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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 (Date of earliest event reported): May 4, 1998
Preferred Employers Holdings, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-12677 65-0698779
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(Commission File Number) (I.R.S. Employer Identification No.)
10800 Biscayne Blvd., Miami, Florida 33161
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 893-4040
Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
In May 1998, Preferred Healthcare Staffing, Inc. ("Preferred
Staffing"), a wholly-owned subsidiary of Preferred Employers Holdings, Inc.
(the "Company"), entered into a $3 million unsecured revolving line of credit
with a bank (the "Credit Facility"). Outstanding borrowings under the Credit
Facility bear interest at the bank's base rate of interest. Interest under
the Credit Facility is due and payable monthly commencing June 2, 1998 and
all unpaid principal and interest is due on May 2, 1999. Outstanding
borrowings under the Credit Facility are secured by a guarantee of the
Company. As of June 1, 1998 Preferred Staffing had outstanding borrowings of
approximately $1,780,000 under the Credit Facility, which borrowings bear
interest at the rate of 8 1/2% per annum.
In May 1998, the Company consummated a private placement of 7%
convertible subordinated notes due May 2003 (the "Notes") in the aggregate
principal amount of $10,580,000. The principal amount of the Notes is
convertible into shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), at a conversion price of $9.00 per share (the
"Conversion Price") at any time prior to the earlier of May 12, 2003 (the
"Maturity Date") or ten business days after the receipt of a Termination
Notice (as defined below). In the event (i) the closing bid price of the
Common Stock equals or exceeds $13.50 per share for twenty consecutive
trading days during any period commencing upon satisfaction of one of the
conditions contained in (ii) hereof and (ii) either a registration statement
covering the shares of Common Stock issuable upon conversion of the Notes has
been declared effective by the Securities and Exchange Commission and remains
effective or at least two years has elapsed since the issuance date of the
Notes and the shares of Common Stock issuable upon conversion of the Notes
are saleable, without restriction, under Rule 144(k) promulgated under the
Securities Act of 1933, as amended, then the holder's right to convert the
outstanding principal amount of the Notes shall be terminated by the Company
by delivering to the holder a notice of termination (the "Termination
Notice"), in which event (a) the holder will have the right at any time
during the ten business days after receipt of the Termination Notice, in its
sole discretion, to convert the outstanding principal amount of the Notes
into shares of Common Stock at the Conversion Price, and (b) thereafter, the
holder's option to convert shall terminate and the Notes may be prepaid by
the Company, at any time prior to the Maturity Date, in whole or in part for
the face amount thereof, together with all accrued and unpaid interest
through the date of prepayment.
In connection with the private placement, the placement agent
received from the Company an aggregate of $900,000 in commissions and
structuring fees and the Company issued the placement agent warrants to
purchase an aggregate of 198,800 shares of Common Stock, at the exercise
price of $9 per share. The warrants are exercisable until May 12, 2003. The
warrants include customary registration rights and dilution provisions for
the benefit of the holder. The Company agreed to file a registration
statement with the Securities and Exchange Commission no later than August 2,
1998 in order to register the sale of the shares of Common Stock issuable
upon conversion of the Notes and to use its best efforts to have such
registration statement declared effective by October 16, 1998.
The Company hereby incorporates by reference herein the matters
announced in the Company's press release dated June 1, 1998 (such press
release is filed as Exhibit 99.1 hereto).
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Item 7. Financial Statements and Exhibits.
(c) Exhibits. The following documents are being filed herewith
by the Company as exhibits to this Current Report on Form 8-K:
4.1 Form of 7% Convertible Subordinated Note.
4.2 Form of Agent's Warrant.
10.1 Loan Agreement, dated May 4, 1998, between Preferred
Healthcare Staffing, Inc. and City National Bank of
Florida.
10.2 Promissory Note and Security Agreement, dated April
27, 1998, by Preferred Healthcare Staffing, Inc. to
City National Bank of Florida.
10.3 Continuous Guaranty, dated May 5, 1998, by the
Company to City National Bank of Florida.
99.1 Press release of the Company dated June 1, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PREFERRED EMPLOYERS HOLDINGS, INC.
Date: June 2, 1998 By:/s/ Mel Harris
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Mel Harris
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibits Page No.
- ----------- -------- --------
<S> <C> <C>
4.1 Form of 7% Convertible Subordinated Note.
4.2 Form of Agent's Warrant.
10.1 Loan Agreement, dated May 4, 1998, between
Preferred Healthcare Staffing, Inc. and City
National Bank of Florida.
10.2 Promissory Note and Security Agreement, dated
April 27, 1998, by Preferred Healthcare Staffing,
Inc. to City National Bank of Florida.
10.3 Continuous Guaranty, dated May 5, 1998, by the
Company to City National Bank of Florida.
99.1 Press release of the Company dated June 1, 1998.
</TABLE>
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EXHIBIT 4.1
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
THE SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER
NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
THIS LEGEND SHALL BE STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN
VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND PAYEE HEREUNDER ARE
SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN SECTION 2 HEREOF. IN THE
EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF SUCH SECTION
2, THE TERMS OF SECTION 2 SHALL GOVERN.
PREFERRED EMPLOYERS HOLDINGS, INC.
No. _________ $______________
Convertible Subordinated Note
Preferred Employers Holdings, Inc., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to the order of
___________________ (the "Payee") on May 12, 2003 (the "Maturity Date") at
the offices of the Company, the principal sum of
______________________________________ Dollars ($______________) or such
lesser principal amount as shall at such time be outstanding hereunder (the
"Principal Amount"). Each payment by the Company pursuant to this Note shall
be made without set-off or counterclaim and shall be made in lawful currency
of the United States of America and in immediately available funds. Interest
on this Note shall accrue on the Principal Amount outstanding from time to
time at a rate per annum computed in accordance with Section 3 hereof,
provided, that after the Maturity Date, the rate of interest applicable to
the unpaid Principal Amount shall be 4% in excess of that otherwise
applicable pursuant to Section 3 of this Note, but in no event in excess of
the Maximum Rate provided in Section 3C of this Note.
Accrued and unpaid interest shall commence on the date hereof and be
payable (i) quarterly on July 31, October 31, January 31 and April 30, (ii)
upon maturity (whether at the Maturity Date, by acceleration or otherwise)
and (iii) after maturity until paid in full (after as well as before
judgment), on demand. Each of the dates referred to in clauses (i), (ii) and
(iii) is sometimes hereinafter referred to as an "Interest Payment Date." All
computations of interest hereunder shall be made based on the actual number
of days elapsed in a year of 360 days (including the first day but excluding
the last day during which any such Principal Amount is outstanding). The
Principal Amount of this Note together with
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interest accrued and unpaid thereon shall be payable on the Maturity Date
unless this Note is converted or prepaid in accordance with Section 6 hereof.
The amount of all repayments of principal, interest rates applicable
thereto and interest accrued thereon shall be recorded on the records of the
Company and, prior to any transfer of, or any action to collect on, this Note
shall be endorsed on this Note. Any such recordation or endorsement shall
constitute prima facie evidence of the accuracy of the information so
recorded or endorsed, but the failure to record any such amount or rate shall
not limit or otherwise affect the obligations of the Company hereunder to
make payments of principal or interest when due. All payments by the Company
hereunder shall be applied first to pay any interest which is due, but
unpaid, then to reduce the Principal Amount.
The Company (i) waives presentment, demand, protest or notice of any
kind in connection with this Note and (ii) agrees to pay to the holder
hereof, on demand, all costs and expenses (including reasonable legal fees
and expenses) incurred in connection with the enforcement and collection or
this Note.
This Note is issued in connection with a private placement of Notes
(the "Private Placement"), as more fully set forth in the Confidential Term
Sheet dated April 13, 1998 (the "Term Sheet"), and pursuant to a Subscription
Agreement, between the Company and the Payee (the "Subscription Agreement"),
a copy of which agreement is available for inspection at the Company's
principal office. Notwithstanding any provision to the contrary contained
herein, this Note is subject and entitled to those terms, conditions,
covenants and agreements contained in the Subscription Agreement which are
expressly applicable to the Notes. Any transferee of this Note, by its
acceptance hereof, assumes the obligations of the Payee in the Subscription
Agreement with respect to the conditions and procedures for transfer of this
Note. Reference to the Subscription Agreement shall in no way impair the
absolute and unconditional obligation of the Company to pay both principal
hereof and interest hereon as provided herein.
1. Prepayment. The Principal Amount of this Note may not be prepaid
in whole or in part, except as provided in Section 6B hereof.
2. Subordination. The Company, for itself, its successors and
assigns, covenants and agrees, and the Payee and each successive holder of
this Note, by its acceptance of this Note, likewise covenants and agrees
(expressly for the benefit of the present and future holders of the Senior
Debt (as hereinafter defined)), that the payment of principal of, and
interest on, this Note is hereby expressly subordinated in right of payment
to the prior payment in full of the principal of, premium (if any) and
interest on, all Senior Debt of the Company (other than the Notes), whether
outstanding on the date hereof or hereafter incurred or created. "Senior
Debt" means, collectively, (i) all Indebtedness for Borrowed Money (and all
renewals, extensions, refundings, amendments and modifications of any such
Indebtedness for Borrowed Money); (ii) all other indebtness incurred prior to
or after the issuance of the Notes which by its terms is senior to the Notes,
except, until either a registration statement covering the shares of Common
Stock issuable upon conversion of the Notes has been declared effective by
the Securities and Exchange Commission or at least two years has elapsed
since the issuance date of the Note (whichever is earlier), High Yield
Convertible Debt; and (iii) all payment obligations of the Company pursuant
to any capitalized lease with an entity that is not an affiliate of the
Company, unless by the terms of the instrument creating or evidencing any
such indebtedness it is expressly provided that such indebtedness is not
superior in right of payment to the Notes.
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"Indebtedness for Borrowed Money" means (i) all payment obligations
of the Company to a bank, insurance company, finance company or other
institutional lender or other entity regularly engaged in the business of
extending credit in the form of borrowed money, provided such entity is not
an affiliate of the Company (each of the foregoing, an "Institutional
Lender") in respect of extensions of credit to the Company (or to a
subsidiary of the Company to the extent such obligations are guaranteed by
the Company pursuant to a written guarantee executed by the appropriate
officers of the Company) and (ii) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether or not drawn,
and banker's acceptances, in each case issued for the account of the Company
(other than such as may be for the benefit of an affiliate of the Company).
"High Yield Convertible Debt" means all obligations of the Company
which pay interest at a rate not less than the prime rate plus 2% and is
convertible by its terms into capital stock of the Company.
The provisions of this Section 2 are not for the benefit of the
Company, but are solely for the purpose of defining the relative rights of
the holders of the Senior Debt, on the one hand, and the holders of the
Notes, on the other hand. Nothing contained herein (i) shall impair, as
between the Company and the holder of this Note, the obligations of the
Company, which are absolute and unconditional, to pay to the holder hereof
all amounts payable in respect of this Note as and when the same shall become
due and payable in accordance with the terms hereof or (ii) is intended to or
shall affect the relative rights of the holder of this Note and the creditors
of the Company, or (iii) shall prevent the holder of this Note from
exercising all rights, powers and remedies otherwise permitted by applicable
law or upon a default or Event of Default under this Note as set forth in
these subordination provisions.
3. Computation of Interest.
A. Base Interest Rate. Subject to subsections B and C below, the
outstanding Principal Amount shall bear interest at the rate of seven percent
(7%) per annum.
B. Penalty Interest. In the event the Company fails to file a
registration statement covering the resale of the Conversion Shares (as
defined in Section 6A hereof) on or prior to the 75th day following the final
closing of the Private Placement (the "Registration Date") as provided for in
the Subscription Agreement, the interest rate applicable to the outstanding
Principal Amount shall be increased by one percent (1%) per annum for each
month following the month in which the Registration Date falls until the
required registration statement is filed up to a maximum of 13%.
C. Maximum Rate. In the event that it is determined that, under
the laws relating to usury applicable to the Company or the indebtedness
evidenced by this Note ("Applicable Usury Laws"), the interest charges and
fees payable by the Company in connection herewith or in connection with any
other document or instrument executed and delivered in connection herewith
cause the effective interest rate applicable to the indebtedness evidenced by
this Note to exceed the maximum rate allowed by law (the "Maximum Rate"),
then such interest shall be recalculated for the period in question and any
excess over the Maximum Rate paid with respect to such period shall be
credited, without further agreement or notice, to the Principal Amount
outstanding hereunder to reduce said balance by such amount with the same
force and effect as though the Company had specifically designated such extra
sums to be so applied to principal and the Payee had agreed to accept such
extra payment(s) as a premium-free prepayment. All such deemed prepayments
shall be applied to the principal balance payable at maturity. In no event
shall any agreed-to or actual exaction as consideration for this Note exceed
the limits imposed or provided
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by Applicable Usury Laws in the jurisdiction in which the Company is resident
applicable to the use or detention of money or to forbearance in seeking its
collection in the jurisdiction in which the Company is resident.
4. Covenants of Company
A. Affirmative Covenants. The Company covenants and agrees
that, so long as this Note shall be outstanding, it will perform the
obligations set forth in this Section 4A:
(i) Taxes and Levies. The Company will file when due all
federal, state and local income tax returns and will promptly pay and
discharge all taxes, assessments, and governmental charges or levies imposed
upon the Company or upon its income and profits, or upon any of its property,
before the same shall become delinquent, except where the failure to file
and/or make payment would not have a material adverse effect on the Company,
and will discharge when due all claims for labor, materials and supplies
which, if unpaid, might become a lien or charge upon any material properties
or any material part thereof of the Company; provided, however, that the
Company shall also not be required to pay and discharge any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company shall set
aside on its books adequate reserves in accordance with generally accepted
accounting principles ("GAAP") with respect to any such tax, assessment,
charge, levy or claim so contested;
(ii) Maintenance of Existence. The Company will do or cause
to be done all things reasonably necessary to preserve and keep in full force
and effect its corporate existence, rights and franchises and comply with all
laws applicable to the Company, except where the failure to so preserve and
keep in full force and effect or so comply would not have a material adverse
effect on the Company;
(iii) Maintenance of Property. The Company will maintain,
preserve, protect and keep its material property used or useful in the
conduct of its business in good repair, working order and condition, and from
time to time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) Insurance. The Company will, to the extent necessary
for the operation of its business, keep adequately insured by financially
sound reputable insurers, all property of a character usually insured by
similar corporations and carry such other insurance as is usually carried by
similar corporations;
(v) Books and Records. The Company will at all times keep
true and correct books, records and accounts reflecting all of its business
affairs and transactions in accordance with GAAP, except where the failure to
do so would not have a material adverse effect on the Company. Such books and
records shall be open at reasonable times and upon reasonable notice to the
inspection of the Payee or its agents;
(vi) Notice of Certain Events. The Company will give prompt
written notice (with a description in reasonable detail) to the Payee of:
(a) the occurrence of any Event of Default or any event
which, with the giving of notice or the lapse of time, would constitute
an Event of Default;
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(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by
the Company to the Payee in writing which has been instituted or, to
the knowledge of the Company, is threatened, against the Company or to
which any of its properties, assets or revenues is subject which, if
adversely determined, would reasonably be expected to have a material
adverse effect on the Company;
(c) the occurrence of any event of default or any event
which, with the giving of notice or the lapse of time, would constitute
an event of default under any document or instrument evidencing or
governing any indebtedness of the Company in the principal amount
exceeding $1,000,000 and the delivery of any notice effecting the
acceleration of any such indebtedness;
(d) any material development which shall occur in any
litigation, arbitration or governmental investigation or proceeding
previously disclosed by the Company to the Payee; and
(e) the occurrence of any other circumstance which has a
reasonable likelihood of having a material adverse effect on the
Company;
(vii) Other Obligations. The Company will maintain all of
its obligations material to its business in whatever manner incurred,
including but not limited to obligations for borrowed money or for services
or goods purchased, as they become due in accordance with their terms; and
(viii) Compliance with Laws. The Company will comply in all
material respects with all applicable federal, state and local laws, rules,
regulations and orders.
B. Negative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 4B:
(i) Liquidation, Dissolution. The Company will not liquidate
or dissolve, consolidate with, or merge into or with, any other corporation or
other entity, other than any merger or consolidation in which the Company is the
surviving entity;
(ii) Sales of Assets. The Company will not sell, transfer,
lease or otherwise dispose of, or grant options, warrants or other rights with
respect to, all or a substantial part of its properties or assets to any person
or entity, provided that this clause (ii) shall not restrict any disposition
made to an entity which has a tangible net worth equal to or greater than the
Company's at the time of transfer and such entity assumes the obligations under
the Notes;
(iii) Liens. The Company will not create, incur, assume or
suffer to exist any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
financing lease) (each, a "Lien") upon any of its property, revenues or assets,
whether now owned or hereafter acquired, except:
(a) Liens granted to secure Indebtedness for Borrowed
Money or indebtedness incurred to finance the acquisition (whether by
purchase or capitalized lease) of assets, but only on the assets
acquired with the proceeds of such indebtedness;
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(b) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(c) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business
(i) for sums not overdue or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books or (ii) relating to
property of the Company which is not material in value or is not
material to the conduct of the business of the Company;
(d) Liens (other than Liens arising under the Employee
Retirement Income Security Act of 1974, as amended, or Section 412(n)
of the Internal Revenue Code of 1986, as amended) incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other forms of governmental insurance or
benefits, or to secure performance of tenders, statutory obligations,
leases and contracts (other than for borrowed money) entered into in
the ordinary course of business or to secure obligations on surety or
appeal bonds;
(e) judgment Liens which, to the extent not covered by
insurance, do not exceed $250,000 or which are in existence less than
30 days after the entry thereof or with respect to which execution has
been stayed; and
(f) investments pledged to AIG as the ceding company
under the Company's reinsurance agreement.
(iv) Redemptions. The Company will not redeem or repurchase
any outstanding equity securities of the Company unless either a registration
statement covering the shares of Common Stock issuable upon conversion of the
Notes has been declared effective by the Securities and Exchange Commission or
at least two years has elapsed since the issuance date of the Note, except for
(A) repurchases of unvested or restricted shares of Common Stock at cost from
employees, consultants or members of the Board of Directors pursuant to
repurchase options of the Company currently outstanding or hereafter entered
into pursuant to a stock option plan or restricted stock plan approved by the
Company's Board of Directors or (B) rescission offers necessary or appropriate
to address violations of applicable securities laws;
(v) Transactions with Affiliates. The Company will not enter
into any transaction, including, without limitation, the purchase, sale, lease
or exchange of property, real or personal, or the rendering of any service, with
any person or entity affiliated with the Company, except upon terms not less
favorable than would be obtained in a comparable arms-length transaction with
any other person or entity not affiliated with the Company;
(vi) Proration of Payments. The Company shall not make or
permit any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of principal or interest payable
hereunder in excess of the Payee's pro rata share of payments then being made in
respect of all Notes; and
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(vii) Indebtedness. The Company will not create, incur, assume
or suffer to exist, contingently or otherwise, any indebtedness if such
indebtedness at the time of incurrence would preclude the timely repayment of
this Note or otherwise render the Company unable to pay its debts as they become
due. Furthermore, the Company will not, until either a registration statement
covering the shares of Common Stock issuable upon conversion of the Notes has
been declared effective by the Securities and Exchange Commission or at least
two years has elapsed since the issuance date of the Note (whichever is
earlier), incur any High Yield Convertible Debt.
5. Events of Default
A. The term "Event of Default" shall mean any of the events set
forth in this Section 5A:
(i) Non-Payment of Obligations. The Company shall default in
the payment of principal on this Note when and as the same shall become due and
payable, whether by acceleration or otherwise or, within 10 business days of its
becoming due, accrued interest on this Note;
(ii) Non-Performance of Affirmative Covenants. The Company
shall default in the due observance or performance of any covenant set forth in
Section 4A, which default shall continue uncured for 10 business days after it
has been discovered by the Company;
(iii) Non-Performance of Negative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 4B;
(iv) Non-Performance of Other Obligations. The Company shall
default in the due observance or performance of any other material covenant or
agreement on the part of the Company to be observed or performed pursuant to the
terms hereof, which default shall continue uncured for 10 business days after
written notice thereof specifying such default shall have been given to the
Company by the holder of this Note (or its agent);
(v) Bankruptcy, Insolvency, etc. The Company shall:
(a) become insolvent or generally fail or be unable to
pay, or admit in writing its inability to pay, its debts as
they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Company or any of its property, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiesce in, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the
Company or for any part of its property, and such trustee,
receiver, sequestrator or other custodian shall not be
discharged within 30 days; or
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect
of the Company and, if such case or proceeding is not
commenced by the Company or converted to a
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voluntary case, such case or proceeding shall be consented to
or acquiesced in by the Company or shall result in the entry
of an order for relief or shall remain for 60 days
undismissed.
(vi) Breach of Warranty. Any material representation or
warranty of the Company contained in the Subscription Agreement is or shall be
incorrect in any material respect when made.
(vii) Cross-Acceleration. Any indebtedness for borrowed money
of the Company or any subsidiary in an aggregate principal amount exceeding
$1,000,000 (1) shall be duly declared to be or shall become due and payable
prior to the stated maturity thereof, or (2) shall not be paid as and when the
same becomes due and payable, including any applicable grace period.
(viii) Judgments. A judgment which, with other such
outstanding judgments against the Company and its subsidiaries (in each case to
the extent not covered by insurance), exceeds an aggregate of $250,000, shall be
rendered against the Company or any subsidiary and, within 30 days after entry
thereof, such judgment shall not have been vacated, discharged or otherwise
satisfied or execution thereof stayed pending appeal, or, within 30 days after
the expiration of any such stay, such judgment shall not have been discharged or
otherwise satisfied.
B. Action if Bankruptcy. If any Event of Default described in
clauses (v)(a) through (d) of Section 5A shall occur, the outstanding Principal
Amount of this Note and all other obligations hereunder shall automatically be
and become immediately due and payable, without notice or demand.
C. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (v)(a) through (d) of
Section 5A) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Required Holders may, upon five days' notice to the Company,
declare all or any portion of the outstanding Principal Amount of this Note,
together with interest accrued thereon to be due and payable and any or all
other obligations hereunder to be due and payable, whereupon the full unpaid
Principal Amount (or any portion thereof so demanded), such accrued interest and
any and all other such obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand,
or presentment.
D. Remedies. Subject to the provisions of Section 5C and 7A
hereof, in case any Event of Default shall occur and be continuing, the holders
of not less than 25% of the outstanding aggregate Principal Amount of the Notes
may proceed to protect and enforce its rights by a proceeding seeking the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note or may proceed to enforce
the payment of this Note or to enforce any other legal or equitable rights as
such holder shall determine.
6. Conversion of Note.
A. Optional Conversion. Subject to Section 6B below, the Payee
shall have the right, at its option, at any time up to and including the earlier
of the Maturity Date or 10 business days after receipt of the Termination Notice
(as defined below), to convert the outstanding Principal Amount of this Note
into shares of the Company's Common Stock at a price equal to $9.00 per share,
subject to adjustment as provided in 6C below (the "Conversion Price").
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B. Termination of Optional Conversion. In the event (i) the
closing bid price of the Company's Common Stock equals or exceeds $13.50 per
share for twenty (20) consecutive trading days during any period commencing
upon satisfaction of one of the conditions contained in Section 6B(ii) hereof
and (ii) either a registration statement covering the shares of Common Stock
issuable upon conversion of the Notes has been declared effective by the
Securities and Exchange Commission and remains effective or at least two
years has elapsed since the issuance date of the Notes and the shares of
Common Stock issuable upon conversion of the Notes are saleable, without
restriction, under Rule 144(k) promulgated under the Securities Act of 1933,
as amended, then the Payee's right to convert the outstanding Principal
Amount of this Note shall be terminated by the Company by delivering to the
Payee a notice of termination (the "Termination Notice"), in which event (a)
the Payee shall have the right at any time during the 10 business days after
receipt of the Termination Notice, in its sole discretion, to convert the
outstanding Principal Amount of this Note into shares of Common Stock of the
Company at the Conversion Price, and (b) thereafter, the Payee's option to
convert shall terminate and the Note may be prepaid by the Company, at any
time prior to the Maturity Date, in whole or in part for the face amount
thereof, together with all accrued and unpaid interest through the date of
prepayment.
C. Optional Conversion. The Payee shall have the right, at its
option, at any time up to and including the Maturity Date, to convert the
outstanding Principal Amount of this Note into shares of the Company's Common
Stock at the Conversion Price.
D. Adjustment of Conversion Price. The Conversion Price in effect
at any time and the number and kind of securities issuable upon conversion of
the Notes shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(i) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the applicable
Conversion Price in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the number of shares
determined by multiplying the Conversion Price by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding after giving
effect to such action, and the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii)Reorganization of the Company. Subject to the exceptions in
Sections 4B(i) and (ii) hereof, in case of any reclassification or capital
reorganization, or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or capital reorganization) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety,
the Company shall, as a condition precedent to such transaction, cause effective
provisions to be made so that the holder of this Note shall have the right
thereafter upon conversion of this Note in accordance with the provisions of
this Section 6, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock which might have been received upon conversion
of this Note immediately prior to such reclassification, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
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which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Note. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition, unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to the holder of this Note at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities, cash or
properties as, in accordance with the foregoing provisions, such holder may be
entitled to acquire. The above provisions of this paragraph shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales, transfers or other dispositions. Nothing herein shall be construed as to
require the consent of the holder to any such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition.
E. Mechanics of Conversion.
(i) Automatic Conversion. In the event the Company determines
to force conversion of the Notes pursuant to the provisions of Sections 6A or
6B hereof, it shall deliver to the Payee at its address appearing on the
records of the Company a written notice of the imminent conversion of this
Note (the "Conversion Notice"), requesting surrender of this Note for
cancellation and written instructions regarding the registration and delivery
of certificates for the Conversion Shares. In the event the Payee receives a
Conversion Notice, the Payee shall be required to surrender this Note for
cancellation as of either the date of the closing of a Qualified Public
Offering or, with respect to a conversion pursuant to Section 6B, within five
business days of the Conversion Notice (the "Conversion Date"), but the
failure of the Payee so to surrender this Note shall not affect the
conversion of the outstanding Principal Amount into Conversion Shares,
provided that if the Note is not surrendered, an affidavit of lost Note shall
be provided to the Company. No holder of this Note shall be entitled upon
conversion of this Note to have the Conversion Shares registered in the name
of another person or entity without first complying with all applicable
restrictions on the transfer of this Note. In the event the Payee does not
provide the Company with written instructions regarding the registration and
delivery of certificates for the Conversion Shares, the Company shall issue
such shares in the name of the Payee and shall forward such certificates to
the Payee at its address appearing on the records of the Company. The person
entitled to receive the Conversion Shares shall be deemed to have become the
holder of record of such shares at the close of business on the Conversion
Date and the person entitled to receive share certificates for the Conversion
Shares shall be regarded for all corporate purposes after the Conversion Date
as the record holder of the number of Conversion Shares to which it is
entitled upon the conversion. The Company may rely on record ownership of
this Note for all corporate purposes, notwithstanding any contrary notice.
After the Conversion Date, this Note shall, until surrendered to the Company,
represent the right to receive the Conversion Shares plus accrued and unpaid
interest on the Principal Amount of this Note through, but excluding the
Conversion Date.
(ii) Optional Conversion. Before the Payee shall be entitled to
convert this Note into Conversion Shares, the Payee shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Company, and shall give written notice to the Company at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for the Conversion Shares are to
be issued. The Company shall, as soon as practicable thereafter, issue and
deliver to the Payee, or to the nominee or nominees of Payee, a certificate or
certificates for the number of Conversion Shares to which such holder shall be
entitled as aforesaid. Such
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conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the Note to be converted, and the
person or persons entitled to receive the Conversion Shares issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
F. Cash Payments. No fractional shares (or scrip representing
fractional shares) of Common Stock shall be issued upon conversion of this Note.
In the event that the conversion of the Principal Amount of this Note would
result in the issuance of a fractional share of Common Stock, the Company shall
pay a cash adjustment in lieu of such fractional share to the holder of this
Note based upon the Conversion Price. Upon the surrender of this Note, accrued
and unpaid interest on the Principal Amount of this Note converted pursuant to
Section 6A, 6B or 6C shall be paid by the Company to the holder of this Note
through but excluding the Conversion Date.
G. Stamp Taxes, etc. The Company shall pay all documentary, stamp
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock upon conversion of this Note; provided, however, that the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
shares in a name other than that of the holder of this Note, and the Company
shall not be required to issue or deliver any such certificate unless and until
the person requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the Company's satisfaction that
such tax has been paid.
H. Validity of Stock. All shares of Common Stock which may be
issued upon conversion of this Note will, upon issuance by the Company in
accordance with the terms of this Note, be validly issued, free from all taxes
and liens with respect to the issuance thereof (other than those created by the
holders), free from all pre-emptive or similar rights and fully paid and
non-assessable.
I. Reservation of Shares. The Company covenants and agrees that it
will at all times have authorized and reserved, solely for the purpose of such
possible conversion, out of its authorized but unissued shares, a sufficient
number of shares of its Common Stock to provide for the exercise in full of the
conversion rights contained in this Note.
J. Notice of Certain Transactions. In case at any time:
(i) The Company shall declare any dividend upon, or other
distribution in respect of, its Common Stock; or
(ii) The Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into shares of stock or any rights to
subscribe thereto; or
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all
or substantially all of the assets of the Company, or a consolidation
or merger of the Company with another corporation (other than a merger
with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification); or
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<PAGE>
(iv) There shall be a voluntary or involuntary dissolution;
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall cause to
be mailed to the registered holder of this Note at the earliest practicable time
(and, in any event not less than 20 days before any record date or other date
set for definitive action), written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or such reorganization, reclassification, sale,
consolidation, merger or dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the kind and amount of the
shares of stock and other securities and property deliverable upon the
conversion of this Note. Such notice shall also specify the date as of which the
holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger or dissolution,
liquidation or winding-up, as the case may be.
Nothing herein shall be construed as the consent of the holder of this Note to
any action otherwise prohibited by the terms of this Note or as a waiver of any
such prohibition.
7. Amendments and Waivers.
A. Waivers, Amendments, etc. (a) The provisions of this Note may from
time to time be amended, modified or waived, if such amendment, modification or
waiver is in writing and consented to by the Company and the holders of not less
than 50% in principal amount of the Notes then outstanding (the "Required
Holders"); provided, however, that no such amendment, modification or waiver:
(i) which would modify this Section 7A, change the definition
of "Required Holders", extend the Maturity Date for more than 90 days,
or subject the Payee under each Note to any additional obligations
shall be made without the consent of the Payee of each Note, or
(iii) which would reduce the amount of any payment of
principal of or interest on any Principal Amount payable hereunder (or
reduce the Principal Amount of or rate of interest payable hereunder)
shall be made without the consent of the holder of each Note so
affected.
(b) No failure or delay on the part of the Payee in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Company in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by the Payee shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
(c) To the extent that the Company makes a payment or payments to the
Payee, and such payment or payments or any part thereof are subsequently for any
reason invalidated, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof
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<PAGE>
originally intended to be satisfied, and all rights and remedies therefor, shall
be revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
(d) After any waiver, amendment or supplement under this section
becomes effective, the Company shall mail to the holders of the Notes a copy
thereof.
8. Miscellaneous
A. Registered Holder. The Company may consider and treat the
person in whose name this Note shall be registered as the absolute owner thereof
for all purposes whatsoever (whether or not this Note shall be overdue) and the
Company shall not be affected by any notice to the contrary. In case of transfer
of this Note by operation of law, the transferee agrees to notify the Company of
such transfer and of its address, and to submit appropriate evidence regarding
such transfer so that this Note may be registered in the name of the transferee.
This Note is transferable only on the books of the Company by the holder hereof,
in person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all holders or
transferees of the Note not registered at the time of sending the communication.
B. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Sections 5-1401 and 5-1402 of
the General Obligations Law of the State of New York shall apply to this Note
and the Company hereby waives any right to stay or dismiss on the basis of forum
non conveniens any action or proceeding brought before the courts of the State
of New York sitting in New York County or of United States of America for the
Southern District of New York and hereby submits to the jurisdiction of such
courts.
C. Notices. Unless otherwise provided, all notices required or
permitted under this Note shall be in writing and shall be deemed effectively
given (i) upon personal delivery to the party to be notified, (ii) upon
confirmed delivery by Federal Express or other nationally recognized courier
service providing next-business-day delivery, or (iii) three business days after
deposit with the United States Postal Service, by registered or certified mail,
postage prepaid and addressed to the party to be notified, in each case at the
address set forth below, or at such other address as such party may designate by
written notice to the other party (provided that notice of change of address
shall be effective upon receipt by the party to whom such notice is addressed).
If sent to Payee, notices shall be sent to the following address:
[Payee]
-------------------------
-------------------------
-------------------------
Attention:
If sent to the Company, notices shall be sent to the following
address:
Preferred Employers Holdings, Inc.
10800 Biscayne Blvd.
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Miami, Florida 33161
Attention: Chief Executive Officer
D. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR
THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING
THIS NOTE.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
in its name by its duly authorized officer.
PREFERRED EMPLOYERS HOLDINGS, INC.
By____________________________________________
Name: William R. Dresback
Title: Senior Vice President,
Chief Financial Officer and Secretary
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EXHIBIT 4.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO
OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS
NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER
IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES
OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.
PREFERRED EMPLOYERS HOLDINGS, INC.
Warrant for the Purchase of Shares of Common Stock.
par value $.01 per Share
This is to certify that, FOR VALUE RECEIVED, Commonwealth
Associates, or assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from Preferred Employers Holdings, Inc., a
Delaware corporation ("Company"), ____________ (___) fully paid, validly
issued and nonassessable shares of Common Stock of the Company ("Common
Stock") at a price of $9.00 per share at any time or from time to time during
the period from May 12, 1998 until May 12, 2003 (the "Exercise Period"). The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price
of a share of Common Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price". This
Warrant, together with warrants of like tenor, constituting in the aggregate
warrants (the "Warrants") to purchase up to __________ shares of Common
Stock, was originally issued pursuant to an agency agreement ("Agency
Agreement") between the Company and Commonwealth Associates ("Commonwealth"),
in connection with a private offering of 7% Subordinated Convertible Notes of
the Company (the "Notes") through Commonwealth (the "Private Placement").
1. This Warrant may be exercised during the Exercise Period,
as to the whole or any lesser number of whole Warrant Shares, by the
surrender of this Warrant (with the election at the end hereof duly executed)
to the Company at its office at 10800 Biscayne Boulevard, Miami, Florida
33161, or at such other place as is designated in writing by the Company,
together with a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Warrant Shares for which this Warrant is being exercised (the "Stock Purchase
Price" ).
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2. (a) In lieu of the payment of the Stock Purchase Price,
the Holder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or in part, into shares of Common
Stock (the "Conversion Right") as provided for in this Section 2. Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any of the Stock Purchase Price) that
number of shares of Common Stock (the "Conversion Shares") equal to the
quotient obtained by dividing (x) the value of this Warrant (or portion
thereof as to which the Conversion Right is being exercised if the Conversion
Right is being exercised in part) at the time the Conversion Right is
exercised (determined by subtracting the aggregate Stock Purchase Price of
the shares of Common Stock as to which the Conversion Right is being
exercised in effect immediately prior to the exercise of the Conversion Right
from the aggregate Current Market Price (as defined in Section 6(e) hereof)
of the shares of Common Stock as to which the Conversion Right is being
exercised) by (y) the Current Market Price of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right provided under this Section 2
may be exercised in whole or in part and at any time and from time to time
while any Warrants remain outstanding. In order to exercise the Conversion
Right, the Holder shall surrender to the Company, at its office, this Warrant
with the Notice of Conversion at the end hereof duly executed. The
presentation and surrender shall be deemed a waiver of the Holders obligation
to pay all or any portion of the aggregate Stock Purchase Price payable for
the shares of Common Stock as to which such Conversion Right is being
exercised. This Warrant (or so much thereof as shall have been surrendered
for conversion) shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Warrant for conversion
in accordance with the foregoing provisions.
3. Upon each exercise of the Holder's rights to purchase
Warrant Shares or Conversion Shares, the Holder shall be deemed to be the
holder of record of the Warrant Shares or Conversion Shares issuable upon
such exercise or conversion, notwithstanding that the transfer books of the
Company shall then be closed or certificates representing such Warrant Shares
or Conversion Shares shall not then have been actually delivered to the
Holder. As soon as practicable after each such exercise or conversion of this
Warrant, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares or Conversion Shares issuable upon such
exercise or conversion, registered in the name of the Holder or its designee.
If this Warrant should be exercised or converted in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
4. Any Warrants issued upon the transfer or exercise or
conversion in part of this Warrant shall be numbered and shall be registered
in a Warrant Register as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register as the
owner in fact thereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in such Warrant on the part of
any other person, and shall not be liable for any registration or transfer of
Warrants which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative,
or accompanied by proper evidence of succession, assignment or authority to
transfer.
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<PAGE>
In all cases of transfer by an attorney, executor, administrator, guardian or
other legal representative, duly authenticate evidence of his or its
authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Warrant or Warrants to the person entitled thereto. This
Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant or Warrants of different denominations of like tenor and representing
in the aggregate the right to purchase a like number of Warrant Shares (or
portions thereof) upon surrender to the Company's authorized agent.
Notwithstanding the foregoing, the Company shall have no obligation to cause
Warrants to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations thereunder.
5. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares
and/or Conversion Shares granted pursuant to the Warrants, such number of
shares of Common Stock as shall, from time to time, be sufficient therefor.
The Company covenants that all shares of Common Stock issuable upon exercise
of this Warrant, upon receipt by the Company of the full Exercise Price
therefore, and all shares of Common Stock issuable upon conversion of this
Warrant, shall be validly issued fully paid, nonassessable and free of
preemptive rights.
6. (a) In case the Company shall at any time after the
date the Warrants were first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Exercise Price, and the
number and kind of securities issuable upon exercise or conversion of this
Warrant, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, shall be
proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Warrant had
been exercised or converted immediately prior to such time, he would have
owned upon such exercise or conversion and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall issue or fix a record
date for the issuance to all holders of Common Stock of rights, options or
warrants to subscribe for or purchase Common Stock (or securities convertible
into or exchangeable for Common Stock) at a price per share (or having
conversion or exchange price per share, if a security convertible into or
exchangeable for Common Stock) less than the Current Market Price on such
record date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares
of Common Stock so to be offered (or the aggregate initial conversion or
exchange price of the convertible or exchangeable securities so to be
offered) would purchase at such Current Market Price and the denominator of
which shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially convertible or
exchangeable). Such adjustment shall become effective at the close of
business on such record date;
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<PAGE>
provided, however, that to the extent the shares of Common Stock (or
securities convertible into or exchangeable for shares of Common Stock) are
not delivered, the Exercise Price shall be readjusted after the expiration of
such rights, options or warrants (but only with respect to Warrants exercised
after such expiration) to the Exercise Price which would then be in effect
had the adjustments made upon the issuance of such rights, options or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities convertible into or exchangeable for shares of
Common Stock) actually issued. In case any subscription price may be paid in
a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the board
of directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of
the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
(c) In case the Company shall distribute to all
holders of Common Stock (including any such distribution made to the
stockholders of the Company in connection with a consolidation or merger in
which the Company is the continuing corporation) evidences of its indebtedness,
cash (other than any cash dividend which, together with any cash dividends paid
within the 12 months prior to the record date for such distribution does not
exceed 5% of the Current Market Price at the record date for such distribution)
or assets (other than distributions and dividends payable in shares of Common
Stock), or rights, options or warrants to subscribe for or purchase Common Stock
or securities convertible into or exchangeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Exercise Price is provided pursuant to Section 6(b) hereof), then, in each case,
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction, the numerator of which
shall be the Current Market Price per share of Common Stock on such record date
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of the portion of the evidences of indebtedness or assets so to
be distributed or of such rights, options or warrants or convertible or
exchangeable securities or the amount of such cash, applicable to one share, and
the denominator of which shall be such Current Market Price per share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective on the record date for the determination of stockholders
entitled to receive such distribution.
(d) In case the Company shall issue shares of
Common Stock or rights, options or warrants to subscribe for or purchase Common
Stock, or securities convertible into or exchangeable for Common Stock
(excluding shares, rights, options, warrants, or convertible or exchangeable
securities, issued or issuable (i) in any of the transactions with respect to
which an adjustment of the Exercise Price is provided pursuant to Sections 6(a),
6(b), or 6(c) above, (ii) upon exercise of the Warrants or the Notes, (iii)
pursuant to any stock option plan in effect as of the date hereof or that may
hereafter be adopted by the Company or (iv) upon exercise of stock options or
warrants that are outstanding as of the date hereof), at a price per share
(determined, in the case of such rights, options, warrants, or convertible or
exchangeable securities, by dividing (x) the total amount received or receivable
by the Company in consideration of the sale and issuance of such rights,
options, warrants, or convertible or exchangeable securities, plus the minimum
aggregate consideration payable to the Company upon exercise, conversion, or
exchange thereof, by (y) the maximum number of shares covered by such rights,
options, warrants, or convertible or exchangeable securities) lower than the
Current Market Price per share of Common Stock in effect immediately prior to
such issuance, then the Exercise Price shall be reduced on the date of such
issuance to a price (calculated to the nearest cent)
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determined by multiplying the Exercise Price in effect immediately prior to such
issuance by a fraction, (iii) the numerator of which shall be an amount equal to
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such issuance plus (B) the quotient obtained by dividing the
consideration received by the Company upon such issuance by such Current Market
Price, and (iv) the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such issuance. For the purposes of
such adjustments, the maximum number of shares which the holders of any such
rights, options, warrants, or convertible or exchangeable securities, shall be
entitled to initially subscribe for or purchase or convert or exchange such
securities into shall be deemed to be issued and outstanding as of the date of
such issuance, and the consideration received by the Company therefor shall be
deemed to be the consideration received by the Company for such rights, options,
warrants, or convertible or exchangeable securities, plus the minimum aggregate
consideration or premiums stated in such rights, options, warrants, or
convertible or exchangeable securities, to be paid for the shares covered
thereby. No further adjustment of the Exercise Price shall be made as a result
of the actual issuance of shares of Common Stock on exercise of such rights,
options, or warrants, or on conversion or exchange of such convertible or
exchangeable securities. On the expiration or the termination of such rights,
options, or warrants, or the termination of such right to convert or exchange,
the Exercise Price shall forthwith be readjusted (but only with respect to
Warrants exercised or converted after such expiration or termination) to such
Exercise Price as would have obtained had the adjustments made upon the issuance
of such rights, options, warrants, or convertible or exchangeable securities,
been made upon the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such rights, options, or warrants,
or upon the conversion or exchange of any such securities; and on any change of
the number of shares of Common Stock deliverable upon the exercise of any such
rights options, or warrants or conversion, or exchange of such convertible or
exchangeable securities, or any change in the consideration to be received by
the Company upon such exercise, conversion, or exchange, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Exercise Price, as then in effect, shall forthwith be readjusted (but only with
respect to Warrants exercised or converted after such change) to such Exercise
Price as would have been obtained had an adjustment been made upon the issuance
of such rights, options, or warrants not exercised prior to such change, or
securities not converted or exchanged prior to such change, on the basis of such
change. In case the Company shall issue shares of Common Stock or any such
rights, options, warrants, or convertible or exchangeable securities, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then the "price per share" and the "consideration received by
the Company" for purposes of the first sentence of this Section 6(d) shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(e) For the purpose of an computation under this
Section 6, the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 15
consecutive trading days immediately preceding the date in question. The
closing price for each day shall be the last reported sales price regular way
on the principal securities exchange or market system (including, for
purposes hereof, the Nasdaq Stock Market, Inc.'s National Market or SmallCap
Market) on which the Common Stock is listed or admitted to trading or, in
case no such reported sale takes place on such day, if the principal market
for the Common Stock is a securities exchange, the closing bid price regular
way on such exchange on such day, or if the principal market for the Common
Stock is the Nasdaq National Market or Nasdaq SmallCap Market, the highest
reported bid price regular way on such system on such day or if the Common
Stock is not listed or admitted to trading
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on any national securities exchange or the Nasdaq National Market or Nasdaq
SmallCap Market, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc., through
Nasdaq or a similar organization if Nasdaq is no longer reporting such
information. If on any such date the Common Stock is not listed or admitted
to trading on any national securities exchange or the Nasdaq National Market
or the Nasdaq SmallCap Market, and is not otherwise quoted by Nasdaq or any
similar organization, the fair value of a share of Common Stock on such date,
as determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(f) No adjustment in the Exercise Price shall be
required if such adjustment is less than $.05; provided, however, that any
adjustments which by reason of this Section 6 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
(g) In any case in which this Section 6 shall require
that an adjustment in the Exercise Price be made effective as of a record
date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised or
converted this Warrant after such record date, the shares of Common Stock, if
any, issuable upon such exercise or conversion over and above the shares of
Common Stock, if any, issuable upon such exercise or conversion on the basis
of the Exercise Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to the Holder a due bill or other appropriate
instrument evidencing the Holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(h) Upon each adjustment of the Exercise Price as a
result of the calculations made in Sections 6(b), 6(c) or 6(d) hereof, this
Warrant shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the nearest thousandth)
obtained by dividing (i) the product obtained by multiplying the number of
shares purchasable upon exercise of this Warrant prior to adjustment of the
number of shares by the Exercise Price in effect prior to adjustment of the
Exercise Price, by (ii) the Exercise Price in effect after such adjustment of
the Exercise Price.
(i) Whenever there shall be an adjustment as provided
in this Section 6, the Company shall promptly cause written notice thereof to
be sent by registered mail, postage prepaid, to the Holder, at its address as
it shall appear in the Warrant Register which notice shall be accompanied by
an officer's certificate setting forth the number of Warrant Shares
purchasable upon the exercise of this Warrant and the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment and the computation thereof, which officer's certificate
shall be conclusive evidence of the correctness of any such adjustment absent
manifest error.
(j) The Company shall not be required to issue
fractions of shares of Common Stock or other capital stock of the Company
upon the exercise or conversion of this Warrant. If any fraction of a share
would be issuable on the exercise or conversion of this Warrant (or specified
portions thereof), the Company shall purchase such fraction for an amount in
cash equal to the same fraction of the Current Market Price of such share of
Common Stock on the date of exercise or conversion of this warrant.
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7. (a) In case of any consolidation with or merger of the
Company with or into another corporation (other than a merger or
consolidation in which the Company is the surviving or continuing
corporation), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety, such successor, leasing, or
purchasing corporation, as the case may be, shall (i) execute with the Holder
an agreement providing that the Holder shall have the right thereafter to
receive upon exercise or conversion of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease
or conveyance by a holder of the number of shares of Common Stock for which
this Warrant might have been exercised or converted immediately prior to such
consolidation, merger, sale, lease or conveyance, and (ii) make effective
provision in its certificate of incorporation or otherwise, if necessary, to
effect such agreement. Such agreement shall provide for adjustments which
shall be as nearly equivalent as practicable to the adjustments in Section 6.
(b) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise or conversion of this Warrant
(other than a change in par value or from no par value to a specified par
value, or a change in the number of outstanding shares of Common Stock as a
result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a
reclassification or change (including a change to the right to receive cash
or other property) in the outstanding shares of Common Stock (other than a
change in par value, or from no par value to a specified par value, or a
change in the outstanding number of shares of Common Stock as a result of a
subdivision or combination, but including any change in the shares into two
or more classes or series of shares), the Holder shall have the right
thereafter to receive upon exercise or conversion of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash, or
any combination thereof receivable upon such reclassification, change,
consolidation or merger by a holder of the number of shares of Common Stock
for which this Warrant might have been exercised or converted immediately
prior to such reclassification, change, consolidation or merger. Thereafter,
appropriate provision shall be made for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall
similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales, leases or
conveyances.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends which are not in
a greater amount per share than the most recent such cash dividend) to all
holders of Common Stock; or
(b) to issue any rights, warrants or other securities
to all holders of Common Stock entitling them to purchase any additional
shares of Common Stock or any other rights, warrants or other securities; or
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(c) to effect any reclassification or change of
outstanding shares of Common Stock as described in Section 7, or any
consolidation, merger, sale, lease or conveyance of property described in
Section 7; or
(d) to effect any liquidation, dissolution, or
winding-up of the Company; or
(e) to take any other action which would cause an
adjustment to the Exercise Price:
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
15 days prior to (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution,
right, warrants or other securities are to be determined (ii) the date on
which any such reclassification, change of outstanding shares of Common Stock
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall
be entitled to exchange their shares for securities or other property, if
any, deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up or (iii) the date of such action which would
require adjustment to the Exercise Price.
9. The issuance of any shares or other securities upon the
exercise or conversion of this Warrant, and the delivery of certificates or
other instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery
of any certificate in a name other than that of the Holder and the Company
shall not be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
10. (a) At any time after July 26, 1998 until May 12, 2005
(the "Registration Rights Period"), the Company shall advise the Holder of
this Warrant or of the Warrant Shares or Conversion Shares or any then holder
of Warrants, Warrant Shares or Conversion Shares (such persons being
collectively referred to herein as "holders") by written notice at least four
weeks prior to the filing of any registration statement under the Securities
Act of 1933, as amended (the "Act") (other than a registration statement on
Form S-4, Form S-8 or any successor form) with the Securities and Exchange
Commission (the "Commission") covering securities of the Company and upon the
request of any such holder, include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares and/or Conversion Shares (collectively the "Registrable Shares"). The
Company shall supply prospectuses and other documents as the Holder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares, qualify the Registrable Shares for
sale in such states as any such holder reasonably designates and do any and
all other acts and things which may be necessary or desirable to enable such
Holders to consummate the public sale or other disposition of the Registrable
Shares, and furnish indemnification in the manner as set forth in Section 11
hereof. Such Holders shall furnish information and indemnification as set
forth in Subsection (f) of this Section 10 and in Section 11 hereof, except
that the maximum amount which may be recovered from the Holder shall be
limited to the amount of net proceeds received by the Holder from the sale of
the
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Registrable Shares. Notwithstanding the foregoing, if the managing
underwriter of any such offering shall advise the Company in writing that, in
its opinion, the distribution of all or a portion of the Registrable Shares
requested to be included in the registration concurrently with the securities
being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Holder who shall have requested registration of his or its Registrable Shares
shall postpone the offering and sale of such Registrable Shares (or the
portions thereof so designated by such managing underwriter) for such period,
not to exceed 90 days (the "Delay Period"), as the managing underwriter shall
request, provided that no such delay shall be required as to any Registrable
Shares if any securities of the Company are included in such registration
statement and eligible for sale during the Delay Period for the account of
any person other than the Company and any Holder unless the securities
included in such registration statement and eligible for sale during the
Delay Period for such other person shall have been reduced pro rata to the
reduction of the Registrable Shares which were requested to be included and
eligible for sale during the Delay Period in such registration.
(b) If the "majority holders" (as defined below) (the
"Requesting Holder") shall give notice to the Company at any time during the
Registration Rights Period to the effect that such holder contemplates (i)
the transfer of all or any part of his or its Registrable Shares, or (ii) the
exercise and/or conversion of all or any part of his or its Warrants and the
transfer of all or any part of the Registrable Shares under such
circumstances that a public offering (within the meaning of the Act) of
Registrable Shares will be involved, and desires to register under the Act,
the Registrable Shares, then the Company shall, as promptly as practicable
after receipt of such notice, file a registration statement sufficient to
permit the Registrable Shares to be sold under the Act as promptly as
practicable thereafter and the Company will use its best efforts to cause
such registration to become effective and continue to be effective (including
the taking of such reasonable steps as are necessary to obtain the removal of
any stop order) until the Requesting Holder has advised that all of the
Registrable Shares have been sold; provided that the Holders of Registrable
Shares included in such registration statement shall furnish the Company with
appropriate information (relating to the intentions of such holders) in
connection therewith as the Company shall reasonably request in writing. The
Requesting Holder may, at its option, request the registration of the
Registrable Shares in a registration statement made by the Company as
contemplated by Subsection (a) of this Section 10 or in connection with a
request made pursuant to Subsection (b) of this Section 10 prior to the
acquisition of the Registrable Shares upon exercise or conversion of the
Warrants and even though the Requesting Holder has not given notice of
exercise or conversion of the Warrants. The Company shall only be obligated
to file one such registration statement for which all expenses incurred in
connection with such registration (other than the fees and disbursements of
counsel for the Holders and underwriting discounts, if any, payable in
respect of the Registrable Shares sold by the Holders) shall be borne by the
Company and one additional such registration statement for which all such
expenses shall be paid by the Holders based upon each Holder's pro rata share
of the Registrable Shares included in such registration. Within ten business
days after receiving any request contemplated by this Section 10(b), the
Company shall give written notice to all the other Holders, advising each of
them that the Company is proceeding with such registration and offering to
include therein all or any portion of any such other Holders' Registrable
Shares, provided that the Company receives a written request to do so from
such Holder within 30 days after receipt by him or it of the Company's
notice. For purposes of this Section 10(b), "majority holder" shall mean any
holder or holders which in the aggregate beneficially own a majority of the
Registrable Shares issued or issuable upon exercise or conversion of the
Warrants, excluding those which have previously been sold pursuant to a
registration statement pursuant to this Section 10 or otherwise under the Act.
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(c) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall use its best efforts to
cause the Registrable Shares so registered to be registered or qualified for
sale under the securities or blue sky laws of such jurisdictions as the
Holder or such holders may reasonably request; provided, however, that the
Company shall not be required to qualify to do business in any state by
reason of this Section 10(c) in which it is not otherwise required to qualify
to do business.
(d) The Company shall keep effective any registration
or qualification contemplated by this Section 10 and shall from time to time
amend or supplement each applicable registration statement, preliminary
prospectus, final prospectus, application, document, and communication or
such period of time as shall be reasonably required to permit the Holders to
complete the offer and sale of the Registrable Shares covered thereby. The
Company shall in no event be required to keep any such registration or
qualification in effect for a period in excess of nine months from the date
on which the Holders are first free to sell such Registrable Shares;
provided, however, that, if the Company is required to keep any such
registration or qualification in effect with respect to securities other than
the Registrable Shares beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Registrable
Shares for so long as such registration or qualification remains or is
required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the
provisions of this Section 10, the Company shall furnish to each
participating Holder such number of copies of the registration statement and
of each amendment and supplement thereto (in each case, including all
exhibits), such reasonable number of copies of each prospectus contained in
such registration statement and each supplement or amendment thereto
(including each preliminary prospectus), all of which shall conform to the
requirements of the Act and the rules and regulations thereunder, and such
other documents, as any participating Holder (a "Participating Holder") may
reasonably request to facilitate the disposition of the Registrable Shares
included in such registration.
(f) The Company's obligation with respect to
registration pursuant to the provisions of this Section 10 shall be
conditioned upon its receipt of such information as it shall reasonably
request from all Participating Holders for use in the registration statement
and, if appropriate, a confidentiality agreement satisfactory to the Company.
(g) In the event of a registration pursuant to the
provision of this Section 10, the Company shall enter into a cross-indemnity
agreement and a contribution agreement, each in customary form with each
underwriter, if any, and, if requested, enter into an underwriting agreement
containing conventional representations, warranties, allocation of expenses,
and customary closing conditions, including, but not limited to, opinions of
counsel and accountants' cold comfort letters, with any underwriter who
acquires any Registrable Shares.
(h) The Company agrees that until all the Registrable
Shares have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall keep current in filing all reports, statements and
other materials required to be filed with the Commission to permit holders of
the Registrable Shares to sell such securities under Rule 144.
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(i) The Company will not, without the written consent
of the Requesting Holder, grant to any persons the right to request the
Company to register any securities of the Company if such right would
adversely effect the registration rights of the Holders.
11. (a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each Participating Holder, its
officers, directors, partners, employees, agents, and counsel, and each
person, if any, who controls any such person within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all loss, liability,
charge, claim, damage, and expense whatsoever (which shall include, for all
purposes of this Section 11, but not be limited to, reasonable attorneys'
fees and any and all expense whatsoever incurred in investigating, preparing,
or defending against any litigation, com menced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), as and when incurred, arising out of, based upon, or in
connection with (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any registration statement, preliminary
prospectus, or final prospectus (as from tire to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale
of any of the Registrable Shares, or (B) in any application or other document
or communication (in this Section 11 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order
to register or qualify any of the Registrable Shares under the securities or
blue sky laws thereof or filed with the Commission or any securities
exchange; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect
to such Participating Holder by or on behalf of such person expressly for
inclusion in any registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, as
the case may be, or (ii) any breach in any material respect of any
representation, warranty, covenant, or agreement of the Company contained in
this Warrant. The foregoing agreement to indemnify shall be in addition to
any liability the Company may otherwise have, including liabilities arising
under this Warrant.
If any action is brought against any Participating Holder or
any of its officers, directors, partners, employees, agents, or counsel, or
any controlling persons of such person (an "indemnified party") in respect of
which indemnity may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the
Company in writing of the institution of such action (but the failure so to
notify shall not relieve the Company from any liability pursuant to this
Section 11(a), except to the extent it may have been prejudiced in any
material respect by such failure) and the Company shall promptly assume the
defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified party or parties unless the employment
of such counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party
or parties to have charge of the defense of such action or such indemnified
party or parties shall have reasonably concluded that there may be one or
more legal defenses available to it or them which are different from or
additional to those available to the Company, in any of which events such
fees and expenses shall be borne by the Company and the Company shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties.
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Anything in this Section 11 to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its prior written consent, which shall not be unreasonably withheld.
The Company shall not, without the prior written consent of each indemnified
party that is not released as described in this sentence (which consent shall
not be unreasonably withheld), settle or compromise any action, or permit a
default or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless
such settlement, compromise, consent, or termination includes an
unconditional release of each indemnified party from all liability in respect
of such action. The Company agrees promptly to notify the Participating
Holders of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of
any Registrable Shares or any preliminary prospectus, prospectus,
registration statement, or amendment or supplement thereto, or any
application relating to any sale of any Registrable Shares.
(b) Each Holder agrees to indemnify and hold harmless
the Company, its directors, officers, partners, employees, agents, and
counsel, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each Holder in Section
11(a), but only with respect to statements or omissions, if any. made in any
registration statement, preliminary prospectus, or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with
written information furnished to the Company with respect to the Holder by or
on behalf' of the Holder expressly for inclusion in any such registration
statement, preliminary prospectus or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based
on any such registration statement, preliminary prospectus, or final
prospectus, or any amendment or supplement thereto, or in any application, in
respect of which indemnity may be sought against the Holder pursuant to this
Section 11(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties by the provisions of
Section 11(a).
(c) To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to
Section 11(a) or 11(b) (subject to the limitations thereof) but it is found
in a final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Warrant
expressly provides for indemnification in such case, or (ii) any indemnified
or indemnifying party seeks contribution under the Act, the Exchange Act or
otherwise, then the Company (including for this purpose any contribution made
by or on behalf of any director of the Company, any officer of the Company
who signed any such registration statement, any controlling person of the
Company and its or their respective counsel), as one entity, and the
Participating Holders of the Registrable Shares included in such registration
in the aggregate (including for this purpose any contribution by or on behalf
of an indemnified party), as a second entity, shall contribute to the losses,
liabilities, claims, damages and expenses whatsoever to which any of them may
be subject, on the basis of relevant equitable considerations such as the
relative fault of the Company and such Participating Holders in connection
with the facts which resulted in such losses, liabilities, claims, damages,
and expenses. The relative fault, in the case of an untrue statement, alleged
untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by such
Participating Holders, and the parties' relative intent, knowledge, access to
information, and
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opportunity to correct or prevent such statement, alleged statement,
omission, or alleged omission. The Company and the Participating Holder agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Participating Holders for contribution were determined by pro
rata or per capita allocation of the aggregate losses, liabilities, claims,
damages and expenses (even if the Participating Holder and the other
indemnified parties were treated as one entity for such purpose) or by any
other method of allocation that does not reflect the equitable considerations
referred to in this Section 11(c). In no case shall any Participating Holder
be responsible for a portion of the contribution obligation imposed on all
Participating Holders in excess of its pro rata share based on the number of
shares of Common Stock owned (or which would be owned prior to the sale of
all Registrable Shares) by it and included in such registration as compared
to the number of shares of Common Stock owned (or which would be owned upon
sale of all Registrable Shares) by all Participating Holders and included in
such registration. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. For
purposes of this Section 11(C), each person, if any, who controls any
Participating Holder within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee,
agent, and counsel of each such Participating Holder or control person shall
have the same rights to contribution as such Participating Holder or control
person and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer
of the Company who shall have signed any such registration statement, each
director of the Company and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 11(c). Anything in this Section 11(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 11(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
12. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, and, in the case of a lost or
stolen Warrant, if requested by the Company, reasonable indemnity against any
losses that may be suffered by the Company as a result of the issuance of a
replacement Warrant, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
13. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any
other proceedings of the Company, except as provided in this Warrant.
14. This Warrant shall be construed in accordance with the
laws of the State of New York applicable to contracts made and performed
within such State, without regard to principles of conflicts of law.
15. The Company irrevocably consents to the jurisdiction of
the courts of the State of New York and of any federal court located in such
State in connection with any action or proceeding arising out of or relating
to this Warrant, any document or instrument delivered pursuant to, in
connection with or simultaneously with this Warrant, or a breach of this
Warrant. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 7 of the Agency Agreement.
Within 30 days after such service, or such other time as may be mutually
agreed upon in writing by the attorneys for the parties
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to such action or proceeding, the Company shall appear or answer such
summons, complaint or other process. Should the Company so served fail to
appear or answer within such 30-day period or such extended period, as the
case may be, the Company shall be deemed in default and judgment may be
entered against the company for the amount as demanded in any summons,
complaint or other process so served.
Dated: ______, 1998
PREFERRED EMPLOYERS HOLDINGS, INC.
By:
------------------------------------------------
William R. Dresback, Senior Vice President, Chief
Financial Officer and Secretary
Attest:
- ----------------------------------
Nancy Ryan, Vice President
and Assistant Secretary
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EXHIBIT 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated the 4th day of May, 1998,
and executed at Nassau, Bahamas, between PREFERRED HEALTHCARE STAFFING, INC.,
a Delaware corporation authorized to transact business in the State of
Florida, 10800 Biscayne Boulevard, 10th Floor, Miami, Florida 33161, (the
"Company", "Borrower" or "Debtor"), and CITY NATIONAL BANK OF FLORIDA, a
national banking association, 25 West Flagler Street, Miami, Florida 33131
(the "Bank" or "Lender");
WITNESSETH:
WHEREAS, Lender has simultaneously herewith extended credit to
Company under Revolving Line of Credit Promissory Note of even date herewith,
in the original principal sum of $3,000,000.00 ("Note"); and
WHEREAS, the Note has payment unconditionally guaranteed by
Preferred Employers Holdings, Inc., the parent corporation of the Borrower
and owner and holder of 100% of the stock of the Borrower.
NOW THEREFORE, in consideration of the premises and the sum of Ten
and No/l00 ($10.00) Dollars and other good and valuable consideration, paid
by each party to the other, the receipt and sufficiency of which is hereby
acknowledged, it is mutually agreed as follows:
1. Recitals. The foregoing recitations are true and correct.
2. Definitions; General Terms. Unless the context otherwise
requires, when used herein, the following terms shall have the following
meanings, which meanings shall be equally applicable to both the singular and
plural forms of such terms:
"Business Days" shall mean days on which the Bank
is open for normal business.
"Event of Default" shall mean the occurrence of
any one or more of the Events of Default described in Section 11 hereof which
shall not be remedied in the period, if any provided therein.
"Indebtedness" shall mean, collectively, all of
the Borrowers presently existing or hereafter created or assumed obligations
for borrowed money; notes payable and drafts accepted representing extensions
of credit.
"Lien" shall mean any security interest, mortgage,
pledge, lien, claim, counterclaim, set off, charge, encumbrance, title
retention agreement or analogous instrument in, of or on any of the
Borrower's assets or properties, now owned or hereafter acquired.
"Loan" means the debt evidenced by the Promissory
Note, copy of which is attached as Exhibit A.
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"Person" shall mean, as the case may be, any
corporation, natural person, firm, joint venture, partnership, trust,
unincorporated organization and government, or any department or agency of
any government.
"Guarantor" Preferred Employers Holdings, Inc. the
parent corporation of the Borrower and owner and holder of 100% of the stock
of the Borrower has executed and delivered its unconditional and continuous
guaranty of payment of all sums due Lender pursuant to the terms of the Note.
"Unmatured Event of Default" shall mean any
condition, event or act which, with notice or lapse of time, or both, as the
case may be, would constitute an Event of Default.
"Maturity Date" shall mean twelve months from the
date of the execution of the Note.
3. Description of the Loan. The loan is evidenced by the Note in the
principal sum of $3,000,000.00, a copy of which is attached hereto as Exhibit
A, and principal and interest shall be payable on the Loan as set forth in
the Note.
Subject to the terms and conditions hereof, Borrower shall,
with respect to the Loan:
a. Borrower agrees to pay all taxes and assessments, and all
recording, documentary fees, registration taxes, appraisal fees, and all
other expenses of closing.
b. All interest shall be payable monthly in arrears. All
interest shall be computed on the basis of a 360-day year and shall be
charged for the actual number of days within the period for which interest is
being charged.
c. If any payment to be made by Borrower under the Loan
shall become due on a Saturday, Sunday or business holiday under the laws of
the State of Florida, the due date of such payment shall be extended to the
next succeeding business day, and the period of such extension shall be
included in computing any interest in respect of such payment.
d. Borrower agrees that it shall be responsible for any
taxes, fees, penalties or assessments including, but not limited to State of
Florida annual intangible tax assessments, which may now or hereafter be
imposed by the State of Florida or any governmental agency having
jurisdiction thereof as a result of any extensions of the maturity date of
the Note pursuant to the terms of this Agreement, and such sums shall
automatically be added to the principal due under the Note and shall be
secured by the Collateral, if any, securing repayment of the Note.
4. Evidence of the Loan ("Loan Documents"). Borrower acknowledges
that all documents, instruments and agreements heretofore granted by Borrower
to Bank to evidence the Loan, are and shall continue to be in full force and
effect including the Note and the terms, conditions, covenants and agreements
set forth in this Loan Agreement, and documents as may be required by Bank,
including but not limited to, those mentioned in this Loan Agreement. The
payment of the Loan shall be and has been unconditionally guaranteed by
Preferred Employers Holdings, Inc. the parent corporation of the Borrower and
owner and holder of 100% of the stock of the Borrower.
2
<PAGE>
5. Conditions Precedent to Effectiveness of Loan Agreement. As
conditions precedent to the effectiveness of this Loan Agreement, Borrower
shall furnish or has furnished evidence to Lender that the following has
occurred or been prepared:
a. Borrower shall have executed and delivered to Lender this
Loan Agreement, the Note, and all other Loan Documents, each in form and
substance satisfactory to Lender.
b. Maintain insurance in such amounts and against such risks
and as is consistent with prudent business practices.
c. Acceptable evidence shall have been furnished to Lender
that Borrower is in good standing with the Secretary of State of Delaware and
Florida, and that its officer will execute and deliver this Loan Agreement
and all Loan Documents contemplated hereby has been and is permitted and
authorized by its Articles of Incorporation, By-Laws and Board of Directors
to do so.
d. Opinions of Borrower's counsel, acceptable to Lender,
that Borrower is a corporation, validly organized and existing under Delaware
law and authorized to transact business in the State of Florida, that
Borrower has been validly created and is existing under Delaware and Florida
Statutes; that Borrower has authority and has taken all necessary steps to
execute and deliver this Agreement, Note and other Loan Documents; that said
documents are valid and enforceable in accordance with their terms, subject
to the standard exceptions for equitable remedies and bankruptcy; that the
Loan as made, pursuant to the terms hereto, is not usurious, that none of the
aforesaid actions, undertakings and agreements contravene or shall contravene
Florida Law or Borrower's Articles of Incorporation and By-Laws, this
Agreement, or the provisions of any contract or agreement known to such
counsel to which Borrower is a party or by which it is bound; Borrower and
Guarantor has taken all necessary action to authorize the execution and
delivery of this Loan Agreement and all documents required to be executed in
connection with the Loan. Said opinion shall further provide that the
Guaranty described above has been duly authorized and validly executed by the
Guarantor, and that the same is valid, binding and enforceable in accordance
with its terms, subject only to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally.
6. Financial Statements. Borrower and Guarantor shall provide Lender
with the following financial information:
a. Annual audited consolidated financial statements prepared
by Guarantor and prepared according to Generally Accepted Accounting
Procedures, within 90 days of Guarantor's fiscal year end, which will include
the Borrower as a wholly owned subsidiary of Guarantor.
b. Quarterly, unaudited, consolidated financial statements
within 45 days of Guarantor's fiscal quarter end, certified as true and
correct by Borrower's and the Guarantor's chief financial officer.
c. Borrower and Guarantor shall provide Lender with a signed
copy of their income tax return within thirty (30) days of filing.
7. Inspection of Books and Assets. Borrower and Guarantor shall
allow any representative of Lender to visit and inspect any of its
properties, to examine its books of record and account and to
3
<PAGE>
discuss its affairs, finances and accounts with its officers, all at such
reasonable times and as often as Lender may reasonably request.
8. Affirmative Covenants. Borrower and Guarantor covenant and agree
that so long as this Agreement is in effect and until the Note, together with
interest and all other obligations incurred hereunder is paid in full,
Borrower and Guarantor will comply with the following:
a. The Borrower and/or Guarantor will at all times have a
minimum net stockholders' equity of $10,000,000. The Borrower and/or
Guarantor must maintain at all times cash and/or short term investments of
not less than $5,000,000.
9. Negative Covenants. Borrower and Guarantor covenant and agree
that so long as this Agreement is in effect and until the Note, together with
the interest and all other obligations incurred hereunder are paid in full,
Guarantor and Borrower will not, unless authorized by Lender in writing to:
a. Liens. Contract, create, incur, assume, or suffer to
exist any mortgage, pledge, lien or other charge or encumbrance of any kind
(including the charge upon property purchased under conditional sale or other
title retention agreements) in excess of $250,000 annually commencing from
the date of execution of this Agreement (excluding employment agreements and
all leases) upon, or grant any security interest in (all of the foregoing
"Liens"), any of its property or assets whether now owned or hereafter
acquired; nor guarantee, assume debt or endorsements except in the ordinary
course of business.
b. Other Indebtedness. Contract, create, incur, assume, be
or become contingently liable, or suffer to exist, any indebtedness for
borrowed money, in excess of $250,000 annually commencing from the date of
execution of this Agreement, except (i) indebtedness incurred pursuant to
this Agreement (ii) indebtedness existing on the effective date of this
Agreement to the extent disclosed in writing to Lender prior to its execution
of this Agreement.
c. Accounts Receivable, etc. Sell, discount, transfer,
assign or otherwise dispose of any of its accounts or notes receivable at
less than face value thereof unless in each case the purpose is to accomplish
collection of delinquent accounts in the ordinary course of business, and
except for endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
10. Jurisdiction. Borrower and Guarantor irrevocably agree, that
subject to Lender's sole and absolute election, all actions or proceedings in
any way arising out of this Agreement, shall be litigated in courts having
situs within Miami-Dade County, State of Florida. Borrower and Guarantor
hereby consent and submit to the jurisdiction of any local, state or federal
courts, located within said county and state. Borrower and Guarantor waive
any objection to venue of any actions instituted hereunder and consent to the
granting of such legal or equitable relief as is deemed appropriate by the
court.
11. Events of Default. In the event of any conflict between the
terms of this Section 11 Events of Default and the Note, the terms under this
Section 11 of the Loan Agreement shall prevail. Upon the occurrence of any of
the following events (hereinafter referred to as an "Event of Default") which
are not cured by Borrower within fifteen (15) business days after receipt of
a notice of default, unless otherwise provided below and except for
subparagraph (a), which shall be five (5) business days:
4
<PAGE>
a. Borrower shall fail to make any payment of principal
and/or interest on the Note when the same shall become due and payable.
b. An event of default as defined in the Guaranty or any
other Loan Document shall occur.
c. Borrower shall fail to perform any other term or
condition of this Agreement.
d. The filing by or against Borrower or the Guarantor of a
petition in bankruptcy or under any rehabilitative provision of the
Bankruptcy Code, or the insolvency of Borrower or the Guarantor, or the
making by Borrower or the Guarantor of an assignment for the benefit of
creditors, or the appointment of a receiver or trustee for Borrower, shall
constitute a default hereunder which shall authorize Lender, at its option,
to immediately accelerate maturity of all indebtedness secured hereby,
provide that if such bankruptcy petition or receivership is involuntary,
Borrower or the Guarantor shall have a period of thirty (30) days in which to
finally dismiss same before Lender may exercise any of the hereinafter
specified remedies in the event of default.
e. Borrower shall fail to perform any covenant or term or
condition of this Agreement, or any representation or warranty of Borrower
herein or in any other loan documentation found to be inaccurate, untrue or
breached, or shall fail to timely perform all terms and conditions for
disbursement of the Loan.
The foregoing shall constitute "Events of Default" hereunder.
12. Remedies. Upon the happening of any Event of Default and in the
event Borrower shall have failed to cure such default in the applicable cure
time period provided above, Lender, at its option, may:
a. Declare immediately due and payable all indebtedness,
with interest, all monies advanced hereunder and accordingly accelerate
payment of the Note, or take any other action permitted thereby or under the
Guaranty of Payment, or by law, notwithstanding anything to the contrary in
the terms of payment stated herein; and
b. Proceed against Borrower and/or Guarantor, or both, to
enforce any or all Loan Documents, in any manner; and
c. The remedies herein provided for shall be in addition to,
and not in substitution for, the rights and remedies which would otherwise be
vested in Lender in law or equity or under the Note, the Guaranty and any
other Loan Documents, all of which rights and remedies are specifically
reserved by Lender, and the failure by Lender to exercise the remedies herein
provided shall not preclude the resort to any other remedy or remedies, nor
shall the exercise of the remedies herein provided prevent the subsequent or
concurrent resort to any other remedy or remedies which by law or equity
shall be vested in Lender for the recovery of damages or otherwise in the
event of a breach of any of the undertakings of Borrower hereunder. No delay
or omission by Lender in exercising any right or remedy accruing upon the
happening of an Event of Default shall impair any such right or remedy or
shall be construed as a waiver of any such default; and every right and
remedy hereby conferred upon Lender
5
<PAGE>
may be exercised from time to time and as often as shall be deemed expedient
by Lender. No waiver of any Event of Default shall extend to or affect any
other Event of Default.
13. Borrower's Assignment. This Loan Agreement may not be assigned
by Borrower without the prior written consent of Lender, which consent may be
withheld in the Lender's sole and absolute discretion, and any attempt to
make such assignment without such consent shall be void and at the option of
Lender, be deemed a default hereunder.
14. Lender's Assignment. This Agreement, the Loan and any documents
evidencing or securing the Loan, may be placed, assigned and/or serviced by
Lender and/or its successors or assigns, and in connection with any of the
foregoing Lender and/or its successors or assigns, may receive servicing,
brokerage and other fees. Any such placement, assignment or servicing shall
be at Lender's sole option and Lender and/or its successors or assigns shall
have no obligation to disclose to Borrower the receipt or contemplated
receipt of any such fees, nor shall Borrower have any claim or right to same.
Lender shall have the right to assign the Loan to an
affiliate of Lender or to a responsible institutional Lender, and any such
assignee shall have the same rights and privileges as Lender does.
15. Declaration of No Set-Off. In the event Lender shall sell and
assign the Note and other Loan Documents, Borrower will, at the request of
Lender, execute and deliver to the purchaser thereof a Declaration of No
Set-Off, or if set-offs do exist, specifying the same, and shall otherwise
assist in every way in such assignment.
16. Indemnification. Borrower agrees to protect, indemnify, defend
and save harmless, Lender and its directors, officers, agents and employees
from and against any and all liability, expense or damage of any kind or
nature and from any suits, claims, or demands, including reasonable legal
fees and expenses on account of any matter or thing, whether in suit or not,
arising out of this Agreement, or in connection therewith, unless said suit,
claim or damage is caused by negligence or willful malfeasance of Lender.
This obligation shall survive the closing of the Loan and the repayment
thereof.
17. Notices. All notices requests and demands to be made hereunder
to the parties hereto shall be in writing and deemed to have been given or
made when sent by the United States Postal Service to the addresses set forth
on Page 1 above, and as to Lender, to the attention of Craig Young, and as to
Borrower, William R. Dresback, Senior Vice President. Such notices request
and demand shall be by registered or certified mail return receipt requested,
or by telegram or telegraph or may be personally delivered to Borrower or to
a responsible person in the Commercial Loan Department of Lender.
18. Lender Determination of Facts. Lender shall at all times be free
to independently establish to its satisfaction the existence or nonexistence
of any facts, the existence or nonexistence of which is a condition of this
Agreement.
19. Incorporation of Preamble, Recital and Exhibits. The preamble,
recital and exhibits hereto are hereby incorporated into this Agreement.
20. Titles and Headings. The titles and headings of sections of this
Agreement are intended for convenience only, and shall not in any way affect
the meaning or construction of any provision of this Agreement.
6
<PAGE>
21. Changes, Waivers, Discharge and Modifications in Writing. No
provisions of this Agreement may be changed, waived, discharged or terminated
except by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. Each
and every covenant and condition for the benefit of Lender contained in this
Agreement may be waived by Lender; provided, however, that any waiver by
Lender of any such covenant or condition shall be in writing and a waiver
only with respect to the instance for which such waiver is granted, and shall
not be deemed to be a waiver by Lender of Borrower's obligation to thereafter
perform each other or the same covenant or condition of Lender's right to
enforce such performance.
22. Definitions include Amendments. Definitions contained in this
Agreement which identify documents, including, but not limited to, the Loan
Documents, shall be deemed to include all amendments and supplements to such
documents to the date hereof and all future amendments and supplements
thereto entered into from time to time to satisfy the requirements of this
Agreement or otherwise with the consent of Lender. Reference to this
Agreement contained in any of the foregoing documents shall be deemed to
include all amendments and supplements to this Agreement.
23. Lender Not Partner of Borrower. Notwithstanding anything to the
contrary herein contained or implied, Lender. by this Agreement or by any
action pursuant, shall not be deemed a partner of or joint venturer with
Borrower, and Borrower hereby indemnifies and agrees to hold Lender harmless
(including the payment of reasonable attorneys' fees) from any and all claims
or damages resulting from such a construction of the parties' relationship.
The requirements herein, and the restrictions imposed in this Agreement are
for the sole protection and benefit of Lender, and not any third party,
specifically but not limited to contractors, supplies and customers of
Borrower. No such third parties shall have any right to seek recourse against
Lender hereunder or otherwise, to require compliance with the terms and
conditions hereof.
24. Costs and Attorneys' Fees. In any litigation, including breach,
enforcement, defense or interpretation arising out of this Agreement, the
prevailing party in such litigation, including proceedings in appellate
courts, shall be entitled to recover reasonable attorney's fees, costs and
expenses.
25. Successors and Assigns. Subject to the restrictions on
Borrower's right to transfer contained herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
26. Entire Agreement. No charge or modification of this Agreement
shall be valid unless the same is in writing and signed by the parties
hereto. This Agreement and the Note and the other Loan Documents contain the
entire agreement between the parties hereto and there are no promises,
agreements, conditions, undertakings, warranties and representations, either
written or oral, express or implied, between the parties hereto other than as
set forth herein or executed concurrently herewith and therein set forth. It
is expressly understood and agreed that the parties hereto intend this
Agreement to be an integration of all prior and contemporaneous promises,
agreements, conditions, undertakings, warranties and representations between
the parties hereto. Each and every one of the obligations, conditions and
undertakings therein of Borrower shall continue and not cease until the Loan,
together with all interest, fees, costs and other amounts due Lender pursuant
hereto and thereto shall have been paid in full and until all obligations of
Borrower, and Guarantor shall have been discharged.
7
<PAGE>
27. Time. Time is of the essence as to all matters provided for in
this Agreement. In the event of any inconsistency between the applicable time
periods or dates contained in this Agreement and those contained in any other
Loan Document entered into between Borrower and Lender concurrently herewith,
the time periods and dates set forth herein shall control.
28. Consent of Guarantor. The undersigned Guarantor by joinder in
and execution of this Agreement hereby consents and agree that its guaranty
will continue to guarantee the obligations described therein, and this
Agreement, and further acknowledges and agrees that this Guaranty of payment
is valid and enforceable according to its terms and that it has no off-sets,
defenses or counterclaims towards the enforcement thereof.
29. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION
(INCLUDING BUT NOT LIMITED TO, ANY CLAIMS, CROSS CLANS OR THIRD PARTY CLAIMS
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN. BORROWER HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF THE LENDER NOR THE LENDER'S COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT
OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. BORROWER ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER
INTO THIS LOAN, BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
Signed, sealed and delivered LENDER
in the presence of: CITY NATIONAL BANK OF FLORIDA,
a national corporation
/s/ By: /s/
- ---------------------------- -----------------------------------------
- ----------------------------
AND
BORROWER
PREFERRED HEALTHCARE STAFFING, INC.,
a Delaware corporation
/s/ By: /s/ William R. Dresback
- ----------------------------- -------------------------------------------
William R. Dresback, Sr. Vice President
- -----------------------------
8
<PAGE>
AND
GUARANTOR
PREFERRED EMPLOYERS HOLDING, INC.
/s/ By: /s/ William R. Dresback
- ----------------------------- -------------------------------------------
William R. Dresback, Sr. Vice President
9
<PAGE>
EXHIBIT 10.2
LOAN NO. _________________________________ CITY NATIONAL BANK
OF FLORIDA
PROMISSORY NOTE &
SECURITY AGREEMENT
REVOLVING LINE OF CREDIT Date April 27, 1998
---------------
Effective
FOR VALUE RECEIVED, the undersigned (jointly and severally, if more than one)
("Maker") promises to pay to the order of CITY NATIONAL BANK OF FLORIDA at its
office at 25 West Flagler Street, Miami, Florida, which together with any holder
hereof is called "Bank", the principal sum of $THREE MILLION AND no/100 DOLLARS
($3,000,000.00) together with interest on the terms below:
The proceeds of this loan are to be used primarily for: /_/ personal, family, or
household purposes: /X/ business use; or /_/ farming operations.
INTEREST CALCULATION
The Interest Rate is:
(XX) A VARIABLE INTEREST RATE OF -0- PERCENT PER ANNUM IN EXCESS OF:
(XX) The City National Bank Base Rate (the base rate of interest
announced from time to time at Bank's discretion)
( ) Other Index________________________________________________
THE VARIABLE INTEREST RATE WILL BE ADJUSTED:
(XX) When the City National Bank Base Rate Changes
( ) When the index as stated above changes
( ) Other ______________________________________________________
( ) A FIXED INTEREST RATE OF ____________________________ PERCENT PER ANNUM
(XX) INTEREST SHALL BE CALCULATED ON THE BASIS OF A THREE HUNDRED SIXTY
(360) DAY YEAR, BUT INTEREST SHALL ACCRUE AND BE PAYABLE FOR THE ACTUAL
NUMBER OF DAYS IN EACH MONTH.
THE MAXIMUM INTEREST RATE WILL NOT EXCEED (*) %. (*)MAXIMUM RATE PER
APPLICABLE FLORIDA AFTER MATURITY, OR WHILE IN DEFAULT, THIS NOTE SHALL BEAR
INTEREST AT THE HIGHEST LEGAL RATE PER ANNUM ALLOWABLE BY FLORIDA LAW.
REPAYMENT SCHEDULE
( ) Principal and interest are due and payable in a single payment
on __________________________________
(XX) Principal payable in a single payment due on May 2, 1999 and
interest due and payable monthly commencing on June 2, 1998
( ) Principal payable on the earlier of demand or _______________
___________________ ______, at the sole discretion of Bank
and accrued interest payable ______________________________
commencing on _______________________________________,
____________.
( ) Payable in ________________ installments of $__________________
plus accrued interest, due and payable ____________________
commencing on ________________________, 19__, together with a
final/balloon payment in the amount of $_______________________
plus accrued interest, due and payable on ____________________,
___________. The terms, if any, for refinancing the balloon
payment, are ________________________
________________________________________.
( ) Payments of principal and interest payable in _________________
installments of $________________________ each, due and payable
_______________________ commencing on ________________, 19__,
together with a final/balloon payment in the amount of
$_________________ due and payable on ________________________,
____. The terms, if any, for refinancing the balloon payment,
are ______________________
_______________________________________________________.
( ) Principal payments are due and payable as follows:_____________
_____________________________________________________.
COLLATERAL
( ) If checked here, this Note is secured by and Maker pledges to
Bank and grants a security interest in the following: Unsecured
Maker and any endorser, surety, guarantor or other party signing this Note or
otherwise guaranteeing or ensuring the performance or payment by Maker (the
"Obligor") pledges to Bank and grants a security interest in all other property
of Maker and of each other Obligor now or hereafter in the possession, custody
or control of Bank, whether held expressly as collateral, security or otherwise
including, but not limited to, any balance or share of any deposit, trust or
agency or special account in which any Obligor has an interest. All of such
property, together with any specific property listed above as pledged to Bank by
Maker(s), shall be referred to as the "Collateral".
The Collateral is also pledged as security for all other liabilities or
obligations of each Maker to Bank (primary, secondary, direct, contingent, sole,
joint or several), due or to become due or which may be hereafter contracted or
acquired. Bank may, at its option, transfer at any time to itself or to its
nominee any Collateral and receive the income thereon and hold the same as
security herefor, or apply it on the principal or interest due hereon or due on
any liability or obligation secured hereby. Notwithstanding the surrender of
this Note upon payment or otherwise, Bank may nevertheless retain the Collateral
for any other liabilities.
Additions to, releases, reductions or exchanges of, or substitutions for the
Collateral, payment on account of this loan or increases of the same, or other
loans made partially or wholly upon the Collateral, may from time to time be
made without affecting the provisions of this Note or the liabilities of any
party hereto. Bank shall not be bound to take any steps necessary to preserve
any rights in the Collateral against prior parties and each Obligor shall take
necessary steps for such purposes. Bank or its nominees need not collect
interest or principal of any Collateral or give any notice with respect thereto.
Maker shall at all times keep the Collateral insured in such forms, and in such
amounts, as shall be acceptable to Bank, and shall keep the Collateral in good
maintenance, repair and condition, if appropriate to the nature of the
Collateral.
If the Collateral shall any time become unsatisfactory to Bank or if Bank shall
at any time deem itself insecure, Maker shall, within five days after demand,
deposit with Bank as additional Collateral, property which is satisfactory to
Bank in its sole discretion.
The undersigned agrees to pay a late charge equal to 5% of each payment of
principal and/or interest which is not paid within 10 days on which it is due.
THE TERMS OF THE REVERSE SIDE OF THIS DOCUMENT AND OF ANY SEPARATE SECURITY
AGREEMENT OR MORTGAGE GRANTING A SECURITY INTEREST ARE MADE A PART OF THIS
PROMISSORY NOTE AND SECURITY AGREEMENT.
PREFERRED HEALTHCARE STAFFING, INC.
Preferred Healthcare Staffing, Inc. a Delaware corporation
- ---------------------------------- -----------------------------------
Mailing Address 10800 Biscayne
Boulevard PH BY: Execution Date
Miami, Florida 33161 /s/ William R. Dresback
- ------------------------------------ -----------------------------------
City State Zip Code William R. Dresback Execution Date
Sr. Vice President
1
<PAGE>
Upon the happening of any of the following events, each of which shall
constitute a default, all liabilities of each Maker or Bank shall become due and
payable at once without notice or demand: (a) failure of any Obligor to perform
any agreement hereunder or to pay in full, when due, this Note or any other
liability whatsoever to Bank or any installment thereof or interest thereon, or
failure to pay when due any premium on any life insurance policy held as
Collateral hereunder; (b) the death of any Obligor; (c) filing of any petition
under the Bankruptcy Act, or any similar federal or state statute, by or against
any Obligor; (d) application for the appointment of a receiver for, the making
of a general assignment for the benefit of creditors by, or the insolvency of,
any Obligor; (e) taking possession of any substantial part of the property of
any Obligor at the insistence of any government authority; (f) dissolution,
merger, consolidation, or reorganization of any Obligor; (g) a material adverse
change has occurred in the financial condition of any Obligor from the
conditions set forth in the most recent financial statement of such Obligor
furnished to bank, or from a condition of such Obligor as most recently
disclosed to Bank in any manner; (h) that any warranty, representation,
certificate, or statement of any Obligor (whether nor not contained herein)
pertaining to or in connection with the loan evidenced hereby is not true; (i)
assignment by any Maker of any equity in any of the Collateral without the
written consent of Bank. The principal of the Note, and any part thereof, shall
bear interest at the maximum legal rate of interest chargeable under the laws of
the State of Florida after default until paid.
Bank may, at any time, whether or not this Note is due (a) pledge or transfer
this Note and Security Agreement and the Collateral, whereupon Bank shall be
relieved of all duties and responsibilities hereunder and relieved from any and
all liability with respect to any Collateral so pledged or transferred, and any
pledgee or transferee shall, for all purposes, stand in place of Bank hereunder
and have all the rights of Bank hereunder; (b) vote the Collateral; (c) notify
Obligor on any Collateral to make payment to Bank of any amounts due or to
become due thereon; (d) demand, sue for, collect or make any compromise or
settlement it deems desirable with reference to the Collateral; (e) take
possession or control of any proceeds of Collateral; and (f) exercise all other
rights necessary or required, in Bank's discretion, in order to protect its
interests hereunder.
In no event shall Bank or any holder hereof be entitled to unearned or unaccrued
interest or other charges or any rebates, except as may be authorized by law;
nor shall any such party be entitled to receive at any time any such charges not
allowed or permitted by law, or any interest in excess of the maximum allowed by
law from time to time.
No delay or omission on the part of Bank in exercising any right hereof shall
operate as a waiver of such right or any other right under this Note.
Presentment, demand, protest, notice of dishonor and all other notices are
hereby waived by each and every Obligor. This Note shall be construed and
enforced according to the laws of the State of Florida and the parties agree
that any litigation by either party with respect to this Note shall take place
and be litigated in Dade County, Florida. The Obligors, jointly and severally,
promise and agree to pay any and all reasonable attorney's fees and costs
(whether or not suit is filed, and including both the trial and appellate level
on appeal, if any) in an amount not less than ten percent (10%) of the principal
sum. The Obligors jointly and severally agree to pay any and all filing fees and
intangible taxes and any other imposition imposed on the obligation evidenced
hereby. Any notice to Maker shall be sufficiently served for all purposes if
placed in the mail, postage prepaid, addressed to or left upon the premises at
the address shown or any other address shown on Bank's records.
Each Obligor hereby expressly consents to any and all extensions and renewals,
in whole or in part, and all delays in time of payment or other performance with
the holder hereof may grant or permit at any time and from time to time without
limitation and without any notice to or further consent of any Obligor. Each
Obligor shall also be bound by all of the foregoing items, and those of the
front side hereof, without the requirement that Bank or any holder hereof first
go against the Collateral hereof, or any security interest granted hereby.
Each Obligor agrees to furnish current and accurate financial data to Bank upon
request.
- ------------------------------------------------------------------------------
ENDORSEMENT
In addition to the liability as endorsers, which the undersigned hereby assume,
and intending to be legally bound, the undersigned (and if more than one, each
of them jointly and severally) (a) hereby become surety to the CITY NATIONAL
BANK OF FLORIDA, Miami, Florida, its successors, endorsers, endorsees and
assigns, for the payment of the within Note; and (b) consent (i) that the
Collateral may be exchanged, surrendered or sold from time to time, (ii) that
the payment of the Note, or any of the liabilities of the Maker thereof, or of
any Collateral, may be extended or renewed in whole or in part and (iii) that
any of the provisions of the Note may be modified; all without notice to and
without affecting the liability of the undersigned as endorsers and sureties.
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- ------------------------------------------------------------------------------
DISBURSEMENT AUTHORIZATION
TO: CITY NATIONAL BANK OF FLORIDA
Gentlemen:
You are hereby authorized and directed to disburse the proceeds of this Note
to:__________________________________________________________________________
Upon delivery of the funds as specified herein, you are fully released and
discharged from all liability resulting therefrom.
Very truly yours,
Preferred Healthcare Staffing,
Name of Maker
By:_/s/_William_R._Dresback_________________
William R. Dresback
Sr. Vice President
By:_________________________________________
STATE OF _________________________________________
COUNTY OF _______________________________________
The foregoing instrument was acknowledged before me this
________________ day of April, 1998 by William R. Dresback, as Sr. Vice
President and ____________, as ______________________________ respectively of
Preferred Healthcare Staffing, Inc. corporation, on behalf of the corporation,
_____________________________ and _________________________ respectively is/are
(personally known to me) or has produced _______________________________________
and (did/did not) take on oath.
Type of Identification
-------------------------------------------
Notary Public, State of
-------------------------------------------
Print Name and Title of Notary
2
<PAGE>
STATE OF _________________________________________
COUNTY OF _______________________________________
The foregoing instrument was acknowledged before me this
________________ day of _______________, ___ by __________________________ who
is (personally known to me) or who has produced
____________________________________ and who (did/did not) take on oath.
Type of Identification
-------------------------------------------
Notary Public, State of
-------------------------------------------
Print Name and Title of Notary
3
<PAGE>
EXHIBIT 10.3
------------
CITY NATIONAL BANK
OF FLORIDA
CONTINUOUS
GUARANTY
TO: CITY NATIONAL BANK OF FLORIDA May 4, 1998
MIAMI, FLORIDA
For value received and to enable PREFERRED HEALTHCARE STAFFING, INC., a
Delaware corporation authorized to transact business in the State of Florida,
of 10800 Biscayne Blvd., Miami, Florida 33161 (the "Debtor"), to obtain
credit from time to time from City National Bank of Florida (the "Bank") the
undersigned request(s) the Bank to extend from time to time to the Debtor,
such credit as the Bank may deem proper and in consideration of any other
credit given, the undersigned hereby guarantee(s) the full and prompt payment
of the Bank at maturity and at all times thereafter of any and all
indebtedness, liabilities and obligations of every nature and kind of the
Debtor to the Bank and every balance and part thereof, and all renewals,
extensions and modifications thereof whether now owing or due or which may
hereafter from time to time be owing or due and howsoever heretofore or
hereafter created or arising or evidenced or acquired.
Guarantors hereby waive demand of payment, protest and notice of protest, on
any and all of the aforesaid items. Payments by the guarantors to the Bank,
pursuant to this guarantee, shall be made at the main office of the Bank in
Miami, Florida inlawful money of the United States, with interest at the
highest rate allowable by the law form maturity until paid. Guarantors also
agree to pay to the Bank any and all expenses of collection under this
guarantee and of items hereby guaranteed, including, but not limited to,
attorneys fees and costs, and any such costs and/or fees relative to any
appeals or other appellate proceedings or remedies.
The liability hereunder shall in no way be affected or impaired by (and the
Bank is hereby expressly authorized to make from time to time without notice
to anyone) any sale, pledge, surrender, compromise, release, renewal,
extension, indulgence, alteration, exchange, change in, or modification of any
said indebtedness, liabilities and obligations, either expressed or implied,
or any contract or contracts evidencing any thereof, or any security or
collateral therefore. The liability hereunder shall in no way be affected or
impaired by any acceptance by the Bank of any security for any of said
indebtedeness, liabilities and obligations, or by any disposition of or
failure, neglect or omission on the part of the Bank to be realized upon any
of said indebtedness, liabilities and obligations, or upon any collateral or
security for any or all of said indebtedness, liabilities and obligations, or
by any application of payments or credits thereon. The Bank shall have the
exclusive right to determine how, when, and what application of payments and
credits, if any, shall be made on said indebtedness, liabilities an
obligations, or any part of them. In order to hold the undersigned liable
hereunder, there shall be no necessity or duty on the part of the Bank to
resort at any time for payment to the Debtor, or to any other person on
corporation, or to all or any of said indebtedness, liabilities and
obligations, or to any collateral or security or property whatsoever.
The Bank is hereby given a lien for the amount of the liability and
indebtedness, whether or not due and payable, created by this Guaranty, upon
all property and securities now or hereinafter in the possession or custody
of the Bank by or for the account of any or all of the guarantors or in which
any or all guarantors may have any interest (all remittances and property to
be deemed in the possession or custody of the Bank as soon as put in transit
to it by mail or carrier) and also upon the balance of any deposit amounts of
any or all of the guarantors with the Bank existing from time to time, and the
Bank is hereby authorized and empowered, at its option, to appropriate any
and all thereof and apply any and all thereof and the proceeds thereof to the
payment
1
<PAGE>
and extinguishment of the liability or indebtedness payable. The Bank is
further hereby authorized and empowered, at its option, at any time after the
liability and indebtedness hereby created becomes payable, to sell, assign
and deliver any securities or property at any time in the possession or
custody of the Bank for any or all guarantors or in which any or all
guarantors may have any interest at any broker's board or at public or
private sale, for cash, credit or for future delivery, all at the option of
the Bank, without further advertisement or notice of sale and without notice
to any or all guarantors of intention to sell, which rights of guarantors are
hereby expressly waived. Upon any sales at public auction or brokers board,
the Bank may bid for and purchase the whole or any part of the securities or
property sold free of any right of redemption which any and all guarantors
hereby waive and release.
Notwithstanding the death or insanity of any of the guarantors, this
Guaranty shall be binding upon their respective heirs, personal
representatives and estate with respect to the aforementioned items coming
into existence after such death or insanity and until actual receipt by the
Bank of written notice thereof from the legal representatives of any such
guarantor. This Guaranty shall continue in full force and be binding upon
each guarantor notwithstanding the death or insanity or release of any other
guarantor. The bankruptcy or insolvency of any guarantor shall not affect the
obligations of the other guarantors hereunder. The obligations hereof shall
survive the death of any or all the guarantors and shall be binding upon the
heirs, personal representatives and estate of any or all guarantors and upon
any surviving guarantor for all the aforesaid items coming into existence
after any such death, the same as if such death had not occurred.
In the event a limited amount is guaranteed herewith, the granting of
credit from time to time by the Bank to said Debtor in excess of such amount
of this Guaranty and without notice to the undersigned is hereby also
authorized and shall in no way affect or impair this Guaranty. All diligence
in collection, and all presentment for payment, demand, protest and notice as
to any and everyone of dishonor and of default and non-payment and of the
creation and existence of any and all of said indebtedness, liabilities and
obligations, and of any security and collateral therefore, and of the
acceptance of this Guaranty and of any and all extensions of credit and
indulgence hereunder, are hereby expressly waived.
No act or commission or omission of any kind or at any time by the Bank
shall affect or impair this Guaranty.
Guarantors hereby agree that their obligations hereunder shall be
absolute and primary and shall be complete and binding upon each guarantor
upon this Guaranty being executed by him and subject to no oral statements or
conditions, precedent or otherwise
In case of death, dissolution, liquidation, failure, insolvency or
bankruptcy of the Debtor, all of said indebtedness, liabilities and
obligations to the extent of the amount of this Guaranty shall, at the option
of the Bank, become immediately due from and be forthwith paid by the
undersigned to the Bank, the same as though said debts, liabilities and
obligations had matured by lapse of time.
This Guaranty shall be a continuing, absolute and unconditional
Guaranty and shall remain In full force and effect until written notice of
its discontinuance shall actually be received by the Bank, and also until any
and all of said Indebtedness, liabilities and obligations created before
receiving such notice of discontinuance shall be fully paid.
The undersigned guarantors agree that it is contemplated that from time
to time, the Bank may extend future increases of credit to the Debtor or new
loans to the Debtor after the original obligation guaranteed hereunder has
been paid and guarantors agree that this Guaranty shall remain in full force
and effect as to such future increases or new obligations until and unless a
termination of this Guaranty is furnished in writing to the Bank.
The undersigned guarantors jointly and severally authorize the Bank to
retain this Guaranty, and this Guaranty shall remain in full force and effect
for a period of four months from the date that written notice of its
discontinuance is receive by the Bank.
2
<PAGE>
The undersigned guarantors jointly and severally further covenant that if any
party liable under this Guaranty or on the guaranteed debt shall file a
petition in bankruptcy, or if a petition in bankruptcy be filed against them,
or if a receiver or trustee be appointed as to their financial affairs, the Bank
may retain this Guaranty and this Guaranty shall remain in full force and
effect until such time as the applicable statute of limitations shall have
run against any such trustee in bankruptcy, receiver or other trustee who may
have some claim against the Bank arising out of, under or related to any
payments made by the guarantor(s) or debtor(s).
In the event the Bank refunds or returns any monies received by it under the
guaranteed debt or under this Guaranty, either voluntarily, through court
action, or otherwise, the guarantors jointly and severally agree to remain
liable hereunder and their liability shall be reinstated as to the amount so
refunded or returned, notwithstanding the fact that this Guaranty and/or the
evidence of indebtedness is or may have been returned to the guarantors, or
is cancelled.
The death or dissolution of the undersigned, or either, or any of them shall
not terminate this Guaranty until written notice of such death or dissolution
shall have been actually received by the Bank, and also until all of said
indebtedness, liabilities and obligations created before receiving such
notice shall be fully paid. And, in the event of the termination of this
Guaranty in a manner and at the time aforesaid in respect to one or more but
less than all of the undersigned by reason of death or dissolution, this
Guaranty shall, notwithstanding, still continue and remain in full force
against the survivor or survivors of the undersigned, until discontinued in
the manner hereinbefore provided.
This Guaranty shall be governed by and construed in accordance with the laws
of Florida. The undersigned waives all rights which they may have under the
Homestead or similar laws of the State of Florida or any other state law.
Except as provided in any other written agreement now or at any time
hereafter in force between Bank and the undersigned, this Guaranty shall
constitute the entire agreement the undersigned with Bank with respect to the
subject matter hereof and no representation, understanding, promise or
condition concerning the subject matter hereof shall be binding upon lender
unless expressed herein.
The obligation of the guarantors hereunder shall be several and also joint,
each with all or with any one or more of the others, and may be enforced
against each separately or against any two or more jointly, or against some
separately and some jointly, and shall inure to the benefit of the Bank, its
successors, legal representatives and assigns. It is specifically intended
that this Guaranty is to Guaranty the indebtedness to the Bank regardless of
any change in the composition of the borrowing entity.
WAIVER OF JURY TRIAL: GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY AND ALL RIGHT GUARANTOR MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY LITIGATION INCLUDING, BUT NOT LIMITED TO, ANY CLAIMS,
CROSS-CLAIMS OR THIRD PARTY CLAIMS ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTY. GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
THE LENDER NOR THE LENDER'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE
THIS WAIVER OR RIGHT TO JURY TRIAL PROVISION. GUARANTOR ACKNOWLEDGES THAT THE
LENDER HAS BEEN INDUCED TO ENTER THE LOAN(S) WHICH THIS GUARANTY APPLIES,
BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH.
3
<PAGE>
IN WITNESS WHEREOF, __________ have hereunto set _______ hand _________
and seal _________ the day and year above written.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:
PREFERRED EMPLOYERS HOLDINGS, INC.
/s/ By: /s/ William R. Dresback (SEAL)
- --------------------------- --------------------------------
William R. Dresback, Senior Vice President
(SEAL)
- --------------------------- --------------------------------
Notwithstanding any provision contained herein to the contrary, this
Continuous Guaranty shall expire upon the full payment of all monies owed to
City National Bank by Preferred Healthcare Staffing, Inc. as evidenced by
that Promissory Note and Security Agreement dated April 27, 1998.
4
<PAGE>
Exhibit 99.1
Preferred Employers Holdings, Inc. Completes a Private
Placement of 7% Subordinated Convertible Notes for $10,580,000
MIAMI, June 1 -- Preferred Employers Holdings, Inc. (Nasdaq SmallCap:PEGI)
announced today that it has consummated a private placement of $10,580,000 of
7% Convertible Subordinate Notes due May 12, 2003 (the "Notes").
The principal amount of the Notes are convertible by the holders into
shares of common stock at any time prior to the earlier of May 12, 2003, or
10 business days after receipt of a termination notice for prepayment of the
Notes at a conversion price of $9.00 per share. The Notes can be prepaid upon
the satisfaction of certain events, which includes having the bid price of
the common stock exceed $13.50 for 20 consecutive trading days. In connection
with the private placement, the Company agreed to file a registration
statement with the Securities and Exchange Commission no later than August 2,
1998, in order to register the sale of the shares of common stock issuable
upon conversion of the Notes.
Commenting on the completion of the private placement, Mel Harris,
Chairman and Chief Executive Officer of Preferred Employers, stated,
"finalizing this private placement should allow Preferred Employers to
continue its strategy of moving into the employee leasing and employee
staffing arena by funding additional acquisitions."
The Company is a multi-service oriented provider engaged in the
following business: (i) a provider of workers' compensation and business
insurance products and risk management and cost containment services
primarily to franchised companies throughout the United States; (ii) a
re-insurer with respect to certain workers' compensation and employers'
liability insurance policies; and (iii) a provider of temporary registered
nurses and other professional medical personnel, primarily to client
hospitals.
Certain statements contained herein are forward-looking statements that have
been made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the actual results in the
future periods or plans for future periods to differ materially from those
described herein as anticipated, believed or estimated.
