (the "Pledged Shares") of capital stock of the corporations
identified on Schedule I hereto (the "Subsidiaries") and the
certificates, if any, representing the Pledged Shares, and all dividends,
cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of the Pledged Shares;
(b) all additional shares (the "Additional Shares") of capital
stock of the Subsidiaries from time to time acquired by the Grantor in
any manner (including, without limitation, any shares of preferred stock
issued by the Subsidiaries) and the certificates, if any, representing
such additional shares), and all dividends, cash instruments and other
property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such shares;
(c) all rights, title and interest to and under the management and
security agreements listed on Schedule IV hereto;
(d) all other rights appurtenant to the property described in
clauses (a), (b) and (c) above (including, without limitation, voting
rights); and
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(e) all cash and noncash proceeds of any and all of the foregoing
Collateral.
Certificates representing those Pledged Shares set forth on Schedule
IA hereto, accompanied by proper instruments of assignment duly executed in
blank by the Grantor, are herewith delivered to the Investors. Promptly upon the
Grantor's acquisition of any Additional Shares, the Grantor will (i) deliver
proper instruments of assignment duly executed in blank by the Grantor together
with any certificates representing such Additional Shares, whereupon such
Additional Shares shall be Pledged Shares, and (ii) amend Schedule I to include
such Additional Shares. The Investors shall have the right, at any time in their
discretion and without notice to the Grantor, to transfer to or register in
their names or the name of any of their nominees any or all of the Pledged
Shares, subject only to the revocable rights specified in Section 5(f). In
addition, the Investors shall have the right at any time to exchange
certificates or instruments representing or evidencing any of the Pledged Shares
for certificates or instruments of small or larger denominations.
SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) The prompt payment by the Grantor, as and when due and
payable, of all amounts from time to time owing by the Grantor to the
Investors in respect of the Investment Agreement, the Notes and the other
Note Documents, including, without limitation, principal of and interest
on the Notes (including, without limitation, all interest that accrues
after the commencement of any case, proceeding or other action relating
to bankruptcy, insolvency or reorganization of the Grantor whether or not
the payment of such interest is unenforceable or is not allowable due to
the existence of such case, proceeding or other action), all fees,
commissions, expense reimbursements, indemnifications and all other
amounts due or to become due under the Investment Agreement, the Notes
and any other Note Document; and
(b) The due performance and observance by the Grantor of all of
their other obligations from time to time existing in respect of the
Investment Agreement and all other Note Documents.
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SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) There is no pending or threatened action, suit, proceeding or
claim before any court or other Governmental Authority or any arbitrator,
or any order, judgment or award by any court or other Governmental
Authority or arbitrator, that may adversely affect the pledge or the
grants by the Grantor, or the perfection or priority, of the security
interest purported to be created hereby in the Collateral, or the
exercise by the Investors of any of their rights or remedies hereunder.
(b) All taxes, assessments and other governmental charges imposed
upon the Grantor or any property of the Grantor (including, without
limitation, all federal income and social security taxes on employees'
wages) and which have become due and payable on or prior to the date
hereof have been paid, except to the extent contested in good faith by
proper proceedings which stay the imposition of any penalty, fine or lien
resulting from the non-payment thereof and with respect to which adequate
reserves in accordance with GAAP, have been established for the payment
thereof.
(c) The chief place of business and chief executive office of the
Grantor and the place where the Grantor keeps its records concerning the
Collateral are located at the addresses specified therefor in Schedule II
hereto.
(d) The Grantor is and will be at all times the sole and exclusive
holder of record and beneficial owner of the Collateral free and clear of
any Lien, claim, security interest, charge or other encumbrance of any
kind with full authority to sell, transfer and grant a security interest
in, the Collateral. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file
in any recording or filing office. The Grantor has not executed any stock
power or other instrument of assignment with respect to any of the
Pledged Shares.
(e) The Pledged Shares have been duly authorized and validly
issued by the Subsidiaries, and are fully paid and non-assessable, and
the Grantor has the right and all requisite corporate authority to
pledge,
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assign, grant a security interest in, transfer and deliver the Pledged
Shares to the Investors as provided herein.
(f) Upon the filing of UCC-1 financing statements described in
Schedule II hereto, the Investors will have a valid and perfected
security interest therein subject to no prior Lien. The authorized,
issued and outstanding capital shares of the Subsidiaries is set forth on
Schedule I, and there are no existing options, warrants, calls or
commitments of any character whatsoever relating to any of the unissued
capital shares of the Subsidiaries, except as set forth on Schedule I
hereto. The Pledged Shares constitute the percentage of the issued and
outstanding shares of stock of the Subsidiaries indicated on Schedule I.
Neither the Grantor nor any of its Subsidiaries owns any capital stock or
other equity interest in any corporation, partnership, limited liability
company, trust or other entity other than the Subsidiaries listed on
Schedule I hereto. The Grantor has not entered into any management and
security agreements contracts other than those set forth on Schedule IV
hereto.
(g) The exercise by the Investors of any of their rights and
remedies hereunder will not contravene law or any contractual restriction
binding on or otherwise affecting the Grantor or any of its properties
and will not result in or require the creation of any Lien, claim,
security interest, charge or other encumbrance upon or with respect to
any of its properties.
(h) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body,
or any other Person, is required for (i) the pledge by the Grantor of the
Collateral or the perfection or maintenance of the pledge, or the grant
by the Grantor, or the perfection, of the security interest purported to
be created hereby in the Collateral or (ii) the exercise by the Investors
of any of their voting rights or any other rights and remedies hereunder,
except the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule
III hereto, all of which financing statements have been or will be duly
filed and are or upon filing will be in full force and effect, or except
as may be required in connection with the disposition of any portion of
the Collateral by laws affecting the offer and sale of securities
generally.
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(i) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Investors shall otherwise
consent in writing:
(a) The Grantor wilt at its expense, at any time and from time to
time, promptly execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable or that
the Investors may request in order (i) to perfect and protect the pledge
and security interest purported to be created hereby; (ii) to enable the
Investors to exercise and enforce their rights and remedies hereunder in
respect of the Collateral; or (iii) otherwise to effect the purposes of
this Agreement, including, without limitation: (A) marking conspicuously
each of its records pertaining to the Collateral with a legend, in form
and substance satisfactory to the Investors, indicating that such
Collateral is subject to the pledge and security interest created hereby
and (B) executing and filing such financing or continuation statements,
or amendments thereto, as may be necessary or desirable or that the
Investors may request in order to perfect and preserve the pledge and
security interest purported to be created hereby.
(b) Unless the Grantor shall have given the Investors not less
than 30 days' prior notice thereof, the Grantor will not change (i) its
name, identity or corporate structure in any manner or (ii) the location
of its chief executive office.
(c) The Grantor will defend the title to the Collateral and the
Lien of the Investors thereon against the claim of any Person claiming
against or through the Grantor and will maintain and preserve such Lien
as long as this Agreement shall remain in effect.
(d) The Grantor will not create or suffer to exist any Lien,
claim, security interest, charge or other encumbrance upon or with
respect to any Collateral except for the security interests permitted
pursuant to the terms of the Investment Agreement.
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(e) The Grantor shall permit the Investors, or any agents or
representatives of the Investors or such professionals or other Persons
as the Investors may designate (i) to examine and inspect the books and
records of the Grantor and take copies and extracts therefrom, and (ii)
to discuss the affairs, finances and accounts of the Grantor, with, and
be advised as to the same by, their officers, directors and independent
accountants (and, by this subsection (d), the Grantor authorize each such
officer, director and independent accountant to discuss the affairs,
finances and accounts of the Grantor with such Person), provided that, in
the absence of a continuing Event of Default, all such actions described
in clauses (i) and (ii) above shall be conducted at reasonable times and
during normal business hours. In addition, the Grantor shall forward to
the Investors copies of any notices or communications received or made by
the Grantor with respect to the Collateral, all in such manner as the
Investors may reasonably require.
(f) Provisions Relating to the Collateral. (i) So long as no Event
of Default or event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default shall have occurred and
be continuing:
(A) Upon demand by the Investors, the Grantor will deliver
stock certificates representing any of the Pledged Shares not delivered
herewith, accompanied by proper instruments of assignment duly executed
in blank by the Grantor.
(B) The Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Investment Agreement; provided, that the Grantor shall
not exercise or refrain from exercising such right if, in the
Investors' judgment, such action would have a material adverse effect
on the value of the Collateral or any part thereof, and provided,
further, that the Grantor shall give the Investors at least five days'
prior written notice of the manner in which it intends to exercise, or
the reasons for refraining from exercising, any such right. The Grantor
shall not exercise or refrain from exercising such right in a manner
which would authorize or effect (except as and to the extent expressly
permitted by the Investment Agreement)
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(i) the dissolution or liquidation, in whole or in part, of any of
the Subsidiaries, (ii) the consolidation or merger of any of the
Subsidiaries with any corporation, (iii) the sale, disposition or
encumbrance of all or substantially all of the assets of any of the
Subsidiaries, (iv) any change in the authorized number of shares, the
stated capital or the authorized share capital of any of the
Subsidiaries, or the issuance of any additional capital shares of any
of the Subsidiaries, or (v) the alteration of the voting rights with
respect to the shares of any of the Subsidiaries.
(C) The Grantor shall be entitled, from time to time, to
collect and receive for its own use dividends paid, payable or
otherwise distributed on the Pledged Shares; provided, that until
actually paid, all rights to such dividends shall remain subject to the
Lien of this Agreement, provided, further, that
(i) all dividends paid or payable other than in cash in
respect of, and instruments and other property received, receivable
or otherwise distributed in respect of, or in exchange for, any
Pledged Shares,
(ii) all dividends and other distributions paid or payable
in cash in respect of any Pledged Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and
(iii) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for, any
Pledged Shares,
shall be, and shall be forthwith delivered to the Investors to hold
as, Collateral and shall, if received by the Grantor, be received in
trust for the benefit of the Investors, be segregated from the other
property or funds of the Grantor, and be forthwith delivered to the
Investors as Collateral in the same form as so received (with any
necessary indorsement or assignment).
8
<PAGE> 9
(ii) Upon the occurrence and during the continuance of an
Event of Default or an event which, with the giving of notice or the
lapse of time, or both, would become an Event of Default:
(A) All rights of the Grantor (x) to exercise or refrain
from exercising the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 5(f)(i)(A)
shall, upon notice to the Grantor by the Investors, cease and (y) to
receive the dividends payments which it would otherwise be authorized
to receive and retain pursuant to Section 5(f)(i)(B) shall
automatically cease, and all such rights shall thereupon become
vested in the Investors who shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual
rights and to receive and hold as Collateral such dividends.
(B) All dividends which are received by the Grantor
contrary to the provisions of paragraph (A) of this Section 5(f)(ii)
shall be received in trust for the benefit of the Investors, shall be
segregated from other funds of the Grantor and shall be forthwith
paid over to the Investors as Collateral in the same form as so
received (with any necessary indorsement).
(g) The Grantor agrees that it will (i) cause the Subsidiaries not
to issue any stock or other securities in addition to or in substitution
for the Pledged Shares issued by the Subsidiaries, except to the Grantor
and (ii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other
securities of Subsidiaries.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) The Grantor hereby authorizes the Investors to file, without
the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to
the Collateral.
(b) The Grantor hereby irrevocably appoints the Investors or their
designee on behalf of the Investors the Grantor's attor-
9
<PAGE> 10
ney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in
the Investors's discretion, to take any action and to execute any
instrument which the Investors may deem necessary or advisable to
accomplish the purposes of this Agreement including, without limitation,
(i) upon the occurrence of an Event of Default, to ask, demand, collect,
sue for, recover, compound, receive and give acquittance and receipts for
moneys due and to become due under or in respect of any Collateral, and
(ii) to receive, endorse, assign and collect any drafts or other
instruments, documents and chattel paper in connection with clause (i)
above, and (iii) to file any claims or take any action or institute any
proceedings which the Investors may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the rights of the
Investors with respect to any Collateral. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission (other than
acts or omissions constituting gross negligence or willful misconduct as
determined by a final judgment or a court of competent jurisdiction), nor
for any error of judgment or mistake of fact or law. This power is
coupled with an interest and is irrevocable until all of the Obligations
are paid in full and the Investment Agreement is terminated.
(c) If the Grantor fails to perform any agreement contained
herein, the Investors may itself perform, or cause performance of, such
agreement or obligation, in the name of the Grantor or the Investors, and
the expenses of the Investors incurred in connection therewith shall be
payable by the Grantor pursuant to Section 7 and 9.
(d) The powers conferred on the Investors hereunder are solely to
protect their interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in their possession and the accounting for moneys actually
received by it hereunder, the Investors shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
10
<PAGE> 11
(a) The Investors may exercise in respect of the Collateral, or
any part thereof, in addition to other rights and remedies provided for
herein, in the Investment Agreement, the Notes or in the Note Documents
or otherwise available to it, all of the rights and remedies of a
secured party in default under the Code (whether or not the Code applies
to the affected Collateral), and are hereby authorized and empowered, at
their election, (i) to (if they have not previously done so pursuant to
Section 2) transfer and register in their or their nominee's name the
whole or any part of the Collateral, (ii) to exercise all voting rights
with respect thereto, (iii) to demand, sue for, collect, receive and
give acquittance for any and all cash dividends or other distributions
or monies due or to become due upon or by virtue thereof, and to settle
prosecute or defend any action or proceeding with respect thereto, (iv)
to otherwise to act with respect to the Collateral or the proceeds
thereof as though the Investors were the outright owners thereof,
Grantor hereby irrevocably constituting the Investors as their proxies
and attorneys-in-fact, with full power of substitution to do so and (v)
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
the Investors's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Investors may deem commercially reasonable. The Grantor agrees that, to
the extent notice of sale shall be required by law, at least 10 days'
notice to the Grantor 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. The Investors shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given.
The Investors 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. The Grantor hereby waives any claims against the Investors
arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate
amount of the Obligations, even if the Investors accept the first offer
received and does not offer the Collateral to more than one offeree and
waives all rights which the Grantor may have to require that all or any
part of the Collateral be marshalled upon any sale (public or private)
thereof.
11
<PAGE> 12
(b) Any cash held by the Investors as Collateral and all proceeds
received by the Investors in respect of any sale or collection from, or
other realization upon, all or any part of the Collateral, after payment
from such proceeds of the Investors's out-of-pocket costs and expenses in
connection with such sale, including, without limitation reasonable
attorneys' fees and expenses, may, in the discretion of the Investors, be
held by the Investors as collateral for, and/or then or at any time
thereafter applied in whole or in part by the Investors against, all or
any part of the Obligations in such manner as the Investors may elect in
their sole discretion.
(c) Other than the exercise of reasonable care in the custody and
preservation of the Collateral, the Investors shall have no duty with
respect thereto. The Investors shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in
their possession if the Collateral is accorded treatment substantially
equal to that which it accords their own property, and 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 agent or bailee selected by the Investors in good faith.
(d) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Investors
are legally entitled, the Grantor shall be liable for the deficiency,
together with interest thereon at the Default Rate or such other rate as
shall be fixed by applicable law, together with the costs of collection
and the reasonable fees, costs, expenses and other client charges of any
attorneys employed by the Investors to collect such deficiency.
(e) The Investors may employ and maintain in the premises of the
Grantor one or more custodians selected by the Investors who shall have
full authority to do all acts necessary or desirable to protect the
Investors's interests hereunder. The Grantor hereby agree to cooperate
with any such custodian and to do whatever the Investors may reasonably
request to preserve the Collateral. All costs and expenses incurred by
the Investors, by reason of the employment of the custodian, shall be
payable the Grantor pursuant to Section 9.
12
<PAGE> 13
SECTION 8. Registration Rights. If the Investors shall determine to
exercise their right to sell all or any of the Pledged Shares pursuant to
Section 7, the Grantor agrees that, upon request of the Investors, the Grantor
will, at its own expense:
(a) Execute and deliver, and cause the Subsidiaries and the
directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts
and things, as may be necessary or, in the opinion of the Agent,
advisable to register the Pledged Shares under the provisions of the
Securities Act of 1933, as from time to time amended (the "Securities
Act"), and to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion
of the Investors, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) Use its best efforts to qualify the Pledged Shares under the
state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Shares, as requested
by the Investors;
(c) Cause the Subsidiaries to make available to their security
holders, as soon as practicable, an earning statement which will satisfy
the provisions of Section 11(a) of the Securities Act; and
(d) Do or cause to be done all such other acts and things as may
be necessary to make such sale of the Pledged Shares or any part thereof
valid and binding and in compliance with applicable law. The Grantor
further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Investors by reason of the failure
by the Grantor to perform any of the covenants contained in this Section
and, consequently, agrees that, if the Grantor shall fail to perform any
of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the Pledged Shares on the date
the Investors shall demand compliance with this Section.
13
<PAGE> 14
SECTION 9. Indemnity and Expenses.
(a) The Grantor agrees to indemnify and hold the
Investors, their Affiliates and each officer, director and agent of
the Investors or any of their Affiliates (the "Indemnitees") harmless
from and against any and all claims, damages, losses, liabilities,
obligations, penalties, costs or expenses (including, without
limitation, reasonable legal fees, costs, expenses and other client
charges) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting
solely and directly from an Indemnitee's gross negligence or willful
misconduct as determined by a final determination of a court of
competent jurisdiction.
(b) Without limiting the generality of the foregoing, the
Grantor will upon demand pay to each Indemnitee (i) the amount of any
and all costs and expenses, including the reasonable fees, costs,
expenses and other client charges of counsel for such Indemnitee and
of any experts and agents (including, without limitation, any Person
which may act as agent of such Indemnitee), which such Indemnitee may
incur in connection with (A) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, or (B) the custody,
preservation, use or operation of the Collateral and (ii) the amount
of any and all costs and expenses, including the reasonable fees,
costs, expenses and other client charges of counsel for such
Indemnitee and of any experts and agents (including, without
limitation, any Person which may act as agent of such Indemnitee),
which such Indemnitee may incur in connection with (A) the sale of,
collection from, or other realization upon, any Collateral, (B) the
exercise or enforcement of any of the rights of such Indemnitee
hereunder, or (C) the failure by the Grantor to perform or observe
any of the provisions hereof.
SECTION 10. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telecopied or
delivered, if to the Grantor, to them at the addresses specified in the
Investment Agreement; and if to the Investors, to them at their address
specified in the Investment Agreement; or as to any such Person at such other
address as shall be designated by such Person in a written notice to such other
person complying as to delivery with the terms of this Section 10. All such
notices and other communica-
14
<PAGE> 15
tions shall be effective (i) if mailed, when received or three Business Days
after deposited in the mail, whichever first occurs (ii) if telecopied, when
transmitted and a confirmation is received, or (iii) if delivered, upon
delivery.
SECTION 11. Miscellaneous.
(a) No amendment of any provision of this Agreement shall
be effective unless it is in writing and signed by the Grantor and
the Investors, and no waiver of any provision of this Agreement, and
no consent to any departure by the Grantor therefrom, shall be
effective unless it is in writing and signed by the Investors, and
then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure on the part of the Investors to exercise,
and no delay in exercising, any right hereunder or under any other
Note Document shall operate as a waiver thereof; nor shall any single
or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The rights and
remedies of the Investors provided herein and in the other Note
Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the
Investors under any Note Document against any party thereto are not
conditional or contingent on any attempt by the Investors to exercise
any of their rights under any other Note Document against such party
or against any other Person.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and
effect until the payment in full or release of the Obligations and
the termination of the Investment Agreement; and (ii) be binding on
the Grantor, their successors and assigns, except that the Grantor
may not assign or transfer any of their rights hereunder without the
prior written consent of the Investors, and shall inure, together
with all rights and remedies of the Investors hereun-
15
<PAGE> 16
der, to the benefit of the Investors and their permitted successors,
transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, without notice to the
Grantor, the Investors may assign or otherwise transfer their rights
under this Agreement and any other Note Document, to any other Person
pursuant to the terms of the Investment Agreement and such other
Person shall thereupon become vested with all of the benefits in
respect thereof granted to the Investors herein or otherwise. Upon
any such assignment or transfer, all references in this Agreement to
the Investors shall mean the assignee of the Investors. None of the
rights or obligations of the Grantor hereunder may be assigned or
otherwise transferred without the prior written consent of the
Investors, and any such assignment or transfer shall be null and
void.
(e) Upon the satisfaction in full of the Obligations and
the termination of the Investment Agreement, (i) this Agreement and
the security interests created hereby shall terminate and all rights
to the Collateral shall revert to the Grantor and (ii) the Investors
will, upon the Grantor's request and at the requesting Grantor's cost
and expense, (A) return to the Grantor(s) such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant
to the terms hereof and (B) execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse
whatsoever.
(f) This Agreement shall be governed by and construed in
accordance with the law of the State of New York, except to the
extent that the validity and perfection or the perfection and the
effect of perfection or non-perfection of the security interest
created hereby, or remedies hereunder, in respect of any particular
Collateral are governed by the law of a jurisdiction other than the
State of New York.
(g) This Agreement supersedes all prior understandings and
agreements, whether written or oral, among the parties hereto
relating to the transactions provided for herein.
(h) All representations and warranties of the Grantor
contained herein or made in connection herewith shall survive the
making of and shall not be waived by the execution and delivery of
this Agreement, the Investment Agreement, the Notes or any other Note
Document, any
16
<PAGE> 17
investigation by the Investors or the purchasing of the Notes. All
covenants and agreements of the Grantor contained herein shall
continue in full force and effect from and after the date hereof
until the indefeasible payment in full of the Obligations.
(i) Section headings in this Agreement are included herein
for the convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
(j) BY ITS EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
GRANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH, THIS AGREEMENT, THE INVESTMENT AGREEMENT, THE NOTES OR ANY
OTHER NOTE DOCUMENT, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE INVESTORS OR The
GRANTOR IN CONNECTION HEREWITH OR THEREWITH. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE INVESTORS TO ENTER INTO THIS AGREEMENT.
17
<PAGE> 18
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
COMPLETE WELLNESS
CENTERS, INC.
By:
--------------------------
Name:
Title:
Accepted and Agreed:
WEXFORD SPECTRUM INVESTORS LLC
By:
--------------------------
Name:
Title:
IMPRIMIS INVESTORS LLC
By:
--------------------------
Name:
Title:
18
<PAGE> 19
Schedule I
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of
Shares of Certifi-
Common cate
Name of Issuer Stock Number
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Complete Wellness Medical Center of Altamonte Springs, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Apopka, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Bradenton, Inc. 200 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Deland, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Ft. Walton Beach, Inc. 200 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Longwood, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Miranar, Inc. 200 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of New Smyrna Beach, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of North Port, Inc. 200 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Ormond Beach, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Sanford, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Titusville, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of West Colonial Drive, Orlando, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Winter Springs, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of South Daytona Beach, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of 66th Street St. Petersburg, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of East Normandy Boulevard, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Toney Penna Drive, Inc. 200 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Casselberry, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Winter Park, Inc. 60 1
- -------------------------------------------------------------------------------------------------------------
Active Health and Rehabilitation Center, Inc. 100 2
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Smoking Cessation, Inc. 7,500 1
- -------------------------------------------------------------------------------------------------------------
Optimum Health Services, Inc. 6,500 2
- -------------------------------------------------------------------------------------------------------------
Complete Wellness Weight Management, Inc. 100 1
- -------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
Schedule IA
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Apopka, Inc. 60 1
- ------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Longwood, Inc. 60 1
- ------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Sanford, Inc. 60 1
- ------------------------------------------------------------------------------------------------------------
Complete Wellness Medical Center of Winter Springs, Inc. 60 1
- ------------------------------------------------------------------------------------------------------------
Complete Wellness Weight Management, Inc. 100 1
- ------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
Schedule II
ADDRESS OF GRANTOR
Chief Place of Business, 666 11th Street,
Chief Executive Office N.W. Suite 200
and Location of Records Washington, D.C. 20001
21
<PAGE> 22
Schedule III
UCC-l FINANCING STATEMENTS
22
<PAGE> 23
Schedule IV
Management and Security Agreements between Complete Wellness Centers, Inc.
("CWC") and each of the following corporations that are owned by a medical
professional but controlled by CWC, dated as of the date set forth below:
12. Complete Wellness Medical Center of Decatur, P.A., June 30, 1997
13. Complete Wellness Medical Center of Searcy, P.A., May 1, 1998
14. Complete Wellness Medical Center of Port Hueneme, P.C., June 30, 1997
15. Complete Wellness Medical Center of Lenoir, P.A., May 1, 1997
16. Complete Wellness Medical Center of Fox River Grove, P.C.,
September 8, 1997
17. Complete Wellness Medical Center of Memphis, P.C., January 12, 1997
18. Complete Wellness Medical Center of Downey, P.C., October 3, 1997
19. Complete Wellness Medical Center of Savannah, L.L.C., August 10, 1998
20. Complete Wellness Medical Center of Lansing, P.C., September 8, 1997
21. Complete Wellness Medical Center of Sterling, S.C., May 1, 1998
22. Complete Wellness Medical Center of Greenwood, P.C., September 30, 1997
23. Complete Wellness Medical Center of Mineral Wells, P.C., August 2, 1997
24. Complete Wellness Medical Center of East Main Street,
Carbondale, P.C., September 18, 1996
25. Complete Wellness Medical Center of Marion, P.A., October 15, 1997
26. Complete Wellness Medical Center of Tustin, P.C., December 15, 1997
27. Complete Wellness Medical Center of Golden Isles, L.L.C., December 3, 1997
28. Complete Wellness Medical Center of Hickory, P.A., May 1, 1997
29. Complete Wellness Medical Center of Corvalis, P.C., June 30, 1997
30. Complete Wellness Medical Center of Scottsdale, P.C., June 2, 1997
31. Complete Wellness Medical Center of Denton, P.C., June 30, 1997
23
<PAGE> 24
32. Complete Wellness Medical Center of Carmel Road, P.A., August 15, 1997
33. Complete Wellness Medical Center of Charlotte, P.C., January 1, 1997
34. Complete Wellness Medical Center of Jackson, P.C., July 13, 1997
35. Complete Wellness Medical Center of Concord, P.A., January 3, 1998
36. Complete Wellness Medical Center of Belleville, P.C., September 8, 1997
37. Complete Wellness Medical Center of La Mirada, P.C., August 3, 1998
38. Complete Wellness Medical Center of Forest Park, Inc., September 12, 1997
39. Complete Wellness Medical Center of Fayetteville, P.A., March 1, 1998
40. Complete Wellness Medical Center of Gastonia, P.A., September 1, 1997
41. Complete Wellness Medical Center of Anderson, P.C., July 24, 1997
42. Complete Wellness Medical Center of West Burlington, P.C., July 30, 1997
43. Complete Wellness Medical Center of Forest City, P.A., April 14, 1997
44. Complete Wellness Medical Center of Modesto, P.C., December 15, 1997
45. Complete Wellness Medical Center of Cookeville, P.C., March 15, 1997
46. Complete Wellness Medical Center of Vincennes, P.C., July 15, 1997
47. Complete Wellness Medical Center of Sioux City, P.C., January 10, 1998
48. Complete Wellness Medical Center of Chesterton, P.C., September 12, 1997
49. Complete Wellness Medical Center of Cincinnati, P.A., June 12, 1997
50. Complete Wellness Medical Center of Orange, P.C., August 3, 1998
24
<PAGE> 25
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
COMPLETE WELLNESS
CENTERS, INC.
By: /s/ C. THOMAS MCMILLEN
--------------------
Name: C. Thomas McMillen
Title: CEO
Accepted and Agreed:
WEXFORD SPECTRUM INVESTORS LLC
By: s/ FREDERICK SIMON
-----------------------
Name: Frederick Simon
Title: Sr. Vice President
IMPRIMIS INVESTORS LLC
By: s/ FREDERICK SIMON
-----------------------
Name: Frederick Simon
Title: Sr. Vice President
18
<PAGE> 1
EXHIBIT III
PROMISSORY NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS IT
HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
$380,000 October 19, 1998
FOR VALUE RECEIVED, COMPLETE WELLNESS CENTERS, INC., a Delaware
corporation (the "Company"), HEREBY PROMISES TO PAY to the order of IMPRIMIS
INVESTORS LLC (the "Purchaser") or its registered assigns (i) the principal sum
of THREE HUNDRED EIGHTY THOUSAND DOLLARS (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Term Loan and the Revolving Loans
made by the Purchaser to the Company under the Investment Agreement referred to
below) and (ii) interest on any and all principal amounts remaining unpaid
hereunder from time to time outstanding from the date hereof until such
principal amount become due, pursuant to the Investment Agreement, dated as of
December 19, 1997, as supplemented through and including the date of this Note
(as supplemented, amended or otherwise modified from time to time, the
"Investment Agreement"; capitalized terms not otherwise defined herein have the
same meanings as specified in the Investment Agreement), among the Company, the
Purchaser and Wexford Spectrum Investors LLC, including without limitation
pursuant to the Third Supplement to Investment Agreement, dated as of the date
of this Note (the "Third Supplement").
Interest on the unpaid balance of the principal amount of this Note
shall be computed on the basis of a 360-day year of twelve 30-day months, shall
accrue from the date of this Note and shall compound quarterly in arrears on the
first day of each quarter commencing on January 1, 1999, at a rate per annum
equal to the sum of the rate from time to time announced by Chase Bank as its
reference rate plus 3% (the "Base Rate") until the unpaid principal balance of
this Note shall be paid in full (whether by scheduled maturity or at a date
fixed for prepayment, redemption or repurchase or by declaration, demand or
otherwise). All such accrued interest shall be capitalized and added to the
principal amount of this Note; provided however, that any overdue payment
(including without limitation, any overdue prepayment redemption or repurchase)
of principal and, to the extent permitted by applicable law, any overdue payment
of interest and premium, if any, shall accrue interest at a rate per annum equal
at all times to the sum of the Base Rate plus 4%, payable at the option of the
registered holder of this Note, upon demand, until the unpaid principal balance
of this Note shall be paid in full.
The unpaid principal balance of this Note, together with any accrued
but unpaid interest hereunder, shall be payable in full on or before February 1,
1999. Payments of principal of, and interest and premium, if any, on this Note
are payable in lawful money of the United States of America at the place
designated therefor as set forth in Section XI of the Investment Agreement, or
at such other place as the Purchaser shall have designated by written notice to
the Company as
<PAGE> 2
provided in the Investment Agreement referred to above. Whenever any payment
under this Note shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest.
Nothing contained in this Promissory Note or the Investment Agreement
shall require the Company to pay interest at a rate exceeding the maximum rate
permitted by applicable law. If interest payable to the Purchaser on any date
would exceed the maximum permissible amount, it shall be automatically reduced
to such amount, and interest for any subsequent period, to the extent less than
that permitted by applicable law, shall, to that extent, be increased by the
amount of such reduction.
This Note is one of a series of Senior Secured Floating Rate Notes
due February 1, 1999 (collectively, the "Notes") originally issued or to be
issued in an aggregate principal amount of up to $475,000 pursuant to the
Investment Agreement. The holder of this Note is entitled to the benefits of
the Investment Agreement and may enforce the agreement of the Company therein
in accordance with the terms thereof, and may enforce the rights and remedies
provided for thereby or otherwise available in respect thereof in accordance
with the respective terms thereof.
This Note is a registered Note and, as provided in and subject to the
terms of the Investment Agreement, is transferable only upon surrender of this
Note for registration of transfer or exchange (and, in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer, duly executed by the registered holder of this Note or
his attorney duly authorized in writing), at which time a new Note for a like
principal amount will be issued to, and registered in the name of, the permitted
transferee. Reference in this Note to a "holder" shall mean the person or entity
in whose name this Note is at the time registered in the register kept by the
Companies as provided in Section X of the Investment Agreement and, prior to the
due presentment for registration of transfer, the Company may treat such person
or entity as the owner of this Note for the purpose of receiving payment and for
all other purposes, and the Companies will not be affected by any notice to the
contrary.
The holder hereof, by acceptance of this Note, agrees that this Note
shall not be transferred, sold or otherwise disposed of except to an Accredited
Investor (as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933, as amended). This Note may be transferred in
whole or in part only by registration of such transfer on the register
maintained for such purpose by the Companies as provided in Section X of the
Investment Agreement.
The Company is required to make redemptions of principal on the dates
and in the amounts specified in the Second Supplement. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Second Supplement.
This Note is secured by, and is entitled to the benefits of the
Pledge Agreement and the Security Agreements, each dated as of October 19, 1998,
and the UCC-I financing statements made by each of the Persons listed on the
signature pages thereof in favor of the holders of the Notes and shall be
further secured from time to time by certain property and assets of the
2
<PAGE> 3
Obligors, pursuant to the terms of the Investment Agreement and such Pledge
Agreement and Security Agreements.
If an Event of Default shall occur and be continuing, the unpaid
balance of principal of this Note and any accrued and unpaid interest and other
amounts payable hereon may be declared or otherwise become due and payable in
the manner, at the price and with the effect provided in Section IX of the
Investment Agreement.
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware applicable to contracts made and to be
performed therein without consideration as to choice of law.
COMPLETE WELLNESS CENTERS, INC.
By: /s/ C. THOMAS MCMILLEN
----------------------------------------
Name: C. Thomas McMillen
Title: CEO
IMPRIMIS INVESTORS LLC
By:
----------------------------------------
Name:
Title:
3
<PAGE> 1
EXHIBIT IV
PROMISSORY NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD UNLESS IT
HAS BEEN REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
$95,000 October 19, 1998
FOR VALUE RECEIVED, COMPLETE WELLNESS CENTERS, INC., a Delaware
corporation (the "Company"), HEREBY PROMISES TO PAY to the order of WEXFORD
SPECTRUM INVESTORS LLC (the "Purchaser") or its registered assigns (i) the
principal sum of NINETY FIVE THOUSAND DOLLARS (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Term Loan and the Revolving
Loans made by the Purchaser to the Company under the Investment Agreement
referred to below) and (ii) interest on any and all principal amounts remaining
unpaid hereunder from time to time outstanding from the date hereof until such
principal amount become due, pursuant to the Investment Agreement, dated as of
December 19, 1997, as supplemented through and including the date of this Note
(as supplemented, amended or otherwise modified from time to time, the
"Investment Agreement"; capitalized terms not otherwise defined herein have the
same meanings as specified in the Investment Agreement), among the Company, the
Purchaser and Wexford Spectrum Investors LLC, including without limitation
pursuant to the Third Supplement to Investment Agreement, dated as of the date
of this Note (the "Third Supplement").
Interest on the unpaid balance of the principal amount of this Note
shall be computed on the basis of a 360-day year of twelve 30-day months, shall
accrue from the date of this Note and shall compound quarterly in arrears on the
first day of each quarter commencing on January 1, 1999, at a rate per annum
equal to the sum of the rate from time to time announced by Chase Bank as its
reference rate plus 3% (the "Base Rate") until the unpaid principal balance of
this Note shall be paid in full (whether by scheduled maturity or at a date
fixed for prepayment, redemption or repurchase or by declaration, demand or
otherwise). All such accrued interest shall be capitalized and added to the
principal amount of this Note; provided however, that any overdue payment
(including without limitation, any overdue prepayment redemption or repurchase)
of principal and, to the extent permitted by applicable law, any overdue payment
of interest and premium, if any, shall accrue interest at a rate per annum equal
at all times to the sum of the Base Rate plus 4%, payable at the option of the
registered holder of this Note, upon demand, until the unpaid principal balance
of this Note shall be paid in full.
The unpaid principal balance of this Note, together with any accrued
but unpaid interest hereunder, shall be payable in full on or before February 1,
1999. Payments of principal of, and interest and premium, if any, on this Note
are payable in lawful money of the United States of America at the place
designated therefor as set forth in Section XI of the Investment Agreement, or
at such other place as the Purchaser shall have designated by written notice to
the Company as
<PAGE> 2
provided in the Investment Agreement referred to above. Whenever any payment
under this Note shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest.
Nothing contained in this Promissory Note or the Investment Agreement
shall require the Company to pay interest at a rate exceeding the maximum rate
permitted by applicable law. If interest payable to the Purchaser on any date
would exceed the maximum permissible amount, it shall be automatically reduced
to such amount, and interest for any subsequent period, to the extent less than
that permitted by applicable law, shall, to that extent, be increased by the
amount of such reduction.
This Note is one of a series of Senior Secured Floating Rate Notes
due February 1, 1999 (collectively, the "Notes") originally issued or to be
issued in an aggregate principal amount of up to $475,000 pursuant to the
Investment Agreement. The holder of this Note is entitled to the benefits of
the Investment Agreement and may enforce the agreement of the Company therein
in accordance with the terms thereof, and may enforce the rights and remedies
provided for thereby or otherwise available in respect thereof in accordance
with the respective terms thereof.
This Note is a registered Note and, as provided in and subject to the
terms of the Investment Agreement, is transferable only upon surrender of this
Note for registration of transfer or exchange (and, in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer, duly executed by the registered holder of this Note or
his attorney duly authorized in writing), at which time a new Note for a like
principal amount will be issued to, and registered in the name of, the permitted
transferee. Reference in this Note to a "holder" shall mean the person or entity
in whose name this Note is at the time registered in the register kept by the
Companies as provided in Section X of the Investment Agreement and, prior to the
due presentment for registration of transfer, the Company may treat such person
or entity as the owner of this Note for the purpose of receiving payment and for
all other purposes, and the Companies will not be affected by any notice to the
contrary.
The holder hereof, by acceptance of this Note, agrees that this Note
shall not be transferred, sold or otherwise disposed of except to an Accredited
Investor (as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act of 1933, as amended). This Note may be transferred in
whole or in part only by registration of such transfer on the register
maintained for such purpose by the Companies as provided in Section X of the
Investment Agreement.
The Company is required to make redemptions of principal on the dates
and in the amounts specified in the Second Supplement. This Note is also subject
to optional prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Second Supplement.
This Note is secured by, and is entitled to the benefits of the
Pledge Agreement and the Security Agreements, each dated as of October 19, 1998,
and the UCC-I financing statements made by each of the Persons listed on the
signature pages thereof in favor of the holders of the Notes and shall be
further secured from time to time by certain property and assets of the
2
<PAGE> 3
Obligors, pursuant to the terms of the Investment Agreement and such Pledge
Agreement and Security Agreements.
If an Event of Default shall occur and be continuing, the unpaid
balance of principal of this Note and any accrued and unpaid interest and other
amounts payable hereon may be declared or otherwise become due and payable in
the manner, at the price and with the effect provided in Section IX of the
Investment Agreement.
This Note shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware applicable to contracts made and to be
performed therein without consideration as to choice of law.
COMPLETE WELLNESS CENTERS, INC.
By: /s/ C. THOMAS MCMILLEN
----------------------------------------
Name: C. Thomas McMillen
Title: CEO
IMPRIMIS INVESTORS LLC
By:
----------------------------------------
Name:
Title:
3
