<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
DRCA MEDICAL CORPORATION
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE, $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
233295 10 4
(CUSIP NUMBER)
ANTHONY MARINATOS
ONE INDEPENDENT DRIVE, SUITE 1610
JACKSONVILLE, FLORIDA 32202
(904) 355-3519
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS)
MAY 21, 1996
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement of Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [X]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class).
<PAGE> 2
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
1) NAMES OF REPORTING PERSONS / S.S OR I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS CHARTWELL CAPITAL INVESTORS, L.P./
59-3271850 ----------------------------------
----------
- -------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A)
--------------------------
(B)
--------------------------
- -------------------------------------------------------------------------------
3) SEC USE ONLY
------------------------------
- -------------------------------------------------------------------------------
4) SOURCE OF FUNDS (SEE INSTRUCTIONS) WC
----
- -------------------------------------------------------------------------------
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
-----------------------
- -------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
-----------------
- -------------------------------------------------------------------------------
NUMBER OF 7) SOLE VOTING POWER 0
SHARES BENE- -------------------------
FICIALLY
OWNED BY 8) SHARED VOTING POWER 720,742
EACH REPORT- -----------------------
ING PERSON
WITH 9) SOLE DISPOSITIVE POWER 0
----------------------
10) SHARED DISPOSITIVE POWER 720,742
--------------------
- -------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
720,742
-------
- -------------------------------------------------------------------------------
2
<PAGE> 3
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
12) CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)
----------------------------------
- -------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.99%
------
- -------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN
--
- -------------------------------------------------------------------------------
3
<PAGE> 4
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
1) NAMES OF REPORTING PERSONS / S.S OR I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS CHARTWELL CAPITAL PARTNERS, L.P./
59-3271857 ---------------------------------
----------
- -------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A)
----------------------------------
(B)
----------------------------------
- -------------------------------------------------------------------------------
3) SEC USE ONLY
----------------------------------
- -------------------------------------------------------------------------------
4) SOURCE OF FUNDS (SEE INSTRUCTIONS) OO
----
- -------------------------------------------------------------------------------
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
-------------------------
- -------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
-----------------
- -------------------------------------------------------------------------------
NUMBER OF 7) SOLE VOTING POWER 0
SHARES BENE- -------------------------
FICIALLY
OWNED BY 8) SHARED VOTING POWER 720,742
EACH REPORT- -----------------------
ING PERSON
WITH 9) SOLE DISPOSITIVE POWER 0
----------------------
10) SHARED DISPOSITIVE POWER 720,742
--------------------
- -------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
720,742
-------
- -------------------------------------------------------------------------------
4
<PAGE> 5
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
12) CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)
---------------------------------
- -------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.99%
------
- -------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN
--
- -------------------------------------------------------------------------------
5
<PAGE> 6
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
1) NAMES OF REPORTING PERSONS / S.S OR I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS CHARTWELL PARTNERS, L.P./
59-3271853 -------------------------
----------
- -------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A)
---------------------------------
(B)
---------------------------------
- -------------------------------------------------------------------------------
3) SEC USE ONLY
-------------------------------
- -------------------------------------------------------------------------------
4) SOURCE OF FUNDS (SEE INSTRUCTIONS) OO
----
- -------------------------------------------------------------------------------
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
--------------
- -------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
-----------------
- -------------------------------------------------------------------------------
NUMBER OF 7) SOLE VOTING POWER 0
SHARES BENE- -------------------------
FICIALLY
OWNED BY 8) SHARED VOTING POWER 720,742
EACH REPORT- -----------------------
ING PERSON
WITH 9) SOLE DISPOSITIVE POWER 0
----------------------
10) SHARED DISPOSITIVE POWER 720,742
--------------------
- -------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
720,742
-------
- -------------------------------------------------------------------------------
6
<PAGE> 7
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
12) CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)
-----------------------------
- -------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.99%
-------
- -------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN
--
- -------------------------------------------------------------------------------
7
<PAGE> 8
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
1) NAMES OF REPORTING PERSONS / S.S OR I.R.S. IDENTIFICATION NOS.
OF ABOVE PERSONS CHARTWELL, INC./
59-3273355 ----------------
----------
- -------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE ROW IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(A)
--------------------------
(B)
--------------------------
- -------------------------------------------------------------------------------
3) SEC USE ONLY
------------------------------
- -------------------------------------------------------------------------------
4) SOURCE OF FUNDS (SEE INSTRUCTIONS) OO
----
- -------------------------------------------------------------------------------
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
---------------
- -------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION FLORIDA
-----------------
- -------------------------------------------------------------------------------
NUMBER OF 7) SOLE VOTING POWER 0
SHARES BENE- -------------------------
FICIALLY
OWNED BY 8) SHARED VOTING POWER 720,742
EACH REPORT- -----------------------
ING PERSON
WITH 9) SOLE DISPOSITIVE POWER 0
----------------------
10) SHARED DISPOSITIVE POWER 720,742
--------------------
- -------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
720,742
-------
- -------------------------------------------------------------------------------
8
<PAGE> 9
CUSIP No. 233295 10 4
- -------------------------------------------------------------------------------
12) CHECK IF AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS)
-----------------
- -------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.99%
------
- -------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO
--
- -------------------------------------------------------------------------------
9
<PAGE> 10
ITEM 1. SECURITY AND ISSUER.
The title of the class of equity securities to which this Statement
relates is common stock, par value $.001 per share, ("Common Stock"), issued by
DRCA Medical Corporation, a Texas Corporation, the principal executive offices
of which are located at Three Riverplace, Suite 1430, Houston, Texas 77056.
ITEM 2. IDENTITY AND BACKGROUND.
The names of the persons filing this Statement are the following:
(i) Chartwell Capital Investors, L.P.("CCI"), a Delaware limited
partnership principally engaged in investments;
(ii) Chartwell Capital Partners, L.P. ("CCP"), a Delaware limited
partnership principally engaged in investments that is the general
partner of CCI;
(iii) Chartwell Partners, L.P. ("CP"), a Delaware limited partnership
principally engaged in investments that is the general partner of CCP;
and
(iv) Chartwell, Inc. ("CI"), a Florida Corporation principally
engaged in investments that is the general partner of CP. The
executive officers and directors of CI are (i) Robert L. Stein, whose
principal occupation is Chairman of CI; (ii) Kenneth Purcell, whose
principal occupation is Chief Executive Officer of CI; (iii) Anthony
Marinatos, whose principal occupation is President of CI; and (iv)
Armindia Lanigan, whose principal occupation is Chief Financial
Officer of CI.
All the individuals listed above are United States citizens with their
business addresses at One Independent Drive, Suite 1610, Jacksonville, Florida
32202. The principal business and office of each entity listed above is also
located at that address.
No person listed in this Item 2 was, during the last five years, a party of
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting, or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws, and no such person has been during the last
five years, convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
10
<PAGE> 11
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The amount of funds or other consideration used in the initial acquisition
of securities of the issuer to which this Statement relates was $2,500,000 in
cash from general partnership funds of CCI.
ITEM 4. PURPOSE OF TRANSACTION.
The securities of the issuer purchased by CCI have been acquired for
investment purposes. The reporting persons may make additional purchases of
securities of the issuer, including without limitation Common Stock, either in
the open market or in private transactions depending on the reporting persons
evaluation of the issuer's business, prospects and financial condition, the
market for Common Stock, other opportunities available to the reporting
persons, general economic conditions, money and stock market conditions and
other future developments. Depending on the same factors, the reporting
persons may decide to sell all or part of their investment in securities of the
issuer, although they have no current intention to do so.
The shares to which this Statement relates were acquired from the issuer
in the transaction described in Item 5 hereof.
Although the purchase of securities of the issuer pursuant to the
Investment Agreement (as hereinafter defined) has been made for investment, CCI
intends to actively review its investment and the business, prospects and
policies of the issuer, and may seek to influence the management and policies
of the issuer from time to time. Pursuant to an understanding between the
issuer and CCI reached in connection with the Investment Agreement, Mr. Tom
Conner was elected to the issuer's board of directors at the issuer's annual
meeting of shareholders held May 9, 1996.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
CCI beneficially owns 720,742 shares of Common Stock, constituting
approximately 11.99% of the outstanding shares of Common Stock, through the
direct ownership of 25,226 shares of the issuer's Cumulative Convertible
Preferred Stock, Series A ("Series A Preferred Stock"), convertible into such
shares of Common Stock. CCP, CP and CI may be deemed to beneficially own such
shares of Common Stock beneficially owned by CCI and to share with CCI voting
and dispositive power with respect to such shares. None of the other persons
listed in Item 2 hereof beneficially owns any shares of Common Stock.
On April 12, 1996, pursuant to an Investment Agreement (the "Investment
Agreement") between CCI and the issuer dated that date, CCI acquired for
$2,500,000 (i) the issuer's 10% $2,500,000
11
<PAGE> 12
Subordinated Promissory Note (the "Note") and (ii) a warrant (the "Warrant") to
acquire approximately 720,000 shares of Common Stock at an initial price of
$3.50 per share, subject to adjustment, which, if still outstanding, would be
exercisable at any time after July 11, 1996 and prior to the close of business
on April 12, 2003.
The Investment Agreement provided that the issuer was to obtain the
approval of its shareholders for the amendment (the "Article Amendment") of the
issuer's articles of incorporation to authorize the issuance of a class of
preferred stock, upon which the Note and Warrant were to be converted into
shares of Series A Preferred Stock and canceled. On May 9, 1996, the issuer's
shareholders approved the Article Amendment, and on May 21, 1996, effective May
15, 1996, the Note and Warrant were converted into 25,226 shares of Series A
Preferred Stock, each convertible into Common Stock at an initial conversion
price of $3.50 per share, subject to adjustment.
Each share of Series A Preferred Stock has a $100 liquidation preference,
bears a cumulative annual dividend of $8.00 per share (increasing after June
31, 2001), and possesses the right to one vote per share, generally voting with
holders of Common Stock and voting as a class with respect to certain
extraordinary matters. At its option, the issuer may cause the shares of
Series A Preferred Stock to be converted into shares of Common Stock if the
trading price of Common Stock exceeds $5.50 for a specified period and with
specified trading volume.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Investment Agreement contains certain affirmative and negative
covenants with respect to the issuer.
In addition, in connection with the Investment Agreement the following
agreements were entered into:
1. A Registration Rights Agreement dated April 12, 1996, between the
issuer and CCI with respect to certain demand and piggyback
registration rights under the Securities Act of 1933, as amended, with
respect to shares of Common Stock acquirable under the Investment
Agreement.
2. A Tag-Along Rights Agreement dated April 12, 1996 between CCI and Jose
E. Kauachi, William F. Donovan, M.D., and Sharon Ann Donovan (the
"Shareholders"). Pursuant to this agreement, until the number of
shares of Common Stock beneficially onwed by CCI is less than 60% of
the number of shares of Common Stock of originally beneficially owned
by CCI, whenever any of the Shareholders desire to sell, assign,
transfer, exchange or otherwise dispose of shares of Common Stock
owned by
12
<PAGE> 13
him or her beneficially or of record, such selling Shareholder must,
if the sale of such shares together with any previous sales of Common
Stock by such selling Shareholder in the aggregate during the prior 90
days exceeds 40,000 shares, give written notice to CCI and provide CCI
the opportunity to participate in the transaction.
3. A Voting and Brokering Agreement dated April 12, 1996, between the
Shareholders and CCI pursuant to which the Shareholders agreed (i) to
vote their stock in favor of the Article Amendment and (ii) to cause
any broker or dealer or investment advisor in which the Shareholder
has an interest of greater than 5% not to purchase or sell securities
of the issuer for its own account, solicit orders to purchase or sell
securities of the issuer except with respect to shares of the issuer
held in the Shareholder's personal account, make a market in
securities of the issuer or recommend that others purchase or sell
securities of the issuer, all for so long as CCI owns any securities
of the issuer.
4. Pursuant to an understanding between the issuer and CCI, Mr.
Tom Conner was elected to the issuer's board of directors at the
issuer's annual meeting of shareholders held on May 9, 1996.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 99.A - Investment Agreement, dated April 12, 1996, entered
into between issuer and CCI
Exhibit 99.B - Registration Rights Agreement, dated April 12,
1996, entered into between CCI and issuer
Exhibit 99.C - Tag-Along Rights Agreement, dated April 12, 1996,
entered into between CCI and the Shareholders
Exhibit 99.D - Voting and Brokering Agreement, dated April 12,
1996, entered into between CCI and the
Shareholders
13
<PAGE> 14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: May 30, 1996
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,its
General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By: /s/ Anthony Marinatos
---------------------------
Anthony Marinatos
President
Date: May 30, 1996
CHARTWELL CAPITAL PARTNERS, L.P.
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc., its
General Partner
By: /s/ Anthony Marinatos
-------------------------------
Anthony Marinatos
President
Date: May 30, 1996
CHARTWELL PARTNERS, L.P.
By: Chartwell, Inc., its
General Partner
By: /s/ Anthony Marinatos
------------------------------
Anthony Marinatos
President
Date: May 30, 1996
CHARTWELL, INC.
By: /s/ Anthony Marinatos
------------------------------
Anthony Marinatos
President
14
<PAGE> 15
JOINT FILING AGREEMENT
This Joint Filing Agreement (the "Agreement") is entered into this 28th
day of May, 1996 between Chartwell Capital Investors, L.P., Chartwell Capital
Partners, L.P., Chartwell Partners, L.P., and Chartwell, Inc. (collectively the
"Parties").
WHEREAS, a Statement on Schedule 13D (the "Schedule") for filing with the
Securities Exchange Commission was prepared on behalf of the Parties with
respect to beneficial ownership of shares in DRCA Medical Corporation; and
WHEREAS, the Parties wish to confirm that the Schedule is to be filed on
behalf of each of the Parties.
NOW THEREFORE, it is agreed that the Schedule is the statement of each of
the undersigned, and that the information therein is true, complete, and
correct to the best of their knowledge.
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,its
General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By: /s/ Anthony Marinatos
---------------------------
Anthony Marinatos
President
CHARTWELL CAPITAL PARTNERS, L.P.
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc., its
General Partner
By: /s/ Anthony Marinatos
-------------------------------
Anthony Marinatos
President
<PAGE> 16
CHARTWELL PARTNERS, L.P.
By: Chartwell, Inc., its
General Partner
By: /s/ Anthony Marinatos
------------------------------
Anthony Marinatos
President
CHARTWELL, INC.
By: /s/ Anthony Marinatos
------------------------------
Anthony Marinatos
President
2
<PAGE> 1
EXHIBIT 99.A
INVESTMENT AGREEMENT, dated as of April 12, 1996, by and between DRCA
Medical Corporation, a Texas corporation (the "Borrower") and Chartwell Capital
Investors, L.P., a Delaware limited partnership (the "Lender")
W I T N E S S E T H :
WHEREAS, the Borrower is a publicly traded corporation engaged in the
business of managing physicians' practices; and
WHEREAS, the Borrower desires to expand its business; and
WHEREAS, the Borrower has requested that Lender make available a
credit facility of $2,500,000; and
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lender is willing to make available to the Borrower the credit
facility provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" shall mean with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person and any Person that directly or indirectly owns
more than 5% of the Borrower, and any officer or director of the Borrower, or
any Affiliate of any such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise. PhysiCare,
L.L.P., is an Affiliate of the Borrower and its Subsidiaries.
"Agreement" shall mean this Investment Agreement, as modified
supplemented or amended from time to time.
"Bankruptcy Code" shall have the meaning provided in Section 9.5.
"Borrower" shall have the meaning ascribed thereto in the first
paragraph of this Agreement.
"Borrowing Entities" shall mean the Borrower, its Subsidiaries and all
entities whose operations are consolidated with the Borrower for financial
reporting purposes.
<PAGE> 2
"Borrowing Date" shall mean the date occurring on or after the
Effective Date on which the proceeds of the Loan are made available to the
Borrower.
"Budget" shall have the meaning provided in Section 6.1(d).
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in New York City, a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities of not more than
six months from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $500,000,000 with maturities of
not more than six months from the date of acquisition by such Person, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) specified in the clause (ii)
above, (iv) commercial paper issued by the parent corporation of any commercial
bank (provided that the parent corporation and the bank are both incorporated in
the United States) of recognized standing having capital and surplus in excess
of $500,000,000 and commercial paper issued by any Person incorporated in the
United States, which commercial paper is rated at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing not more
than six months after the date of acquisition by such Person and (v) investments
in money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the voting common stock of the Borrower and
any stock into which such Common Stock may thereafter have been changed.
"Consulting Agreement" shall mean the Consulting Agreement in the form
of Exhibit A hereto.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without
2
<PAGE> 3
limitation, any obligation of such Person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (x) for the purchase
or payment of any such primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the holder of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of primary obligation in respect of which such Contingent Obligation is
made, or if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Conversion" shall have the meaning provided in Section 8.1.
"Conversion Date" shall have the meaning provided in Section 8.1.
"Conversion Expiry Date" shall mean June 30, 1996.
"Conversion Notice" shall have the meaning provided in Section 8.3.
"Conversion Tests" shall have the meaning provided in Section 8.4.
"Credit Documents" shall mean this Agreement, the Note, the Warrant,
the Preferred Stock, the Tag-Along Rights Agreement, the Voting Agreement and
the Registration Rights Agreement.
"Default" shall mean any event, act or condition which notice or lapse
of time, or both, would constitute an Event of Default.
"Default Rate of Interest" shall have the meaning provided in Section
2.3.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Effective Date" shall have the meaning provided in Section 10.9.
3
<PAGE> 4
"ERISA Affiliate" shall mean with respect to any Person any Person any
other Person with respect to whom such Person may have liability under ERISA.
"Event of Default" shall have the meaning provided in Section 9.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
"Health Care Laws" shall mean the federal and state laws, regulations,
orders and restrictions governing the corporate practice of medicine, physician
self-referral and medical fraud and abuse.
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the face amount of all letters of credit issued for account of
such Person and all drafts drawn thereunder, (iii) all liabilities secured by
any Lien on any property owned by such Person, whether or not such liabilities
have been assumed by such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee and (v) all
Contingent Obligations of such Person.
"Lender" shall have the meaning ascribed thereto in the first
paragraph of this Agreement.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever (including
without limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"Loan" shall have the meaning provided in Section 2.1.
"Maturity Date" shall mean June 30, 1996; provided, however, in the
event that Borrower is not able to obtain the approval of its shareholders
necessary to authorize the issuance of the Preferred Stock on or before June 30,
1996, the Maturity Date will be extended until December 31, 1996.
"Note" shall have the meaning provided in Section 2.2.
4
<PAGE> 5
"Permitted Liens" are liens permitted by Section 7.1.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer plan or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute), or at any time during the five
calendar years preceding the date of this Agreement was maintained or
contributed to by (or to which there was an obligation to contribute), any of
the Borrowing Entities or an ERISA Affiliate of any of the Borrowing Entities.
"Preferred Stock" shall mean the Series A Convertible Preferred stock
of the Borrower containing the terms and conditions set forth in Exhibit B
hereto.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement in the form of Exhibit C hereto.
"SEC" shall have the meaning provided in Section 6.1(g).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any similar federal statute.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and (ii) any
partnership, association, joint venture or other entity in which such Person
and/or one or more Subsidiaries of such Person has more than a 50% equity
interest at the time.
"Tag-Along Rights Agreement" shall mean the Tag-Along Rights Agreement
in the form of Exhibit D hereto.
"Termination Date" shall mean the date of the earlier of (i) the
redemption for cash and cancellation of the Preferred Stock, (ii) the conversion
of the Preferred Stock into Common Stock or (iii) the issuance of Common Stock
in respect of the exercise of the Warrant Agreement.
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"Transfer" shall mean sale, gift, pledge, assignment, bequest,
transfer, transfer in trust, mortgage alienation, hypothecation, encumbering or
disposition in any manner whatsoever, voluntarily or involuntarily, including,
without limitation, any attachment, assignment for the benefit of creditors or
transfer by operation of law or otherwise, or any transfer as a result of any
voluntary or involuntary legal proceedings, execution, sale, bankruptcy,
insolvency, or otherwise.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"United States" and "U.S." shall each mean the United States of
America.
"Voting Agreement" shall mean the Voting and Brokerage Agreement in
the form of Exhibit E hereto.
"Warrant" shall mean the Warrant in the form of Exhibit F hereto.
1.2 Principles of Construction. (a) All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not a particular provision of this Agreement.
(b) All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States in conformity with those used in the preparation of the financial
statements referred to in Section 5.5 (a).
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 The Loan, Subject to and upon the terms and conditions set forth
herein, the Lender agrees to make a term loan (the "Loan") in an amount equal to
$2,500,000.
2.2 Note. The Borrower's obligation to pay the principal of, and
interest on, the loan made by Lender shall be evidenced by a subordinated
promissory note duly executed and delivered by the Borrower in the form of
Exhibit G (the "Note").
2.3 Interest. (a) The Borrower agrees to pay interest in respect of
the unpaid principal amount of the Note from the Borrowing Date until the
earlier of the Maturity Date or the date an Event of Default occurs at a rate
per annum which shall be 10% until June 30, 1996, and 18% per annum thereafter;
provided, however, that if the Note is converted to shares of Preferred Stock
pursuant to Section 8, interest shall accrue until the Conversion
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Date. Except in the case of an Event of Default and acceleration by Lender,
subject to clause (b) below, accrued interest shall be due and payable by the
Borrower on the Maturity Date. In the event that the Maturity Date is a date
after June 30, 1996, (i) then Borrower shall pay to the Lender on June 30, 1996,
all interest accrued up to such date; and (ii) after June 30, 1996, all accrued
interest on the outstanding principal amount of the Loan shall be due and
payable on the last day of each calendar month until the Maturity Date.
(b) If the Borrower satisfies the Conversion Tests provided for in
Section 8.4 and requires the Conversion of the Loan into shares of Preferred
Stock of the Borrower, or if the Lender chooses to convert the Note into
Preferred Stock of the Borrower, accrued interest charges on the Loan up to the
Conversion Date shall be converted into Preferred Stock.
(c) If the Borrower defaults in the payment of the amounts due under
Section 2.3(a) hereof on the Maturity Date or an Event of Default occurs, the
rate of interest (the "Default Rate of Interest") payable on the total amount
owed (including principal and, if and to the extent permitted by law, accrued
interest and other amounts) shall be 18% per annum. Nothing set forth herein or
in any of the other Credit documents shall permit Lender to charge, or require
Borrower to pay, interest in excess of the lawful rate of interest. Any such
payment in excess of the lawful rate shall be credited to principal or refunded
to Borrower.
2.4 Warrant. The Borrower shall execute and deliver to the Lender
with the Note a detachable warrant in the form of the Warrant which shall be
surrendered by Lender to Borrower and cancelled upon Conversion and shall be
exercisable, if at all, by Lender only after the Maturity Date if the Conversion
has not occurred on or before the Maturity Date, all as more specifically set
forth in the Warrant.
SECTION 3. PREPAYMENTS; PAYMENTS.
3.1 Prepayments. Prior to June 30, 1996, except as otherwise provided
in Section 8 regarding the Borrower's right to cause a Conversion, the Borrower
shall have no right to prepay the Loan. On or after June 30, 1996, Borrower may
pay without penalty all or any portion of the amount owed earlier than it is
due.
3.2 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under the Agreement or the Notes shall be made to
the Lender not later than 2:00 p.m. (Wilmington, Delaware time) on the date when
due and shall be made in Dollars in immediately available funds at Lender's
account at First Union National Bank of Delaware, Wilmington, Delaware. If any
payment to be made hereunder or under the Note shall be stated
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to be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, interest shall be payable at
the applicable rate during such extension.
3.3 Net Payments. All payments made by the Borrower hereunder or
under the Note will be made without setoff, counterclaim or other defense. All
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax imposed on or measured by the net income or
net profits of Lender pursuant to the laws of the jurisdiction in which the
principal office of Lender is located or any subdivision thereof or therein) and
all interest, penalties or similar liabilities with respect to such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or another
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Agreement or under the Note, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or in
the Note. The Borrower agrees to indemnify and hold harmless Lender, and
reimburse Lender upon its written requests, for the amount of any Taxes so
levied or imposed and paid by Lender.
SECTION 4. CONDITIONS PRECEDENT.
The obligation of Lender to make a loan hereunder is subject, at the
time of the making of such loan (except as hereinafter indicated), to the
satisfaction of the following conditions:
4.1 Execution of Agreement; Note and Warrant. On the Borrowing Date,
there shall have been delivered to Lender the Note and Warrant duly executed by
the Borrower in the amount, maturity and as otherwise provided herein.
4.2 No Default; Representations and Warranties. At the time of the
Loan and also after giving effect thereto (i) there shall exist no Default or
Event of Default and (ii) all representations and warranties contained herein
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of the date
of such Loan.
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4.3 Opinion of Counsel. On the Borrowing Date, Lender shall have
received from Hutcheson & Grundy, L.L.P., counsel to the Borrower, an opinion
addressed to the Lender and dated the Borrowing Date covering the matters
incident to the transactions contemplated herein as the Lenders may reasonably
request in form and substance satisfactory to the Lender and the Borrower.
4.4 Corporate Documents; Proceedings. (a) On the Borrowing Date, the
Lenders shall have received a certificate, dated the Borrowing Date, signed by
the President or any Vice President of the Borrower, and attested to by the
Secretary or any Assistant Secretary of the Borrower, in the form of Exhibit H
with appropriate insertions, together with copies of the Articles of
Incorporation and By-Laws of the Borrower and the resolutions of the Borrower
referred to in such certificate.
(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated in this Agreement
and other documents to be received by Lender shall be satisfactory in form and
substance to the Lender, and the Lender shall have received all information and
copies of all documents and papers, including records of corporate proceedings
and governmental approvals, if any, which the Lender reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.
4.5 Evidence of Insurance Coverage. Schedule 4.5. lists the policies
of insurance insuring Borrower and its assets against reasonably anticipated
risks, which policies are in full force and effect.
4.6 Other Agreements. Each of the parties to the following agreements
shall have executed and delivered such agreements, all of which shall be in full
force and effect:
(a) the Tag-Along-Rights Agreement;
(b) the Voting Agreement;
(c) the Registration Rights Agreement;
(d) the Consulting Agreement;
(e) the Warrant; and
(f) An Option Agreement between Borrower and Tom Conner in form and
substance acceptable to Lender.
Lender's funding of the Loan shall constitute evidence of Borrower's
satisfaction of the conditions precedent specified in Article 4 or Lender's
waiver of the conditions specified herein.
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The Note and the Warrant shall be delivered to Lender's designated agent in
Wilmington, Delaware. All other certificates, legal opinions and other
documents and all papers referred to in this Section 4, unless otherwise
specified, shall be delivered to Lender at the Lender's office and shall be
satisfactory in form and substance to the Lender.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce the Lender to enter into this Agreement and to make
the Loan, the Borrower makes the following representations, warranties and
agreements as of the Effective Date and the Borrowing Date, which shall survive
the execution and delivery of this Agreement and the Note, the making of the
Loan and the Conversion.
5.1 Corporate Status. The Borrower is a duly organized and validly
existing corporation in good standing under the laws of Texas. Each of the
Borrowing Entities is a duly organized and validly existing entity under the
laws of the jurisdiction of its incorporation. Each of the Borrowing Entities
(i) has the power and authority to own its property and assets and to transact
the business in which it is engaged and (ii) is duly qualified as a foreign
corporation or partnership, and in good standing in each jurisdiction where the
ownership, leasing or operation of property or the conduct of its business
requires such qualification.
5.2 Corporate Power and Authority. The Borrower has the corporate
power to execute, deliver and perform the terms and provisions of each of the
Credit Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance by it of each of
such Credit Documents. The Borrower has duly executed and delivered each of the
Credit Documents that it is required to execute and deliver, and each such
Credit Document constitutes its legal, valid and binding obligation enforceable
in accordance with its terms.
5.3 No Violation. Neither the execution, delivery or performance by
the Borrower of the Credit Documents to which it is a party, nor compliance by
it with the terms and provisions thereof, nor the use of the proceeds of the
Loan (i) will contravene any provision of any law, statute, rule or regulation
or any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
the Borrower or any of the Borrowing Entities pursuant to the terms of any
indenture, mortgage, deed of trust, credit agreement, loan agreement or any
other agreement, contract or instrument to which the Borrower or
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any of the Borrowing Entities is a party or by which it or any of its property
or assets is bound or to which it may be subject or (iii) will violate any
provision of the Articles of Incorporation or By-Laws or other organizational
document of the Borrower or any of the Borrowing Entities.
5.4 Governmental Approvals. Except for filings necessary to authorize
the Preferred Stock, no order, consent, approval, license, authorization or
validation of, or filing recording or registration with (except as have been
obtained or made prior to the Effective Date), or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance of any Credit Document to which the Borrower is a party or (ii) the
legality, validity, binding effect or enforceability of any such Credit Document
or (iii) the activities of the Borrower or the Borrowing Entities anticipated to
be undertaken in connection with its business.
5.5 Financial Statements; Financial Condition; Undisclosed
Liabilities; etc. (a) The audited balance sheets of the Borrowing Entities at
December 31, 1995 and the related statements of income and the related schedules
of the Borrowing Entities for the period ended on such date, with the report of
Price Waterhouse thereon, and heretofore furnished to the Lender present fairly
the financial condition of the Borrowing Entities at the date of such statements
of financial condition and the results of the operations of the Borrowing
Entities for such fiscal year. All such financial statements have been prepared
in accordance with generally accepted accounting principles and practices
("GAAP"). Except as set forth on Schedule 5.5(b), since December 31, 1995,
there has been no material adverse change in the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrowing
Entities taken as a whole.
(b) Except as fully reflected in the financial statements delivered
pursuant to Section 5.5(a) or as set forth in Schedule 5.5(b), there are no
liabilities or obligations with respect to the Borrowing Entities of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would be material to the
Borrowing Entities taken as a whole. The Borrower does not know of any basis
for the assertion against the Borrowing Entities of any liability or obligation
of any nature whatsoever that is not fully reflected in the financial statements
delivered pursuant to Section 5.5(a) which, either individually or in the
aggregate, could be material to the Borrowing Entities taken as a whole.
(c) Schedule 5.5(c) hereto fully and accurately sets out all the
material contracts to which any of the Borrowing Entities
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is a party, and Borrower has provided copies to Lender of such contracts
requested by Lender.
5.6 Litigation. There are no actions, suits or proceedings pending or,
to the best knowledge of the Borrower, threatened (i) with respect to any of the
Credit Documents or (ii) except as set forth in Schedule 5.6 hereto, against any
of the Borrowing Entities, except for actions, suits or proceedings as would
not, in the aggregate, have a material adverse effect on the business,
operations, property, assets, condition (financial or otherwise) or prospects of
the Borrowing Entities taken as a whole.
5.7 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of any of the
Borrowing Entities in writing to the Lender (including without limitation all
information contained in the Credit Documents) for purposes of or in connection
with this Agreement or any transaction contemplated herein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of any of the Borrowing Entities in writing to the Lender will be, true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any fact necessary to
make such information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided.
5.8 Use of Proceeds. All proceeds of the Loan shall be used by the
Borrower for the purposes listed in Schedule 5.8 hereto. Any other use of the
proceeds of the Loan shall require the prior written consent of the Lender. The
Borrower shall not use the proceeds to make a capital contribution to a
Subsidiary or to any other person.
5.9 Tax Returns and Payments. Each of the Borrowing Entities has
filed all tax returns required to be filed by it and has paid all income taxes
payable by it which have become due pursuant to such tax returns and all other
taxes and assessments payable by it which have become due, other than those not
yet delinquent and except for those contested in good faith and for which
adequate reserves have been established. Such tax returns accurately reflect in
all material respects all liability for taxes of the Borrower and its
Subsidiaries for the periods covered thereby. Each of the Borrowing Entities
has paid, or has provided adequate reserves (in good faith judgment of the
management of the Borrower and in accordance with generally accepted accounting
principles) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof. There is no material action, suit, proceeding, investigation,
audit, or claim now pending or, to the best knowledge of the Borrower,
threatened by
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any authority regarding any taxes relating to the Borrower or any of its
Subsidiaries.
5.10 Compliance with ERISA. Each Plan is in substantial compliance
with ERISA and the Code; none of the Borrower, any other Borrowing Entity nor
any ERISA Affiliate has incurred as of December 31, 1995 any material liability
to or on account of a Plan except as reflected in the December 31, 1995,
financial statements of the Borrowing Entities; no proceedings have been
instituted to terminate any Plan; to the knowledge of the Borrower, no condition
exists which presents a material risk to the Borrower or any of the Borrowing
Entities or any ERISA Affiliate of incurring a liability after December 31, 1995
to or on account of a Plan except in the ordinary course of the business of the
Borrowing Entities and similar in nature and amount to expenses and liabilities
reflected in the December 31, 1995 financial statements of the Borrowing
Entities; and the Borrower and the other Borrowing Entities may terminate
contributions to any employee benefit plans maintained by them without incurring
any material liability, other than for benefits accrued and reflected in the
December 31, 1995 financial statements of the Borrowing Entities, to any Person
interested therein.
5.11 Capitalization. The authorized capital stock of the Borrower
consists of 50,000,000 shares of Common Stock of which 5,285,975 shares are
outstanding. All such outstanding shares of Common Stock have been duly and
validly issued and are fully paid and non-assessable. Other than the Note
issued to the Lender pursuant to this Agreement, the stock options to be granted
to Tom Conner pursuant to the Option Agreement referred to in Section 4.6(f)
hereof, the Preferred Stock into which the Note is convertible and the
securities and agreements listed on Schedule 5.11 hereto, none of the Borrower
or its Subsidiaries has outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
5.12 Subsidiaries. The entities listed on Schedule 5.12 hereto are
the only Subsidiaries of the Borrower. Schedule 5.12 hereto correctly sets
forth the percentage ownership (direct and indirect) of the Borrower in each
class of capital stock of its Subsidiaries and also identifies the direct owner
thereof.
5.13 Compliance with Statutes, etc. Each of the Borrowing Entities
is in compliance with all applicable statutes, regulations and orders of, and
all applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including without limitation, the Health Care Laws and all
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applicable statutes, regulations, orders and restrictions relating to
environmental standards and controls), except such non compliances as would not,
in the aggregate, have a material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrowing Entities taken as a whole.
5.14 Investment Company Act. None of the Borrowing Entities is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
5.15 Public Utility Holding Company Act. None of the Borrowing
Entities is a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.16 Labor Relations. None of the Borrowing Entities is engaged in
any unfair labor practice that would have a material adverse effect on the
Borrowing Entities taken as a whole. There is (i) no significant unfair labor
practice complaint pending against any of the Borrowing Entities or, to the best
knowledge of the Borrower, threatened against any of them, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending against any of the Borrowing Entities
or, to the best knowledge of the Borrower, threatened against any of them, (ii)
no significant strike, labor dispute, slowdown or stoppage pending against any
of the Borrowing Entities or, to the best knowledge of the Borrower, threatened
against any of the Borrowing Entities and (iii) to the best knowledge of the
Borrower, no union representation question existing with respect to the
employees of any of the Borrowing Entities and, to the best knowledge of the
Borrower, no union organizing activities are taking place, except (with respect
to any mater specified in clause (i), (ii) or (iii) above, either individually
or in the aggregate) such as could not have a material adverse effect on the
business, operations, property, assets, condition (financial or otherwise) or
prospects of the Borrowing Entities taken as a whole.
5.17 Patents, Licenses, Franchises and Formulas. Each of the
Borrowing Entities owns all the patents, trademarks, permits, service marks,
trade names, copyrights, licenses, franchises and formulas, or rights with
respect to the foregoing, and has obtained assignments of all leases and other
rights of whatever nature, necessary for the present conduct of its business,
without any known conflict with the rights of others which, or the failure to
obtain which, as the case may be, would result in a material adverse effect on
the business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrowing Entities taken as a whole.
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SECTION 6. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that on and after the Effective Date and
until the Termination Date:
6.1 Information Covenants. The Borrower will furnish to the Lender:
(a) Quarterly Financial Statements. Within 45 days (or 90 days in
the case of the fourth fiscal quarter) after the close of each quarterly
accounting period in each fiscal year of the Borrower, consolidating and
consolidated statements of financial condition of the Borrowing Entities as
at the end of such quarterly accounting period in each fiscal year of the
Borrower, and the related statements of income and retained earnings and
statements of changes in financial position for such quarterly period and
for the elapsed portion of the fiscal year ended with the last day of such
quarterly period, in each case setting forth comparative figures for the
related periods in the prior fiscal year, all of which shall be certified
by the chief financial officer of the Borrower, subject to normal year-end
audit adjustments and prepared in accordance with generally accepted
accounting principles.
(b) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Borrower, the consolidating and consolidated
statements of financial condition of the Borrowing Entities as at the end
of such fiscal year and the related statements of income and retained
earnings and statements of changes in financial position for such fiscal
year, in each case setting forth comparative figures for the preceding
fiscal year and prepared in accordance with generally accepted accounting
principles and certified by independent certified public accountants of
recognized national standing reasonably acceptable to the Lender, in each
case together with a report of such accounting firm stating that in the
course of its regular audit of the financial statements of the Borrowing
Entities, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm obtained no knowledge of any
Default or Event of Default which has occurred and is continuing or, if in
the opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(c) Management Letters. Promptly after the Borrower's receipt
thereof, a copy of any "management letter" received by the Borrower from
its certified public accountants, if any.
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(d) Budgets. Within 60 days after the first day of each fiscal year
of the Borrower, a budget for the Borrowing Entities in form and substance
satisfactory to the Lender (including budgeted statements of income and
sources and uses of cash and balance sheets) prepared by the Borrower for
the entire fiscal year in aggregate and individually for each month of such
fiscal year ("Budget") accompanied by the statement of the chief financial
officer of the Borrower to the effect that, to the best of his knowledge,
the Budget is a reasonable estimate for the period covered thereby.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 6.1(a) and (b), a certificate
of the chief financial officer of the Borrower to the effect that, to the
best of his knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof.
(f) Notice of Default or Litigation. Promptly, and in any event
within three Business Days after an officer of the Borrower obtains
knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or Event of Default, (ii) any litigation or
governmental proceeding pending (x) against any of the Borrowing Entities
which could materially and adversely affect the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Borrowing Entities taken as a whole or (y) with respect to any of the
Credit Documents and (iii) any other event which is likely to materially
and adversely affect the business, operations, property, assets, condition
(financial or otherwise) or prospects of the Borrowing Entities, taken as a
whole.
(g) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if any,
which the Borrower shall file with the Securities and Exchange Commission
or any governmental agencies substituted therefor (the "SEC").
(h) Other Information. From time to time, such other information or
documents (financial or otherwise) as the Lender may reasonably request,
including monthly statements.
6.2 Books, Records and Inspections. The Borrower will, and will cause
each of the other Borrowing Entities to, keep proper books of record and account
in which full, true and correct entries in conformity with generally accepted
accounting principles and all
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requirements of law shall be made of all dealings and transactions in relation
to its business and activities. The Borrower will, and will cause each of the
other Borrowing Entities to, permit officers and designated representatives of
the Lender to visit and inspect, under guidance of officers of the Borrower or
such Borrowing Entity, any of the properties of the Borrower or the other
Borrowing Entities, and to examine the books of record and account of the
Borrower or such Borrowing Entity with, and be advised as to the same by, its
and their officers, all at such reasonable times and intervals and to such
reasonable extent as the Lender may request.
6.3 Maintenance of Property, Insurance. The Borrower will, and will
cause each of the other Borrowing Entities to, (i) keep all property useful and
necessary in its business in good working order and condition, (ii) maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are
reflected in Schedule 4.5 hereto, and (iii) furnish to the Lender, upon written
request, full information as to the insurance carried.
6.4 Corporate Franchises. The Borrower will, and will cause each of
the other Borrowing Entities to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its material
rights, franchises, licenses and patents; provided, however, that nothing in
this Section 6.4 shall prevent the withdrawal by the Borrower or any of the
other Borrowing Entities of its qualification as a foreign corporation in any
jurisdiction where such withdrawal does not have a material adverse effect on
the business, operations, property, assets, condition (financial or otherwise)
or prospects of the Borrowing Entities taken as a whole.
6.5 Compliance with Statutes, etc. The Borrower will, and will cause
each of the other Borrowing Entities to, comply, and periodically undertake such
studies and investigations as Lender may reasonably request to insure
compliance, with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including, without limitation, the Health Care Laws and all applicable
statutes, regulations, orders and restrictions relating to environmental
standards and controls), except such noncompliances as could not, in the
aggregate, have a material adverse effect on the business, operations, property,
assets, condition (financial or otherwise) or prospects of the Borrowing
Entities taken as a whole.
6.6 ERISA. The Borrower will deliver to the Lender a complete copy
of the annual report (Form 5500) of each Plan
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required to be filed with the Internal Revenue Service within 30 days of such
filing.
6.7 Performance of Obligations. The Borrower will, and will cause
each of the other Borrowing Entities to, perform all its obligations under the
terms of each mortgage, indenture, security agreement and other debt instrument
by which it is bound, except such non-performances as could not in the aggregate
have a material adverse effect on the business, operations, property, assets,
condition (financial or otherwise) or prospects of the Borrowing Entities taken
as a whole.
6.8 Preferred Stock. The Borrower will promptly take all reasonable
actions necessary to authorize and issue the Preferred Stock prior to the
Maturity Date including recommending approval by its shareholders.
6.9 Payment of Taxes. The Borrower will pay and discharge or cause to
be paid and discharged, and will cause each of the other Borrowing Entities to
pay and discharge, all material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any material
properties belonging to it, in each case on a timely basis, and all lawful
claims which, if unpaid, might become a lien or charge upon any material
properties of the Borrower or any of the other Borrowing Entities; provided that
neither the Borrower nor any of the other Borrowing Entities shall be required
to pay any such tax, assessment, charge, levy or claim which is being contested
in good faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with generally accepted accounting
principles.
6.10 Further Action by Borrower. The Borrower, at its expense, shall
promptly and duly execute and deliver to the Lender such documents and
assurances and take such further action as Lender may from time to time
reasonably request in order to carry out more effectively the intent and purpose
of this Agreement and the other Credit Documents and to establish and protect
the rights and remedies created or intended to be created in favor of the Lender
hereunder and thereunder.
SECTION 7. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Effective
Date and until the Termination Date:
7.1 Consolidation, Merger, Sale of Assets, etc. Without the written
consent of the Lender, the Borrower will not, and will not permit any of the
other Borrowing Entities to, wind up, liquidate or dissolve its affairs or enter
into any transaction of merger or consolidation, or convey, sell, lease or
otherwise
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dispose of (or agree to do any of the foregoing at any future time) all or any
substantial part of its property or assets, or purchase or otherwise acquire (in
one or a series of related transactions) any part of the property or assets
(other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any Person except acquisitions
(by any form, whether in the form of a merger, consolidation, asset acquisition
or otherwise, provided that in any such merger or consolidation the holders of
Common Stock immediately prior thereto receive as a result securities entitling
such holders to exercise immediately thereafter more than 50 percent of the
total voting power of all outstanding securities entitled to vote in the
election of directors of the surviving corporation) of medical practices,
medical service businesses, or other businesses related thereto or permit any of
the other Borrowing Entities to do any of the foregoing, except that (i) the
Borrowing Entities may make sales of inventory in the ordinary course of
business, (ii) the Borrowing Entities may, in the ordinary course of business,
sell equipment which is uneconomic or obsolete, and (iii) capital expenditures
shall be permitted to the extent not in violation of Section 7.6.
7.2 Dividends. The Borrower will not and will not permit any of the
other Borrowing Entities to, declare or pay any dividends, or return any
capital, to its stockholders or partners or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders or
partners as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares or any interest in its or their
capital or capital stock now or hereafter outstanding (or any options or
warrants issued by the Borrower or any of the Borrowing Entities with respect to
its or their capital or capital stock); provided, however, a wholly owned
Subsidiary may take any of such actions prohibited above with another wholly
owned Subsidiary or with Borrower.
7.3 Indebtedness. Without the written consent of the Lender, the
Borrower will not, and will not permit any of the other Borrowing Entities to,
contract, create, incur, assume or suffer to exist any Indebtedness, except (i)
for the purposes listed in Schedule 5.8, (ii) accrued expenses and current trade
accounts payable incurred in the ordinary course of business, which are to be
repaid in full not more than 90 days after the date on which such Indebtedness
is originally incurred, (iii) debt reflected in the financial statements dated
December 31, 1995 submitted to the Lender in accordance with Section 5.5, (iv)
liabilities set forth on Schedule 5.5(b) and (v) any indebtedness incurred in
connection with any individual capital expenditures of less than $75,000.
7.4 Advances, Investments and Loans. Without the written consent of
the Lender, the Borrower will not, and will not permit any of the other
Borrowing Entities to, lend money or credit or make advances to any Person, or
purchase or acquire any stock,
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obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, except that the following shall be permitted:
(i) the Borrower and the other Borrowing Entities may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(ii) the Borrower and the other Borrowing Entities may acquire and hold
Cash Equivalents;
(iii) the Borrower and the other Borrowing Entities may execute, without
limitation, promissory notes, security agreements, financing statements and/or
any other documents required to document and/or collateralize loans or advances
from one Borrowing Entity to any other Borrowing Entity and to evidence any
Borrowing Entity's guarantee or pledge of collateral to support Borrower's
commercial and/or private lending sources; and
(iv) the Borrower and the other Borrowing Entities may make loans or
advances to employees or Affiliates in the ordinary course of business up to
$5,000.00 per Person, which loans or advances are expected to be repaid within
90 days, or in any case to any Person in an amount not to exceed $1,000.00
7.5 Transactions with Affiliates. Schedule 7.5 sets forth
substantially all of the transactions between the Borrowing Entities and their
Affiliates. Except for transactions with Subsidiaries as contemplated by this
Agreement and the transactions with Affiliates described on Schedule 7.5, the
Borrower will not, and will not permit any of the other Borrowing Entities to,
enter into any transaction or series of related transactions, whether or not in
the ordinary course of business, with any Affiliate of the Borrowing Entities,
other than on terms and conditions substantially as favorable to the Borrower or
such Borrowing Entity as would be obtainable by the Borrower or such Borrowing
Entity at the time in a comparable arm's-length transaction with a Person other
than an Affiliate.
7.6 Capital Expenditures. Without the prior written consent of the
Lender, the Borrower will not, and will not permit any of the other Borrowing
Entities to, make any expenditure for fixed or capital assets (including,
without limitation, expenditures for maintenance and repairs which should be
capitalized in accordance with generally accepted accounting principles and
including capitalized lease obligations) other than those expenditures described
in Schedule 5.8 hereto and any individual capital expenditures of less than
$75,000.00.
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7.7 Limitation on Modifications of Articles of Incorporation, By-Laws
and Certain Other Agreements; etc. The Borrower will not, and will not permit
any of the other Borrowing Entities to, amend, modify or change its articles of
incorporation or by-laws, or any agreement entered into by it, with respect to
its capital or capital stock, or enter into any new agreement with respect to
its capital or capital stock except the Borrower may amend its articles of
incorporation to authorize the Preferred Stock and delete certain restrictions
therein regarding the number of the Borrower's directors.
7.8 Business. The Borrower will not, and will not permit any of the
other Borrowing Entities to, engage (directly or indirectly) in any business
materially different than the business in which it is engaged on the Effective
Date.
SECTION 8. CONVERSION OF NOTE.
8.1 Conversion. (a) Subject to and upon compliance with the
provisions of this Section 8 and provided the shareholders of Borrower have
authorized the Borrower to issue Preferred Stock, the Lender may on any Business
Day (such Business Day, a "Conversion Date"), at its option, convert the Note
(including any accrued but unpaid interest due under the Note) in whole, but not
in part, into a whole number of shares of Preferred stock of the Borrower as set
forth below.
(b) Subject to and upon compliance with the provisions of this Section
8 and provided that the Borrower has met the Conversion Tests prior to the
Conversion Expiry Date, the Lender shall convert the Note in whole, but not in
part, into a whole number of shares of Preferred Stock of the Borrower as set
forth below.
(c) Conversion of the Note into shares of Preferred Stock pursuant to
paragraphs (a) or (b) is referred to as "Conversion."
8.2 Determination of Number of Shares. Upon Conversion of the Note,
the Lender shall be entitled to receive from the Borrower a number of shares of
the Borrower's Preferred Stock ($100 liquidation preference) determined by
dividing the principal plus accrued interest outstanding under the Note on the
Conversion Date by $100.00.
8.3 Notice of Conversion. (a) Whenever the Lender elects to effect a
Conversion, the Lender shall give the Borrower at least 10 Business Days prior
notice thereof. Each such notice (a "Conversion Notice") shall specify (i) the
Conversion Date, and (ii) the number of shares of Preferred Stock that the
Lender will receive.
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(b) Whenever the Borrower has met the Conversion Tests and elects to
require a Conversion, it shall give the Lender at least 10 Business Days prior
notice thereof by completing and delivering to Lender a Conversion Notice.
8.4 Conversion Tests. Provided that the following conditions are met
(the "Conversion Tests"), the Borrower may require the Conversion of the Notes:
(i) No material Default or material Event of Default has occurred and
remains unremedied; and
(ii) The stockholders of the Borrower shall have approved an amendment
of the Borrower's Articles of Incorporation to authorize issuance of preferred
shares, the Borrower's Board of Directors shall have duly adopted, authorized
and designated the Preferred Stock and the Borrower shall have amended its
Articles of Incorporation and taken all other corporate action that may be
necessary to issue the Preferred Stock.
(iii) Borrower's Counsel, Hutcheson & Grundy, L.L.P., shall have
delivered to the Lender an opinion in form and substance satisfactory to the
Lender relating to the authorization of the Preferred Stock.
8.5 Mechanics of Conversion. On the Conversion Date, (i) the Borrower
shall deliver to the Lender at the Lender's office a certificate or certificates
for the number of shares of Preferred Stock to which the Lender is entitled
pursuant to Section 8.2 and (ii) in exchange the Lender shall tender to the
Borrower the Note and the Warrant Agreement.
8.6 Effect of Conversion. The delivery to the Lender of a certificate
or certificates evidencing the shares of Preferred Stock into which the Lender's
Note has been converted plus cash in lieu of any fractional shares shall be
deemed to satisfy the Borrower's obligation to pay, when due, the principal
amount of the Loan so converted and all accrued and unpaid interest thereon
through the Conversion Date. Such accrued interest shall be deemed paid and not
cancelled, extinguished or forfeited.
8.7 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the Conversion of the Note.
8.8 Borrower to Reserve Preferred Stock. (a) The Borrower covenants
and agrees that upon approval of an amendment to the Borrower's Articles of
Incorporation by the shareholders authorizing the Preferred Stock, it will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Preferred Stock for the purpose of
effecting Conversion of the Note hereunder the full number of
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shares of Preferred Stock deliverable on the Conversion Date pursuant to Section
8.2 and, if at any time the sum of the number of authorized but unissued shares
of Preferred Stock shall not be sufficient to effect Conversion of the Note
hereunder, the Borrower will take such corporate action as may be necessary to
increase its authorized but unissued Preferred Stock to such number of shares as
shall be sufficient for that purpose.
(b) The Borrower covenants and agrees that all Preferred Stock which
may be delivered in accordance with this Agreement shall upon delivery be duly
and validly issued and fully paid and nonassessable.
8.9 Taxes on Conversion. The Borrower will pay any and all
documentary stamp or similar issue or transfer taxes or any other taxes payable
in respect of the issue or delivery of Preferred Stock upon Conversion.
8.10 Legend. The Lender acknowledges that any certificate for shares
of Preferred Stock received by it hereunder upon Conversion will bear the
following legend:
The shares represented by this Certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and such securities may not be offered, sold, pledged or otherwise
transferred except (1) pursuant to an exemption from, or in a
transaction not subject to, the registration requirements under the
Securities Act to the extent supported by an opinion of counsel who is
reasonably acceptable to the issuer or (2) pursuant to an effective
registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any State of the
United States.
The foregoing legend shall be removed from the certificates
representing any such converted shares at the request of the holder thereof at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act, which request is accompanied by an opinion of legal counsel who
is reasonably satisfactory to the Borrower concerning compliance with the
conditions of Rule 144(k).
8.11 Lender's Representation Regarding Acquisition of the Preferred
Stock. Lender has conducted its own due diligence regarding Borrower, has met in
person or via telephone with Borrower's management and board of directors and
has been given the opportunity to review all corporate documents of Borrower and
to ask questions regarding Borrower and its business prior to Lender's execution
of this Agreement. Lender has been provided and has reviewed (i) the Borrower's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995 and
(ii) the Proxy Statement
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for the Borrower's 1996 annual meeting of stockholders. The Lender will
represent and warrant on the Conversion Date that it is acquiring the Preferred
Stock solely for its own account and not with the intent to resell such shares
in connection with any distribution of such securities in violation of the
Securities Act or other applicable securities laws and the rules and regulations
promulgated thereunder.
SECTION 9. EVENTS OF DEFAULT.
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
9.1 Payments. The Borrower shall default in the payment when due of
the principal or interest on the Note or any other amounts owing hereunder or
under the Note and the continuance thereof for ten (10) days after written
notice; or
9.2 Representations, etc. Any representation, warranty or statement
made by or on behalf of any of the Borrowing Entities, herein or in any other
Credit Document or in any certificate delivered pursuant hereto or thereto shall
prove to be untrue in any material respect on the date as of which made or
deemed made; or
9.3 Covenants. The Borrower or any other Borrowing Entity shall (i)
default in the due performance or observance by it of any term, covenant or
agreement contained in Section 6.1(f) or Section 7 or (ii) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Sections 9.1 and 9.2 and clause (i) of this Section 9.3)
contained in this Agreement, and such default referred to in clause (i) or (ii)
of the this Section 9.3 shall continue unremedied for a period of 30 days after
written notice, specifying the default, to the Borrower by the Lender; or
9.4 Default Under Other Agreements. (a) The Borrower, or any of the
Borrowing Entities shall be in default in (i) any payment of any Indebtedness
(other than the Note) beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii) the
observance or performance of any agreement or condition relating to any
Indebtedness (other than the Note) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause (determined without regard
to whether any notice is required), any such Indebtedness to become due prior to
its stated maturity; or (b) any Indebtedness of the Borrower or any of the
Borrowing Entities shall be declared to be
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due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; provided that it
shall not be a Default or Event of Default under this Section 9.4 unless the
aggregate principal amount of all such Indebtedness as described in clauses (a)
and (b), inclusive, exceeds $100,000 at any one time; or
9.5 Bankruptcy, etc. The Borrower or any of the other Borrowing
Entities shall commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto or any similar law of any jurisdiction (the "Bankruptcy
Code"); or an involuntary case is commenced against the Borrower, or any of the
Borrowing Entities, and the petition is not controverted within 10 days, and is
not dismissed within 60 days, after commencement of the case; or a custodian is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower, or any of the Borrowing Entities, or the Borrower or any of the
Borrowing Entities commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Borrower or any of the Borrowing Entities, or there is
commenced against the Borrower or any of the Borrowing Entities any such
proceeding which remains undismissed for a period of 60 days, or the Borrower or
any of the Borrowing Entities is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
the Borrower or any of the Borrowing Entities suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or the Borrower or any of the
Borrowing Entities makes a general assignment for the benefit of creditors; or
any corporate action is taken by the Borrower or any of the Borrowing Entities
for the purpose of effecting any of the foregoing; or
9.6 ERISA. Borrower or any of the Borrowing Entities or ERISA
Affiliates has incurred or is likely to incur a liability to or on account of a
Plan and there shall result from any such the imposition of a Lien upon the
assets of the Borrower or any of the Borrowing Entities, the granting of a
security interest, or a liability or a material risk of incurring a liability,
which Lien, security interest or liability, will have a material adverse effect
upon the business, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrowing Entities taken as a whole; or
9.7 Judgments. One or more judgments or decrees shall be entered
against the Borrower, or any of the Borrowing Entities involving in the
aggregate for the Borrower and the Borrowing Entities a liability (not paid or
fully covered by insurance) of $100,000 or more, and all such judgments or
decrees shall not have
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been vacated, discharged or stayed or bonded pending appeal within 60 days after
the entry thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Lender may by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Lender or the holder of the Note to enforce its claims against the Borrower
(provided, that, if an Event of Default specified in Section 9.5 shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Lender to the Borrower shall occur automatically without
the giving of any such notice), (i) declare the principal of and any accrued
interest in respect of the Loan and the Note and all obligations owing hereunder
and thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower or (ii) declare that the total amount owed
(including principal, accrued interest and other amounts to the extent permitted
by law) shall thereafter bear interest at the Default Rate of Interest.
In addition to the above rights and remedies that the Lenders have if an Event
of Default shall occur, the Lender shall be relieved of any obligation, but not
the right, to convert its Note pursuant to Section 8.1(b).
SECTION 10. MISCELLANEOUS.
10.1 Payment of Expenses, etc. The Borrower shall: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Lender (including, without limitation,
the reasonable fees and disbursements of Lender's counsel) in connection with
the preparation, execution and delivery of this Agreement and the other Credit
Documents and the documents and instrument referred to herein and therein and
any amendment, waiver or consent relating hereto or thereto and in connection
with the enforcement of this Agreement and the other Credit Documents and the
documents and instruments referred to herein and therein (including, without
limitation, the reasonable fees and disbursements of counsel for the Lender);
(ii) pay and hold the Lender harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save the Lender harmless from and against any and all liabilities with respect
to or resulting from any delay or omission to pay such taxes; and (iii)
indemnify the Lender, its partners, officers, directors, employees,
representatives and agents from and hold each of them harmless against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements incurred by any of them as a
result of, or arising
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out of, or in any way related to, or by reason of, any investigation, litigation
or other proceeding (whether or not the Lender is a party thereto) related to
the entering into and/or performance of this Agreement or any other Credit
Document or the use of the proceeds of the Loan hereunder or the consummation of
any transactions contemplated herein or in any other Credit Document, including,
without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such liabilities, obligations, losses, etc., to the extent
incurred by reason of the gross negligence or willful misconduct of the person
to be indemnified).
10.2 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder or related to the
execution hereof shall be in writing (including telegraphic, telex, facsimile or
cable communication) and mailed through the U.S. Postal Service, telegraphed,
telexed, telecopies, cabled or delivered to the address of the party listed
opposite such party's signature line, or at such other address as shall be
designated by such party in a written notice to the other party hereto. All
such notices and communications shall, when mailed, telegraphed, telexed,
telecopies, or cabled or sent by courier, become effective upon receipt.
10.3 Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, provided that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Lender. No assignment by Lender of the Credit Documents
shall be effective so long as any amount is due Lender under the Note and
Borrower is not in default thereunder. No assignment by Lender of this
Agreement, unless the Note is in default, shall be effective until three (3)
years after the date of this Agreement; provided, however, this sentence does
not prohibit Lender from assigning any of the other Credit Documents. If the
Lender transfers, assigns or pledges all or a part of its rights hereunder or
under the Note to any other Person, any reference to Lender in this Agreement or
the Note shall thereafter refer to the Lender and to such other person to the
extent of their respective interests.
10.4 No Waiver; Remedies Cumulative. No failure or delay on the part
of the Lender or any holder of the Note in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Lender or the holder of the Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights, powers and remedies herein or in any other
Credit Document
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expressly provided are cumulative and not exclusive of any rights, powers or
remedies which the Lender or any holder of the Note would otherwise have. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lender or any holder of the Note to any
other or further action in any circumstances without notice or demand.
10.5 Obligations. No partner of Lender will have any personal liability
for the performance of this Agreement, or for any claim, liability, judgment or
obligation arising out of or connected with this Agreement. The Borrower, may
look solely to Lender and Lender's assets for satisfaction of any such
performance, claim, liability, judgment or obligation.
10.6 Calculations; Computations. (a) The financial statements to be
furnished to the Lender pursuant hereto shall be made and prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved (except as set forth in the notes thereto or as otherwise
disclosed in writing by the Borrower to the Lender).
(b) All computations of interest hereunder shall be made on the basis
of a year of the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable.
10.7 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF DELAWARE. Subject
to the provision of clause (c) below, any legal action or proceeding against
any of the parties hereto with respect to this Agreement or any other Credit
Document may be brought in the courts of the State of Texas or of the United
States for the Southern District of Texas, and, by execution and delivery of
this Agreement, each party hereto hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each of the Borrower and the Lender further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to its address set forth opposite its
signature below, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Lender, or any holder of the Note
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in any other
jurisdiction.
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(b) Each of the Borrower and the Lender hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and to the arbitration in accordance with clause (d) below and
hereby further irrevocably waives and agrees not to plead or claim in any such
court or arbitration tribunal that any such action or proceeding brought in any
such court or tribunal has been brought in an inconvenient forum.
(c) Notwithstanding the above, either party may submit any dispute,
controversy or claim arising out of, relating to, or in connection with, this
Agreement or any other Credit Document or the interpretation, enforcement or
breach thereof to be resolved by arbitration conducted pursuant to clause (d)
below. Upon notification by such party of its desire therefore, the other party
hereby consents to the removal of any action commenced by either party in any
court to arbitration.
(d) The arbitration referred to in clause (c) above shall be conducted
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), as amended and in effect on the date that demand for
arbitration is filed with the AAA. Each party to the arbitration shall select
one (1) arbitrator. Immediately thereafter, the two (2) arbitrators selected by
the parties pursuant to the preceding sentence shall mutually select a third
arbitrator. If the parties are unable to select a third arbitrator, the third
arbitrator will be selected by the AAA. The ruling of the three (3) arbitrators
selected in accordance with the preceding sentences shall be binding and
conclusive upon the parties hereto to the fullest extent permitted, and judgment
upon the award rendered may be entered in any court of competent jurisdiction.
The arbitration shall take place in Jacksonville, Florida.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by both parties hereto shall be lodged with the Borrower and the
Lender.
10.9 Effectiveness. This Agreement shall become effective on the date
(the "Effective Date") on which all parties hereto shall have each signed a
copy of this Agreement (whether the same or different copies).
10.10 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for
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convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
10.11 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by this Borrower and each of the Lenders.
10.12 Survival. All representations, warranties and indemnities set forth
herein shall survive the execution and delivery of this Agreement and the Note,
the making and repayment of the Loan and the Conversion for the benefit of the
Lender in its capacity as a former creditor and as a shareholder.
10.13 Allocation. Lender and Borrower hereby stipulate and agree that the
Note has a value of $2,499,000 and the Warrant has a value of $1,000. Lender
and Borrower shall each file their federal income tax returns in accordance
with these stipulated values.
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
DRCA MEDICAL CORPORATION
Three Riverplace
Suite 1430
Houston, Texas 77056
By Jose E. Kauachi
------------------------------------
Jose E. Kauachi
Chairman of the Board & CEO
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,
its General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By Anthony Marinatos
---------------------------
Anthony Marinatos
President
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<PAGE> 1
EXHIBIT 99.B
Registration Rights Agreement
The REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
April 12, 1996, by and between DRCA Medical Corporation, a Texas corporation
(the "Company"), and Chartwell Capital Investors, L.P., a Delaware limited
partnership (the "Investor").
Introduction
The Company and The Investor are parties to the Investment Agreement
dated April 12, 1996 (the "Sale Agreement"), pursuant to which the Investor has
acquired certain securities directly or indirectly convertible into shares of
Common Stock (as hereinafter defined) from the Company and pursuant to which
this Agreement has been executed and delivered.
1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
Common Stock: The shares of Common Stock, par value $.001 per share, of the
Company as existing on the date hereof.
Company: As defined in the introductory paragraph of this Agreement.
Effective Date: The earlier to occur of (i) the date six months after the
Conversion Date (as defined in the Sale Agreement or (ii) the Conversion
Expiry Date (as defined in the Sale Agreement).
Exchange Act: The Securities Exchange Act of 1934, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time. Reference to a particular section
of the Exchange Act shall include a reference to the comparable section, if
any, of any such similar Federal statute.
Initiating Holders: Any holder or holders of Registrable Securities
holding greater than 50% of the Registrable Securities (by number of shares
at the time issued and outstanding) and initiating a request pursuant to
Section 2.1 hereof for the registration of all or part of such holder's or
holders' Registrable Securities.
<PAGE> 2
Person: A corporation, an association, a partnership, an organization,
business, an individual, a governmental or political subdivision thereof or
a governmental agency.
Registrable Securities: (a) any shares of Common Stock issued or issuable
upon conversion of the convertible preferred stock issued upon conversion
of the Note (as defined in the Sale Agreement), any shares of Common Stock
issued or issuable upon exercise of the warrant issued pursuant to the Sale
Agreement and (c) securities issued or issuable with respect to any Common
Stock referred to in the foregoing subdivisions (a) and (b) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (i) a registration statement
with respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) they shall have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent disposition of them
shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, or (iv) they shall
have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's performance
of or compliance with Section 2 hereof, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, the reasonable
fees and disbursements of not more than one counsel retained collectively
by the holder or holders of more than 50% of the Registrable Securities
being registered, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, provided
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel
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<PAGE> 3
or general overhead expenses of the Company, auditing fees, premiums or
other expenses relating to liability insurance required by underwriters of
the Company or other expenses for the preparation of financial statements
or other data normally prepared by the Company in the ordinary course of
its business or which the Company would have incurred in any event.
Requesting Holder: As defined in Section 2.6 hereof.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time. References to a particular
section of the Securities Act shall include a reference to the comparable
section, if any, of any such similar Federal statute.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time or from time to time after the
Effective Date until such time as the Investor shall be eligible to effect sales
pursuant to Rule 144(k) under the Securities Act or any similar rule or
regulation hereafter adopted by the Commission, upon the written request of one
or more Initiating Holders, requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested registration to all
registered holders of Registrable Securities, and thereupon the Company will use
its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so requested
to register by such Initiating Holders for disposition in accordance with
the intended method of disposition stated in such request;
(ii) all other Registrable Securities the holders of which shall have
made a written request to the Company for registration thereof within 30
days after the giving of such written notice by the Company (which request
shall specify the intended method of disposition of such Registrable
Securities); and
(iii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities pursuant
to this Section 2.1, all to the extent requisite to permit the disposition
(in
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<PAGE> 4
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities and the additional shares of Common Stock, if any,
so to be registered, provided that the Company shall not be required to
effect (i) more than two registrations pursuant to this Section 2.1, (ii) a
registration statement other than on Form S-3 or any similar short form
registration statement form adopted by the Commission, unless such
registration statement form is unavailable solely because of the failure by
the Company to file timely periodic reports under the Exchange Act, or
(iii) any registration of Registrable Securities pursuant to this Section
2.1 unless the aggregate number of shares of Registrable Securities
requested to be registered by all holders of Registrable Securities is
equal to or greater than 25% of the Registrable Securities originally
issuable under the Sale Agreement.
(b) Certain Information. The Company agrees to include in any
registration statement filed under this Section 2.1 all information which
holders of Registrable Securities being registered shall reasonably request
(after giving due regard to the confidentiality of such information), provided,
however, that such inclusion shall be in the best interests of the Company as
shall be determined in good faith by its Board of Directors.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1 by any
Initiating Holders.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating Holders shall have elected to pay
all Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(e) Priority in Requested Registrations. If any financial
advisor retained by more than 50% of the Registrable
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<PAGE> 5
Securities being registered shall advise the Company in writing that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in the contemplated offering within a
price range acceptable to the holders of a majority of the Registrable
Securities requested to be included in such registration, the Company will
include in such registration, to the extent of the number which the Company is
so advised can be sold in such offering, (i) first, Registrable Securities
requested to be included in such registration by the holder or holders of
Registrable Securities, pro rata among such holders on the basis of the number
of such securities requested to be included by such holders; and (ii) second,
securities the Company proposes to sell and other securities of the Company
included in such registration by the holders thereof.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4, S-8, S-14 or S-15 or any successor or
similar forms and other than pursuant to Section 2.1 hereof), whether or not for
sale for its own account, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder made within 10 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration
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<PAGE> 6
under Section 2.1 hereof, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1 hereof.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of holders of Registrable Securities are not
also to be included in such underwritten offering (either because the Company
has not been requested so to include such Registrable Securities pursuant to
Section 2.4(b) or, if requested to do so, is not obligated to do so under
Section 2.4(b)), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the distribution of
all or a specified number of such Registrable Securities concurrently with the
securities being distributed by such underwriters would interfere with the
successful marketing of the securities being distributed by such underwriters
(such writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect), then
the Company may, upon written notice to all holders of such Registrable
Securities, reduce pro rata (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) the number of such
Registrable Securities the registration of which shall have been requested by
each holder of Registrable Securities so that the resultant aggregate number of
such Registrable Securities so included in such registration shall be equal to
the number of shares stated in such managing underwriter's letter.
2.3 Registration Procedures. If and whenever (a) the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2 hereof
or (b) there is a Requesting Holder in connection with any other proposed
registration by the Company under the Securities Act, the Company shall, as
expeditiously as possible:
(i) prepare and (within 90 days after the end of the period within
which requests for registration may be given to the Company, or in any
event as soon thereafter
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<PAGE> 7
as possible, and in the case of a registration pursuant to Section 2.1
hereof such filing to be made within 90 days after the initial request of
one or more Initiating Holders of Registrable Securities or in any event as
soon thereafter as possible) file with the Commission the requisite
registration statement to effect such registration (including such audited
financial statements as may be required by the Securities Act or the rules
and regulations promulgated thereunder) and thereafter use its best efforts
to cause such registration statement to become and remain effective,
provided, however, that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto, and further provided that if the
Company shall furnish to the Initiating Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed at
the date filing would be required hereunder and it is therefore essential
to defer the filing of such registration statement, the Company shall have
an additional period of not more than 60 days within which to file such
registration statement (which additional period may be extended to 90 days
if such deferral will materially reduce the expenses of such registration
due to the elimination of the need for any special audits to be performed
in connection with such registration) ,and further provided that before
filing such registration statement or any amendments thereto, the Company
will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until the earlier of such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or (A) in the case of a registration pursuant to Section 2.1
hereof, the expiration of two years after such registration statement
becomes
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<PAGE> 8
effective, or (B) in the case of a registration pursuant to Section 2.2
hereof, the expiration of 90 days after such registration statement becomes
effective;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each Requesting Holder and each
underwriter, if any, of the securities being sold by such seller such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and Requesting Holder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such Seller;
(iv) use its best efforts (A) to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws of such jurisdictions as
shall reasonably be requested by such seller and any Requesting Holder, (B)
to keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and (C) take any other action
which may be reasonably necessary or advisable to enable Requesting Holder
or seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this subdivision (iv), be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) notify each seller of Registrable Securities covered by such
registration statement and each Requesting Holder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act,
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<PAGE> 9
upon the discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and at the request of any such seller or Requesting Holder promptly
prepare and furnish to such seller or Requesting Holder (and each underwriter,
if any) a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first day of the full calendar month after the effective
date of such registration statement, if such earnings statement is
necessary to satisfy the provisions of Section 11(a) of the Securities Act,
and will furnish to each such seller and each Requesting Holder at least
five business days (or such shorter reasonable time period as given
circumstances shall dictate) prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus and
shall not file any thereof to which any such seller or any Requesting
Holder shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or of the rules or regulations thereunder; and
(viii) enter into such agreements and take such other actions as
sellers of such Registrable Securities holding more than 50% of the shares
so to be sold shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by
applicable law or the Commission in connection therewith.
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Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
If any such registration or comparable statement refers to any holder
of Registrable Securities by name or otherwise as the holder of any securities
of the Company then such holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder.
2.4 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 hereof and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 2.2 hereof and subject
to the provisions of Section 2.2(b), use its reasonable best efforts to arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such underwritten
offering shall inform the holders of the Registrable Securities requesting such
registration and the holders of any other securities which shall have exercised,
in respect of such underwritten offering, registration rights comparable to the
rights under Section 2.2 hereof by letter of its belief that inclusion in such
underwritten distribution of all or a specified number of such Registrable
Securities or of such other securities so requested to be included would
interfere with the successful marketing of the securities (other than such
Registrable Securities and other securities so requested to be included) by the
underwriters (such writing to
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state the basis of such belief and the approximate number of such Registrable
Securities and other securities so requested to be included which may be
included in such underwritten offering without such effect), then the Company
may, upon written notice to all holders of such Registrable Securities and of
such other securities so requested to be included, exclude pro rata from such
underwritten offering (if and to the extent stated by such managing underwriter
to be necessary to eliminate such effect) the number of such Registrable
Securities and shares of such other securities so requested to be included the
registration of which shall have been requested by each holder of Registrable
Securities and by the holders of such other securities so that the resultant
aggregate number of such Registrable Securities and of such other securities so
requested to be included which are included in such underwritten offering shall
be equal to the approximate number of shares stated in such managing
underwriter's letter, provided that such other securities shall first be so
excluded, and thereafter, Registrable Securities shall be so excluded pro rata
based on the number of shares so requested to be included.
The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(b) Holdback Agreements.
(i) Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities, if so required by the managing underwriter,
not to effect any public sale or distribution of any securities of the
Company, during the seven days prior to and the 90 days after any
underwritten registration pursuant to Section 2.2 hereof has become
effective, except as part of such underwritten registration, but only if
such holder participates in such registration, and except for any
incidental registration pursuant to Section 2.2 hereof with respect to any
distribution or public sale in which the managing underwriter has agreed to
include such securities in the registration or public distribution.
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(ii) The Company agrees (x), if so required by the managing
underwriter, not to effect any public sale or distribution of its equity
securities or securities convertible into or exchangeable or exercisable
for any of such securities during the seven days prior to and the 90 days
after any underwritten registration pursuant to Section 2.2 hereof has
become effective, except as part of such underwritten registration and
except pursuant to registrations on Form S-4, S-8, S-14 or S-15 or any
successor or similar forms thereto, and (y) use its best efforts to cause
each holder of its securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in each case
purchased directly from the Company at any time after the date of this
Agreement (other than in a public offering) to agree not to effect any such
public sale or distribution of such securities during such period.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, each Requesting Holder and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Rights of Requesting Holders. The Company will not file any
registration statement under the Securities Act (other than by a registration on
Form S-8), unless it shall first have given to each holder of Registrable
Securities at the time outstanding (other than any such person who acquired all
such securities held by such person in a public offering registered under the
Securities Act or as the direct or indirect transferee of shares initially
issued in such an offering), at least 30 days prior written notice thereof. Any
such person who shall so request within 30 days after such notice (a "Requesting
Holder") shall have the rights of a Requesting Holder provided in Sections 2.3,
2.5 and 2.7 hereof. In addition, if any such registration statement refers to
any Requesting Holder by name or otherwise as the holder of any securities of
the Company, then such Requesting Holder shall have the right to require (a) the
insertion therein of language, in form and substance reasonably satisfactory to
such holder and the Company, to the effect that the holding by such holder of
such
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securities does not necessarily make such holder of a "controlling person"
of the Company within the meaning of the Securities Act and is not to be
construed as recommendation by such holder of the investment quality of the
Company's debt or equity securities covered thereby and that such holding does
not imply that such holder will assist in meeting any future financial
requirements of the Company, or (b) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any rules
and regulations promulgated thereunder, the deletion of the reference to such
holder.
2.7 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless (i) in the case of
any registration statement filed pursuant to Section 2.1 or 2.2 hereof, the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, and (ii) in the case of any registration statement of the
Company, any Requesting Holder, its directors and officers and each other
Person, if any who controls such Requesting Holder within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or Requesting Holder or any such director or
officer or underwriter or controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder, such Requesting Holder and each such director, officer,
underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the
13
<PAGE> 14
Company through an instrument duly executed by such holder or Requesting Holder,
as the case may be, specifically stating that it is for use in the preparation
thereof and, provided further that the Company shall not be liable to any Person
who participates as an underwriter, in the offering or sale of Registrable
Securities or to any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder or such
Requesting Holder or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. The Company may require, as
a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 2.3 hereof, that the Company shall have
received an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall be limited to the
extent allowable by applicable law and shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive the transfer of such
securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an
14
<PAGE> 15
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to sue, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the
preceding subdivisions of this Section 2.7 is unavailable to an indemnified
party in respect of any expense, loss, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits
15
<PAGE> 16
received by the Company on the one hand and the holder or underwriter, as the
case may be, on the other from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that the foregoing
contribution agreement shall not inure to the benefit of any indemnified Person
if indemnification would be unavailable to such indemnified Person by reason of
the proviso contained in the first sentence of subdivision (a) of this Section
2.7, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this Section 2.7
had been available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivisions
(c) of this Section 2.7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any
16
<PAGE> 17
damages that such holder or underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
3. Rule 144. The Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
4. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of more than 50% of the shares of Registrable Securities. Each holder
of any Registrable Securities at the time or thereafter outstanding shall be
bound by any consent authorized by this Section 4, whether or not such
Registrable Securities shall have been marked to indicate such consent;
provided, however, that no amendment shall be made to Section 2.7 hereof without
the written consent of the Company and the holder or holders of 100% of the
shares of Registrable Securities.
5. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require
17
<PAGE> 18
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
6. Notices. Except as otherwise provided in this Agreement, all
communications provided for hereunder shall be in writing and either hand
delivered or sent by prepaid commercial courier, telecopy or first-class
registered or certified mail, postage prepaid, and addressed
if to the Investor:
Attention:
FAX:
with a copy to: Kirschner, Main, Graham, Tanner & Demont
One Independent Drive, Suite 2000
Jacksonville, Florida 32202
(Mailing Address: Post Office Box 1559
Jacksonville, Florida
32201-1559)
Attention: James L. Main, Esq.
FAX: (904) 358-2199
if to any other
holder of Registrable
Securities: The address that such holder shall have
furnished to the Company in writing, or,
until any such other holder so furnishes
to the Company an address, then to and at
the address of the last holder of such
Registrable Securities who has furnished
an address to the Company
if to the Company: DRCA Medical Corporation
Three Riverway
Suite 1430
Houston, Texas 77056
Attention: President
FAX: (713) 439-0826
with a copy to: Hutcheson & Grundy, L.L.P.
3300 Two Allen Center
1200 Smith Street
Houston, Texas 77002
Attention: E. Scott Lineberry, Esq.
FAX: (713) 951-2925
or at such other address the Investor or the Company shall have given notice to
other. Notices sent by commercial courier services for next day delivery shall
be deemed given and received the day
18
<PAGE> 19
after they are sent, notices sent by telecopy shall be deemed given and received
the day they are sent, and notices sent by mail shall be deemed given and
received five (5) days after being mailed as aforesaid.
7. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein.
8. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
9. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Texas without reference to the principles of conflicts of laws.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year set forth above.
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,its
General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By: Anthony Marinatos
---------------------------
Anthony Marinatos
President
DRCA MEDICAL CORPORATION
By Jose E. Kauachi
------------------------------------
Name: Jose E. Kauachi
Title: Chairman of the Board & CEO
20
<PAGE> 1
EXHIBIT 99.C
TAG-ALONG RIGHTS AGREEMENT
THIS AGREEMENT is made as of this 12th day of April, 1996, by and among
Jose E. Kauachi, William F. Donovan, M.D., and Sharon Ann Donovan, his wife,
(the "Shareholders") and CHARTWELL CAPITAL INVESTORS, L.P., a Delaware limited
partnership ("Chartwell").
W I T N E S S E T H :
WHEREAS, Chartwell and DRCA Medical Corporation, a Texas corporation
("DRCA") are entering into that certain Investment Agreement dated as of April
12, 1996 (the "Investment Agreement") whereby Chartwell will agree to acquire a
financial interest in DRCA pursuant to which it will have the right to acquire
Common Stock of DRCA or shares into or for which such Common Stock may have
been converted in any recapitalization, merger, exchange, consolidation or
similar transaction ("Common Stock") by exercise of warrants or conversion of
Preferred Stock; and
WHEREAS, as a condition to funding under the Investment Agreement,
Chartwell has required that the Shareholders enter into this Agreement
NOW THEREFORE, in consideration of the promises and of the mutual
agreements, covenants and provisions herein contained, the parties hereto agree
as follows:
1. TAG-ALONG RIGHTS. Chartwell and the Shareholders agree as follows.
(a) Whenever and on each occasion that any Shareholder (the
"Selling Shareholder") shall desire, in one or more related transactions
involving neither a public offering nor a sale under Rule 144, to sell, assign,
transfer, exchange or otherwise dispose of (a "Sale") shares of Common Stock
owned by it beneficially or of record, such Selling Shareholder shall, if the
sale of such shares together with any previous Sales of Common Stock by such
Selling Shareholder in the aggregate during the prior 90 days constitutes a Sale
of more than 40,000 shares, give written notice to Chartwell of the proposed
transaction and shall provide Chartwell the same opportunity to sell to the
proposed transferee, upon the same terms and conditions offered to such Selling
Shareholder, up to the number of shares of Common Stock ("the Sale Shares")
obtained by multiplying the Percentage, as hereinafter defined, times the sum of
(i) the total number of shares of Common Stock which the Selling Shareholder
then proposes to sell, assign, transfer, exchange or otherwise dispose of in
such Sale plus (ii) the total number of shares of Common Stock assigned,
transferred, exchanged or otherwise disposed of in previous Sales during the
prior 90 days by such Selling Shareholder in which Chartwell was not entitled to
participate by reason of the 40,000 share minimum described above.
<PAGE> 2
The Percentage is the decimal number obtained by dividing the number of shares
of Common Stock that Chartwell would own if it exercised all of its Warrants and
converted all of its Preferred Stock into Common Stock of DRCA (the "Chartwell
Common") by the sum of the number of shares comprised by the Chartwell Common
plus the number of shares of Common Stock owned by the Selling Shareholder on a
fully diluted basis. Within 10 business days after its receipt of such notice,
Chartwell may exercise, by notice to the Selling Shareholder, the option to sell
up to the number of shares of Common Stock equal to the number of the Sale
Shares to the proposed transferee in accordance with the terms described in the
notice, provided that the sale by the Selling Shareholder is completed. Any
such option which is not exercised within such period shall expire.
(b) The exercise by Chartwell of any option arising pursuant to this
Agreement shall be effected by the giving of notice of such exercise to the
Selling Shareholder as provided herein.
(c) Notwithstanding the foregoing, the provisions of this Agreement shall
be inapplicable to (i) transfers by gift where no consideration is received by
the Selling Shareholder, and (ii) a sale, assignment or transfer by the Selling
Shareholder of Common Stock by way of grant of a lien or other security
interest on such Common Stock in connection with a bona fide financing.
(d) Subject to reaching the threshold of 40,000 shares of Common Stock
described in Section 1(a) above, each Selling Shareholder agrees that no sale,
assignment, or transfer of Common Stock may be made by it unless the proposed
transferee has agreed to purchase shares of Common Stock from Chartwell, but
only if and to the extent required by this Agreement, and that, if any transfer
of Common Stock is made by a Selling Shareholder or such transferee contrary to
the provisions of this Agreement, Chartwell may enforce these rights hereunder
by actions for specific performance to the extent permitted by law, in addition
to any other legal or equitable remedies which it may have. The Selling
Shareholders' only obligations under this Agreement are to provide the required
notice and to refrain from entering into any sales transaction with a proposed
transferee which does not also include the sale of shares by Chartwell to the
extent required in accordance with the provisions of this Agreement. Without
limiting the foregoing, in no event shall any Selling Shareholder have any
liability or other obligation to Chartwell in the event that such Selling
Shareholder determines not to proceed with any transaction after it has
delivered a notice to Chartwell.
(e) As used in this Agreement, "beneficial ownership" shall be determined
in accordance with the rules and regulations adopted by the Securities &
Exchange Commission, as now in effect, under Section 16(a) of the Securities &
Exchange Act of 1934, as amended.
2
<PAGE> 3
2. NOTICES. All notices or other communications required or contemplated
by this Agreement shall be in writing and (i) hand delivered, (ii) sent by fax
and confirmed by first class mail or (iii) sent postage prepaid, by first-class
registered or certified mail, return receipt requested and addressed, in each
case, as set forth below or to such other address or fax number as may be
hereafter designated by either party in written notice to the other party
hereto:
(a) If to Chartwell:
Chartwell Capital Investors, L.P
1610 Independent Square
Jacksonville, FL 32202
Attention: Anthony Marinatos
Fax No.: (904) 353-5833
With a copy to:
Kirschner, Main, Graham,
Tanner & Demont
One Independent Drive, Suite 2000
Jacksonville, FL 32202
Attention: James L. Main
Fax No.: 904-358-2199
(b) If to a Shareholder:
c/o DRCA Medical Corporation
Three Riverway
Suite 1430
Houston, Texas 77056
Attention: President
Fax: (713) 439-0826
With a copy to:
Hutcheson & Grundy, L.L.P.
3300 Two Allen Center
1200 Smith Street
Houston, Texas 77002
Attention: E. Scott Lineberry
Fax No.:713-951-2925
All notices shall be effective when received at the address or fax number of
the party to whom addressed.
3. AMENDMENTS AND WAIVERS. This Agreement and any term hereof may be
altered, waived, amended or terminated, in whole or in part, only on the written
consent of each party hereto.
3
<PAGE> 4
4. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Texas, without giving effect to the
choice of law principles thereof.
5. TERMINATION. This Agreement shall terminate immediately after the
completion of the transaction or series of transactions that reduces the number
of shares comprising the Chartwell Common at the time to less than 60% of the
number of shares comprising the Chartwell Common on the date hereof.
6. MISCELLANEOUS. In case any provision of this Agreement shall be held
to be invalid or unenforceable in whole or in part, neither the validity nor the
enforceability of the remainder of this Agreement shall in any way be affected.
The headings in this Agreement are for convenience and reference only and shall
not limit or otherwise affect the provisions hereof.
7. BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and permitted
assigns of the parties hereto. No assignment by Chartwell hereof shall be
effective so long as any amount is due Chartwell under the Note (as defined in
the Investment Agreement) and DRCA is not in default thereunder.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their officers thereunto duly authorized, all as of the day and
year first above written.
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,its
General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By: Anthony Marinatos
---------------------------
Anthony Marinatos
President
Jose E. Kauachi
-----------------------------------------
Jose E. Kauachi
William F. Donovan, M.D.
-----------------------------------------
William F. Donovan, M.D.
Sharon Ann Donovan
-----------------------------------------
Sharon Ann Donovan, his wife
5
<PAGE> 1
EXHIBIT 99.D
VOTING AND BROKERING AGREEMENT
THIS AGREEMENT is made as of this 12th day of April 1996, by Jose E.
Kauachi, William F. Donovan, M.D., and Sharon Ann Donovan, his wife,
(collectively the "Shareholders" and individually a "Shareholder") and CHARTWELL
CAPITAL INVESTORS, L.P. ("Chartwell").
W I T N E S S E T H :
WHEREAS, DRCA Medical Corporation (the "Corporation") and Chartwell have
entered into an Investment Agreement dated April 12, 1996 whereby Chartwell is
acquiring a substantial financial investment in the Corporation; and
WHEREAS, the Shareholders collectively own beneficially or of record and
have the right to vote 2,463,385 shares of voting common stock (the "Common
Stock") in the Corporation; and
WHEREAS, a condition to Chartwell's obligation to make the financial
investment in the Corporation is that the Shareholders agree to vote the Common
Stock as set forth herein and otherwise agree to the provisions hereof; and
WHEREAS, the shareholders desire to induce Chartwell to make the financial
investment in the Corporation and therefore desire to set forth in writing their
understanding and agreements.
NOW THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. SHAREHOLDER COVENANTS
The Shareholders hereby agree:
(a) To vote or cause to be voted the Common Stock, and any other
common stock of the Company under their control, in favor of
amending the Company's Articles of Incorporation to authorize
convertible preferred stock as described in the Investment
Agreement;
(b) Not to transfer the Common Stock or grant a proxy (other than
proxies requiring the proxy to vote as required by Section 1(a)
hereof) with respect thereto until the Articles of Incorporation
have been so amended or a vote of the shareholders (at which the
Shareholders voted the Common Stock for approval) has been taken
and authorization of the preferred stock has been disapproved;
and
<PAGE> 2
(c) To cause any stock broker or dealer or investment advisor in
which the Shareholder has an interest of greater than 5% not to
(i) purchase or sell securities of the Corporation for its own
account, (ii) solicit orders to purchase or sell securities of
the Corporation except with respect to securities of the
Corporation held in the shareholder's personal account at such
stock broker, dealer or investment advisory firm, (iii) make a
market in securities of the Corporation or (iv) recommend that
others purchase or sell securities of the Corporation, all for so
long as Chartwell owns any securities of the Corporation.
2. SPECIFIC PERFORMANCE
The parties hereto agree that the voting of shares in accordance with this
Agreement and the other agreements contained herein shall be specifically
enforceable.
3. SEVERABILITY
If any of the provisions, or portions of them, of this Agreement are held
to be unenforceable for invalid by any court of competent jurisdiction, the
validity and enforceability of the remaining provisions, or portions, shall not
be affected.
4. GOVERNING LAW
The Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.
5. AMENDMENT
This Agreement may be amended only by the written consent of all of the
parties to this Agreement at the time of the amendment.
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
this Agreement to be executed by their duly authorized officers.
CHARTWELL CAPITAL INVESTORS, L.P.
By: Chartwell Capital Partners, L.P.,its
General Partner
By: Chartwell Partners, L.P.,
its General Partner
By: Chartwell, Inc.,
its General Partner
By: Anthony Marinatos
---------------------------
Anthony Marinatos
President
Jose E. Kauachi
-----------------------------------------
Jose E. Kauachi
William F. Donovan, M.D.
-----------------------------------------
William F. Donovan, M.D.
Sharon Ann Donovan
-----------------------------------------
Sharon Ann Donovan, his wife
