SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 9, 1999
SIMIONE CENTRAL HOLDINGS, INC.
(Exact name of registrant as specified in charter)
Delaware 000-22162 22-3209241
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
6600 Powers Ferry Road
Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (770) 644-6700
883041v1
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ITEM 5. OTHER EVENTS.
On September 9, 1999, Simione Central Holdings, Inc. ("Simione
Central"), issued a press release ("Press Release") announcing that it has
entered into an amendment to the MCS, Inc. merger agreement dated May 26, 1999,
whereby the shares of MCS, a wholly-owned subsidiary of Mestek, Inc., shall be
spun-off to the shareholders of Mestek and MCS shall be merged with and into
Simione Central. This amendment is filed to include as exhibits the merger
agreement, the financing documents with Mestek, and the loan agreement with
Silicon Valley Bank.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
Exhibit
Number Description
2.1* Amended and Restated Agreement and Plan of Merger and Investment
Agreement dated September 9, 1999 among MCS, Inc., Mestek, Inc.,
Registrant, John E. Reed, Stewart B. Reed and E. Herbert Burk
10.1 Secured Promissory Note dated September 9, 1999, payable to Mestek,
Inc., in the original principal amount of $3,000,000
10.2 Security Agreement dated September 9, 1999, by and between Registrant
and Mestek, Inc.
10.3 Form of Certificate of Designations for the Series B Preferred Stock
of Registrant
10.4 Form of Warrant exercisable by Mestek, Inc.
10.5 Form of Merger Option Agreement between Registrant and Mestek, Inc.
10.6 Loan and Security Agreement dated September 9, 1999 between Silicon
Valley Bank and the Registrant and its wholly-owned subsidiaries
* In accordance with Item 601(b)(2) of Regulation S-K, the schedules have been
omitted. There is a list of schedules at the end of the Exhibit, briefly
describing them. The Registrant will furnish supplementary a copy of any omitted
schedule to the Commission upon request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIMIONE CENTRAL HOLDINGS, INC.
Date: September 15, 1999 By:/s/ George M. Hare
-----------------------------------------
George M. Hare
Chief Financial Officer
(Principal Financial and Accounting Officer)
883041v1
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1* Amended and Restated Agreement and Plan of Merger and Investment
Agreement dated September 9, 1999 among MCS, Inc., Mestek, Inc.,
Registrant, John E. Reed, Stewart B. Reed and E. Herbert Burk
10.1 Secured Promissory Note dated September 9, 1999, payable to Mestek,
Inc., in the original principal amount of $3,000,000
10.2 Security Agreement dated September 9, 1999, by and between Registrant
and Mestek, Inc.
10.3 Form of Certificate of Designations for the Series B Preferred Stock
of Registrant
10.4 Form of Warrant exercisable by Mestek, Inc.
10.5 Form of Merger Option Agreement between Registrant and Mestek, Inc.
10.6 Loan and Security Agreement dated September 9, 1999 between Silicon
Valley Bank and the Registrant and its wholly-owned subsidiaries
- --------------------
* In accordance with Item 601(b)(2) of Regulation S-K, the schedules have been
omitted. There is a list of schedules at the end of the Exhibit, briefly
describing them. The Registrant will furnish supplementary a copy of any omitted
schedule to the Commission upon request.
EXHIBIT 2.1
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND INVESTMENT AGREEMENT
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND INVESTMENT
AGREEMENT, dated as of the 9th day of September, 1999 (the "Agreement"), is by
and among MCS, INC., a Pennsylvania corporation (the "Company"), MESTEK, INC., a
Pennsylvania corporation ("Parent"), SIMIONE CENTRAL HOLDINGS, INC., a Delaware
corporation ("Purchaser"), JOHN E. REED, STEWART B. REED and E. HERBERT BURK.
W I T N E S S E T H:
WHEREAS, the Company, Parent and Purchaser entered into that certain
Agreement and Plan of Merger dated as of May 26, 1999 (the "Original Agreement")
under which the parties contemplated the acquisition by Purchaser of the Company
pursuant to the merger of the Company with and into Purchaser in accordance with
the terms and conditions set forth in the Original Agreement ("Merger");
WHEREAS, Purchaser acquired the stock of CareCentric Solutions, Inc.
("CareCentric") pursuant to a merger that was consummated on August 12, 1999
(the "CareCentric Acquisition");
WHEREAS, the parties have decided that, in order to fulfill the original
business plan underlying the Original Agreement and to fully realize the
benefits of the CareCentric Acquisition, it is necessary to amend the Original
Agreement to provide for additional financial investment in Purchaser by Parent
(to satisfy certain CareCentric liabilities and other business needs) (the
Original Agreement, as amended and restated herein, is referred to hereafter as
the "Agreement");
WHEREAS, the parties have decided that it is necessary for Parent and its
shareholders to control Purchaser after the Merger in order to reflect Parent's
additional financial investment in Purchaser and to ensure that the business
plan for Purchaser after the Merger envisioned by the parties can be
implemented;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Parent is making a $3 million loan to Purchaser ("Loan");
WHEREAS, prior to Closing, Parent intends to effect a spinoff under Section
355 of the Code pursuant to which Parent will distribute its Company Capital
Stock to its stockholders pro rata in accordance with their respective ownership
interests in Parent's common stock ("Spinoff");
WHEREAS, at Closing Parent intends to purchase from Purchaser newly-issued
Series B Preferred Stock of Purchaser ("Purchaser Series B Preferred") for a
total consideration of $6 million ("Mestek Investment");
WHEREAS, the Loan shall be deemed repaid upon the closing of the Mestek
Investment;
WHEREAS, Purchaser shall issue Parent a warrant ("Mestek Warrant") to
purchase 2,000,000 shares of Purchaser Common Stock ("Warrant Shares") upon the
closing of the Mestek Investment;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS; LOAN AND INVESTMENT
1.1. DEFINED TERMS. As used in this Agreement:
"Acquisition Proposal" shall have the meaning ascribed to it in Section
4.16(a) hereof.
"Affiliate" shall have the meaning ascribed to it in Paragraphs (c) and (d)
of Rule 145 under the Securities Act.
"Affiliated Group" means any affiliated group within the meaning of Section
1504(a) of the Code or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" means the Agreement and Plan of Merger, and all Schedules and
Exhibits hereto.
"Assets" means all of the assets of the Company (other than those
assets relating to the Company's ProfitWorks applications software system and
related product line, which shall be disposed of by the Company prior to the
Closing Date) or of Purchaser (as the context shall require), of every kind and
nature.
"CareCentric" shall have the meaning ascribed to it in the Recitals hereof.
"CareCentric Acquisition" shall have the meaning ascribed to it in the
Recitals hereof.
"Certificate" and "Certificates" shall have the meanings set forth in
Section 3.4 hereof.
"Certificate of Designations" shall have the meaning ascribed to it in
Section 1.4 hereof.
"Closing" and "Closing Date" shall have the meaning ascribed to such terms
in Section 3.5 hereof.
"Closing Balance Sheet" shall mean the Company's balance sheet to be dated
as of September 30, 1999.
"Closing Documents" means this Agreement and all other documents to be
executed and delivered either simultaneously herewith or at Closing in
connection with the Transactions.
"COBRA" shall have the meaning ascribed to it in Section 5.18(e) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Capital Stock" shall have the meaning ascribed to it in Section
3.1 hereof.
"Company Employees" shall have the meaning ascribed to it in Section
5.18(a) hereof.
"Company Financial Statements" shall have the meaning ascribed to it in
Section 5.8(a) hereof.
"Company Information" shall have the meaning ascribed to it in Section
4.17(a) hereof.
"Company Software" shall have the meaning ascribed to it in Section 5.12(d)
hereof.
"Company Stockholder Approval" means with respect to the Company the
requisite approval by holders of the Company's capital stock of this Agreement,
the Merger and the Certificates of Merger.
"Company Stockholders" means the holders of all of the issued and
outstanding Company Capital Stock, after giving effect to the consummation of
the Spinoff.
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nondisclosure Agreement dated as of February 8, 1999 by and among Purchaser,
Parent and the Company.
"Customer Contract" shall have the meaning ascribed to it in Section 5.11
hereof, and shall apply with respect to Purchaser in Section 6.11 hereof.
"Delaware Act" means the General Corporation Law of the State of Delaware.
"Disqualification" shall have the meaning ascribed to it in Section 2.5
hereof.
"DOL" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Effective Time" shall have the meaning ascribed to it in Section 2.2
hereof.
"Employee Benefit Plan" shall have the meaning ascribed to it in Section
5.18(a) hereof, and shall apply with respect to Purchaser in Section 6.18
hereof.
"Environmental Laws" shall have the meaning ascribed to it in Section
5.6(c) hereof.
"ERISA" shall have the meaning ascribed to it in Section 5.18(a) hereof.
"ERISA Affiliate" shall have the meaning ascribed to it in Section 5.18(a)
hereof, and shall apply with respect to Purchaser in Section 6.18 hereof.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and all regulations promulgated pursuant thereto.
"Exchange Ratio" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Authority" shall include any and all governmental or
quasi-governmental bodies, agencies, bureaus, departments, boards, commissions,
instrumentalities or other entities having or asserting jurisdiction over
Purchaser, Parent or the Company, as applicable.
"HSR" shall have the meaning ascribed to it in Section 4.15 hereof.
"Immigration Laws" shall have the meaning ascribed to it in Section 5.13
hereof.
"IRS" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"knowledge" or "known" means or refers to the actual knowledge of the
president, chief financial officer or general counsel as to Purchaser and as to
Parent, and the president or chief financial officer, as to the Company.
"Licensed Software" shall have the meaning ascribed to such term in Section
5.12(c) hereof, and shall apply with respect to Purchaser in Section 6.12(c)
hereof.
"Loan" shall have the meaning ascribed to it in the Recitals hereof.
"Lockup Period" shall have the meaning ascribed to it in Section 3.4(b)
hereof.
"Material Adverse Consequence" means a material adverse effect upon, or in,
or circumstances likely to result in, a material adverse change in the business,
assets, liabilities, operations, results of operations, properties (including
intangible properties), regulatory status or condition (financial or otherwise)
of the Company or Purchaser, as the case may be, taken as a whole, the effect of
which is equal to or greater than $2,000,000.
"Material Adverse Effect" means a material adverse effect upon, or in, or
circumstances likely to result in, a material adverse change in (i) the
business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company or Purchaser, as the case may be, taken as a whole,
the effect of which is equal to or greater than $100,000, (ii) the legality,
validity, binding effect or enforceability of this Agreement, or (iii) the
ability of the Company or Purchaser, as the case may be, to perform its
respective obligations under this Agreement.
"Material Contracts" shall have the meaning ascribed to it in Section 5.10
hereof, and shall apply with respect to Purchaser in Section 6.10 hereof.
"Merger" shall have the meaning ascribed to it in the preamble.
"Merger Option Agreement" shall have the meaning ascribed to it in Section
3.3(a) hereof.
"Merger Options" shall have the meaning ascribed to it in Section 3.3(a)
hereof.
"Merger Shares" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
"Mestek Investment" shall have the meaning ascribed to it in the Recitals
hereof.
"Mestek Major Stockholders" means any of John E. Reed, Stewart B. Reed and
E. Herbert Burk.
"Mestek Warrant" shall have the meaning ascribed to it in the Recitals
hereof.
"Note" shall have the meaning ascribed to it in Section 1.2 hereof.
"Options" shall have the meaning ascribed to it in Section 3.3(a) hereof.
"Owned Software" shall have the meaning ascribed to it in Section 5.11
hereof, and shall apply with respect to Purchaser in Section 6.11 hereof.
"PBGC" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Parent Affiliated Group" shall have the meaning ascribed to it in Section
5.9(f) hereof.
"Parent Designee" shall have the meaning ascribed to it in Section 2.5(c)
hereof.
"Parent Plan" shall have the meaning ascribed to it in Section 4.5 hereof.
"Pennsylvania Act" means the Pennsylvania Business Corporation Law.
"Person" means an individual, corporation, limited liability company, limited
liability partnership, limited partnership, trust, joint venture, association or
unincorporated organization or a Governmental Authority.
"Pre-Closing Tax Periods" shall have the meaning ascribed to it in Section
4.9(a) hereof.
"ProfitWorks Business" shall have the meaning ascribed to it in Section 4.4
hereof.
"Public Reports" has the meaning set forth in Section 5.6(d) hereof.
"Purchaser Common Stock" shall have the meaning ascribed to it in Section
3.1 hereof.
"Purchaser Conversion Rights" shall have the meaning ascribed to it in
Section 6.5 hereof.
"Purchaser Employees" shall have the meaning ascribed to it in Section
6.18(a) hereof.
"Purchaser Financial Statements" shall have the meaning ascribed to it in
Section 6.8(a) hereof.
"Purchaser Plan" shall have the meaning ascribed to it in Section 4.5
hereof.
"Purchaser Series B Preferred" shall have the meaning ascribed to it in the
Recitals hereof.
"Purchaser Software" shall have the meaning ascribed to it in Section
6.12(d).
"Purchaser Stockholder Approval" means with respect to the Purchaser the
requisite approval by holders of Purchaser's capital stock of this Agreement,
the Merger, the Mestek Investment, the Mestek Warrant and the Certificates of
Merger.
"Registrable Shares" means the Merger Shares, the Option Shares (as defined
in the Merger Option Agreement), the Mestek Warrant, the Warrant Shares and any
shares of Purchaser Common Stock to be issued pursuant to the indemnification
provisions of Article 7 hereof.
"Registration Rights Agreements" shall have the meaning ascribed to it in
Section 4.1.
"Registration Statement" shall have the meaning ascribed to it in Section
4.17(a) hereof.
"Revised Schedules" shall have the meaning ascribed to it in Section 8.7
hereof.
"Rights Holder" and "Rights Holders" shall have the meaning ascribed to
such terms in Section 4.1(l) hereof.
"Rule 145 Letter" shall have the meaning ascribed to it in Section 4.18
hereof.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and all
regulations promulgated thereunder.
"Securities Filings" shall mean all filings made by Purchaser with the SEC
from and after January 1, 1996 pursuant to the Securities Act and the Exchange
Act.
"Security Agreement" shall have the meaning ascribed to it in Section 1.2
hereof.
"Spinoff" shall have the meaning ascribed to it in the Recitals hereof.
"Spinoff Date" means the date of the consummation of the Spinoff.
"Surviving Corporation" shall have the meaning ascribed to it in Section
2.1 hereof.
"Tax" or "Taxes" means all taxes, charges, fees, interest, fines,
penalties, additions to tax or other assessments imposed by any Tax Authority,
including without limitation, income, excise, environmental, property, sales,
gross receipts, gains, transfer, occupation, privilege, employment (including
social security and unemployment), use, value added, capital stock or surplus,
franchise, advance corporate, withholding, unemployment, estimated and customs
duties taxes.
"Tax Authority" means any United States federal, foreign, national, state,
county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising any
taxing authority or any other authority exercising tax regulatory authority.
"Tax Return" means any return, declaration, report, claim for refund or
information return filed or to be filed with any Tax Authority in connection
with the determination, assessment, collection or administration of any Tax,
including any schedule or attachment thereto and any amendment thereof.
"Termination Date" means the date on which this Agreement may be terminated
pursuant to Section 10.1 hereof.
"Transaction Documents" shall have the meaning ascribed to such term in
Section 7.1 hereof.
"Transactions" means the transactions contemplated by this Agreement.
"Warrant Shares" shall have the meaning ascribed to it in the Recitals
hereof.
"Warrants" shall have the meaning ascribed to it in Section 3.3(a) hereof.
1.2. LOAN. Simultaneously with the execution and delivery of this
Agreement, Parent is making the Loan to Purchaser. The Loan is evidenced by that
certain secured promissory note from Purchaser in favor of Parent of even date
herewith in the original principal amount of $3,000,000 attached hereto as
Exhibit 1.2(a) (the "Note"). The Note is secured by the grant of a security
interest from Purchaser to Parent pursuant to a security agreement of even date
herewith attached hereto as Exhibit 1.2(b) ("Security Agreement"). Purchaser
shall execute any Uniform Commercial Code financing statements or other
documents reasonably required by Parent in order to perfect its security
interest in Purchaser's assets granted under the Security Agreement. The parties
hereto acknowledge and agree that Parent's security interest under the Security
Agreement is expressly subordinated to the lien on Purchaser's assets currently
held by Silicon Valley Bank.
1.3. SPINOFF. Parent and the Company shall consummate the Spinoff on or
before the Closing. The closing of the Spinoff shall be an express condition to
the closing of the Merger.
1.4. PARENT INVESTMENT. Simultaneously with the Closing, Parent shall
purchase from Purchaser 5,600,000 shares of Purchaser Series B Preferred in
consideration for the payment in immediately available funds of (x) $6,000,000,
less (y) the outstanding principal balance and all accrued but unpaid interest
under the Note. The Note, Security Agreement and any Uniform Commercial Code
financing statements and any other documents executed by Purchaser in connection
with the Loan shall be marked "cancelled" or terminated upon the closing of the
Mestek Investment. Immediately prior to the Closing, Purchaser shall cause to be
filed with the Delaware Secretary of State's office a Certificate of
Designation, Rights and Preferences setting forth the relative rights and
preferences of the Series B Preferred ("Certificate of Designations"). The form
of the Certificate of Designations is set forth as Exhibit 1.4 attached hereto.
As additional consideration for the Mestek Investment, Parent shall receive the
Merger Options, as described in Section 3.3(a) hereof.
1.5. MESTEK WARRANT. At Closing, Purchaser shall deliver the Mestek Warrant
to Parent in the form attached hereto as Exhibit 1.5. Purchaser shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Purchaser Common Stock for delivery upon exercise of the Mestek Warrant. In
addition, Purchaser will cause the Warrant Shares to be listed on the NASDAQ
National Market, if not previously listed.
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ARTICLE 2.
THE MERGER
2.1. THE MERGER. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement, the Pennsylvania
Act and the Delaware Act, the Company shall be merged into Purchaser, the
separate corporate existence of the Company shall cease, and Purchaser shall
continue as the surviving corporation. Purchaser as the surviving corporation
after the Merger shall be governed by the Delaware Act, and is hereinafter
sometimes referred to as the "Surviving Corporation".
2.2. EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article 8 and Article 9, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of each of Pennsylvania and Delaware in such
form as required by, and executed in accordance with, the relevant provisions of
the Pennsylvania Act and the Delaware Act (the effective time of the last such
filing being the "Effective Time"). At the Effective Time, Purchaser shall
deliver to the Company Stockholders in the manner provided in this Article 2 the
certificates evidencing the Merger Shares issued in the Merger.
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Pennsylvania Act and
Delaware Act. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all property, rights, privileges, powers and
franchises of the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company immediately prior to the Effective
Time shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4. SUBSEQUENT ACTIONS.
(a) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurance or any other actions or things are necessary or desirable to (i) vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or (ii) otherwise to carry out this
Agreement, then the officers and directors of the Surviving Corporation shall be
authorized to (x) execute and deliver, in the name and on behalf of the Company,
all such deeds, bills of sale, assignments and assurances and (y) to take and
do, in the name of and on behalf of each such corporation or otherwise, all such
other actions and things as may be necessary or desirable, to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
(b) If, at any time after the Effective Time, Parent shall consider or be
advised that any assignments, conveyances, assurance or any other actions or
things are necessary or advisable to (i) vest, perfect or confirm of record or
otherwise in the Company Stockholders their right, title or interest in the
Merger Shares, or (ii) otherwise to carry out this Agreement, then the officers
and directors of Parent shall be authorized to (x) execute and deliver, in the
name and on the behalf of the Surviving Corporation, all such assignments,
conveyances and assurances, and (y) to take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest to the Merger Shares in the Company Stockholders or
otherwise to carry out this Agreement.
2.5. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
(a) Unless otherwise determined by Purchaser, Parent and the Company before
the Effective Time, at the Effective Time the Certificate of Incorporation of
Purchaser, as in effect immediately before the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Purchaser, as in effect immediately before the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided by law, the Certificate of Incorporation of the Surviving
Corporation and such Bylaws.
(c) The directors of Purchaser in office immediately before the Effective
Time shall, by virtue of the approval of this Agreement by the stockholders and
directors of Purchaser and the Company, be the directors of the Surviving
Corporation, all of whom shall hold their directorships until the election and
qualification of their respective successors or until their tenure is otherwise
terminated by law, or in accordance with the Bylaws of the Surviving
Corporation. Purchaser shall submit for approval by its stockholders in the
joint proxy statement/prospectus included in the Registration Statement a
proposal to elect six (6) directors to its Board of Directors, two (2) of whom
shall be designees of CareCentric. Upon consummation of the Merger, the
directors of Purchaser shall appoint six designees of Parent (each, a "Parent
Designee," which term shall include any successor or replacement designee
requested by Parent), as designated by Parent prior to the Effective Time and
named in the Registration Statement, to be elected to the Board of Directors of
the Surviving Corporation. For a period of eighteen months after the Effective
Time, (a) Purchaser will use its best efforts to cause the Parent Designees to
be named as nominees for election to the Board of Directors in each proxy
statement of the Surviving Corporation relating to an annual or a special
meeting of stockholders at which Directors will be elected, and (b) the Mestek
Major Shareholders will vote their Merger Shares in favor of all nominees
recommended by the Surviving Corporation Board of Directors in any such proxy
statement. Notwithstanding the foregoing, the Surviving Corporation may decline
to name a Parent Designee as a nominee for any of the following reasons (each a
"Disqualification"):
(i) the Parent Designee has been convicted of a felony;
(ii) the Parent Designee has been named as a target in an SEC
investigation due to alleged misconduct in connection with Parent
Designee's service as a director of any publicly held company (including
but not limited to Purchaser);
(iii) the SEC has barred the Parent Designee from service on the
Board;
(iv) the presence of the Parent Designee will cause the Surviving
Corporation's Directors and Officers' insurance carrier to decline to
provide coverage at standard rates, unless such coverage may be obtained
from the same carrier and the Company agrees to pay for the additional
premiums related to such Parent Designee's service on the Board; or
(v) based on a written opinion from legal counsel, it cannot nominate
Parent Designee without breaching its duties to its stockholders.
Likewise, Parent may decline to vote for any nominee to the Board of
Directors who is subject to a Disqualification for any of the reasons stated
above.
2.6. STOCKHOLDERS' MEETING. Parent and the Company, acting through their
respective Boards of Directors, shall:
(a) promptly furnish a copy of the proxy statement/prospectus included in
the Registration Statement to each of their stockholders after the Registration
Statement has become effective with the SEC;
(b) duly call, give notice of, convene and hold a special joint meeting of
their stockholders and submit this Agreement, the Spinoff and the Merger and any
related matters, as appropriate, to a vote of the Company's and Parent's
stockholders as soon as practicable for the purpose of considering and taking
action upon this Agreement and any such related matters; and
(c) use their reasonable best efforts, subject to the provisions of Section
4.16 of this Agreement, to obtain the necessary approval of the Merger by their
stockholders.
2.7. TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code. The business purpose of the Merger is to combine the business operations
of Purchaser and Company so as to give the Surviving Corporation the critical
mass and resources necessary to compete in an ever-changing marketplace and to
deliver software and service solutions that meet customers' requirements.
ARTICLE 3.
MERGER CONSIDERATION
3.1. CONVERSION OF COMPANY CAPITAL STOCK. The manner and basis of
converting shares of the capital stock of the Company (the "Company Capital
Stock") into shares of common stock of Purchaser, $0.01 par value ("Purchaser
Common Stock"), shall be as follows:
(a) Except as provided in Section 3.2, each share of Company Capital Stock
which shall be outstanding immediately prior to the Effective Time shall at the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into only the right to receive a number of
shares of Purchaser Common Stock to be computed as set forth on Schedule 3.1(a)
(the "Exchange Ratio"). The shares to be issued with respect to previously
outstanding Company Capital Stock are hereinafter referred to as "Merger
Shares". No Company Capital Stock shall be deemed to be outstanding or to have
any rights other than those set forth above in this Section 3.1 after the
Effective Time.
(b) Each share of Company Capital Stock, if any, held in the treasury of
the Company shall automatically be canceled and extinguished without any
conversion thereof and no payment will be made with respect thereto.
3.2. FRACTIONAL SHARES. No scrip or fractional shares of Purchaser Common
Stock shall be issued in the Merger, nor will any outstanding fractional share
interest entitle the owner thereof to vote, to receive dividends or to exercise
any other right of a stockholder of Purchaser. All fractional shares of
Purchaser Common Stock to which a Company Stockholder immediately prior to the
Effective Time would otherwise be entitled at the Effective Time shall be
aggregated. If a fractional share results from such aggregation, such Company
Stockholder shall be entitled, at the Effective Time, to recover cash in lieu of
such fractional shares, with the cash amount due to be computed based on the
closing sales prices of the Purchaser Common Stock as reported on the NASDAQ
National Market on the business day next preceding the day the Merger is
consummated.
3.3. STOCK OPTIONS AND WARRANTS.
(a) All stock options of Purchaser (the "Options") outstanding at the
Effective Time, as identified on Schedule 3.3(a), shall remain outstanding
following the Effective Time. All warrants of Purchaser ("Warrants") outstanding
at the Effective Time, as identified on Schedule 3.3(a) (including the Mestek
Warrant and the Merger Options, whether or not included on Schedule 3.3(a)),
shall remain outstanding following the Effective Time. As part of the
consideration for entering into the Merger, Parent shall receive options to
purchase additional shares of Purchaser Common Stock (the "Merger Options")
equal to .8518518 multiplied by the aggregate number of shares of Purchaser
Common Stock issuable upon exercise of the Options and Warrants (other than the
Mestek Warrant) and issuable in connection with the Purchaser Conversion Rights,
as set forth in an agreement in the form of Exhibit 3.3(a) attached hereto (the
"Merger Option Agreement"). As part of the consideration for entering into the
Mestek Investment, Parent shall receive the Mestek Warrant.
(b) Purchaser shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Purchaser Common Stock for delivery
upon exercise of the Merger Options. In addition, Purchaser will cause such
shares to be listed on the NASDAQ National Market, if not previously listed.
(c) Approval by the stockholders of Purchaser of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 3.3.
3.4. DELIVERY OF MERGER SHARES.
(a) At the Closing (as defined herein), each Company Stockholder's
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock ("Certificate" or
"Certificates") shall be cancelled, and each Company Stockholder shall be issued
the appropriate number of Merger Shares as set forth in Section 3.1(a) hereof.
(b) The Merger Shares will be subject to a restriction on transfer such
that each Company Stockholder receiving Merger Shares may not, directly or
indirectly, without the prior written consent of, or notice of waiver by, Parent
(i) from the date hereof through the date that is two years after the effective
date of the Merger (the "Lockup Period") offer, sell, contract to sell, pledge,
grant any option for the sale of, or otherwise dispose, contract to dispose of
or cause the disposition of, any Merger Shares, except to Parent or any Person
which was a stockholder of Parent on the record date set in connection with the
Spinoff, or (ii) during the Lockup Period exercise any registration rights,
whether held by the recipient of Merger Shares on the Closing Date or thereafter
acquired, with respect to any Merger Shares or any securities convertible into
or exchangeable or exercisable for any Merger Shares. The stock certificates
representing the Merger Shares will include a legend reflecting the Lockup
Period restriction, and a stop transfer order shall be placed with the
Purchaser's transfer agent.
(c) The Merger Shares shall be registered pursuant to the Registration
Statement. The Merger Shares issuable to the Mestek Major Stockholders shall
also have registration rights in accordance with Section 4.1 of this Agreement.
3.5. CLOSING. The closing of the Transactions (the "Closing") shall take
place on or before January 7, 2000, at the offices of Purchaser's counsel in
Atlanta, or another mutually agreed upon location as soon as practicable
following compliance or waiver of the terms, conditions and contingencies
contained herein or such other date as is mutually agreed upon by the parties
hereto (such date to be herein referred to as the "Closing Date"). All
computations, adjustments, and transfers for the purposes hereof shall be
effective as of the close of business on the Closing Date. Each of the parties
will take all lawful actions as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible subject to the satisfaction of the
closing conditions set forth in Articles 8 and 9.
ARTICLE 4.
ADDITIONAL COVENANTS
4.1. REGISTRATION RIGHTS.
(a) Upon request by one (1) or more of the Rights Holders, Purchaser will
use its best efforts to file within 45 days of a request from such Rights
Holders a registration statement with the SEC (utilizing Form S-3 or a successor
form thereto and Rule 415 to the extent available) to register Registrable
Shares as requested by such Rights Holders. Purchaser shall not be required to
file more than three such registration statements (excluding any registration
statement which is delayed pursuant to clause (e) below and through which the
Rights Holders are unable to register eighty percent (80%) or more of the amount
of Registrable Shares that they originally requested to register in such
registration statement), and no such filing shall be made prior to the date
which is six months after the Closing Date.
(b) If Purchaser at any time proposes to register an offering of its
securities under the Securities Act, either for its own account or for the
account of or at the request of one or more Persons holding securities of
Purchaser, Purchaser will:
(i) give written notice thereof to each of the Rights Holders (which shall
include a list of the jurisdictions in which Purchaser intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws) within 10 days of its receipt of a request from one or more Persons
holding securities of Purchaser to register securities, or from its decision to
effect a registration of securities for its own account, whichever first occurs;
and
(ii) use its best efforts to include in such registration and in any
underwriting involved therein, all the Registrable Shares specified in a written
request by any Rights Holder made within 30 days after receipt of such written
notice from Purchaser, except as set forth in Section 4.1(e) below and subject
to the currently existing piggyback rights referenced in Section 4.1(g). (c)
Without regard to whether the registration statement relating to the proposed
sale of the Registrable Shares is made effective or the proposed sale of such
shares is carried out, Purchaser shall pay the fees and expenses in connection
with any such registration including, without limitation, legal, accounting and
printing fees and expenses in connection with such registration statements, the
registration filing and examination fees paid under the Securities Act and state
securities laws and the filing fees paid to the National Association of
Securities Dealers, Inc. Notwithstanding the foregoing, each Rights Holder shall
be responsible for the payment of underwriting discounts and commissions, if
any, and applicable transfer taxes relating to the Registrable Shares sold by
such Rights Holder and for the fees and charges of any attorneys or other
advisers retained by such Rights Holder.
(d) If and whenever pursuant to the provisions of this Section 4.1
Purchaser effects registration of Registrable Shares under the Securities Act of
1933 and state securities laws, Purchaser shall:
(i) Prepare and file with the SEC a registration statement with respect to
such securities and use its best efforts to cause such registration statement to
become and remain effective for a period not to exceed two years after the
filing (but which period shall be extended by the duration of any delay periods
under clause (e) below);
(ii) Use its best efforts to register or qualify the securities covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as any Rights Holder shall reasonably request, and do any and all
other acts and things which may be necessary or advisable (in the reasonable
opinion of such Rights Holder) to enable such Rights Holder to consummate the
disposition thereof; provided, however, that in no event shall Purchaser be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to the service of process
in suits other than those arising out of the offer or sale of the securities
covered by such registration statement in any jurisdictions where it is not now
so subject.
(e) Anything in this Section 4.1 to the contrary notwithstanding:
(i) Purchaser shall not be obligated pursuant to Section 4.1(a) or
Section 4.1(b) to effect any registration with respect to any Registrable
Shares that have been sold by a Rights Holder pursuant to Rule 144.
(ii) Purchaser may defer the filing ("Filing") of any registration
statement or suspend the use of a prospectus under a currently effective
registration statement under Section 4.1(a) at its discretion for "Good
Cause." "Good Cause" means either if (1) Purchaser is engaged in active
negotiations with respect to the acquisition of a "significant subsidiary"
as defined in Regulation S-X promulgated by the SEC under the Exchange Act
and the Securities Act which would in the opinion of counsel for Purchaser
be required to be disclosed in the Filing; or (2) in the opinion of counsel
for Purchaser, the Filing would require the inclusion therein of certified
financial statements other than those in respect of Purchaser's most
recently ended full fiscal year and any preceding full fiscal year, and
Purchaser may then, at its option, delay the imposition of its obligations
pursuant to Section 4.1(a) hereof until the earlier of (A) the conclusion
or termination of such negotiations, or the date of availability of such
certified financial statements, whichever is applicable, or (B) 60 days
from the date of the registration request.
In the event Purchaser has deferred a requested Filing, pursuant to
the preceding paragraph, such deferral period shall end if Purchaser
registers shares for resale by another stockholder of Purchaser. In the
event Purchaser undertakes an underwritten public offering to issue
Purchaser securities for cash during any period in which a requested Filing
has been deferred or if the registration of which Purchaser gives notice
under Section 4.1(b)(i) is for an underwritten public offering to issue
Purchaser securities for cash, Purchaser shall include the Registrable
Securities in such underwritten offering subject to (A) the right of the
managing underwriters to object to including such shares, (B) Section
4.1(g), and (C) the condition that the Rights Holders selling Registrable
Shares in such underwritten offering shall cooperate in the registration
process in all material respects, including execution by such Rights
Holders of the underwriting agreement agreed to by Purchaser and the
underwriters.
If the managing underwriter elects to limit the number or amount of
securities to be included in any registration referenced in the preceding
paragraph or in Section 4(b)(ii), all Persons holding securities of the
Purchaser (including the Rights Holders) who hold registration rights and
who have requested registration (collectively, the "Security Holders")
shall participate in the underwritten public offering pro rata based upon
the ratio of the total number or amount of securities to be offered in the
offering by the total number or amount of securities held by each Security
Holder (including the number or amount of securities which each such
Security Holder may then be entitled to receive upon the exercise of any
option or warrant, or the exchange or conversion of any security, held by
each Security Holder). If any such Security Holder would thus be entitled
to include more securities than such Security Holder requested to be
registered, the excess shall be allocated among the other Security Holders
pro rata in a manner similar to that described in the previous sentence.
Notwithstanding the foregoing, the holders of registration rights under the
Registration Rights Agreements (as defined in Section 4.1(g)) shall have
priority in accordance with the terms of such agreements, if applicable,
but only to the extent that such rights have not been waived or amended.
(iii) Purchaser may amend any registration statement to withdraw
registration of a Rights Holder's Registrable Shares if that Rights Holder
shall fail or refuse to cooperate in full and in a timely manner with all
reasonable requests relating to such registration and the public offering
generally made by Purchaser, the underwriters (if any), their respective
counsel and Purchaser's auditors.
(f) (i) Notwithstanding anything contained to the contrary in, and in
addition to the indemnification provisions of Section 7.1 hereof, with respect
to any registration statement relating to any Registrable Shares sold by any
Rights Holder, such Rights Holder will indemnify Purchaser and each person, if
any, who controls Purchaser within the meaning of the Securities Act, in
writing, in form and substance acceptable to counsel for Purchaser, against any
and all expenses, claims, damages or liabilities to which Purchaser may become
subject under the Securities Act, Exchange Act, any applicable state securities
laws, or otherwise, insofar as such expenses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any preliminary prospectus, registration
statement, final prospectus or any amendment or supplement thereto, or any
filing made pursuant to the Exchange Act, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make statements contained therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to Purchaser
by such Rights Holder expressly for use in the preparation thereof.
(ii) With respect to any registration statement relating to any
Registrable Shares held by any Rights Holder, Purchaser will indemnify such
Rights Holder, each underwriter of the Registrable Shares, and each person,
if any, who controls such Rights Holder or any such underwriter within the
meaning of the Securities Act, against all expenses, claims, damages or
liabilities to which such Rights Holder, any such underwriter, or any such
controlling person may become subject, under the Securities Act, the
Exchange Act, any applicable state securities law, or otherwise, insofar as
such expenses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary prospectus, registration statement, final
prospectus or any amendment or supplement thereto, or any filing under the
Exchange Act, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements contained therein not misleading;
provided, however, that (x) Purchaser shall not be liable to any Rights
Holder or to any controlling person of such Rights Holder in any such case
to the extent that such expenses, claims, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to Purchaser by such Rights
Holder expressly for use in the preparation thereof; and (y) Purchaser
shall not be liable to any underwriter or any controlling person of such
underwriter in any such case to the extent that such expenses, claims,
damages or liabilities arise out of or are based upon any untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
Purchaser by such underwriter expressly for use in the preparation thereof.
(g) The parties hereto acknowledge that the rights to registration
contained herein shall (i) be subject to the prior rights of holders under those
certain Registration Rights Agreements ("Registration Rights Agreements") dated
October 6, 1996 by and among InfoMed Holdings, Inc. (as predecessor in interest
to the Purchaser) and certain shareholders of Purchaser named therein, copies of
which have been provided to Parent, the Right Holders and the Company, but only
to the extent that such rights have not been waived or amended, and (ii) be
equal in priority to the rights of certain parties as described in Section
4.1(g) of that certain Agreement and Plan of Merger dated as of July 12, 1999 by
and among Purchaser, Simione Acquisition Corporation and CareCentric.
(h) Purchaser shall as promptly as practicable prepare and file with the
SEC such amendments and supplements to any registration statement and prospectus
used pursuant to or in connection with this Section 4.1 as may be necessary to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement or for such shorter
period as may be required herein.
(i) Purchaser shall furnish to each selling Rights Holder such number of
conformed copies of its registration statement and of each such amendment and
supplement thereto (in each case including all exhibits, such number of copies
of the prospectus comprised in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other related documents) as such
Rights Holder may reasonably request in order to facilitate the disposition of
the Registrable Shares to be registered.
(j) Purchaser will not grant any right of registration under the Securities
Act relating to any of its equity securities to any person or entity other than
pursuant to this Agreement unless the Rights Holders shall be entitled to have
included in such registration all Registrable Shares requested by the Rights
Holders to be so included prior to the inclusion of any securities requested to
be registered by the persons or entities entitled to any such other registration
rights, other than securities subject to the Registration Rights Agreements,
which shall have priority (but only to the extent that such prior rights have
not been waived or amended).
(k) For so long as the Rights Holders collectively own securities
representing 20% or more of the voting power of Purchaser on a fully diluted
basis, and except as expressly set forth in Section 4(g) hereof, no other Person
shall be entitled to "piggyback" or participate in any of the demand
registrations that any Rights Holder initiates pursuant to Section 4.1(a)
without such Rights Holder's prior written consent.
(l) For purposes of this Section 4.1, "Rights Holder" shall mean any Mestek
Major Stockholder or Parent, and "Rights Holders" shall mean the Mestek Major
Stockholders and Parent.
4.2. STOCKHOLDERS' MEETING. Purchaser, acting through its Board of
Directors, shall duly call, give notice of, convene and hold a meeting of its
stockholders and submit this Agreement and the Merger and any related matters,
as appropriate, to a vote of Purchaser's stockholders as soon as practicable for
the purpose of considering and taking action upon this Agreement and any such
related matters, and shall use its reasonable best efforts to obtain the
necessary approval of the Merger by its stockholders.
4.3. BEST EFFORTS TO LIST SHARES AND MAINTAIN S-3 AND NASDAQ NMS STATUS.
Purchaser shall use all of its efforts to ensure that, prior to the Effective
Time, the Registrable Shares will be approved for trading on the NASDAQ National
Market System subject to official notice of issuance. After the Closing,
Purchaser shall use its best efforts to ensure that it shall remain eligible to
(i) register the Registrable Shares on Form S-3 under the Securities Act or any
successor form thereof, and (ii) maintain approval for trading of the
Registrable Shares on the NASDAQ National Market System.
4.4. PROFITWORKS AGREEMENT. Prior to the Effective Time, Parent and the
Company shall consummate a transaction pursuant to which Parent shall acquire
from the Company all of the assets, and assume all of the liabilities, of the
Company's ProfitWorks applications software and related product line
("ProfitWorks Business"). Such acquisition by Parent shall expressly provide
that the Company shall have no further obligation to provide service, pay monies
or otherwise have any future obligations (other than obligations in respect of
the Company's warranties to Parent regarding title to its assets transferred to
Parent) with respect to the ProfitWorks Business.
4.5. PARENT PLAN AND COMPANY PLAN. Parent agrees that it will cause the
account balance, if any, of each Company Employee (as defined in Section 5.18)
under the Mestek, Inc. Savings & Retirement Plan (the "Parent Plan") to be fully
vested as of the Spinoff Date. Subject to and in accordance with Code Section
401(k) and other applicable law, Company Employees shall be eligible to receive
a distribution of their vested account balances under the Parent Plan within a
reasonable time period following the Spinoff Date, and Purchaser and Parent
agree to cooperate with respect to the timing of such distribution, including
distribution of plan loan offset amounts. Purchaser agrees that it will timely
loan funds to Company Employees who have participant loans outstanding under the
Parent Plan as of the Spinoff Date, who become participants in The Simione
Central Holdings, Inc. 401(k) Retirement Plan (the "Purchaser Plan"), and who
elect direct rollovers of their entire remaining account balances under the
Parent Plan (net of outstanding loan balances) to the Purchaser Plan, to permit
such Company Employees to roll over their outstanding participant loan balances
in full to the Purchaser Plan within 60 days of the date the plan loan offset
amount is distributed from the Parent Plan. As of the Spinoff Date, the Company
shall cease to be an adopting employer under the Parent Plan and under any other
Employee Benefit Plan sponsored by Parent. Parent and the Company agree to take
all actions necessary to terminate the participation of the Company in the
Parent Plan as of the Spinoff Date. On or prior to the Closing Date, the Company
shall terminate the Employees' Retirement Plan of MCS, Inc., with the manner of
such termination to be conducted in accordance with applicable law.
4.6. COMPANY FINANCIAL STATEMENTS. Parent has delivered to Purchaser
audited Company financial statements for the Company's fiscal years ended
December 31, 1997 and December 31, 1998 and an unaudited balance sheet for the
Company as of June 30, 1999 and the Company's related statement of income,
stockholder's equity and cash flow for the period from January 1, 1999 through
June 30, 1999. By no later than November 15, 1999, Parent or the Company will
deliver to Purchaser an unaudited balance sheet for the Company as of September
30, 1999 and the Company's related statements of income, stockholder's equity
and cash flows for the period from January 1, 1999 through September 30, 1999.
4.7. CONDUCT OF BUSINESS BY PURCHASER AND THE COMPANY PENDING MERGER.
Except as set forth on Schedule 4.7, each of Purchaser and the Company covenants
and agrees that, unless the other party shall otherwise consent in writing or
except as otherwise set forth herein, between the date hereof and the Closing,
the businesses of the Company and Purchaser shall be conducted only in, and the
Company and Purchaser shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice; and the Company and
Purchaser will use respective best efforts to preserve intact respective
business organizations, to keep available the services of their present
officers, employees and consultants and to preserve respective present
relationships with customers, suppliers and other persons with which they have
significant business relations; provided, however, that nothing herein shall
obligate Purchaser or the Company to pay any additional compensation to any such
persons. Each of the Company and Purchaser covenants that, between the date
hereof and the Closing, it will not, directly or indirectly, do any of the
following without the prior written consent of the other party:
(a) (i) issue, sell (other than upon exercise of outstanding Options or
Warrants, whose terms shall not be changed) pledge, dispose of, encumber,
authorize, or propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of its capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of its capital stock; (ii) amend or propose to amend its Certificate or
Articles of Incorporation or Bylaws; (iii) split, combine or reclassify any
outstanding share of its capital stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to its capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of its capital stock;
or (v) authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section 4.7(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) directly or indirectly, any Person or any business owned by such Person;
(ii) except in the ordinary course of business and in a manner consistent with
past practices, sell, pledge, dispose of, or encumber or authorize or propose
the sale, pledge, disposition or encumbrance of any of its assets; (iii) enter
into any material contract or agreement, except in the ordinary course of
business; (iv) authorize any capital expenditure in excess of $50,000 or outside
the ordinary course of business; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters
prohibited by this Section 4.7(b);
(c) take any action other than in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to increasing compensation of any officer,
director, stockholder or employee or with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies in effect on the date
hereof and fully disclosed to the other parties hereto prior to the date hereof)
or with respect to any increase of benefits payable under its severance or
termination pay policies in effect on the date hereof;
(d) make any payments except in the ordinary course of business and in
amounts and in a manner consistent with past practice (none of which payments
shall be unreasonable or unusual), under any employee benefit plan or otherwise
to any of its employees, independent contractors or consultants, enter into any
employee benefit plan, any employment or consulting agreement, grant or
establish any new awards under any such existing employee benefit plan or
agreement, or adopt or otherwise amend any of the foregoing, except as otherwise
required by applicable law;
(e) except in the ordinary course of business or as permitted herein, take
any action to incur or increase prior to Closing any indebtedness for borrowed
money from banks or other financial institutions or cancel, without payment in
full, any notes, loans or receivables except in the ordinary course of business;
(f) directly or indirectly loan or advance monies to any Person under any
circumstance whatsoever except for credit transactions with customers on terms
consistent with past practices; or
(g) fail to pay, perform or discharge as they become due any of its
liabilities or obligations, the failure of which to pay, perform or discharge
would have a Material Adverse Effect; or
(h) do any act or omit to do any act which might reasonably be expected to
cause a breach of any contract, commitment or obligation.
4.8. EXPENSES. All of the expenses previously incurred by Purchaser in
connection with the authorization, preparation, execution and performance of the
Original Agreement and other agreements referred to therein, including, without
limitation, all fees and expenses of agents, representatives, brokers, counsel,
financial printers and accountants for Purchaser, shall be paid by Purchaser.
All of the expenses incurred by Purchaser in connection with the authorization,
preparation, execution and performance of this Agreement, the Note, the Security
Agreement, the Certificate of Designations, the Mestek Warrant, or otherwise
incurred by Purchaser as a result of the Spinoff including, without limitation,
expenses relating to revising the proxy statement relating to the Merger
previously filed with the SEC and converting such filing into the Registration
Statement, and all fees and expenses of agents, representatives, financial
printers, brokers, counsel and accountants for Purchaser in connection
therewith, shall be paid by Parent regardless of whether or not the Merger is
consummated. All reasonable expenses incurred by the Company and/or Parent in
connection with the authorization, preparation, execution and performance of
this Agreement on behalf of the Company and/or Parent and the other agreements
referred to herein, including without limitation, all reasonable fees and
expenses of advisors, agents, representatives, brokers, counsel and accountants,
shall be paid by Parent or the Company if the Merger is not consummated, and
shall be paid by Parent if the Merger is consummated; provided, however, that
Parent shall not be required to pay costs incurred by Company personnel in
connection with the Transactions; and provided, further, that Purchaser shall be
responsible for one-half (1/2) of all expenses incurred by the Company
(including, without limitation, the expenses of the Company's accountants, Grant
Thornton, LLP) in connection with the preparation of financial statements
required for filing in the Registration Statement and any valuation reports not
yet produced that Purchaser and Parent reasonably determine are necessary in
connection with the Transactions.
4.9. TAX MATTERS.
(a) Parent shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date ("Pre-Closing Tax Periods").
Parent shall permit Purchaser to review and comment on each such Tax Return
described in the preceding sentence prior to filing. Parent shall reimburse
Purchaser for Taxes of the Company with respect to such Pre-Closing Tax Periods
within fifteen (15) days after payment by Purchaser of such Taxes to the extent
such Taxes exceed in the aggregate the reserve for Tax liability (other than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet. Purchaser
will remit to Parent within fifteen (15) days of receipt any refunds it may
receive from any Tax Authority with respect to Pre-Closing Tax Periods.
(b) The parties anticipate that the Merger will terminate all Tax periods
for the Company. With respect, however, to any Tax periods of the Company which
are determined to begin before the Closing Date and end after the Closing Date,
Purchaser shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company. Parent will remit to Purchaser within fifteen
(15) days after the date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
Taxable period ending on the Closing Date to the extent such Taxes exceed in the
aggregate the reserve for Tax liability (other than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet. Purchaser shall reimburse Parent
for any refund of Taxes of the Company with respect to such periods within
fifteen (15) days after receipt by Purchaser of such refund. For purposes of
this Section, in the case of any Taxes that are imposed on a periodic basis and
are payable for a Tax period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such Tax period
ending on the Closing Date shall (i) in the case of any Taxes other than Taxes
based upon or related to income or receipts, be deemed to be the amount of such
Tax for the entire Tax period multiplied by a fraction the numerator of which is
the number of days in the Tax period ending on the Closing Date and the
denominator of which is the number of days in the entire Tax period, and (ii) in
the case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Tax period ended on the
Closing Date. Any credits relating to a Tax period that begins before and ends
after the Closing Date shall be taken into account as though the relevant Tax
period ended on the Closing Date. All determinations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior
practice of the Company. This Section 4.9(b) shall not apply to the federal
income taxes associated with the Parent Affiliated Group.
(c) With respect to the Parent Affiliated Group:
(i) Parent and the Company have allocated, and will continue to
allocate through the Closing Date, Federal income taxes in accordance with
consolidated return regulations. Such Federal income tax allocations shall
be set forth on the Closing Balance Sheet. Any tax sharing agreement
between Parent and the Company shall be terminated as of the Closing Date
and will have no further effect for any taxable period. Parent will not
elect to retain any net operating loss carryovers or capital loss
carryovers of the Company under Treasury Reg. ss.1.1502-20(g).
(ii) Parent will include the income of the Company (including any
deferred income triggered into income by Treasury Reg. ss.1.1502-13 and
Treasury Reg. ss.1.1502-14 and any excess loss accounts taken into income
under Treasury Reg. ss.1.1502-19) on the Parent's consolidated federal
income Tax Returns for all periods through the Closing Date and pay any
federal income Taxes attributable to such income. Purchaser will furnish
Tax information within ninety (90) days after the Closing Date concerning
the Company to Parent for inclusion in Parent's federal consolidated income
Tax Return for the period which includes the Closing Date in accordance
with the Company's past custom and practice. Parent will allow the
Purchaser an opportunity to review and comment upon such Tax Returns
(including any amended returns) to the extent that they relate to the
Company. Parent will take no position on such Tax Returns that relate to
the Company that would adversely affect the tax liability of Purchaser
after the Closing Date. The income of the Company will be apportioned to
the period up to and including the Closing Date and the period after the
Closing Date by closing the books of the Company as of the end of the
Closing Date.
(iii) Parent will allow Purchaser and its counsel to participate in
any audits of Parent consolidated federal income Tax Returns to the extent
that such returns relate to the Company. Parent will not settle any such
audit in a manner which could adversely affect the tax liability of
Purchaser after the Closing Date without the prior written consent of
Purchaser, not to be unreasonably withheld. Parent will not file an amended
consolidated federal income Tax Return with respect to any income Tax
matters of the Company that could adversely affect the tax liability of
Purchaser without the prior written consent of Purchaser, not to be
unreasonably withheld.
(iv) Purchaser and Parent shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Purchaser and Parent agree (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to
any taxable period beginning before the Closing Date until the expiration
of the statute of limitations (and, to the extent notified by Purchaser or
Parent, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any Tax
Authority, and (ii) to give the other party reasonable written notice prior
to transferring, destroying or discarding any such books and records and,
if the other party so requests, Purchaser or Parent, as the case may be,
shall allow the other party to take possession of such books and records.
(v) For federal income Tax purposes, the parties intend that the
Merger shall be treated as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. None of the parties hereto shall take a position
on any Tax Return which is inconsistent with such Tax treatment.
4.10. NOTIFICATION OF CERTAIN MATTERS.
(a) Purchaser shall give prompt notice to Parent and the Company of the
following:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (A) any representation,
warranty or agreement of Purchaser contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to
the Closing, or (B) directly or indirectly, any Material Adverse Effect; or
(ii) any material failure of Purchaser, any officer, director,
employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
(b) Parent and the Company shall give prompt notice to Purchaser of the
following:
(i) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (A) any representation or
warranty of Parent or the Company contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to
the Closing, or (B) directly or indirectly, any change in or effect on the
business of the Company that is or will be materially adverse to the
business, operations, properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or regulatory
status of the Company, or (C) a material adverse effect upon the legality,
validity, binding effect or enforceability of this Agreement, or the
ability of Parent or the Company to perform its respective obligations
hereunder; or
(ii) Any material failure of Parent or the Company, or any officer,
director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) Notwithstanding the foregoing, the delivery of any notice pursuant
to this Section shall not waive or release Parent, the Company or Purchaser
from its covenants, representations or warranties under this Agreement.
4.11. PUBLIC ANNOUNCEMENTS.
(a) Except for and to the extent of any public announcement or disclosures
relating to the Transactions previously made by any of the parties hereto, as
may be required by law or stock exchange requirements, or as provided in this
Section, each of the Company, Purchaser and Parent agree that until the
consummation of the Transactions, each of such parties will not, and will direct
its directors, officers, employees, representatives and agents who have
knowledge of the Transactions not to, disclose to any Person who is not a
participant in discussions concerning the Transactions (other than Persons whose
consent is required to be obtained hereunder), any of the terms, conditions or
other facts with respect to the Transactions.
(b) The Company and Parent shall obtain the prior oral or written consent
of Purchaser, and Purchaser shall obtain the prior oral or written consent of
the Company and Parent, before issuing any press release or otherwise making any
public statements with respect to the Transactions and shall not issue any such
press release or make any such public statement prior to receiving such consent,
except as may be, in the good faith belief of the party issuing such press
release, required by law or stock exchange requirements. The parties acknowledge
and agree that Purchaser and Parent expect to issue press releases with respect
to the Transactions immediately after execution of this Agreement, as well as
after the Closing.
4.12. TAX FREE REORGANIZATION. After the Closing, Parent and Purchaser
shall use their best efforts to protect the parties' intended tax treatment of
the Merger as a tax free reorganization, as provided in Section 2.7 hereof.
Purchaser will continue after the Closing the historical business operation of
the Company pursuant to Regulation 1.368-1(d) of the Code.
4.13. ACCESS AND INSPECTION. On reasonable notice, each party hereto shall
provide the other party (or parties) full access during normal business hours
from and after the date hereof until the Closing to all of the books and records
of such party as they relate to the business and affairs of Purchaser or the
Company (or, as to Parent only, the business and affairs of the Company) as may
be requested, in each case for the purpose of making such continuing
investigation of such party and its respective predecessors as it may desire.
Each party shall cause appropriate personnel to assist the other party (or
parties) in such continuing investigation and shall cause personnel, counsel,
accountants and other non-employee representatives to be reasonably available to
such party (or parties) in connection with its continuing investigation.
4.14. ONGOING BUSINESS. Prior to Closing, neither Purchaser nor the Company
will engage in any activities outside the ordinary course of business, except as
contemplated herein.
4.15. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Subject to compliance
with applicable law, Purchaser, Parent and the Company will (a) cooperate with
one another (i) in promptly determining whether in connection with this
Agreement any filings, including qualifications to conduct business as a foreign
corporation, are required to be made with, or consents, approvals, permits or
authorizations are required to be obtained from, any Governmental Authority
under any federal, state or foreign law or regulation or from any other third
party under any Material Contract (as defined herein) and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations and (b) provide one another with copies of all filings made by
such party with any Governmental Authority in connection with this Agreement. In
the event that the parties determine that a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR") is required to consummate
the Transactions, Purchaser and Parent shall each bear one-half (1/2) of the
cost of the filing fee.
4.16. NO SOLICITATION.
(a) In consideration of the expenses to be incurred by each of the parties
hereto in negotiating toward this Agreement and in conducting its due diligence
investigation, each of the parties hereto shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party, (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale or
transfer of substantial assets, sale of any shares of capital stock (including
without limitation by way of a tender offer), acquisition of shares of capital
stock or assets, or similar transaction involving it or any of its subsidiaries,
other than the Transactions (any of the foregoing inquiries or proposals being
referred to in this Agreement as an "Acquisition Proposal"), or (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or agree to or
recommend any Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in
this Section 4.16(a) shall prevent any of the parties hereto or its respective
Board of Directors, from (A) furnishing non-public information, or entering into
discussions or negotiations, with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity or
agreeing to or recommending an unsolicited bona fide written Acquisition
Proposal to its stockholders, if and only to the extent that (1) the Board of
Directors of such party believes in good faith (after consultation with its
advisors) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Acquisition Proposal, would, if
consummated, result in a transaction more favorable to such party over the long
term than the transaction contemplated by this Agreement, and such Board of
Directors determines in good faith after receipt of an opinion from outside
legal counsel to the effect that such action is likely necessary for such Board
of Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party than those
contained in the Confidentiality Agreement; or (B) complying with rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
(b) Notwithstanding the foregoing, nothing in this Agreement shall prohibit
Parent from soliciting, negotiating, agreeing to or consummating any Acquisition
Proposals involving subsidiaries or divisions of Parent other than the Company.
(c) If either Purchaser or the Company enters into a definitive agreement
pursuant to an Acquisition Proposal, such party shall be deemed to have
terminated this Agreement and shall pay the non-terminating party a termination
fee within three business days of its entering into such a definitive agreement.
The termination fee shall be the sum of (i) the non-terminating party's
out-of-pocket costs incurred in connection with the Transactions through the
date of termination, not to exceed $500,000 in the aggregate, and (ii)
$1,200,000. The payment of a termination fee pursuant to this subsection, which
is agreed to be a fair estimate of the expenses and damages which would be
suffered by the non-terminating party in such event, shall be the sole and
exclusive remedy of the non-terminating party against the terminating party and
its respective directors, officers, employees, attorneys, agents, advisors or
other representatives (including its stockholders), with respect to the
occurrences giving rise to such payment. Should any court of competent
jurisdiction determine that, consistent with applicable law, the termination fee
set forth above is unenforceable or otherwise contrary to public policy, the
parties hereto agree to any reformation of this Agreement by a court that would
result in such termination fee being upheld and given effect.
(d) Parent and the Company hereby consent to Purchaser's negotiation, but
not consummation, of potential acquisitions that Purchaser has disclosed in
writing to Parent at or prior to the date hereof.
4.17. REGISTRATION.
(a) The Company shall furnish to Purchaser such information, (including
information about the Company and its affiliates), as may be necessary to enable
Purchaser to prepare and file with the SEC a registration statement on Form S-4
under the Securities Act, and the rules and regulations promulgated thereunder,
in respect of the Purchaser Common Stock to be issued by reason of the Merger,
the Mestek Warrant, and the Purchaser Common Stock reserved for issuance under
the Mestek Warrant (such registration statement, including the proxy
statement/prospectus included therein which is to be furnished to the holders of
the Company Capital Stock and/or to the holders of Purchaser Common Stock, in
each case together with any amendments or supplements thereto, being referred to
in this Agreement as the "Registration Statement"). The Company covenants that
the Company Information (as defined below) included in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, at the time the proxy statement/prospectus contained therein is first
mailed to the Company's stockholders, or at the time of the meeting of the
Company's stockholders held to approve the Merger Agreement, contain any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or omit to state
a material fact necessary in order to make the statements therein not false or
misleading. If at any time prior to the Effective Time any event or circumstance
should come to the attention of the Company with respect to the Company
Information that is required to be set forth in an amendment or supplement to
the Registration Statement, the Company shall promptly notify Purchaser and
shall assist Purchaser in appropriately amending or supplementing the
Registration Statement in the manner contemplated in Section 4.17(d) below. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the Exchange
Act that is incorporated by reference into the Registration Statement. The
Company covenants that the Registration Statement insofar as it relates to
information concerning the Company, or any of its businesses, assets, directors,
officers, or stockholders or any other affiliates or other matters pertaining to
the Company that is supplied by the Company for inclusion in the Registration
Statement, including by incorporation by reference to SEC filings (the "Company
Information") shall comply as to form and substance in all material respects
with the applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that the Company shall have no liability or obligation for
any information other than the Company Information.
(b) The Company shall instruct its accountants, Grant Thornton, LLP, to
deliver and shall use its reasonable best efforts to cause such accountants to
deliver to Purchaser letters dated at the time the Registration Statement
becomes effective and as of the Closing Date, addressed to Purchaser, each
containing such matters as are customarily contained in auditors' letters
regarding information about the Company included in the Registration Statement,
which auditors' letters shall be in form and substance reasonably satisfactory
to Purchaser.
(c) Purchaser shall file the Registration Statement and use its reasonable
best efforts to have it declared effective by the SEC as promptly as
practicable, and shall use its reasonable best efforts to take any action
required to be taken to comply in all material respects with any applicable
federal or state securities laws in connection with the issuance of Purchaser
Common Stock in the Merger, the Mestek Warrant, and the Purchaser Common Stock
reserved for issuance under the Mestek Warrant; except that such covenant of
Purchaser is made, as to those portions of the Registration Statement containing
or required to contain Company Information, assuming and relying solely on
timely and full compliance with Sections 4.17(a) and 4.17(b). Purchaser will, in
a timely manner, provide the Company with copies of any written communications
to or from the SEC and notify the Company of any material oral communications to
or from the SEC with respect to the Registration Statement or the transactions
contemplated thereby.
(d) Purchaser covenants that the information included in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, at the time the proxy statement/prospectus contained therein is first
mailed to the Company's stockholders, or at the time of the meeting of the
Company's stockholders held to approve the Merger, contain any statement which,
at the time and in light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or omit to state a material
fact necessary in order to make the statements therein not false or misleading;
except that Purchaser makes no covenant as to those portions of the Registration
Statement containing or required to contain Company Information. If at any time
prior to the Effective Time any event or circumstance should come to the
attention of Purchaser that is required to be set forth in an amendment or
supplement to the Registration Statement, Purchaser shall use its reasonable
efforts to amend or supplement appropriately the Registration Statement. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the Exchange
Act that is incorporated by reference into the Registration Statement.
(e) The Registration Statement and all other documents required to be filed
by Purchaser with the SEC in connection with the Transactions shall comply as to
form and substance in all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder and the Exchange Act
and the rules and regulations thereunder; except that Purchaser shall have no
liability or obligation for any failure to comply with such requirements arising
out of the Company Information.
(f) Purchaser shall use all reasonable efforts to take such action as may
be necessary to ensure that the requirements of Rule 144(c) under the Securities
Act are satisfied so as to enable any Affiliates of the Company to offer or sell
the Purchaser Stock received by them in the Merger pursuant to paragraph (d) of
Rule 145 (subject to compliance with the provisions of paragraphs (e), (f) and
(g) of Rule 144).
(g) Each party will provide to the other parties, or their counsel, drafts
of the information related to or customarily provided by such party to be
included in the Registration Statement on Form S-4 and will generally cooperate
with each other in the preparation thereof.
4.18. AFFILIATES The Company shall use its reasonable best efforts to cause
each person that is an Affiliate of the Company on the date immediately
preceding the date of the filing of the Registration Statement to deliver to
Purchaser on such date a written agreement substantially in the form attached
hereto as Exhibit 4.18 ("Rule 145 Letter"), and, in the event that any other
person becomes an affiliate of the Company thereafter, to cause such person to
provide a Rule 145 Letter to Purchaser at the Closing.
4.19. DISSENTERS RIGHTS. In the event that, in obtaining Company
Stockholder Approval, holders of five percent (5%) or more of the aggregate
number of shares of issued and outstanding Company Capital Stock shall have
exercised (and not withdrawn) dissenters rights under the Pennsylvania Act, the
parties shall negotiate in good faith to amend this Agreement to provide for the
payment of cash amounts to Company Stockholders who perfect (and do not
withdraw) their dissenters rights under the Pennsylvania Act, and the payment of
related legal expenses and court costs, in a manner mutually satisfactory to
Purchaser and Parent.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND PARENT
In order to induce Purchaser to enter into this Agreement and consummate
the Transactions, each of the Company and Parent represents and warrants to
Purchaser as follows, each of which warranties and representations is material
to and relied upon by Purchaser:
5.1. ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania. The states in which the Company is qualified to do business are
set forth on Schedule 5.1. The Company has all necessary corporate power and
authority to own, lease and operate its properties and conduct its business as
it is currently being conducted. The Company does not own, directly or
indirectly, any equity interest in any corporation, partnership, joint venture,
or other entity and does not have any subsidiaries, which for purposes of this
Agreement means any corporation or other legal entity of which the Company
(either alone or through or together with any other Affiliate of the Company)
owns, directly or indirectly, more than 20% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
5.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. The Company has full
corporate power and authority to execute and deliver this Agreement and each of
the Closing Documents to which the Company is or will be a party and to
consummate the Transactions. The Board of Directors of the Company at a meeting
duly called and held has determined that the Merger is advisable and in the best
interest of the Company and has approved it, and has recommended it to the
Company's stockholders. The directors of the Company have also duly approved and
authorized the execution and delivery of this Agreement and each of the Closing
Documents to which the Company is or will be a party and the consummation of the
Transactions, and, other than the requisite stockholder vote, no other corporate
proceeding on the part of the Company is necessary to approve the Transactions.
Assuming that this Agreement and each of the Closing Documents to which
Purchaser is a party constitutes a valid and binding agreement of Purchaser,
this Agreement and each of the Closing Documents to which the Company or Parent
is or will be a party constitutes, or will constitute when executed and
delivered, a valid and binding agreement of the Company or Parent, as the case
may be, in each case enforceable in accordance with its terms, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency or
other similar laws relating to the enforcement of creditors' rights generally
and by the application of general principles of equity. The duly elected
officers and directors of the Company are set forth on Schedule 5.2 attached
hereto. Copies of the Articles of Incorporation, the Bylaws and all minutes of
the Company are contained in the minute books of the Company. True, correct and
complete copies of the minute books of the Company have been delivered to
Purchaser.
5.3. OWNERSHIP OF ASSETS. The Company has title to all of its properties
and assets, other than leased or licensed property, in each case free and clear
of any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 5.3 or
reserved against in the Company Financial Statements (as defined in Section
5.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Material Adverse Effect. All buildings, machinery and
equipment owned or leased by the Company are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. The Company
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of the
Company as of the Effective Time will reflect actual transactions and will have
arisen in the ordinary course of business.
5.4. NO CONFLICT; REQUIRED CONSENTS. Schedule 5.4 lists all third party
consents or approvals required with respect to the Company for consummation of
the Transactions, which consents the Company agrees to use its best reasonable
efforts to obtain. Assuming all such consents, approvals, authorizations and
other actions have been obtained or taken and assuming the appropriate filings
are made by Purchaser, Parent and the Company to effectuate the Merger under the
Pennsylvania Act and the Delaware Act, and under the Securities Act and the
Exchange Act, the execution and delivery by the Company of this Agreement and
the Closing Documents and the consummation by the Company of the Transactions do
not and will not (a) require the consent, approval or action of, or any filing
or notice to, any corporation, firm, Person or other entity or any public,
governmental or judicial authority (except for such consents, approvals,
actions, filings or notices the failure of which to make or obtain will not in
the aggregate have a Material Adverse Effect); (b) violate the terms of any
instrument, document or agreement to which the Company is a party, or by which
the Company or the property of the Company is bound, or be in conflict with,
result in a breach of or constitute (upon the giving of notice or lapse of time
or both) a default under any such instrument, document or agreement, or result
in the creation of any lien upon any of the property or assets of the Company
except for such violations, conflicts, breaches and defaults which, individually
or in the aggregate, would not have a Material Adverse Effect; (c) violate the
Company's Articles of Incorporation or Bylaws; or (d) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any federal,
state, county, municipal, or foreign court or Governmental Authority applicable
to the Company, or the business or assets of the Company, except for such
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not subject to, or a party to, any mortgage,
lien, lease, agreement, contract, instrument, order, judgment or decree or any
other material restriction of any kind or character which would prevent or
hinder the continued operation of the business of the Company after the Closing
on substantially the same basis as theretofore operated.
5.5. CAPITALIZATION. The authorized and outstanding capital stock of the
Company is set forth on Schedule 5.5, and no shares of the Company's Capital
Stock are held in the treasury of the Company. All outstanding Company Capital
Stock has been duly authorized, and is validly issued, fully paid and
nonassessable. No party has any preemptive (whether statutory or contractual)
rights in any capital stock of the Company. The Company has no convertible
securities, options, warrants, or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which it is bound to issue any
additional shares of its capital stock or other securities. All securities of
the Company were offered and sold in compliance with applicable Federal and
state securities laws. Each and every dividend of the Company, if any, whether
paid in cash or other property, has been declared and paid in compliance with
applicable law, and the Company has no further obligation with respect to such
payment.
5.6. COMPLIANCE WITH LAWS; FILINGS WITH THE SEC.
(a) The Company is in compliance with, and the Company operated any
businesses previously owned by it in compliance with all applicable laws,
orders, rules and regulations of all Governmental Authorities, including
applicable Environmental Laws, except for such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has not received notice of any noncompliance with the foregoing.
(b) Neither the Company nor any other Persons providing services for the
Company have, to the knowledge of the Company or Parent, engaged in any
activities which would be a basis for exclusion from any otherwise available
Medicare, Medicaid or other federally funded programs under Section 1320a - 7a
of Title 42 of the United States Code, or prohibited under any applicable
portions of Section 1320a - 7b of such Title 42, or regulations promulgated
thereunder, or related state or local statutes or regulations, including any
"fraud and abuse" provisions, except where such noncompliance has and will have,
individually and in the aggregate, no Material Adverse Effect.
(c) Without limiting the foregoing, the Company and any other person or
entity for whose conduct the Company is legally held responsible are in
compliance with all applicable federal, state, regional, local or provincial
laws, statutes, ordinances, judgments, rulings and regulations relating to any
matters of pollution, protection of the environment, health or safety, or
environmental regulation or control (collectively, "Environmental Laws"), except
where such noncompliance has and will have, individually or in the aggregate, no
Material Adverse Effect. Neither the Company, nor any other person or entity for
whose conduct the Company is legally responsible has received any notice,
demand, request for information, or administrative inquiry relating to any
violation of an Environmental Law or the institution of any suit, action, claim,
or proceedings alleging such violation or investigation by any Governmental
Authority or any third party of any such violation.
(d) Parent has made all filings with the SEC that it has been required to
make under the Securities Act and the Exchange Act since January 1, 1996
(collectively, the "Public Reports"), and has done so in a timely manner. Each
of the Public Reports has complied with the Securities Act and the Exchange Act
in all material respects. None of the Public Reports, as of their respective
dates, to the Parent's knowledge, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
5.7. LICENSES AND PERMITS. The Company holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
necessary or required for the use or ownership of its assets and the operation
of its business, except where the failure to hold such license, permit,
concession, grant, franchise, approval or authorization has and will have,
individually or in the aggregate, no Material Adverse Effect. The Company has
not received notice of any violations in respect of any such licenses, permits,
concessions, grants, franchises, approvals or authorizations, which violations,
individually or in the aggregate, would have a Material Adverse Effect. No
proceeding is pending or, to the knowledge of the Company, threatened, which
seeks revocation or limitation of any such licenses, permits, concessions,
grants, franchises, approvals or authorizations, nor is there any basis
therefor, the revocation or limitation of which, individually or in the
aggregate, would have a Material Adverse Effect.
5.8. LIABILITIES AND OBLIGATIONS OF THE COMPANY.
(a) Attached hereto as Schedule 5.8 are true, correct and complete copies
of the Company's unaudited balance sheets as of December 31, 1997 and December
31, 1998, and unaudited balance sheet as of June 30, 1999, and the related
statements of income, stockholders' equity and cash flows for the years and six
months then ended, together, except in the case of the financial statements
dated June 30, 1999, with the reports of Grant Thornton thereon (collectively,
the "Company Financial Statements"). The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, fairly present in all material respects the financial
condition of the Company as of the respective dates thereof, and disclose all
liabilities of the Company, whether absolute, contingent, accrued or otherwise,
existing as of the date thereof that are of a nature required to be reflected in
financial statements prepared in accordance with generally accepted accounting
principles, except for liabilities that, individually or in the aggregate, would
not have a Material Adverse Effect; provided, however, that the interim
financial statements are subject to normal year-end adjustments which are not
expected to be material in amount.
(b) The Company has no liability or obligation (whether accrued, absolute,
contingent or otherwise) including, without limitation, any liability that might
result from an audit of its Tax Returns by any Tax Authority, except for (i)
liabilities that, individually or in the aggregate, would not have a Material
Adverse Effect, (ii) the liabilities and obligations of the Company that are
disclosed or reserved against in the Company Financial Statements or Schedule
5.8 hereto, to the extent and in the amounts so disclosed or reserved against,
and (iii) liabilities incurred or accrued in the ordinary course of business
since June 30, 1999 and liabilities incurred in connection with the
Transactions.
(c) Except as disclosed in the Company Financial Statements or Schedule
5.8, the Company is not in default with respect to any liabilities or
obligations, except for defaults that, individually or in the aggregate, would
not have a Material Adverse Effect and all such liabilities or obligations shown
or reflected in the Company Financial Statements or Schedule 5.8 and such
liabilities incurred or accrued subsequent to June 30, 1999 were incurred in the
ordinary course of business except as indicated in Schedule 5.8, except for
liabilities and obligations that, individually or in the aggregate, would not
have a Material Adverse Effect.
5.9. TAXES.
Except as to any noncompliance with any of the following provisions that
would not, individually or in the aggregate, have a Material Adverse Effect:
(a) The Company has timely filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. Except as
set forth in Schedule 5.9, the Company currently is not the beneficiary of any
extension of time within which to file any Tax Return. There are no liens or
other security interests on any of the assets of any of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax, other than
liens, if any, for Taxes not yet due and payable.
(b) The Company has timely paid, withheld and/or remitted to the
appropriate Tax Authority all Taxes required to be paid, withheld and/or
remitted on or before the Closing Date. The reserves for Taxes to be reflected
on the Closing Balance Sheet (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) will be
adequate to cover all Tax liabilities, contingent or otherwise, as of the
Closing Date.
(c) No employee of the Company or any of its subsidiaries responsible for
Tax matters has received notice that any Tax Authority proposes to assess any
additional Taxes against the Company for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax liability of the
Company either (i) claimed or raised by any Tax Authority in writing, or (ii) as
to which any employee of the Company or the Parent responsible for Tax matters
has knowledge based upon personal contact with any agent of such Tax Authority.
(d) Except as set forth in Schedule 5.9, the Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. The Company has not made any payments which
have not yet been reported on any Tax Return, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate the Company to make any payments that will not be deductible
under Section 280G of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.
(f) The Company is not a party to any Tax allocation or sharing agreement
other than concerning federal income taxes for an Affiliated Group the common
parent of which is Parent (such group, the "Parent Affiliated Group"). The
Company has not been a member of an Affiliated Group or filed or been included
in a combined, consolidated or unitary Tax Return other than a consolidated
federal income Tax Return for the Parent Affiliated Group. The Company has no
contractual obligation to indemnify any other person with respect to the payment
of any Taxes of the other person which could have a Material Adverse Effect.
With respect to the Parent Affiliated Group:
(i) The Parent Affiliated Group has filed all federal income Tax
Returns that it was required to file for each taxable period during which
the Company was a member of the group. All such Tax Returns were correct
and complete in all material respects in so far as they relate to the
Company. All income Taxes owed by such Affiliated Group (whether or not
shown on any Tax Return) have been paid for each taxable period during
which the Company was a member of the group; provided however, that Taxes
for the taxable year which includes the Closing Date shall be paid when
due.
(ii) No employee of any of Parent and any of its subsidiaries
responsible for Tax matters expects any authority to assess any additional
income Taxes against the Parent Affiliated Group for any taxable period
during which the Company was a member of the group. There is no dispute or
claim concerning any income Tax liability of the Parent Affiliated Group
for any taxable period during which the Company was a member of the group
either (A) claimed or raised by any authority in writing or (B) as to which
any employees of any of Parent and its subsidiaries responsible for Tax
matters has knowledge based upon personal contact with any agent of such
authority. Except as set forth on Schedule 5.9, the Parent Affiliated Group
has not waived any statute of limitations in respect of any income Taxes or
agreed to any extension of time with respect to an income Tax assessment or
deficiency for any taxable period during which the Company was a member of
the group.
5.10. CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY. Schedule 5.10 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written) to which the Company is a party that involve a receipt or an
expenditure by the Company or require the performance of services or delivery of
goods to, by, through, on behalf of or for the benefit of the Company, which in
each case relates to a contract, agreement, commitment or instrument that
requires (or is reasonably expected to require) payments or provides (or is
reasonably expected to provide) for receipts in excess of $25,000 from the
Closing Date until the first (1st) anniversary thereof.
The contracts, agreements, commitments and other instruments listed or
required to be listed on Schedule 5.10 or listed on a Schedule referred to in
Section 5.12 hereof are herein referred to as the "Material Contracts". All of
the Material Contracts are in full force and effect.
None of the Company, and, to the knowledge of the Company and Parent, any
other party to any such contract, commitment or arrangement has breached any
provision of, or is in default under, the terms thereof, the breach of or
default under which would, individually or in the aggregate, have a Material
Adverse Effect; and there are no existing facts or circumstances known to the
Company or Parent that would prevent the work in process of the Company or its
contracts and agreements from maturing upon performance by the Company into
collectible accounts receivable in the aggregate in amounts consistent with
historical experience. Except as set forth on Schedule 5.10 or as reserved
against in the Company Financial Statements, there are no contracts or
commitments that require the performance of services or provision of goods by
the Company at a direct cost for each such contract or commitment known by the
Company to be in excess of the revenue to be derived pursuant to the terms of
such contract or commitment, which, individually, or in the aggregate, would
have a Material Adverse Effect. Except for terms specifically described in
Schedule 5.10, the Company has not received any payment from any contracting
party in connection with or as an inducement for entering into any contract,
agreement, policy or instrument except for payment for actual services rendered
or to be rendered by the Company consistent with amounts historically charged
for such services.
5.11. CUSTOMER CONTRACTS. With respect to each contract, agreement,
commitment or other instrument in effect to which the Company is a party with
any customer of the Company (each, a "Customer Contract") all performance
warranties with respect to computer software represented in writing as owned by
or proprietary to the Company ("Owned Software") made by the Company in any
Customer Contract, including warranties with respect to capacity, availability,
downtime and response time, and Year 2000 compliance have been satisfied in all
material respects upon the terms and conditions and to the extent provided for
in such Customer Contract, except for failures to satisfy which, individually or
in the aggregate, would not have a Material Adverse Effect.
5.12. INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
(a) Schedule 5.12(A) hereto sets forth (i) a complete and correct list of
all trademarks, trade names, service marks, service names, and brand names
(whether or not any of the same are registered), and all patents and registered
copyrights and all applications for the foregoing, if any, (setting forth the
registration, issue or serial number of the patents and registered copyrights
and a description of the same) applicable to or used in the business of the
Company; (ii) the owner of such intellectual property and any registration
thereof or application thereof; and (iii) a complete list of all licenses
granted by or to the Company with respect to any of the above (identified by
title, date and parties) (not inclusive of Customer Contracts). All such
trademarks, trade names, service marks, service names, brand names, copyrights
and patents are owned by the Company free and clear of all liens, claims,
security interests and encumbrances, except for such liens, claims, security
interests and encumbrances as would, individually or in the aggregate, not have
a Material Adverse Effect. Except as set forth on Schedule 5.12(A), the Company
is not currently in receipt of any notice of any violation of, and, to the
Company's and Parent's knowledge, the Company is not violating the rights of
others in any trademark, trade name, service mark, copyright, patent, trade
secret, know-how or other intangible asset, except such violations as,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) Schedule 5.12(B) contains a complete and accurate list of all Owned
Software. Except as set forth on Schedule 5.12(B), the Company has title to the
Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, inventors, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such computer software. Except as set forth on Schedule 5.12(B) and
except for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (c) below) in order to operate fully in the manner in which it is
intended. The source code to the Owned Software has not been published or
disclosed to any other parties, except as set forth in the Customer Contracts or
as set forth on Schedule 5.12(B), and except pursuant to contracts requiring
such other parties to keep the Owned Software confidential. To the knowledge of
the Company and Parent, no such other party has breached any such obligation of
confidentiality.
(c) Schedule 5.12(C) contains a complete and accurate list of all software
(other than commercially available over-the-counter "shrink-wrap" software)
under which the Company is a licensee, lessee or otherwise has obtained the
right to use (the "Licensed Software"). The Company has the right and license to
use, sublicense, modify and copy Licensed Software to the extent set forth in
the respective license, lease or similar agreement pursuant to which the
Licensed Software is licensed to the Company, free of any other limitations or
encumbrances, and the Company is in compliance with all applicable provisions of
such agreements, except for failures to comply which, individually or in the
aggregate, would not have a Material Adverse Effect. Except as disclosed on
Schedule 5.12(C), none of the Licensed Software has been incorporated into or
made a part of any Owned Software or any other Licensed Software. The Company
has not published or disclosed any Licensed Software to any other party except
in accordance with and as permitted by any license, lease or similar agreement
relating to the Licensed Software and except pursuant to contracts requiring
such other parties to keep the Licensed Software confidential. No party to whom
the Company has disclosed Licensed Software has, to the knowledge of the Company
and Parent, breached such obligation of confidentiality, except for such
publications and disclosures that, individually or in the aggregate, would not
have a Material Adverse Effect.
(d) The Owned Software and Licensed Software and commercially available
over-the-counter "shrink-wrap" software constitute all software used in the
businesses of the Company (collectively, the "Company Software"). The
Transactions will not cause a breach or default under any licenses, leases or
similar agreements relating to the Company Software or impair Purchaser's
ability to use the Company Software in the same manner as such computer software
is currently used by the Company. To the knowledge of the Company and Parent,
(i) the Company is not infringing any intellectual property rights of any other
person or entity with respect to the Company Software, and (ii) no other person
or entity is infringing any intellectual property rights of the Company with
respect to the Company Software, except for infringements that, individually or
in the aggregate, would not have a Material Adverse Effect.
5.13. LABOR MATTERS. Except as set forth on Schedule 5.13, within the last
three (3) years the Company has not been the subject of any known union activity
or labor dispute, nor has there been any strike of any kind called or, to the
knowledge of the Company or Parent, threatened to be called against the Company.
The Company has not violated any applicable federal or state law or regulation
relating to labor or labor practices, except where such violation has and will
have, individually or in the aggregate, no Material Adverse Effect. Schedule
5.13 sets forth a true, correct and complete list of employer loans or advances
from the Company to their respective employees. The Company is in compliance
with all applicable requirements of the Immigration and Nationality Act of 1952,
as amended by the Immigration Reform and Control Act of 1986 and the regulations
promulgated thereunder (hereinafter collectively referred to as the "Immigration
Laws"), except where such noncompliance has and will have, individually or in
the aggregate, no Material Adverse Effect.
5.14. WORK-IN-PROCESS, ORDERS AND RETURNS.
(a) Except as set forth on Schedule 5.14(A), as of the date hereof, except
for any claims specifically disclosed on other Schedules hereto, to the
Company's and the Parent's knowledge, there are no claims nor does the Company
reasonably expect to make or receive any claims to terminate Customer
Agreements, or material licenses, services, or other orders, or for refunds
relating to Customer Agreements, licenses, maintenance agreements, or other fees
by reason of alleged dissatisfaction with the Company's capabilities or
performance (including those related to Company Software), or defective or
unsatisfactory services or products, except as would not result in, individually
or in the aggregate, a Material Adverse Effect.
(b) Except as set forth on Schedule 5.14(B), neither the Company nor Parent
has been notified that the consummation of the Transactions will result in any
cancellations or withdrawals of accepted and unfilled orders for services or
Company Software, or maintenance or other services and the Company will inform
Purchaser promptly upon receipt of any notification to that effect received
after the date hereof, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Material Adverse Effect. To
the knowledge of the Company and Parent, neither the execution of this Agreement
nor the consummation of the Transactions will result in any material
cancellations or withdrawals of accepted and unfilled orders for the license or
sales of Company Software, services or merchandise, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a Material
Adverse Effect.
5.15. ABSENCE OF CERTAIN CHANGES. Except as reflected on Schedule 5.15, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since June 30, 1999, the Company has not and at the Closing Date will not
have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured), except for losses that, individually or in the aggregate, would
not have a Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets (including
Customer Agreements), except in the ordinary course of business consistent with
past practices;
(c) Permitted or allowed any of the Assets to be mortgaged, pledged, or
subjected to any lien or encumbrance, except for liens for Taxes not yet due and
payable and liens and encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect;
(d) Written down the value of any inventory, contract or other intangible
asset, or written off as uncollectible any notes or accounts receivable or any
portion thereof, except for write-downs and write-offs in the ordinary course of
business, consistent with past practice and at a rate no greater than during the
latest complete fiscal year; cancelled any other debts or claims, or waived any
rights of substantial value, or sold or transferred any of its material
properties or assets, real, personal, or mixed, tangible or intangible, except
in the ordinary course of business and consistent with past practice, and except
for those that, individually or in the aggregate, would not have a Material
Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or transfer,
any of the Assets, except in the ordinary course of business and consistent with
past practice;
(f) To the Company's and Parent's knowledge, received notice of any pending
or threatened adverse claim or an alleged infringement of proprietary material,
whether such claim or infringement is based on trademark, copyright, patent,
license, trade secret, contract or other restrictions on the use or disclosure
of proprietary materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse Effect;
(h) Become aware of any event, condition or other circumstance relating
solely to the Assets (as opposed to any such event, condition, or circumstance
which is, for example, national or industry-wide in nature) which might
reasonably be expected to materially adversely affect the Assets;
(i) Made any capital expenditures or commitments, any one of which is more
than $50,000, for additions to property, plant, or equipment;
(j) Made any material change in any method of accounting or accounting
practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to, or sold,
transferred, or leased any material properties or assets (real, personal, or
mixed, tangible or intangible) to, or entered into any agreement, arrangement,
or transaction with any of the Company's officers or directors, or any business
or entity in which any officer or director of the Company, or any affiliate or
associate of any of such Persons has any direct or indirect interest; or
(l) Agreed to take any action described in this Section 5.15.
5.16. LEASES. Schedule 5.16 contains a list of all leases pursuant to which
the Company leases real or personal property, and copies of all such leases have
been delivered to Purchaser. All such leases are in full force and effect, and
except as set forth on Schedule 5.16, no event has occurred which is a default
or which with the passage of time will constitute a default by the Company
thereunder, nor has any such event occurred to the knowledge of the Company or
Parent which is a default by any other party to such lease. All property leased
by the Company or Parent as lessee is in the possession of the Company. Except
as indicated in Schedule 5.16, no consent of any lessor is required in
connection with the Transactions.
5.17. LITIGATION. Except as set forth in Schedule 5.17, (i) there are no
actions, proceedings or regulatory agency investigations against the Company or,
to the Company or Parent's knowledge, involving the Assets pending (served) or
threatened against the Company or against Parent, (ii) neither the Company nor
Parent knows of any such action, proceeding or investigation against the
Company, and (iii) no such action, proceeding, or regulatory agency
investigation has been pending (served) during the three-year period preceding
the date of this Agreement.
5.18. EMPLOYEE BENEFIT PLANS: EMPLOYEES.
Except as to any noncompliance with any of the following provisions that
would not, individually, or in the aggregate, have a Material Adverse Effect:
(a) Schedule 5.18 sets forth a list of each "employee benefit plan" (as
defined by Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and any other bonus, profit sharing, pension,
compensation, deferred compensation, stock option, stock purchase, fringe
benefit, severance, scholarship, disability, sick leave, vacation, bonus,
retention, or other plan, agreement, or arrangement (each such plan, agreement
or arrangement is referred to herein as an "Employee Benefit Plan", and
collectively, the "Employee Benefit Plans") that is currently in effect for the
benefit of (i) directors or employees of the Company, (ii) former directors or
employees of the Company, or (iii) beneficiaries of anyone described in (i) or
(ii) (collectively, "Company Employees") or with respect to which the Company or
any "ERISA Affiliate" (hereby defined to include any trade or business, whether
or not incorporated, other than the Company, which has employees who are treated
pursuant to Section 4001(a)(14) of ERISA and/or Section 414 of the Code as
employees of a single employer which includes the Company) has any obligation on
behalf of any Company Employee. Except as disclosed on Schedule 5.18 attached
hereto, there are no other benefits to which any Company Employee is entitled
for which the Company has any obligation.
(b) Parent has delivered to Purchaser, with respect to each Employee
Benefit Plan, true and complete copies of (i) the documents embodying the plan,
including, without limitation, the current plan documents and documents creating
any trust maintained pursuant thereto, all amendments, group annuity contracts,
insurance contracts, the most recent summary plan description, if any, and
employee handbooks, (ii) annual reports including but not limited to Forms 5500,
990 and 1041 for the last two (2) years for the plan and any related trust;
(iii) any communication involving the plan or any related trust to or from the
Internal Revenue Service ("IRS"), Department of Labor ("DOL"), Pension Benefit
Guaranty Corporation ("PBGC") or any other governmental authority since January
1, 1998, but excluding any IRS determination letter submission; and (iv) the
most recent determination letter received from the IRS pertaining to any
Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of
the Code.
(c) The Company has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 5.18 attached hereto, the
Company is not liable for, and neither the Company nor Purchaser will be liable
for, any contribution, tax, lien, penalty, cost, interest, claim, loss, action,
suit, damage, cost assessment or other similar type of liability or expense of
any ERISA Affiliate (including predecessors thereof) with regard to any Employee
Benefit Plan maintained, sponsored or contributed to by an ERISA Affiliate (if a
like definition of Employee Benefit Plan were applicable to the ERISA Affiliate
in the same manner as it applies to the Company), including, without limitation,
withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA,
liabilities to the PBGC, or liabilities under Section 412 of the Code or Section
302(a) of ERISA.
(e) The Company has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA").
(f) With respect to each Employee Benefit Plan and except as otherwise set
forth on Schedule 5.18 attached hereto:
(i) each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the IRS
to the effect that the Employee Benefit Plan is qualified under Section 401
of the Code and that any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has
occurred or, to the knowledge of the Company and Parent, is expected to
occur that caused or could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any penalty or tax
liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof
have been made;
(iii) there are no violations of or failures to comply with ERISA and
the Code with respect to the filing of applicable reports, documents, and
notices regarding the Employee Benefit Plan with DOL, the IRS, the PBGC or
any other governmental authority, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no claims, lawsuit, arbitration or other action has been asserted
or instituted or, to the knowledge of the Company and Parent, threatened in
writing against the Employee Benefit Plan, any trustee or fiduciaries
thereof, the Company or any ERISA Affiliate, any director, officer or
employee thereof, or any of the assets of the Employee Benefit Plan or any
related trust, except for routine claims for benefits;
(v) any bonding required with respect to the Employee Benefit Plan in
accordance with the applicable provisions of ERISA has been obtained and is
in full force and effect;
(vi) the Employee Benefit Plan complies in all respects with and has
been maintained and operated in all respects in accordance with its
respective terms and the terms and the provisions of applicable law,
including, without limitation, ERISA and the Code (including rules and
regulations thereunder);
(vii) no "prohibited transaction" (within the meaning of Section 4975
of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly
or indirectly result in such a "prohibited transaction") which has
subjected or, to the knowledge of Company and Parent, could reasonably be
expected to subject the Company, any ERISA Affiliate or Purchaser, or any
officer, director or employee of the Company, any ERISA Affiliate or
Purchaser, or the Employee Benefit Plan trustee, administrator or other
fiduciary, to a tax or penalty on prohibited transactions imposed by either
Section 502 of ERISA or Section 4975 of the Code or any other liability
with respect thereto, which tax, penalty or liability could have a Material
Adverse Effect;
(viii) to the knowledge of the Company and Parent, the Employee
Benefit Plan is not under audit or investigation by the IRS or the DOL or
any other governmental authority and no such completed audit, if any, has
resulted in the imposition of any tax, interest or penalty.
(g) The Company is not subject to any liens, excise or other taxes under
ERISA, the Code or other applicable law relating to any Employee Benefit Plan.
(h) None of the Employee Benefit Plans is subject to Title IV of ERISA.
(i) In the case of any Employee Benefit Plan that is a Multiemployer Plan,
the Company has no withdrawal liability under Part 1 of Subtitle E of Title IV
of ERISA as a result of either a "complete withdrawal" (as defined in Section
4203 of ERISA) or a "partial withdrawal" (as defined in Section 4205 of ERISA)
by the Company from such Employee Benefit Plan occurring on or prior to the date
hereof.
(j) The consummation of the Transactions will not give rise to any
liability for any employee benefits, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any Company Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the Code
as such Section of the Code is currently in effect.
(l) Except as set forth on Schedule 5.18, attached hereto, no Employee
Benefit Plan provides for any health benefits (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under Section
401(a) of the Code) to any Company Employee who, at the time the health benefit
is to be provided, is a former director or former employee of the Company (or a
beneficiary of any such person), nor, to the knowledge of the Company and
Parent, have any representations, agreements, covenants or commitments been made
to provide such health benefits.
(m) Since June 30, 1999 and through the date hereof, except as set forth on
Schedule 5.18 attached hereto or as required by applicable law or consistent
with past practice, neither the Company nor any ERISA Affiliate has, nor will
it, (i) institute or agree to institute any new employee benefit plan or
practice for any Company Employee, (ii) make or agree to make any change in any
Employee Benefit Plan, (iii) make or agree to make any increase in the
compensation payable or to become payable by the Company or any ERISA Affiliate
to any Company Employee, other than regularly scheduled increases, or (iv)
except pursuant to this Agreement and except for contributions required to
provide benefits pursuant to the provisions of the Employee Benefit Plans, pay
or accrue or agree to pay or accrue any bonus, percentage of compensation, or
other like benefit to, or for the credit of, any Company Employee.
(n) Any contribution, insurance premium, excise tax, interest charge or
other liability or charge imposed or required with respect to any Employee
Benefit Plan which is attributable to any period or any portion of any period
prior to the Closing shall, to the extent required by GAAP, be reflected as a
liability on the Closing Balance Sheet, including, without limitation, any
portion of the matching contribution required with respect to the Parent Plan
for the plan year ending after the Closing which is attributable to elective
contributions made by Company Employees in such plan prior to the Closing.
5.19. ACCURACY OF REPRESENTATIONS. No representation or warranty by the
Company or Parent contained in this Agreement and no statement contained in any
certificate or schedule furnished to Purchaser pursuant to the provisions hereof
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading. To the
knowledge of the Company and Parent, there is no current event or condition of
any kind or character pertaining to the Company that may reasonably be expected
to have a Material Adverse Effect, except as disclosed herein.
5.20. BROKERS FEES AND EXPENSES. Neither the Company nor Parent or any
affiliate thereof has retained or utilized the services of any advisor, broker,
finder or intermediary, or paid or agreed to pay any fee or commission to any
other Person or entity for or on account of the Transactions, or had any
communications with any Person or entity which would obligate Purchaser to pay
any such fees or commissions.
5.21. BANK ACCOUNTS. Schedule 5.21 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
the Company has any deposit account or safe deposit box, together with a listing
of account numbers and names of all Persons authorized to draw thereon or have
access thereto.
5.22. BUSINESS PRACTICES. Neither the Company nor anyone acting on its
behalf has made any payment of funds of the Company prohibited by law, and no
funds of the Company have been set aside to be used for any payment prohibited
by law.
5.23. INSURANCE. Schedule 5.23 lists all of the insurance policies
maintained by the Company, which Schedule includes the name of the insurance
company, the policy number, a description of the type of insurance covered by
such policy, the dollar limit of the policy, and the annual premiums for such
policy. The Company shall maintain such insurance policies in full force and
effect at least through the Closing Date.
5.24. TAX FREE REORGANIZATION. To the knowledge of the Company there is no
fact pertaining to it that would prevent the Merger from qualifying as a
tax-free reorganization under the Code.
5.25. NO EXISTING DISCUSSION. As of the date hereof, the Company is not
engaged directly or indirectly, in any discussion or negotiations with any other
party with respect to an Acquisition Proposal.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce the Company and Parent to enter into this Agreement and
consummate the Transactions, Purchaser represents and warrants to the Company
and Parent as follows, each of which representations and warranties is material
to and relied upon by the Company and Parent:
6.1. ORGANIZATION OF PURCHASER. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Delaware. The states in
which Purchaser is qualified to do business are set forth on Schedule 6.1.
Purchaser has all necessary corporate power and authority to own, lease and
operate its properties and conduct its business as it is currently being
conducted. Except as set forth on Schedule 6.1, Purchaser does not own, directly
or indirectly, any equity interest in any corporation, partnership, joint
venture, or other entity and does not have any subsidiaries.
6.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Purchaser has full
corporate power and authority to execute and deliver this Agreement and each of
the Closing Documents to which Purchaser is or will be a party and to consummate
the Transactions. The Board of Directors of Purchaser has duly approved and
authorized the execution and delivery of this Agreement and each of the Closing
Documents to which it is or will be a party and the consummation of the
Transactions and has resolved to submit the Merger to and recommend approval of
the Merger by the stockholders of Purchaser, and, except for shareholder
approval, no other corporate proceedings on the part of Purchaser are necessary
to approve and authorize the execution and delivery of this Agreement and such
Closing Documents and the consummation of the Transactions. Assuming that this
Agreement and each of the Closing Documents to which Purchaser is a party
constitutes a valid and binding agreement of Company and/or Parent, as the case
may be, this Agreement and each of the Closing Documents to which Purchaser is a
party constitutes, or will constitute when executed and delivered, a valid and
binding agreement of Purchaser in each case enforceable against Purchaser in
accordance with its terms, except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors' rights generally and by the application of general
principles of equity.
6.3. NO CONFLICT; CONSENTS. Except as set forth on Schedule 6.3 hereto, and
except for the applicable requirements of the Securities Act, the Exchange Act,
state blue sky laws and the rules of the NASDAQ Stock Market, Inc., the
execution and delivery by Purchaser of this Agreement, the Closing Documents to
which it is or will be a party and the consummation by Purchaser of the
Transactions do not and will not (a) require the consent, approval or action of,
or any filing or notice to, any corporation, firm, Person or other entity or any
public, governmental or judicial authority; (b) violate the terms of any
instrument, document or agreement to which Purchaser is a party, or by which
Purchaser or the property of Purchaser is bound, or be in conflict with, result
in a breach of or constitute (upon the giving of notice or lapse of time, or
both) a default under any such instrument, document or agreement or result in
the creation of any lien upon any of the property or assets of Purchaser, except
for such violations, conflicts, breaches and defaults which, individually or in
the aggregate, would not have a Material Adverse Effect; (c) violate Purchaser's
Certificate of Incorporation or Bylaws; or (d) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any federal,
state, county, municipal, or foreign court or Governmental Authority applicable
to Purchaser, the business or assets of Purchaser, or the Merger, except for
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Purchaser is not subject to, or a party to, any
mortgage, lien, lease, agreement, contract, instrument, order, judgment or
decree or any other material restriction of any kind or character which would
prevent or hinder the continued operation of the business of Purchaser after the
Closing on substantially the same basis as theretofore operated.
6.4. OWNERSHIP OF ASSETS. Purchaser has title to all of its properties and
assets, other than leased or licensed property, in each case free and clear of
any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 6.4 or
reserved against in Purchaser's financial statements (as described in Section
6.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Material Adverse Effect. All buildings, machinery and
equipment owned or leased by Purchaser are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. Purchaser
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of Purchaser
as of the Effective Time will reflect actual transactions and will have arisen
in the ordinary course of business.
6.5. CAPITALIZATION. The authorized capital stock of Purchaser consists of
10,000,000 shares of preferred stock, $.001 par value per share, of which
3,034,521 shares of Series A Preferred Stock are outstanding, and 20,000,000
shares of common stock, $.001 par value per share, of which 8,741,713 shares are
outstanding as of the date hereof. In addition, rights to receive 32,392 shares
of Purchaser Common Stock, relating to unconverted shares from Purchaser's 1997
reverse stock split ("Purchaser Conversion Rights"), are outstanding as of the
date hereof. All outstanding shares of Purchaser Common Stock and Purchaser's
Series A Preferred Stock have been duly authorized, and are validly issued,
fully paid and nonassessable.. Except as set forth in Schedule 6.5, no party has
any preemptive (whether statutory or contractual) rights in any capital stock of
Purchaser. Except for the Purchaser Conversion Rights, and the Options and the
Warrants identified on Schedule 3.3(a), Purchaser has no convertible securities,
options, warrants, or other contracts, commitments, agreements, understandings,
arrangements or restrictions by which it is bound to issue any additional shares
of its capital stock or other securities. All securities of Purchaser were
offered and sold in compliance with applicable Federal and state securities
laws. Each and every dividend of the Purchaser, if any, whether paid in cash or
other property, has been declared and paid in compliance with applicable law,
and the Purchaser has no further obligation with respect to such payment.
6.6. COMPLIANCE WITH LAWS.
(a) Purchaser is in compliance with, and Purchaser operated any businesses
previously owned by it in compliance with all applicable laws, orders, rules and
regulations of all Governmental Authorities, including applicable Environmental
Laws, except for such noncompliance as would not, individually or in the
aggregate, have a Material Adverse Effect. Purchaser has not received notice of
any noncompliance with the foregoing.
(b) Neither Purchaser nor any other Persons providing services for
Purchaser have, to the knowledge of Purchaser, engaged in any activities which
would be a basis for exclusion from any otherwise available Medicare, Medicaid
or other federally funded programs under Section 1320a - 7a of Title 42 of the
United States Code, or prohibited under any applicable portions of Section 1320a
- - 7b of such Title 42, or regulations promulgated thereunder, or related state
or local statutes or regulations, including any "fraud and abuse" provisions,
except where such noncompliance has and will have, individually and in the
aggregate, no Material Adverse Effect.
(c) Without limiting the foregoing, Purchaser and any other person or
entity for whose conduct Purchaser is legally held responsible are in compliance
with all Environmental Laws, except where such noncompliance has and will have,
individually or in the aggregate, no Material Adverse Effect. Neither Purchaser,
nor any other person or entity for whose conduct Purchaser is legally
responsible has received any notice, demand, request for information, or
administrative inquiry relating to any violation of an Environmental Law or the
institution of any suit, action, claim, or proceedings alleging such violation
or investigation by any Governmental Authority or any third party of any such
violation.
6.7. LICENSES AND PERMITS. Purchaser holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
necessary or required for the use or ownership of its assets and the operation
of its business, except where the failure to hold such license, permit,
concession, grant, franchise, approval or authorization has and will have,
individually or in the aggregate, no Material Adverse Effect. Purchaser has not
received notice of any violations in respect of any such licenses, permits,
concessions, grants, franchises, approvals or authorizations, which violations,
individually or in the aggregate, would have a Material Adverse Effect. No
proceeding is pending or, to the knowledge of Purchaser, threatened, which seeks
revocation or limitation of any such licenses, permits, concessions, grants,
franchises, approvals or authorizations, nor is there any basis therefor, the
revocation or limitation of which, individually or in the aggregate, would have
a Material Adverse Effect.
6.8. LIABILITIES AND OBLIGATIONS OF PURCHASER.
(a) Attached hereto as Schedule 6.8 are true, correct and complete copies
of Purchaser's balance sheets as of December 31, 1997 and December 31, 1998, and
unaudited balance sheet as of June 30, 1999, and the related statements of
income, stockholders' equity and cash flows for the years and six months then
ended, together (except in the case of the financial statements dated June 30,
1999) with the reports of independent public accountants thereon (collectively,
the "Purchaser Financial Statements"). The Purchaser Financial Statements are
complete, have been prepared in accordance with generally accepted accounting
principles, consistently applied, fairly present in all material respects the
financial condition of Purchaser as of the respective dates thereof, and
disclose all liabilities of Purchaser, whether absolute, contingent, accrued or
otherwise, existing as of the date thereof that are of a nature required to be
reflected in financial statements prepared in accordance with generally accepted
accounting principles, and except for liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect; provided, however, that the
interim financial statements are subject to normal year-end adjustments which
are not expected to be material in amount.
(b) Purchaser has no liability or obligation (whether accrued, absolute,
contingent or otherwise) including, without limitation, any liability that might
result from an audit of its Tax Returns by any Tax Authority, except for (i)
liabilities that, individually or in the aggregate, would not have a Material
Adverse Effect, (ii) the liabilities and obligations of Purchaser that are
disclosed or reserved against in the Purchaser Financial Statements or Schedule
6.8 hereto, to the extent and in the amounts so disclosed or reserved against,
and (iii) liabilities incurred or accrued in the ordinary course of business
since June 30, 1999 and liabilities incurred in connection with the
Transactions.
(c) Except as disclosed in the Purchaser Financial Statements or Schedule
6.8, Purchaser is not in default with respect to any liabilities or obligations,
except for defaults that, individually or in the aggregate would not have a
Material Adverse Effect, and all such liabilities or obligations shown or
reflected in the Purchaser Financial Statements or Schedule 6.8 and such
liabilities incurred or accrued subsequent to June 30, 1999 were incurred in the
ordinary course of business except as indicated in Schedule 6.8, and except for
liabilities and obligations, that, individually or in the aggregate, would not
have a Material Adverse Effect.
6.9. TAXES.
Except as to any noncompliance with any of the following provisions that
would not, individually or in the aggregate, have a Material Adverse Effect:
(a) All Tax Returns required to be filed by Purchaser and/or its Affiliated
Group on or before the date hereof have been timely filed with the appropriate
Tax Authorities in all jurisdictions in which such Tax Returns are required to
be filed and all amounts shown as owing thereon have been paid. All Taxes which
have become due or payable on or prior to the date hereof, whether disputed or
not, have been paid in full. All Taxes which are required to be collected or
withheld by Purchaser and its Affiliated Group on or prior to the date hereof
have been so collected or withheld. All deposits required by law to be made by
Purchaser and its Affiliated Group on or prior to the date hereof with respect
to employees' withholding Taxes have been duly made. No employee of Purchaser or
any member of its Affiliated Group responsible for Tax matters (i) has received
notice from any Tax Authority of the assessment or proposed assessment of Tax
liabilities, disallowances, or assessments which remain unpaid and, (ii) has
knowledge of any fact or facts which exist(s) or has existed which would
constitute grounds for the assessment of any Tax liability. There is no
examination currently in progress of the Tax Returns of Purchaser or its
Affiliated Group by any Taxing Authority for which any employee of Purchaser or
any of its Affiliated Group has received any notice, and, to the knowledge of
employees of Purchaser or any member of its Affiliated Group responsible for Tax
matters based upon personal contact with any agent of such Tax Authority, no
such examination has been threatened by any Taxing Authority.
(b) Purchaser has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Purchaser has not made any payments which
have not yet been reported on any Tax Return, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate the Purchaser and its Affiliated Group to make any payments that
will not be deductible under Section 280G of the Code. Purchaser and its
Affiliated Group has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code.
(c) Neither Purchaser nor its Affiliated Group has any contractual
obligation to indemnify any other person with respect to the payment of any
Taxes of the other person which could have a Material Adverse Effect.
(d) Purchaser and its Affiliated Group's financial statements for the year
ended December 31, 1998 and the unaudited interim quarter ending June 30, 1999
reflect an adequate reserve for deferred taxes established for timing
differences between book and tax accounting income/asset basis. Purchaser and
its Affiliated Group have not recognized a net tax asset for the future benefit
of net operating loss carryovers and research and experimentation tax credit
carryovers.
6.10. CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY Schedule 6.10 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written) to which Purchaser is a party that involve a receipt or an expenditure
by Purchaser or require the performance of services or delivery of goods to, by,
through, on behalf of or for the benefit of Purchaser, which in each case
relates to a contract, agreement, commitment or instrument that requires (or is
reasonably expected to require) payments or provides (or is reasonably expected
to provide) for receipts in excess of $25,000 from the Closing Date until the
first (1st) anniversary thereof.
The contracts, agreements, commitments and other instruments listed or
required to be listed on Schedule 6.10 or listed on a Schedule referred to in
Section 6.12 hereof are herein referred to as the "Material Contracts". All of
the Material Contracts are in full force and effect.
None of the Company, and, to the knowledge of Purchaser, any other party to
any such contract, commitment or arrangement has breached any provision of, or
is in default under, the terms thereof, the breach of or default under which
would, individually or in the aggregate, have a Material Adverse Effect; and
there are no existing facts or circumstances known to Purchaser that would
prevent the work in process of Purchaser or its contracts and agreements from
maturing upon performance by Purchaser into collectible accounts receivable in
the aggregate in amounts consistent with historical experience. Except as set
forth on Schedule 6.10 or as reserved against in the Purchaser Financial
Statements, there are no contracts or commitments that require the performance
of services or provision of goods by Purchaser at a direct cost for each such
contract or commitment known by Purchaser to be in excess of the revenue to be
derived pursuant to the terms of such contract or commitment, which,
individually or in the aggregate, would have a Material Adverse Effect. Except
for terms specifically described in Schedule 6.10, Purchaser has not received
any payment from any contracting party in connection with or as an inducement
for entering into any contract, agreement, policy or instrument except for
payment for actual services rendered or to be rendered by Purchaser consistent
with amounts historically charged for such services.
6.11. CUSTOMER CONTRACTS With respect to each Customer Contract, all
performance warranties with respect to Owned Software made by Purchaser in any
Customer Contract, including warranties with respect to capacity, availability,
downtime and response time, and Year 2000 compliance have been satisfied in all
material respects upon the terms and conditions and to the extent provided for
in such Customer Contract, except for failures to satisfy which, individually or
in the aggregate, would not have a Material Adverse Effect.
6.12. INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
(a) Schedule 6.12(A) hereto sets forth (i) a complete and correct list of
all trademarks, trade names, service marks, service names, and brand names
(whether or not any of the same are registered), and all patents and registered
copyrights and all applications for the foregoing, if any, (setting forth the
registration, issue or serial number of the patents and registered copyrights
and a description of the same) applicable to or used in the business of
Purchaser; (ii) the owner of such intellectual property and any registration
thereof or application thereof; and (iii) a complete list of all licenses
granted by or to Purchaser with respect to any of the above (identified by
title, date and parties) (not inclusive of Customer Contracts). All such
trademarks, trade names, service marks, service names, brand names, copyrights
and patents are owned by Purchaser free and clear of all liens, claims, security
interests and encumbrances, except for such liens, claims, security interests
and encumbrances as would, individually or in the aggregate, not have a Material
Adverse Effect. Except as set forth on Schedule 6.12(A), Purchaser is not
currently in receipt of any notice of any violation of, and, to Purchaser's
knowledge, Purchaser is not violating the rights of others in any trademark,
trade name, service mark, copyright, patent, trade secret, know-how or other
intangible asset, except such violations as, individually or in the aggregate,
would not have a Material Adverse Effect.
(b) Schedule 6.12(B) contains a complete and accurate list of all Owned
Software. Except as set forth on Schedule 6.12(B), Purchaser has title to the
Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, inventors, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such computer software. Except as set forth on Schedule 6.12(B) and
except for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (c) below) in order to operate fully in the manner in which it is
intended. The source code to the Owned Software has not been published or
disclosed to any other parties, except as set forth in the Customer Contracts or
as set forth on Schedule 6.12(B), and except pursuant to contracts requiring
such other parties to keep the Owned Software confidential. To the knowledge of
Purchaser, no such other party has breached any such obligation of
confidentiality.
(c) Schedule 6.12(C) contains a complete and accurate list of all Licensed
Software. Purchaser has the right and license to use, sublicense, modify and
copy Licensed Software to the extent set forth in the respective license, lease
or similar agreement pursuant to which the Licensed Software is licensed to
Purchaser, free of any other limitations or encumbrances, and Purchaser is in
compliance with all applicable provisions of such agreement, except for failures
to comply which, individually or in the aggregate, would not have a Material
Adverse Effect. Except as disclosed on Schedule 6.12(C), none of the Licensed
Software has been incorporated into or made a part of any Owned Software or any
other Licensed Software. Purchaser has not published or disclosed any Licensed
Software to any other party except in accordance with and as permitted by any
license, lease or similar agreement relating to the Licensed Software and except
pursuant to contracts requiring such other parties to keep the Licensed Software
confidential. No party to whom Purchaser has disclosed Licensed Software has, to
the knowledge of Purchaser, breached such obligation of confidentiality, except
for such publications and disclosures that, individually or in the aggregate,
would not have a Material Adverse Effect.
(d) The Owned Software and Licensed Software and commercially available
over-the-counter "shrink-wrap" software constitute all software used in the
businesses of Purchaser (collectively, the "Purchaser Software"). The
Transactions will not cause a breach or default under any licenses, leases or
similar agreements relating to Purchaser Software or impair Purchaser's ability
to use Purchaser Software in the same manner as such computer software is
currently used by Purchaser. To the knowledge of Purchaser, (i) Purchaser is not
infringing any intellectual property rights of any other person or entity with
respect to Purchaser Software, and (ii) no other person or entity is infringing
any intellectual property rights of Purchaser with respect to Purchaser
Software, except for infringements that, individually or in the aggregate, would
not have a Material Adverse Effect.
6.13. LABOR MATTERS. Except as set forth on Schedule 6.13, within the last
three (3) years Purchaser has not been the subject of any known union activity
or labor dispute, nor has there been any strike of any kind called or, to the
knowledge of Purchaser, threatened to be called against Purchaser. Purchaser has
not violated any applicable federal or state law or regulation relating to labor
or labor practices, except where such violation has and will have, individually
or in the aggregate, no Material Adverse Effect. Schedule 6.13 sets forth a
true, correct and complete list of employer loans or advances from Purchaser to
its employees. Purchaser is in compliance with all applicable requirements of
the Immigration Laws, except where such noncompliance has and will have,
individually or in the aggregate, no Material Adverse Effect.
6.14. WORK-IN-PROCESS, ORDERS AND RETURNS.
(a) Except as set forth on Schedule 6.14(A), as of the date hereof, except
for any claims specifically disclosed on other Schedules hereto, to Purchaser's
knowledge, there are no claims nor does Purchaser reasonably expect to make or
receive any claims to terminate Customer Agreements, or material licenses,
services, or other orders, or for refunds relating to Customer Agreements,
licenses, maintenance agreements, or other fees by reason of alleged
dissatisfaction with Purchaser's capabilities or performance (including those
related to Purchaser Software), or defective or unsatisfactory services or
products, except as would not result in, individually or in the aggregate, a
Material Adverse Effect.
(b) Except as set forth on Schedule 6.14(B), Purchaser has not been
notified that the consummation of the Transactions will result in any material
cancellations or withdrawals of accepted and unfilled orders for services or
Purchaser Software, or maintenance or other services and Purchaser will inform
Purchaser promptly upon receipt of any notification to that effect received
after the date hereof, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Material Adverse Effect. To
the knowledge of Purchaser, neither the execution of this Agreement nor the
consummation of the Transactions will result in any material cancellations or
withdrawals of accepted and unfilled orders for the license or sales of
Purchaser Software, services or merchandise, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a Material
Adverse Effect.
6.15. ABSENCE OF CERTAIN CHANGES Except as reflected on Schedule 6.15, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since June 30, 1999, Purchaser has not and at the Closing Date will not
have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured), except for losses that, individually or in the aggregate, would
not have a Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets (including
Customer Agreements), except in the ordinary course of business consistent with
past practices;
(c) Permitted or allowed any of the Assets to be mortgaged, pledged, or
subjected to any lien or encumbrance, except for liens for Taxes not yet due and
payable and liens and encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect;
(d) Written down the value of any inventory, contract or other intangible
asset, or written off as uncollectible any notes or accounts receivable or any
portion thereof, except for write-downs and write-offs in the ordinary course of
business, consistent with past practice and at a rate no greater than during the
latest complete fiscal year; cancelled any other debts or claims, or waived any
rights of substantial value, or sold or transferred any of its material
properties or assets, real, personal, or mixed, tangible or intangible, except
in the ordinary course of business and consistent with past practice and except
for those that, individually or in the aggregate, would not have a Material
Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or transfer,
any of the Assets, except in the ordinary course of business and consistent with
past practice;
(f) To Purchaser's knowledge, received notice of any pending or threatened
adverse claim or an alleged infringement of proprietary material, whether such
claim or infringement is based on trademark, copyright, patent, license, trade
secret, contract or other restrictions on the use or disclosure of proprietary
materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse Effect;
(h) Become aware of any event, condition or other circumstance relating
solely to the Assets (as opposed to any such event, condition, or circumstance
which is, for example, national or industry-wide in nature) which might
reasonably be expected to materially adversely affect the Assets;
(i) Made any capital expenditures or commitments, any one of which is more
than $50,000, for additions to property, plant, or equipment;
(j) Made any material change in any method of accounting or accounting
practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to, or sold,
transferred, or leased any material properties or assets (real, personal, or
mixed, tangible or intangible) to, or entered into any agreement, arrangement,
or transaction with any of Purchaser's officers or directors, or any business or
entity in which any officer or director of Purchaser, or any affiliate or
associate of any of such Persons has any direct or indirect interest; or
(l) Agreed to take any action described in this Section 6.15.
The Company and Parent acknowledge and agree that a decrease in the market
price of Purchaser Common Stock is not a material adverse change.
6.16. LEASES Schedule 6.16 contains a list of all leases pursuant to which
Purchaser leases real or personal property, and copies of all such leases have
been delivered to the Company and Parent. All such leases are in full force and
effect, and except as set forth on Schedule 6.16, no event has occurred which is
a default or which with the passage of time will constitute a default by
Purchaser thereunder, nor has any such event occurred to the knowledge of
Purchaser which is a default by any other party to such lease. All property
leased by Purchaser as lessee is in the possession of Purchaser. Except as
indicated in Schedule 6.16, no consent of any lessor is required in connection
with the Transactions.
6.17. LITIGATION. Except as set forth in Schedule 6.17, (i) there are no
actions, proceedings or regulatory agency investigations against Purchaser or,
to Purchaser's knowledge, involving the Assets pending (served) or threatened
against Purchaser, (ii) Purchaser does not know of any such action, proceeding
or investigation against Purchaser, and (iii) no such action, proceeding, or
regulatory agency investigation has been pending (served) during the three-year
period preceding the date of this Agreement.
6.18. EMPLOYEE BENEFIT PLANS: EMPLOYEES.
Except as to any noncompliance with any of the following provisions that
would not, individually, or in the aggregate, have a Material Adverse Effect.
(a) Schedule 6.18 sets forth a list of each Employee Benefit Plan that is
currently in effect for the benefit of (i) directors or employees of Purchaser,
(ii) former directors or employees of Purchaser, or (iii) beneficiaries of
anyone described in (i) or (ii) (collectively, "Purchaser Employees") or with
respect to which Purchaser or any ERISA Affiliate has any obligation on behalf
of any Purchaser Employee. Except as disclosed on Schedule 6.18 attached hereto,
there are no other benefits to which any Purchaser Employee is entitled for
which Purchaser has any obligation.
(b) Purchaser has delivered to Parent and the Company, with respect to each
Employee Benefit Plan, true and complete copies of (i) the documents embodying
the plan, including, without limitation, the current plan documents and
documents creating any trust maintained pursuant thereto, all amendments, group
annuity contracts, insurance contracts, the most recent summary plan
description, if any, and employee handbooks, (ii) annual reports including but
not limited to Forms 5500, 990 and 1041 for the last two (2) years for the plan
and any related trust; (iii) any communication involving the plan or any related
trust to or from the IRS, DOL, PBGC or any other governmental authority since
January 1, 1998, but excluding any IRS determination letter submission; and (iv)
the most recent determination letter received from the IRS pertaining to any
Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of
the Code.
(c) Purchaser has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 6.18 attached hereto,
Purchaser is not liable for any contribution, tax, lien, penalty, cost,
interest, claim, loss, action, suit, damage, cost assessment or other similar
type of liability or expense of any ERISA Affiliate (including predecessors
thereof) with regard to any Employee Benefit Plan maintained, sponsored or
contributed to by an ERISA Affiliate (if a like definition of Employee Benefit
Plan were applicable to the ERISA Affiliate in the same manner as it applies to
Purchaser), including, without limitation, withdrawal liability arising under
Title IV, Subtitle E, Part 1 of ERISA, liabilities to the PBGC, or liabilities
under Section 412 of the Code or Section 302(a) of ERISA.
(e) Purchaser has complied in all respects with COBRA.
(f) With respect to each Employee Benefit Plan and except as otherwise set
forth on Schedule 6.18 attached hereto:
(i) each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the IRS
to the effect that the Employee Benefit Plan is qualified under Section 401
of the Code and that any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has
occurred or, to the knowledge of Purchaser, is expected to occur that
caused or could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any penalty or tax
liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof
have been made;
(iii) there are no violations of or failures to comply with ERISA and
the Code with respect to the filing of applicable reports, documents, and
notices regarding the Employee Benefit Plan with DOL, the IRS, the PBGC or
any other governmental authority, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no claims, lawsuit, arbitration or other action has been asserted
or instituted or, to the knowledge of Purchaser, threatened in writing
against the Employee Benefit Plan, any trustee or fiduciaries thereof,
Purchaser or any ERISA Affiliate, any director, officer or employee
thereof, or any of the assets of the Employee Benefit Plan or any related
trust, except for routine claims for benefits;
(v) any bonding required with respect to the Employee Benefit Plan in
accordance with the applicable provisions of ERISA has been obtained and is
in full force and effect;
(vi) the Employee Benefit Plan complies in all respects with and has
been maintained and operated in all respects in accordance with its
respective terms and the terms and the provisions of applicable law,
including, without limitation, ERISA and the Code (including rules and
regulations thereunder);
(vii) no "prohibited transaction" (within the meaning of Section 4975
of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly
or indirectly result in such a "prohibited transaction") which has
subjected or, to the knowledge of Purchaser, could reasonably be expected
to subject Purchaser, any ERISA Affiliate or the Company, or any officer,
director or employee of Purchaser, any ERISA Affiliate, or the Company, or
the Employee Benefit Plan trustee, administrator or other fiduciary, to a
tax or penalty on prohibited transactions imposed by either Section 502 of
ERISA or Section 4975 of the Code or any other liability with respect
thereto, which tax, penalty or liability could have a Material Adverse
Effect;
(viii) to the knowledge of Purchaser, the Employee Benefit Plan is not
under audit or investigation by the IRS or the DOL or any other
governmental authority and no such completed audit, if any, has resulted in
the imposition of any tax, interest or penalty.
(g) Purchaser is not subject to any liens, excise or other taxes under
ERISA, the Code or other applicable law relating to any Employee Benefit Plan.
(h) None of the Employee Benefit Plans is subject to Title IV of ERISA.
(i) In the case of any Employee Benefit Plan that is a Multiemployer Plan,
Purchaser has no withdrawal liability under Part 1 of Subtitle E of Title IV of
ERISA as a result of either a "complete withdrawal" (as defined in Section 4203
of ERISA) or a "partial withdrawal" (as defined in Section 4205 of ERISA) by
Purchaser from such Employee Benefit Plan occurring on or prior to the date
hereof.
(j) The consummation of the Transactions will not give rise to any
liability for any employee benefits, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any Purchaser Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code, as such Section of the Code is currently in effect.
(l) Except as set forth on Schedule 6.18 attached hereto, no Employee
Benefit Plan provides for any health benefits (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under Section
401(a) of the Code) to any Purchaser Employee who, at the time the health
benefit is to be provided, is a former director or former employee of Purchaser
(or a beneficiary of any such person), nor, to the knowledge of Purchaser, have
any representations, agreements, covenants or commitments been made to provide
such health benefits.
(m) Since June 30, 1999 and through the date hereof, except as set forth on
Schedule 6.18 attached hereto or as required by applicable law or consistent
with past practice, neither Purchaser nor any ERISA Affiliate has, nor will it,
(i) institute or agree to institute any new employee benefit plan or practice
for any Purchaser Employee, (ii) make or agree to make any change in any
Employee Benefit Plan, (iii) make or agree to make any increase in the
compensation payable or to become payable by Purchaser or any ERISA Affiliate to
any Purchaser Employee, other than regularly scheduled increases, or (iv) except
pursuant to this Agreement and except for contributions required to provide
benefits pursuant to the provisions of the Employee Benefit Plans, pay or accrue
or agree to pay or accrue any bonus, percentage of compensation, or other like
benefit to, or for the credit of, any Purchaser Employee.
(n) Any contribution, insurance premium, excise tax, interest charge or
other liability or charge imposed or required with respect to any Employee
Benefit Plan which is attributable to any period or any portion of any period
prior to the Closing shall, to the extent required by GAAP, be reflected as a
liability on the Purchaser Financial Statements, including, without limitation,
any portion of the matching contribution required with respect to the Purchaser
Plan for the plan year ending after the Closing which is attributable to
elective contributions made by Purchaser Employees in such plan prior to the
Closing.
6.19. BROKERS FEES AND EXPENSES. Neither Purchaser nor any affiliate
thereof has retained or utilized the services of any advisor, broker, finder, or
intermediary, or paid or agreed to pay any fee or commission to any other Person
or entity for or on account of the Transactions, or had any communications with
any Person or entity which would obligate the Company or Parent to pay any such
fees or commissions.
6.20. BANK ACCOUNTS. Schedule 6.20 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
Purchaser has any deposit account or safe deposit box, together with a listing
of account numbers and names of all Persons authorized to draw thereon or have
access thereto.
6.21. BUSINESS PRACTICES. Neither Purchaser nor anyone acting on its behalf
has made any payment of funds of Purchaser prohibited by law, and no funds of
Purchaser have been set aside to be used for any payment prohibited by law.
6.22. INSURANCE. Purchaser maintains property, fire, casualty, general
liability insurance and other forms of insurance relating to its assets and the
operation of its business against risks of the kind customarily insured against
and in amounts customarily insured (and, where appropriate, in amounts not less
than the replacement cost of the assets). Purchaser shall maintain such
insurance policies in full force and effect at least through the Closing Date.
Schedule 6.22 lists all of the insurance policies maintained by Purchaser, which
Schedule includes the name of the insurance company, the policy number, a
description of the type of insurance covered by such policy, the dollar limit of
the policy, and the annual premiums for such policy.
6.23. TAX FREE REORGANIZATION. To the knowledge of Purchaser there is no
fact pertaining to it that would prevent the Merger from qualifying as a
tax-free reorganization under the Code. Purchaser has no present intention to
redeem or reacquire any of its stock to be issued pursuant to the Merger.
Purchaser has no present intention to dispose of any of the assets of the
Company acquired in the Merger, except for dispositions made in the ordinary
course of business or transfers described in Code Section 368(a)(2)(C).
6.24. NO EXISTING DISCUSSION. As of the date hereof, Purchaser is not
engaged directly or indirectly, in any discussion or negotiations with any other
party with respect to an Acquisition Proposal.
6.25. SHARES TO BE DELIVERED. The Merger Shares to be issued with respect
to previously outstanding Company Capital Stock when issued and delivered to
Company Stockholders pursuant to this Agreement will be duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of Purchaser. Upon
delivery of the Merger Shares after the Closing, Company Stockholders will
receive good and unencumbered title to the Merger Shares, free and clear of all
liens, restrictions, charges, encumbrances and other security interests of any
kind or nature whatsoever, except for restrictions existing under applicable
securities laws regarding transferability of the Merger Shares, and except for
any restrictions set forth on the legends of the stock certificates evidencing
the Merger Shares.
6.26. ACCURACY OF SECURITIES FILINGS; FINANCIAL STATEMENTS.
(a) Except as set forth in Schedule 6.26, Purchaser has made all filings
with the SEC that it has been required to make under the Securities and Exchange
Act, and has done so in a timely manner. Purchaser has furnished, or otherwise
made available, the Securities Filings to the Company and Parent. Each of the
Securities Filings has complied with the Securities Act and the Exchange Act in
all material respects. None of the Securities Filings, as of their respective
dates, to Purchaser's knowledge, contain any untrue statement of any material
fact or omit to state a material fact required therein to be stated or omit to
state a material fact in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of Purchaser for
inclusion in the Proxy Statement will, at the date of the filing of the Proxy
Statement with the SEC, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
(b) The financial statements of Purchaser included and/or incorporated by
reference into the Securities Filings (including the related notes and
schedules) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of Purchaser as of the indicated dates and the results of operations
of Purchaser for the indicated periods, are consistent with the books and
records of Purchaser and, except as disclosed on Schedule 6.26, do not contain
any material item of special or non-recurring or other income not earned in the
ordinary course of business; provided, however, that the interim financial
statements are subject to normal year-end adjustments which are not expected to
be material in amount.
(c) Except as and to the extent specifically disclosed in this Agreement,
on the date hereof, there are, and prior to Closing will be, no liabilities or
obligations of Purchaser of any nature, whether liquidated, accrued, absolute,
continued or otherwise except for those (i) that are specifically reflected or
reserved against as to amount in the latest balance sheet contained in the
Securities Filings, or (ii) that arose thereafter in the ordinary course of
business, or (iii) that it specifically set forth on Schedule 6.8 attached
hereto; and at the Closing, there will be no liabilities or obligations of
Purchaser of any nature, whether liquidated or unliquidated, accrued, absolute,
contingent or otherwise which are material individually or in the aggregate,
except for those (A) that are specifically reflected or reserved against as to
amount in the latest balance sheet contained in the Securities Filings, or (B)
that arise after the date of such balance sheet in the ordinary course of
business (and are immaterial) or (C) that are specifically set forth on Schedule
6.26.
6.27. APPROVALS. The execution and delivery of this Agreement and the
consummation of the Transactions by Purchaser will not require the consent,
approval, order or authorization of any governmental entity or regulatory
authority or any other Person under any statute, law, rule, regulation (other
than applicable federal and state securities laws), permit, license, agreement,
indenture or other instrument to which Purchaser is a party or to which any of
its properties are subject, except for such consents, approvals, actions,
filings or notices the failure of which to make or obtain will not have a
Material Adverse Effect on Purchaser, and except for any federal or state
filings required by applicable securities laws (such as the Registration
Statement), and the filing of the listing application for the Merger Shares with
NASDAQ National Market, no declaration, filing or registration with any
governmental entity or regulatory authority is required by Purchaser in
connection with the execution and delivery of this Agreement, the consummation
of the Transactions, or the performance by Purchaser of its obligations
hereunder.
6.28. ACCURACY OF REPRESENTATIONS. No representation or warranty by
Purchaser contained in this Agreement and no statement contained in any
certificate or schedule furnished to the Company or Parent pursuant to the
provisions hereof contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein not
misleading. To the knowledge of Purchaser, there is no current event or
condition of any kind or character pertaining to Purchaser that may reasonably
be expected to have a Material Adverse Effect, except as disclosed herein.
6.29. NASDAQ RULES. The consummation of the Transactions will not result in
violation by Purchaser of any applicable NASDAQ rules or requirements.
<PAGE>
ARTICLE 7.
INDEMNIFICATION
7.1. INDEMNIFICATION BY PARENT. Parent hereby indemnifies and holds
harmless Purchaser and each of its affiliates, directors, officers, employees,
advisors and agents from and against all claims, liabilities, lawsuits, costs,
damages or expenses (including, without limitation, reasonable attorneys' fees
and expenses incurred in litigation or otherwise) arising out of and sustained
by any of them due to (a) any misrepresentation or breach of any representation,
warranty, covenant or agreement of Company or Parent contained in this Agreement
or any document executed and delivered by Parent or the Company in connection
with the Transactions ("Transaction Documents"); (b) the ownership or use of the
Assets, including, without limitation, any and all claims, liabilities, Taxes,
debts, contracts, agreements, obligations, damages, costs and expenses, known or
unknown, fixed or contingent, claimed or demanded by third parties against the
Surviving Corporation arising out of the operation of the Company's business
prior to the Closing Date or as a result of the Transactions, which were not
specifically disclosed herein or in the Schedules attached hereto; or (c) the
Spinoff (collectively all claims described in this Section 7.1, being "Section
7.1 Indemnified Claims").
7.2. INDEMNIFICATION BY SURVIVING CORPORATION. The Surviving Corporation,
hereby indemnifies and holds harmless Parent and each of its affiliates,
directors, officers, employees, advisors and agents from and against all claims,
liabilities, lawsuits, costs, damages or expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred in litigation or
otherwise) arising out of and sustained by any of them due to (a) any
misrepresentation or breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or any of the Transaction
Documents; or (b) the ownership or use of the Assets, including, without
limitation, any and all claims, liabilities, Taxes, debts, contracts,
agreements, obligations, damages, costs and expenses, known or unknown, fixed or
contingent, claimed or demanded by third parties against the Parent arising out
of the operation of the Purchaser's business prior to or after the Closing Date
(except as to Purchaser's business previously owned and operated by the Company,
only after the Closing Date) or as a result of the Transactions, which were not
specifically disclosed herein or in the Schedules attached hereto (collectively
all claims described in this Section 7.2, being "Section 7.2 Indemnified
Claims").
7.3. PROVISIONS REGARDING INDEMNIFICATION. The indemnified party (or
parties) shall promptly notify the indemnifying party (or parties) of any claim,
demand, action or proceeding for which indemnification will or may be sought
under Section 7.1 or 7.2 of this Agreement and, if such claim, demand, action or
proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right, at its expense, to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate in at its own expense, but
not control, the defense of any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand, action or
proceeding, Parent and Purchaser shall cooperate with each other. No such third
party claim, demand, action or proceeding shall be settled without the prior
written consent of the indemnified party provided, however, that if a firm,
written offer is made to settle any such third party claim, demand, action or
proceeding (which offer does not involve the admission of guilt or wrongdoing by
any indemnified party) and the indemnifying party proposes to accept such
settlement and the indemnified party refuses to consent to such settlement,
then: (i) the indemnifying party shall be excused from, and the indemnified
party shall be solely responsible for, all further defense of such third party
claim, demand, action or proceeding; and (ii) the maximum liability of the
indemnifying party relating to such third party claim, demand, action or
proceeding shall be the amount of the proposed settlement if the amount
thereafter recovered from the indemnified party on such third party claim,
demand, action or proceeding is greater than the amount of the proposed
settlement.
7.4. SURVIVAL. The representations and warranties contained in this
Agreement and in the Transaction Documents delivered at the Closing shall
survive the Closing for a period ending on the first (1st) anniversary date of
the Closing and shall thereafter cease to be of any force and effect, except for
(a) claims as to which notice has been given in accordance with Section 7.3
hereof prior to such date and which are pending on such date and (b)
representations and warranties relating to: (i) title to the Assets (Sections
5.3 and 6.4 hereof), (ii) ownership of stock of the Company and Purchaser
(Sections 5.5 and 6.5 hereof), (iii) Taxes (Sections 5.9 and 6.9 hereof) and
(iv) employee benefits (Sections 5.18 and 6.18 hereof), each of which shall
survive until the end of the statute of limitations applicable to the underlying
claim for which indemnification is sought.
7.5. LIMITATIONS.
(a) Notwithstanding anything to the contrary contained herein, Purchaser
will not assert a claim against Parent under this Article 7 until the total of
all Section 7.1 Indemnified Claims exceeds in the aggregate $1,000,000 (the
"Base Amount"), at which time all Section 7.1 Indemnified Claims in excess of
such Base Amount may be claimed in full and, if indemnifiable under this Article
7, shall be indemnified in full.
(b) Notwithstanding anything to the contrary contained herein, Parent will
not assert a claim against Purchaser under this Article 7 until the total of all
Section 7.2 Indemnified Claims exceeds the Base Amount, at which time all
Section 7.2 Indemnified Claims in excess of such Base Amount may be claimed in
full and, if indemnifiable under this Article 7, shall be indemnified in full.
(c) All Section 7.1 or Section 7.2 Indemnified Claims shall be satisfied by
delivery from the indemnifying to the indemnified party of a number of shares of
Purchaser Common Stock having a value equal to the amount of the Section 7.1 or
Section 7.2 Indemnified Claims, based on the market price of Purchaser Common
Stock as of the date the indemnified party paid the amount(s) giving rise to the
Section 7.1 Indemnified Claim or Section 7.2 Indemnified Claim.
(d) Any indemnification claims of Purchaser or Parent pursuant to Section
4.1 hereof shall not be subject to any of the terms or limitations described in
this Article 7.
(e) The satisfaction of all Section 7.1 Indemnified Claims and Section 7.2
Indemnified Claims shall be deemed to constitute adjustments to the aggregate
consideration paid by Purchaser pursuant to the Merger.
7.6. NO RECOURSE AGAINST THE COMPANY. Parent hereby irrevocably waives any
and all right to recourse against the Company with respect to any breach of any
representation, warranty, covenant, or noncompliance with any conditions or
covenants, given or made by Parent or the Company in this Agreement or any
document, certificate or agreement entered into or delivered pursuant hereto.
Parent shall not be entitled to contribution from, subrogation to or recovery
against the Company with respect to any liability of Parent or the Company that
may arise under or pursuant to this Agreement or the Transactions.
7.7. EFFECT OF INSURANCE. With respect to any indemnifiable claim
hereunder, the amount recoverable by the party seeking indemnification shall
take into account any reimbursements realized by such party from insurance
policies or other indemnification sources, arising from the same incident or set
of facts or circumstances giving rise to the claim for indemnification. Upon the
payment of the indemnified claim from the indemnifying party to the indemnified
party, the indemnifying party shall have a right of subrogation with respect to
any insurance proceeds or other rights to third party reimbursement for such
claims held by the indemnified party.
ARTICLE 8.
CONDITIONS TO OBLIGATIONS
OF PURCHASER TO CLOSE
Each and every obligation of Purchaser under this Agreement to be performed
on or prior to the Closing shall be subject to the fulfillment, on or prior to
the Closing, of each of the following conditions, which conditions each of the
Company and Parent agrees to use best efforts to satisfy:
8.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties made by the Company and Parent in or pursuant to the Agreement or
given on their behalf hereunder shall be true and correct in all respects on and
as of the Closing Date, in each case with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except to the extent expressly made as of an earlier date, in which case
such representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Material Adverse Consequence.
8.2. OBLIGATIONS PERFORMED. The Company shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually, or in
the aggregate, a Material Adverse Consequence.
8.3. CONSENTS. Purchaser shall have obtained Purchaser Stockholder
Approval, and the Company shall have obtained Company Stockholder Approval, and
any waiting period applicable to this Agreement, the Merger and the Transactions
under HSR shall have expired or early termination thereof shall have been
granted.
8.4. CLOSING DELIVERIES. The Company shall have delivered to Purchaser each
of the following:
(a) a certificate of the President of the Company certifying as to the
matters set forth in Sections 8.1, 8.2 and 8.3 hereof and as to the satisfaction
of all other conditions set forth in this Article 8;
(b) Certificates of Merger duly executed by an officer of the Company for
filing in accordance with the provisions of Section 2.2 hereof;
(c) the corporate minute books, seals and stock transfer books of the
Company certified by the corporate secretary of the Company as true, correct and
complete, including minutes authorizing the Merger and the Transactions;
(d) an executed agreement reasonably satisfactory to Purchaser pursuant to
which the Company has disposed of certain assets of its ProfitWorks applications
software and related product line, consistent with the provisions of Section 4.4
hereof;
(e) the audited Company financial statements, as more fully described in
Section 4.6 hereof, and an unaudited Closing Balance Sheet;
(f) an opinion of counsel to the Company and Parent reasonably satisfactory
to Purchaser and addressing only the issues of incorporation in Pennsylvania,
qualification in other states, corporate power and authority to execute this
Agreement and the Merger Option Agreement and to consummate the Transactions,
the enforceability of this Agreement and the Merger Option Agreement, and no
conflicts with the Articles of Incorporation or By-Laws of the Company or
Parent;
(g) the Merger Option Agreement duly executed by an officer of Parent;
(h) a shareholder voting agreement executed by holders of at least sixty
percent (60%) of the Merger Shares as required pursuant to Section 3 of that
certain Shareholder Voting Agreement dated as of August 12, 1999 by and among
Parent, Purchaser and Daniel J. Mitchell, as designated agent of certain
shareholders of CareCentric;
(i) receipt in immediately available funds of $6,000,000 less the
outstanding principal balance and all accrued but unpaid interest due under the
Note as of the Closing Date; and
(j) evidence of termination of the Note and Security Agreement, and
executed Uniform Commercial Code UCC-3 termination statements.
8.5. NO CHALLENGE. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency or any
pending action by any other Person, challenging or seeking damages in connection
with the Merger and having a Material Adverse Consequence on Purchaser.
8.6. NO MATERIAL ADVERSE CONSEQUENCE. Since the date of execution of this
Agreement, there shall have been no Material Adverse Consequence as to the
Company.
8.7. REVISED SCHEDULES. The Company shall have provided Purchaser with
revised Schedules dated as of the Closing Date (the "Revised Schedules"), with
all material changes through such date duly noted thereon, and the Revised
Schedules will not contain any disclosures which (i) should have been but were
not disclosed on the Schedules attached hereto or (ii) set forth material
changes which in the opinion of Purchaser, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Consequence as to the
Company unless such disclosures are approved in writing by Purchaser.
8.8. REPAYMENT OF DEBTS. At the Closing, all officers, directors,
stockholders and employees of the Company shall repay to the Surviving
Corporation in full any outstanding indebtedness, if any, owed to the Company by
them or their families.
8.9. RELEASES. Each of the officers and directors of the Company shall have
executed releases in favor of the Company in form reasonably satisfactory to
Purchaser and its counsel.
8.10. SPINOFF. The Spinoff shall have been consummated in compliance in all
material respects with the Exchange Act and any other applicable federal or
state securities laws or regulations.
8.11. REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
ARTICLE 9.
CONDITIONS TO OBLIGATIONS
OF THE COMPANY AND PARENT TO CLOSE
Each and every obligation of the Company and Parent under this Agreement to
be performed on or prior to the Closing, shall be subject to the fulfillment, on
or prior to the Closing, of each of the following conditions, which conditions
Purchaser agrees to use best efforts to satisfy:
9.1. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties made by Purchaser in or pursuant to the Agreement or given on its
behalf hereunder shall be true and correct in all respects on and as of the
Closing Date, in each case with the same effect as though such representations
and warranties had been made or given on and as of the Closing Date (except to
the extent expressly made as of an earlier date, in which case such
representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Material Adverse Consequence.
9.2. OBLIGATIONS PERFORMED. Purchaser shall have performed and complied
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually, or in
the aggregate, a Material Adverse Consequence.
9.3. CONSENTS. Purchaser shall have obtained Purchaser Stockholder
Approval, and the Company shall have obtained Company Stockholder Approval; any
waiting period applicable to this Agreement, the Merger and the Transactions
under HSR shall have expired or early termination thereof shall have been
granted; and the Registrable Shares shall have been listed and eligible for
trading on the NASDAQ National Market System subject only to official notice of
issuance.
9.4. CLOSING DELIVERIES. Purchaser shall have delivered to the Company
Stockholders and the Company each of the following:
(a) delivery of the Merger Shares to Parent;
(b) certified copies of the corporate resolutions of Purchaser authorizing
the execution, delivery and performance of this Agreement by Purchaser, together
with an incumbency certificate with respect to the respective officers of
Purchaser executing documents or instruments on behalf of Purchaser;
(c) a certificate of the President or any Senior Vice President of
Purchaser certifying as to the matters set forth in Sections 9.1, 9.2 and 9.3
hereof and as to the satisfaction of all other conditions set forth in this
Article 9;
(d) an opinion of counsel to Purchaser reasonably satisfactory to Parent
and the Company and addressing only the issues of incorporation in Delaware,
qualification in other states, corporate power and authority to execute and
deliver this Agreement and consummate the Transactions, the enforceability of
this Agreement and the Merger Option Agreement, and no conflicts with the
Certificate of Incorporation or By-Laws of Purchaser;
(e) Certificates of Merger duly executed by an officer of Purchaser for
filing in accordance with Section 2.2, or evidence of such filing;
(f) the Merger Option Agreement duly executed by an officer of Purchaser;
(g) evidence that the Certificate of Designations was duly filed with the
Delaware Secretary of State;
(h) a certificate for 5,600,000 shares of Purchaser Series B Preferred
issued to Parent; and
(i) the Mestek Warrant, duly executed by an officer of Purchaser.
9.5. NO CHALLENGE. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency or any pending action by any other Person, challenging or
seeking damages from Parent or the Company in connection with the Merger and
having a Material Adverse Consequence on the Company or Purchaser.
9.6. REVISED SCHEDULES. Purchaser shall have provided the Company and
Parent with Revised Schedules dated as of the Closing Date, with all material
changes through such date duly noted thereon, and the Revised Schedules will not
contain any disclosures which (i) should have been but were not disclosed on the
Schedules attached hereto or (ii) set forth material changes which in the
opinion of the Parent and the Company, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Consequence as to Purchaser,
unless such disclosures are approved in writing by Parent and the Company.
9.7. NO MATERIAL ADVERSE CONSEQUENCE. Since the date of execution of this
Agreement, there shall have been no Material Adverse Consequence as to
Purchaser.
9.8. SPINOFF. The Spinoff shall have been consummated in compliance in all
material respects with the Exchange Act and any other applicable federal or
state securities laws or regulations.
9.9. REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
ARTICLE 10.
TERMINATION
10.1. TERMINATION This Agreement may be terminated at any time (the
"Termination Date") before the Closing Date:
(a) by mutual written consent of Purchaser, Parent and the Company;
(b) by Purchaser upon the occurrence or upon its discovery of a Material
Adverse Consequence as to the Company;
(c) by Parent or the Company upon the occurrence or upon their discovery of
a Material Adverse Consequence as to Purchaser;
(d) by Purchaser or the Company pursuant to Section 4.16 hereof; or
(e) by Purchaser, Parent or the Company if the Closing is not consummated
on or before January 7, 2000, unless the failure to close by such date is
attributable to actions or omissions of the party seeking to terminate this
Agreement under this subsection.
10.2. EFFECT OF TERMINATION. In the event this Agreement is terminated
pursuant to Sections 10.1(a), 10.1(b), 10.1(c) or 10.1(e) above, no party shall
have any obligations to the others hereunder except for those obligations with
respect to confidentiality and the return of confidential information set forth
below and in the Confidentiality Agreement. If this Agreement is terminated
pursuant to Section 10.1(d), the remedies available to the non-terminating party
set forth in Section 4.16(c) hereof shall apply. If this Agreement is
terminated, each party shall promptly return to each other all copies of the due
diligence materials previously provided to such party or their representatives,
and the obligations in respect of confidentiality set forth in the
Confidentiality Agreement shall remain in effect.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1. SEVERABILITY. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and shall, to the extent
possible, be modified to conform with such laws, without invalidating the
remaining provisions hereto.
11.2. MODIFICATION. This Agreement may not be changed or modified except in
writing specifically referring to this Agreement and signed by each of the
parties hereto.
11.3. ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. Except as provided
pursuant to the Spinoff, this Agreement and the Closing Documents may not be
assigned by Purchaser and may not be assigned by the Company or Parent without
the prior written consent of Purchaser. The terms and conditions hereof shall
survive the Closing as provided herein and shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns. By their execution and delivery of this
Agreement, the Mestek Major Stockholders hereby covenant and agree to vote their
shares of Parent's common stock, and Company Capital Stock to be issued to them
after the Spinoff, in favor of the Merger.
11.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below.
If to Company or Parent: Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
Attention: Chief Executive Officer
Telefax: (413) 568-7428
with a copy to: Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078
Attn: Marc R. Paul, Esq.
Telefax: (202) 452-7074
If to Purchaser: Simione Central Holdings, Inc.
6600 Powers Ferry Road
Atlanta, Georgia 30339
Attention: Chief Executive Officer
Telefax: (770) 644-6558
with a copy to: Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Sherman A. Cohen, Esq.
Telefax: (404) 873-8631
or at such other address as any party hereto notifies the other parties hereof
in writing.
11.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except for the
Confidentiality Agreement, the restrictions and obligations of which shall
survive according to its terms, this Agreement, together with the Exhibits and
Schedules attached hereto, constitutes the entire agreement and supersedes any
and all other prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, is not intended to confer upon
any Person other than Purchaser, the Company, and Parent, any rights or remedies
hereunder. No provision of this Agreement shall be construed against any party
on the ground that such party drafted the provision or caused it to be drafted
or the provision contains a covenant of such party.
11.7. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, excluding those
relating to conflicts of laws.
11.8. ARBITRATION. Any claim arising out of or related to this Agreement or
the alleged breach of a representation, warranty or covenant thereof or arising
out of any of the Transactions, which has not been resolved by mutual agreement
of the parties after a sixty (60) day negotiation period in which the parties
try to resolve the claim, shall be finally settled by arbitration. Such
arbitration shall be conducted in Wilmington, Delaware in accordance with the
Commercial Rules of the American Arbitration Association then in effect, as
modified or supplemented herein, or as the parties mutually agree otherwise.
Notwithstanding the rules of the arbitral body, the parties hereto agree (a)
that any arbitration shall be presided over by a single arbitrator, who shall
have been admitted to the practice of law, and be in good standing or on
retirement status in any of the fifty United States or the District of Columbia,
(b) that the arbitrator shall base his decision on the facts as presented into
evidence, and (c) that the arbitrator shall prepare a written memorandum of
decision setting forth the findings of fact and conclusions of law. The
arbitrator shall be selected by Purchaser and Parent. If they cannot agree on
such selection within a thirty (30) day period, they shall ask the American
Arbitration Association to appoint an arbitrator. The decision of the arbitrator
shall be final, and judgment may be entered upon it in accordance with the
applicable law in any court having jurisdiction. Any claim for relief made
pursuant to this Agreement shall be made within one (1) year from the date upon
which the party claiming relief knew or should have known of the cause of action
constituting such claim. All costs of the arbitration shall be borne by the
party determined to be the losing party by the arbitrator. For purposes of
determining the prevailing and losing party, the arbitrator may consider offers
of settlement by either Purchaser or Parent, or both of them.
11.9. HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.10. INCORPORATION OF EXHIBIT AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.11. WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.12. TIME OF ESSENCE. Time is of the essence in this Agreement.
11.13. APPOINTMENT OF AGENT. By operation of this Agreement and upon the
approval of this Agreement by the holders of Company Capital Stock, Parent shall
be appointed as the designated agent of the Company Stockholders for the purpose
of enforcing the rights of the Company Stockholders pursuant to Section 7.2 of
this Agreement. The Company Stockholders shall be bound by any actions taken by
Parent on their behalf pursuant to Section 7.2 or otherwise under this
Agreement.
11.14. PROVISION OF ASSISTANCE.
(a) After the date of the Amendment Agreement and prior to the Closing
Date, upon reasonable request from the Purchaser, Parent will use its
commercially reasonable efforts to make Parent's and the Company's employees
available to Purchaser on a consulting basis. The cost of such assistance will
be equal to Parent's and the Company's out-of-pocket expenses plus a per
employee consulting fee based on the employee's skill, experience and workload,
to be determined by Parent or the Company after consultation with Purchaser.
Notwithstanding Section 4.8, the cost of such assistance will be billed to
Purchaser at the earlier of the Closing Date or the Termination Date and shall
be due and payable by Purchaser upon Purchaser's receipt of such bills.
(b) Purchaser, Parent and the Company will negotiate in good faith to enter
into, on or prior to the Closing Date, an agreement for services such as those
described in Section 11.14(a) to be provided after the Closing Date; provided,
however, that such services agreement shall not be a condition to the Closing.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
COMPANY: PURCHASER:
MCS, INC. SIMIONE CENTRAL HOLDINGS, INC.
By:____________________________ By:_____________________________
Name:__________________________ Name:___________________________
Title:_________________________ Title:__________________________
PARENT:
MESTEK, INC.
By:_____________________________
Name:___________________________
Title:__________________________
MESTEK MAJOR SHAREHOLDERS
________________________________
John E. Reed
________________________________
Stewart B. Reed
________________________________
E. Herbert Burk
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND INVESTMENT AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
Schedules* Description
- --------- -----------
Schedule 3.1(a) Exchange Ratio
Schedule 3.3(a) Options and Warrants
Schedule 4.7 Exceptions to conduct of Purchaser and Company pending Merger
Schedule 5.1 States of Qualification - Company
Schedule 5.2 Officers and Directors - Company
Schedule 5.3 Encumbrances - Company
Schedule 5.4 Required Consents and Approvals - Company
Schedule 5.5 Capitalization of the Company
Schedule 5.8 Company Financial Statements; Liabilities not disclosed on
Financials - Company
Schedule 5.9 Taxes
Schedule 5.10 Material Contracts - Company
Schedule 5.12(A) Intellectual Property - Company
Schedule 5.12(B) Owned Software - Company
Schedule 5.12(C) Licensed Software - Company
Schedule 5.13 Labor Matters - Company
Schedule 5.14(A) Work-in-Process, Orders and Returns - Company
Schedule 5.14(B) Cancellations Arising from Transactions - Company
Schedule 5.15 Exceptions to Absence of Certain Changes - Company
Schedule 5.16 Leases - Company
Schedule 5.17 Litigation - Company
Schedule 5.18 Employee Benefit Plans of All Kinds - Company
Schedule 5.21 Bank Accounts - Company
Schedule 5.23 Insurance - Company
Schedule 6.1 States of Qualification - Purchaser
Schedule 6.3 Purchaser Consents
Schedule 6.4 Encumbrances - Purchaser
Schedule 6.5 Capitalization - Purchaser
Schedule 6.8 Purchaser Financial Statements; Liabilities not disclosed on
Financials - Purchaser
Schedule 6.10 Material Contracts - Purchaser
Schedule 6.12(A) Intellectual Property - Purchaser
Schedule 6.12(B) Owned Software - Purchaser
Schedule 6.12(C) Licensed Software - Purchaser
Schedule 6.13 Labor Matters - Purchaser
Schedule 6.14(A) Work-in-Process, Orders and Returns - Purchaser
Schedule 6.14(B) Cancellations Arising from Transactions - Purchaser
Schedule 6.15 Exceptions to Absence of Certain Changes - Purchaser
Schedule 6.16 Leases - Purchaser
Schedule 6.17 Litigation - Purchaser
Schedule 6.18 Employee Benefit Plans of All Kinds - Purchaser
Schedule 6.20 Bank Accounts - Purchaser
Schedule 6.22 Insurance - Purchaser
Schedule 6.26 Exceptions regarding Securities Filings - Purchaser
Exhibits Descriptions
- -------- ------------
Exhibit 1.2(a)(1) Note
Exhibit 1.2(b)(2) Security Agreement
Exhibit 1.4 (3) Certification of Designations
Exhibit 1.5 (4) Mestek Warrant
Exhibit 3.3(a)(5) Merger Option Agreement
* In accordance with Item 601(b)(2) of Regulation S-K, the schedules have been
omitted. There is a list of schedules at the end of the Exhibit, briefly
describing them. The Registrant will furnish supplementary a copy of any omitted
schedule to the Commission upon request.
(1) Filed as Exhibit 10.1 to this Form 8-K/A.
(2) Filed as Exhibit 10.2 to this Form 8-K/A.
(3) Filed as Exhibit 10.3 to this Form 8-K/A.
(4) Filed as Exhibit 10.4 to this Form 8-K/A.
(5) Filed as Exhibit 10.5 to this Form 8-K/A.
EXHIBIT 10.1
883138v1
SECURED PROMISSORY NOTE
Westfield, Massachusetts
$3,000,000.00 September __, 1999
FOR VALUE RECEIVED, Simione Central Holdings, Inc., a Delaware corporation,
having a place of business at 6600 Powers Ferry Road, Atlanta Georgia, 30339
(hereinafter "Borrower"), does hereby promise to pay to the order of Mestek,
Inc., a Pennsylvania corporation (hereinafter "Lender"), at its offices in
Westfield, Massachusetts, or such other place as the holder hereof may
designate, on or before the earlier of the closing of the Merger Agreement as
defined in the Security Instrument defined below or January 31, 2000 (the
"Maturity Date"), the principal sum of Three Million and 00/100 Dollars
($3,000,000.00), together with interest on the unpaid principal balance hereof
at the then current prime rate of BankBoston, N.A., or any successor thereto, as
established from time to time, plus two percentage points (2%). However, in the
event the closing of the transactions described in the First Amendment to
Agreement and Plan of Merger and Investment Agreement dated as of September 8,
1999 ("Amendment") does not occur on or before January 31, 2000, and such
failure to close is not the result of a breach of the Amendment by Borrower, the
Maturity Date shall be extended until the earlier to occur of (i) the actual
date of the closing, or (ii) June 30, 2000. Interest shall commence on the date
of this Note and shall be payable monthly in arrears on the first day of each
month, commencing on the first day of the month immediately following the date
of this Note, and continuing until all principal amounts due hereunder are paid
in full. The Borrower shall have the right to prepay the principal amount of
this Note in whole or in part at any time without penalty prior to the Maturity
Date. Any partial prepayment shall not relieve the Borrower of the obligation to
repay the entire principal amount hereunder as such amount falls due. All
interest under this Note shall be computed on the basis of the actual number of
days elapsed over an assumed year consisting of three hundred sixty (360) days.
All payments hereunder shall be made in lawful money of the United States in
immediately available funds.
Borrower, as maker, endorser, surety, guarantor, or in any other capacity,
hereby: (i) waives diligence, presentment, demand, protest and notice of
presentment, notice of protest and notice of dishonor of the debt evidenced by
this Note and each and every other notice of every kind with respect to this
Note; and (ii) agrees that the Lender or any other holder of this Note, at any
time or times, without notice to or the consent of Borrower, may grant
extensions of time without limit as to the number or the aggregate period of
such extensions, for the payment of any principal and/or interest due hereunder
and consents to any substitution, exchange or release of collateral, and to the
addition or release of any other person who may at any time be or become
primarily or secondarily liable for the repayment of the indebtedness evidenced
by this Note. This Note is secured by, and is entitled to the benefits of that
certain Security Agreement of even date herewith (the "Security Instrument").
The Security Instrument sets forth the terms whereby all indebtedness under this
Note, as it may be amended or extended, is secured. The Security Instrument and
all other instruments evidencing or securing the indebtedness hereunder are
hereby made part of this Note and are deemed incorporated herein in full.
It shall be an event of default hereunder ("Event of Default") (i) if Borrower
shall fail to make any payment of principal or interest hereunder when due, and
not cured within five (5) days after delivery of notice, or (ii) if Borrower
shall breach any representation or warranty, or default in the performance of
any condition, covenant, obligation or agreement, contained in the Security
Instrument, and such breach or default shall continue uncured for ten (10)
calendar days, or (iii) if Borrower shall become insolvent or file or have filed
against it a bankruptcy which is not stayed within sixty (60) days or be
dissolved. If an Event of Default shall occur and remain uncured, then, or at
any time thereafter, the entire unpaid principal amount of this Note, together
with accrued interest thereon, shall at the election of the Lender, and without
notice of such election, become immediately due and payable in full; and Lender
may take such other actions as may be provided for in the Security Instrument or
in this Note, or as may be available to Lender under applicable law.
The rights and remedies of the Lender as provided in this Note and in the
Security Instrument shall be cumulative and concurrent, and may be pursued
singly, successively, or together against Borrower, the collateral described in
the Security Instrument, and any other funds, property or security of Borrower
held by Lender. The delay or omission of Lender in exercising any such right or
remedy shall in no event be construed as a waiver or release of said rights or
remedies, or of the right to exercise them from time to time and at any time at
any later date.
No waiver of any default hereunder shall be deemed a waiver of any subsequent or
continuing default nor shall any delay by the holder in enforcing any right
hereunder be considered a waiver of such right. Borrower agrees to pay all costs
of collection or enforcement of any amount due under this Note upon an Event of
Default including reasonable attorneys' fees and disbursements whether suit is
brought or not. In the event that any one or more provisions of this Note shall
for any reason be held to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Note, and this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Note may not be
changed, modified or amended in any way other than by a writing signed by the
party against whom such change, modification or amendment is sought.
Whenever used herein, the words "Borrower" and "Lender" shall be deemed to
include their respective successors and assigns. Time is of the essence of this
Note and of the payments and performances hereunder and under the Security
Instrument. This Note is to be construed in all respects and enforced according
to the laws of the State of Delaware.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY WAIVES
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS NOTE, AND CONSENTS TO PERSONAL JURISDICTION OF ANY FEDERAL OR STATE COURT
SITTING IN HAMPDEN COUNTY IN THE COMMONWEALTH OF MASSACHUSETTS.
EXECUTED UNDER SEAL BY BORROWER.
ATTEST: SIMIONE CENTRAL HOLDINGS, INC.
__________________________ By: ___________________________
Name: __________________________
Its: __________________________
EXHIBIT 10.2
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is made as of the ___ day of
September, 1999 by and between Simione Central Holdings, Inc., a Delaware
corporation having its principal place of business at 6600 Powers Ferry Road,
Atlanta, Georgia, 30339 for itself and on behalf of all of its subsidiaries and
the assets held thereby ("Debtor"), and Mestek, Inc., a Pennsylvania corporation
having its principal place of business at 260 North Elm Street, Westfield,
Massachusetts, 01085 ("Secured Party").
RECITALS
A. Debtor and Secured Party have previously entered into that certain
Agreement and Plan of Merger dated May 26, 1999, whereby MCS, Inc., a
wholly-owned subsidiary of Secured Party, shall be merged with and into
Debtor.
B. Debtor has, with the assent of Secured Party, entered into and consummated
a merger agreement with CareCentric Solutions, Inc., a Delaware corporation
("CareCentric"), whereby CareCentric merged with and into Debtor.
C. As evidenced by the Promissory Note of even date herewith (the "Note"),
Secured Party has loaned to Debtor the principal amount of the Promissory
Note, which shall be utilized by Debtor to finance a loan obligation
assumed in the above CareCentric merger and to provide working capital.
D. Secured Party and Debtor desire to secure to the fullest extent permissible
under law, the repayment of the indebtedness evidenced by the Note and the
full, complete, faithful and timely performance of any and all of Debtor's
obligations under and pursuant to the Note and this Agreement.
E. Debtor has agreed to grant a security interest in the Collateral (as
defined below) to Secured Party to secure certain of Debtor's obligations
to Secured Party under the Note, as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
1. Security Interest. As collateral security for the prompt and complete payment
and performance when due of all the Obligations (defined below), Debtor hereby
pledges, assigns, transfers, grants and delivers to Secured Party a continuing
security interest in all of Debtor's right, title and interest in and to all of
Debtor's Accounts, Chattel Paper, Documents and Instruments, General
Intangibles, Goods, Equipment, and Inventory (as such terms are defined in
Article 9 of the Uniform Commercial Code as enacted in the State of Delaware
from time to time (the "Code")), including without limitation:
1.1 all of Debtor's accounts receivable, chattel paper, contract rights and
general intangibles ("Receivables"), and all books, records, ledgers,
print-outs, file materials and other papers relating to Receivables;
1.2 all of Debtor's inventory and stock in trade, including all work-in-process
or finished goods ("Inventory");
1.3 all of Debtor's computer equipment (including servers, desktops, and
portables), printers, monitors, scanners, data storage devices, cables, and all
other computer peripherals; all office equipment, telephone equipment and all
other fixed tangible assets of Debtor ("Equipment");
1.4 all of Debtor's patents, patent applications, trademarks, service marks,
trade names, copyrights and copyright applications, and all inventions,
inventor's notes, discoveries, trade secrets, ideas, proprietary processes and
formulae, improvements, designs and specifications (including design choices),
proprietary and trade rights, data and know-how, whether patentable or not, with
respect to the software and software products owned, developed, designed,
licensed or distributed by Debtor in its business as a software developer, and
all licenses and rights with respect to third party computer software, and any
and all claims for damages by way of past, present and future infringement of
any of the rights included above, with the right, but not the obligation, to sue
for and collect such damages for said use or infringement of the intellectual
property rights identified above (the "Intellectual Property");
1.5 whether now owned or hereafter acquired, together with all additions,
accessions, substitutions and increases therein or thereto, and all products
thereof and all cash and noncash proceeds thereof, including without limitation
chattel paper and insurance proceeds (collectively, the "Collateral").
2. Obligations Secured. The security interest granted hereby secures all
payments and performances of Debtor under the Note, and all other debts,
liabilities and agreements of Debtor to Secured Party, whether now existing or
hereafter arising, which are reduced to writing and signed by the parties, and
which specifically state that such debts, liabilities and agreements of Debtor
are secured by the security interests granted herein (the "Obligations").
3. Debtor's Representations and Warranties. Debtor represents and warrants that:
3.1 Debtor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business under the laws of any state where its business requires it to be
qualified. The execution, delivery and performance of this Agreement has been
duly authorized by all requisite corporate action of Debtor. This Agreement is
the valid and binding obligation of Debtor enforceable against Debtor in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights and
remedies generally and general principles of equity.
3.2 The execution and delivery of this Agreement does not (i) conflict with or
violate any provision of the Certificate of Incorporation or By-laws of Debtor,
(ii) conflict with or violate any law, rule, regulation, ordinance, judgment or
decree applicable to Debtor or the Collateral, (iii) conflict with or result in
any breach of or constitute a default under, or give to others any rights of
termination or cancellation of, or accelerate the performance of any obligation
of Debtor under, any term, condition, or provision of any note, bond, mortgage,
indenture, contract, or other instrument or obligation to which Debtor is a
party or by which the Collateral is bound or affected, except as has been
consented to by the party entitled to the performance thereof.
3.3 Except for the security interest previously granted by Debtor to Silicon
Valley Bank (the "Bank") in and to certain items of the Collateral (the "Bank
Interest") which Bank Interest has been perfected and is represented in full by
that certain UCC-1 financing statement filed in Cobb County, Georgia, which
security interest is prior to this security interest granted to Secured Party,
Debtor has all right, title and interest in and to the Collateral free and clear
of all liens, encumbrances, and other charges, and the Collateral will at all
times be the property of Debtor, and be used solely in Debtor's business. Debtor
represents and warrants that, except for the Bank Interest, the Debtor has not
granted to any party, or to any affiliate of Debtor, any security interest(s) in
the Collateral, and that the security interests granted herein shall, upon
perfection thereof, constitute a valid, perfected security interest and lien
upon the Collateral enforceable as such against Debtor.
3.4 Debtor has obtained from the Bank its consent to the grant of the security
interests referred to in Section 1, as may be required by Debtor's agreement(s)
with the Bank.
3.5 Debtor has its principal place of business at 6600 Powers Ferry Road,
Atlanta, Georgia, and has offices and business locations at which some of the
Collateral is located at the locations set forth in Exhibit A, as amended from
time to time. Debtor will notify Secured Party in writing at least forty-five
(45) days prior to any change in the location of its principal place of
business, and with such Notice, Debtor shall provide the full mailing address of
Debtor's new principal place of business.
3.6 All Collateral owned or held by Debtor on the date hereof is located at one
of the locations shown on Exhibit A. All Collateral now held or subsequently
acquired shall be kept at any one of the locations shown on Exhibit A, or such
new location as Debtor may establish providing that Debtor shall notify Secured
Party in writing thirty (30) days prior to the establishment of a new location
of the full mailing address of any new location of, or the establishment of any
new place of business, where the Collateral may be kept.
3.7 As of the date when each of the Receivables arise, Debtor shall be deemed to
have represented and warranted to Secured Party that such Receivable is, and all
records, papers and documents relating thereto (i) represent the legal, valid
and binding obligation of the account debtor evidencing indebtedness unpaid and
owed by such account debtor to Debtor except for a customary percentage of
accounts which may not be collectible, and (ii) represent and evidence true and
valid obligations, enforceable in accordance with their respective terms,
subject to the effect of applicable bankruptcy, insolvency, reorganization,
marshaling of assets or similar laws affecting creditors' rights and remedies
generally and general principles of equity.
4. Debtor's Covenants
4.1 Debtor hereby agrees to execute and deliver immediately upon the request of
Secured Party any UCC-1 financing statements, UCC-3 amendments, assignments or
continuation statements, or other documents, instruments, or other notices
prepared by Secured Party appropriate under applicable law, in respect of any
security interest created pursuant to this Agreement. In the event that any
re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is required to protect
and preserve such lien or security interest in the Collateral, Debtor shall, at
Secured Party's cost and expense, cause the same to be re-recorded and/or
refiled at the time and in the manner requested by Secured Party, its agents,
representatives and designees. Debtor hereby designates Secured Party, its
agents, representatives and designees as the agents and attorneys-in-fact,
coupled with an interest, for Secured Party to sign such financing statements,
and any continuations, assignments, re-recordings and/or re-filings thereof, on
behalf of Debtor.
4.2 Debtor shall at its own expense and at all times keep the Collateral insured
against fire, theft and all other risks which the Collateral may be subject, for
the full replacement value thereof; shall name Secured Party as a loss payee
under such insurance policies; and shall provide to Secured Party a certificate
of insurance evidencing such coverage. Each such policy shall state that it
cannot be cancelled without thirty (30) days' prior written notice to Secured
Party. If Debtor shall fail to insure the Collateral as required by this Section
, then Secured Party may, but shall not be required to, procure or renew or
extend such insurance and Debtor agrees to reimburse Secured Party for all costs
and expenses thereof.
4.3 Debtor will at all times keep accurate and complete records of the
Collateral, and will pay before delinquency any and all taxes, governmental
charges or assessments now or hereafter imposed on the Collateral.
4.4 Except as otherwise allowed in this Agreement or approved in advance by
Secured Party, Debtor shall refrain from (i) making, causing or permitting any
sale, conveyance, distribution or transfer of any of the Collateral other than a
sale of Inventory in the ordinary course of business in a bona fide arm's length
transaction for market value, without the express consent of Secured Party,
which consent shall not be unreasonably withheld; (ii) after the date hereof
mortgaging, pledging, subjecting to lien or otherwise encumbering any item of
the Collateral without the express written consent of Secured Party; (iii)
allowing any policies of insurance obtained with respect to the Collateral to
lapse, terminate or be reduced in scope or amount; (iv) failing to maintain the
Collateral in its present condition, ordinary wear and tear excepted; (v)
allowing any liens to be assessed against the Collateral after the date of this
Agreement as a result of the Debtor's failure to pay in a timely manner any
amounts in respect of the Collateral including all taxes with respect thereto;
or (vi) materially violating any applicable Federal, state or local laws that
affect the Collateral.
5. Debtor's Rights until Default. In the absence of the occurrence of any Event
of Default under this Agreement or in the performance or observance of the
Obligations, Debtor shall have the right, in the ordinary course of business, to
use, sell, control, collect and compromise the Collateral.
6. Default. Debtor shall be in default under this Agreement upon the happening
of any of the following events or conditions and the lapse of the applicable
cure period if any ("Event of Default").
6.1 Failure to pay when due any of the Obligations within five (5) calendar days
after receipt of written notice from Secured Party to Debtor.
6.2 Failure to perform any of the Obligations, or to pay, perform or observe any
of the terms, conditions, agreements, covenants and obligations of Debtor under
this Agreement within thirty (30) days after receipt of written notice from
Secured Party to Debtor; provided, however, if such failure is not capable of
being cured within such thirty day period, Debtor shall not take and continue to
take all commercially reasonable actions to cure such failure during such thirty
day period, and shall not fully cure such failure within sixty (60) days after
receipt of the above notice.
6.3 Debtor's dissolution, termination of existence whether by merger,
combination or otherwise, insolvency, business failure, discontinuance of
business, appointment of a receiver or custodian of any part of Debtor's
property, assignment for the benefit of creditors by Debtor, the recording or
existence of any lien for unpaid taxes other than taxes which are not yet due,
the commencement of any proceeding under any bankruptcy or insolvency laws of
any state or of the United States by or against Debtor, or service upon Secured
Party of any writ, summons, or process designed to affect any of the Collateral;
and such appointment, assignment, lien, proceeding, writ, summons or process
continues un-stayed and in effect for a period of sixty (60) consecutive days.
7. Secured Party's Rights upon Default. Upon an Event of Default and at any time
thereafter, Secured Party, without diligence, presentment, demand, protest or
notice or advertisement of any kind, and subject to the rights of the Bank, may:
7.1 Make all Obligations immediately due and payable in full.
7.2 Personally, or by its agents or attorneys, immediately take possession of
the Collateral or any part thereof, from Debtor or any other person who then has
possession of the Collateral or any part thereof, and for that purpose may enter
upon Debtor's premises where any of the Collateral is located and remove such
Collateral and use in connection with such removal any and all services,
supplies, aids and other facilities of Debtor.
7.3 Take possession of the Collateral or any part thereof, by directing Debtor
in writing to deliver the same to Secured Party at any place or places
designated by Secured Party, in which event Debtor shall at its own expense; (a)
forthwith cause the same to be moved to the place or places so designated by
Secured Party and there delivered to Secured Party; (b) store and keep any
Collateral so delivered to Secured Party at such place or places pending further
action by Secured Party as provided in Section 7.4; and (c) provide guards and
maintenance services as shall be necessary to protect and preserve the
Collateral.
7.4 Sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Secured Party may deem commercially
reasonable. Notice of any sale shall be given to Debtor as set forth in the
applicable statute before the time of any intended public sale, or as set forth
in the applicable statute before the time at which any private sale which may be
made, or at any time thereafter, which Debtor hereby agrees shall constitute
reasonable notice of such sale. The Secured Party may be the purchaser of any or
all of the Collateral at any such sale and shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at such sale, to use and apply any of the
Obligations as a credit on account of the purchase price of any Collateral
payable at such sale. Each purchaser at any such sale shall acquire the property
sold absolutely free from any claim or right on the part of Debtor, and Debtor
hereby waives, to the fullest extent permitted by law, all rights of redemption,
stay or appraisal hereafter enacted. The Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Debtor hereby waives, to the fullest extent
permitted by law, any claims against the Secured Party arising by reason of the
fact that the price at which any Collateral may have been sold at such private
sale was less than the price which might have been obtained at a public sale.
7.5 Exercise the remedies of a secured party afforded by the Uniform Commercial
Code as enacted in the Commonwealth of Massachusetts and other applicable law or
by the terms of any agreement between Debtor and Secured Party.
7.6 Secured Party shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of Secured Party hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, and if the Obligations then currently due are fully paid, then any
surplus amounts shall be applied to payment of any other amounts required by
applicable law (including without limitation 9-504(1)(c) of the Code) and then
any remaining amounts shall be paid by Secured Party to Debtor. Debtor shall be
liable to Secured Party for any deficiency.
7.7 The rights and remedies of Secured Party herein provided are cumulative, may
be exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
8. Debtor's Obligation to Pay Fees and Expenses of Secured Party. Debtor shall
pay to Secured Party on demand any and all out-of-pocket expenses (including,
but not limited to, a collection charge on all accounts collected, all
reasonable attorneys' fees and expenses, and all other expenses of like or
unlike nature) incurred or paid by the Secured Party to obtain or enforce
payment of any of the Obligations, or in the prosecution or defense of any
action or concerning any matter growing out of or connected with the subject
matter of this Agreement, the Obligations, the Collateral or any of Secured
Party's rights or interests therein or thereto. All such expenses may be added
to the principal amount of any indebtedness owed by Debtor to Secured Party and
shall constitute part of the Obligations secured hereby.
9. Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Debtor hereby irrevocably appoints Secured
Party (and any officers and employees of Secured Party as it may designate) as
Debtor's true and lawful attorney to: (a) send requests for verification of
Receivables or notify account debtors of Secured Party's security interest in
the Receivables, (b) endorse Debtor's name on any checks or other forms of
payment or security that may come into the possession of Secured Party, (c)
make, settle, and adjust all claims with respect to the Receivables for amounts
and upon terms which Secured Party deems commercially reasonable, (d) to
transfer the Intellectual Property into the name of Secured Party or a third
party to the extent permitted under this Agreement or under the Code. The
appointment of Secured Party as Debtor's attorney in fact, and each and every
one of Secured Party's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed.
10. Notices. All notices given hereunder shall be in writing and shall be deemed
delivered when served personally, transmitted to the facsimile number set forth
below, or on the second business day after being deposited in the United States
mail, certified or registered mail, postage prepaid, addressed as follows:
If to Secured Party: Mestek, Inc.
260 North Elm Street
Westfield, MA 01085
Attn: Stephen M. Shea
Fax: (413) 568-7428
With copies to: Mestek, Inc.
260 North Elm St.
Westfield, MA 01085
Attn: Timothy P. Scanlan, Esq.
Fax: (413) 568-7428
If to Debtor: Simione Central Holdings, Inc.
6600 Powers Ferry Road
Atlanta, GA 30339
Attn: Barrett C. O'Donnell
Fax: (770) 644-6558
With copies to: Simione Central Holdings, Inc.
6600 Powers Ferry Road
Atlanta, GA 30339
Attn: Reid Horovitz, Esq.
Fax: (770) 644-6558
11. Miscellaneous. This Agreement constitutes the entire agreement between the
parties regarding the subject matter hereof and supersedes all prior agreements,
understandings and negotiations. This Agreement or any part hereof may not be
changed, waived, or amended except by an instrument in writing signed by Debtor
and Secured Party. No waiver by Secured Party of any right or remedy provided
hereunder shall be valid unless made in writing and signed by an authorized
representative of Secured Party. Any waiver or forbearance by Secured Party of
any right or remedy provided hereunder on any one occasion shall not operate as
a waiver or promise of forbearance of such right or remedy on any other
occasion. The use of the singular number shall be held to include the plural
when the context requires. This Agreement shall be binding upon and inure to the
benefit of each corporate party hereto, its successors and assigns. Any notice
required or permitted hereunder shall be in writing and shall be duly given to
any party if hand delivered or if mailed first class postage prepaid to the
address set forth above or to such other address as may be specified by notice
in writing. The substantive and procedural laws of the State of Delaware,
excluding its principles of conflict of laws, shall govern the construction and
enforceability of this Agreement.
[Signatures on next page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as an instrument under seal by the duly authorized officers of the
parties as of the date first above written.
ATTEST: SIMIONE CENTRAL HOLDINGS, INC.
By:_________________________________
Barrett C. O'Donnell,
Chairman
ATTEST: MESTEK, INC.
By:__________________________________
Stephen M. Shea,
Senior Vice President - Finance
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
1. Debtor's locations at which the Collateral is located.
<S> <C> <C> <C>
Address City State Zip
6600 Powers Ferry Road Atlanta GA 30339
4130 Whitney Avenue Hampden CT 06518
1700 West Park Dr., S. 300 Westborough MA 01581
1180 SW 36th Ave. Pompono Beach FL 33069
16152 Beach Blvd. Huntington Beach CA 92647
102 Decker Dr., S. 240 Irvine TX 76062
4040 Woodcock Dr., S. 249 Jacksonville FL 32207
758 State Highway 18 East Brunswick NJ 08816
1 Sugarland Creek Center Blvd., S. 850 Sugarland TX 77478
11555 Medlock Bridge Rd. Duluth GA 30097
4140 Fifth Avenue North St. Petersburg FL 33713
</TABLE>
EXHIBIT 10.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B PREFERRED STOCK
OF SIMIONE CENTRAL HOLDINGS, INC.
It is hereby certified that:
1. The name of the corporation is Simione Central Holdings, Inc. (the
"Corporation").
2. Section 1 of Article III of the Certificate of Incorporation of the
Corporation authorizes the issuance of up to 10,000,000 shares of preferred
stock, par value, 1/10th of 1 cent, and Section 3 of Article III of the
Certificate of Incorporation of the Corporation expressly vests in the Board of
Directors of the Corporation the authority provided therein to issue shares of
preferred stock at any time and from time to time, in one or more series, and to
fix or alter the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of such
shares of preferred stock, including without limitation of the generality of the
foregoing, dividend rights, dividend rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences of any wholly unissued series of
preferred shares and the number of shares constituting any of such series and
the designation thereof, or any of them.
3. Pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation and Section 151(g) of the General Corporation Law
of the State of Delaware, the Board of Directors adopted on the ______ day of
______, 1999 the resolutions set forth below: (a) creating a series of shares of
preferred stock designated "Series B Preferred Stock"; and (b) setting forth the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions, of the shares of the
Series B Preferred Stock. No shares of Series B Preferred Stock have been
previously issued.
Resolutions of the Board of Directors of the Corporation adopted on the day
of , 1999:
"RESOLVED, that pursuant to authority granted to and vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation of the Corporation, the Board of Directors hereby
creates a series of preferred stock, par value 1/10th of 1 cent per share, of
the Corporation and states its designation and number of shares and fixes the
relative rights, preferences and limitations thereof as follows:
A. Designation. The designation shall be "Series B Preferred Stock" (the
"Series B Preferred Stock"). Each share of the Series B Preferred Stock shall be
identical in all respects with the other shares of Series B Preferred Stock.
B. Number. The number of shares of Series B Preferred Stock shall be
5,600,000, which number from time to time may be increased or decreased (but not
below the number then outstanding) by the Board of Directors of the Corporation.
Any shares of Series B Preferred Stock purchased by the Corporation shall be
canceled and shall revert to authorized but unissued shares of preferred stock
undesignated as to series.
C. Voting. Each share of the Series B Preferred Stock shall have two (2)
votes in all matters to be voted upon by the shareholders of the Corporation.
The Series B Preferred Stock shall vote on any matter upon which shareholders of
the Corporation are entitled to vote, together as a single class with such
shareholders.
D. Director. For so long as the Series B Preferred Stock shall remain
outstanding, in the event that the Board of Directors of the Corporation is
unable to reach a decision on a vote on any matter properly before the Board of
Directors in two consecutive meetings of the Board of Directors, the number of
directors of the Board of Directors shall be increased by One (1) member and the
holders of the Series B Preferred Stock shall have the right to appoint such
member of the Board of Directors. Any director who has been appointed by the
holders of the Series B Preferred Stock may be removed during such director's
term of office, whether with or without cause, only by the affirmative vote of
the holders of a majority of the Series B Preferred Stock.
E. Dividends. The holder of each share of Series B Preferred Stock shall be
entitled to receive, prior and in preference to any distribution to the holders
of common stock, and subject to the dividend rights of the holders of the Series
A Preferred Stock pursuant to the provisions of the Certificate of Designations,
Preferences and Rights of Series A Preferred Stock, cumulative dividends at the
rate per annum of nine percent (9%) of the One Dollar and Seven and 143/1000
cents ($1.07143) original issuance price per share (the "Original Issuance
Price") of the Series B Preferred Stock declared by the Board of Directors out
of funds legally available therefor. All accrued but unpaid dividends on
outstanding shares of the Series B Preferred Stock must be paid in full before
any cash dividend may be declared on the common stock.
F. Mergers. In the event of a Change of Control Transaction (as defined
below), each share of Series B Preferred Stock shall be entitled to receive the
same consideration as an outstanding share of common stock, but in any event not
less than the Original Issuance Price, plus accumulated but unpaid dividends.
For the purposes of this Section F, a "Change of Control Transaction" with
respect to the Corporation means (i) the acquisition of the Corporation by a
non-affiliated third party pursuant to a merger, consolidation or business
combination; (ii) the sale of all or a substantial part of the assets of the
Corporation to a non-affiliated third party; (iii) the occurrence of a
transaction pursuant to which any entity or person shall, alone or in
combination with any affiliate (as defined in the Securities and Exchange Act of
1934 as amended and all regulations promulgated pursuant thereto, (the "Exchange
Act")) become the beneficial owner (as defined in Rules 13(d) and 13(d)-5 under
the Exchange Act) of fifty percent (50%) or more of any outstanding class of
capital stock of the Corporation having ordinary voting power in the election of
its directors; or (iv) the Corporation shall cease to own less than eighty
percent (80%) of the voting stock of any of its subsidiaries (unless such
failure is due to the merger of any subsidiary with and into the corporation).
The transactions among the Corporation, Mestek, Inc. and MCS, Inc. contemplated
in that certain Agreement and Plan of Merger dated as of May 26, 1999, as
amended, by and between such parties shall not be deemed to constitute a Change
of Control Transaction under this Section F.
G. Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the assets of the
Corporation available for distribution to its shareholders shall be distributed
in the following order of priority:
1. The remaining assets, if any, of the Corporation available for
distribution to the shareholders shall be distributed in accordance with the
provisions of the Certificate of Designations, Preferences and Rights of Series
A Preferred Stock.
2. After distribution of the amount set forth above, the holder of each
share of Series B Preferred Stock then outstanding shall be entitled to receive,
prior and in preference to any distribution to the holders of common stock, an
amount equal to One Dollar and Seven and 143/1000 cents ($1.07143) per share
(the "Liquidation Price") plus an amount equal to the Original Issuance Price
multiplied by nine (9%) percent per annum from the date of original issuance of
the Series B Preferred Stock to the date of distribution, provided such amount
shall be reduced by an amount equal to all dividends declared and paid with
respect to such shares of Series B Preferred Stock since the original date of
issuance. If the assets and funds of the Corporation available for distribution
to the holders of Series B Preferred Stock shall be insufficient to permit the
payment of the full preferential amount set forth in this Section, then all the
assets of the Corporation available for distribution shall be distributed to the
holders of Series B Preferred Stock pro rata so that each share receives the
same percentage of its respective liquidation interest.
3. After distribution of the amount set forth above, the remaining assets,
if any of the Corporation available for distribution to the shareholders shall
be distributed to holders of shares of common stock to the exclusion of the
holders of Series A Preferred Stock and Series B Preferred Stock until such
holders of common stock have been paid an amount equal to the aggregate
liquidation price of the Series A Preferred Stock and the Series B Preferred
Stock, and then, if any assets remain, the balance shall be distributed ratably
to the holders of common stock and to the holders of Series A Preferred Stock
and the holders of Series B Preferred Stock.
H. The Corporation will not amend this Certificate in a manner which
materially and adversely impacts the rights of the Series B Preferred Stock
hereunder or recombine or reclassify the Series B Preferred Stock without the
prior written approval of holders of a majority of the shares of Series B
Preferred Stock then outstanding.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the Series B Preferred Stock and fixing the
powers, designations, preferences and relative, optional, participating, and
other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics thereof shall, upon the effective date of
said series, be deemed to be included in and be a part of the Certificate of
Incorporation of the corporation pursuant to the provisions of Sections 104 and
151 of the General Corporation Law of the State of Delaware."
The effective time and date of the Series B Preferred Stock herein
certified shall be the filing date of this Certificate of Designations with the
Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its Chief Executive Officer, and such authorized officer hereby
declares, under penalty of perjury under the laws of the State of Delaware, that
he signed this Certificate in the official capacity set forth beneath his
signature and that the statements set forth in this Certificate are true and
correct to his own knowledge this ____ day of _________, 1999.
-------------------------------------
Barrett C. O'Donnell, Chief Executive Officer
EXHIBIT 10.4
WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS.
Warrant to purchase 2,000,000 shares of
the $0.001 par value common
stock of Simione Central Holdings, Inc.
(subject to adjustment)
WARRANT TO PURCHASE COMMON STOCK
OF
SIMIONE CENTRAL HOLDINGS, INC.
This certifies that, for value received, Mestek, Inc., or its successors or
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from Simione Central Holdings, Inc. (the "Company") up to 2,000,000
shares of the $0.001 par value common stock of the Company, as the Company is
constituted on the day of , 1999 (the "Warrant Issue Date"), upon surrender of
this certificate at 6600 Powers Ferry Road, Atlanta Georgia, or such other place
as the Company may designate in writing to the Holder, and the simultaneous
payment therefor in lawful money of the United States of America of the Exercise
Price (as hereinafter defined). The number, character and Exercise Price of such
shares are subject to adjustment as provided herein. The term "Warrant" as used
herein shall include this certificate, the securities represented by this
certificate and any warrants delivered in substitution or exchange for this
certificate as provided herein.
This Warrant is issued in connection with that certain Agreement and Plan
of Merger by and among MCS, Inc., Mestek, Inc. and the Company dated as of May
26, 1999, as amended by that certain First Amendment to the Agreement and Plan
of Merger and Investment Agreement by and among MCS, Inc., Mestek, Inc., the
Company, John E. Reed, Stewart B. Reed and E. Herbert Burk (the "Amendment")
dated as of September 9, 1999 (collectively, the "Merger Agreement").
1. TERM OF WARRANT. SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN, THIS
WARRANT SHALL BE EXERCISABLE, IN WHOLE OR IN PART, DURING THE PERIOD OF
TIME (THE "EXERCISE PERIOD") COMMENCING ON THE WARRANT ISSUE DATE AND
ENDING AT 5:00 P.M. ON THE THIRD ANNIVERSARY OF THE WARRANT ISSUE DATE, AND
SHALL BE VOID THEREAFTER.
2. EXERCISE PRICE. THE PRICE AT WHICH THE HOLDER MAY EXERCISE THIS WARRANT
(THE "EXERCISE PRICE") SHALL BE THE GREATER OF (I) $2.175 (WHICH EQUALS
120% OF THE CLOSING PRICE OF THE COMPANY'S COMMON STOCK TRADED ON NASDAQ ON
SEPTEMBER 8, 1999), AND (II) 100% OF THE CLOSING PRICE OF THE COMPANY'S
COMMON STOCK LISTED ON NASDAQ ON THE CLOSING DATE (AS SUCH TERM IS DEFINED
IN THE MERGER AGREEMENT), PROVIDED, THAT IN NO EVENT SHALL THE EXERCISE
PRICE EXCEED THREE DOLLARS ($3.00) PER SHARE.
3. VESTING OF WARRANT. EFFECTIVE AS OF THE WARRANT ISSUE DATE, THE WARRANT
SHALL BE FULLY VESTED AND EXERCISABLE, AND THE HOLDER SHALL HAVE THE FULLY
VESTED RIGHT TO PURCHASE 2,000,000 SHARES OF THE COMPANY'S COMMON STOCK
PURSUANT TO THE TERMS AND CONDITIONS OF THIS WARRANT.
4. EXERCISE OF THE WARRANT. THE PURCHASE RIGHTS REPRESENTED BY THIS WARRANT
ARE EXERCISABLE BY THE HOLDER, IN WHOLE OR IN PART, AT ANY TIME, AND FROM
TIME TO TIME DURING THE EXERCISE PERIOD, BY THE HOLDER'S SURRENDER OF THIS
WARRANT AT 6600 POWERS FERRY ROAD, ATLANTA GEORGIA, OR SUCH OTHER PLACE AS
THE COMPANY MAY DESIGNATE IN WRITING TO HOLDER, AND THE SIMULTANEOUS
PAYMENT THEREFOR IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA OF THE
EXERCISE PRICE IN IMMEDIATELY AVAILABLE FUNDS. THIS WARRANT SHALL BE DEEMED
EXERCISED ON THE DATE IMMEDIATELY PRIOR THERETO, AND THE HOLDER SHALL BE
ENTITLED TO RECEIVE THE SHARES OF COMMON STOCK OF THE COMPANY AND BE
TREATED FOR ALL PURPOSES AS THE HOLDER OF RECORD OF SUCH SHARES AS OF THE
CLOSE OF BUSINESS ON SUCH DATE. AS PROMPTLY AS PRACTICABLE, BUT IN NO EVENT
LATER THAN 10 BUSINESS DAYS THEREAFTER, THE COMPANY SHALL ISSUE AND
DELIVER, AT ITS SOLE COST AND EXPENSE, TO THE PERSON OR PERSONS ENTITLED TO
RECEIVE THE SAME A CERTIFICATE OR CERTIFICATES FOR THE NUMBER OF SHARES
ISSUABLE UPON SUCH EXERCISE. IN THE EVENT THAT THIS WARRANT IS EXERCISED IN
PART, THE COMPANY, AT ITS SOLE COST AND EXPENSE, SHALL EXECUTE AND DELIVER
A NEW WARRANT OF LIKE TENOR AS THIS WARRANT, EXERCISABLE FOR THE REMAINING
NUMBER OF SHARES FOR WHICH THIS WARRANT MAY THEN BE EXERCISED, AND SHALL
CANCEL THIS WARRANT ONLY UPON ISSUANCE OF SUCH NEW WARRANT. NO FRACTIONAL
SHARES OR SCRIP REPRESENTING FRACTIONAL SHARES SHALL BE ISSUED UPON THE
EXERCISE OF THIS WARRANT, AND IN LIEU THEREOF, THE COMPANY SHALL MAKE A
CASH PAYMENT TO THE HOLDER EQUAL TO THE EXERCISE PRICE MULTIPLIED BY SUCH
FRACTION.
5. RIGHTS AS A STOCKHOLDER. THE HOLDER SHALL NOT BE ENTITLED TO VOTE, RECEIVE
DIVIDENDS OR BE DEEMED TO BE THE OWNER OF RECORD OF THE SHARES OF COMMON
STOCK OF THE COMPANY TO WHICH THIS WARRANT RELATES UNLESS AND UNTIL THE
HOLDER EXERCISES THIS WARRANT, AND THEN THE HOLDER SHALL ENJOY SUCH RIGHTS
ONLY TO THE EXTENT OF SUCH EXERCISE.
6. TRANSFER OF WARRANT.
1. WARRANT REGISTER. THE COMPANY WILL MAINTAIN A REGISTER (THE "WARRANT
REGISTER") MAINTAINING THE NAMES AND ADDRESSES OF THE HOLDER OR
HOLDERS. ANY HOLDER OF THIS WARRANT OR ANY PORTION THEREOF MAY CHANGE
HIS/HER ADDRESS AS SHOWN ON THE WARRANT REGISTER BY WRITTEN NOTICE TO
THE COMPANY REQUESTING SUCH CHANGE. ANY NOTICE OR WRITTEN
COMMUNICATION REQUIRED OR PERMITTED TO BE GIVEN TO THE HOLDER MAY BE
DELIVERED OR GIVEN BY MAIL TO SUCH HOLDER AS SHOWN ON THE WARRANT
REGISTER AND AT THE ADDRESS SHOWN ON THE WARRANT REGISTER. UNTIL THIS
WARRANT IS TRANSFERRED ON THE WARRANT REGISTER OF THE COMPANY, THE
COMPANY MAY TREAT THE HOLDER AS SHOWN ON THE WARRANT REGISTER AS THE
ABSOLUTE OWNER OF THIS WARRANT FOR ALL PURPOSES, NOTWITHSTANDING ANY
NOTICE TO THE CONTRARY.
2. WARRANT AGENT. THE COMPANY MAY, BY WRITTEN NOTICE TO THE HOLDER,
APPOINT AN AGENT FOR THE PURPOSE OF MAINTAINING THE WARRANT REGISTER
REFERRED TO IN SECTION 6(A) ABOVE, ISSUING THE COMMON STOCK OR OTHER
SECURITIES THEN ISSUABLE UPON THE EXERCISE OF THIS WARRANT, EXCHANGING
THIS WARRANT, REPLACING THIS WARRANT, OR ANY OR ALL OF THE FOREGOING.
THEREAFTER, ANY SUCH REGISTRATION, ISSUANCE, EXCHANGE, OR REPLACEMENT,
AS THE CASE MAY BE, SHALL BE MADE AT THE OFFICE OF SUCH AGENT.
3. TRANSFERABILITY OF WARRANT. THIS WARRANT MAY NOT BE TRANSFERRED OR
ASSIGNED (I) EXCEPT IN ITS ENTIRETY (OTHER THAN TRANSFERS TO
SUBSIDIARIES OR AFFILIATES OF MESTEK, INC.) AND (II) WITHOUT
COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS BY
THE TRANSFEROR AND THE TRANSFEREE (INCLUDING DELIVERY OF INVESTMENT
REPRESENTATION LETTERS REASONABLY SATISFACTORY TO THE COMPANY, IF SUCH
ARE REQUESTED BY THE COMPANY), AND THEN ONLY AGAINST RECEIPT OF AN
AGREEMENT OF THE TRANSFEREE TO COMPLY WITH THE PROVISIONS OF THIS
SECTION 6(C) WITH RESPECT TO ANY RESALE OR OTHER DISPOSITION OF THIS
WARRANT.
4. EXCHANGE OF WARRANT UPON A TRANSFER. ON SURRENDER OF THIS WARRANT FOR
EXCHANGE, PROPERLY ENDORSED AND SUBJECT TO THE PROVISIONS OF THIS
WARRANT WITH RESPECT TO COMPLIANCE WITH THE ACT AND WITH THE
LIMITATIONS ON ASSIGNMENTS AND TRANSFERS AND CONTAINED IN THIS SECTION
6, THE COMPANY AT ITS EXPENSE SHALL ISSUE TO OR ON THE ORDER OF THE
HOLDER A NEW WARRANT OR WARRANTS OF LIKE TENOR, IN THE NAME OF THE
HOLDER OR AS THE HOLDER (ON PAYMENT BY THE HOLDER OF ANY APPLICABLE
TRANSFER TAXES) MAY DIRECT, FOR THE NUMBER OF SHARES ISSUABLE UPON
EXERCISE HEREOF.
5. COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the shares of common stock to be issued
upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of the common stock to be
issued upon exercise hereof except under circumstances that will
not result in a violation of the Act or any state securities
laws. Upon exercise of this Warrant, the Holder shall, if
requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of common stock so
purchased are being acquired solely for the Holder's own account
and not as a nominee for any other party, for investment, and not
with a view toward distribution or resale.
(ii) This Warrant and all shares of common stock issued upon exercise
hereof or conversion thereof shall be stamped or imprinted with a
legend in substantially the following form (in addition to any
legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS.
7. RESERVATION OF STOCK. THE COMPANY COVENANTS THAT DURING THE EXERCISE
PERIOD, THE COMPANY WILL RESERVE FROM ITS AUTHORIZED AND UNISSUED SHARES OF
TREASURY COMMON STOCK A SUFFICIENT NUMBER OF SHARES TO PROVIDE FOR THE
ISSUANCE OF COMMON STOCK UPON THE EXERCISE OF THE WARRANT AND, FROM TIME TO
TIME, WILL TAKE ALL STEPS NECESSARY TO AMEND ITS CERTIFICATE OF
INCORPORATION (THE "CERTIFICATE") TO PROVIDE SUFFICIENT AUTHORIZED RESERVED
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT. THE COMPANY
FURTHER COVENANTS THAT ALL SHARES THAT MAY BE ISSUED UPON EXERCISE OF THE
RIGHTS REPRESENTED BY THIS WARRANT AND PAYMENT OF THE EXERCISE PRICE, ALL
AS SET FORTH HEREIN, WILL BE FREE FROM ALL TAXES, LIENS AND CHARGES IN
RESPECT OF THE ISSUE HEREOF (OTHER THAN TAXES IN RESPECT OF ANY TRANSFER
OCCURRING CONTEMPORANEOUSLY OR OTHERWISE SPECIFIED HEREIN). THE COMPANY
AGREES THAT ITS ISSUANCE OF THIS WARRANT SHALL CONSTITUTE FULL AUTHORITY TO
ITS OFFICERS WHO ARE CHARGED WITH THE DUTY OF EXECUTING STOCK CERTIFICATES
TO EXECUTE AND ISSUE THE NECESSARY CERTIFICATES FOR SHARES OF COMMON STOCK
UPON THE EXERCISE OF THIS WARRANT.
8. MERGER, SALE OF ASSETS AND OTHER FUNDAMENTAL CORPORATE CHANGES. IF AT ANY
TIME DURING THE EXERCISE PERIOD THERE SHALL BE A SALE OF ALL OR
SUBSTANTIALLY ALL OF THE COMPANY ASSETS, OR A MERGER, CONSOLIDATION OR
REORGANIZATION OF THE COMPANY IN WHICH THE COMPANY IS NOT THE SURVIVING
ENTITY, OR OTHER TRANSACTION IN WHICH THE SHARES OF THE COMPANY ARE
CONVERTED INTO SHARES OF ANOTHER ENTITY, THE COMPANY SHALL PROVIDE THE
HOLDER WITH WRITTEN NOTICE THEREOF NOT LESS THAN 30 CALENDAR DAYS PRIOR TO
THE CONSUMMATION OF SUCH EVENT AND AN OPPORTUNITY TO EXERCISE THIS WARRANT
PRIOR TO THE CONSUMMATION OF SUCH EVENT.
9. ADJUSTMENTS. THE NUMBER OF SECURITIES PURCHASABLE HEREUNDER IS SUBJECT TO
ADJUSTMENT FROM TIME TO TIME DURING THE EXERCISE PERIOD IN ORDER TO
PRESERVE THE VALUE OF THIS WARRANT AS FOLLOWS:
1. If the Company at any time during the Exercise Period splits,
subdivides or combines the securities as to which purchase rights
under this Warrant exist into a different number of securities of the
same class, the Holder shall be entitled to acquire a proportionate
number of securities of the same class.
2. If the Company at any time during the Exercise Period changes any of
the securities as to which purchase rights under this Warrant exist
into another class of securities of the Company, this Warrant shall
thereafter represent the right, but not the obligation, with respect
to the securities that were subject to the purchase rights under this
Warrant immediately prior to such change, to acquire such number of
securities of such other class as would have been issuable as a result
of such change had the Holder exercised this Warrant immediately prior
to such change.
3. If at any time during the Exercise Period, the holders of the common
stock of the Company become entitled to receive, without consideration
therefor, other or additional stock or other securities or property
(other than cash) of the Company, then this Warrant shall represent
the right, but not the obligation, to acquire, in addition to the
number of shares of the security receivable upon exercise of this
Warrant that the Holder is otherwise entitled to acquire, and without
payment of additional consideration for the right to acquire such
additional property, the amount of such other or additional stock or
other securities or property (other than cash) of the Company that
such holder would have been entitled to receive had it been the holder
of record of the security receivable to which purchase rights under
this Warrant relate at the time the holders of the Company's common
stock became entitled to receive such property.
10. Miscellaneous.
(a) Successors. All the covenants and provisions hereof by or for the
benefit of the Company or the Holder shall bind and inure to the benefit of
their respective successors and assigns.
(b) Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
construed in accordance with the laws of said State.
(c) Attorneys Fees in the Event of a Dispute. In the event of any
action at law, suit in equity or arbitration proceeding in relation to this
Warrant or any common stock issued or to be issued hereunder, the
prevailing party or parties shall be paid by the other party or parties a
reasonable sum for attorneys, fees and expenses of such prevailing party or
parties.
(d) Saturdays, Sundays, Holidays. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in the
State of Delaware, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday.
(e) Amendment. This Warrant and any term hereof may not be changed,
waived, discharged or amended except by an instrument in writing signed by
the party against whom enforcement of such change, waiver, discharge or
amendment is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer.
Dated _______________.
Simione Central Holdings, Inc.
By: ______________________
HOLDER:
Mestek, Inc.
By: ___________________
7025810v1
EXHIBIT 10.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES ACT OF ANY JURISDICTION BY REASON OF SPECIFIC
EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING IN
WHICH THE SECURITIES WERE OFFERED. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED
UNER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAW, IF SUCH REGISTRATION IS REQUIRED.
OPTION AGREEMENT
THIS OPTION AGREEMENT, effective as of the ____ day of ____________, 1999,
by and between Simione Central Holdings, Inc., a Delaware corporation (the
"Company"), and Mestek, Inc., a Pennsylvania corporation (the "Optionee").
WITNESSETH:
WHEREAS, the Company has entered into an Agreement and Plan of Merger by
and among the Company, Optionee and a wholly-owned subsidiary of Optionee (the
"Merger Agreement").
WHEREAS, in connection with the Merger Agreement the Company has sold to
Optionee, and Optionee has purchased from the Company, certain securities of the
Company as more particularly described in the Merger Agreement.
WHEREAS, pursuant to and in accordance with the terms and conditions of
Section 3.3 of the Merger Agreement, the Company and Optionee desire to enter
into this Agreement with respect to an option on certain shares of common stock
of the Company (the "Common Stock") in order to set forth the terms and
conditions upon which such option shall be granted by the Company and exercised
by Optionee.
NOW, THEREFORE, in consideration of the mutual benefits to each party, it
is agreed as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Optionee shall have the right to purchase a number of shares of Common Stock
equal to 0.8518518 (the "Ratio") multiplied by the number of "Scheduled
Option/Warrant Shares" (as defined below); such shares hereinafter are referred
to as the "Option Shares," and this option hereinafter is referred to as the
"Option". "Scheduled Option/Warrant Shares" means those shares of Common Stock
which may be, subject to various agreements evidencing "Scheduled
Options/Warrants" (as defined below), purchased by "Scheduled Option/Warrant
Holders" (as defined below), as set forth in Schedule A. The aggregate number of
Scheduled Option/Warrant Shares shall be equal to the aggregate number of shares
subject to Scheduled Option/Warrants. "Scheduled Option/Warrants" shall mean
those options and warrants set forth on Schedule A which have been, on or before
the date hereof, granted to Scheduled Option/Warrant Holders. "Scheduled
Option/Warrant Holder(s)" shall mean those individuals who have been granted
Scheduled Option/Warrants on or before the date hereof. The Company represents
and warrants that Schedule A sets forth all outstanding options and warrants of
the Company as of the date hereof. Notwithstanding anything in this Agreement to
the contrary, Scheduled Option/Warrant Shares shall also be deemed to include
any shares of Common Stock issuable as of the date hereof in connection with any
outstanding rights to receive shares of Common Stock from or relating to the
Company's 1997 reverse stock split.
2. EXERCISE OF OPTION.
(A) VESTING OF OPTION CONTINGENT UPON EXERCISE OF SCHEDULED
OPTIONS/WARRANTS AND PURCHASE OF SCHEDULED OPTION/WARRANT SHARES.
Immediately upon the exercise after the date hereof of any Scheduled
Option/Warrants and purchase of Scheduled Option/Warrant Shares by a
Scheduled Option/Warrant Holder (a "Vesting Event"), the Option shall
become exercisable with respect to the number of Option Shares equal to the
Ratio multiplied by the number of Scheduled Option/Warrant Shares purchased
by such Scheduled Option/Warrant Holder (the "Vesting Event Number") at the
same price per share as such Scheduled Option/Warrant Shares were purchased
(the "Vesting Event Price"). Prior to the occurrence of a Vesting Event, no
portion of the Option shall be exercisable by Optionee, and Option Shares
shall become subject to purchase under the terms and provisions of the
Option only to the extent that Vesting Events occur as set forth in the
preceding sentence.
(B) NOTIFICATION OF EXERCISE OF SCHEDULED OPTIONS/WARRANTS. Each time
any Vesting Event occurs, the Company shall promptly, and in no event later
than ten (10) days following such Vesting Event, notify Optionee of the
Vesting Event Number and the Vesting Event Price with respect to such
Vesting Event, and the date on which such Vesting Event occurred.
(C) METHOD OF EXERCISE AND PAYMENT. When Option Shares become subject
to purchase upon the occurrence of a Vesting Event, the Option Shares which
Optionee desires to purchase may be exercised by Optionee's delivery to the
Secretary of the Company of one or more Notices of Exercise, in the form of
Schedule B, each accompanied by payment in full of the "Option Price" (as
defined below). Such delivery must be made within one hundred eighty (180)
days of the date on which Optionee received notice of the Vesting Event
from the Company. The "Option Price" shall be an amount equal to the number
of Option Shares purchased multiplied by the Vesting Event Price, and shall
be paid by cashier's check payable to the Company or by wire transfer of
immediately available funds to an account designated from time to time by
the Company for such purpose.
3. TERMINATION OF OPTION AND OPTION RIGHTS. The Option shall not be
exercisable either in whole or in part 180 days after the date on which Optionee
receives notice from the Company that all Scheduled Options/Warrants have either
expired and are no longer exercisable, or have been fully exercised.
Furthermore, portions of the Option shall terminate (and Option Shares shall no
longer be subject to purchase by Optionee) as follows:
(A) PARTIAL TERMINATION UPON FAILURE TO EXERCISE. Upon the occurrence
of a Vesting Event, any Option Shares which become subject to purchase by
Optionee in accordance with the provisions of Section 2 above and which
Optionee fails to purchase within 180 days of the date of receipt of notice
by Optionee of such Vesting Event, shall cease to be subject to purchase
under the Option, and such portion of the Option shall no longer be
exercisable.
(B) PARTIAL TERMINATION UPON TERMINATION OF UNDERLYING SCHEDULED
OPTION/WARRANTS. To the extent that any Scheduled Option/Warrant Shares are
no longer subject to purchase by a Scheduled Option/Warrant Holder due to
the expiration or termination of all or a portion of a Scheduled
Option/Warrant, or for any other reason, any Option Shares which could have
become subject to purchase by Optionee in accordance with the provisions of
Section 2 above with respect to a Vesting Event involving such Scheduled
Option/Warrant Shares shall cease to be subject to purchase under the
Option, and such portion of the Option shall no longer be exercisable.
4. NOTIFICATION OF CHANGE IN CONTROL TRANSACTION. In the event the Company
proposes or becomes aware of a "Change in Control Transaction," the Company
shall promptly, and in no event later than ten (10) days following the proposal
of such Change in Control Transaction, notify the Optionee of such Change in
Control Transaction. "Change in Control Transaction" shall mean any transaction
wherein the Company (i) consolidates with or merges into any other corporation
and is not the continuing or surviving corporation of such consolidation or
merger, or (ii) permits any other corporation to consolidate with or merge into
the Company and the Company is the continuing or surviving corporation but, in
connection with such consolidation or merger, the Common Stock is changed into
or exchanged for stock or other securities of any other corporation or cash or
any other assets, or (iii) transfers all or substantially all of its properties
and assets to any other corporation, or (iv) effects a capital reorganization or
reclassification of the capital stock of the Company in such a way that holders
of Common Stock shall be entitled to receive stock, securities, cash or assets
with respect to or in exchange for Common Stock.
5. REGISTRATION RIGHTS. The Option Shares shall be subject to, and shall
deemed to be "Registrable Shares" within the meaning of, Section 4.1 of the
Merger Agreement relating to registration rights.
6. RESERVATION OF SHARES; VALIDITY OF ISSUANCE. The Company covenants and
agrees that it shall reserve for issuance upon the exercise of this Option and
keep available out of its authorized but unissued Common Stock, such number of
shares of Common Stock for which this Option shall from time to time be
exercisable. The Company represents and warrants that all shares issued upon the
exercise of this Option will, upon issuance, be fully paid and nonassessable and
be free from all liens and charges in respect of their issuance, with all taxes
payable by the Company with respect to such issuance fully paid by the Company.
7. ADJUSTMENTS FOR STOCK SPLITS AND COMBINATIONS. If presently outstanding
shares of Common Stock shall be subdivided into a greater number of shares, or a
dividend in Common Stock or other securities of the Company convertible or
exchangeable into shares of Common Stock (in which latter event the number of
shares of Common Stock issuable upon the conversion or exchange of such
securities shall be deemed to have been distributed), shall be paid in respect
to the Common Stock (but in all cases excluding any such events if material
value is paid to the Company in connection therewith), (a) the number of shares
of Common Stock which may be acquired by the Optionee upon the exercise of this
Option shall, simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend, be proportionately
increased, and (b) the Option Price shall be adjusted, to the same extent and in
the same manner that the number of shares subject to, and the exercise price of,
the Scheduled Options/Warrants are increased or adjusted, as the case may be.
Conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares, the number of shares of Common Stock which may be
acquired by the Optionee upon the exercise of this Option shall, simultaneously
with the effectiveness of such combination, be proportionately reduced, and the
Option Price shall be adjusted in accordance herewith.
8. AGREEMENT OF OPTIONEE. Optionee hereby agrees to hold all of the Option
Shares acquired by Optionee pursuant to Optionee's exercise of this Option for
investment purposes and not with a view to resale or distribution thereof to the
public. Optionee hereby agrees to execute such documents as the Board of
Directors of the Company may require with respect to state and federal
securities laws and any restrictions on the resale of the Option Shares which
may be applicable.
9. NO IMPAIRMENT. The Company will not, by amendment of its Restated
Articles or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by the Company under this Option, but will at all times in
good faith assist in the carrying out of all the provisions of this Option and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of Optionee. The Company shall not amend, adjust or
substitute any of the Scheduled Options/Warrants in a manner that would impair
the rights of Optionee under this Option Agreement without the prior written
consent of Optionee.
10. NO VOTING RIGHTS. This Option shall not entitle Optionee to any voting
rights or other rights as a stockholder of the Company, and no dividend or
interest shall be payable or accrue in respect of this Option or the interest
represented by or the shares purchasable under this Option until and unless, and
except to the extent that, this Option shall be exercised.
11. STOCK CERTIFICATES. The issuance of stock certificates upon the
exercise of this Option shall be made without charge to Optionee for any tax
(other than (i) income taxes and (ii) transfer taxes resulting from issuance of
stock certificates to a person other than Optionee) in respect of the issue of
such stock. Optionee shall for all purposes be deemed to have become the holder
of record of the shares issued upon exercise of this Option on the date both the
Option Price and the Notice of Exercise are delivered to the Company,
irrespective of the date of delivery of the certificate for such shares, except
that, if the date the Notice of Exercise and the Option Price are delivered to
the Company is a date the Company is closed for business, Optionee shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the Company is open for business. Such
certificates evidencing the shares of Common Stock issued pursuant to the
exercise of this Option shall bear restrictive legends similar to those at the
head of this Agreement and any other legend required pursuant to any federal,
state, local or foreign law governing the Common Stock.
12. MISCELLANEOUS.
(a) Any notice, request, instruction or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing
and delivered personally or sent by registered or certified mail (including
by overnight courier or express mail service), postage or fees prepaid,
if to the Company to:
Simione Central Holdings, Inc.
6600 Powers Ferry Road, Suite 300
Atlanta, Georgia 30339
Attention: General Counsel
with a copy to:
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention: Sherman A. Cohen, Esq.
if to Optionee to:
Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
Attention: Stephen M. Shea, CFO
with a copy to:
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006-4078
Attention: Marc R. Paul, Esq.
or at such other address for a party as shall be specified by like notice.
Any notice which is delivered personally in the manner provided herein
shall be deemed to have been duly given to the party to whom it is directed
upon actual receipt by such party or the office of such party. Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the
fourth business day after the day it is so placed in the mail or, if
earlier, the time of actual receipt.
(b) This Agreement is being made in, and shall be construed in
accordance with and governed by the laws of the State of Delaware, without
giving effect to, the principles of conflicts of law thereof.
(c) This Agreement together with the other "Transaction Documents" (as
defined in the Merger Agreement), constitute the sole understanding of the
parties with respect to the subject matter hereof.
(d) The headings of the Sections and paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
(e) This Agreement may be executed in multiple counterparts, each of
which shall for all purposes be deemed to be an original and all of which
shall constitute the same instrument.
(f) This Agreement shall not be assigned by either party without the
prior written consent of the other party.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date indicated on the first page
hereof.
COMPANY:
SIMIONE CENTRAL HOLDINGS, INC.
By: _________________________________
Name: _______________________________
Chairman, CEO and President
OPTIONEE:
MESTEK, INC.
By: _________________________________
Name: _______________________________
Chairman, CEO and President
EXHIBIT 10.6
LOAN AND SECURITY AGREEMENT
BETWEEN
SIMIONE CENTRAL HOLDINGS, INC.
SC HOLDING, INC.
SIMIONE CENTRAL NATIONAL, LLC
SIMIONE CENTRAL CONSULTING, INC.
SIMIONE ACQUISITION CORPORATION
AND
SILICON VALLEY BANK
DATED SEPTEMBER 3, 1999
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION............................................1
1.1. Definitions.......................................................1
1.2. Accounting and Other Terms........................................8
2. LOAN AND TERMS OF PAYMENT...............................................8
2.1. Advances..........................................................8
2.1.1. Revolving Advances.............................................8
2.2. Overadvances......................................................9
2.3. Interest Rates, Payments, and Calculations........................9
2.4. Crediting Payments................................................9
2.5. Fees.............................................................10
2.6. Additional Costs.................................................10
2.7. Term.............................................................11
3. CONDITIONS OF LOANS....................................................11
3.1. Conditions Precedent to Initial Advance..........................11
3.2. Conditions Precedent to all Advances.............................11
4. CREATION OF SECURITY INTEREST..........................................12
4.1. Grant of Security Interest.......................................12
4.2. Delivery of Additional Documentation Required....................12
4.3. Right to Inspect.................................................12
5. REPRESENTATIONS AND WARRANTIES.........................................12
5.1. Due Organization and Qualification...............................12
5.2. Due Authorization; No Conflict...................................12
5.3. No Prior Encumbrances............................................13
5.4. Bona Fide Eligible Accounts......................................13
5.5. Merchantable Inventory...........................................13
5.6. Intellectual Property............................................13
5.7. Name; Location of Chief Executive Office.........................13
5.8. Litigation.......................................................13
5.9. No Material Adverse Change in Financial Statements...............13
5.10. Solvency.........................................................14
5.11. Regulatory Compliance............................................14
5.12. Environmental Condition..........................................14
5.13. Taxes............................................................14
5.14. Subsidiaries.....................................................14
5.15. Government Consents..............................................14
5.16. Full Disclosure..................................................15
6. AFFIRMATIVE COVENANTS..................................................15
6.1. Good Standing....................................................15
6.2. Government Compliance............................................15
6.3. Financial Statements, Reports, Certificates......................15
6.4. Inventory; Returns...............................................16
6.5. Taxes............................................................16
6.6. Insurance........................................................17
6.7. Principal Depository.............................................17
6.8. Profitability....................................................18
6.9 Further Assurances..............................................18
6.10 Registration of Intellectual Property Rights.....................18
7. NEGATIVE COVENANTS.....................................................19
7.1. Dispositions.....................................................19
7.2. Changes in Business, Ownership, or Management, Business
Locations.....................................................19
7.3. Mergers or Acquisitions..........................................19
7.4. Indebtedness.....................................................19
7.5. Encumbrances.....................................................19
7.6. Distributions....................................................20
7.7. Investments......................................................20
7.8. Transactions with Affiliates.....................................20
7.9. Subordinated Debt................................................20
7.10. Inventory........................................................20
7.11. Compliance.......................................................20
8. EVENTS OF DEFAULT......................................................20
8.1. Payment Default..................................................20
8.2. Covenant Default.................................................20
8.3. Material Adverse Change..........................................21
8.4. Attachment.......................................................21
8.5. Insolvency.......................................................21
8.6. Other Agreements.................................................21
8.7. Subordinated Debt................................................21
8.8. Judgments........................................................22
8.9. Misrepresentations...............................................22
9. BANK'S RIGHTS AND REMEDIES.............................................22
9.1. Rights and Remedies..............................................22
9.2. Power of Attorney................................................23
9.3. Accounts Collection..............................................24
9.4. Bank Expenses....................................................24
9.5. Bank's Liability for Collateral..................................24
9.6. Remedies Cumulative..............................................24
9.7. Demand; Protest..................................................24
10. NOTICES.............................................................24
11. CHOICE OF LAW AND VENUE.............................................25
12. GENERAL PROVISIONS..................................................26
12.1. Successors and Assigns...........................................26
12.2. Indemnification..................................................26
12.3. Time of Essence..................................................26
12.4. Severability of Provisions.......................................26
12.5. Amendments in Writing, Integration...............................26
12.6. Counterparts.....................................................26
12.7. Survival.........................................................27
12.8. Joint and Several................................................27
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of September 3,
1999, by and between SILICON VALLEY BANK ("Bank"); and SIMIONE CENTRAL HOLDINGS,
INC., a Delaware corporation having as its principal address 6600 Powers Ferry
Road, Atlanta, Georgia 30339 ("Borrower") and the wholly owned subsidiaries of
Borrower listed in Schedule A hereto (collectively "Subsidiaries", individually
a "Subsidiary") (Borrower and Subsidiaries are sometimes collectively referred
to as "Borrowers").
RECITALS
Borrowers wish to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrowers. This Agreement sets forth the terms on
which Bank will advance credit to Borrowers, and Borrowers will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1. Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrowers
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrowers, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrowers and Borrowers' Books relating to any of
the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons' managers and members.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, (including fees and expenses of
appeal or review, or those incurred in any Insolvency Proceeding) whether or not
suit is brought.
"Borrowers' Books" means all of Borrowers' books and records
including, without limitation: ledgers; records concerning Borrowers' assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" means an amount equal to seventy-five percent (75%)
of Eligible Accounts as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrowers.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of Georgia are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Georgia or other applicable states' Uniform
Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to Five
Million and No/100 Dollars ($5,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the 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 as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrowers' business that comply with all of Borrowers' representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrowers in accordance
with the provisions hereof. Unless otherwise agreed to by Bank in writing,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety
(90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days of
invoice date;
(c) Accounts with respect to an account debtor, including Affiliates,
whose total obligations to Borrowers exceed twenty-five percent (25%) of all
Accounts, to the extent such obligations exceed the aforementioned percentage,
except as approved in writing by Bank;
(d) Accounts with respect to which the account debtor does not have
its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a federal,
state, or local governmental entity or any department, agency, or
instrumentality thereof;
(f) Accounts with respect to which any Borrower is liable to the
account debtor, for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
(sometimes referred to as "contra" accounts, e.g. accounts payable, customer
deposits, credit accounts, contract billings, advance billings, etc.) against
amounts owed to Borrower;
(g) Accounts generated by demonstration or promotional equipment, or
with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, bill and hold, or other terms by reason of which the
payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor is an Affiliate,
officer, employee, or agent of any Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
good faith, that there may be a basis for dispute (but only to the extent of the
amount subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(j) Accounts the collection of which Bank reasonably determines to be
doubtful by reason of the account debtor's financial condition.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which any Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to any Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which any
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of a Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by any Borrower, and any other present or future agreement
entered into between any Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to time.
"Mask Works" means all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrowers to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrowers' present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Net Income (Loss)" shall mean, for any fiscal period of Borrower, the
net income (or loss) of Borrowers and their Subsidiaries on a consolidated basis
for such period (taken as a single accounting period) determined in conformity
with GAAP, less the increase in capitalized software costs.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by any Borrower (whether joint, several or
contingent) pursuant to this Agreement or any other agreement, whether absolute
or contingent, due or to become due, now existing or hereafter arising,
including any interest that accrues after the commencement of an Insolvency
Proceeding and including any debt, liability, or obligation owing from any
Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Payment Date" means the third (3rd) calendar day of each month
commencing on the first such date after the Closing Date and ending on the
Revolving Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrowers in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings and as to which adequate reserves are maintained on Borrowers' Books
in accordance with GAAP, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any Equipment acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such Equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses granted to others
in the ordinary course of any Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder;
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; and
(f) The Security Agreement between Mestek, Inc. and Simione Central
Holdings, Inc. attached as Schedule 1.1.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with maturities of
fewer than 90 days of Borrowers determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
President and the Chief Financial Officer of Borrower.
"Revolving Maturity Date" means September 3, 2000.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by any Borrower that is
subordinated to the debt owing by Borrowers to Bank on terms acceptable to Bank
(and identified as being such by Borrowers and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, limited liability company, joint venture, or
any other business entity of which more than fifty percent (50%) of the voting
stock or other equity interests is owned or controlled, directly or indirectly,
by such Person or one or more Affiliates of such Person, including, but not
limited to the Subsidiaries.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2. Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1. Advances. Borrowers, jointly and severally, promise to pay to the
order of Bank, in lawful money of the United States of America, the aggregate
unpaid principal amount of all Advances made by Bank to any Borrower hereunder.
Borrowers shall also pay interest on the unpaid principal amount of such
Advances at rates in accordance with the terms hereof.
2.1.1. Revolving Advances.
(a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to any Borrower in an aggregate outstanding amount
not to exceed the Committed Revolving Line or the Borrowing Base, whichever is
less. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1 may be repaid and reborrowed at any time during the
term of this Agreement. (b) Whenever a Borrower desires an Advance, such
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Eastern time, on the Business Day that the Advance is to be made. Each
such notification shall be promptly confirmed by a Transaction Report and Loan
Request Form in substantially the form of Exhibit B hereto. Bank is authorized
to make Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrowers, jointly and
severally, shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount of
Advances made under this Section 2.1 to such Borrower's deposit account. (c) The
Committed Revolving Line shall terminate on the Revolving Maturity Date, at
which time all Advances under this Section 2.1 and other amounts due under this
Agreement (except as otherwise expressly specified herein) shall be immediately
due and payable.
2.2. Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Bank pursuant to Section 2.1.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrowers shall immediately pay to Bank, in cash, the amount
of such excess.
2.3. Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any Advances
shall bear interest, on the average daily balance thereof, at a per annum rate
equal to two (2) percentage points above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after
the occurrence of an Event of Default and the continuance thereof, at a rate
equal to three (3) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest on the Committed Revolving Line shall be due
and payable on each Payment Date. Borrowers hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number _____ for
payments of principal and interest due on the Obligations and any other amounts
owing by any Borrower to Bank. Bank will notify Borrowers promptly of all debits
which Bank has made against any Borrower's accounts. Any such debits against any
Borrower's accounts in no way shall be deemed a set-off. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4. Crediting Payments. Subject to Section 6.7(b) relating to the
Collateral Account, prior to the occurrence of an Event of Default, Bank shall
credit a wire transfer of funds, check or other item of payment to such deposit
account or Obligation as Borrowers specify. Subject to Section 6.7(b) relating
to the Collateral Account, after the occurrence of an Event of Default, the
receipt by Bank of any wire transfer of funds, check, or other item of payment,
whether directed to a Borrower's deposit account with Bank or to the Obligations
or otherwise, shall be immediately applied to conditionally reduce Obligations,
but shall not be considered a payment in respect of the Obligations unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Subject to
Section 6.7(b) relating to the Collateral Account, any wire transfer or payment
received by Bank after 12:00 noon Eastern time shall be deemed to have been
received by Bank as of the opening of business on the immediately following
Business Day. Whenever any payment to Bank under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date that is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5. Fees. Borrowers, jointly and severally, shall pay to Bank the
following:
(a) Facility Fee. A Facility Fee for the Committed Revolving Line
equal to Twenty-Five Thousand and No/100 Dollars ($25,000), which fee shall be
due on the Closing Date and shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's fees and
out-of-pocket expenses for Bank's audits of Borrowers' Accounts, and for each
appraisal of Collateral and financial analysis and examination of Borrowers
performed from time to time by Bank or its agents, which fee shall be $500 per
day, per person, plus out of pocket expenses; provided, however, such fee shall
not exceed $7,500 per audit or examination.
(c) Collateral Handling Fee. A collateral handling fee of $2,500 per
month, to be paid on each Payment Date.
(d) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.6. Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrowers or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing is to
increase the cost to Bank, reduce the income receivable by Bank or impose any
expense upon Bank with respect to any loans, Bank shall notify Borrowers
thereof. Borrowers (jointly and severally) agree to pay to Bank the amount of
such increase in cost, reduction in income or additional expense as and when
such cost, reduction or expense is incurred or determined, upon presentation by
Bank of a statement of the amount and setting forth Bank's calculation thereof,
all in reasonable detail, which statement shall be deemed true and correct
absent manifest error.
2.7. Term. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Revolving Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1. Conditions Precedent to Initial Advance. The obligation of Bank
to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of Secretary or Manager of each Borrower with
respect to articles of incorporation, bylaws, articles of organization,
operating agreement, as applicable, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) financing statements (Forms UCC-1);
(d) insurance certificates;
(e) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; (f) Certificate(s) of Good Standing and Foreign
Qualification for each Borrower; (g) Certified Articles of Incorporation or
Organization of each Borrower; (h) Intellectual Property Security Agreement; (i)
such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate; and (j) all obligations of CareCentric
Solutions, Inc. to the Bank, including but not limited to a $1,500,000 revolving
line of credit, shall be paid in full.
3.2. Conditions Precedent to all Advances. The obligation of Bank to
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Transaction Report and Loan Request
Form as provided in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Transaction Report and Loan Request Form and on the effective date of each
Advance as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Advance. The
making of each Advance shall be deemed to be a representation and warranty by
Borrowers on the date of such Advance as to the accuracy of the facts referred
to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1. Grant of Security Interest. Borrowers grant and pledge to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrowers of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrowers
acknowledge that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2. Delivery of Additional Documentation Required. Borrowers shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3. Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrowers' usual business hours, to inspect Borrowers' Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrowers' financial condition or the amount, condition of, or any other
matter relating to, the Collateral and Bank shall receive the fee set forth in
Section 2.5(b) hereof.
5. REPRESENTATIONS AND WARRANTIES
Borrowers, jointly and severally, represents and warrants as follows:
5.1. Due Organization and Qualification. Borrower and each Subsidiary
is a corporation or limited liability company, duly existing and in good
standing under the laws of its state of organization and qualified and licensed
to do business in, and is in good standing in, any state in which the conduct of
its business or its ownership of property requires that it be so qualified.
Simione Central, Inc. and Script Systems, Inc. are inactive corporations that do
not have any employees, assets, contract rights, other property or obligations.
5.2. Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrowers' powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in any Borrower's Articles/Certificate of Organization,
Operating Agreement, Articles/Certificate of Incorporation or Bylaws as
applicable, nor will they constitute an event of default under any material
agreement to which a Borrower is a party or by which a Borrower is bound. Except
as set forth in Schedule 5.2, no Borrower is in default under any agreement to
which it is a party or by which it is bound, which default could have a Material
Adverse Effect.
5.3. No Prior Encumbrances. Each Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4. Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. No Borrower has received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in any Borrowing
Base Certificate as an Eligible Account.
5.5. Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
5.6. Intellectual Property. Except as set forth in Schedule 5.6,
Borrowers are the sole owners of the Intellectual Property Collateral, except
for non-exclusive licenses granted by a Borrower to its customers in the
ordinary course of business. Each of the Patents is valid and enforceable, and
no part of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property Collateral violates the rights of any third party.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the Patents and Trademarks and the Register of Copyrights
with respect to the Copyrights and Mask Works necessary to perfect the security
interests created hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with, any
United States governmental authority or United States regulatory body is
required either (i) for the grant by Borrowers of the security interest granted
hereby or for the execution, delivery or performance of Loan Documents by
Borrowers in the United States or (ii) for the perfection in the United States
or the exercise by Bank of its rights and remedies hereunder.
5.7. Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrowers have not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof. The chief executive office of
all of the Borrowers is located at the address indicated in Section 10 hereof.
5.8. Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrowers' knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrowers' interest or Bank's security interest in the
Collateral
5.9. No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrowers and any Subsidiary that
have been delivered by Borrowers to Bank fairly present in all material respects
Borrowers' consolidated financial condition as of the date thereof and
Borrowers' consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrowers since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.10. Solvency. The fair saleable value of Borrowers' assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrowers are not left with unreasonably small capital after
the transactions contemplated by this Agreement; and Borrowers are able to pay
their debts (including trade debts) as they mature.
5.11. Regulatory Compliance. Borrowers and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from a Borrower's failure to
comply with ERISA that is reasonably likely to result in a Borrower incurring
any liability that could have a Material Adverse Effect. No Borrower is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. No Borrower is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Each Borrower has complied with all the provisions of the
Federal Fair Labor Standards Act. No Borrower has violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12. Environmental Condition. None of Borrowers' or any Subsidiary's
properties or assets has ever been used by any Borrower or any Subsidiary or, to
the best of Borrowers' knowledge, by previous owners or operators, in the
disposal of, or to produce, store, handle, treat, release, or transport, any
hazardous waste or hazardous substance other than in accordance with applicable
law; to the best of Borrowers' knowledge, none of Borrowers' or Subsidiaries'
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by any Borrower or any Subsidiary; and neither any Borrower nor
any Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by any Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste or
hazardous substances into the environment.
5.13. Taxes. Borrowers and each Subsidiary have filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein.
5.14. Subsidiaries. No Borrower owns any stock, partnership interest
or other equity securities or interests of any Person, except for Permitted
Investments.
5.15. Government Consents. Borrowers and each Subsidiary have each
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrowers' business as currently
conducted.
5.16. Full Disclosure. No representation, warranty or other statement
made by Borrowers in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrowers, jointly and severally, covenant and agree that, until
payment in full of all outstanding Obligations, and for so long as Bank may have
any commitment to make a Credit Extension hereunder, Borrowers shall do all of
the following:
6.1. Good Standing.
Each Borrower shall maintain its and each of its Subsidiaries'
existence as a corporation or limited liability company, as the case may be, and
good standing in its jurisdiction of organization and maintain qualification in
each jurisdiction in which the failure to so qualify could have a Material
Adverse Effect. Each Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, to the extent consistent with prudent management of
each Borrowers' business, in force all licenses, approvals and agreements, the
loss of which could have a Material Adverse Effect.
6.2. Government Compliance.
Each Borrower shall meet, and shall cause each Subsidiary to meet, the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. Each Borrower shall comply, and shall cause each Subsidiary to
comply, with all statutes, laws, ordinances and government rules and regulations
to which it is subject, noncompliance with which could have a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Bank's
Lien on the Collateral.
6.3. Financial Statements, Reports, Certificates. Borrowers shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month (other than a month which is the last month of
a fiscal quarter in which case subparagraph (b) below shall govern), a company
prepared consolidated balance sheet and income statement covering Borrowers'
consolidated operations during such period, in a form and certified by an
officer of Borrower reasonably acceptable to Bank; (b) as soon as available, but
in any event within forty-five (45) days after the end of each calendar quarter,
a Company prepared consolidated balance sheet and income statement covering
Borrowers' consolidated operations during such period, in a form and certified
by an officer of Borrowers; (c) as soon as available, but in any event within
ninety (90) days after the end of each Borrowers' fiscal year, audited
consolidated financial statements of Borrowers prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (d) within one (1) day of filing, copies of all statements,
reports and notices sent or made available generally by each Borrower to its
security holders or to any holders of Subordinated Debt and all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (d)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against any Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more; and (e) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.
Within thirty (30) days after the last day of each month, Borrowers
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable and accounts payable.
Borrowers shall deliver to Bank with the monthly or quarterly
financial statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto.
Borrowers shall deliver weekly transaction reports, and each time an
Advance is requested, for the purpose of reporting sales, audit memos and other
collateral adjustments.
Bank shall have a right from time to time hereafter to audit Accounts
of the Borrowers at Borrowers' expense, as set forth in Section 2.5(b) hereof.
Initially it is intended that such audit will be quarterly. The first Advance
shall not be made until completion of an audit of Borrowers' Accounts.
6.4. Inventory; Returns. Borrowers shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between any Borrower and its account debtors shall be on
the same basis and in accordance with the usual customary practices of
Borrowers, as they exist at the time of the execution and delivery of this
Agreement. Borrowers shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than One Hundred Thousand Dollars ($100,000).
6.5. Taxes. Borrowers shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrowers will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that a Borrower or a Subsidiary has made such
payments or deposits; provided that such Borrower or a Subsidiary need not make
any payment if the amount or validity of such payment is (i) contested in good
faith by appropriate proceedings, (ii) is reserved against (to the extent
required by GAAP) by Borrowers and (iii) no lien other than a Permitted Lien
results.
6.6. Insurance.
Borrowers, at their expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrowers' business is
conducted on the date hereof. Borrowers shall also maintain insurance relating
to Borrowers' ownership and use of the Collateral in amounts and of a type that
are customary to businesses similar to Borrowers'.
All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrowers shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7. Principal Depository. Borrowers shall each maintain their
principal depository and operating accounts with Bank. Borrowers may maintain a
money market and petty cash account, provided they are subject to an Account
Control Agreement agreeable to Bank. (b) Borrowers shall open and maintain with
Bank an account (the "Collateral Account") into which funds received by
Borrowers from account debtors shall immediately be deposited. Borrowers shall
direct all account debtors to mail or deliver all checks or other forms of
payment for amounts owing to Borrowers to a post office box designated by Bank,
over which Bank shall have exclusive and unrestricted access. Bank shall collect
the mail delivered to such post office box, open such mail, and endorse and
credit all items to the Collateral Account. Borrowers shall direct all account
debtors or other persons owing money to any Borrower who makes payments by
electronic transfer of funds to wire such funds directly to the Collateral
Account. Borrowers shall hold in trust for Bank all amounts that any Borrower
receives despite the directions to make payments to the post office box or
Collateral Account, and immediately deliver such payments to Bank in their
original form as received from the account debtor with proper endorsements for
deposit into the Collateral Account. Borrower irrevocably authorizes Bank to
transfer to the Collateral Account any funds that have been deposited into any
other accounts or that Bank has otherwise received. Borrowers shall not
establish or maintain any accounts with any person other than Bank except for
accounts opened in the ordinary course of business from which all funds are
transferred on a daily basis to the Collateral Account or as set forth in
subsection (a) above. Bank shall have all right, title and interest in all of
the items from time to time in the Collateral Account and their proceeds. Bank
shall have the right from time to time in its sole discretion to apply all
amounts in the Collateral Account against outstanding Obligations of Borrowers
and collections will be applied three (3) Business Days after receipt. At such
time, neither Borrower nor any person claiming through Borrowers shall have any
right in or control over the use of, or any right to withdraw any amount from
the Collateral Account, which shall be under the sole control of Bank.
6.9. Profitability.
Borrowers on a consolidated basis shall have minimum Net Income or
maximum Net Loss for each quarter, as set forth below:
Time Period Maximum Net Loss or
Minimum Net Income
July 1, 1999 - Sept. 30, 1999 ($4,000,000)
Oct. 1, 1999 - Dec. 31, 1999 ($2,000,000)
January 1, 2000 - March 31, 2000 ($1,500,000)
Thereafter $1.00
6.9 Further Assurances. At any time and from time to time Borrowers
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
6.10 Registration of Intellectual Property Rights. Borrowers shall
register or cause to be registered (to the extent not already registered) with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, those intellectual property rights listed on Exhibits A,
B, C and D to the Intellectual Property Security Agreement delivered to Bank by
Borrowers in connection with this Agreement within thirty (30) days of the date
of this Agreement. Borrowers shall register or cause to be registered with the
United States Patent and Trademark Office or the United States Copyright Office,
as applicable, those additional intellectual property rights developed or
acquired by Borrowers from time to time in connection with any product prior to
the sale or licensing of such product to any third party, including without
limitation revisions or additions to the intellectual property rights listed on
such Exhibits A, B, C and D. (b) Borrowers shall execute and deliver such
additional instruments and documents from time to time as Bank shall reasonably
request to perfect Bank's security interest in the Intellectual Property
Collateral. (c) Borrowers shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents, Copyrights, and Mask Works, (ii)
use its best efforts to detect infringements of the Trademarks, Patents,
Copyrights and Mask Works and promptly advise Bank in writing of material
infringements detected and (iii) not allow any Trademarks, Patents, Copyrights,
or Mask Works to be abandoned, forfeited or dedicated to the public without the
written consent of Bank, which shall not be unreasonably withheld, unless Bank
determines that reasonable business practices suggest that abandonment is
appropriate. (d) Bank shall have the right, but not the obligation, to take, at
Borrowers' sole expense, any actions that Borrowers is required under this
Section 6.10 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.10.
7. NEGATIVE COVENANTS
Borrowers (jointly and severally) covenant and agree that, so long as
any Advance hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, no Borrower will do any of the following without the Bank's prior
written consent:
7.1. Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than Transfers: (i) of
inventory in the ordinary course of business, (ii) of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business; (iii) that constitute payment of normal and
usual operating expenses in the ordinary course of business; or (iii) of
worn-out or obsolete Equipment.
7.2. Changes in Business, Ownership, or Management, Business
Locations. Engage in any business, or permit any of its Subsidiaries to engage
in any business, other than the businesses currently engaged in by Borrower and
any business substantially similar or related thereto (or incidental thereto).
No Borrower will, without at least thirty (30) days prior written notification
to Bank, relocate its chief executive office or add any new offices or business
locations.
7.3. Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock, assets or property of another Person;
provided, however, such merger or acquisition shall be permitted without the
Bank's consent if: (a) (i) any stock or convertible securities (on an as
converted basis) issued in such transaction by Borrowers is less than thirty
percent (30%) of the outstanding capital stock of the Borrowers prior to such
closing; or (ii) if Borrowers are paying less than $2,000,000 in consideration
for such transaction (provided, however, if Borrowers on a consolidated basis
for the immediately preceding fiscal quarter prior to such transaction have a
ratio of Quick Assets to Current Liabilities of at least 1.25 to 1.00, such
threshold shall be $5,000,000); and. (b) Such transaction will not cause an
Event of Default hereunder, including, but not limited to a breach of a
financial covenant hereunder.
Notwithstanding anything herein to the contrary, Bank consents to the
acquisition of MCS, Inc. by Borrowers in accordance with Agreement and Plan of
Merger dated May 26, 1999; provided, MCS must be made a co-Borrower hereunder at
the time of such acquisition.
7.4. Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5. Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6. Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, except as set forth on Schedule 7.6. Notwithstanding anything herein to
the contrary, no Borrower shall transfer any assets, property or rights to, or
on behalf of, or guarantee any obligations of Simione Central, Inc. or Script
Systems, Inc.
7.7. Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8. Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrowers
except for transactions that are in the ordinary course of Borrowers' business,
upon fair and reasonable terms that are no less favorable to Borrowers than
would be obtained in an arm's length transaction with a non-affiliated Person.
7.9. Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10. Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrowers shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrowers give Bank prior written
notice and as to which Borrowers sign and file a financing statement where
needed to perfect Bank's security interest.
7.11. Compliance. Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of
its important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
purpose; fail to meet the minimum funding requirements of ERISA; permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral; or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrowers under this Agreement:
8.1. Payment Default. If any Borrower fails to pay, when due, any of
the Obligations.
8.2. Covenant Default. (a) If any Borrower fails to perform any
obligation under Sections 6.3, 6.6, 6.7, 6.8, 6.9 or 6.10, or violates any of
the covenants contained in Article 7 of this Agreement, or
(b) If any Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between any Borrower and Bank and as to any default under such other
term, provision, condition, covenant or agreement that can be cured, has failed
to cure such default within thirty (30) days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrowers be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrowers shall have an additional reasonable period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that no Advances will
be required to be made during such cure period);
8.3. Material Adverse Change. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of any
Borrower, or (ii) is, based upon a reasonable standard, a material impairment of
the prospect of repayment of any portion of the Obligations or (iii) is a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4. Attachment. If any material portion of any Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if any Borrower
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of any
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of any Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after any Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by any Borrower (provided that no Advances will be required to be made during
such cure period);
8.5. Insolvency. If any Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by any Borrower, or if an Insolvency
Proceeding is commenced against any Borrower and is not dismissed or stayed
within 30 days (provided that no Advances will be made prior to the dismissal of
such Insolvency Proceeding);
8.6. Other Agreements. If there is a default in any agreement to which
any Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7. Subordinated Debt. If any Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8. Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against any Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment);
8.10. Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate or writing delivered to Bank by any
Borrower or any Person acting on any Borrower's behalf pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document.
9. BANK'S RIGHTS AND REMEDIES
9.1. Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(d) Without notice to or demand upon any Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrowers agree to assemble the Collateral
if Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrowers authorize Bank to enter the premises where the Collateral
is located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
lien which in Bank's determination appears to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrowers' premises, Borrowers hereby grant Bank a license to
enter such premises and to occupy the same, without charge in order to exercise
any of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(e) Without notice to Borrowers set off and apply to the Obligations
any and all (i) balances and deposits of any Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of any
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a non-exclusive, royalty-free license or
other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, any Borrower's labels, patents, copyrights, mask works, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and, in connection with Bank's exercise of its rights under this
Section 9.1, any Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrowers' premises) as Bank determines is
commercially reasonable, and apply the proceeds thereof to the Obligations in
whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and (i) Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Borrowers.
(j) Bank shall have a non-exclusive, royalty-free license to use the
Intellectual Property Collateral to the extent reasonably necessary to permit
Bank to exercise its rights and remedies upon the occurrence of an Event of
Default.
9.2. Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, each Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as any
Borrowers' true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse any Borrowers' name on any checks or other forms of payment or
security that may come into Bank's possession; (c) sign any Borrowers' name on
any invoice or bill of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to any Borrowers' policies of insurance; and (e) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (f)
to modify, in its sole discretion, any intellectual property security agreement
entered into between any Borrower and Bank without first obtaining any
Borrowers' approval of or signature to such modification by amending Exhibit A,
Exhibit B, Exhibit C, and Exhibit D, thereof, as appropriate, to include
reference to any right, title or interest in any Copyrights, Patents,
Trademarks, Mask Works acquired by any Borrower after the execution hereof or to
delete any reference to any right, title or interest in any Copyrights, Patents,
Trademarks, or Mask Works in which any Borrower no longer has or claims any
right, title or interest; (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of any Borrower where permitted by law; and
(h) to transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial
Code, provided Bank may exercise such power of attorney to sign the name of any
Borrower on any of the documents described in Section 4.2 regardless of whether
an Event of Default has occurred. The appointment of Bank as each of Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3. Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
any Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrowers shall collect all amounts owing to any Borrower for
Bank, receive in trust all payments as Bank's trustee, and if requested or
required by Bank, immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4. Bank Expenses. If any Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.
9.5. Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6. Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on any Borrower's part shall be deemed a continuing waiver. No delay by
Bank shall constitute a waiver, election, or acquiescence by it. No waiver by
Bank shall be effective unless made in a written document signed on behalf of
Bank and then shall be effective only in the specific instance and for the
specific purpose for which it was given.
9.7. Demand; Protest. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which any Borrower may in any way be
liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrowers or to Bank, as the case may be, at its
addresses set forth below:
If to Borrowers: Simione Central Holdings, Inc.
6600 Powers Ferry Road
Atlanta, Georgia 30339
Attn.: George Hare
FAX: 770-644-3918
If to Bank: Silicon Valley Bank
3343 Peachtree Road
Suite 312
Atlanta, Georgia 30326
Attn.: Angela Hart
FAX: (404) 261-2202
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of Georgia, without regard to principles of
conflicts of law. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWERS
AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS
AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THE BORROWERS AND THE BANK ALSO AGREE THAT ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
OR TO ENFORCE ANY JUDGMENT OBTAINED AGAINST ANY BORROWER IN CONNECTION WITH THIS
AGREEMENT OR SUCH OTHER LOAN DOCUMENT, MAY BE BROUGHT BY THE BANK OR BORROWERS
IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF THE STATE IN WHICH BANK'S
ADDRESS SHOWN IN SECTION 10 ABOVE IS LOCATED, OR IN ANY OTHER COURT TO THE
JURISDICTION OF WHICH SUCH BORROWER OR ANY OF ITS PROPERTY IS OR MAY BE SUBJECT.
EACH OF THE BORROWERS AND THE BANK IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE AFORESAID STATE AND FEDERAL COURTS, AND IRREVOCABLY WAIVES ANY PRESENT OR
FUTURE OBJECTION TO VENUE IN ANY SUCH COURT, AND ANY PRESENT OR FUTURE CLAIM
THAT ANY SUCH COURT IS AN INCONVENIENT FORUM, IN CONNECTION WITH ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
12. GENERAL PROVISIONS
12.1. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by any Borrower without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion. Bank shall have
the right without the consent of any Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder. Bank shall provide notice of such
transfer to Borrowers in a reasonable time after the occurrence thereof.
12.2. Indemnification. Borrowers, jointly and severally, shall,
indemnify ,defend, protect and hold harmless Bank and its officers, employees,
and agents against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses in any
way suffered, incurred, or paid by Bank as a result of or in any way arising out
of, following, or consequential to transactions between Bank and any Borrower
whether under the Loan Documents, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3. Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4. Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5. Amendments in Writing, Integration. This Agreement cannot be
amended or terminated except by a writing signed by Borrowers and Bank. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7. Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrowers to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8. Joint and Several. All obligations of Borrowers hereunder shall
be joint and several and all reference to "Borrower" or "Borrowers" hereunder
shall be deemed to refer to both Borrowers, jointly and individually. The
Borrowers acknowledge that all Advances hereunder shall inure to the benefit of
all Borrowers. The Obligations shall be deemed to include all joint or
individual indebtedness or obligations, contingent or otherwise, of each
Borrower owed to the Bank, which Obligations shall all be secured by the
Collateral.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, under seal, as of the date first above written.
SIMIONE CENTRAL HOLDINGS, INC.
By:
Title:
[CORPORATE SEAL]
SC HOLDINGS, INC.
By:
Title:
[CORPORATE SEAL]
SIMIONE CENTRAL NATIONAL, LLC
By: (SEAL)
Title:
(SIGNATURES CONTINUED ON THE FOLLOWING PAGE.)
<PAGE>
(SIGNATURES CONTINUED FROM THE PREVIOUS PAGE.)
SIMIONE CENTRAL CONSULTING, INC.
By:
Title:
[CORPORATE SEAL]
SIMIONE ACQUISITION CORPORATION
By:
Title:
[CORPORATE SEAL]
SILICON VALLEY BANK
By:
Title:
<PAGE>
EXHIBIT A
The Collateral consists of all of Borrowers' right, title and interest
in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrowers' custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrowers
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrowers, whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by Borrowers;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrowers' Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrowers' Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
<PAGE>
EXHIBIT B
Transaction Report and Loan Request Form
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrowers: Simione Central Holdings, Inc., SC Holdings, Inc., Simione Central
National, LLC, Simione Central Consulting, Inc., and Simione Acquisition
Corporation
Commitment Amount: $5,000,000
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ______ $__________
2. Additions (please explain on reverse)$__________
3. TOTAL ACCOUNTS RECEIVABLE $ $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
1. Amounts over 90 days due $__________
2. Balance of 50% over 90 day accounts $__________
3. Concentration Limits $__________
4. Foreign Accounts $__________
5. Governmental Accounts $__________
6. Contra Accounts $__________
7. Promotion or Demo Accounts $__________
8. Intercompany/Employee Accounts $__________
9. Other (please explain on reverse) $__________
10. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
11. Eligible Accounts (#3 minus #13) $__________
12. LOAN VALUE OF ACCOUNTS (75% of #14) $__________
BALANCES
1. Maximum Loan Amount $__________
2. Total Funds Available [Lesser of #16 or #15] $__________
3. Present balance owing on Line of Credit $__________
4. Outstanding under Sublimits ( ) $__________
5. RESERVE POSITION (#17 minus #18 and #19) $__________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
</TABLE>
COMMENTS:
===========================================
BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status: Yes / No
===========================================
SIMIONE CENTRAL HOLDINGS, INC.
SC HOLDINGS, INC.
SIMIONE CENTRAL NATIONAL, LLC
SIMIONE CENTRAL CONSULTING, INC.
SIMIONE ACQUISITION
By: ____________________________
Authorized Signer
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: Simione Central Holdings, Inc., SC Holdings, Inc., Simione Central
National, LLC, Simione Central Consulting, Inc., and Simione
Acquisition Corporation
The undersigned authorized Officer and Member of SIMIONE CENTRAL
HOLDINGS, INC., SC HOLDINGS, INC., SIMIONE CENTRAL NATIONAL, LLC, SIMIONE
CENTRAL CONSULTING, INC., AND SIMIONE ACQUISITION CORPORATION hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between each of the Borrowers and Bank (the "Agreement"), (i) each of
the Borrowers is in complete compliance for the period ending with all required
covenants except as noted below and (ii) all representations and warranties of
each of the Borrowers stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer and Member further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer and
Member expressly acknowledges that no borrowings may be requested by the
Borrower at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that such compliance is determined
not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
Monthly financial statements Monthly within 30 days Yes No
Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10Q and 10K Within 1 day after filing with the SEC Yes No
A/R and A/P Monthly within 30 days Yes No
Borrowing Bank Certificate Monthly within 30 days Yes No
Financial Covenant Required Actual Complies
Maintain on a Quarterly Basis:
Minimum Net Income or
Maximum Net Loss Q3 99($4,000,000) $________ Yes No
Q4 99($2,000,000)
Q1 00($1,500,000)
Thereafter $1.00
===========================================
BANK USE ONLY
Received By:____________________
Date:________________
Reviewed By:____________________
Compliance Status: Yes / No
===========================================
Comments Regarding Exceptions:
Sincerely,
_______________________ Date:_______________
Signature
Title
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrowers: SIMIONE CENTRAL HOLDINGS, INC.
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: working capital
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
Amount paid to Borrower directly: $__________
Undisbursed Funds $__________
Principal $__________
CHARGES PAID IN CASH. Borrowers have paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $__________
$25,000 Loan Fee
$__________ Accounts Receivables Audit
Other Charges Paid in Cash: $__________
$__________ UCC Search Fees
$__________ UCC Filing Fees
$__________ Outside Counsel Fees and Expenses
Total Charges Paid in Cash
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered the amount of any loan payment. If the funds in the
account are insufficient to cover any payment, Bank shall not be obligated to
advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF SEPTEMBER 3, 1999.
BORROWER:
- ------------------------------------
Authorized Signature
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: SIMIONE CENTRAL HOLDINGS, INC.,
Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. SIMIONE CENTRAL HOLDINGS, INC. ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 3, 1999, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
3, 1999.
GRANTOR:
x______________________________
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: SC HOLDING, INC.
Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. SC HOLDING, INC. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 3, 1999, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
3, 1999.
GRANTOR:
x______________________________
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: SIMIONE CENTRAL NATIONAL, LLC
Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. SIMIONE CENTRAL NATIONAL, LLC. ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 3, 1999, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
3, 1999.
GRANTOR:
x______________________________
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: SIMIONE CENTRAL CONSULTING, INC.
Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. SIMIONE CENTRAL CONSULTING, INC. ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 3, 1999, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
3, 1999.
GRANTOR:
x______________________________
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: SIMIONE ACQUISITION CORPORATION
Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. SIMIONE ACQUISITION CORPORATION. ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 3, 1999, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER
3, 1999.
GRANTOR:
x______________________________
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE>
SCHEDULE A
LIST OF SUBSIDIARIES
SIMIONE CENTRAL HOLDINGS, INC., a Delaware corporation ("SCH")
SC HOLDING, INC., a Georgia corporation ("SH")
SIMIONE CENTRAL NATIONAL, LLC, a Georgia limited liability company ("LLC")
SIMIONE CENTRAL CONSULTING, INC., a Georgia corporation ("SCC")
SIMIONE ACQUISITION CORPORATION, a Delaware corporation ("SAC")
<PAGE>
SCHEDULE 1.1
Security Agreement between
Mestek, Inc. and Simione Central Holdings, Inc.
883222v1
