As filed with the Securities and Exchange Commission on September 13, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
CORECARE SYSTEMS, INC.
(Name of Small Business Issuer in its charter)
Nevada 870409962
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9425 Stenton Avenue, Erdenheim, PA 19038
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (215) 836-2530
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Act: Common Stock,
$.001 par value
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CORECARE SYSTEMS, INC.
FORM 10-SB
TABLE OF CONTENTS
PART I..................................................................-1-
ITEM 1 - DESCRIPTION OF BUSINESS............................-1-
ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .............................-13-
ITEM 3 - DESCRIPTION OF PROPERTY............................-23-
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..............................-24-
ITEM 5- DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS....................................-29-
ITEM 6 - EXECUTIVE COMPENSATION.............................-32-
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ......................................-34-
ITEM 8 - DESCRIPTION OF SECURITIES..........................-36-
PART II.................................................................-45-
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS................................-45-
ITEM 2 - LEGAL PROCEEDINGS..................................-46-
ITEM 3 - CHANGE IN AND DISAGREEMENTS WITH
ACCOUNTANTS........................................-47-
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES............-47-
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS..........-52-
PART F/S................................................................-53-
FINANCIAL STATEMENTS...........................................-53-
PART III................................................................III-1
ITEM 1 - INDEX TO EXHIBITS.....................................III-1
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
(a) Business Development:
CoreCare Systems, Inc. (the "Company") is a regional behavioral health
care provider serving Eastern Pennsylvania and New Jersey. The Company's
headquarters are located at 9425 Stenton Avenue, Erdenheim, PA 19038. Its
telephone number at that location is (215) 836-2530.
The Company was incorporated in Nevada in 1991 to acquire the business
and assets of PC Ware International, Inc. (PC Ware"), a privately held
corporation engaged in the business of designing, developing, manufacturing and
selling personal computer products. This business was divested by the Company in
August 1992 and, in November 1992, the Company acquired all of the outstanding
capital stock of Nimble Computer Corporation, and changed its corporate name to
Nimble Technologies International, Inc. Thereafter, the Company, through Nimble
Computer Corporation, engaged in the development of hand-held, pen-based
computers known as the NimblePad 35 and NimblePad 45. No commercially viable
products were developed, however, and, on May 1, 1994, the Company sold Nimble
Computer Corporation back to the investors from whom it had acquired that
corporation.
The Company was inactive from May 1994 until January 19, 1995, when it
acquired all of the outstanding capital stock of CoreCare, Inc., a
privately-held Pennsylvania corporation, in exchange for 4,500,000 shares of the
Company's Common Stock and 6,000 shares of the Company's Series "A" Preferred
Stock. In connection with that acquisition, the Company changed its corporate
name to CoreCare Systems, Inc. At the time of its acquisition by the Company,
CoreCare, Inc., through a wholly-owned subsidiary (Lakewood Retreat, Inc.),
operated a 29 bed residential psychiatric treatment center in northeastern
Pennsylvania.
Commencing with its acquisition of CoreCare, Inc., the Company has
pursued a business plan to develop a behavioral health care provider system that
provides easy access and a continuum of care to patients and their families and
is responsive to the cost-effectiveness demands of the Managed Care companies
that increasingly control the payments for such care.
In furtherance of that plan:
In March 1995, the Company acquired all of the outstanding capital
stock of CareGroup of America Inc., a Pennsylvania corporation. CareGroup of
America, Inc, since renamed CoreCare Behavioral Health Management, Inc.
("CBHM"), had been organized in 1994 as a professional management company
specializing in behavioral health care services. It currently holds a three year
renewable contract expiring December 31, 1998 to manage and provide clinical
services for the St. Luke's/Quakertown Community Hospital acute inpatient
psychiatric unit and Renewal Centers, an adolescent drug and alcohol
rehabilitation center.
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In April 1995, the Company acquired certain assets of the business of
Chestnut Hill Fitness Club, Inc., which now comprise the business and assets of
the Company's Chestnut Hill Health and Fitness Center ("CHHFC"). CHHFC provides
a complex of related health and medical services including aerobic programs with
the latest cardiac conditioning techniques, resistance and weight training
equipment, physical therapy, exercise physiologists and a registered dietitian.
In June 1995, the Company acquired all of the outstanding capital stock
of Managed CareWare, Inc. ("Managed CareWare"). Managed CareWare is a computer
software company which has developed and continues to develop proprietary
software programs for monitoring behavioral health care patients and operating
behavioral health care practices, with an emphasis on the reporting required for
Managed Care companies.
Also in June 1995, the Company acquired American Institute for
Behavioral Counseling, Inc. ("AIBC") and Penn Interpersonal Communications, Inc.
("Penn"), which, together, operated three outpatient treatment centers providing
an essential link in the Company's service capabilities in the Lehigh Valley
area of Pennsylvania, and in central and northern New Jersey. In connection with
its acquisition of AIBC and Penn, the Company acquired Bio Diagnostic
Technologies, Inc., a related company which provided behavioral diagnostic
testing services to AIBC and Penn.
In October 1995, the Company acquired Westmeade Healthcare, Inc.
("Westmeade"). This acquisition provided the Company with two psychiatric
residential treatment facilities in southeastern Pennsylvania -- The Westmeade
Center at Wyndmoor, licensed for 24 beds to serve adults, and The Westmeade
Center at Warwick, licensed for 32 beds to serve adolescents.
The Company conducts all of its operations through its subsidiary
corporations. Unless the context indicates otherwise, the term "Company" when
used herein shall include the Company's subsidiaries.
(b) Business of Issuer:
The Company has undertaken an aggressive acquisition and development
campaign to create a behavioral health care system which will provide easy
access and continuity of care to patients and their families, and respond to the
cost-effectiveness demands of the healthcare industry in a Managed Care
environment by:
o creating a critical mass of services in a defined geographic area;
o providing a spectrum of high quality acute, step-down, and outpatient
services;
o structuring services with clinical continuity such that clinicians
follow patients through service levels;
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o shifting the focus of clinical control from the individual clinician
to the system case manager following approved clinical protocols;
o computerization of all administrative, financial, and clinical
functions; and
o structuring to deliver services pursuant to capitated
contracts, i.e. contracts shifting the risk for
treatment costs of a defined population from the
insurer or other third-party payor to the provider.
The healthcare industry today is increasingly affected at virtually
every level and in every service area by Managed Care companies, i.e., companies
which contract with the healthcare providers to provide services and products to
the Managed Care companies' subscribers. Generally, Managed Care companies seek
to contract products and services at a cost below the provider's customary fee
schedule in exchange for the access to the larger patient-base which these
organizations control. Two major segments of Managed Care include health
maintenance organizations ("HMOs") and preferred provider organizations
("PPOs"). HMOs and PPOs customarily pay each provider on a fee-for-service
basis, usually at a lower rate than the provider would otherwise charge. The
rates are negotiated per each individual contract. With increasing frequency,
HMOs may contract with providers on a "capitated" or "case rate" basis.
Capitation means that the provider is paid a periodic fee based on the number of
subscribers eligible to use that provider's services, without regard initially
to the level of use. Case rate means that each provider is paid a set amount for
each inpatient episode. The Company currently has two case rate contracts, and
no capitated contracts.
Management believes that Managed Care has been a catalyst for the
consolidation of individual and small group health care providers into corporate
delivery systems. Managed Care companies prefer to contract with multi-service
system providers who, with one call, can provide a variety of services to
multiple patients. In addition, integration of services helps assure better
clinical continuity of services and greater cost efficiency. The Company
believes it is positioned to benefit from this trend in defined geographical and
service areas.
(b)(1) Principal products and services: At the present time, the
services provided by the Company are within the following categories: (A) Acute
Residential Psychiatric Care; (B) Hospital-based Management Services; (C)
Outpatient Care; and (D) Health and Fitness Center.
(A) Acute Residential Psychiatric Care
The Company, through two acute residential treatment centers, Westmeade
Center at Wyndmoor and Westmeade Center at Warwick (the "Westmeade Centers"), is
engaged in the business of providing non-hospital acute residential psychiatric
services to both adult and adolescent patients. A third residential treatment
center, Lakewood Retreat, located in the Pocono Mountain region of northeastern
Pennsylvania, was closed in April 1996.
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The Westmeade Center at Wyndmoor is a 24 bed facility serving adult
patients in suburban Philadelphia, Pennsylvania. The Westmeade Center at Warwick
is located in Hartsville, Bucks County, Pennsylvania, approximately mid-way
between Philadelphia and Doylestown, Pennsylvania, and is a 32 bed facility
serving adolescent patients. Through the Westmeade Centers, the Company provides
services that are less costly than in a traditional hospital setting. The
residential psychiatric treatment program is intended for patients who volunteer
to be admitted for treatment, who do not need extensive long-term care, and who
do not need any form of restraint.
Following the acquisition of the Westmeade facilities, the Company
determined that it would be more efficient to concentrate its residential
treatment efforts at the Westmeade Centers, and to sell Lakewood Retreat. In
part, the decision was motivated by Managed Care companies' desire to use
providers that are geographically convenient and easily accessible to their
patients, and Lakewood Retreat's distance from the Company's concentrations of
service in south central and east central Pennsylvania.
The Westmeade Centers' Program: The Westmeade Centers were established
to provide residential psychotherapeutic services to adults, 18 years and older,
and adolescents, ages 12 to 18, who are ambulatory and medically stable. The
program, which operates 24 hours each day, offers intensive clinical treatment
in a comfortable, home-like setting. The length of stay is short-term and the
focus of treatment addresses the key issues which precipitated the patient's
admission. The goal is to eliminate or reduce the barriers that prevent the
patient from functioning successfully as an outpatient.
The Westmeade Centers provide an acute care alternative to inpatient
psychiatric treatment. The Westmeade Centers are also utilized as step-down
units for those persons who still require 24 hour supervision but have
benefitted from hospitalization to the degree that a less restrictive setting
can now meet their therapeutic needs. The Westmeade Centers do not attempt to
treat people who are so severely ill that they require seclusion and/or
restraint that is only available in a hospital setting.
Each patient is assessed to determine unique strengths and weaknesses
so that an individualized treatment plan can be developed by a
multi-disciplinary treatment team. The goal of this process is to identify the
specific interventions designed to assist and encourage the patient's
understanding of his or her potential for emotional and psychological well being
to build a successful outpatient. The philosophical basis of the program is
identified by this process; the treatment plan establishes a guideline for the
direction of care the multi-disciplinary professional staff will provide and is
related to the unique identified clinical problems of each patient. As part of
the treatment planning process, objectives are established which address the
methodology, staff responsibility and time frames necessary to facilitate
treatment.
The Westmeade Centers' patients suffer from a variety of psychiatric
disorders such as depression, manic depression and anxiety disorder. The
Westmeade Centers' core psychiatric programs are designed to accomplish
stabilization of symptoms by addressing management of
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major life stressors. Therapy experiences focus on cognitive and behavioral
restructuring of dysfunctional thinking and belief systems by addressing
cognitive and perceptual misperceptions, dysfunctional coping mechanisms, and
inadequate life skills. Concentrated, diagnosis-driven individual and group
therapy is given to patients in homogeneous groups (gender-specific where
needed).
The Westmeade Centers' Market: The Westmeade Centers' primary market is
Eastern Pennsylvania. The Westmeade Centers' collectively have entered into
approximately 60 contracts with Managed Care providers, health insurance
companies, commercial and workers compensation insurance companies or carriers
which will reimburse the Company for the care received by patients covered by
such insurance. The majority of these contracts are fee for-service. The
Westmeade Centers have two case rate contracts, providing a flat fee for all
services relating to each inpatient episode. These contracts also provide a
"penalty" for recidivism -- if the patient is readmitted within a certain number
of days after discharge, the Company will not be reimbursed for services
provided in connection with the readmission.
Notwithstanding the number of contracts which the Westmeade Centers
have, there is no assurance that these companies will continue to provide
coverage for the psychiatric care offered by the Westmeade Centers, even with
these contracts in force. In addition, these contracts permit the Westmeade
Centers to seek payment for treatment of the patients who are subscribers or
insureds of the payor companies, but do not ensure that the potential patients
covered by these payors who seek behavioral health care will become patients of
the Westmeade Centers.
(B) Hospital-Based Management Services
The Company, through CBHM, holds a three year management agreement
expiring December 31, 1998 to manage the St. Lukes/Quakertown Community Hospital
acute psychiatric unit and Renewal Centers, a subsidiary of St. Lukes Hospital
which is an adolescent rehabilitation center, both located in Quakertown, Bucks
County, Pennsylvania. The contract renews for two additional one year periods
effective December 31, 1998 unless either party gives notice of its election to
terminate the contract. The Company's management believes that the contract
provides a strategic advantage in providing psychiatric services through a
multi-hospital system, as well as establishing a "link" in the integrated
network of services provided to Managed Care companies. Under the Management
Agreement, the Company receives an annual base fee of approximately $700,000 and
an additional monthly fee for profitability performance. Through this
relationship, the Company has joined the Eastern Pennsylvania Behavioral Health
Network set up at St. Lukes Hospital to more effectively serve both the Managed
Care and self-insured market place, as well as a broader geographic market.
CBHM's Market: CBHM, through the St. Luke's/Quakertown management
agreement, serves the Lehigh Valley and Eastern Pennsylvania area. As a
management company, its marketing area is focused on Eastern Pennsylvania and
New Jersey. As of the date of this Registration Statement, CBHM is in discussion
with other acute care hospitals regarding the management of both adolescent and
adult inpatient units. CBHM is also negotiating with
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several area nursing homes for psychiatric consulting service arrangements.
There is no assurance that CBHM will conclude any of these proposed management
agreements.
(C) Outpatient Treatment Services
AIBC and Penn provide facilities and services (marketing and
administrative) to licensed mental health professionals (sixteen at September 9,
1996, including four psychiatrists, four psychologists and eight other
clinicians) who specialize in diagnosis, psychotherapy, hypnosis,
pharmacotherapy and biofeedback to meet the needs of adults, adolescents and
children. The Company, through the professionals associated with AIBC and Penn,
provides outpatient, diagnostic and treatment services for a variety of
emotional and behavioral difficulties, including anxiety and panic attacks,
eating disorders, depression, phobias, stress, marital problems and
psychosomatic disorders. AIBC and Penn have secured over 30 Managed Care
contracts, most of which are with companies that also have contracts with the
Westmeade Centers, thus affording Managed Care companies continuity of their
subscribers' care.
Outpatient Market: AIBC and Penn have offices in Green Brook (north
central), New Jersey, and Easton (east central), Pennsylvania. These sites serve
primarily Managed Care referral patients, as well as personal injury and
workers' compensation claimants, and provide a link to the New York market area.
(D) Health and Fitness Center
The Company, through its wholly-owned subsidiary, CHHFC, operates a
health and fitness center, which provides a complex of related health and
medical services, including a comprehensive aerobic program with the latest
cardiac conditioning techniques, as well as healthfit for weight loss and yoga
for stress management, resistance and weight training equipment, physical
therapy, exercise physiologists and a registered dietitian. CHHFC leases
approximately 7,000 square feet in the Whitemarsh Professional Center in
Erdenheim, Pennsylvania, which facility has a sauna, whirlpool, full locker room
and child care.
The Company's marketing strategy is to encourage the health and fitness
center members to purchase various other health related services. The Company
intends to further expand services to the behavioral market by developing the
physical therapy program into an outpatient pain clinic which may lead to the
patient's seeking the Company's other programs and services. The Company intends
to expand the focus of a dietitian and weight loss program into an eating
disorder clinic and outpatient program.
CHHFC's Market: CHHFC serves a local higher income community, the
Chestnut Hill area of Philadelphia, Pennsylvania. Its service area is
approximately 20 minutes driving radius from the health and fitness center.
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(b)(2) Distribution Methods:
The Company obtains patients primarily through referrals from
physicians, hospitals, community based health care organizations, and Managed
Care plans and other third party payors. Therefore, the focus of the Company's
sales and marketing programs is direct sales to physicians, hospitals, other
health care institutions and third party payors. The Company's marketing focus
is necessarily local, concentrating on establishing relationships with the local
referral sources. In the markets which it currently serves, the Company believes
that it has a strong reputation for quality with physicians and other referral
sources.
Both payors and referral sources increasingly demonstrate a preference
for providers which offer systems of care at various levels. Integration of
services helps assure better clinical continuity of services and greater cost
efficiency. In addition, Managed Care companies and other payors are continually
trying to reduce the number of vendors with whom they must contract. The Company
believes, therefore, that achieving a critical density of services in a defined
geographical area, establishing and maintaining personal relationships with
referral sources, a continued focus on quality, and increasing economies of
scale all are important keys to its ability to compete effectively with smaller
local competitors which may not offer a full range of services, as well as
larger national providers which may not provide a full spectrum of integrated
clinical services in the Company's market area.
The Company markets its services to all types of payors, including
insurance companies and Managed Care companies, but primarily to Managed Care
companies on a negotiated fee basis. In markets where the Company can offer a
comprehensive range of services, it intends to market its services on a selected
"capitated basis" (fixed fee per covered life per month), or "case rate basis"
(fixed fee per inpatient episode). To date, the Company has not entered into any
capitated contracts. The Company currently has two case rate contracts, in which
the Managed Care company agrees to pay a fixed fee for an inpatient episode.
This fee includes room and board, treatment, and doctors visits. The Company
also has two contracts with recidivism penalties if the patient is readmitted
for service within 14 days with respect to one contract and 30 days with respect
to the other, in which case further treatment is without compensation.
Referral sources include case managers, crisis workers, hospital
emergency rooms, evaluation centers, private practitioners, clinics, etc. that
have direct patient contact and a need or obligation to place the patient in a
treatment setting. A referral source usually has a range of options of the best
placement for a patient and weighs several factors including proximity to the
patient, cost, appropriateness of service and responsiveness of provider.
Effective in September 1995, the Company entered into a Consulting
Agreement with Choate Health Management Services, Inc ("Choate"). Shortly
thereafter, Choate was acquired by Continuum, Inc., a subsidiary of Merit
Behavioral Care Corp. ("Merit"), a Managed Care company which is one of the
largest behavioral Managed Care companies in the United States, and covers
approximately 700,000 lives in the Company's market area.
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Under its Consulting Agreement with the Company, Choate provides
various consulting and development services to the Company and assists the
Company in developing systems procedures, clinical protocols and training to
effectively offer a continuum of services to Managed Care companies and other
payors. The Company believes that Choate is nationally recognized as an
innovative provider of behavioral health care services to serve the varied
demands of the Managed Care market and that its relationship with Choate will
enable it to attract significantly more business from Managed Care companies.
The Consulting Agreement also provides that Choate and the Company will
jointly seek to enter into third party management agreements with hospitals in
the Company's geographic area, with management services to be provided by
Choate, and the net revenues from such management agreements to be divided
equally between the Company and Choate (with Choate entitled to an additional
25% of the revenues if the aggregate revenues received by Choate under the
Consulting Agreement do not reach certain amounts). Under the Consulting
Agreement, Choate will provide the Company with a right of first refusal (a) to
enter into any management agreements with hospitals in Eastern Pennsylvania, New
Jersey and Delaware and (b) to participate with Choate in the development or
acquisition of residential psychiatric treatment or triage services in hospitals
in that geographic area. The Consulting Agreement provides that Choate will
assist the Company in developing clinical assessment (i.e., triage) and crisis
intervention services.
Under the Consulting Agreement, the Company agrees to pay Choate a base
consulting fee of $10,000 per month, an additional consulting fee of 10% of the
Company's consolidated net operating profit and a 10% fee in connection with the
closings of any acquisitions or financings where the acquired company or the
financing source was introduced to the Company by Choate. Under the Consulting
Agreement, Choate is to receive a minimum of $600,000 in aggregate fees and
revenues under the Consulting Agreement during the 12 month period ending
December 1, 1996 and minimum fees equal to the greater of $600,000 or 10% of the
increase in the Company's annual consolidated revenues in succeeding years.
Currently, Choate and the Company have initiated contract negotiations
with various community hospitals for the management of their psychiatric units,
although, as of the date of this Registration Statement, none of such agreements
have been executed. Additionally, the Company is in negotiations with Continuum,
Inc. to provide triage services for an as yet undetermined number of covered
lives.
(b)(3) Product or Service Development:
The Company's marketing strategy is to develop in selected geographic
markets, extensive, wholly-owned, multi-level health care delivery systems which
provide a high quality of care in a cost effective manner. The Company intends
to pursue growth by surrounding inpatient sites with outpatient mental health
clinics and other alternative or step-down services. The Company believes that
by providing a fully integrated coverage of the market, it will be able to
generate a critical mass of clinicians, patients and services to generate
significant cost
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advantages that are more attractive to payors. The Company believes that this
critical mass strategy will allow the Company to leverage management resources,
contracting opportunities with Managed Care payors, sales and marketing
programs, information systems and corporate overhead.
The Company's approach to the delivery of health services is intended
to yield the following benefits:
o The Low Cost Provider. By establishing an extensive, fully integrated
network of multi-disciplinary health care professionals in a given
market, the Company will seek to achieve economies of scale, thereby
lowering the cost of care without compromising quality. For instance,
the Company believes that by employing a full range of clinicians it is
better able to match the appropriate clinician and type of treatment to
the patients' needs.
o Managed-Care Friendly. The Company believes that establishing a
significant presence in each of its markets will enable it to meet
payor needs more effectively, and that as the Company increases its
ability to provide a full range of health services, a standardized
level of care and the ability to service all of the payors' patients
within a geographic region, it will increase market share.
Additionally, the Company will offer payors systems for risk management
(including contracts under which the Company assumes various levels of
risk), claims reimbursement and clinical outcomes measures, thereby
reducing the payors' administrative burden as well as the number of
provider contracts.
o Attractive to Sellers. The Company believes that through successful
implementation of its business plan and marketing strategy, it will
represent an increasingly attractive potential buyer to single and
multi-site health care providers who face significant uncertainty
regarding the future and who may not possess the financial resources or
administrative skills to adapt to health care reforms, including
changes in reimbursement. The Company will be able to offer potential
sellers management expertise, administrative and regulatory support and
increased job security. In addition, the Company will offer sellers the
ability to realize the value of their businesses as well as the
opportunity to benefit economically from the growth of a larger
enterprise.
(b)(4) Competition:
There is intense competition among providers in the Company's existing
markets. While most of the markets in which the Company provides services are
highly fragmented, the behavioral health care industry in general is undergoing
consolidation, and the Company will face intense competition in seeking to
increase its market share. Many of the Company's current and potential
competitors have significantly greater financial and other resources than will
be available to the Company. In addition, the national competitors benefit from
contracting with
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Managed Care companies which themselves operate in more than one region, volume
purchasing and, in some cases, name recognition.
While it will develop strategic start-up services where necessary, the
Company's management believes that the pace of consolidation in the behavioral
health care industry dictates an aggressive acquisition, alliance or joint
venture strategy to enter new markets and to increase market share.
(b)(5) Raw Materials: Not Applicable.
(b)(6) Customers:
For the year ended December 31, 1995, combined from the Company and the
Westmeade Centers, inpatient revenue was broken down as follows:
31% Private payment sources (including private insurance
companies)
39% Managed Care/Preferred provider arrangements
30% Medicaid
All patients whose treatment is funded by Medicaid are served at The
Westmeade Center at Warwick, the Company's facility for adolescents. The Company
does not have a direct contract with Medicaid, but treats Medicaid patients
under a contract with the Pennsylvania Department of Public Welfare.
Outpatient revenues were broken down as follows:
76% Private payment sources
24% Managed Care
Private payment is the category for which patients are neither
reimbursed by Medicare nor covered by a Managed Care arrangement. These payors
include traditional insurance indemnity plans as well as direct payments by
patients. With respect to outpatient revenues, this category also includes
personal injury insurance coverage.
With respect to both inpatient and outpatient revenues, the Company
anticipates that in the future, in line with general health care industry
trends, the percentage of revenues derived from private payment sources will
decrease, and the percentage of revenues derived from Managed Care and preferred
provider arrangements will increase.
Currently, CBHM revenues are 100% derived from the St.
Luke's/Quakertown Contract. In the six months ended June 30, 1996, revenues from
this contract represented approximately 10% of the Company's total revenues.
Revenue components include the contracts base management fee, performance fees
and allied health fees. Allied health fees are currently pass-through fees to
clinicians who are subcontractors to CBHM.
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CHHFC serves a private pay consumer market; however, given the
preventive medicine orientation of HMOs, many will reimburse for fitness
services. Currently, CHHFC is negotiating preferred provider contracts with such
agencies. CHHFC also offers corporate contracts for employers interested in
providing such services to their employees.
(b)(7) Patents, Trademarks, Licenses, etc.: The Company has no patents
or trademarks or licenses that are material to its operations. Various licenses
are required for the operation of the Westmeade Centers and other company
operations. See "Governmental Approvals" below.
(b)(8) Governmental Approvals:
The Westmeade Center at Wyndmoor operates as a "Mental Health
Establishment" under a provisional license as a Residential Treatment Facility
for Adults issued by the Pennsylvania Department of Public Welfare. The
provisional nature of this license does not reflect any deficiency; rather, it
reflects the fact that the license is newly issued. Prior to September 1, 1996,
the Wyndmoor facility was licensed as a personal care facility. The Wyndmoor
facility is licensed for 24 beds.
The Westmeade Center at Warwick is licensed for 32 beds by the
Pennsylvania Department of Public Welfare, Office of Children, Youth and
Families, as a Residential Treatment Facility for Children and Adolescents.
Both of the Westmeade Centers operate with a Certificate of
Accreditation from the Joint Commission on the Accreditation of Health-Care
Facilities with Commendation.
CHHFC operates as a "Health Club" under a Certificate of Compliance
issued by the Attorney General of the Commonwealth of Pennsylvania, Bureau of
Consumer Protection, pursuant to the Pennsylvania Health Club Act.
(b)(9) Governmental Regulations:
Health care is an area of extensive federal, state and local
regulation. Changes in the law or new interpretations of existing laws can have
a dramatic effect on methods of doing business, costs of doing business and
amounts of reimbursement by government and private third party payors. The
health care industry is subject to state laws governing certification,
professional licensure, certificate of need requirements and physician and other
health care provider self-referrals. In addition, state regulation of Medicaid
reimbursement directly impacts the profitability of servicing Medicaid patients.
Federal regulations covering fraud and abuse, and arrangements among health care
providers which may be deemed under Medicare/Medicaid regulations as fraud and
abuse or self-referral arrangements, can limit the ways in which the Company
conducts business. No assurance can be given that federal and state regulations,
administrative actions pursuant to such regulations, or changes in such
regulations will not adversely affect the Company.
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In addition, numerous federal legislative proposals have been initiated
which contemplate significant changes in the availability, delivery, pricing and
payment for health medical products and services. Various states also have
undertaken or are considering significant health care reform initiatives.
Although it is not possible to predict the exact manner and the extent to which
the Company will be affected by the passage of health care "reform" measures or
other legislative or administrative initiatives, it is virtually certain that
health care delivery, reimbursement of health care costs, and virtually every
other aspect of the health care industry will be the subject of legislative and
administrative initiatives in the future. It is likely that the Company will be
affected in some fashion by any new legislative and administrative measures
which are adopted, and such effects could be material and adverse to the
business of the Company.
Most states have laws, regulations and professional licensing board
legal doctrines which prohibit the employment of physicians by corporations
other than professional corporations with all stockholders being licensed
persons. Certain states have legislation or regulations, or rulings or opinions
of courts or state officials, suggesting that other health care professionals
may not lawfully provide services as employees of business corporations. To the
extent that such restrictions are or become applicable to the Company's
operations, the Company must structure its operations to be in compliance with
such provisions. There is no assurance, however, that the Company will develop a
satisfactory structure to deal with all such restrictions.
(b)(10) Research and Development: Not Applicable.
(b)(11) Environmental Laws: The Company's operations are not
significantly affected by environmental regulations.
(b)(12) Employees: As of August 31, 1996, the Company and its
subsidiaries had 132 employees of which 63 are full-time employees. This number
does not include mental health professionals (e.g., psychiatrists,
psychologists, etc.) who provide services through the Company's facilities and
who may be deemed employees for federal tax and accounting purposes.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's financial statements and notes thereto.
(a) Introduction
The Company is a regional behavioral healthcare provider serving
eastern Pennsylvania and New Jersey.
-12-
<PAGE>
In January 1995, the Company acquired all of the outstanding capital
stock of CoreCare, Inc., a privately-held corporation operating a residential
treatment facility (Lakewood Retreat) located in northeast Pennsylvania. For
financial reporting purposes, the Company's acquisition of CoreCare, Inc. was
accounted for as a reverse purchase under which the Company was recapitalized to
include, without any revaluation, the historical financial information of
CoreCare, Inc. and the assets and liabilities (which were negligible) of the
Company at that time. Thus, the Company's financial statements at and for the
twelve months ended December 31, 1994, essentially represented the assets,
liabilities, operations and changes in financial position of CoreCare, Inc.
which, in turn, principally reflected assets, liabilities and operations of
Lakewood Retreat and general and administrative expenses relating to development
of the Company's business plan which was implemented beginning in 1995.
In addition to its acquisition of CoreCare, Inc., during 1995 the
Company acquired:
- in March 1995, CareGroup of America, Inc. which manages and provides
clinical services to the St. Lukes/Quakertown Community Hospital acute
inpatient psychiatric unit and to Renewal Centers, an adolescent drug
and alcohol rehabilitation center;
- in April 1995, the assets of the Chestnut Hill Health and Fitness
Center;
- in June 1995, Managed Careware, Inc., a software development company
specializing in clinical records management;
- also in June 1995, American Institute for Behavioral Counselling,
Inc. and Penn Interpersonal Communications, Inc. (hereinafter,
collectively, "AIBC") which operate psychiatric and other behavioral
health outpatient service facilities in east-central Pennsylvania and
central and northern New Jersey;
- in October 1995, Westmeade Healthcare, Inc., which operates two (one
owned and one leased) psychiatric residential treatment centers in
southeastern Pennsylvania.
Primarily as a result of these acquisitions, the Company's assets at
December 31, 1995, were $8,471,029, an increase of approximately 276% over total
assets at December 31, 1994 ($2,252,170). Since all acquisitions were made
solely or partly in consideration of the issuance of equity securities of the
Company, the shareholders' equity of the Company also increased dramatically in
1995, from a deficiency of $1,576,395 at December 31, 1994, to positive equity
of $2,305,030 at December 31, 1995 (including "good will" of $2,172,490 related
to the acquired entities, i.e., the excess of the purchase price paid for the
acquired entities over the fair value of the net assets acquired). Additional
information concerning the Company's financial position and balance sheet data
at December 31, 1995, and June 30, 1996, is set forth below under the caption
"Liquidity and Capital Resources".
-13-
<PAGE>
Operations of the entities acquired in 1995 (with the exception of
CoreCare, Inc.) are included in the Company's consolidated statement of
operations for the year ended December 31, 1995, only from the respective dates
of their acquisition by the Company. Recorded on that basis, the Company's
consolidated revenues in 1995 increased approximately 367% to $3,388,834 from
$725,585 in 1994. The Company's loss from operations in 1995, which, as
described below, included substantial restructuring and acquisition related
expenses and other non-recurring charges to operations, was $2,571,769 versus a
loss from operations of $778,789 in 1994.
Revenues for the first six months of 1996, which included the
operations of the entities acquired in 1995, were $3,903,125 versus $821,409 in
the six months ended June 30, 1995, resulting in a loss from operations of
$169,063 in the six months ended June 30, 1996, versus a loss of $911,920 in the
comparable 1995 period.
Additional information concerning the Company's results of operations
in the years ended December 31, 1994 and 1995, and the six month periods ended
June 30, 1995 and 1996, as well as certain pro-forma financial information, is
set forth under the caption "Results of Operations".
(b) Results of Operations
(i) 1995 versus 1994
In 1994, Lakewood Retreat was the Company's sole revenue producing
unit. Operating revenues in 1995 increased primarily as a result of acquisitions
made during the year. Revenues of entities acquired in 1995 (other than
CoreCare, Inc.) from their respective acquisition dates were $2,510,343, or
approximately 74% of consolidated 1995 revenues, as follows:
- CareGroup of America, Inc. (operating as CoreCare Behavioral) -
$693,884, or 21% of revenues;
- Chestnut Hill Health and Fitness Center - $380,097, or 11% of
revenues;
- Managed CareWare, Inc. - no revenues (this unit has been used "in
house" to service other operations of the Company);
- AIBC - $745,506, or 22% of revenues; and
- Westmeade Healthcare, Inc. - $690,856, or 20% of revenues.
The balance of 1995 revenue was generated by Lakewood Retreat ($878,491 or
approximately 26% of revenue). After 1995, the relative significance, in terms
of their contribution to consolidated revenues, of entities acquired in 1995
other than Westmeade Healthcare, Inc.
-14-
<PAGE>
("Westmeade") was substantially reduced because of Westmeade's significance. See
"1995 versus 1994, Proforma with Westmeade" below.
1995 operating expenses and direct costs increased $4,456,229 or 296%
from fiscal 1994, primarily as a result of operating expenses of acquired
entities. The Company had significant non-recurring charges to operations during
fiscal 1995, including aggressive write downs of accounts receivables in
acquired entities ($1,049,011); the write-off of contract rights relating to the
operation of Lakewood Retreat ($201,098); and the establishment of a reserve for
closure costs against the decision to close Lakewood Retreat in 1996 ($434,458).
Direct expenses in 1995 were 53% of net revenue versus 89% in fiscal
1994 when Lakewood Retreat was the Company's sole operating unit. Similarly,
gross profit for 1995 was $1,581,922, or approximately 47% of net revenues,
compared to a gross margin of only 11% in 1994.
General and administrative expenses in 1995 increased approximately
436% over 1994 to $2,232,840 or 66% of revenues versus $416,820 or 57% of
revenues in 1994. This increase was significantly disproportionate to the
increase in revenues, reflecting a higher overhead structure after acquisitions
were completed, and atypical legal, accounting and other costs relating to
acquisitions and other financings which were expensed as incurred.
Salaries and employee benefits represented 29% and 52% of net revenues
for 1995 and 1994 respectively. Depreciation expense doubled in 1995, primarily
reflecting the increase in depreciable assets resulting from the Westmeade
acquisition. Amortization expense increased from $9,353 to $180,901 due to the
purchase of contract rights and goodwill resulting from acquisitions during
1995. Interest expense as a percentage of net revenue decreased in 1995, from
43% in 1994 to 9% in 1995, primarily as a result of the increase in revenues
through acquisitions made using equity securities and, thus, without a
proportionate increase in interest bearing debt.
The weighted average number of common shares outstanding in 1995 was
6,109,728 shares which represented a 36% increase over 1994 levels. Net loss per
common share worsened to $(.47) in 1995 from $(.25) in 1994, since the increase
in outstanding shares was proportionately less than the increase in the loss
year to year.
Analysis of 1995 Operations: In 1994 the Company had only one operating
unit, Lakewood Retreat, a residential psychiatric treatment facility located in
Stroudsburg, PA. In 1995, the Company's operations were carried on in four
service lines:
1) residential psychiatric treatment facilities,
2) outpatient care
3) hospital-based management services
4) health and fitness center
-15-
<PAGE>
These service lines produced a loss from operations, on a consolidated basis,
primarily attributable to:
1) Two residential psychiatric treatment facilities with census
levels below break-even;
2) High operating expenses of acquired entities, due in part to
inadequate operating controls, budgets and management information
systems.
3) High overhead payroll relative to the Company's revenue base.
4) Declining market position of acquired entities due to competitive
disadvantages arising, in part, from the "managed care"
environment.
5) Non-competitive rate structures.
All of these deficiencies have been and are being addressed by management, as
discussed below.
Residential psychiatric treatment facilities operated by the Company in
1995 consisted of Lakewood Retreat and the two Westmeade facilities, the latter
located in Hartsville, PA (The Westmeade Center at Warwick) and in Wyndmoor, PA
(The Westmeade Center at Wyndmoor), both in the suburban Philadelphia area.
These facilities contributed $1,569,347 to consolidated revenues reported in
1995, or approximately 46% of total revenues, with the Westmeade operations
included only from the acquisition date for these facilities (October 1995).
Total operating expenses and direct costs associated with the residential
treatment facilities in 1995 were $3,053,796, or approximately 51% of total
operating expense and direct costs. Losses attributable to operations of the
residential treatment facilities in 1995 represented 60% of the total Company
loss.
The following table summarizes the revenues and operating expenses of
residential treatment facilities reflected in 1995 results of operations:
-16-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Operating Operating
Revenue (% of Expense and Direct
Facility total) Costs (% of total)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Lakewood Retreat $878,491 $2,797,755
(26%) (47.2%)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Westmeade Center at Warwick $462,874 $508,360
(14%) (8.6%)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Westmeade Center at Wyndmoor $227,982 $327,444
(7%) (5.5%)
- --------------------------------------------------------------------------------------------
</TABLE>
As part of the ongoing, nationwide effort to reduce healthcare costs,
and under the impetus of managed care in particular, there has been increasing
pressure to reduce the average length of a patient's stay in hospitals and other
"inpatient" facilities such as the Company's residential treatment centers. The
following table illustrates this trend by quarter during 1994 and 1995 for the
Company's inpatient residential treatment facilities:
<TABLE>
<CAPTION>
1995* 1994
-------------------------------------- -------------------------------------
Quarter 4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
# of Facilities 3 3 3 3 1 1 1 1
Admissions 161 210 286 256 43 45 43 38
Average Length
of Stay-Adult 7.61 7.78 9.31 8.42 13.22 14.3 13.8 13.57
Average Length of
Stay-Adolescent 28.62 34.99 56.34 65.14 N/A N/A N/A N/A
Patient Days 3,851 3,942 3,998 4,260 712 644 662 612
Average
Occupancy Rate 52% 53% 55% 59% 36.33 32.33 34.2 35.06
</TABLE>
* Includes Westmeade data for the entire year.
-17-
<PAGE>
Given the pressure to reduce the length of a patient's stay, to
maintain or increase occupancy rates a provider must increase the number of
admissions at its facilities. With respect to the Company, as the table above
indicates, the Company was not successful in raising the occupancy rate at its
residential treatment centers during 1995. A number of steps were taken in 1995
and in the first six months of 1996 to increase the utilization of the Company's
facilities, including: implementation of the Company's acquisition strategy
which is to provide a continuum of behavioral healthcare services from both a
geographic and service point of view; establishment of a contractual alliance
with Choate Health Management Systems, Inc.; and the closure of Lakewood Retreat
in April 1996 (see "Results of Operations -- June 30, 1996 versus June 30, 1995"
below). These efforts began to show positive results in 1996, as the average
occupancy rate for the Westmeade residential treatment centers moved up to 85%
in the second quarter of 1996, following the closure of Lakewood Retreat. The
Company estimates that its "break even" occupancy rate at the Westmeade
residential facilities is approximately 55%.
Outpatient care services were provided in 1995 by AIBC at locations in
Hampton and Greenbrook, New Jersey, and in Easton, PA. Commencing with the
effective dates of their acquisition by the Company (June 30, 1995), these units
contributed revenues of $745,506, or 22% of total revenues. Outpatient service
operating expenses and direct costs were $975,294, or 16.4% of Company operating
expenses and direct costs and approximately 4% of the Company's 1995 net loss
was attributable to outpatient service operations. In 1996 the Company closed
its Hampton office to improve operating efficiencies.
Hospital-based management services were provided through CareGroup of
America, acquired on March 27, 1995. Currently the Company has one
hospital-based management service contract which generated revenues of $693,884
in 1995, or 20.47% of total revenues. Operating expenses and direct costs
attributable to contract management services in 1995 were $704,736, or
approximately 11.9% of total operating expenses and direct costs, resulting in a
loss of $10,852 to the Company in 1995 from contract management services.
Chestnut Hill Health and Fitness Center contributed revenues of
$380,097, or 11.21% of total revenues in 1995. Operating expenses and direct
costs were $619,514, or 10.4% of total operating expenses and direct costs,
resulting in losses representing 8.4% of total net loss.
(ii) Six Months Ended June 30, 1996 versus 1995
The Company incurred a loss of $383,958 or $(.05) per share for the
period ended June 30, 1996, compared to a loss of $1,038,254 or $(.18) per share
for the period ended June 30, 1995.
During the six months ended June 30, 1996 operating revenues increased
to $3,903,125, or 375%, from the same period in 1995. Revenues from Westmeade
during this period were $2,361,360, or approximately 60% of the Company's total
revenues.
The following table summarizes the contribution to revenues and
operating income (loss) by each of the Company's service lines in the six months
ended June 30, 1996:*
-18-
<PAGE>
<TABLE>
<CAPTION>
Operating
Expenses and Operating
Revenues/ Direct Costs Income
Service Line (% of total)* (% of Total)* (Loss)*
------------ ------------- -------------- -------
<S> <C> <C> <C>
Residential treatment centers $ 2,361,360 $ 2,216,615 $ 144,745
(excluding Lakewood Retreat) (60%) (54%)
Hospital based management $ 387,733 $ 345,532 $ 42,201
services (10%) (9%)
Outpatient Care $ 853,649 $ 976,402 ($ 122,753)
(22%) (24%)
Health and Fitness Center $ 300,383 $ 533,639 ($ 233,256)
(8%) (13%)
</TABLE>
- -----------
*Since a significant number of admissions being referred to Lakewood
Retreat could be served at the Westmeade Center at Wyndmoor, and the Wyndmoor
and Lakewood facilities both were operating below break-even and generating
significant negative cash flow, the Company decided to close Lakewood in the
first half of 1996 to create a profitable base for the Wyndmoor facility. This
decision was also responsive to the increasing trend under managed care to limit
patient referrals to a thirty minute travel radius from the patient's home,
which would increasingly diminish the referral draw of Lakewood. The above table
does not reflect revenues generated by Lakewood prior to its closure, or any
operating costs associated with Lakewood which were charged to a reserve for
closure costs established at year end 1995.
The improvement in operating results in the first half of 1996
reflected the increased level of revenues resulting from the Company's 1995
acquisitions, and certain cost containment and other measures discussed below
which were instituted by the Company in the first half of 1996.
In February 1996, the Company replaced a major accounts receivable
factoring arrangement of approximately $1,000,000 with a different financing
group which provided lower fees and more favorable terms.
As described above in the discussion of the Company's residential
psychiatric treatment centers, the Company closed Lakewood Retreat in the second
quarter of 1996 which contributed to an increased patient census at the
Westmeade Center at Wyndmoor, and an occupancy rate of 85% of the Company's
residential treatment centers in the second quarter, without Lakewood Retreat.
-19-
<PAGE>
In addition, a number of operational changes effected during the first
six months of 1996 which are expected to reduce or eliminate the need to finance
operating deficiencies in the second half of 1996, and to contribute to
long-term profitability. These include centralizing core services such as
accounting, administration, admission intake and marketing; computerization of
billing and collections; and initiation of a system-wide management information
system. The Company has not yet completed this process and will continue to
experience costs associated with this process such as contract renegotiations
costs, staff and position termination costs, recruitment and training costs,
consulting fees, legal fees, hardware and software expenditures.
Also, in the second quarter the Company took a significant step toward
risk-sharing with managed care companies by signing two managed care contracts
with recidivism penalties. One contract structures payment on the basis of a
case rate. The Company did experience some operational losses in adjusting to
these recidivism penalty contracts but such losses were not material. To date no
capitation contracts have been signed. The Company believes the ability to
manage risk-sharing contracts will be increasingly important to maintaining
market share.
(iii) 1995 versus 1994, Proforma with Westmeade
Westmeade accounted for approximately 60% of consolidated revenues for
the six months ended June 30, 1996, and represented 39% of consolidated assets
at June 30, 1996. Because of the significance of Westmeade to current
operations, proforma financial information relating to Westmeade has been
presented as though Westmeade had been acquired on January 1, 1995. Because
Westmeade incurred losses in 1994 and 1995, giving proforma effect to the
acquisition of Westmeade as if that acquisition had occurred on January 1, 1994,
increases the Company's losses in those periods, as follows:
December 31, 1994 December 31, 1995
----------------- -----------------
Revenues $5,103,157 $7,040,746
Net Loss ($2,435,257) ($3,447,019)
Net Loss Per
Common Share ($ .54) ($ .56)
This proforma financial information is presented for information purposes only
and is not necessarily indicative of the operations results that would have
occurred had the acquisition of Westmeade been consummated as of January 1,
1994, nor is it necessarily indicative of future operations results. Proforma
operations results include the proforma amortization of the excess of the
Westmeade acquisition cost over the fair value of net assets purchased over a 40
year period. Additional proforma information for 1995 is presented in Note 4 to
the Company's Consolidated Financial Statements.
-20-
<PAGE>
(c) Liquidity and Capital Resource
(i) December 31, 1995
In 1994, net cash provided by operating activities for the year ended
December 31, 1994, was insufficient to cover the cost of operating activities
and a working capital deficit that existed at the beginning of the year. During
1994, net cash of $683,555 was provided by financing activities to meet these
deficiencies, primarily the opening of lines of credit for Lakewood and
CoreCare, Inc., secured by the personal guarantees and collateral of certain
Company officers. Nevertheless, at year end the Company's current liabilities
exceeded its current assets by $1,257,682, and the Company had a stockholders'
deficiency of $1,576,395.
Primarily as a result of its acquisition program, the sale of equity
securities for cash and the conversion of debt to equity, the Company erased the
deficit in stockholders' equity and, at year-end 1995, reported stockholders'
equity of $2,305,030, with a nearly four fold increase in total assets.
Because of losses incurred in operations, however, and costs incurred
in connection with the implementation of the Company's acquisition program and
related financing transactions, the Company's current position did not improve
correspondingly. Since net cash provided by operating activities in 1995 was
insufficient to cover the working capital deficit that existed at the beginning
of the year, and provide the working capital necessary to support current
operations, these needs were met during 1995 through: the sale of equity
securities ($1,335,000), including certain Westmeade acquisition equity
financing); conversion of short term debt to equity ($104,667); short term bank
borrowings (approximately $350,000 secured by Lakewood Retreat accounts
receivable and personal guarantees of the Company's officers); additional
borrowings (approximately $360,000) from certain investors for a term of one
year; and by extending accounts payable and accrued expenses.
At year end 1995, the Company's current liabilities ($3,936,648)
exceeded its current assets ($1,197,373) by $2,739,275. A substantial portion of
current liabilities at December 31, 1995, represented the current portion of
long-term debt, including $1,150,000 of short term notes acquired with the
Westmeade Center at Warwick which were repaid from the proceeds of a permanent
mortgage in 1996, and $973,000 representing the balance due on the mortgage
facility for Lakewood Retreat, of which $834,000 remained outstanding at June
30, 1996. See "June 30, 1996" below.
(ii) June 30, 1996
At June 30, 1996, the Company's current liabilities ($3,677,629)
exceeded its current assets ($1,697,615) by $1,980,014, for a ratio of current
assets to liabilities of approximately .46, versus a ratio of approximately .30
at December 31, 1995. Approximately 64% of current liabilities at June 30, 1996,
were represented by the current portion of long term debt, including
-21-
<PAGE>
$1,100,000 secured by collateral provided by certain officers of the Company
which is not due until June 30, 1997.
In July 1996, the Company further improved its current position by
repaying $200,000 in short term bridge notes outstanding at June 30, 1996, with
a $500,000 long term subordinated debt facility provided by an institutional
investor.
To further reduce current indebtedness and address its needs for
working capital, the Company initiated an equity financing of $750,000 in August
1996. The Company is placing these securities directly, through its own officers
and directors, and there is no assurance that all or any funds sought through
this means will be raised.
Of immediate concern is the payment or extension of the balance
remaining due on the Lakewood Retreat mortgage (approximately $834,000 at June
30, 1996) which is due September 16, 1996. The Lakewood facility, which was
purchased in 1992 for $1,250,000 and subsequently renovated extensively, has an
appraised value of $2,300,000 and is currently offered for sale. The Company is
negotiating with several prospective buyers of the facility, but the Company
will not be able to complete a sale of the facility before the due date of the
mortgage. The Company is pursuing both an extension of the mortgage debt from
the current lender (which would be short term) and alternative financing
arrangements (which would be long term subject to prepayment upon sale of the
facility). If efforts to effect an amicable extension or refinancing prior to
September 16, 1996, were to fail, and the Company was similarly unable to obtain
the forbearance of its current lender, the Company might be required to seek the
protection of the Bankruptcy Court for Lakewood Retreat, Inc. and its immediate
parent, CoreCare, Inc., in order to permit an orderly liquidation of the
property. In the opinion of management, such an event would not materially
affect the Company's other subsidiaries, which currently represent 100% of
continuing operations. Upon eventual sale of the facility, the Company
anticipates booking a one time non-recurring profit and utilizing cash proceeds
in excess of debt secured by the facility to reduce other indebtedness.
Based on current activities and assuming successful completion of its
$750,000 equity financing, management expects the Company to be able to satisfy
its cash requirements during the remainder of fiscal 1996, excluding repayment
of the Lakewood Retreat balloon principal payment. However, the cash needs of
the Company may vary from month to month depending upon the actual level of
business activity, seasonal influences, and through the first six months of
fiscal 1996 the Company continues to incur losses. Therefore, no assurance can
be given that the Company will generate adequate cash flow to meet cash
obligations required by operations. Given the Company's high ratio of debt to
equity, the excess of current liabilities over current assets at June 30, 1996,
the possible need to support operating cash needs, and the fact that the
Company's business plan calls for continued expansion of its service areas -
geographically, quantitatively and by breadth of services provided within its
existing service lines - by acquisition which will require funds for
acquisition-related costs apart of any financing of the purchase price of
acquired entities, the Company will require significant additional capital to
implement that plan. The Company has no present commitments for and additional
financing
-22-
<PAGE>
and, thus, can give no assurance as to its ability to secure capital as and when
required, or as to the terms of future financings, if any. Failure to secure the
capital needed to implement its business plan could, at a minimum, require the
Company to curtail its plans for growth and, in a worst case situation, cause
the Company to fail.
ITEM 3 - DESCRIPTION OF PROPERTY
The Westmeade Center at Wyndmoor is a stone, four story Victorian style
mansion on a two acre site. The facility houses a reception area, administrative
offices, a kitchen, 11 patient bedrooms, nursing office and station, a
medication room, as well as laundry and linen facilities and recreation areas.
The interior is planned to provide a home-like setting. The monthly rent is
$15,000 through December 31, 1996 and escalates to a maximum of $19,000 at the
end of the lease term. The term of the lease runs through July 31, 2001.
The Westmeade Center at Warwick is comprised of two buildings: the main
house and a renovated barn. The main house consists of a reception area,
offices, a living room, therapy rooms, kitchen and dining area, laundry
facilities, recreation areas and 13 patient bedrooms. The barn is a two-story
structure that houses the education program, offices and storage. The building
is encumbered by a mortgage securing a $1,775,000 loan obtained in June, 1996.
The Company makes a monthly mortgage payment of $18,248.00. While the mortgage
is paid on a 20 year schedule, the principal balance is due in June 2001.
The Company's outpatient care service facilities are leased. AIBC
presently operates an outpatient facility in Greenbrook, NJ, which consists of
approximately 3,800 square feet of office space in a typical commercial office
building. AIBC leases the space for $3,300 per month with a term of November 1,
1995 to October 1, 1998. A second leased facility, located in Hampton, NJ, is no
longer in operation. This office, consisting of approximately 800 square feet of
space in a two story professional building, is rented at a cost of $1,500 per
month, from Marlene Todaro, an officer of AIBC and owner, together with her
husband, also an officer of AIBC and Penn, of approximately 7.6% of the
Company's outstanding Common Stock. Pursuant to its acquisition agreement with
the Todaro's, the Company agreed to continue to pay the rent, which the Company
believes is approximately the same as the mortgage payment. The Company is
seeking a buyer for the property, in which event its obligation for rental would
terminate.
Penn's offices in Easton, PA are leased, and consist of approximately
1,800 square feet on the third floor of a professional office building. The term
of the lease is from January 1996 to January, 2001 with an aggregate rental fee
of $12,215.
The Company's Lakewood Retreat facility in East Stroudsburg, PA, along
with the surrounding acreage (approximately 63 acres in all), is for sale. As of
June 30, 1996, the balance of the first mortgage on this facility, due September
16, 1996, was $834,000. The facility was acquired by the Company in 1992 at a
cost of $1,060,000, and the Company has invested approximately $400,000 in
renovations and improvements.
-23-
<PAGE>
CHHFC leases approximately 7,000 square feet in the Whitemarsh
Professional Center located at 9425 Stenton Avenue, Erdenheim, PA 19038 for the
operation of the health and fitness center. The Company's corporate headquarters
also are located at this location. CHHFC holds the right of first refusal on the
purchase of the Whitemarsh Professional Center. The monthly rental payment under
the lease is $13,396.58.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information as of September 9, 1996 with
respect to the beneficial ownership of the Company's securities by officers and
directors, individually and as a group, and all holders of more than 5% of the
shares of any class of the Company's voting securities. Unless otherwise
indicated, all shares are beneficially owned and sole investment and voting
power is held by the beneficial owners indicated.
On September 9, 1996, there were 9,194,825 shares of Common Stock
outstanding.
-24-
<PAGE>
Number of Shares Beneficially Owned
(% of class)(1)
<TABLE>
<CAPTION>
Series C Series E Series F
Name and Address of Common Series A Preferred Series D Preferred Preferred
Beneficial Owner Stock (2) Preferred (3) Preferred (10) (11)
- ------------------- --------- --------- ----- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
(a) Officers and directors:
Thomas T. Fleming 1,898,044(4) 3,000 -0- -0- -0- -0-
Health Ventures Limited (20.6%) (50%)
9425 Stenton Avenue
Erdenheim, PA 19038
Rose S. DiOttavio 1,800,000(5) 3,000 -0- -0- -0- -0-
Health Ventures Limited (19.6%) (50%)
9425 Stenton Avenue
Erdenheim, PA 19038
Thomas X. Flaherty 405,000 -0- -0- -0- -0- -0-
Value-Added Investment Corp. (4.4%)
1770 E. Lancaster Avenue
Suite 15
Paoli, PA 19301
Officers and Directors as a 4,103,044 6,000 -0- -0- -0- -0-
group (3 persons) (44.6%) (100%)
(b) Other beneficial owners:
Mentor Special Situation 658,333(6) -0- -0- -0- -0- -0-
Fund, L.P. (7.2%)
P.O. Box 560
Yardley, PA 19067
Joseph M. Huber 600,030(7) -0- 9,000 -0- -0- -0-
5 Bryce Road (6.1%) (65.7%)
Voorhees, NJ 08043
Pocono Neuropsychiatric 69,788(8) -0- 1,046.77 -0- -0- -0-
Center, Ltd. (*) (7.6%)
125 Stokes Avenue
Stroudsburg, PA 18360
Chestnut Hill Fitness Club, Inc. 383,351(9) -0- 3,647.3 -0- -0- -0-
9425 Stenton Avenue (4.1%) (26.6%)
Erdenheim, PA 19038
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Series C Series E Series F
Name and Address of Common Series A Preferred Series D Preferred Preferred
Beneficial Owner Stock (2) Preferred (3) Preferred (10) (11)
- --------------------- --------- --------- ----- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
John Gentry, Ph.D 73,334 -0- -0- 850 -0- -0-
43 Langhorne Road (*) (100%)
Chalfont, PA 18914
Phila. Ventures, II, L.P. (12) 993,372(13) -0- -0- -0- 9,933.72 -0-
Phila. Ventures-Japan I, L.P. (9.8%) (75%)
Phila. Ventures-Japan II, L.P.
200 S. Broad Street - 8th Fl.
Philadelphia, PA 19102
Franklin Capital Assoc., L.P. 331,628(14) -0- -0- -0- 3,316.28 -0-
237 Second Avenue South (3.4%) (25%)
Franklin, TN 37064
Maurice L. Stewart 5,000(15) -0- -0- -0- -0- 100
197 Eighth Street - 712 (*) (6.66%)
Charlestown, MA 02129
Anne W. Buck 5,000(16) -0- -0- -0- -0- 100
546 E. Gravers Lane (*) (6.66%)
Wyndmoor, PA 19038
Raymond James & Assoc., Inc. 12,500(17) -0- -0- -0- -0- 250
CSDN FBO: (*) (16.66%)
Burton A. Fleming IRA
45673270
880 Carrillon Pkwy.
P.O. Box 12749
St. Petersburg, FL 33733-2749
Janney Montgomery Scott, Inc. 5,000(18) -0- -0- -0- -0- 100
CSDN FBO: (*) (6.66%)
Harold A. DeHaven, Jr.
1 Roll A/CH2658-9535
1801 Market Street
Philadelphia, PA 19103
Smith Barney As IRA CSDN FBO: 10,000(19) -0- -0- -0- -0- 200
Stephen G. Vasso (*) (13.33%)
652-30811-2-757
1650 Market Street - 45th Floor
Philadelphia, PA 19103
Richard F. Biborisch Profit Sharing 10,000(20) -0- -0- -0- -0- 200
Retirement Plan (*) (13.33%)
645 Lakeview Circle
Newtown Square, PA 19073
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Series C Series E Series F
Name and Address of Common Series A Preferred Series D Preferred Preferred
Beneficial Owner Stock (2) Preferred (3) Preferred (10) (11)
- --------------------- --------- --------- ----- --------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
James F. Rea 7,500(21) -0- -0- -0- -0- 150
c/o Merrill Lynch (*) (10%)
455 S. Gulph Road
King of Prussia, PA 19406
Richard E. Buck 7,500(22) -0- -0- -0- -0- 150
546 E. Gravers Lane (*) (10%)
Wyndmoor, PA 19038
Harvey A. Horowitz 12,500(23) -0- -0- -0- -0- 250
2019 Montgomery Avenue (*) (16.66%)
Villanova, PA 19085
</TABLE>
- -----------
* Less than one percent.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Registration
Statement. In computing the number of shares and the percentage of
outstanding shares of each class of securities held by each person or group
of persons above, any security which such person or persons has or have a
right to acquire within 60 days from the date of this Registration
Statement is deemed outstanding, but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(2) In computing the number of shares and the percentage of outstanding Common
Stock "beneficially owned" by a person who owns any shares of any series of
Convertible Preferred Stock, the shares issuable upon exercise of such
rights to acquire Common Stock owned by such persons, but no other person,
are deemed to be outstanding.
(3) The 13,694.07 shares of Series C Convertible Preferred Stock outstanding
are convertible into Common Stock on the basis of 66.67 shares of Common
Stock per share of Series C Convertible Preferred Stock.
(4) Does not include 140,186 shares of Common Stock owned and 243,165 shares of
Common Stock issuable upon conversion of Series C Convertible Preferred
Stock owned by Chestnut Hill Fitness Club, Inc. Health Ventures Limited, a
consulting firm in which Mr. Fleming is a principal, is a stockholder of
Chestnut Hill Fitness Club, Inc.
(5) Does not include 140,186 shares of Common Stock owned and 243,165 shares of
Common Stock issuable upon conversion of Series C Convertible Preferred
Stock owned by Chestnut Hill Fitness Club, Inc. Health Ventures Limited, a
consulting firm in which Ms. DiOttavio is a principal, is a stockholder of
Chestnut Hill Fitness Club, Inc.
-27-
<PAGE>
(6) Consists of warrants issued to Mentor Special Situation Fund, L.P. and
Mentor Management Company to purchase an aggregate of 658,333 shares of
Common Stock.
(7) Consists of 600,030 shares of Common Stock issuable upon conversion of
Series C Convertible Preferred Stock.
(8) Consists of 69,788 shares of Common Stock issuable upon conversion of
Series C Convertible Preferred Stock.
(9) Includes 243,165 shares of Common Stock issuable upon conversion of Series
C Convertible Preferred Stock.
(10) The 13,250 shares of Series E Convertible Preferred Stock outstanding are
convertible into Common Stock on the basis of 100 shares of Common Stock
per share of Series E Convertible Preferred Stock.
(11) The 1,500 shares of Series F Convertible Preferred Stock outstanding are
convertible into Common Stock on the basis of 50 shares of Common Stock per
share of Series F Convertible Preferred Stock.
(12) Philadelphia Ventures, II, L.P. owns 7,739.8 shares and Philadelphia
Ventures-Japan I, L.P. and Philadelphia Ventures-Japan II, L.P. each own
1,096.96 of these shares of Series E Convertible Preferred Stock. Charles
A. Burton is the general partner of all three of these funds.
(13) Consists of 993,372 shares of Common Stock issuable upon conversion of
Series E Convertible Preferred Stock.
(14) Consists of 331,628 shares of Common Stock issuable upon conversion of
Series E Convertible Preferred Stock.
(15) Consists of 5,000 shares of Common Stock issuable upon conversion of Series
F Convertible Preferred Stock.
(16) Consists of 5,000 shares of Common Stock issuable upon conversion of Series
F Convertible Preferred Stock.
(17) Consists of 12,500 shares of Common Stock issuable upon conversion of
Series F Convertible Preferred Stock.
(18) Consists of 5,000 shares of Common Stock issuable upon conversion of Series
F Convertible Preferred Stock.
-28-
<PAGE>
(19) Consists of 10,000 shares of Common Stock issuable upon conversion of
Series F Convertible Preferred Stock.
(20) Consists of 10,000 shares of Common Stock issuable upon conversion of
Series F Convertible Preferred Stock.
(21) Consists of 7,500 shares of Common Stock issuable upon conversion of Series
F Convertible Preferred Stock.
(22) Consists of 7,500 shares of Common Stock issuable upon conversion of Series
F Convertible Preferred Stock.
(23) Consists of 12,500 shares of Common Stock issuable upon conversion of
Series F Convertible Preferred Stock.
ITEM 5- DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- ---------
Thomas T. Fleming 69 Chairman of the Board of Directors
and Chief Executive Officer
Rose S. DiOttavio 45 President and a Director
Thomas X. Flaherty 34 Treasurer and a Director
Frank Cannon 39 Chief Financial Officer
All directors hold office until the next annual meeting of stockholders
of the Company and until their successors have been elected and qualified. There
are no family relationships among the directors and officers. No director
receives any compensation for serving as director.
Thomas T. Fleming has been Chairman of the Board of Directors of the
Company and Chief Executive Officer of the Company since January 31, 1995. Mr.
Fleming has been Chairman of Lakewood Retreat, Inc. since July 1992 and
CoreCare, Inc. since October 1991.
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<PAGE>
Mr. Fleming has been Chairman of Health Ventures Limited, a consulting
firm specializing in asset-based financial transactions as well as operation
turn-around, since 1986. Mr. Fleming has had over 25 years experience in health
care operations, financing, manufacturing, marketing and real estate
development. Specifically, he was the founder in 1973 of Horsham Clinic and
Horsham Psychiatric Group (includes Wyoming Valley Clinic, The Meadows, The
Cloisters at Pine Island); Senior Vice President of Howmet Corporation; a former
Financial Consultant for Envirodyne, Inc.; Chairman of Capital Home Care Group;
Managing Director of UMS Communities, Inc.; and a General Partner of Holmstead
Properties.
Mr. Fleming also has served as a consultant on various third-party
acquisition transactions including the sale of developed properties for
construction of two personal care homes (JAD Development), acquisition of
Retirement Centers of America from Avon (UMS Corporation), acquisition of Park
Avenue Manor (AmeriCare Partners), financing of Renewal Centers, acquisition and
financing of Whitemarsh Professional Center, acquisition of St. Mary's Hospital
by Neumann Medical Center, and financial restructuring of Senior Lifestyles,
Inc.
Additionally, Mr. Fleming also has served on numerous civic and
corporate Boards of Directors. Most recently, they include Quality Health
Services, Inc.; Renewal Centers, Inc.; Lifequest; Chestnut Hill Community
Association; and The Christmas Revels. Mr. Fleming also was founder and Chairman
of the Christmas Revels, is a former Commissioner of Higher Education (City of
Philadelphia), a former Chairman of Chestnut Hill Academy, and a former Chairman
of The Philadelphia Council for Performing Arts.
Mr. Fleming received a B.A. from Haverford College in 1949 and also
attended Georgetown Foreign Service School. He is a fellow in the American
Institute of Management.
Rose S. DiOttavio has been President of the Company and a director of
the Company since January 31, 1995 and has been President of Lakewood Retreat,
Inc. since July 1992 and CoreCare, Inc. since October 1991. She has focused her
career solely in the health care industry serving in a variety of management
positions and functions including operations troubleshooter, needs assessment,
regulatory compliance, financial feasibility, project development, financial
consulting, operations and fiscal management, expert witness and acquisition due
diligence.
Ms. DiOttavio has been President of Health Ventures Limited since 1986.
She currently serves as a consultant to Standish Care Corporation. Formerly, she
has served as President and Chairperson of Neumann Medical Center; Vice
President of Strategic Planning for Neumann Medical Center; Development
Consultant for UMS Communities, Inc.; Director and Executive Vice President of
Capital Home Care Group; Vice President of Planning and Development for Horsham
Psychiatric Group; Vice President of Operations for Medical Management
Institute; Consultant -- Strategic Planning for Plante & Moran (CPA/Consulting
Firm, Michigan); Deputy Director for Health Systems Agency of Southeastern
Pennsylvania; Senior Planning Associate for Regional Comprehensive Health
Planning Council, Inc.; and Chairperson, Metropolitan Home Health Services, Inc.
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<PAGE>
Ms. DiOttavio holds a B.S. and M.S.H. from the University of Pittsburgh
and its Graduate School of Public Health. She has been noted for distinction in
Outstanding Young Women of America and Who's Who of American Women. She also
serves currently as a Director and Corporate Secretary of Horizon House, a
non-profit organization serving the mentally ill, homeless and disadvantaged.
Thomas X. Flaherty has been Treasurer of the Company since January 31,
1995. Mr. Flaherty has been the President and founder of Value Added Investment
Corporation ("VAIC"), a specialized investment banking and financial consulting
organization headquartered in Narberth, Pennsylvania since March 1990. Prior to
forming VAIC, Mr. Flaherty was a tax consultant with the accounting firms of
Arthur Andersen and Co. and Coopers and Lybrand. Previously, Mr. Flaherty was
employed as a Financial Analyst and Investment Consultant by Shearson Lehman
Brothers. He has held or currently holds licenses as a Certified Public
Accountant and a registered securities broker and commodities broker.
Mr. Flaherty is a recognized speaker and member of the National
Speakers Bureau. He has presented and lectured worldwide on various financial,
business and management topics. Outside of his daily responsibilities as
President of VAIC, Mr. Flaherty also serves as a member of the Board of
Directors of the following corporations and other organizations: Durable Medical
Equipment Corporation; ITI Technical Services, Incorporated; The Marquis
Mortgage Corporation; Park Place Builders, Inc.; Senior Lifestyles Incorporated;
Universal Trade Corporation; Living Younger Longer, Inc.; M & M Opportunities,
Inc.; The Northwestern Corporation; The Northwestern Properties Company;
Northwestern Enterprises, Inc.; The Amica Company; Allied Health Care, Inc.; and
Northwestern Management Services Company.
Frank Cannon, CPA, has been Chief Financial Officer of the Company
since May 1996. Mr. Cannon, a Certified Public Accountant, has over 15 years
experience including both public accounting and private industry. Prior to
joining the Company, Mr. Cannon was Chief Financial Officer of the Med-Atlantic
region of American Medical Response, and was an Audit Manager with the
Philadelphia office of Coopers & Lybrand.
Mr. Cannon holds a B.S. in Accounting from Villanova University, and a
B.A. from LaSalle University. He is also a member of both the American Institute
of Certified Public Accountants and the Pennsylvania Institute of Certified
Public Accountants.
In addition, the Company has several acting vice presidents, each of
whom has some responsibility for a specific segment of the Company's business
but none of whom has discretionary authority and none of whom are considered
executive officers under applicable securities rules.
Key Employee:
Anthony Todaro is the President of AIBC and Penn and has held such
positions for more than the past five years.
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<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION
(a) General:
For the fiscal years ended December 31, 1995, 1994, 1993 and 1992 none
of the Company's officers received any compensation from the Company. In order
to reflect a fair estimate of the cost of services provided by the Company's
Chairman of the Board, Thomas T. Fleming, and President, Rose S. DiOttavio, in
this period, the Company charged operations with $144,000 in each of 1994 and
1995, and credited a like amount to paid in capital. Mr Fleming and Ms.
DiOttavio will receive annual salaries of $72,000 commencing October 1, 1996.
Mr. Flaherty is not expected to receive any compensation from the Company during
1996. From October 27, 1995 through September 1, 1996, David Lovitz, former
President of Westmeade and a Vice President of the Company, received an annual
salary of $110,000. Mr. Lovitz has deferred an aggregate of $15,000 until either
(i) the combined operations of the Wyndmoor and Warwick facilities show a
positive cash flow or (ii) the first anniversary of his employment with the
Company. Mr. Lovitz's employment contract is in the process of being
renegotiated. See (g) below.
(b) Summary Compensation Table:
The following summary compensation table sets forth information
concerning compensation for services rendered in all capacities awarded to,
earned by or paid to the Company's Chief Executive Officer and the next four
most highly compensated executive officers during the year ended December 31,
1995.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------- All Other Annual All Other
Name and Principal Position Salary Bonus ($) Compensation Compensation
- --------------------------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Thomas Fleming, Chairman -0- -0- -0- -0-
of the Board and Chief
Executive Officer
Anthony Todaro, Ph.D. 174,730 -0- -0- -0-
President of AIBC & (1)
Penn (Subsidiaries)
David Lovitz, Senior Vice 98,164 -0- -0- -0-
President (2)
</TABLE>
- -----------
(1) Includes $90,000 compensation earned by Dr. Todaro as an executive
officer of AIBC and Penn prior to their acquisition by the Company in
June 1995.
-32-
<PAGE>
(2) Includes $94,135.30 compensation earned by Mr. Lovitz in his capacity
for Westmeade prior to its acquisition by the Company in October 1995.
(c) Options/SAR Grants: None
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value:
During the fiscal year ended December 31, 1995, no executive officer of
the Company exercised any options. As of December 31, 1995, no executive officer
of the Company owned any unexercised options or SARs.
(e) Long-Term Incentive Plans: None.
(f) Compensation of Directors:
During the fiscal years ended December 31, 1995, 1994 and 1993 no
director of the Company received any compensation for any services provided in
such capacity. Directors of the Company are reimbursed for expenses incurred by
them in connection with their activities on behalf of the Company.
(g) Employment Contracts and Termination of Employment and Change in
Control Arrangements:
The Company and/or its subsidiaries have entered into employment
contracts with Anthony Todaro, Ph.D., and David Lovitz.
Under an Employment and Non-Competition Agreement dated June 30, 1995
between Anthony Todaro, Ph.D., and AIBC, Dr. Todaro is employed as President and
Chief Executive Officer of AIBC for an initial term of four years. Dr. Todaro is
entitled to a base salary of $170,000 each year and management incentive bonuses
equal to 10% of the earnings before interest, depreciation, taxes and
amortization of AIBC.
Under an Employment Agreement effective October 27, 1995 between the
Company, Westmeade and David Lovitz, Mr. Lovitz is employed as Senior Vice
President of the Company and President of Westmeade for an initial term of three
terms. This agreement may automatically renew for one year time periods unless
either party notifies the other in writing at least 90 days prior to the
expiration of any term. Under this agreement, Mr. Lovitz is entitled to an
annual salary of $110,000 and a stock award of 300,000 shares of the Company's
Common Stock on the earlier of either (i) a Public Offering of the Company's
Common Stock, (ii) a Secondary Public Offering of the Company's Common Stock,
(iii) a Change of Control of the Company or (iv) the termination of the
employment agreement. Mr. Lovitz is also entitled to an incentive stock option
of an additional 300,000 shares of the Company's Common Stock for $1.00 per
share under the Employment Agreement. The Company is in the process of
renegotiating Mr. Lovitz's Employment Agreement and, following the
renegotiation, the
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<PAGE>
Company expects that Mr. Lovitz will serve as a consultant to the Company. As
part of that renegotiation, it also is expected that Mr. Lovitz's right to
receive an incentive stock option of $300,000 shares of the Company's Common
Stock will be terminated. Currently, Mr. Lovitz is not acting as an officer of
the Company.
(h) Report on Repricing of Options/SARS: Not Applicable.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company believes that the terms of the transactions described below
were as favorable to the Company as would have been obtained by the Company in
arms-length negotiation with non-affiliated entities.
Facility Renovation
The Lakewood Retreat facility was renovated by Park Place Builders,
Inc. ("Park Place Builders") in 1992. Thomas Flaherty, Treasurer and a director
of the Company is a director of Park Place Builders.
The cost of the renovation, aggregating $350,000, was paid for by
CoreCare's issuance of the following debt to Park Place Builders:
Convertible Subordinated Promissory Note $200,000
Note payable at 8% per annum, due on March 1, 1997 150,000
--------
Total $350,000
========
The $200,000 convertible Subordinated Promissory Note was converted to
the Company's Series B Convertible Preferred Stock at the time of the
acquisition of CoreCare by the Company.
Advances from Affiliates
Prior to 1995, certain corporations affiliated with Thomas Fleming and
Rose DiOttavio made advances to CoreCare from time to time. All such advances
bore interest at a rate of 8% per annum. No advances were made in 1995, and as
of December 31, 1995, there were no balances on such advances.
From time to time Thomas Fleming and Rose DiOttavio have made advances
to the Company. A substantial portion of these advances consisted of funds from
bank financings obtained by Mr. Fleming and Ms. DiOttavio personally, which they
then lent to the Company upon the same terms which they had obtained from the
banks.
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<PAGE>
On December 31, 1995, Mr. Fleming and Ms. DiOttavio converted $92,055
in advances they had made to the Company into 920 shares of the Company's Series
F Convertible Preferred Stock, and on June 30, 1996, converted an additional
$70,000 in advances to 700 shares of the Company's Series F Convertible
Preferred Stock. As of June 30, 1996, there were no outstanding advances from
Mr. Fleming or Ms. DiOttavio other than $184,980 for funds which they had
borrowed from banks and re-lent to the Company ($284,980 at December 31, 1995).
Personal Guarantees by Principal Stockholders
The Company's subsidiaries have approximately $2.5 million in lines of
credit and term loans which either are loans made directly to the Company or its
subsidiaries which are secured by personal guarantees and collateral of Thomas
Fleming, Rose DiOttavio, and in some cases, other members of the Fleming family.
Purchase From Affiliate
In April 1995, CHHFC acquired certain assets of Chestnut Hill Fitness
Club, Inc. The agreed value of the assets purchased was $672,222, payment for
which the Company issued 3,647.3 shares of Series C Convertible Preferred Stock,
140,186 shares of Common Stock, and assumed $167,306 of Chestnut Hill Fitness
Club, Inc.'s liabilities. The principal stockholder of CHFC was Health Ventures
Limited. Thomas Fleming and Rose DiOttavio are principals and stockholders of
Health Ventures Limited.
Exchange of CoreCare Notes for Series B Convertible Preferred Stock
In January, 1995, holders of $565,000 outstanding principal amount of
Secured Subordinated Notes of CoreCare agreed to convert all of the outstanding
principal and a minimum of $72,500 of accrued interest into 6375 shares of the
Company's Series B Convertible Preferred Stock. The conversion was effected on
April 15, 1995. Pursuant thereto, Thomas Fleming exchanged $106,570 of
outstanding principal of and accrued interest on Secured Subordinated Notes of
CoreCare for 1,065.70 shares of Series B Convertible Preferred Stock of the
Company.
Conversion of Series B Convertible Preferred Stock
On June 30, 1996, the four Series B Convertible Preferred stockholders,
including Mr. Fleming, converted their preferred shares and accrued dividends
into Common Stock. The conversion ratio is 92 shares of Common Stock per share
of Series B Convertible Preferred Stock. The aggregate number of common shares
issued was 725,903. The conversion also included accrued and unpaid interest on
the CoreCare Notes totaling $124,582.21 at $1.00 per share.
-35-
<PAGE>
Office Lease
The Company pays approximately $18,000 per year rent for an office
condominium of approximately 800 square feet in Hampton, New Jersey, formerly
used by AIBC. Marlene Todaro is the owner of this property. The rental is
approximately equal to the mortgage payment Mrs. Todaro pays for this property.
The Company has decided to close this office and is, together with Mrs. Todaro,
seeking a buyer for the property. However, pursuant to the acquisition agreement
with AIBC, the Company is obligated to continue to pay this rent.
Conversion of Series C Convertible Preferred Stock
On June 30, 1996, 1,000 shares of the Series C Convertible Preferred
Stock were converted to Common Stock. The conversion ratio is 66.67 shares of
Common Stock per share of Series C Preferred Stock. The aggregate number of
shares issued was 74,462. The conversion also included accrued dividends
totaling $7,791.78 at $1.00 per share.
See Item 4 "Recent Sales of Unregistered Securities" for descriptions
of certain transactions involving acquisitions by the Company.
ITEM 8 - DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, $.001 par value per share, of which 9,194,825 shares are
outstanding as of September 9, 1996, 10,000 shares of Series A Preferred Stock,
7,000 shares of Series B Convertible Preferred Stock, 25,000 shares of Series C
Convertible Preferred Stock and 1,000,000 shares of Preferred Stock as to which
the Board has the power to designate the rights, terms, preferences, etc. Of the
initially undesignated Preferred Stock, 15,000 have been designated as Series D
Preferred Stock, 13,250 shares have been designated as Series E Convertible
Preferred Stock and 6,000 shares have been designated as Series F Convertible
Preferred Stock.
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value per share. As of September 9, 1996, 9,194,825 shares were issued
and outstanding. Holders of Common Stock are entitled to one vote for each share
of Common Stock owned of record on all matters to be voted on by stockholders,
including the election of directors. The holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors, in its discretion, from funds legally available therefor.
The rights of holders of Common Stock to receive dividends are subject
to the dividend rights of the holders of Preferred Stock, as described below.
Similarly, the rights of holders of
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<PAGE>
Common Stock, upon liquidation or dissolution of the Company, are subject to the
preferences afforded to holders of the Company's Preferred Stock.
The Common Stock has no preemptive or other subscription rights, and
there are no conversion rights or redemption provisions. All outstanding shares
of Common Stock are validly issued, fully paid, and nonassessable.
Series A Preferred Stock
The Company has authorized 10,000 shares of Series A Preferred Stock,
$.001 par value per share, of which 6,000 shares are issued and outstanding as
of the date of this Registration Statement. The Company's Series A Preferred
Stock has sixty-five (65) votes per share; a liquidation value of $100.00 per
share ($600,000 in the aggregate) in liquidation of the Company; a preference
over Common Stock to the extent of its liquidation value; and is entitled to
annual dividends in the amount of $4.00 per share (i.e., an annual rate of four
(4%) percent) payable semi-annually in arrears unless and until a "Dividend
Reset Event" occurs. After a Dividend Reset Event, the annual dividend rate on
Series A Preferred will be increased from four (4%) percent to a rate equal to
the "prime rate" as published in the Wall Street Journal as of the last business
day preceding the Dividend Reset Event plus six (6%) percent. The Series A
Preferred is redeemable by the Company, at liquidation value, in whole or in
part, at any time after a Dividend Reset Event, upon not less than thirty (30)
days written notice.
The term "Dividend Reset Event" is defined to mean either (a) a public
offering of equity securities by the Company or any corporation which owns 50%
or more of all classes of the Company's common stock then outstanding
(hereinafter, a "Parent of the Company") which results in the Company's receipt
(or receipt by the Parent of the Company) of not less than $5,000,000 net of
offering underwriting discounts and commissions, or (b) either the Company
and/or the Parent of the Company, on a consolidated basis, having as of any
fiscal year-end stockholders' equity of $12,000,000 or more.
Series B Convertible Preferred Stock
The Company has authorized 7,000 shares of Series B Convertible
Preferred Stock. All previously outstanding shares of Series B Preferred were
converted on June 30, 1996, and as of the date of this Registration Statement,
there were no shares of Series B Preferred outstanding.
Holders of Series B Preferred are entitled to receive annual dividends
equal to the dividends payable on Series A Preferred Stock, and to convert
shares of Series B Preferred into Common Stock on the basis of 92 shares of
Common Stock per share of Series B Preferred Stock, i.e., at an imputed price of
$1.11 per share of Common Stock. Conversion prices/ratios will be adjusted in
the event of any stock splits, dividends on Common Stock payable in Common Stock
or similar events. Series B Preferred Stock has a liquidation value of $100.00
per share in liquidation of the Company.
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<PAGE>
Holders of Series B Preferred are entitled to a number of votes in the
election of directors and on all other matters submitted to stockholders for
their approval or consent which is equal to the number of shares of Common Stock
into which their Series B Preferred is convertible at the time of the meeting at
which the vote is cast or, in the case of an action of stockholders taken
without a formal meeting, on the date of such action. Holders of Series B
Preferred vote as a class with holders of Common Stock, except that, without the
vote or consent of the holders of at least 67% of Series B Preferred then
outstanding, the Company may not (i) create or issue or increase the authorized
number of shares of any class or classes or series of stock, other than the
Series C Convertible Preferred Stock described below, ranking prior to the
Series B Preferred upon liquidation or in the payment of dividends, (ii) amend
or alter or repeal any of the provisions of the Company's Articles of
Incorporation so as to affect adversely the preferences or rights of the Series
B Preferred, or (iii) authorize any reclassification of the Series B Preferred.
The Company has the right to redeem the Series B Shares upon not less
than thirty (30) days written notice.
Series C Convertible Preferred Stock
The Company has authorized 25,000 shares of Series C Convertible
Preferred Stock, of which 13,694.07 shares are issued and outstanding as of the
date of this Registration Statement. Holders of shares of Series C Convertible
Preferred Stock (the "Series C Preferred") are entitled to annual dividends of
$6.00 per share, payable semi-annually.
Each share of Series C Preferred are convertible at the option of its
holder into 66.67 shares of Common Stock, i.e., at an imputed price of $1.50 per
share of Common Stock. Conversion prices/ratios will be adjusted in the event of
any stock splits, dividends on Common Stock payable in Common Stock or similar
events. Series C Preferred Stock has a liquidation value of $100.00 per share in
liquidation of the Company.
Holders of Series C Preferred are entitled to a number of votes in the
election of directors and on all other matters submitted to stockholders for
their approval or consent equal to the number of shares of Common Stock into
which Series C Preferred is convertible at the time of the meeting at which the
vote is cast or, in the case of an action of stockholders taken without a formal
meeting, on the date of such action. Holders of Series C Preferred vote as a
class with holders of Common Stock, except that, without the vote or consent of
the holders of at least 67% of Series C Preferred then outstanding, the Company
may not (i) create or issue or increase the authorized number of shares of any
class or classes or series of stock ranking prior to the Series C Preferred upon
liquidation, (ii) amend or alter or repeal any of the provisions of the
Company's Articles of Incorporation so as to affect adversely the preferences or
rights of the Series C Preferred, or (iii) authorize any reclassification of the
Series C Preferred.
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The Company has the right to redeem the Series C Shares upon not less
than thirty (30) days written notice.
Series D Preferred Stock
The Company's Board of Directors has designated 15,000 shares of its
Preferred Stock as Series D Preferred Stock, of which 750 shares are issued and
outstanding as of the date of this Registration Statement. Holders of shares of
Series D Preferred Stock (the "Series D Preferred") will be entitled to annual
dividends of $6.00 per share, payable semi-annually. Series D Preferred Stock
has a liquidation value of $100.00 per share in liquidation of the Company.
The Company's Series D Preferred Stock has 50 votes per share. Holders
of Series D Preferred will vote as a class with holders of Common Stock, except
that, without the vote or consent of the holders of at least 67% of Series D
Preferred then outstanding, the Company may not (i) create or issue or increase
the authorized number of shares of any class or classes or series of stock
ranking prior to the Series D Preferred upon liquidation, (ii) amend or alter or
repeal any of the provisions of the Company's Articles of Incorporation so as to
affect adversely the preferences or rights of the Series D Preferred, or (iii)
authorize any reclassification of the Series D Preferred. The Company has the
right to redeem the Series D Shares upon not less than thirty (30) days written
notice.
Series E Convertible Preferred Stock
The Company's Board of Directors has designated 13,250 shares of its
Preferred Stock as Series E Preferred Stock, of which 13,250 shares are issued,
and outstanding as of the date of this Registration Statement. Holders of shares
of Series E Preferred Stock (the "Series E Preferred") are entitled to annual
dividends of $6.00 per share payable semi-annually.
Each share of Series E Preferred are convertible at the option of its
holder into 100 shares of Common Stock, i.e., at an imputed price of $1.00 per
share of Common Stock. Conversion prices/ratios will be adjusted in the event of
any stock splits, dividends on Common Stock payable in Common Stock or similar
events. Series E Preferred Stock has a liquidation value of $100.00 per share in
liquidation of the Company.
Holders of Series E Preferred are entitled to a number of votes in the
election of directors and on all other matters submitted to stockholders for
their approval or consent equal to the number of shares of Common Stock into
which Series E Preferred is convertible at the time of the meeting at which the
vote is cast or, in the case of an action of stockholders taken without a formal
meeting, on the date of such action. Holders of Series E Preferred vote as a
class with holders of Common Stock, except that, without the vote or consent of
the holders of at least 67% of Series E Preferred then outstanding, the Company
may not (i) create or issue or increase the authorized number of shares of any
class or classes or series of stock ranking prior to the Series E Preferred upon
liquidation, (ii) amend or alter or repeal any of the provisions of the
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Company's Articles of Incorporation so as to affect adversely the preferences or
rights of the Series E Preferred, or (iii) authorize any reclassification of the
Series E Preferred.
The Company has the right to redeem the Series E Shares upon not less
than thirty (30) days written notice.
Series F Convertible Preferred Stock
The Company's Board of Directors has designated 6,000 shares of its
Preferred Stock as Series F Convertible Preferred Stock, of which 1,500 shares
are issued and outstanding as of the date of this Registration Statement.
Holders of shares of Series F Convertible Preferred Stock (the "Series F
Preferred") are entitled to annual dividends of $6.00 per share, payable
semi-annually.
Each share of Series F Preferred are convertible at the option of its
holder into 50.00 shares of Common Stock, i.e., at an imputed price of $2.00 per
share of Common Stock. Conversion prices/ratios will be adjusted in the event of
any stock splits, dividends on Common Stock payable in Common Stock or similar
events. Series F Preferred has a liquidation value of $100.00 per share in
liquidation of the Company.
Holders of Series F Preferred are entitled to a number of votes in the
election of directors and on all other matters submitted to stockholders for
their approval or consent equal to the number of shares of Common Stock into
which Series F Preferred is convertible at the time of the meeting at which the
vote is cast or, in the case of an action of stockholders taken without a formal
meeting, on the date of such action. Holders of Series F Preferred vote as a
class with holders of Common Stock, except that, without the vote or consent of
the holders of at least 67% of series F Preferred then outstanding, the Company
may not (i) create or issue or increase the authorized number of shares of any
class or classes or series of stock ranking prior to the Series F Preferred upon
liquidation, (ii) amend or alter or repeal any of the provisions of the
Company's Articles of Incorporation so as to affect adversely the preferences or
rights of the Series F Preferred, or (iii) authorize any reclassification of the
Series F Preferred.
The Company has the right to redeem the Series F Shares upon not less
than thirty (30) days written notice.
Undesignated Preferred Stock
The Company's Board of Directors presently has the authority by
resolution to issue up to 965,750 shares of preferred stock in one or more
series and fix the number of shares constituting any such series, the voting
powers, designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations, or restrictions thereof,
including the dividend rights, dividend rate, terms of redemption (including
sinking fund provisions), redemption price or prices, conversion rights and
liquidation preferences of the shares constituting any series, without any
further vote or action by the stockholders. For
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example, the Board of Directors is authorized to issue a series of preferred
stock that would have the right to vote, separately or with any other series of
preferred stock, on any proposed amendment to the Company's Articles of
Incorporation or any other proposed corporate action, including business
combinations and other transactions.
Outstanding Warrants
Prior to the date of this Registration Statement, the Company had
issued the following outstanding Warrants to purchase Common Stock:
<TABLE>
<S> <C> <C>
A. Series WC and WD Warrants:
Exercisable for: 383,737.2 shares. If the Company does not register
the shares for sale under the Securities Act of 1933
by December 1, 1996, the number of shares for
which these warrants are exercisable will increase
by 20%
Exercise Price: $1.125/share
Expiration Date: December 31, 1996 (provided that the expiration
date will be extended until such time as the
Company shall have processed a registration
statement covering the warrant shares and such
registration statement shall have been effective for
90 days)
B. Sage Equities Warrant:
Exercisable for: 50,000 shares
Exercise Price: $2.00/share
Expiration Date: October 17, 1997 (provided that the expiration date
shall be extended until such time as the Company
has processed a registration statement covering the
warrant shares and such registration statement has
been effective for 90 days)
C. Choate Health Management Warrant
Exercisable for: 10% of the Common Stock outstanding on the date
of exercise. In determining the number of shares
outstanding, all securities convertible into common
stock are deemed converted.
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Exercise Price: $2.00/share - Escalates by $.50/share on October
18, 1997, and each October 18 thereafter, to a
maximum of $3.50/share
Expiration Date: October 17, 2000 (provided that the expiration date
shall be extended indefinitely until the Company has
processed a registration statement covering the
warrant shares and such registration statement has
been in effect for 90 days)
D. HealthPartners Funding, L.P. Warrant
Exercisable for: 15,000 shares
Exercise Price: $1.00/share
Expiration Date: December 31, 2000
E. Warrants Issued to Mentor Special Situation Fund and Mentor
Management Company
(i) Exercisable for: 333,333 shares
Exercise Price: $1.50/share
Expiration Date: August 2, 2001
(ii) Exercisable for: 200,000 shares
Exercise Price: $1.00/share
Expiration Date: June 10, 2001
(iii) Exercisable for: 125,000 shares
Exercise Price: $1.50/share
Expiration Date: August 2, 2001
</TABLE>
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Warrant Offering
The Company is currently offering up to 495,000 Series E Warrants as
part of the Rule 504 offering described in response to Item 4 of Part II of this
Registration Statement. Each Series E Warrant is exercisable for one share of
Common Stock, at an exercise price of $3.00 per share, for five years beginning
one year after the termination date of the offering. As of the date of this
Registration Statement, none of the Series E Warrants had been issued.
Transfer Agent
The Company's transfer agent is StockTrans, Inc., 7 East Lancaster
Avenue, Ardmore, PA 19003-2318.
Anti-Takeover Provisions
Although the Board of Directors is not presently aware of any takeover
attempts, the Certificate of Incorporation and Bylaws of the Company and Nevada
law contain certain provisions which may be deemed to be "anti-takeover" in
nature in that such provisions may deter, discourage or make more difficult the
assumption of control of the Company by another corporation or person through a
tender offer, merger, proxy contest or similar transaction or series of
transactions.
Authorized but Unissued Shares: The authorized capital stock of the
Company includes 50,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock. These shares of capital stock were authorized for the purpose
of providing the Board of Directors of the Company with as much flexibility as
possible to issue additional shares for proper corporate purposes, including
equity financing, acquisitions, stock dividends, stock splits, employee stock
option plans, and other similar purposes which could include public offerings or
private placements. Shares of Preferred Stock could be issued quickly with terms
calculated to delay or prevent a change in control of the Company without any
further action by the stockholders.
No Cumulative Voting: Neither the Company's Articles of Incorporation
nor its Bylaws contain provisions for cumulative voting. Cumulative voting
entitles each stockholder to as many votes as equal the number of shares owned
by him multiplied by the number of directors to be elected. With cumulative
voting, a stockholder may cast all these votes for one candidate or distribute
them among any two or more candidates. Thus, cumulative voting for the election
of directors allows a stockholder or group of stockholders who hold less than
50% of the outstanding shares voting to elect one or more members of a board of
directors. Without cumulative voting for the election of directors, the vote of
holders of a plurality of the shares voting is required to elect any member of a
board of directors and would be sufficient to elect all the members of the board
being elected.
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PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
(a) Market Information
The Company's Common Stock is traded over-the-counter on the electronic
bulletin board operated by the National Association of Securities Dealers under
the symbol "CRCS". The following table sets forth the high and low bid prices
quoted for the Company's Common Stock since the acquisition of CoreCare in
January 1995. All activities of the Company prior to its acquisition of CoreCare
have been discontinued and historical stock price information relating to
periods pre-dating the acquisition of CoreCare has been omitted as being
unrelated to the Company's present business activity:
High Low
---- ---
Calendar year 1995
First Quarter 2 3/8 2
Second Quarter 1 5/8 1 1/4
Third Quarter 1 1/4 5/8
Fourth Quarter 1 3/4 1 3/8
Calendar year 1996
First Quarter 1 5/8 1 1/4
Second Quarter 3 3/8 1 3/8
July 1 - September 10 2 3/4 1 1/4
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
(b) Holders
As of September 9, 1996, there were approximately 249 record holders of
the Company's Common Stock.
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(c) Dividends
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that all future earnings will be
retained by the Company to support its growth strategy. Accordingly, the Company
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future. In addition, dividends on Common Stock cannot be paid until all
dividends in arrears on the preferred stock has been paid. The payment of
dividends on Common Stock will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, future earnings, operations,
capital requirements, the general financial condition of the Company,
contractual restrictions and general business conditions. The Company's term
loan and revolving credit facility prohibits the payment of dividends without
the consent of the lenders.
For information concerning dividend rights of holders of the Company's
Preferred Stock, see "Part I, Item 8 - Description of Securities".
ITEM 2 - LEGAL PROCEEDINGS
Union Chelsea National Bank holds a mortgage foreclosure judgment,
entered into by consent, against property owned by the Company's subsidiary,
Lakewood Retreat, Inc. Pursuant to a Loan Modification Agreement executed in
April, 1995 and further extension agreements, Union Chelsea has agreed to take
no action to enforce this judgment before September 16, 1996, when the balance
of the first mortgage on this property ($834,000 at June 30, 1996) is due, and
has given verbal approval to a further extension until December 31, 1996.
In July, 1996, a suit was filed in the Superior Court of New Jersey,
Somerset County by certain therapists formerly associated with the Company's
subsidiaries, AIBC and Penn. The complaint names these subsidiaries as
defendants as well as the Company, Anthony Todaro, Marlene Todaro, Thomas
Fleming and Rose DiOttavio. The suit alleges that the plaintiffs were damaged
because the fees charged by the Company's subsidiaries for providing office
space and management services exceeded the reasonable value of the services
provided by the defendants to the plaintiffs. The suit also claims that the
Company's subsidiaries have not remitted to the plaintiffs an unspecified amount
of fees collected from patients by the subsidiaries which allegedly were to have
been remitted to the plaintiffs. The suit also alleges that the defendants
tortiously interfered with the plaintiffs' contractual relationships with
patients and Managed Care companies, and defamed the plaintiffs. The complaint
does not specify the damages sought by the plaintiffs. Management does not
believe there is any validity to these claims; however, the Company is
re-examining the records to determine whether any fees which should have been
remitted were, in fact, not remitted. The Company believes that the ultimate
resolution of this litigation will not have a material, adverse affect upon the
business, finances or affairs of the Company.
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The employment tax returns for the Company's subsidiary, AIBC are under
audit for the years 1990 through 1992, which are years prior to the Company's
acquisition of AIBC. The Internal Revenue Service ("IRS") has asserted that
AIBC's therapists should have been treated as employees rather than independent
contractors. The Company believes that its treatment of the therapists as
independent contractors is consistent with a longstanding recognized practice of
the therapeutic community. The IRS has recently proposed a settlement in which
the IRS would require a payment of approximately $40,000, provided that AIBC
treat all therapists as employees for federal employment tax purposes beginning
October 1, 1996.
The Company is subject to professional malpractice and related claims
from time to time in the ordinary course of its business. The Company maintains
insurance for these claims; currently, the insurers are defending all such
claims and the Company is confident that its ultimate liability or settlement
obligation in all such claims will be within policy limits.
ITEM 3 - CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
The following sales of securities of the Company took place on the
dates indicated:
(a) Rule 504 Offering - 1996
On August 23, 1996, the Company initiated an offering under Rule 504
("Rule 504"), Regulation D, promulgated under the Securities Act of 1933, as
amended (the "Securities Act") of a maximum of 495,000 Units for $1.50 per Unit.
Each Unit consists of one share of the Company's Common Stock and one Series E
Warrant exercisable for one share of the Company's Common Stock, at an exercise
price of $3.00 per share, for five years beginning one year after the
termination date of the offering. As of the date of this Registration Statement,
this offering was pending.
The shares and warrants to be issued in this offering have not been
registered under Federal or any state laws. Pursuant to Rule 504(b)(1), the
shares and warrants are not "restricted securities", as that term is defined in
Rule 144, promulgated under the Securities Act ("Rule 144"), and the Company
does not intend to impose any restrictions on the resale thereof, except to the
extent that such restriction is required by state law. The shares issued upon
the exercise of the warrants may be deemed "restricted securities" under federal
securities law upon their issuance and subject to restrictions on transfer.
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(b) Shares Issued for Services
In April, June and July of 1996, the Company issued 271,000 shares of
Common Stock as compensation for consulting services rendered. On April 16,
1996, the Company issued 61,000 shares of Common Stock to Select Media, on June
27, 1996, the Company issued an aggregate of 10,000 shares to Phoenix Capital
Corporation and its principal, and on July 11, 1996 the Company issued 200,000
shares of Common Stock to Madison Research Group. The transactions with Select
Media and Madison Research Group were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act. The shares of
Common Stock issued to Select Media and Madison Research Group are restricted
securities as that term is defined in Rule 144 and may be resold only in
compliance with the registration provisions of the Securities Act or an
exemption thereunder. The transaction with Phoenix Capital Corporation was
exempt from registration under Rule 504.
(c) Conversion of Note
On June 30, 1996, the Company issued 26,447 shares of Common Stock to
one holder of a Convertible Note of the Company upon conversion of the principal
and accrued interest of the Note. Such Note was issued by the Company on October
10, 1995 for $25,000. The Share of Common Stock issued in this transaction are
restricted securities under Rule 144 and may be resold only in compliance with
the registration provision of the Securities Act or an exemption thereunder.
This transaction was exempt from registration under the Securities Act pursuant
to Section 4(2) of the Securities Act.
(d) $250,000 Note and Shares of Common Stock
On June 11, 1996, the Company borrowed $250,000 from an individual
accredited investor and stockholder of the Company. The Company's obligation to
repay this loan is evidenced by a Promissory Note which carries a 7% interest
rate, and is payable June 11, 1997. As additional compensation to the lender for
making the loan, the Company issued 50,000 shares of Common Stock for no
additional consideration. For accounting and securities laws compliance (i.e.,
Rule 504 offering amount limitations) purposes, the Company valued these shares
at $100,000. The loan transaction was exempt under Section 4(2) of the Act, and
issuance of the compensation shares was exempt under Rule 504.
(e) $500,000 Subordinated Debt
On August 2, 1996, the Company borrowed approximately $500,000 (the
"Mentor Subdebt) from Mentor Special Situations Fund., L.P. ("Mentor"), $200,000
of which was used to repay a prior "bridge loan" from Mentor to the Company. The
Mentor Subdebt is subordinated to all bank and institutional lender debt of the
Company existing as of the date of the transaction. In connection with its
borrowings from Mentor, including the bridge loan repaid with proceeds of the
Mentor Subdebt, the Company issued to Mentor and its affiliates warrants to
purchase 200,000 shares of the Company's Common Stock at $1.00 per share, with
an
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exercise period of June 11, 1996 through June 10, 2001 and 458,333 shares of the
Company's Common Stock at $1.50 per share, with an exercise period of August 2,
1996 through August 2, 2001. The issuance of securities in the transactions with
Mentor were exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act, and are "restricted securities" as that term
is defined in Rule 144 and which may be resold only in compliance with
registration provisions of the Securities Act or an exemption thereunder.
(f) One Year Notes and Warrants
Between November 1995 and February 1996, in separately negotiated
transactions, the Company borrowed a total of $359,750 from eight individual,
accredited investors, for a term of one year from the date of investment. The
debt is evidenced by Promissory Notes bearing interest at 7% per annum. In
addition, each investor received a warrant to purchase shares of the Company's
Common Stock at $1.125 per share within a defined exercise period. None of the
investors were previously related to the Company. The issuance of these
securities was exempt from registration under Rule 506 of Regulation D.
(g) Acquisition of Westmeade
On October 27, 1995, the Company acquired Westmeade by means of a
merger between a wholly owned subsidiary of the Company and Westmeade, with
Westmeade as the surviving corporation. Pursuant to the terms of the merger,
12,750 shares of the Company's Series E Convertible Preferred Stock were issued
in exchange for, and to extinguish, certain "Investor Notes" held by four
venture capital funds. The aggregate outstanding interest and principal of the
Investor Notes at closing was $2,065,000. The four venture capital funds
included Philadelphia Ventures, II, L.P. Franklin Capital Associates, and two
other funds affiliated with Philadelphia Ventures, II, L.P. At closing,
Philadelphia Ventures, II, L.P. received an additional 500 shares of Series E
Convertible Preferred Stock pursuant to the merger agreement as compensation for
the Company's failure to have Philadelphia Ventures, II, L.P. removed as a
guarantor from certain Westmeade debts.
Also pursuant to the merger agreement, the Company issued 300,000
shares of its Common Stock to the holders of Westmeade's preferred stock, all of
whom had acquired their shares through institutional venture capital
associations and were accredited investors. The holders of Westmeade's common
stock did not receive any Company securities.
Also in connection with the Westmeade acquisition, to finance certain
of the Company's obligations to finance Westmeade operations arising under the
merger agreement, the Company raised $150,000 through the sale of 1,500 shares
of its Series F Convertible Preferred Stock at a price of $10.00 per share to 9
individual accredited investors.
Also in connection with the Westmeade acquisition, the Company issued
150,000 shares of Common Stock to New Health Management Inc. ("New Health").
Initially, New Health was a 50%/50% participant with the Company in the effort
to acquire Westmeade, and these shares
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were issued, along with the Company's payment of a fee of $5,000 and agreement
to pay consulting fees of $2,500 per month for 24 months, to extinguish New
Health's rights to participate in the acquisition. The buyout was completed
prior to the acquisition of Westmeade, in June 1995. The issuance of the shares
was exempt from registration under the Securities Act pursuant to Section 4(2)
of the Securities Act. The shares of the Company's Common Stock issued in this
transaction are "restricted securities" as that term is defined in Rule 144 and
may be resold only in compliance with registration provisions of the Securities
Act or an exemption thereunder.
The issuance of all securities in connection with the Westmeade
acquisition was exempt from registration pursuant to Section 4(2) and/or Rule
506 of Regulation D. The securities issued are "restricted securities" as that
term is defined in Rule 144 and may be resold only in compliance with
registration provisions of the Securities Act or an exemption thereunder.
(h) Choate
On October 18, 1995, when the Company entered into a consulting
agreement with Choate, it also provided Choate with a warrant for 10% of the
Company's Common Stock at escalating exercise prices over time beginning at
$2.00 per share. In connection with this, the Company also issued a $100,000
promissory note to Sage Equities, Inc. which bears an interest rate of 12% per
annum, is due and payable on October 17, 1996 and included a warrant to purchase
50,000 shares of the Company's Common Stock. The Company believes that Sage
Equities, Inc. was an affiliate of Choate at the time of this transaction. This
transaction was exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act.
(i) Acquisition of Managed CareWare
On June 30, 1995, the Company acquired all of the outstanding capital
stock of Managed CareWare by issuing 850 shares of Series "D" Preferred Stock
and 73,334 shares of Common Stock to the Stockholder of Managed CareWare (one
person). This transaction was exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act. The shares of the Company's
Series D Preferred Stock issued in this transaction are "restricted securities"
as that term is defined in Rule 144 and may be resold only in compliance with
registration provisions of the Securities Act or an exemption thereunder.
(j) Acquisition of AIBC and Bio
On June 30, 1995, the Company acquired AIBC and Bio from Marlene and
Anthony Todaro by converting AIBC's outstanding capital stock into 675,000
shares of Common Stock and Bio's outstanding capital stock into 25,000 shares of
the Company's Common Stock for a total exchange of 700,000 shares of Common
Stock. This transaction was exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act.
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(k) Acquisition of Penn
On June 30, 1995, the Company acquired the stock of Penn from Marlene
and Anthony Todaro for a purchase price of $300,000 in the form of a promissory
note payable upon demand on or after April 1, 1996, issued by the Company. The
note was satisfied in July 1996. This transaction was exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act, and the
note issued in this transaction was a restricted securities" as that term is
defined in Rule 144.
(l) Satisfaction of Lakewood Retreat Indebtedness
On May 9, 1995, the Company entered into an agreement with Pocono
Neuropsychiatric Center, Ltd. ("Pocono") whereby Pocono and James A. Taylor,
M.D., a principal of Pocono, agreed to discharge all of Lakewood Retreat's
obligations owed to Pocono and Dr. Taylor in exchange for the Company issuing
1,046.77 shares of Series C Convertible Preferred Stock to Pocono. This
transaction was exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act. The shares of the Company's Series C
Convertible Preferred Stock issued in this transaction are "restricted
securities" as that term is defined in Rule 144 and may be resold only in
compliance with registration provisions of the Securities Act or an exemption
thereunder.
(m) Acquisition of Assets of CHHFC
In April 1995, the Company acquired assets of Chestnut Hill Fitness
Club, Inc. ("CHFC"). The purchase price of the assets was $672,222 payable with
3,647.3 shares of the Company's Series "C" Convertible Preferred Stock, 140,186
shares of the Company's Common Stock and the assumption by the Company of
$167,306 of CHFC's liabilities. Thomas Fleming and Rose DiOttavio together
controlled a majority of CHFC's voting stock prior to the acquisition by CHHFC.
See "Part I, Item 7 - Certain Relationships and Related Transactions." This
transaction was exempt from registration under the Securities Act pursuant to
Section 4(2) of the Securities Act. The shares of the Company's Common Stock and
Series C Convertible Preferred Stock issued in this transaction and any shares
of the Company's Common Stock issued upon conversion of such shares of Series C
Convertible Preferred Stock are "restricted securities" as that term is defined
in Rule 144 and may be resold only in compliance with registration provisions of
the Securities Act or an exemption thereunder.
(n) Options/Common Stock upon Exercise of Options
On April 3, 1995, the Company's Board of Directors approved the
issuance of an option for 200,000 shares of the Company's Common Stock at $.58
per share to a financial consultant, Phoenix Capital, Inc. On May 22, 1996, the
option was exercised. This transaction was exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act.
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(o) Acquisition of CareGroup
On March 24, 1995, the Company acquired all of the outstanding capital
stock of CareGroup 10,000 shares of Series "C" Convertible Preferred Stock of
the Company to the stockholders of CareGroup (two persons). The prior owners of
CareGroup were not affiliated with the Company at the time of the acquisitions.
This transaction was exempt from registration under the Securities Act pursuant
to Section 4(2) of the Securities Act. The shares of the Company's Series C
Convertible Preferred Stock issued in this transaction are "restricted
securities" as that term is defined in Rule 144 and may be resold only in
compliance with registration provisions of the Securities Act or an exemption
thereunder.
(p) Rule 504 Offering - 1995
On February 10, 1995, the Company initiated an equity placement under
Rule 504 in which 975,000 shares were sold at $1.00 per share to a total of 29
investors, none of whom prior to or following the purchase was an affiliate of
the Company. Shares purchased in this offering were not registered under Federal
or any state laws. Pursuant to Rule 504(b)(1), the shares are not "restricted
securities" as that term is defined in Rule 144, and the Company did not impose
any restrictions on the resale thereof in the offering.
(q) Acquisition of CoreCare
On January 31, 1995, the Company acquired all of the outstanding
capital stock of CoreCare, Inc. in exchange for 4,500,000 shares of the
Company's Common Stock and 6,000 shares of the Company's Series A Preferred
Stock from holders of CoreCare, Inc. Common Stock and Series A Preferred Stock
(six persons, including Thomas Fleming, Thomas Flaherty and Rose DiOttavio). See
"Part I, Item 4 - Security Ownership of Certain Beneficial Owners and
Management." This transaction was exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act. The shares of the Company's
Common Stock and Series A Preferred Stock issued in this transaction are
"restricted securities" as that term is defined in Rule 144 and may be resold
only in compliance with registration provisions of the Securities Act or an
exemption thereunder.
In connection with the CoreCare, Inc. acquisition, holders of $565,000
outstanding principal amount of Secured Subordinated Notes of CoreCare, Inc.
(five persons, including Thomas Fleming) agreed to convert, subject to the
satisfaction of certain post-acquisition conditions, all of the outstanding
principal of $565,000 and a minimum of $72,500 of accrued interest into 6,375
shares of the Company's Series B Convertible Preferred Stock. The conversion was
effected in April 1995. See "Part I, Item 4 - Security Ownership of Certain
Beneficial Owners and Management." This transaction was exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act. The
shares of the Company's Series B Convertible Preferred Stock issued in this
transaction and any shares of the Company's Common Stock issued upon conversion
of such shares of Series B Convertible Preferred Stock
-51-
<PAGE>
are "restricted securities" as that term is defined in Rule 144 and may be
resold only in compliance with registration provisions of the Securities Act or
an exemption thereunder.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation contains a provision permitted
by Nevada law which eliminates the personal liability of the Company's directors
for monetary damages for breach of their fiduciary duty of care which arises
under state law. Although this does not change the directors' duty of care, it
limits legal remedies which are available for breach of that duty to equitable
remedies, such as an injunction or rescission. The provision of the Company's
Articles of Incorporation has no effect on directors' liability for: (1) breach
of the directors' duty of loyalty; (2) acts or omissions not in good faith or
involving intentional misconduct or known violations of law; and (3) approval of
any transactions from which the directors derive an improper personal benefit.
The Nevada statute permits indemnification of directors and employees
of a corporation under certain conditions and subject to certain limitations.
-52-
<PAGE>
PART F/S
FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report........................................... 2
Consolidated Balance Sheets............................................ 3-4
Consolidated Statements of Operations.................................. 5
Consolidated Statements of Changes in
Shareholders' Equity................................................... 6
Consolidated Statements of Cash Flows.................................. 7
Notes to Consolidated Financial Statements............................. 8-30
-53-
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
CoreCare Systems, Inc.
Erdenheim, Pennsylvania
We have audited the accompanying consolidated balance sheets of CoreCare
Systems, Inc. as of December 31, 1995, and the related consolidated statements
of operations, changes in shareholders' equity, and cash flows for the two years
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the financial position of CoreCare Systems, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
two years then ended in conformity with generally accepted accounting
principles.
SCHIFFMAN HUGHES BROWN
Certified Public Accountants
Blue Bell, Pennsylvania
July 3, 1996
2
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1995 1996
---- ----
(Unaudited)
Current assets:
Cash $ 133,546 $ 388,397
Accounts receivable, net (Note 5) 998,725 1,307,409
Other 65,102 1,809
---------- ----------
Total current assets 1,197,373 1,697,615
---------- ----------
Contract rights, net of amortization of $25,939
at June 30, 1996 and $137,883 at December 31, 1995
(Note 3) 781,334 673,337
---------- ----------
Real estate held for sale or development (Note 4) 115,857 115,857
---------- ----------
Property, plant and equipment net (Note 6) 4,038,632 3,919,247
---------- ----------
Other assets:
Goodwill, net of amortization of $40,870 at
June 30, 1996 and $13,545 at December 31, 1995 2,172,490 2,145,165
Deferred finance costs, net of amortization of
$11,849 at June 30, 1996 and $23,679 at
December 31, 1995 30,211 329,892
Deferred rent 65,000 54,167
Security deposits 43,976 68,976
Restricted cash 26,156 26,156
Other 41,860
---------- ----------
2,337,833 2,666,216
---------- ----------
Total assets $8,471,029 $9,072,272
========== ==========
See independent auditor's report and notes to financial statements
3
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt (Note 7) $ 1,956,095 $ 2,364,058
Obligations under capital lease, current (Note 9) 45,504 41,148
Accounts payable 676,170 506,263
Advances, officers-shareholders 284,980 184,980
Accrued expenses and payroll taxes payable 824,421 581,180
Accrued restructuring costs (Note 10) 434,458
----------- -----------
Total current liabilities 3,936,648 3,677,629
----------- -----------
Long-term debt, net of current portion (Note 7) 1,875,000 2,906,972
----------- -----------
Obligations under capital leases, non current (Note 15) 69,371 40,106
----------- -----------
Commitments and contingencies (Note 16)
Shareholders' equity (Notes 3 and 8):
Preferred stock 58 51
Common stock 7,832 9,113
Additional paid in capital 7,382,009 7,907,228
Accumulated deficit (5,084,869) (5,468,827)
----------- -----------
Total shareholders' equity 2,305,030 2,447,565
----------- -----------
Total liabilities and shareholders' deficiency $ 8,471,029 $ 9,072,272
=========== ===========
</TABLE>
See independent auditor's report and notes to financial statements
4
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------------- ---------------------
1995 1994 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Net patient service revenue $ 2,314,853 $ 725,585 $ 561,022 $ 3,215,009
Management service revenue 693,884 168,389 387,733
Fitness club revenue 380,097 91,998 300,383
----------- ----------- ----------- -----------
3,388,834 725,585 821,409 3,903,125
Direct costs 644,169
Patient services 1,442,049 464,532 1,506,742
Management services 272,424 88,400 325,336
Fitness club 92,439 29,467 113,538
----------- ----------- ----------- -----------
Gross profit 1,581,922 81,416 239,010 1,957,509
----------- ----------- ----------- -----------
Operating expenses:
Salaries and employee benefits 989,496 376,319 318,933 777,127
Selling and administrative 2,232,840 416,820 515,542 927,225
Restructuring expense 635,556
Amortization 180,901 9,353 58,933 123,156
Depreciation 114,898 57,713 36,400 124,760
Bad debt expense 221,122 174,304
----------- ----------- ----------- -----------
Total operating expenses 4,153,691 860,205 1,150,930 2,126,572
----------- ----------- ----------- -----------
Income (loss) from operations (2,571,769) (778,789) (911,920) (169,063)
----------- ----------- ----------- -----------
Non-operating expenses:
Interest expense, net 287,194 310,048 126,334 179,523
Other expense 6,841 18,398 35,372
----------- ----------- ----------- -----------
294,035 328,446 126,334 214,895
----------- ----------- ----------- -----------
Net loss $(2,865,804) $(1,107,235) $(1,038,254) $ (383,958)
=========== =========== =========== ===========
Net loss per common share $ (.47) $ (.25) $ (.18) $ (.05)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 6,109,728 4,500,000 5,684,233 7,907,714
=========== =========== =========== ===========
</TABLE>
See independent auditor's report and notes to financial statements
5
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Additional
Common Stock Preferred Stock Paid In Accumulated
Shares Par Value Shares Par Value Capital Deficit Total
------ --------- ------ --------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 80 $ 80 20 $20 $ 498,570 $(1,111,830) $ (613,160)
Contributed capital for services 144,000 144,000
Net loss for year ended
December 31, 1994 (1,107,235) (1,107,235)
--------- ------ ------ --- ---------- ----------- -----------
Balance, December 31, 1994 80 80 20 20 642,570 (2,219,065) (1,576,395)
Net loss for year ended
December 31, 1995 (2,865,804) (2,865,804)
Recapitalization 5,453,357 5,373 5,980 5,373
Issuance of stock 2,378,520 2,379 38,240 38 6,595,439 6,597,856
Contributed capital for services 144,000 144,000
--------- ------ ------ --- ---------- ----------- -----------
7,831,957 7,832 44,240 58 7,382,009 (5,084,869) 2,305,030
Net loss for the six months ended
June 30, 1996 (383,958) (383,958)
Issuance of preferred stock 700 1 69,999 70,000
Conversion of accrued interest on
debenture to preferred stock 723 1 1
Issuance of stock 347,447 347 311,653 312,000
Conversion of preferred stock to
common stock 933,743 934 (8,940) (9) 71,567 72,492
Contributed capital for services 72,000 72,000
--------- ------ ------ --- ---------- ----------- -----------
9,113,147 $9,113 36,723 $51 $7,907,228 $(5,468,827) $ 2,447,565
========= ====== ====== === ========== =========== ===========
</TABLE>
See independent auditor's report and notes to financial statements
6
<PAGE>
CORECARE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
---------------------------- ---------------------------
1995 1994 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,865,804) $(1,107,235) $(1,038,254) $ (383,958)
Non-cash adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation 114,898 57,713 104,646 124,760
Amortization 180,901 15,961 123,156
Allowance for doubtful accounts 184,604 140,000 174,304
Restructuring expense 635,546
(Increase) decrease in operating assets:
Accounts receivable (696,209) (180,422) (501,851) (482,988)
Other current assets (34,857) 2,603 (253,243) 63,293
Deposits (74,932) (25,000)
Deferred costs (65,000) (291,005)
Other assets (41,860)
Increase (decrease) in operating liabilities:
Accounts payable 559,790 53,765 230,859 (169,904)
Accrued expenses and payroll taxes payable 68,116 339,826 (312,044) (594,747)
Notes payable, other (4,692)
----------- ----------- ----------- -----------
Net cash used in operating activities (1,918,015) (682,481) (1,844,819) (1,503,949)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Businesses acquired (4,663,150) (2,604,392)
Purchase of property and equipment (12,351) (381,802) (1,511)
----------- ----------- ----------- -----------
Net cash used in investing activities (4,663,150) (12,351) (2,986,194) (1,511)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Advances exchanged for preferred stock 70,000
Proceeds from issuance of stock 6,603,229 5,333,604 312,000
Contributed capital for services 144,000 144,000 72,000 72,000
Advances from officers 247,811 14,069 173,171 (100,000)
Loans from related parties (54,201) 18,398
Repayment of notes (917,000) (174,848)
Repayment of lease obligations 48,237 (33,621)
Proceeds from short and long term debt 687,250 458,851 (54,201) 3,719,614
Repayment of short and long term debt (2,279,679)
----------- ----------- ----------- -----------
Net cash provided by financing activities 6,711,089 683,555 5,349,726 1,760,311
----------- ----------- ----------- -----------
Net increase (decrease) in cash 129,924 (11,277) 518,713 254,851
Cash, beginning of year 3,622 14,899 3,622 133,546
----------- ----------- ----------- -----------
Cash, end of year $ 133,546 $ 3,622 $ 522,335 $ 388,397
=========== =========== =========== ===========
Supplemental disclosures of cash flows information:
Interest paid $ 316,466 $ 188,378 $ 215,283
=========== =========== ===========
Taxes paid $ -0- $ -0- $ -0- $ -0-
=========== =========== =========== ===========
Non-cash financing activities:
Proceeds from issuance of stock $ 5,536,173 $ 5,083,604 $ 196,000
=========== =========== ===========
Contributed capital for services $ 144,000 $ 144,000 $ 72,000 $ 72,000
=========== =========== =========== ===========
Repayment of advances $ 92,056 $ 70,000
=========== ===========
Issuance of preferred stock for notes payable
and accrued interest $ 562,000 $ 562,000 $ 72,493
=========== =========== ===========
Non-cash investing activities:
Businesses acquired $ 4,633,150 $ 2,304,382
=========== ===========
Common stock issued for services $ 174,393
===========
</TABLE>
See independent auditor's report and notes to financial statements
7
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
1. The Business:
CoreCare Systems, Inc. (the "Company") is a Nevada corporation which was
incorporated in August 1991 in order to effect a change in the state of
incorporation of a predecessor corporation which had been incorporated in
Utah, as Execu-Serve, Inc., in 1984.
On January 31, 1995, the Company acquired all of the outstanding capital
stock of CoreCare, Inc., a privately-held Pennsylvania corporation, in
exchange for 4,500,000 shares of the Company's Common Stock and 6,000
shares of newly-authorized Series A Preferred Stock of the Company. The
capital stock of the Company received by former CoreCare-PA shareholders in
this stock for stock exchange represented approximately 82% of the
outstanding voting stock of the Company immediately following the
acquisition. Thus, the acquisition of CoreCare, Inc. by the Company was
accounted for as a "reverse acquisition", i.e., CoreCare, Inc. was deemed
to be the acquiring corporation for financial reporting purposes. Under
reverse acquisition accounting principles, the consolidated financial
statements of the Company were restated to include the historical
consolidated financial information of CoreCare, Inc. and the assets and
liabilities of the Company as of the acquisition date.
2. Summary of significant accounting policies:
Principles of consolidation:
The 1995 and 1994 financial statements of the Company include the accounts
of CoreCare Systems, Inc., and its wholly owned subsidiaries.
All material inter-company accounts and transactions have been eliminated
in consolidation.
8
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
2. Summary of significant accounting policies (continued):
Net patient service revenue:
Patient service revenue is recorded net of contractual allowances and
accounted for using the accrual method of accounting based upon the
Company's established standard rates; recorded during the period in which
the services are provided. Contractual and other allowances including
uncollectible amounts are accounted for on the accrual basis so as to
include actual net revenue amounts which are expected to be realized
through payments from third-party payors and others.
Goodwill and contract rights:
Costs in excess of the fair value of net assets acquired are being
amortized on a straight-line basis over a 40 year period.
Contract rights are being amortized on a straight-line method over a 5 year
period.
Real estate held for sale or development:
The Company owns 56.7 plus or minus acres of developable, unimproved
land which is recorded at cost.
9
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
2. Summary of significant accounting policies (continued):
Property, plant and equipment and depreciation:
Property, plant and equipment are stated at cost less accumulated
depreciation. Additions and betterments are capitalized and maintenance and
repairs are charged to current operations. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation and
amortization are removed from the accounts and the gain or loss on such
dispositions is included in current operations. Depreciation is provided
using the straight line method. Estimated useful lives of the assets are:
Building 31.5 years
Building improvements 31.5 to 39 years
Furniture and equipment 5 to 7 years
Automobiles 5 years
Deferred finance costs:
Deferred finance costs arising from the acquisition of long term debt are
being amortized, using the straight-line method over the terms of the
related subordinated convertible promissory notes.
Net loss per common share:
Net loss per common share for all periods has been computed by dividing the
net loss applicable to common stock by the weighted average number of
shares of common stock outstanding during the period.
10
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
3. Acquisitions:
Through the issuance of certain capital stock (see Note 8) during 1995, the
Company acquired the following entities which became wholly owned
subsidiaries of the Company:
Chestnut Hill Health and Fitness Center, Inc.:
On March 17, 1995 (effective as of April 3, 1995), Chestnut Hill Health and
Fitness Center, Inc. ("CHHFC") acquired certain assets of the business of
Chestnut Hill Fitness Club ("CHFC"). The purchase price of the assets was
$504,916 payable with 3,647.3 shares of the Company's Series "C"
Convertible Preferred Stock to CHFC, 140,186 shares of the Company's Common
Stock and the assumption by the Company of $167,306 of CHFC's liabilities.
Prior to the acquisition by CHHFC, the two principal officers of the
Company together controlled a majority of CHFC's voting stock. The purchase
price was allocated to equipment, furniture and fixtures, and contracts.
CoreCare Behavioral Health Management Inc.:
On March 24, 1995, the Company acquired all of the outstanding capital
stock of the CoreCare Behavioral Health Management, Inc. for $662,495. The
Company paid for the acquisition by issuing 10,000 shares of Series "C"
Convertible Preferred Stock to the selling stockholders of CareGroup. The
purchase price has been allocated to contract rights which are being
amortized over five years.
Managed CareWare:
On June 30, 1995, the Company acquired all of the outstanding capital stock
of Managed CareWare for $200,000 through the issuance, to the selling
Stockholder of Managed CareWare, of 850 shares of the Company's Series "D"
Convertible Preferred Stock and 73,334 shares of the Company's Common
Stock. The purchase price has been allocated to proprietary software.
11
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
3. Acquisitions (continued):
American Institute for Behavioral Counseling:
On June 30, 1995, the Company acquired American Institute for Behavioral
Counseling ("AIBC") and Bio Diagnostic Technologies ("BIO") for $700,000 by
converting AIBC's outstanding capital stock into 675,000 shares of the
Company's Common Stock and BIO's outstanding capital stock into 25,000
shares of Common Stock for a total exchange of 700,000 shares of the
Company's Common Stock. Accrual basis financial information is not
available for periods prior to the date of acquisition.
Penn Communications, Inc.:
On June 30, 1995, the Company acquired 100% of the outstanding common stock
of Penn Interpersonal Communications, Inc. ("PENN") for $300,000 by issuing
a $300,000 promissory note which is payable upon demand on or after April
1, 1996. The parties have extended the due date of this Note to July 31,
1996 in exchange for the principal payment of $25,000 at signing with
subsequent payments of $15,000 on June 1, 1996 and $15,000 on July 1, 1996.
Accrual basis financial information is not available for periods prior to
the date of acquisition.
Westmeade Healthcare, Inc.:
On October 27, 1995, the Company acquired 100% of the outstanding common
stock and preferred stock of Westmeade Healthcare, Inc. for $2,295,738 by
issuing 13,250 shares of CoreCare Series "E" Convertible Preferred Stock,
by exchanging Westmeade "Investor Notes" in an aggregate principal amount
of $2,065,000, including all unpaid interest of $345,901 and 300,000 shares
of CoreCare Common Stock (in exchange for Westmeade Preferred Stock). In
addition, the Company issued 150,000 shares of its Common Stock and paid
$50,000 plus fees to acquire the acquisition rights to Westmeade from a
third party. For the years ended December 31, 1995 and 1994, Westmeade had
net patient revenue of $4,342,000 and $4,376,000, respectively, and net
losses of $529,000 and $1,328,000, respectively.
12
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
3. Acquisitions (continued):
The following proforma statement of operations information for CoreCare
Systems, Inc. is presented as though the acquisition of Westmeade has
occurred on January 1, 1995:
December 31, 1995
-----------------
Revenue:
Net patient service revenue $ 5,966,765
Management service revenue 693,884
Fitness club revenue 380,097
-----------
7,040,746
Direct costs
Patient services 3,453,790
Management services 272,424
Fitness club 92,439
-----------
Gross profit 3,222,093
-----------
Operating expenses:
Salaries and employee benefits 1,824,343
Selling and administrative 2,868,331
Restructuring expense 635,556
Amortization 213,763
Depreciation 179,105
-----------
Total operating expenses 5,721,098
-----------
Income (loss) from operations (2,499,005)
Non-operating expenses:
Interest expense, net 572,693
Other expense 375,321
-----------
948,014
Net loss $(3,447,019)
===========
Net loss per common share $ (.56)
===========
Weighted average number of common shares 6,109,728
===========
13
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
3. Acquisitions (continued):
The proforma financial information is presented for information purposes
only and is not necessarily indicative of the operating results that would
have occurred had the acquisition of Westmeade been consummated as of the
above dates, nor are they necessarily indicative of future operating
results. The operating results include the amortization of the excess of
cost over fair value of net assets purchased which is being amortized over
40 years.
The aforementioned acquisitions have been accounted for by using the
purchase method of accounting. Accordingly, the purchase price was
allocated to assets and liabilities acquired based upon their estimated
fair values at the dates of acquisition. The results of operations of the
acquired companies are included in the consolidated financial statements
from the respective dates of acquisition.
4. Real estate held for sale or development:
In connection with the acquisition of Lakewood Retreat, Inc., on July 22,
1992, the Company purchased real estate which included 56.7 plus or minus
acres of unimproved developable land. The cost allocated to the developable
land, of $115,857, is based upon the then fair market value of the
unimproved developable land. The Company has adopted FASB Statement No. 121
and the real estate is valued at the lower of cost or net realizable value.
In the opinion of management, the unimproved land can be developed into
approximately 35 single family home lots. It is management's intention to
sell the property and, therefore, has recorded the asset as real estate
held for sale or development.
5. Accounts receivable:
In December, 1993, a subsidiary of the company entered into an agreement
whereby it can sell, on a revolving basis, up to $1,000,000 of certain
accounts receivable. The subsidiary has the obligation to repurchase
defaulted accounts receivable in accordance with specific conditions. Upon
the sale of the accounts receivable, the subsidiary receives proceeds of
approximately 80% of such receivables with up to 19% held in certain
reserves. The reserves are maintained as a fixed percentage of the
cumulative balance of sold and unpaid receivables. Excess reserves are
remitted to the subsidiary.
14
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
5. Accounts receivable (continued):
Accounts receivable are comprised of the following:
December 31, June 30,
1995 1996
---- ----
Total accounts receivable $2,568,898 $3,608,656
Accounts receivable, sold 766,281 1,323,052
---------- ----------
1,802,617 2,285,604
Allowance for doubtful accounts 803,892 978,195
---------- ----------
Accounts receivable, net $ 998,725 $1,307,409
========== ==========
6. Property, plant and equipment:
Property, plant and equipment is classified as follows:
December 31, June 30,
1995 1996
---- ----
Land $ 476,492 $ 476,492
Building 2,691,726 2,691,726
Building improvements 564,380 564,380
Furniture and equipment 546,882 548,393
Automobiles 91,885 91,885
Property held for licensing (a) 200,000 200,000
Furniture and equipment under
capital lease 213,418 213,418
----------- ----------
4,784,783 4,786,294
Less: Accumulated depreciation 746,151 867,047
----------- ----------
$4,038,632 $3,919,247
========== ==========
- ----------
(a) Upon the purchase of Managed CareWare, the Company acquired proprietary
software which will be exploited through licensing relationships with
customer users.
15
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
7. Long term debt:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ --------
<S> <C> <C>
Mortgage note payable: $ 973,000 $834,000
Payable in monthly installments of
$3,500 plus interest at the rate of
11% per annum. The mortgage is
collateralized by assets of Lakewood
which include real estate held for
sale or development and property,
plant and equipment having a carrying
value of $1,631,973. The note was to
mature on April 19, 1996 but was
extended to September 16, 1996. The
terms for the extension require the
Company to reduce the principal
$50,000 in June, July and August of
1996 and to issue 15,000 shares of
its common stock.
Notes payable, banks:
At December 31, 1995, the
Company had four promissory notes
payable with one bank totaling
$725,000. The notes bear interest
at rates from 8.75% to 11.25% per
annum and were due on March 15, 1996.
The notes were collateralized by
letters of credit secured by
personal assets of the Company's
Chairman and President. This debt was
refinanced during March, 1996. (Continued)
</TABLE>
16
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
7. Long term debt (continued):
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ --------
<S> <C> <C>
The refinanced note, which becomes due
during June, 1997, bears interest at the
bank's prime rate. Interest is payable
monthly. The note is collateralized by
securities. $ 725,000 $1,100,000
At December 31, 1995, the Company had a
note with one bank totaling $1,000,000
bearing interest at prime plus 1.5%
and due on demand. This obligation was
collateralized by a mortgage on real
estate of Westmeade Healthcare, Inc.
This note was refinanced during June,
1996. The refinanced permanent mortgage accrues
interest at the rate of 10.94%
per annum and is being amortized over
a 20 year period. Property, plant and
equipment costing $1,727,604 are
pledged as collateral. 1,000,000 1,775,000
Notes which bear interest at rates
from 9.75% to 11.75% per annum and
become due during 1996. 213,028 189,063
Investor notes bearing interest from 6% to 15%
per annum and maturing throughout 1996 and 1997. 620,067 1,222,967
</TABLE>
17
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
7. Long term debt (continued):
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ --------
<S> <C> <C>
Note payable bearing interest at the rate of
8% per annum due upon successful filing of a
Regulation 5 Underwriting. 150,000 150,000
Subordinated note payable bearing interest
at 9% due on demand. This obligation was
refinanced during June, 1996. 150,000
---------- ----------
3,831,095 5,271,030
Less amount due in one year 1,956,095 2,364,058
---------- ----------
$1,875,000 $2,906,972
========== ==========
</TABLE>
8. Description of securities:
Authorized shares:
The authorized capital stock of the Company includes 50,000,000 shares of
common stock and 1,000,000 shares of Preferred Stock. These shares of
capital stock were authorized for the purpose of providing the Board of
Directors of the Company with as much flexibility as possible to issue
additional shares for proper corporate purposes, including equity
financing, acquisitions, stock dividends, stock splits, employee stock
option plans, and other similar purposes which could include public
offerings or private placements.
Common stock:
Of the authorized shares of common stock, $.001 par value, 7,831,957 and
9,113,147 shares were issued and outstanding as of December 31, 1995 and
June 30, 1996, respectively. The par value is $.001 per common share.
Holders of Common Stock are entitled to one vote for each share of Common
Stock owned of record on all matters to be voted on by stockholders,
including the election of directors. The holders of Common Stock are
entitled to receive such dividends, if any, as may be declared from time
to time by the Board of Directors, in its discretion, from funds legally
available therefor.
18
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
8. Description of securities (continued):
The rights of holders of Common Stock to receive dividends are subject to
the dividend rights of the holders of Preferred Stock, as described
below. Similarly, the rights of holders of Common Stock, upon liquidation
or dissolution of the Company, is subject to the preferences afforded to
holders of the Company's Preferred Stock.
The common stock has no preemptive or other subscription rights, and
there are no conversion rights or redemption provisions. All outstanding
shares of Common Stock are validly issued, fully paid, and nonassessable.
Preferred stock:
Holders of Preferred Stock vote as a class with holders of Common Stock,
except that, without the vote or consent of the holder of at least 67% of
the respective Preferred Stock then outstanding, the Company may not
(i) create or issue or increase the authorized number of shares of any
class or classes or series of stock ranking prior to the Preferred Stock
upon liquidation, (ii) amend or alter or repeal any of the provisions of
the Company's Articles of Incorporation so as to affect adversely the
preferences or rights of the Preferred Stock, or (iii) authorize any
reclassification of the Preferred Stock. The Company has the right to
redeem the Preferred Stock upon not less than thirty (30) days written
notice.
Holders of Series B, C, E and F Preferred Stock are entitled to vote in
the election of directors and on all other matters submitted to
stockholders for their approval or consent. The number of votes is equal
to the number of shares of Common Stock into which their Preferred Stock
is convertible at the time of the meeting at which the vote is cast or,
in the case of an action of stockholders taken without a formal meeting,
on the date of such action.
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
8. Description of securities (continued):
Series A Preferred Stock:
The Company has authorized 10,000 shares of Series A Preferred Stock,
$.001 par value per share, of which 6,000 shares are issued and
outstanding as of December 31, 1995 and 1994 and June 30, 1996. The
Company's Series A Preferred Stock is entitled to sixty-five (65) votes
per share; a liquidation value of $100.00 per share ($600,000 in the
aggregate) in liquidation of the Company; a preference over Common Stock
to the extent of its liquidation value; and is entitled to annual
dividends in the amount of $4.00 per share (i.e., an annual rate of four
(4%) percent) payable semi-annually in arrears unless and until a
"Dividend Reset Event" occurs. After a Dividend Reset Event, the annual
dividend rate on Series A Preferred will be increased from four (4%)
percent to a rate equal to the "prime rate" as published in the Wall
Street Journal as of the last business date preceding the Dividend Reset
Event plus six (6%) percent. The Series A Preferred is redeemable by the
Company at its option, at liquidation value, in whole or in part, at any
time after a Dividend Reset Event, upon not less than thirty (30) days
written notice.
The term "Dividend Reset Event" is defined to mean either (a) a public
offering of equity securities by the Company or any corporation which
owns 50% or more of all classes of the Company's common stock then
outstanding (hereinafter, a "Parent of the Company") which results in the
Company's receipt (or receipt by the Parent of the Company) of not less
than $5,000,000 net of offering underwriting discounts and commissions,
or (b) either the Company and/or the Parent of the Company, on a
consolidated basis, having, as of any fiscal year-end, stockholders'
equity of $12,000,000 or more.
Series B Convertible Preferred Stock:
The Company has authorized 7,000 shares of Series B Convertible Preferred
Stock, $.001 par value per share, of which 6,375 and 0 shares are issued
and outstanding as of December 31, 1995 and June 30, 1996, respectively.
Holders of Series B Preferred are entitled to receive annual dividends
equal to the dividends payable on Series A Preferred Stock, and to
convert shares of Series B Preferred into Common Stock on the basis of 92
shares of Common Stock per share of Series B Preferred Stock, i.e., at an
imputed price of $1.11 per share of Common Stock. Conversion
prices/ratios will be adjusted in the event of any stock splits,
dividends on Common Stock payable in Common Stock or similar events.
20
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
8. Description of securities (continued):
The Company has the right to redeem the Series B Shares upon not less
than thirty (30) days written notice.
Series C Convertible Preferred Stock:
The Company has authorized 25,000 shares of Series C Convertible
Preferred Stock, $.001 par value per share, of which 14,694.07 and 12,852
shares are issued and outstanding as of December 31, 1995 and June 30,
1996, respectively. Holders of shares of Series C Convertible Preferred
Stock (the "Series C Preferred") are entitled to annual dividends of
$6.00 per share, payable semi-annually.
Each share of Series C Preferred are convertible at the option of its
holder into 66.67 shares of Common Stock, i.e., at an imputed price of
$1.50 per share of Common Stock. Conversion prices/ratios will be
adjusted in the event of any stock splits, dividends on Common Stock
payable in Common Stock or similar events.
The Company has the right to redeem the Series C Shares upon not less
than thirty (30) days written notice.
Series D Preferred Stock:
The Company has authorized 15,000 shares of Series D Preferred Stock,
$.001 par value per share, of which 850 shares have been issued as of
December 31, 1995 and June 30, 1996. Holders of shares of Series D
Preferred Stock (the "Series D Preferred") will be entitled to annual
dividends of $6.00 per share, payable semi-annually.
The Company's Series D Preferred Stock has 50 votes per share.
Series E Preferred Stock:
The Company has authorized 13,250 shares of its Series E Preferred Stock,
$.001 par value, of which 13,250 shares are issued, and outstanding as of
December 31, 1995 and June 30, 1996. Holders of shares of Series E
Preferred Stock (the "Series E Preferred") are entitled to annual
dividends of $6.00 per share payable semi-annually.
21
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
8. Description of securities (continued):
Each share of Series E Preferred is convertible at the option of its
holder into 100 shares of Common Stock, i.e., at an imputed price of
$1.50 per share of Common Stock. Conversion prices/ratios will be
adjusted in the event of any stock splits, dividends on Common Stock
payable in Common Stock or similar events.
Series F Convertible Preferred Stock:
The Company has authorized 6,000 shares of Series F Convertible Preferred
Stock, $.001 par value, of which 3,071 and 3,771 shares are issued and
outstanding as of December 31, 1995 and June 30, 1996, respectively.
Holders of shares of Series F Convertible Preferred Stock (the "Series F
Preferred") are entitled to annual dividends of $6.00 per share, payable
semi-annually.
Each share of Series F Preferred Stock is convertible at the option of
its holder into 50 shares of Common Stock at an imputed price of $1.50
per share of Common Stock. Conversion prices/ratios will be adjusted in
the event of any stock splits, dividends on Common Stock payable in
Common Stock or similar events.
9. Obligations under capital leases:
A subsidiary of the Company is the lessee of furniture and equipment
under capital leases expiring in 1998.
Under the terms of one capital lease, the Company may increase the assets
under lease with lessor approval. Additionally, this lease requires that
the subsidiary company maintain $60,000 in certificates of deposit as a
security deposit, reduced at the rate of $12,000 per year, which is
recorded on the balance sheet as restricted cash. At December 31, 1995,
the subsidiary company had leased furniture and equipment under this
lease with an approximate cost of $149,000.
22
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
9. Obligations under capital leases (continued):
The assets and liabilities under capital leases are recorded at the lower
of the present value of the minimum lease payment or the fair value of
the assets. The assets are amortized over their estimated productive
lives. Amortization of the assets under capital leases are included in
depreciation and amortization expense for the year ended December 31,
1995. Lease payments vary according to the aggregate assets under lease
and are payable in monthly installments ($3,584 at December 31, 1995)
including interest imputed at the approximate rate of 10%.
Minimum future lease payments under these capital lease obligations are
as follows:
Year ending December 31, 1995
Year ending December 31, 1996 $ 58,300
Year ending December 31, 1997 42,699
Year ending December 31, 1998 33,373
--------
Total minimum lease payments 134,372
Less amount representing interest 19,497
--------
Present value of net minimum lease payments $114,875
========
Current portion $ 45,504
Noncurrent portion 69,371
--------
$114,875
========
10. Restructuring:
During the fourth quarter of 1995, the Company recorded a
restructuring charge of $635,556 related to management's decision to
close The Lakewood Retreat, Inc. facility. Of these charges, $434,458
relate to payroll expense and costs associated with operating the
facility until the date of closure (which occurred during April, 1996)
and thereafter until sold. Unamortized contract rights totaling
$201,098 were written off and included in the restructuring charge.
23
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
11. Net patient service revenue:
Net patient service revenue for the years ended December 31, 1995 and
1994 and June 30, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
----------------------- ----------------------
1995 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Patient service revenue $3,540,272 $1,116,742 $863,464 $5,503,027
Contractual adjustments 1,225,419 391,157 302,442 2,288,018
---------- ---------- -------- ---------
Net patient service revenue $2,314,853 $ 725,585 $561,022 $3,215,009
========== ========== ======== ==========
</TABLE>
12. Income taxes:
At December 31, 1995, the Company had net operating loss carryforwards
available to reduce future federal taxable income of approximately
$4,614,000. The carryforwards expire through 2010.
13. Related party transactions:
In 1995 and 1994 the Chairman and the President did not receive their
annual salaries of $72,000 each. The salaries totaled $144,000 in 1995
and 1994 were recorded as an administrative expense and as contributed
capital.
In 1995 and 1996, the Chairman and the President exchanged advances to
the Company totaling $92,055 for 92 and $70,000 for 70 shares of
Preferred Series F Stock, respectively.
14. Subsidiary companies' financial information:
The Company has two subsidiaries which each account for more than ten
percent of revenue or assets.
Lakewood Retreat, Inc. ceased operations during December, 1995 (see
Note 10).
24
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
14. Subsidiary companies' financial information (continued):
Lakewood Retreat, Inc.
(Wholly Owned Subsidiary)
Balance Sheet Financial Highlights
<TABLE>
<CAPTION>
June 30,
December 31, -----------------------------
1995 1995 1996
---------- -----------------------------
<S> <C> <C> <C>
Current assets $ 90,218 $ 247,519 $ 52,195
Property, plant and equipment
(net of accumulated depreciation) 1,516,116 1,552,163 1,482,665
Contract rights to minority interest, net 219,804
Real estate held for sale or development 115,857 115,857 115,857
Other assets 30,211 28,053
---------- ---------- ----------
Total assets $1,752,402 $2,135,343 $1,678,770
========== ========== ==========
Current liabilities 4,023,181 1,991,902 3,054,965
Advances to officers shareholders 162,240
Long term liabilities 464,546 2,064,043 1,269,078
Equity (2,735,325) (2,082,842) (2,645,273)
---------- ---------- ----------
$1,752,402 $2,135,343 $1,678,770
========== ========== ==========
</TABLE>
Lakewood Retreat, Inc.
(Wholly Owned Subsidiary)
Statements of Operating Highlights
<TABLE>
<CAPTION>
June 30,
December 31, ----------------------------
1995 1995 1996
----------- ---------- ---------
<S> <C> <C> <C>
Patient service revenue $ 878,491 $ 442,769 $ -0-
Direct operating costs 808,203 548,027 -0-
----------- --------- ---------
Gross profit (loss) 70,288 (105,258)
Operating expenses 1,639,674 369,637
Other non-operating expenses 250,246 117,143 -0-
----------- ---------- ---------
Net loss $(1,819,632) $(592,038) $ -0-
=========== ========== =========
</TABLE>
25
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
14. Subsidiary companies' financial information (continued):
Lakewood Retreat, Inc.
(Wholly Owned Subsidiary)
Statements of Cash Flows
<TABLE>
<CAPTION>
June 30,
December 31, ---------------------------
1995 1995 1996
----------- ------------ ---------
<S> <C> <C> <C>
Net income (loss) $(1,819,633) $ (592,039)
Net cash provided by (used in)
operating activities (1,514,424) (491,392) $(561,619)
Net cash provided by (used in)
investing activities
Net cash provided by (used in)
financing activities 1,517,236 478,039 565,181
----------- ----------- ---------
Net increase (decrease) in cash 2,812 (13,353) 3,562
Cash, beginning 3,622 3,622 6,434
----------- ------------ ---------
Cash, ending $ 6,434 $ (9,731) $ 9,996
=========== =========== =========
</TABLE>
Westmeade Healthcare, Inc.
(Wholly Owned Subsidiary)
Balance Sheet Financial Highlights
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---------- ----------
<S> <C> <C>
Current assets $ 764,389 $1,636,535
Property, plant and equipment
(net of accumulated depreciation) 1,763,743 1,699,044
Other assets 68,182 147,349
---------- ----------
Total assets $2,596,314 $3,482,978
========== ==========
Current liabilities 2,120,901 2,937,922
Long term liabilities 69,371 40,107
Equity 406,042 504,949
---------- ----------
$2,596,314 $3,482,978
========== ==========
</TABLE>
26
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
14. Subsidiary companies' financial information (continued):
Westmeade Healthcare, Inc.
(Wholly Owned Subsidiary)
Statements of Operating Highlights
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---------- ----------
<S> <C> <C>
Patient service revenue $4,342,768 $2,361,360
Direct operating costs 2,623,747 1,271,619
---------- ----------
Gross profit 1,719,021 1,089,741
Operating expenses 1,564,320 945,762
Other non-operating expenses 684,188 110,071
---------- ----------
Net income (loss) $ (529,487) $ 33,908
=========== ==========
</TABLE>
Westmeade Healthcare, Inc.
(Wholly Owned Subsidiary)
Statements of Cash Flows
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
--------- ---------
<S> <C> <C>
Net income (loss) $(529,487) $ 33,908
Net cash used in operating activities (509,934) (364,744)
Net cash used in investing activities
Net cash used in financing activities 432,217 591,379
--------- ---------
Net (decrease) increase in cash (77,177) 226,635
Cash, beginning 182,300 104,583
--------- ---------
Cash, ending $ 104,583 $ 331,218
========= =========
</TABLE>
27
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
15. Parent company financial information:
CoreCare Systems, Inc.
(Parent Only)
Balance Sheet Financial Highlights
<TABLE>
<CAPTION>
June 30,
December 31 ----------------------------
1995 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current assets $ 41,820 $4,059,716 $ 92,204
Amounts due from affiliates 827,131 1,827,929
Investments in unconsolidated entities 5,258,043 5,400,535
Contract rights, net 511,067 448,816
Other assets 72,000 344,699
---------- ---------- ----------
$6,638,061 $4,131,716 $8,114,183
========== ========== ==========
Current liabilities 227,727 375,119 1,491,523
Advances, officers shareholders 30,819 23,100
Long term liabilities 300,000
Equity 6,079,515 3,733,497 6,622,660
---------- ---------- ----------
$6,638,061 $4,131,716 $8,114,183
========== ========== ==========
</TABLE>
CoreCare Systems, Inc.
(Parent Only)
Statements of Operating Highlights
<TABLE>
<CAPTION>
June 30,
December 31, ---------------------------
1995 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Management fee income
Direct operating costs $ 683,435 $ 405,221 $ 850,926
--------- --------- ---------
Gross profit (loss) (683,435) (405,221) (850,926)
Other non-operating expenses 194,854 7,988 100,048
Other income 1,397
--------- --------- ---------
Net loss $(876,892) $(413,209) $(950,974)
========= ========= =========
</TABLE>
28
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
15. Parent company financial information (continued):
CoreCare Systems, Inc.
(Parent Only)
Statements of Cash Flows
<TABLE>
<CAPTION>
June 30,
December 31, -------------------------------
1995 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net loss $ (876,892) $ (413,209) $ (950,974)
Net cash provided by (used in)
operating activities (574,259) (413,209) (528,594)
Net cash provided by (used in)
investing activities (4,663,150) (2,986,194) (142,492)
Net cash provided by (used in)
financing activities 6,114,261 3,932,232 671,046
----------- ----------- -----------
Net increase (decrease) in cash (40) 532,829 40
Cash, beginning 0 (40)
----------- ----------- -----------
Cash, ending $ (40) $ 532,829 $ -0-
=========== =========== ===========
</TABLE>
16. Commitments and contingencies:
Facility leases:
Corporate office and fitness center:
The Company leases its corporate offices and fitness center under a
noncancellable operating lease expiring in 1994 with an option to renew
for three consecutive year period.
In August 1994, the lease was extended through August 1997. Monthly lease
payments are $13,000. Under the terms of the lease, the Company is
responsible for substantially all operating and executory costs.
Adult residential psychiatric treatment center:
A subsidiary of the Company leases its adult residential psychiatric
treatment facility under a noncancellable operating lease expiring in
1994 with an option to renew the lease for two consecutive five year
periods. In October 1995, the lease was extended to December 31, 1998.
Monthly lease payments are $15,000. Under the terms of the lease, the
Company is responsible for substantially all operating and executory
costs.
29
<PAGE>
CORECARE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(INFORMATION AT JUNE 30, 1995 AND 1996 AND
FOR THE SIX MONTHS THEN ENDED IS UNAUDITED)
16. Commitments and contingencies (continued):
Litigation:
In the ordinary course of business, the Company and its subsidiaries are
involved in and subject to claims, contractual disputes and other
uncertainties. In the opinion of management, after consultation with
legal counsel, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial condition.
30
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1 Articles of Incorporation of the Company
filed August 12, 1991
2.2 Articles of Amendment to the Articles of
Incorporation of the Company filed
November 16, 1992
2.3 Articles of Amendment to the Articles of
Incorporation of the Company filed
January 31, 1995
2.4 By-laws of the Company
3.1 Form of Certificate evidencing Common Stock
of the Company
3.2 Certificate of Designation of Series D Preferred
Stock
3.3 Certificate of Amendment to Certificate of
Designation of Series D Preferred Stock
3.4 Certificate of Designation of Series E Preferred
Stock
3.5 Certificate of Amendment to Certificate of
Designation of Series E Preferred Stock
3.6 Certificate of Designation of Series F Con-
vertible Preferred Stock
3.7 Form of Series WC Warrant
3.8 Form of Series WD Warrant
3.9 Form of Series E Warrant
3.10 Form of Sage Equities, Inc. Warrant
III-1
<PAGE>
Exhibit No. Description
3.11 Form of Choate Health Management, Inc.
Warrant
3.12 Form of Health Partners Funding, L.P.
Warrant
3.13 Form of Investor Noteholder Agreement
and Consent
3.14 Registration Rights Agreement between
the Company and Anthony and Marlene
Todaro dated June 30, 1995
3.15 Registration Rights Agreement between
the Company and David Lovitz dated
October 27, 1995
3.16 Note and Warrant Purchase Agreement
between the Company and Mentor Special
Situation Fund, L.P. ("Mentor") dated
August 2, 1996
3.17 Warrant issued by the Company to Mentor
dated June 10, 1996
3.18 Warrant issued by the Company to Mentor
dated August 2, 1996
3.19 Warrant issued by the Company to Mentor
Management Company dated August 2, 1996
3.20 Bridge Note from the Company to Mentor
dated April 12, 1996
3.21 Promissory Note from the Company to Mentor
dated August 2, 1996
3.22 Note from Westmeade Healthcare, Inc.
("Westmeade") to Finova Capital Corpora-
tion ("Finova") dated June 27, 1996
III-2
<PAGE>
Exhibit No. Description
3.23 Mortgage, Assignment of Leases, Rents and
Other Income and Security Agreement between
Westmeade and Finova dated June 27, 1996
6.1 Agreement by and among CoreCare, Inc.,
ACQ-III, ACQ-IV, Penn Interpersonal
Communications, Inc. ("Penn") and Marlene
and Anthony Todaro dated June 30, 1995
6.2 Accounts Receivable Purchase and Sale
Agreement between Westmeade and Health
Partners Funding, L.P. dated January
24, 1996
6.3 Note from Westmeade to Finova dated
June 27, 1996 (contained in Exhibit 3.22)
6.4 Mortgage, Assignment of Leases, Rents
and Other Income and Security Agreement
between Westmeade and Finova dated
June 27, 1996 (contained in Exhibit 3.23)
6.5 Form of Notes issued by the Company to WC
and WD Warrantholders
6.6 Form of Note from the Company to Madison Bank
dated August 22, 1996
6.7 Demand Note from the Company to United
States Trust Company of New York
6.8 Security Agreement between Penn and
Marlene and Anthony Todaro dated June
30, 1995
6.9 Security Agreement between CoreCare
Acquisition, Inc.-III, CoreCare Acquisition
Inc.-IV and Marlene and Anthony Todaro
dated June 30, 1995
III-3
<PAGE>
Exhibit No. Description
6.10 Pledge Agreement between the Company,
Marlene and Anthony Todaro and Podvey,
Sachs, Meanor, Catenacci, Hildner &
Cocoziello ("Podvey") dated June 30, 1995
6.11 Pledge Agreement between the Company,
Marlene and Anthony Todaro and Podvey
dated June 30, 1995
6.12 Pledge Agreement between the Company,
Marlene and Anthony Todaro and Podvey
dated June 30, 1995
6.13 Guaranty by Penn to Marlene and Anthony
Todaro dated June 30, 1995
6.14 Guaranty by CoreCare Acquisition, Inc.-III
and CoreCare Acquisition Inc.-IV to Marlene
and Anthony Todaro dated June 30, 1995
6.15 Guaranty by the Company to Marlene and
Anthony Todaro dated June 30, 1995
6.16 Lease between Westmeade Center at
Wyndmoor, Inc. and Eliott Krems
and Robert H. Koen dated June 27, 1996
6.17 Employment Agreement between the Company,
Westmeade and David Lovitz effective
October 27, 1995
6.18 Employment and Non-Competition Agreement
between American Institute for Behavioral
Counseling, Inc. ("AIBC") and Marlene
Todaro dated June 30, 1995
6.19 Employment and Non-Competition Agreement
between AIBC and Anthony Todaro dated
June 30, 1995
6.20 Consulting Agreement between John Gentry,
Psy.D. and Managed CareWare, Inc. dated
June 30, 1995
III-4
<PAGE>
Exhibit No. Description
6.21 Consulting Agreement between the Company
and Choate Health Management, Inc. dated
as of September 1, 1995
6.22 Management Contract between CoreCare
Behavioral Health Management, Inc. ("CBHM")
and Quakertown Community Hospital and
Renewal Centers effective January 1, 1995
6.23 Amendment dated July 31, 1996 to Manage-
ment Contract between CBHM and Quakertown
Community Hospital and Renewal Centers
</TABLE>
III-5
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
CORECARE SYSTEMS, INC.
By: /s/ Thomas T. Fleming
------------------------
Thomas T. Fleming,
Chief Executive Officer
Date:
Pursuant to the requirement of the Securities and Exchange Act of 1934,
this registration statement has been signed by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
Signatures Title Date
/s/ Thomas T. Fleming Chairman of September 13, 1996
- --------------------- the Board of
Thomas T. Fleming Directors, Chief
Executive Officer
/s/ Rose S. DiOttavio President and September 13, 1996
- --------------------- Director
Rose S. DiOttavio
/s/ Thomas X. Flaherty Treasurer September 13, 1996
- ---------------------- and Director (Principal
Thomas X. Flaherty Financial and Accounting
Officer)
/s/ Joan K.S. Biddle Corporate Secretary September 13, 1996
- ----------------------- and Vice President
Joan K.S. Biddle
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
TING PERIPHERALS, INC.
WE, THE UNDERSIGNED natural persons of the age of twenty-one (21) years or
more, acting as incorporators of a corporation under the Nevada Business
Corporation Act, adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the corporation is Ting Peripherals, Inc.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSE
The purpose or purposes for which this corporation is engaged are:
(a) To engage in the specific business of looking for business
acquisitions and related items; also the business of making
investments, including investments in, purchase and ownership of any
and all kinds of property, assets or business whether alone or in
conjunction with others. Also, to acquire, develop, explore and
otherwise deal in and with all kinds of real and personal property
and all related activities, and for any and all other lawful
purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage, pledge, hypothecate, sell,
assign, transfer, exchange, or otherwise dispose of or deal in or
with its own corporate securities or stock or other securities
including, without limitations, any shares of stock, bonds,
debentures, notes, mortgages, or other obligations, and any
certificates, receipts or other instruments representing rights or
interests therein on any property or assets created or issued by any
person, firm, associate, or corporation, or instrumentalities
thereof; to make payment therefor in any lawful manner or to issue
in exchange therefor its unreserved earned surplus for the purchase
of its own shares, and to exercise as owner or holder of any
securities, any and all rights, powers, and privileges in respect
thereof.
(c) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one
or more of the subjects herein enumerated, or which may, at any
time, appear conducive to or expedient for the protection or benefit
of this corporation, and to do said acts as fully and to the same
extent as natural persons might, or could do in any part of the
world as principals, agents, partners, trustees, or otherwise,
either alone or in conjunction with any other person, association,
or corporation.
(d) The foregoing clauses shall be construed both as purposes and powers
and shall not be held to limit or restrict in any manner the general
powers of the corporation, and the enjoyment and exercise thereof,
as conferred by the laws of the State of Nevada; and it is the
intention that the purposes and powers specified in each of the
paragraphs of this Article III shall be regarded as independent
purposes and powers.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have authority
to issue is 50,000,000 shares of Common Stock having a par value of $.001 per
share. All common stock of the corporation shall be of the same class, common,
and shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment. The
corporation shall also have authority to issue 5,000,000 shares of Preferred
Stock having a par value of $.001 per share and to be issued with such rights,
preferences and designations and in such series as determined by the Board of
Directors of the corporation.
ARTICLE V - AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of
"a majority" of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS' RIGHTS
The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have pre-emptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - INITIAL OFFICE AND AGENT
The corporate Trust Company of Nevada
One East First Street
Reno, Nevada 89501
ARTICLE VIII DIRECTORS
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorized such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance here in.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of
this corporation is one. The name and address of the person who is to serve as
Director until the first annual meeting of stockholders or until his successor
is elected, is:
NAME ADDRESS
---- -------
Joan J. Lee 311 South State St., Suite 460
Salt Lake City, Utah 84111
ARTICLE IX - INCORPORATORS
The name and address of each incorporator is:
NAME ADDRESS
---- -------
Thomas G. Kimble 311 South State, Suite 440
Salt Lake City, Utah 84111
ARTICLE X
COMMON DIRECTORS - TRANSACTIONS BETWEEN CORPORATIONS
No contract or other transaction between this corporation and any one or
more of its directors or any other corporation, firm, association, or entity in
which one or more of its directors or officers are financially interested, shall
be either void or voidable because of such relationship or interest, or because
such director or directors are present at the meeting of the Board of Directors,
or a committee thereof, which authorizes, approves, or ratifies such contract or
transaction, or because his or their votes are counted for such purpose if:
(a) the fact of such relationship or interest is disclosed or known to the Board
of Directors or committee which authorizes, approves, or ratifies the contract
or transaction by vote or consent sufficient for the purpose without counting
the votes or consents of such interested director; or (b) the fact of such
relationship or interest is disclosed or known to the stockholders entitled to
vote and they authorize, approve, or ratify such contract or transaction by vote
or written consent, or (c) the contract or transaction is fair and reasonable to
the corporation.
Common or interested directors may be counted in determining the presence
of quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves, or ratifies such contract or transaction.
ARTICLE XI
LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extent provided by applicable law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the corporation for
or with respect to any act or omissions of such persons occurring prior to such
amendment.
Under penalties of perjury, I declare that these Articles of Incorporation
have been examined by me and are, to the best of my knowledge and belief, true,
correct and complete.
DATED this 2nd day of August, 1991.
/s/ Thomas G. Kimble
--------------------
Thomas G. Kimble, Incorporator
STATE OF UTAH )
ss.
COUNTY OF SALT LAKE )
On the 2nd day of August, 1991, personally appeared before me, Thomas G.
Kimble, who duly acknowledged to me that he signed the foregoing Articles of
Incorporation as the Sole Incorporator.
/s/ Patricia B. Haslam
----------------------
NOTARY PUBLIC
Residing at Salt Lake County
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
The Corporation Trust Company of Nevada hereby accepts the appointment as
Registered Agent of the above named corporation.
The Corporation Trust Company
of Nevada
Dated: 8/5/91 By: /s/ Corinne M. Lude
-----------------------
Corinne M. Lude Asst. Secy.
EXHIBIT 2.2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TING PERIPHERALS, INC.
Pursuant to the applicable provisions of the Nevada Business Corporations
Act, Ting Peripherals, Inc. (the "Corporation") adopts the following Articles of
Amendment to its Articles of Incorporation by stating the following:
FIRST: The present name of the Corporation is Ting Peripherals, Inc.
SECOND: The following amendments to its Articles of Incorporation were
adopted by majority consent of shareholders of the Corporation on November 13,
1992 in the manner prescribed by Nevada law.
1. Article I is amended to read as follows:
Name. The name of the corporation shall be: Nimble Technologies
International, Inc.
2. The Corporation has effectuated a 1 for 2 reverse stock split of its
shares of common stock outstanding as of November 13, 1992 decreasing said
outstanding shares from 15,094,983 shares to 7,547,492 shares. Said reverse
split to be effective with the commencement of business on November 17, 1992.
THIRD: The number of shares of the Corporation outstanding and entitled to
vote at the time of the adoption of said amendment was 15,094,983.
FOURTH: The number of shares voted for such amendments was 9,973,840 (66%)
and the number voted against such amendment was -0-.
DATED this 12th day of November 1992.
ATTEST: TING PERIPHERALS, INC.
By:_________________________ By: /s/ John Cannizzo III
---------------------
Stephen R. Forem, John Cannizzo III,
Secretary President
VERIFICATION
STATE OF CALIFORNIA )
:SS
COUNTY OF ORANGE )
The undersigned being first duly sworn deposes and states: that the
undersigned is the Secretary of Ting Peripherals, Inc., that the undersigned has
read the Articles of Amendment and knows the contents thereof and that the same
contains a truthful statement of the Amendment duly adopted by the sole director
and stockholders of the Corporation.
_____________________________
Stephen R. Forem,
Secretary
STATE OF CALIFORNIA )
:SS
COUNTY OF ORANGE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared President and Secretary of Ting Peripherals, Inc., a
Nevada corporation, and signed the foregoing Articles of Amendment as their own
free and voluntary acts and deeds pursuant to a corporate resolution for the
uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 12th day of November
1992.
/s/ Karen J. Holsclaw
---------------------
NOTARY PUBLIC, residing at
My Commission Expires: _________________
September 15, 1995
EXHIBIT 2.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
NIMBLE TECHNOLOGIES INTERNATIONAL, INC.
Pursuant to the applicable provisions of the Nevada Business Corporations
Act, Nimble Technologies International, Inc. (the "Corporation") adopts the
following Articles of Amendment to its Articles of Incorporation by stating the
following:
FIRST: The present name of the Corporation is Nimble Technologies
International, Inc.
SECOND: The following amendments to its Articles of Incorporation were
adopted by majority vote of shareholders of the Corporation in the manner
prescribed by applicable law.
1. Article I is amended to read as follows:
Name: The name of the Corporation shall be Corecare Systems, Inc.
2. Article IV is hereby amended to read:
ARTICLE IV - STOCK
Common Stock. The aggregate number of shares of common stock which this
Corporation shall have authority to issue is 50,000,000 shares having a par
value of $.001 per share. All shares of common stock of the Corporation shall be
of the same class and shall have the same rights and preferences. Fully-paid
stock of the Corporation shall not be liable as to any further call or
assessment. The shares of common stock of the Corporation shall not have
cumulative voting rights and shall have no preemptive rights and shall be
entitled to one vote per share on all matters submitted to the Corporation's
shareholders for a vote.
Preferred Stock. In addition to the Series A, B and C Preferred stock set
forth below, the Corporation shall have authority to issue 1,000,000 shares of
preferred stock having a par value of $.001 per share and to be issued with such
rights, preferences and designations and in such series as determined by the
board of directors of the Corporation.
Series "A" Preferred Stock. The Corporation shall have authority to issue
ten thousand (10,000) shares of Preferred Stock designated as Series "A"
Preferred Stock, which shall have a par value of $.001 per share, and the
following preferences and relative, participating, optional or other rights,
qualifications, limitations and restrictions:
1. Dividends.
(a) Holders of Series "A" Preferred Stock (hereinafter referred to
as the "Preferred A Shares" or "Shares") shall be entitled to receive an annual
dividend Of $4.00 per Share unless and until a "Dividend Reset Event" (as
defined in Section 1.b below) shall occur. From and after a Dividend Reset
Event, the annual dividend on the Preferred A Shares shall equal the product
obtained by multiplying $100.00 by a fraction, the numerator of which is the
"prime rate" of interest last published in The Wall Street Journal prior to such
Dividend Reset Event plus six (6%) percent, and the denominator of which is one
hundred (100%) percent.
(b) As used herein, the term "Dividend Reset Event" shall mean the
first to occur of either (i) a public offering of equity securities by the
Corporation or any corporation which owns fifty (50%) percent or more of the
Corporation's outstanding Common Stock (hereinafter, a "Parent Corporation")
which results in the receipt by the Corporation and/or the Parent Corporation of
offering proceeds net of underwriting commissions and discounts of not less than
$5,000,000, or (ii) the Corporation and/or the Parent Corporation having
stockholders' equity as of a fiscal year end equal to $12,000,000 or more.
(c) Dividends on Preferred A Shares shall accrue from the date of
the issuance of the Shares at the rate set forth in or determined under Section
1.a above, and shall be payable in semi-annual installments to the holders of
record of such Shares as of October 31 and March 31 in each year that such Share
is outstanding (the "Record Dates") not later than ten (10) days after the
Record Date the "Dividend Payment Date". Holders of Preferred A Shares which are
issued other than on a Record Date shall receive a reduced dividend on the first
Dividend Payment Date following the issuance of such Shares which shall be
determined by multiplying the semi-annual dividend which otherwise would be
payable on such Dividend Payment Date by a fraction, the numerator of which
equals (i) the number of days during which such Shares were outstanding as of
the first Record Date on which they are outstanding, or (ii) 180, whichever is
less, and the denominator of which is 180.
(d) Notwithstanding anything to the contrary herein, no dividends
shall be paid on Preferred A Shares at any time that the Corporation is in
arrears in payment of dividends on its Series "C" Convertible Preferred Stock.
2. Rights and Liquidation, Dissolution or Winding Up. 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, whether from capital, surplus or earnings, shall be distributed in
the following order of priority:
(a) First, to the holders of Series "C" Convertible Preferred Stock
and any other class or series of Preferred Stock or other capital stock of the
Corporation which is entitled to a preference in liquidation and dissolution
over the Preferred A Shares, but only to the extent of that preference.
(b) Next, to the holders of Series A Preferred Stock, Series "B"
Convertible Preferred Stock and any other class or series of Preferred Stock or
other capital stock of the Corporation which is of equal rank with the Preferred
A Shares with respect to sharing in the proceeds of liquidation and dissolution
of the Corporation, but only to the extent that such class or series of capital
stock is of equal rank. In such Distribution, holders of Preferred A Shares
shall be entitled to receive, prior to and in preference to any distribution to
the holders of Common Stock or any other class or series of capital stock of the
Corporation with respect to which the instrument creating such class or series
Of capital stock shall provide that holders of shares of such class Or series
shall be subordinate and inferior to the rights of holders of Preferred A Shares
in liquidation and dissolution and winding up, and in lieu of any other payment,
an amount equal to $100.00 per Preferred A Share then outstanding plus any
dividends accrued and unpaid through the liquidation date (the "Preferred A
Liquidation Preference").
(c) After distribution of the Preferred A Liquidation Preference to
holders of Preferred A Shares, the remaining assets of the Corporation available
for distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of shares of other classes of capital stock of the
Corporation, as their rights may appear.
3. Voting.
(a) In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred A Share shall
entitle the holder thereof to sixty-five (65) votes per Share on all matters as
to which holders of Common Stock shall be entitled to vote, in the same manner
and with the same effect as, and as a class with, the holders of Common Stock
and any other class or series of capital stock of the Corporation which votes as
a class with the Common Stock.
(b) Except as hereinafter provided in these Articles or in Section
3.d below, the Corporation shall not, without the affirmative consent or
approval of the holders of Preferred A Shares representing at least 67% of the
total number of Preferred A Shares then outstanding, acting separately as one
class, given either by written consent in lieu of a meeting or by vote at a
meeting called for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred A Shares, or (B) which in any manner
adversely affects the holders of Preferred A Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series A
Preferred Stock.
(c) For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred A
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and
(ii) the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
(d) The Corporation may, with the affirmative consent or approval of
holders of 67% or more of Preferred A Shares outstanding, take any of the
actions described in Section 3.b above.
4. Redemption.
(a) The Corporation shall have the right, at any time and from time
to time after a Dividend Reset Event has occurred, upon written notice (a
"Redemption Notice") to all holders of Preferred A Shares at their respective
registered addresses stating that the Corporation is exercising its right of
redemption set forth herein and fixing a date for such redemption (the
"Redemption Date") which shall be no more than sixty (60) and no less than
thirty (30) days following the date of the Redemption Notice, redeem Preferred A
Shares at a price per Preferred A Share (the"Redemption Price") equal to 100% of
the Preferred A Liquidation Preference as of the Redemption Date.
(b) From and after the Redemption Date, holders of Preferred A
Shares shall cease to be shareholders of the Corporation and the sole right of
holders of Preferred A Shares shall be to receive the Redemption Prices as
provided herein.
(c) The Corporation shall pay the Redemption Price to each holder of
record of Preferred A Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred A Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
(d) If the Corporation at any time redeems fewer than all Preferred
A Shares, it shall redeem the Preferred A Shares pro-rata from all holders
thereof.
5. Other. Except as expressly provided herein, Preferred A Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
Series "B" Convertible Preferred Stock. The Corporation shall have
authority to issue seven thousand (7,000) shares of Preferred Stock of the
Corporation designated as Series "B" Convertible Preferred Stock and which shall
have a par value of $.001 per share, and the following preferences and relative,
participating, optional or other rights, qualifications, limitations and
restrictions:
1. Dividends. Series "B" Convertible Preferred Stock (hereinafter
referred to as the "Preferred B Shares" or "Shares") shall accrue, and holders
of such Shares shall be entitled to receive, dividends as and when accrual and
payment of dividends on the Corporations Series "A" Preferred Stock is provided
for herein under the description of the Series "A" Preferred Stock. The rights
of holders of Preferred B Shares with respect to the payment of dividends shall
be of equal rank to that of holders of Series "A" Preferred Stock.
2. Rights in Liquidation and Dissolution. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the rights of holders of Preferred A Shares to receive assets of
the Corporation available for distribution to its shareholders, whether from
capital, surplus or earnings, shall be of the same rank and priority as is
provided in these Articles for the holders of the Corporation's Series "A"
Preferred Stock, and the amount which holders of Preferred B Shares shall be
entitled to receive in liquidation and dissolution in respect of each Preferred
B Share (the "Preferred B Liquidation Preference") shall equal the Preferred A
Liquidation Preference.
3. Voting.
(a) In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred B Share shall
entitle the holder thereof to a number of votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote which is equal to the
number of shares of the Corporation's Common Stock into which such Share is then
Convertible pursuant to Section 4 below, in the same manner and with the same
effect as, and as a class with, the holders of Common Stock or any other class
of capital stock which votes as a class with the Common Stock.
(b) Except as provided elsewhere in these Articles or in Section 3.d
below, the Corporation shall not, without the affirmative consent or approval of
the holders of Preferred B Shares representing at least 67% of the total number
of Preferred B Shares then outstanding, acting separately as one class, given
either by written consent in lieu of a meeting or by vote at a meeting called
for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred B Shares, or (8) which in any manner
adversely affects the holders of Preferred B Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series "B"
Convertible Preferred Stock.
(c) For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred B
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and (ii)
the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
(d) The Corporation may, with the affirmative consent or approval of
holders of 67% or more of Preferred B Shares outstanding, take any of the
actions described in Section 3.b above.
4. Conversion.
(a) Subject to adjustment as provided in Sections 4.b and 4.c below,
holders of Preferred B Shares shall have the right, at a holder's option, at any
time or from time to time prior to the Redemption Date (as hereinafter defined),
to convert each Preferred B Share into ninety-two (92) shares of fully paid and
non-assessable shares of Common Stock of the Corporation.
(b) If, at any time after the date that Preferred B Shares are first
issued (the "Original Issue Date") the number of shares of Common Stock
outstanding is increased by a subdivision, conversion or split-up of shares of
Common Stock, then, following the record date fixed therefor, the ratio upon
which Preferred B Shares may be converted into Common Stock (the "Conversion
Ratio") shall be appropriately adjusted by increasing the number of shares of
Common Stock issuable upon conversion of each Preferred B Share in proportion to
such increase in outstanding shares of Common Stock.
(c) If, at any time after the Original Issue Date, the number of
shares of Common Stock outstanding is decreased by a stock combination, reverse
split or conversion, then, following the record date for such combination,
reverse stock split or conversion, the Conversion Ratio shall be appropriately
adjusted by decreasing the number of shares of Common Stock issuable on
conversion of each Preferred B Share in proportion of such decrease in
outstanding shares of Common Stock.
(d) In case, at any time after the Original Issue Date, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or sub-division,
split-up or combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a consolidation or merger in
which the Corporation is the continuing corporation and which does not result in
any change in the Common Stock) or of the sale or other disposition of all or
substantially all the properties and assets of the Corporation as an entirety to
any other person, each Preferred B share shall after such reorganization,
reclassification, consolidation, merger, sale or other disposition be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed of to which the holder of the number
of shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or other
disposition) upon conversion of such Preferred B Share would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 4 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(e) To exercise the right to convert set forth in this Section 4, a
holder of Preferred B Shares shall deliver to the Corporation at its principal
executive offices, marked to the attention of the Secretary of the Corporation,
the certificate or certificates representing the Preferred B Shares to be
converted, endorsed to, or accompanied by a separate assignment to, the
Corporation, and (b) a written notice stating (i) such holder's wish to exercise
the right to convert such Preferred B Shares set forth in this designation, (ii)
the name or names and addresses in which and to which securities or other
property then deliverable upon conversion of Preferred B Shares should be
registered and delivered (if to a person other than the holder and/or to an
address other than the holder's address of record). The conversion of a
Preferred B Share shall be deemed effective, and such Preferred B Share shall
cease to be outstanding for any purpose, upon receipt by the Corporation of the
aforementioned Notice of Conversion and certificate representing such Preferred
B Share, provided the same are received prior to the Redemption Date, and the
sole right of the holder of such Preferred B Share after conversion shall be to
receive the securities or other property then issuable upon the conversion
thereof.
(f) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any Preferred B Shares;
provided. however, that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the Preferred B Shares in respect of which such shares are being
issued.
(g) The Corporation shall reserve, and at all times from and after
the Original Issue Date keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of Preferred B Shares sufficient shares to provide for
the conversion of all outstanding Preferred B Shares.
(h) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from all
taxes, liens or charges with respect thereto.
5. Redemption.
(a) The Corporation shall have the right, at any time and from time
to time upon written notice (a "Redemption Notice") to all holders of Preferred
B Shares at their respective registered addresses stating that the Corporation
is exercising its right of redemption set forth herein and fixing a date for
such redemption (the "Redemption Date") which shall be no more than sixty (60)
and no less than thirty (30) days following the date of the Redemption Notice,
redeem Preferred B Shares at a price per Preferred B Share (the "Redemption
Price") equal to 100% of the Preferred B Liquidation Preference as of the
Redemption Date.
(b) From and after the Redemption Date, holders of Preferred B
Shares shall cease to be shareholders of the Corporation and the sole right of
holders of Preferred B Shares shall be to receive the Redemption Prices as
provided herein.
(c) The Corporation shall pay the Redemption Price to each holder of
record of Preferred B Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred B Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
(d) If the Corporation at any time redeems fewer than all Preferred
B Shares, it shall redeem the Preferred B Shares pro rata from all holders
thereof.
6. Other. Except as expressly provided herein, Preferred B Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
Series "C" Convertible Preferred Stock. The Corporation shall have
authority to issue twenty-five thousand (25,000) of Preferred Stock designated
as Series "C" Convertible Preferred Stock, which shall have a par value of $.001
per share, and the following preferences and relative, participating, optional
or other rights, qualifications, limitations and restrictions:
1. Dividends.
(a) Holders of Series "C" Convertible Preferred Stock (hereinafter
referred to in this Section C as the "Preferred C Shares" or "Shares") shall be
entitled to receive an annual dividend of $6.00 per Share which shall accrue and
be payable in semi-annual installments to the holder of record of such Share as
of October 31 and March 31 in each year that such Share is Outstanding (the
"Record Dates") not later than ten (10) days after the Record Date (the
"Dividend Payment Date"). Preferred C Shares which are issued other than on a
Record Date shall receive a reduced dividend on the first Dividend Payment Date
on which they are outstanding determined by multiplying the regular dividend by
a fraction, the numerator of which equals the number of days from the date of
issuance of such Shares to the first Record Date on which such Shares are
outstanding or 180, whichever is less, and the numerator of which is 380.
(b) Preferred C Shares shall be preferred over Common Stock, Series
"A" Preferred Stock and Series "B" Convertible Preferred Stock as to dividends,
and no dividends shall be declared, set aside or paid on any of such series or
class of capital stock so long as any arrearage exists in the payment of
dividends on the Preferred C Shares.
2. Rights on Liquidation and Dissolution. 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,
whether from capital, surplus or earnings, shall be distributed in the following
order of priority:
(a) The holders of Series C Shares shall be entitled to receive,
prior to and in preference to any distribution to the holders of Common Stock,
Series "A" Preferred Stock, Series "B" Convertible Preferred Stock or any other
class or series of capital stock of the Corporation with respect to which the
instrument creating such class or series of capital stock shall provide that
holders of shares of such class or series shall be subordinate and inferior to
the rights of holders of Preferred C Shares in liquidation, dissolution and
winding up, and in lieu of any other payment, an amount equal to $100.00 per
Preferred C Share then outstanding plus accrued and unpaid dividends, if any
(the "Preferred C Liquidation Preference").
(b) After distribution of the Preferred C Liquidation Preference to
holders of Preferred C Shares, the remaining assets of the Corporation available
for distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of shares of other classes of capital stock of the
Corporation, as their rights may appear.
3. Voting.
(a) In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred C Share shall
entitle the holder thereof to a number of votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote which is equal to the
number of shares of the Corporation's Common Stock into which such Share is then
convertible pursuant to Section 4 below, in the same manner and with the same
effect as, and as a class with, the holders of Common Stock and any other class
of capital stock which votes as a class with the Common Stock.
(b) Except as provided elsewhere in these Articles or in Section 3.d
below, the Corporation shall not, without the affirmative consent or approval of
the holders of Preferred C Shares representing at least 67% of the total number
of Preferred C Shares then outstanding, acting separately as one class, given
either by written consent in lieu of a meeting or by vote at a meeting called
for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred C Shares, or (8) which in any manner
adversely affects the holders of Preferred C Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series "C"
Convertible Preferred Stock.
(c) For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred C
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and (ii)
the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
(d) The Corporation may, with the affirmative consent or approval of
holders of 67% or more of Preferred C Shares outstanding, take any of the
actions described in Section 3.b above.
4. Conversion.
(a) Subject to adjustment as provided in Sections 4.b and 4.c below,
holders of Preferred C Shares shall have the right, at a holder's option, at any
time or from time to time prior to the Redemption Date (as hereinafter defined),
to convert each Preferred C Share into sixty-six and sixty-seven one hundredths
(66.67) shares of fully paid and nonassessable shares of Common Stock of the
Corporation.
(b) If, at any time after the date that Preferred C Shares are first
issued (the "Original Issue Date") the number of shares of Common Stock
outstanding is increased by a subdivision, conversion or split-up of shares of
Common Stock, then, following the record date fixed therefor, the ratio upon
which Preferred C Shares may be converted into Common Stock (the "Conversion
Ratio") shall be appropriately adjusted by increasing the number of shares of
Common Stock issuable upon conversion of each Preferred C Share in proportion to
such increase in outstanding shares of Common Stock.
(c) If, at any time after the Original Issue Date, the number of
shares of Common Stock outstanding is decreased by a stock combination, reverse
split or conversion, then, following the record date for such combination,
reverse stock split or conversion, the Conversion Ratio shall be appropriately
adjusted by decreasing the number of shares of Common Stock issuable on
conversion of each Preferred C Share in proportion of such decrease in
outstanding shares of Common Stock.
(d) In case, at any time after the Original Issue Date, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
Corporation with Or into another person (other than a consolidation or merger in
which the Corporation is the continuing corporation and which does not result in
any change in the Common Stock) or of the sale or other disposition of all or
substantially all the properties and assets of the Corporation as an entirety to
any other person, each Preferred B Share shall after such reorganization,
reclassification, consolidation, merger, sale or other disposition be
convertible into the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed of to which the holder of the number
of shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or other
disposition) upon conversion of such Preferred C Share would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 4 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(e) To exercise the right to convert set forth in this Section 4, a
holder of Preferred C Shares shall deliver to the Corporation at its principal
executive offices, marked to the attention of the Secretary of the Corporation,
the certificate or certificates representing the Preferred C Shares to be
converted, endorsed to, or accompanied by a separate assignment to, the
Corporation, and (b) a written notice stating (i) such holder's wish to exercise
the right to convert such Preferred C Shares set forth in this designation, (ii)
the name or names and addresses in which and to which securities or other
property then deliverable upon conversion of Preferred C Shares should be
registered and delivered (if to a person other than the holder and/or to an
address other than the holder's address of record). The conversion of a
Preferred C Share shall be deemed effective, and such Preferred C Share shall
cease to be outstanding for any purpose, upon receipt by the Corporation of the
aforementioned Notice of Conversion and certificate representing such Preferred
C Share, provided the same are received prior to the Redemption Date, and the
sole right of the holder of such Preferred C Share after conversion shall be to
receive the securities or other property then issuable upon the conversion
thereof.
(f) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any Preferred C Shares;
provided, however, that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the Preferred C Shares in respect of which such shares are being
issued.
(g) The Corporation shall reserve, and at all times from and after
the Original Issue Date keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of Preferred C Shares sufficient shares to provide for
the conversion of all outstanding Preferred C Shares.
(h) All shares of Common Stock which may be issued in connection
with the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from all
taxes, liens or charges with respect thereto.
5. Redemption.
(a) The Corporation shall have the right, at any time and from time
to time upon written notice (a "Redemption Notice") to all holders of Preferred
C Shares at their respective registered addresses stating that the Corporation
is exercising its right of redemption set forth herein and fixing a date for
such redemption (the "Redemption Date") which shall be no more than sixty (60)
and no less than thirty (30) days following the date of the Redemption Notice,
redeem Preferred C Shares at a price per Preferred C Share (the "Redemption
Price") equal to 100% of the Preferred C Liquidation Preference as of the
Redemption Date.
(b) From and after the Redemption Date, holders of Preferred C
Shares shall cease to be shareholders of the Corporation and the sole right of
holders of Preferred C Shares shall be to receive the Redemption Prices as
provided herein.
(c) The Corporation shall pay the Redemption Price to each holder of
record of Preferred C Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred C Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
(d) If the Corporation at any time redeems fewer than all Preferred
C Shares, it shall redeem the Preferred C Shares pro-rata from all holders
thereof.
6. Other. Except as expressly provided herein, Preferred C Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
THIRD: The Corporation has effectuated a 1 for 8 reverse stock split of
its shares of common stock outstanding as of January 30, 1995, decreasing said
outstanding shares from 7,947,492 shares to 993,344 shares. Said reverse split
became effective with the commencement of business on January 31, 1995.
FOURTH: The number of shares of the Corporation outstanding and entitled
to vote at the time of the adoption of said amendment was 7,947,492.
FIFTH: The number of shares voted for such amendments was 6,399,420
(80.5%) and no shares were voted against such amendment.
DATED this 30th day of January, 1995.
NIMBLE TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ Glen R. Ulmer
-----------------
Glen R. Ulmer, President
and Secretary
VERIFICATION
STATE OF UTAH )
:SS
COUNTY OF SALT LAKE )
The undersigned being first duly sworn deposes and states: that the
undersigned is the Secretary of Nimble Technologies International, Inc., that
the undersigned has read the Articles of Amendment and knows the contents
thereof and that the same contains a truthful statement of the Amendment duly
adopted by the sole director and stockholders of the Corporation.
/s/ Glen R. Ulmer
-----------------
Glen R. Ulmer
STATE OF UTAH )
:SS
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared President and Secretary of Nimble Technologies
International, Inc., a Nevada corporation, and signed the foregoing Articles of
Amendment as his own free and voluntary acts and deeds pursuant to a corporate
resolution for the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this 30th day of January
1995.
My Commission Expires:
11/1/97 /s/ Thomas G. Kimble
--------------------
NOTARY PUBLIC
Residing at:
EXHIBIT 2.4
BY-LAWS
Of
CORECARE SYSTEMS, INC.
ARTICLE I - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Nevada as may be designated from time to
time by the Board of Directors (the "Board") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on such date as is determined by the
Board of Directors
1.3 Special Meeting. Special meetings of stockholders may be called at any
time by the Board or the President, and shall be called by the Board upon the
request of the holders of a majority of the outstanding shares of stock of the
Corporation entitled to vote at the meeting. Business transacted at any special
meeting of stockholders shall be limited to matters relating to the purpose or
purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notices of
all meetings shall state the place, date and hour of the meeting. The notice of
a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called.
1.5 Voting List. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at the place where the meeting is to be held
or, if such place is specified in the notice of the meeting at a place within
the city which the meeting is to be held other than the place of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time of the meeting, and may be inspected by any stockholder
who is present.
1.6 Quorum and Required Vote. Except as otherwise provided by law or in
the Certificate of Incorporation, the holders of a majority of the shares of
stock entitled to vote on a particular matter present in person or represented
by proxy shall constitute a quorum for the purpose of considering such matter.
1.7 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote and held of record by such stockholder, and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of the stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for such
stockholder by proxy in accordance with applicable law.
ARTICLE II - Directors
2.1 General Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board, which may exercise all of the
powers of the Corporation except as may be otherwise provided by law or the
Certificate of Incorporation.
2.2 Number and Term. Except as may be provided in the Certificate of
Incorporation, the Board shall have the authority to determine the number of
directors which shall constitute the Board and the terms of office of directors.
2.3 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and place, either within or without the State of Nevada, as
shall be determined from time to time by the Board.
2.4 Special Meeting. Unless the Board shall otherwise direct, special
meetings of the Board may be held at any time and place, within or without the
State of Nevada, and shall be called at any time by or at the request of the
President and shall be called by or at the written request of one-third of the
directors, or by one director in the event that there is only a single director
in office. Notice, which need not be written, of the time and place of special
meetings shall be given to each director at least twenty-four (24) hours before
the time for which the meeting is scheduled. A notice or waiver of notice of a
meeting of the Board need not specify the purposes of the meeting. Any business
may be transacted at a special meeting.
2.5 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the Directors may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.6 Quorum. A majority of all the directors in office shall constitute a
quorum at all meetings of the Board.
2.7 Committees. The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not such member or members constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board and subject to the provisions of the General Corporation
Law of the State of Nevada, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation.
ARTICLE III - Officers
3.1 Enumeration. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board may determine.
3.2 Election. Officers shall be elected annually by the Board at its first
meeting following the annual meeting of stockholders.
3.3 Duties and Powers. Except as otherwise provided by the Board, the
officers shall have, exercise and perform the duties and powers usually incident
to their offices and as set forth herein:
(i) President. The President shall be the chief operating officer
and executive officer of the Corporation. The President shall, subject to the
direction of the Board, have general charge and supervision of the business of
the Corporation. Unless otherwise provided by the Board, the President shall
preside at all meetings of the stockholders, and if he is a director, at all
meetings of the Board.
(ii) Vice President. Any Vice President shall perform such duties
and possess such powers as the Board or the President may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
President in the order determined by the Board) shall perform the duties of the
President and when so performing shall have all the powers of and be subject to
all the restrictions upon the President.
(iii) Secretary. The Secretary shall perform such duties and shall
have such powers as the Board or the President may from time to time prescribe,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board, to attend all meetings of
stockholders and the Board and keep a record of the proceedings, to maintain a
stock ledger and prepare lists of stockholders and their addresses as required,
to be custodian of corporate records and the corporate seal and to affix and
attest to the same on documents.
(iv) Treasurer. The Treasurer shall perform such duties and shall
have such powers as may from time to time be assigned to him by the Board or the
President, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected by the Board, to disburse such funds as
ordered by the Board, to make proper accounts of such funds, and to render as
required by the Board statements of all such transactions and of the financial
condition of the Corporation.
3.4 Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board.
ARTICLE IV - Transfer of Share Certificates
Except as otherwise established by rules and regulations adopted by the
Board and subject to applicable law, shares of stock may be transferred on the
books of the Corporation only by the registered holder or by duly authorized
attorney. Transfers shall be made only on surrender to the Corporation or its
transfer agent of the certificate representing such shares properly endorsed or
accompanied by a written assignment or power of attorney properly executed, and
with such proof of authority of the authenticity of signature as the Corporation
or its transfer agent may reasonably require. Except as may be otherwise
required by law, by the Certificate of Incorporation or by these By-Laws, the
Corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect to such stock, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
transferred on the books of the Corporation in accordance with the requirements
of these By-Laws.
ARTICLE V - Indemnification
5.1 Right to Indemnification. The Corporation shall indemnify any person
who was or is a party or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (collectively, a "proceeding"), by reason of the
fact such person is or was a director or officer of the Corporation or a
constituent corporation absorbed in a consolidation or merger (hereinafter, a
"constituent corporation"), or is or was serving at the request of the
Corporation or a constituent corporation as a director, officer, partner,
employee or agent of another corporation, partnership, joint venture or other
enterprise or entity, or is or was a director or officer of the Corporation
serving at its request as an administrator, trustee or other fiduciary of one or
more of the employee benefit plans, if any, of the Corporation or another entity
which may be in effect from time to time (any such person, an "Authorized
Representative"), against all expenses, liability and loss actually and
reasonably incurred or suffered by such Authorized Representative in connection
with such proceeding, whether or not the indemnified liability arises or arose
from any proceeding by or in the right of the Corporation, to the extent that
such Authorized Representative is not otherwise indemnified and to the extent
that such indemnification is not prohibited by law as it presently exists or may
hereafter be amended.
5.2 Advance of Expenses. Absent a by-law, written agreement or resolution
of stockholders of the Corporation to the contrary, the Corporation may, but
shall have no obligation to, pay expenses incurred by an Authorized
Representative in defending a proceeding in advance of the final disposition of
such proceeding.
5.3 Procedure for Determining Permissibility. To determine whether any
indemnification under this Article V is permissible, the Board by a majority
vote of a quorum consisting of directors not parties to such proceeding may, and
on request of any Authorized Representative seeking indemnification shall be
required to, determine in each case whether the applicable standards in any
applicable statute have been met, or such determination shall be made by
independent legal counsel if such quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested directors so directs,
provided that, if there has been a change in control of the Corporation between
the time of the action or failure to act giving rise to the claim for
indemnification and the time such claim is made, at the option of the Authorized
Representative seeking indemnification, the permissibility of indemnification
shall be determined by independent legal counsel. If a claim for indemnification
under this Article is not paid in full within ninety (90) days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim, and the Corporation shall have the
burden of proving that the claimant was not entitled to the requested
indemnification under applicable law. The reasonable expenses of any Authorized
Representative in prosecuting a successful claim for indemnification, and the
fees and expenses of any independent legal counsel engaged to determine
permissibility of indemnification, shall be borne by the Corporation. For
purposes of this paragraph, "independent legal counsel" means legal counsel
other than that regularly or customarily engaged by or on behalf of the
Corporation.
5.4 Proceedings Initiated by Authorized Representatives. Notwithstanding
any other provision of this Article V, the Corporation shall be required to
indemnify an Authorized Representative in connection with a proceeding initiated
by such Authorized Representative only if the proceeding was authorized by the
Board.
5.5 Indemnification Not Exclusive; Inuring of Benefit. The indemnification
provided by this Article V shall not be deemed exclusive of any other right to
which one seeking indemnification may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, these By-Laws,
agreement, vote of stockholders or disinterested directors or otherwise, and
shall inure to the benefit of the heirs, executors and administrators of any
such person.
5.6 Insurance and Other Indemnification. The Board shall have the power to
(i) authorize the Corporation to purchase and maintain, at the Corporation's
expenses, insurance on behalf of the Corporation and on behalf of others to the
extent that power to do so has not been prohibited by applicable law, and (ii)
give other indemnification to the extent not prohibited by applicable law.
5.7 Modification or Repeal. Any modification or repeal of any provision of
this Article V shall not adversely affect any right or protection of an
Authorized Representative existing hereunder with respect to any act or omission
occurring prior to such modification or repeal.
ARTICLE VI - Amendments
6.1 These By-Laws may be altered, amended or repealed or new By-Laws may
be adopted by the affirmative vote of a majority of the directors present at any
regular or special meeting of the Board at which a quorum is present.
EXHIBIT 3.1
FRONT OF CERTIFICATE
NUMBER SHARES
CORECARE SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
O T C: C R C S CUSIP 218908 10 1
COMMON STOCK
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF $.001 PAR VALUE EACH OF
CORECARE SYSTEMS, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Nevada,
and to the Articles of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
COUNTERSIGNED:
DATED: STOCKTRANS, INC.
7 EAST LANCASTER AVE., ARDMORE, PA 19003
TRANSFER AGENT
By: Authorized Signature
s/ Joan K. Biddle CORECARE SYSTEMS, INC. s/Rose S. DiOttavio
- ------------------ -------------------
Assistant Secretary CORPORATE SEAL 1984 President
NEVADA
BACK OF CERTIFICATE
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____Custodian______
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with
right of survivorship
and not as tenants
in common Act____________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_____________________________________________________________________Shares of
the stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint________________________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated____________________________
____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
_______________________________________________________________________________
EXHIBIT 3.2
Certificate of Designations, Preferences
and Relative, Participating Optional
and Other Special Rights of
SERIES "D" PREFERRED STOCK
By Resolution of the Board of Directors
of
CORECARE SYSTEMS, INC.
We, Rose DiOttavio, President, and Thomas T. Fleming, Assistant Secretary,
of CORECARE SYSTEMS, INC., a corporation organized and existing under the
General Corporation Law of the State of Nevada, in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes thereof, DO HEREBY
CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of said Corporation, as amended, said Board of
Directors, by unanimous written consent dated as of April 19, 1995, adopted a
resolution providing for the designation of a series of Fifteen Thousand
(15,000) shares of Series "D" Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Articles of
Incorporation, as amended, 15,000 shares of this Corporation's authorized
and previously unissued and undesignated Preferred Stock, par value $.001,
per share are hereby designated as the Corporation's Series "D" Preferred
Stock, to have the following preferences, and relative, optional and other
special rights, qualifications, limitations and restrictions:
Series "D" Preferred Stock.
1. Dividends.
a. Holders of Series "D" Preferred Stock (hereinafter referred to in
this Resolution as the "Preferred D Shares" or "Shares") shall be entitled to
receive an annual dividend of $6.00 per Share which shall accrue and be payable
in semi-annual installments to the holder of record of such Share as of October
31 and March 31 in each year that such Share is outstanding (the "Record Dates")
not later than ten (10) days after the Record Date (the "Dividend Payment
Date"). Preferred D Shares which are issued other than on a Record Date shall
receive a reduced dividend on the first Dividend Payment Date on which they are
outstanding determined by multiplying the regular dividend by a fraction, the
numerator of which equals the number of days from the date of issuance of such
Shares to the first Record Date on which such Shares are outstanding or 180,
whichever is less, and the numerator of which is 180.
b. Notwithstanding anything to the contrary herein, no dividends
shall be paid on Preferred D Shares at any time that the Corporation is in
arrears in payment of dividends on its Series "A" Preferred Stock, Series "B"
Convertible Preferred Stock, Series "C" Convertible Preferred Stock or any other
capital stock of the Corporation which is entitled to a preference in dividends
over the Preferred D Shares (collectively, the "Senior Series"), but only to the
extent of such preference.
2. Rights on Liquidation and Dissolution. 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,
whether from capital, surplus or earnings, shall be distributed in the following
order of priority:
a. First, to the holders of all Senior Series, in accordance with
the relative rights and preferences among such Series;
b. Next, to the holders of Series D Preferred Stock and any other
class or series of Preferred Stock or other capital stock of the Corporation
which is of equal rank with the Preferred D Shares with respect to sharing in
the proceeds of liquidation and dissolution of the Corporation, but only to the
extent that such class or series of capital stock is of equal rank. In such
distribution, holders of Preferred D Shares shall be entitled to receive, prior
to and in preference to any distribution to the holders of Common Stock or any
other class or series of capital stock of the Corporation with respect to which
the instrument creating such class or series of capital stock shall provide that
holders of shares of such class or series shall be subordinate and inferior to
the rights of holders of Preferred D Shares in liquidation and dissolution and
winding up, and in lieu of any other payment, an amount equal to $100.00 per
Preferred D Share then outstanding plus any dividends accrued and unpaid through
the liquidation date (the "Preferred D Liquidation Preference").
c. After distribution of the Preferred D Liquidation Preference to
holders of Preferred D Shares, the remaining assets of the Corporation available
for distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of shares of other classes of capital stock of the
Corporation, as their rights may appear
3. Voting.
a. In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred D Share shall
entitle the holder thereof to fifty (50) votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote in the same manner and
with the same effect as, and as a class with, the holders of Common Stock and
any other class of capital stock which votes as a class with the Common Stock.
b. Except as provided elsewhere in this Resolution or in Section 3.d
below, the Corporation shall not, without the affirmative consent or approval of
the holders of Preferred D Shares representing at least 67% of the total number
of Preferred D Shares then outstanding, acting separately as one class, given
either by written consent in lieu of a meeting or by vote at a meeting called
for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred D Shares, or (B) which in any manner
adversely affects the holders of Preferred D Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series "D"
Preferred Stock.
c. For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred D
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and (ii)
the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
d. The Corporation may, with the affirmative consent or approval of
holders of 67% or more of Preferred D Shares outstanding, take any of the
actions described in Section 3.b above.
4. Redemption.
a. The Corporation shall have the right, at any time and from time
to time upon written notice (a "Redemption Notice") to all holders of Preferred
D Shares at their respective registered addresses stating that the Corporation
is exercising its right of redemption set forth herein and fixing a date for
such redemption (the "Redemption Date") which shall be no more than sixty (60)
and no less than thirty (30) days following the date of the Redemption Notice,
redeem Preferred D Shares at a price per Preferred D Share (the "Redemption
Price") equal to 100% of the Preferred D Liquidation Preference as of the
Redemption Date.
b. From and after the Redemption Date, holders of Preferred D Shares
shall cease to be shareholders of the Corporation and the sole right of holders
of Preferred D Shares shall be to receive the Redemption Prices as provided
herein.
c. The Corporation shall pay the Redemption Price to each holder of
record of Preferred D Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred D Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
d. If the Corporation at any time redeems fewer than all Preferred D
Shares, it shall redeem the Preferred D Shares pro-rata from all holders
thereof.
5. Other. Except as expressly provided herein, Preferred C Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
IN WITNESS WHEREOF, said CoreCare Systems, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Rose DiOttavio,
its President, and Thomas T. Fleming, its Assistant Secretary, this 19th day of
April, 1995.
By: /s/ Rose S. DiOttavio
---------------------
President
(SEAL) By: /s/
---------------------
Assistant Secretary
STATE OF Pennsylvania :
:ss
COUNTY OF Philadelphia :
On April 19, 1995 personally appeared before me, a Notary Public, Rose
DiOttavio who acknowledged that she executed the above instrument in the
capacity indicated.
/s/ Mary Anne R. Beckman
------------------------
NOTARY PUBLIC
(SEAL)
EXHIBIT 3.3
Certificate of Amendment
to
Certificate of Designations, Preferences
and Relative, Participating Optional
and Other Special Rights of
SERIES "D" PREFERRED STOCK
By Resolution of the Board of Directors
of
CORECARE SYSTEMS, INC.
We, Rose DiOttavio, President, and Thomas T. Fleming, Assistant Secretary,
of CORECARE SYSTEMS, INC., a corporation organized and existing under the
General Corporation Law of the State of Nevada, in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of said Corporation, as amended, said Board of
Directors, by unanimous written consent dated as of October 4, 1995, adopted a
resolution amending the Certificate of Designations, Preferences and Relative,
Participating Optional and Other Special Rights of Series "D" Preferred Stock of
said Corporation, which resolution is as follows:
WHEREAS, the Corporation desires to amend the Certificate of Designations,
Preferences and Relative, Participating Optional and Other Special Rights
of Series "D" Preferred Stock of the Corporation (the "Series D
Designation") to provide that Series "D" Preferred Stock shall be of equal
rank with the Corporation's Series "A" Preferred Stock and Series "B"
Convertible Preferred Stock with respect to payment of dividends and
sharing in the proceeds of liquidation and dissolution of the Corporation.
WHEREAS, the holder of all of the outstanding shares of the Series "D"
Preferred Stock of the Corporation has consented to the proposed amendment
to the Series D Designation.
NOW, THEREFORE, Be It and It Hereby Is:
RESOLVED, that the consideration which the Corporation received for the
issuance of the Series "D" Preferred Stock in the acquisition of Managed
CareWare, Inc., a Pennsylvania corporation, is at least equal to the
amount to be paid to the holders of such shares on liquidation, and the
annual dividend on such shares does not exceed six percent of the amount
payable upon liquidation for any such class or series of capital stock
convertible into Common Stock of the Corporation, or eight percent of the
amount payable upon liquidation for any such class or series of capital
stock that is not convertible into Common Stock of the Corporation.
RESOLVED, that Section 1.b of the Series D Designation shall be, and
hereby is, amended and restated in its entirety to read as follows:
b. The rights of holders of Preferred D Shares with respect to
the payment of dividends shall be of equal rank to that of holders
of Series "A" Preferred Stock and Series "B" Convertible Preferred
Stock, and in the event that full cumulative dividends on
outstanding shares of Preferred D Shares have not been paid when
scheduled and have not been paid thereafter, dividends declared on
Preferred D Shares, Series "A" Preferred Stock and Series "B"
Convertible Preferred Stock and any other capital stock of the
Corporation which is of equal rank with respect to payment of
dividends with the Preferred D Shares shall be paid pro rata among
each such class or series. Notwithstanding anything to the contrary
herein, no dividends shall be paid on Preferred D Shares at any time
that the Corporation is in arrears in payment of dividends on its
Series "C" Convertible Preferred Stock or any other capital stock of
the Corporation which is entitled to a preference in dividends over
the Preferred D Shares (collectively, the "Senior Series"), but only
to the extent of such preference.
RESOLVED, that Section 2.b of the Series D Designation shall be, and
hereby is, amended and restated in its entirety to read as follows:
b. Next, to the holders of Series "A" Preferred Stock, Series
"B" Convertible Preferred Stock, Series D Preferred Stock and any
other class or series of Preferred Stock or other capital stock of
the Corporation which is of equal rank with the Preferred D Shares
with respect to sharing in the proceeds of liquidation and
dissolution of the Corporation, but only to the extent that such
class or series of capital stock is of equal rank. In such
distribution, holders of Preferred D Shares shall be entitled to
receive, prior to and in preference to any distribution to the
holders of Common Stock or any other class or series of capital
stock of the Corporation with respect to which the instrument
creating such class or series of capital stock shall provide that
holders of shares of such class or series shall be subordinate and
inferior to the rights of holders of Preferred D Shares in
liquidation and dissolution and winding up, and in lieu of any other
payment, an amount equal to $100.00 per Preferred D Share then
outstanding plus any dividends accrued and unpaid through the
liquidation date (the "Preferred D Liquidation Preference").
RESOLVED, that Section 5 of the Series D Designation shall be, and hereby
is, amended and restated in its entirety to read as follows:
5. Other. Except as expressly provided herein, Preferred D
Shares shall have the same rights and privileges as shares of the
Corporation's Common Stock.
RESOLVED, that the President, any Vice President, Secretary or other
proper officer of the Corporation is hereby authorized, directed and
empowered to execute and deliver, in the name of and on behalf of the
Corporation and without further authorization from the Board of Directors,
such other agreements, certificates, instruments and other documents and
to take or cause to be taken all such other action as in their judgment
may be necessary or desirable to carry out the purposes of these
resolutions.
RESOLVED, that all acts of the officers of the Corporation in furtherance
of the transaction contemplated by the foregoing resolutions taken prior
to the adoption of these resolutions are hereby ratified, confirmed,
approved and adopted in all respects.
IN WITNESS WHEREOF, said CoreCare Systems, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Rose DiOttavio,
its President, and Thomas T. Fleming, its Assistant Secretary, this 4th day of
October, 1995.
By: /s/ Rose S. DiOttavio
---------------------
President
(SEAL) By: /s/
---------------------
Assistant Secretary
STATE OF Pennsylvania :
:ss
COUNTY OF Montgomery :
On October 4, 1995 personally appeared before me, a Notary Public, Rose
DiOttavio who acknowledged that she executed the above instrument in the
capacity indicated.
/s/
----------------------
NOTARY PUBLIC
(SEAL)
EXHIBIT 3.4
Certificate of Designations, Preferences
and Relative, Participating, Optional
and Other Special Rights of
SERIES "E" CONVERTIBLE PREFERRED STOCK
By Resolution of the Board of Directors
of
CORECARE SYSTEMS, INC.
We, Rose S. DiOttavio, President, and Thomas T. Fleming, Assistant
Secretary, of CORECARE SYSTEMS, INC., a corporation organized and existing under
the General Corporation Law of the State of Nevada, in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of said Corporation, as amended, said Board of
Directors, by unanimous written consent dated as of October 4, 1995, adopted a
resolution providing for the designation of a series of Twelve Thousand Seven
Hundred Fifty (12,750) shares of Series "E" Convertible Preferred Stock, which
resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Articles of
Incorporation, as amended, 12,750 shares of this Corporation's authorized
and previously unissued and undesignated Preferred Stock, par value $.001,
per share are hereby designated as the Corporation's Series "E"
Convertible Preferred Stock, to have the following preferences, and
relative, optional and other special rights, qualifications, limitations
and restrictions:
Series "E" Convertible Preferred Stock.
1. Dividends.
a. Holders of Series "E" Convertible Preferred Stock (hereinafter
referred to in this Resolution as the "Preferred E Shares" or "Shares") shall be
entitled to receive an annual dividend of $6.00 per Share which shall accrue and
be payable in semi-annual installments to the holder of record of such Share as
of October 31 and March 31 in each year that such Share is outstanding (the
"Record Dates") not later than ten (10) days after the Record Date (the
"Dividend Payment Date"). Preferred E Shares which are issued other than on a
Record Date shall receive a reduced dividend on the first Dividend Payment Date
on which they are outstanding determined by multiplying the regular dividend by
a fraction, the numerator of which equals the number of days from the date of
issuance of such Shares to the first Record Date on which such Shares are
outstanding or 180, whichever is less, and the numerator of which is 180.
b. The rights of holders of Preferred E Shares with respect to the
payment of dividends shall be of equal rank to that of holders of Series "C"
Convertible Preferred Stock, and in the event that full cumulative dividends on
outstanding shares of Preferred E Shares have not been paid when scheduled and
have not been paid thereafter, dividends declared on Preferred E Shares and
Series "C" Convertible Preferred Stock and any other capital stock of the
Corporation which is of equal rank with respect to payment of dividends with the
Preferred E Shares shall be paid pro rata among each such class or series.
c. Preferred E Shares shall be preferred over Common Stock, Series
"A" Preferred Stock, Series "B" Convertible Preferred Stock and the Series "D"
Convertible Preferred Stock as to dividends, and no dividends shall be declared,
set aside or paid on any of such series or class of capital stock so long as any
arrearage exists in the payment of dividends on the Preferred E Shares.
2. Rights on Liquidation and Dissolution. 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,
whether from capital, surplus or earnings, shall be distributed in the following
order of priority:
a. First, to the holders of Series "C" Convertible Preferred Stock
and Series "E" Convertible Preferred Stock and any other class or series of
Preferred Stock or other capital stock of the Corporation which is of equal rank
with the Preferred E Shares with respect to sharing in the proceeds of
liquidation and dissolution of the Corporation, but only to the extent that such
class or series of capital stock is of equal rank. In such distribution, holders
of Preferred E Shares shall be entitled to receive, prior to and in preference
to any distribution to the holders of Common Stock, Series "A" Preferred Stock,
Series "B" Convertible Preferred Stock, Series "D" Convertible Preferred Stock
or any other class or series of capital stock of the Corporation with respect to
which the instrument creating such class or series of capital stock shall
provide that holders of shares of such class or series shall be subordinate and
inferior to the rights of holders of Preferred E Shares in liquidation and
dissolution and winding up, and in lieu of any other payment, an amount equal to
$100.00 per Preferred E Share then outstanding (the "Preferred E Liquidation
Preference"). If the assets available to be distributed are not sufficient to
satisfy the Preferred E Liquidation Preference of all outstanding Preferred E
Shares, as well as the liquidation preference of the outstanding shares of
Series C Convertible Preferred Stock and the outstanding shares of any other
class or series which is of equal rank with the Preferred E Shares as to sharing
in the proceeds of liquidation and dissolution of the Corporation, then the
amount to be distributed with respect to each such share shall bear the same
proportion to the amount available to be distributed as the liquidation
preference of each such share bears to the aggregate liquidation preference of
all such shares.
b. After distribution of the Preferred E Liquidation Preference to
holders of Preferred E Shares, the remaining assets of the Corporation available
for distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of shares of other classes of capital stock of the
Corporation, as their rights may appear.
3. Voting.
a. In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred E Share shall
entitle the holder thereof to a number of votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote which is equal to the
number of shares of the Corporation's Common Stock into which such Share is then
convertible pursuant to Section 4 below, in the same manner and with the same
effect as, and as a class with, the holders of Common Stock or any other class
of capital stock which votes as a class with the Common Stock.
b. Except as provided elsewhere in this Resolution or in Section 3.d
below, the Corporation shall not, without the affirmative consent or approval of
the holders of Preferred E Shares representing at least 67% of the total number
of Preferred E Shares then outstanding, acting separately as one class, given
either by written consent in lieu of a meeting or by vote at a meeting called
for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred E Shares, or (B) which in any manner
adversely affects the holders of Preferred E Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series "E"
Convertible Preferred Stock; or
(iii) (A) transfer all or substantially all of the
Corporation's business or assets, or (B) approve a consolidation or merger to
which the Corporation shall be a party, or (C) enter into a plan of liquidation
or dissolution.
c. For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred E
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and (ii)
the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
d. The holders of Preferred E Shares shall receive thirty (30) days
prior written notice at their respective registered addresses of any meeting
called for the purpose of voting on any matter as to which the holders of
Preferred E Shares shall be entitled to vote and after such vote, the holders of
Preferred E Shares shall not be entitled to any notice that the transaction, if
approved by the required vote, will be or has been effectuated; or, if any
matter as to which the holders of Preferred E Shares shall be entitled to vote
is approved by written consent in lieu of a meeting, the holders of Preferred E
Shares shall receive thirty (30) days prior written notice of such action at
their respective registered addresses prior to the effectuation of such
transaction.
4. Conversion.
a. Subject to adjustment as provided in Sections 4.b and 4.c below,
each holder of Preferred E Shares shall have the right, at a holder's option, at
any time or from time to time prior to the Redemption Date (as hereinafter
defined), to convert each Preferred E Share into One Hundred (100) shares of
fully paid and non-assessable shares of Common Stock of the Corporation.
b. If, at any time after the date that Preferred E Shares are first
issued (the "Original Issue Date") the number of shares of Common Stock
outstanding is increased by a subdivision, conversion or split-up of shares of
Common Stock, then, following the record date fixed therefor, the ratio upon
which Preferred E Shares may be converted into Common Stock (the "Conversion
Ratio") shall be appropriately adjusted by increasing the number of shares of
Common Stock issuable upon conversion of each Preferred E Share in proportion to
such increase in outstanding shares of Common Stock.
c. If, at any time after the Original Issue Date, the number of
shares of Common Stock outstanding is decreased by a stock combination, reverse
split or conversion, then, following the record date for such combination,
reverse stock split or conversion, the Conversion Ratio shall be appropriately
adjusted by decreasing the number of shares of Common Stock issuable on
conversion of each Preferred E Share in proportion of such decrease in
outstanding shares of Common Stock.
d. In case, at any time after the Original Issue Date, of any
capital reorganization, or any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock) or of the sale or other disposition of
all or substantially all the properties and assets of the Corporation as an
entirety to any other person, each Preferred E Share shall after such
reorganization, reclassification, consolidation, merger, sale or other
disposition be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or of the corporation resulting from
such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise disposed to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time of
such reorganization, reclassification, consolidation, merger, sale or other
disposition) upon conversion of such Preferred E Share would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 4 shall similarly apply to
successive reorganizations, reclassification, consolidations, mergers, sales or
other dispositions.
e. To exercise the right to convert set forth in this Section 4, a
holder of Preferred E Shares shall deliver to the Corporation at its principal
executive offices, marked to the attention of the Secretary of the Corporation,
the certificate or certificates representing the Preferred E Shares to be
converted, endorsed to, or accompanied by a separate assignment to, the
Corporation, and (b) a written notice stating (i) such holder's wish to exercise
the right to convert such Preferred E Shares set forth in this designation, (ii)
the name or names and addresses in which and to which securities or other
property then deliverable upon conversion of Preferred E Shares should be
registered and delivered (if to a person other than the holder and/or to an
address other than the holder's address of record). The conversion of a
Preferred E Share shall be deemed effective, and such Preferred E Share shall
cease to be outstanding for any purpose, upon receipt by the Corporation of the
aforementioned Notice of Conversion and certificate representing such Preferred
E Share, provided the same are received prior to the Redemption Date, and the
sole right of the holder of such Preferred E Share after conversion shall be to
receive the securities or other property then issuable upon the conversion
thereof.
f. The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any Preferred E Shares;
provided, however, that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the Preferred E Shares in respect of which such shares are being
issued.
g. The Corporation shall reserve, and at all times from and after
the Original Issue Date keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of Preferred E Shares sufficient shares to provide for
the conversion of all outstanding Preferred E Shares.
h. All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from all
taxes, liens or charges with respect thereto.
5. Redemption.
a. Subject to the provisions of Section 5.b below, the Corporation
shall have the right, upon written notice (a "Redemption Notice") to all holders
of Preferred E Shares at their respective registered addresses stating that the
Corporation is exercising its right of redemption set forth herein and fixing a
date for such redemption (the "Redemption Date") which shall be no more than
sixty (60) and no less than thirty (30) days following the date of the
Redemption Notice, to redeem Preferred E Shares at a price per Preferred E Share
(the "Redemption Price") equal to 100% of the Preferred E Liquidation Preference
as of the Redemption Date. Notwithstanding the foregoing, the Corporation may
not redeem Preferred E Shares prior to the fifth anniversary of the Original
Issue Date except upon the occurrence of (i) the closing of the Corporation's
public offering of its Common Stock pursuant to a registration statement filed
under the Securities Act of 1933, the net proceeds of which to the Corporation,
after deducting all brokerage commissions, underwriters' discounts and similar
fees, but before other expenses, is not less than $3,000,000 (other than a
registration statement relating solely to an offer and sale of securities to the
employees of or other persons providing services to the Corporation registered
on Form S-8 or a comparable or successor form) or (ii) the effectuation of the
merger or consolidation of the Corporation with or into another entity or
entities, or the acquisition of all of the outstanding shares of the
Corporation's Common Stock by another entity or entities, pursuant to which the
holders of the Corporation's Common Stock will receive securities which are
listed on any national securities exchange or included in the NASDAQ System, or
will be so listed or included upon effectuation of the merger, consolidation or
acquisition.
b. The Corporation's right to redeem Preferred E Shares provided in
Section 5.a above may be exercised by the Corporation only if the Fair Market
Value (as defined below) of the Corporation's Common Stock for a period of
thirty (30) consecutive days immediately prior to the Redemption Date is at
least 200% of the amount derived by dividing the Preferred E Liquidation
Preference by the number of shares of Common Stock into which each Preferred E
Share is then convertible. For purposes of this Section 5.b, Fair Market Value
of the Corporation's Common Stock shall mean, as of any day, the closing sales
price of the Common Stock on such day on the New York Stock Exchange, or, if the
Common Stock is not then listed on the New York Stock Exchange, then on the
principal national securities exchange on which the Common Stock is listed, or,
if the Common Stock is not then listed on a national securities exchange, then
the closing sales price of the Common Stock on such day as reported on the
NASDAQ National Market System, or, if the Common Stock is not then included on
the NASDAQ National Market System, then the average of the closing bid and ask
prices of the Common Stock on such day in the over-the-counter market as
reported by NASDAQ, or, if the bid and ask prices for the Common Stock are not
reported by NASDAQ, then as reported by the National Quotation Bureau, Inc. or
any successor organization.
c. Each holder of Preferred E Shares shall have the right, at any
time on or after the tenth anniversary of the Original Issue Date and upon
thirty days' written notice to the Corporation fixing the Redemption Date, to
require the Corporation to redeem at the Redemption Price such holder's
Preferred E Shares which have not been redeemed by the Corporation or converted
into Common Stock in accordance with Section 4 hereof on or before the tenth
anniversary of the Original Issue Date.
d. From and after the Redemption Date, holders of Preferred E Shares
shall cease to be shareholders of the Corporation and the sole right of holders
of Preferred E Shares shall be to receive the Redemption Prices as provided
herein.
e. The Corporation shall pay the Redemption Price to each holder of
record of Preferred E Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred E Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
f. If the Corporation at any time redeems fewer than all Preferred E
Shares, it shall redeem the Preferred E Shares pro-rata from all holders
thereof.
g. The holders of the Preferred E Shares shall continue to have the
right to convert their Preferred E Shares into Common Stock, in accordance with
Section 4 hereof, after the Corporation has given a Redemption Notice, until
5:00 P.M., Philadelphia Time, on the Redemption Date.
6. Other. Except as expressly provided herein, Preferred E Shares
shall have the same rights and privileges as shares of the Corporation's Common
Stock.
IN WITNESS WHEREOF, said CoreCare Systems, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Rose S.
DiOttavio, its President, and Thomas T. Fleming, its Assistant Secretary, this
4th day of October, 1995.
By: /s/ Rose S. DiOttavio
---------------------
President
(SEAL) By: /s/
---------------------
Assistant Secretary
STATE OF Pennsylvania :
:ss
COUNTY OF Montgomery :
On October 4, 1995 personally appeared before me, a Notary Public, Rose S.
DiOttavio who acknowledged that she executed the above instrument in the
capacity indicated.
/s/
---------------------
NOTARY PUBLIC
(SEAL)
EXHIBIT 3.5
Certificate of Amendment
to
Certificate of Designations, Preferences
and Relative, Participating, Optional
and Other Special Rights of
SERIES "E" CONVERTIBLE PREFERRED STOCK
By Resolution of the Board of Directors
of
CORECARE SYSTEMS, INC.
We, Rose S. DiOttavio, President, and Joan K.S. Biddle, Assistant
Secretary, of CORECARE SYSTEMS, INC., a corporation organized and existing under
the General Corporation Law of the State of Nevada, in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of said Corporation, as amended, said Board of
Directors, by unanimous written consent dated as of August 1, 1996, adopted a
resolution amending the Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Series E Preferred Stock of
said Corporation, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Articles of
Incorporation, as amended, an additional 500 shares of this Corporation's
authorized and previously unissued and undesignated Preferred Stock, par
value $.001, are hereby designated as Series "E" Convertible Preferred
Stock, such that the aggregate number of shares designated as Series "E"
Convertible Preferred Stock shall be 13,250; and that the Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of the Series "E" Convertible Preferred Stock be amended to
reflect such additional shares.
RESOLVED, that the President, any Vice President, acting alone or together
with any other proper officer of the Corporation is hereby authorized,
directed and empowered to execute, file, record and/or deliver, in the
name of and on behalf of the Corporation, such certificates and other
instruments as may be required as in their judgment may be necessary or
desirable to carry out the foregoing resolution.
RESOLVED, that all acts of the officers of the Corporation in furtherance
of the amendment contemplated by the foregoing resolution taken prior to
the adoption of these resolutions are hereby ratified, confirmed, approved
and adopted in all respects.
We further certify that approval of the stockholders required by Section 78.1955
of the Nevada Revised Statutes has been obtained.
IN WITNESS WHEREOF, said CoreCare Systems, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Rose DiOttavio,
its President, and Joan K.S. Biddle, its Assistant Secretary, this 4th day of
October, 1995.
By: /s/ Rose S. DiOttavio
---------------------
President
(SEAL) By: /s/
_____________________
Assistant Secretary
STATE OF Pennsylvania :
:ss
COUNTY OF Montgomery :
On October 4, 1995 personally appeared before me, a Notary Public, Rose
DiOttavio who acknowledged that she executed the above instrument in the
capacity indicated.
/s/
_____________________
NOTARY PUBLIC
(SEAL)
STATE OF Pennsylvania :
:ss
COUNTY OF Montgomery :
On October 4 , 1995 personally appeared before me, a Notary Public, Joan
K.S. Biddle, who acknowledged that she executed the above instrument in the
capacity indicated.
/s/
_____________________
NOTARY PUBLIC
(SEAL)
EXHIBIT 3.6
Certificate of Designations, Preferences
and Relative, Participating, Optional
and Other Special Rights of
SERIES "F" CONVERTIBLE PREFERRED STOCK
By Resolution of the Board of Directors
of
CORECARE SYSTEMS, INC.
We, Rose S. DiOttavio, President, and Thomas T. Fleming, Assistant
Secretary, of CORECARE SYSTEMS, INC., a corporation organized and existing under
the General Corporation Law of the State of Nevada, in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation of said Corporation, as amended, said Board of
Directors, by unanimous written consent dated as of October 4, 1995, adopted a
resolution providing for the designation of a series of 6,000 (Six Thousand)
shares of Series "F" Convertible Preferred Stock, which resolution is as
follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Articles of
Incorporation, as amended, 6,000 shares of this Corporation's authorized
and previously unissued and undesignated Preferred Stock, par value $.001,
per share are hereby designated as the Corporation's Series "F"
Convertible Preferred Stock, to have the following preferences, and
relative, optional and other special rights, qualifications, limitations
and restrictions:
Series "F" Convertible Preferred Stock.
1. Dividends.
a. Holders of Series "F" Convertible Preferred Stock (hereinafter
referred to in this Resolution as the "Preferred F Shares" or "Shares") shall be
entitled to receive an annual dividend of $6.00 per Share which shall accrue and
be payable in semi-annual installments to the holder of record of such Share as
of December 31 and June 30 in each year that such Share is outstanding (the
"Record Dates") not later than ten (10) days after the Record Date (the
"Dividend Payment Date"). Preferred F Shares which are issued other than on a
Record Date shall receive a reduced dividend on the first Dividend Payment Date
on which they are outstanding determined by multiplying the regular dividend by
a fraction, the numerator of which equals the number of days from the date of
issuance of such Shares to the first Record Date on which such Shares are
outstanding or 180, whichever is less, and the numerator of which is 180.
b. Notwithstanding anything to the contrary herein, no dividends
shall be paid on Preferred F Shares at any time that the Corporation is in
arrears in payment of dividends on its Series "C" Convertible Preferred Stock or
Series "E" Convertible Preferred Stock.
2. Rights on Liquidation and Dissolution. 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,
whether from capital, surplus or earnings, shall be distributed in the following
order of priority:
a. First, to the holders of Series "C" Convertible Preferred Stock
and Series "E" Convertible Preferred Stock and any other class or series of
Preferred Stock or other capital stock of the Corporation which is entitled to a
preference in liquidation and dissolution over the Preferred F Shares, but only
to the extent of that preference.
b. Next, to the holders of Series "A" Preferred Stock, Series "B"
Convertible Preferred Stock, Series "D" Preferred Stock and Series "F"
Convertible Preferred Stock and any other class or series of Preferred Stock or
other capital stock of the Corporation which is of equal rank with the Preferred
F Shares with respect to sharing in the proceeds of liquidation and dissolution
of the Corporation, but only to the extent that such class or series of capital
stock is of equal rank. In such distribution, holders of Preferred F Shares
shall be entitled to receive, prior to and in preference to any distribution to
the holders of Common Stock or any other class or series of capital stock of the
Corporation with respect to which the instrument creating such class or series
of capital stock shall provide that holders of shares of such class or series
shall be subordinate and inferior to the rights of holders of Preferred F Shares
in liquidation and dissolution and winding up, and in lieu of any other payment,
an amount equal to $100.00 per Preferred F Share then outstanding (the
"Preferred F Liquidation Preference").
c. After distribution of the Preferred F Liquidation Preference to
holders of Preferred F Shares, the remaining assets of the Corporation available
for distribution, if any, to the shareholders of the Corporation shall be
distributed to the holders of shares of other classes of capital stock of the
Corporation, as their rights may appear.
3. Voting.
a. In addition to the rights specified in Section 3.b below and any
other rights provided in the Corporation's Bylaws, each Preferred F Share shall
entitle the holder thereof to a number of votes per Share on all matters as to
which holders of Common Stock shall be entitled to vote which is equal to the
number of shares of the Corporation's Common Stock into which such Share is then
convertible pursuant to Section 4 below, in the same manner and with the same
effect as, and as a class with, the holders of Common Stock or any other class
of capital stock which votes as a class with the Common Stock.
b. Except as provided elsewhere in this Resolution or in Section 3.d
below, the Corporation shall not, without the affirmative consent or approval of
the holders of Preferred F Shares representing at least 67% of the total number
of Preferred F Shares then outstanding, acting separately as one class, given
either by written consent in lieu of a meeting or by vote at a meeting called
for such purposes:
(i) create or issue any class or series of capital stock (A)
ranking, either as to payment of dividends, distribution of assets or
redemptions, prior to the Preferred F Shares, or (B) which in any manner
adversely affects the holders of Preferred F Shares; or
(ii) alter or change the designations, powers, preferences or
rights, or the qualifications, limitations or restrictions of the Series "F"
Convertible Preferred Stock.
c. For purposes hereof, the creation by the Corporation of one or
more classes or series of Preferred Stock ranking on a parity with Preferred F
Shares as to dividends, redemption, liquidation or dissolution shall not be
deemed to violate Section 3.b(ii) above if (i) the amount to be paid to holders
of shares of such class or series on liquidation does not exceed the amount paid
to the Corporation in consideration for the issuance of such shares, and (ii)
the annual dividend on such shares does not exceed six (6%) percent of the
amount payable upon liquidation for any such class or series of capital stock
convertible into Common Stock, or eight (8%) percent of the amount payable upon
liquidation for any such class or series of capital stock that is not
convertible into Common Stock.
d. The Corporation may, with the affirmative consent or approval of
holders of 67% or more of Preferred F Shares outstanding, take any of the
actions described in Section 3.b above.
4. Conversion.
a. Subject to adjustment as provided in Sections 4.b and 4.c below,
holders of Preferred F Shares shall have the right, at a holder's option, at any
time or from time to time prior to the Redemption Date (as hereinafter defined),
to convert each Preferred F Share into Fifty (50) shares of fully paid and
non-assessable shares of Common Stock of the Corporation.
b. If, at any time after the date that Preferred F Shares are first
issued (the "Original Issue Date") the number of shares of Common Stock
outstanding is increased by a subdivision, conversion or split-up of shares of
Common Stock, then, following the record date fixed therefor, the ratio upon
which Preferred F Shares may be converted into Common Stock (the "Conversion
Ratio") shall be appropriately adjusted by increasing the number of shares of
Common Stock issuable upon conversion of each Preferred F Share in proportion to
such increase in outstanding shares of Common Stock.
c. If, at any time after the Original Issue Date, the number of
shares of Common Stock outstanding is decreased by a stock combination, reverse
split or conversion, then, following the record date for such combination,
reverse stock split or conversion, the Conversion Ratio shall be appropriately
adjusted by decreasing the number of shares of Common Stock issuable on
conversion of each Preferred F Share in proportion of such decrease in
outstanding shares of Common Stock.
d. In case, at any time after the Original Issue Date, of any
capital reorganization, or any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock) or of the sale or other disposition of
all or substantially all the properties and assets of the Corporation as an
entirety to any other person, each Preferred F Share shall after such
reorganization, reclassification, consolidation, merger, sale or other
disposition be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or of the corporation resulting from
such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise disposed to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time of
such reorganization, reclassification, consolidation, merger, sale or other
disposition) upon conversion of such Preferred F Share would have been entitled
upon such reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 4 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
e. To exercise the right to convert set forth in this Section 4, a
holder of Preferred F Shares shall deliver to the Corporation at its principal
executive offices, marked to the attention of the Secretary of the Corporation,
the certificate or certificates representing the Preferred F Shares to be
converted, endorsed to, or accompanied by a separate assignment to, the
Corporation, and (b) a written notice stating (i) such holder's wish to exercise
the right to convert such Preferred F Shares set forth in this designation, (ii)
the name or names and addresses in which and to which securities or other
property then deliverable upon conversion of Preferred F Shares should be
registered and delivered (if to a person other than the holder and/or to an
address other than the holder's address of record). The conversion of a
Preferred F Share shall be deemed effective, and such Preferred F Share shall
cease to be outstanding for any purpose, upon receipt by the Corporation of the
aforementioned Notice of Conversion and certificate representing such Preferred
F Share, provided the same are received prior to the Redemption Date, and the
sole right of the holder of such Preferred F Share after conversion shall be to
receive the securities or other property then issuable upon the conversion
thereof.
f. The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Corporation upon conversion of any Preferred F Shares;
provided, however, that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the Preferred F Shares in respect of which such shares are being
issued.
g. The Corporation shall reserve, and at all times from and after
the Original Issue Date keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of Preferred F Shares sufficient shares to provide for
the conversion of all outstanding Preferred F Shares.
h. All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable and free from all
taxes, liens or charges with respect thereto.
5. Redemption.
a. The Corporation shall have the right, at any time and from time
to time upon written notice (a "Redemption Notice") to all holders of Preferred
F Shares at their respective registered addresses stating that the Corporation
is exercising its right of redemption set forth herein and fixing a date for
such redemption (the "Redemption Date") which shall be no more than sixty (60)
and no less than thirty (30) days following the date of the Redemption Notice,
redeem Preferred F Shares at a price per Preferred F Share (the "Redemption
Price") equal to 100% of the Preferred F Liquidation Preference as of the
Redemption Date.
b. From and after the Redemption Date, holders of Preferred F Shares
shall cease to be shareholders of the Corporation and the sole right of holders
of Preferred F Shares shall be to receive the Redemption Prices as provided
herein.
c. The Corporation shall pay the Redemption Price to each holder of
record of Preferred F Shares as of the Redemption Date, provided, however, that
as a condition precedent to the Corporation's payment of the Redemption Price to
any holder, such holder shall deliver to the Corporation the certificate
representing the Preferred F Shares to be redeemed or, in lieu thereof,
satisfactory evidence that such certificate has been lost or destroyed, together
with a bond or surety satisfactory to the Corporation to protect it against loss
should such certificate subsequently be tendered for redemption.
d. If the Corporation at any time redeems fewer than all Preferred F
Shares, it shall redeem the Preferred F Shares pro-rata from all holders
thereof.
e. The holders of the Preferred F Shares shall continue to have the
right to convert their Preferred F Shares into Common Stock, in accordance with
Section 4 hereof, after the Corporation has given a Redemption Notice, until
5:00 P.M., Philadelphia, Pennsylvania Time, on the Redemption Date.
6. Other. Except as expressly provided herein, Preferred F Shares shall
have the same rights and privileges as shares of the Corporation's Common Stock.
IN WITNESS WHEREOF, said CoreCare Systems, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Rose S.
DiOttavio, its President, and Thomas T. Fleming, its Assistant Secretary, this 4
day of October, 1995.
By: /s/ Rose S. DiOttavio
---------------------
President
(SEAL) By: /s/
---------------------
Assistant Secretary
STATE OF Pennsylvania :
:ss
COUNTY OF Montgomery :
On October 4, 1995 personally appeared before me, a Notary Public, Rose S.
DiOttavio who acknowledged that she executed the above instrument in the
capacity indicated.
/s/
---------------------
NOTARY PUBLIC
(SEAL)
EXHIBIT 3.7
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
CORECARE SYSTEMS, INC.
Series WC Warrant for the Purchase of Shares of Common Stock
No. WC -
THIS CERTIFIES THAT, for value received, _____________ ("Holder") is
entitled to subscribe for and purchase from CORECARE SYSTEMS, INC., a Nevada
corporation (the "Company"), at any time and prior to the Expiration Date set
forth below (the "Exercise Period"), ______________________ (______) fully paid
and nonassessable shares (the "Shares") of the Company's Common Stock, $.001 par
value per share (the "Common Stock"), subject to the adjustments set forth in
Sections 2 and 7 below, at a price of One Dollar and Twelve and One Half Cents
($1.125) Per Share (the "Exercise Price"), subject to the other terms and
conditions set forth herein.
1. Transfer, assignment or hypothecation of this Warrant by the Holder may
be made only in accordance with and subject to the terms, conditions and other
provisions of this Warrant. The term "Holder," as used herein, shall include the
original Holder and only such persons to whom this Warrant is transferred in
strict conformity with the terms and conditions set forth herein. As used
herein, the term "Warrant" shall mean and include this Warrant and any Warrant
or Warrants hereafter issued in consequence of the exercise or transfer of this
Warrant, in whole or in part.
2. (a) The Expiration Date of this Warrant shall be December 31, 1996,
provided that prior to such date the Company has filed and processed to
effectiveness a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), in respect of the Shares issuable hereunder (a
"Registration Statement" or "Statement"), which Registration Statement shall
have remained effective and current so that Shares could be sold pursuant to the
Statement in accordance with the Act for not less than ninety (90) days (the
"Registration Condition"). If the Registration Condition has not been satisfied
prior to October 1, 1996 the Expiration Date shall be the tenth day following
the date upon which the Registration Condition is first satisfied. The Company
shall give Holder prompt notice of the filing and the effectiveness of any
Registration Statement.
(b) If the Company has not processed a Registration Statement to
effectiveness on or prior to July 1, 1996, then the number of Shares for which
this Warrant may be exercised shall increase by twenty percent (20%). If the
Company has not processed a Registration Statement to effectiveness on or prior
to December 1, 1996, then the number of Shares for which this Warrant may be
exercised shall increase by an additional twenty percent (20%) of the original
number of Shares.
3. This Warrant may be exercised from time to time during the Exercise
Period as to the whole or any lesser number of whole Shares by the surrender of
this Warrant (with the form of Election to Purchase at the end hereof duly
executed) to the Company at its offices located at 9425 Stenton Avenue,
Erdenheim, PA 19038, Attn: President (or such other place as is designated in
writing and delivered to Holder by the Company), accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price"). The Shares Purchase Price may also be paid by the
Holder's cancelling the principal indebtedness of the Company under a certain
Promissory Note from the Company issued to the original Holder hereof, dated of
even date herewith, in the amount of $39,375.
4. Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of (a)
this Warrant, (b) a duly executed form of Election to Purchase, and (c) payment
of the Shares Purchase Price. If the Shares Purchase Price is paid by
cancellation of a Promissory Note as set forth in the final sentence of Section
3 hereof, the Holder shall deliver the original Promissory Note to the Company
for cancellation; if the Holder is not the original Payee under such Promissory
Note, then Holder shall also present the Company with evidence, reasonably
satisfactory to the Company, that the Holder is the lawful owner of the
Promissory Note. Upon each exercise of this Warrant, the Holder shall be deemed
to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Shares issuable upon such exercise, registered in the name of the Holder or
its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Shares subject to purchase hereunder.
5. The Company shall maintain a register on which the names and addresses
of the persons to whom this Warrant is issued and shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Subject to compliance with applicable securities laws and any other
restrictions set forth herein, this Warrant shall be transferable on the books
of the Company only upon delivery thereof with the form of Assignment at the end
hereof duly completed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of transfer,
the Company shall deliver a new Warrant or Warrants exchanged, at the option of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, unless such transfer is registered under the Act or the Company shall
have received an opinion of counsel as set forth in paragraph (f) of Section 10
hereof.
6. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. The Company covenants and agrees that all of the Shares
which may be issued pursuant to this Warrant will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
7. (a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the shares of Common Stock into a greater
number of shares or (iii) combine or reclassify the outstanding shares of Common
Stock into a lesser number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price then in
effect by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding immediately after giving effect to such action, and of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall become effective
automatically concurrently with the time of such declaration, distribution,
subdivision, reclassification or combination and shall be made successively
whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (a) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the initial Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 7 shall be made to the
nearest one-hundredth of a cent and to the nearest whole Share.
8. (a) In case of any consolidation with or merger of the Company with or
into another corporation, or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, appropriate provisions shall be made so that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of Shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease or conveyance and, in any such case, effective provision
shall be made in its Articles of Incorporation or otherwise, if necessary, in
order to effect such agreement. Such agreement shall provide for adjustments
which shall be as nearly equivalent as practicable to the adjustments in Section
7.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares) or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) in
the Shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but including
any change in the Shares into two or more classes or series of Shares), the
Holder shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash or any combination thereof receivable by the holder of the number of Shares
for which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger. Thereafter, appropriate
provision (as reasonably determined by the Board of Directors) shall be made for
adjustment which shall be as nearly equivalent as practicable to the adjustments
in Section 7.
(c) The above provisions of this Section 8 shall similarly apply to
successive reclassification and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
9. The issue of any stock or other certificate upon the exercise of this
Warrant shall be made without charge to the Holder for any tax in respect of the
issue of such certificate. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificates unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
10. (a) The Company shall use its best efforts to register the Shares for
sale under the Act not later than July 1, 1996, and to maintain a Registration
Statement in effect with respect to the Shares for not less than ninety
(90) days.
(b) This Warrant is one of a Series of similar warrants denominated
as the Company's "Series WC" Warrants (the "WC Warrants") all issued on or about
December 1, 1995 and initially exercisable for an aggregate maximum 222,222
shares of Common Stock. The shares issuable under all such Warrants are referred
to herein as the "Registrable Shares." If the Company has not registered the
Shares for sale under the Act on or before July 1, 1996, then at any time
thereafter, the holders of a majority in interest of the then unregistered
Registrable Shares (all WC Warrants being deemed exercised for purposes of this
paragraph (b)) held by all Holders of WC Warrants or shares issued upon exercise
of such WC Warrants, shall have the right to notify the Company in writing that
such Holders intend to offer or cause to be offered for sale any of the
Registrable Shares (but not less than 10% in the aggregate of the Registrable
Shares which would be outstanding upon exercise in full of all WC Warrants)) and
shall have the right to demand the Company to cause such Registrable Shares to
be registered under the Act. In such event, the Company will notify all other
Holders of Registrable Shares of such notice from a majority of the Holders of
Registrable Shares . Upon written request of any Holder of Registrable Shares
given within fifteen (15) days after receipt by such Holder of such notification
from the Company, the Company will use its best efforts to cause such of the
Registrable Shares as may be requested by any Holders thereof to be registered
under the Act as expeditiously as possible; provided that the Company shall be
obligated to register shares pursuant to this paragraph (b) on not more than two
occasions and provided further that the Company shall not be required to effect
any such registration within ninety (90) days of the Closing of an underwritten
primary public offering by the Company.
(c) The Company shall not be required to effect the registration of
any of the shares requested by a Holder of Registrable Shares under subparagraph
(b) if, in the unqualified opinion of counsel for the Company which is
reasonably acceptable to counsel for the Holder, such Holder may then sell all
shares as to which such Holder had requested registration under the provisions
of the Securities Act without registration thereunder.
(d) Each registration pursuant to paragraph (b) above shall be
subject to the registration procedures, provisions regarding expenses and
indemnification and other matters set forth on Exhibit A hereto.
(e) The Company agrees that so long as it shall have an effective
registration statement under the Act with respect to any of the Shares (and for
one year thereafter) and for so long as the Company shall have any securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, it shall file all reports required to be filed pursuant to the
Securities Exchange Act of 1934, as amended, so as to be in compliance with the
then current public information requirements specified in Rule 144 (as amended)
or any successor rule promulgated under the Securities Act.
(f) Unless registered under the Act, this Warrant and the Shares or
other securities issued upon exercise of this Warrant shall not be transferrable
unless, in the opinion of counsel reasonably satisfactory to the Company, an
exemption from registration under applicable securities laws is available. The
Warrant, Shares and other securities issued upon the exercise of this Warrant
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Shares or securities shall bear the following legend and any
other legend which counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
12. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
13. This Warrant shall be governed by and construed in accordance with the
laws of the State of incorporation of the Company.
14. The Company warrants the due authorization, execution and delivery of
this Warrant as of the 1st day of December, 1995.
CORECARE SYSTEMS, INC.
[SEAL]
By: /s/ Rose S. DiOttavio
---------------------
Rose S. DiOttavio, President
ATTEST:
By: /s/
------------------------
Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock issuable
upon the exercise thereof and requests that certificates for such Shares be
issued in his/her/its name and delivered to him/her/it at the following address:
_______________________________________________________________________________;
Date:__________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of _______________________ Shares(*)
purchasable upon exercise thereof to____________________________, whose address
is__________________________________________________________________ and hereby
irrevocably constitute and appoint _________________________________________
his/her/its Attorney to transfer said Warrant on the book of the Company, with
full power of substitution.
Date:___________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the names(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.8
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
CORECARE SYSTEMS, INC.
Series WD Warrant for the Purchase of Shares of Common Stock
No. WD -
THIS CERTIFIES THAT, for value received, ____________________________
("Holder") is entitled to subscribe for and purchase from CORECARE SYSTEMS,
INC., a Nevada corporation (the "Company"), at any time and prior to the
Expiration Date set forth below (the "Exercise Period"),
____________________________ (______) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), subject to the adjustments set forth in Sections 2 and 7 below, at a
price of One Dollar and Twelve and One Half Cents ($1.125) Per Share (the
"Exercise Price"), subject to the other terms and conditions set forth herein.
1. Transfer, assignment or hypothecation of this Warrant by the Holder may
be made only in accordance with and subject to the terms, conditions and other
provisions of this Warrant. The term "Holder," as used herein, shall include the
original Holder and only such persons to whom this Warrant is transferred in
strict conformity with the terms and conditions set forth herein. As used
herein, the term "Warrant" shall mean and include this Warrant and any Warrant
or Warrants hereafter issued in consequence of the exercise or transfer of this
Warrant, in whole or in part.
2. (a) The Expiration Date of this Warrant shall be December 31, 1996,
provided that prior to such date the Company has filed and processed to
effectiveness a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), in respect of the Shares issuable hereunder (a
"Registration Statement" or "Statement"), which Registration Statement shall
have remained effective and current so that Shares could be sold pursuant to the
Statement in accordance with the Act for not less than ninety (90) days (the
"Registration Condition"). If the Registration Condition has not been satisfied
prior to October 1, 1996 the Expiration Date shall be the tenth day following
the date upon which the Registration Condition is first satisfied. The Company
shall give Holder prompt notice of the filing and the effectiveness of any
Registration Statement.
(b) If the Company has not processed a Registration Statement to
effectiveness on or prior to July 1, 1996, then the number of Shares for which
this Warrant may be exercised shall increase by twenty percent (20%). If the
Company has not processed a Registration Statement to effectiveness on or prior
to December 1, 1996, then the number of Shares for which this Warrant may be
exercised shall increase by an additional twenty percent (20%) of the original
number of Shares.
3. This Warrant may be exercised from time to time during the Exercise
Period as to the whole or any lesser number of whole Shares by the surrender of
this Warrant (with the form of Election to Purchase at the end hereof duly
executed) to the Company at its offices located at 9425 Stenton Avenue,
Erdenheim, PA 19038, Attn: President (or such other place as is designated in
writing and delivered to Holder by the Company), accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price"). The Shares Purchase Price may also be paid by the
Holder's cancelling the principal indebtedness of the Company under certain
Promissory Notes from the Company issued to the original Holder hereof, dated on
or about the date hereof, in the aggregate amount of $50,000.
4. Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of (a)
this Warrant, (b) a duly executed form of Election to Purchase, and (c) payment
of the Shares Purchase Price. If the Shares Purchase Price is paid by
cancellation of a Promissory Note as set forth in the final sentence of Section
3 hereof, the Holder shall deliver the original Promissory Note to the Company
for cancellation; if the Holder is not the original Payee under such Promissory
Note, then Holder shall also present the Company with evidence, reasonably
satisfactory to the Company, that the Holder is the lawful owner of the
Promissory Note. Upon each exercise of this Warrant, the Holder shall be deemed
to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Shares issuable upon such exercise, registered in the name of the Holder or
its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Shares subject to purchase hereunder.
5. The Company shall maintain a register on which the names and addresses
of the persons to whom this Warrant is issued and shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Subject to compliance with applicable securities laws and any other
restrictions set forth herein, this Warrant shall be transferable on the books
of the Company only upon delivery thereof with the form of Assignment at the end
hereof duly completed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of transfer,
the Company shall deliver a new Warrant or Warrants exchanged, at the option of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, unless such transfer is registered under the Act or the Company shall
have received an opinion of counsel as set forth in paragraph (f) of Section 10
hereof.
6. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. The Company covenants and agrees that all of the Shares
which may be issued pursuant to this Warrant will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
7. (a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the shares of Common Stock into a greater
number of shares or (iii) combine or reclassify the outstanding shares of Common
Stock into a lesser number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price then in
effect by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding immediately after giving effect to such action, and of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall become effective
automatically concurrently with the time of such declaration, distribution,
subdivision, reclassification or combination and shall be made successively
whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this Warrant is
adjusted pursuant to subparagraph (a) above, the number of Shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of Shares initially issuable upon exercise of this Warrant by the
initial Exercise Price in effect on the date hereof and dividing the product so
obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 7 shall be made to the nearest
one-hundredth of a cent and to the nearest whole Share.
8. (a) In case of any consolidation with or merger of the Company with or
into another corporation, or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, appropriate provisions shall be made so that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of Shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease or conveyance and, in any such case, effective provision
shall be made in its Articles of Incorporation or otherwise, if necessary, in
order to effect such agreement. Such agreement shall provide for adjustments
which shall be as nearly equivalent as practicable to the adjustments in
Section 7.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares) or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) in
the Shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but including
any change in the Shares into two or more classes or series of Shares), the
Holder shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash or any combination thereof receivable by the holder of the number of Shares
for which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger. Thereafter, appropriate
provision (as reasonably determined by the Board of Directors) shall be made for
adjustment which shall be as nearly equivalent as practicable to the adjustments
in Section 7.
(c) The above provisions of this Section 8 shall similarly apply to
successive reclassification and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
9. The issue of any stock or other certificate upon the exercise of this
Warrant shall be made without charge to the Holder for any tax in respect of the
issue of such certificate. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificates unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
10. (a) The Company shall use its best efforts to register the Shares for
sale under the Act not later than July 1, 1996, and to maintain a Registration
Statement in effect with respect to the Shares for not less than ninety
(90) days.
(b) This Warrant is one of a Series of similar warrants denominated
as the Company's "Series WD" Warrants (the "WD Warrants") all issued in
February, 1996. The shares issuable under all such Warrants are referred to
herein as the "Registrable Shares." If the Company has not registered the Shares
for sale under the Act on or before July 1, 1996, then at any time thereafter,
the holders of a majority in interest of the then unregistered Registrable
Shares (all WD Warrants being deemed exercised for purposes of this paragraph
(b)) held by all Holders of WD Warrants or shares issued upon exercise of such
WD Warrants, shall have the right to notify the Company in writing that such
Holders intend to offer or cause to be offered for sale any of the Registrable
Shares (but not less than 10% in the aggregate of the Registrable Shares which
would be outstanding upon exercise in full of all WD Warrants)) and shall have
the right to demand the Company to cause such Registrable Shares to be
registered under the Act. In such event, the Company will notify all other
Holders of Registrable Shares of such notice from a majority of the Holders of
Registrable Shares . Upon written request of any Holder of Registrable Shares
given within fifteen (15) days after receipt by such Holder of such notification
from the Company, the Company will use its best efforts to cause such of the
Registrable Shares as may be requested by any Holders thereof to be registered
under the Act as expeditiously as possible; provided that the Company shall be
obligated to register shares pursuant to this paragraph (b) on not more than two
occasions and provided further that the Company shall not be required to effect
any such registration within ninety (90) days of the Closing of an underwritten
primary public offering by the Company.
(c) The Company shall not be required to effect the registration of
any of the shares requested by a Holder of Registrable Shares under subparagraph
(b) if, in the unqualified opinion of counsel for the Company which is
reasonably acceptable to counsel for the Holder, such Holder may then sell all
shares as to which such Holder had requested registration under the provisions
of the Securities Act without registration thereunder.
(d) Each registration pursuant to paragraph (b) above shall be
subject to the registration procedures, provisions regarding expenses and
indemnification and other matters set forth on Exhibit A hereto.
(e) The Company agrees that so long as it shall have an effective
registration statement under the Act with respect to any of the Shares (and for
one year thereafter) and for so long as the Company shall have any securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, it shall file all reports required to be filed pursuant to the
Securities Exchange Act of 1934, as amended, so as to be in compliance with the
then current public information requirements specified in Rule 144 (as amended)
or any successor rule promulgated under the Securities Act.
(f) Unless registered under the Act, this Warrant and the Shares or
other securities issued upon exercise of this Warrant shall not be transferrable
unless, in the opinion of counsel reasonably satisfactory to the Company, an
exemption from registration under applicable securities laws is available. The
Warrant, Shares and other securities issued upon the exercise of this Warrant
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Shares or securities shall bear the following legend and any
other legend which counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
12. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
13. This Warrant shall be governed by and construed in accordance with the
laws of the State of incorporation of the Company.
14. The Company warrants the due authorization, execution and delivery of
this Warrant as of the First day of February, 1996.
CORECARE SYSTEMS, INC.
[SEAL]
By: /s/ Rose S. DiOttavio
---------------------
Rose S. DiOttavio, President
ATTEST:
By: /s/ Joan Biddle
---------------
Joan Biddle, Asst. Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock issuable
upon the exercise thereof and requests that certificates for such Shares be
issued in his/her/its name and delivered to him/her/it at the following address:
_______________________________________________________________________________;
Date:__________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of _______________________ Shares(*)
purchasable upon exercise thereof to____________________________, whose address
is__________________________________________________________________ and hereby
irrevocably constitute and appoint _________________________________________
his/her/its Attorney to transfer said Warrant on the book of the Company, with
full power of substitution.
Date:___________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the names(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.9
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
CORECARE SYSTEMS, INC.
Series WE Warrant for the Purchase of Shares of Common Stock
No. WE -
THIS CERTIFIES THAT, for value received, _________________ ("Holder") is
entitled to subscribe for and purchase from CORECARE SYSTEMS, INC., a Nevada
corporation (the "Company"), at any time after___________________ , 1997 [one
year after termination date of offering] and prior to the Expiration Date set
forth below (the "Exercise Period"), ________________ (___________) fully paid
and nonassessable shares (the "Shares") of the Company's Common Stock, $.001 par
value per share (the "Common Stock"), subject to the adjustments set forth in
Section 7 below, at a price of Three Dollars ($3.00) per Share (the "Exercise
Price"), subject to the other terms and conditions set forth herein.
1. Transfer, assignment or hypothecation of this Warrant by the Holder may
be made only in accordance with and subject to the terms, conditions and other
provisions of this Warrant. The term "Holder," as used herein, shall include the
original Holder and only such persons to whom this Warrant is transferred in
strict conformity with the terms and conditions set forth herein. As used
herein, the term "Warrant" shall mean and include this Warrant and any Warrant
or Warrants hereafter issued in consequence of the exercise or transfer of this
Warrant, in whole or in part.
2. This Warrant is one of a series of Warrants initially issued as part of
Units issued by the Company pursuant to a Confidential Offering Memorandum dated
__________ , 1996. The Expiration Date of this Warrant shall be _________, 2002
[Five years after initially exercisable], subject to extension in accordance
with the provisions of Section 10 hereof.
3. This Warrant may be exercised from time to time during the Exercise
Period as to the whole or any lesser number of whole Shares by the surrender of
this Warrant (with the form of Election to Purchase at the end hereof duly
executed) to the Company at its offices located at 9425 Stenton Avenue,
Erdenheim, PA 19038, Attn: President (or such other place as is designated in
writing and delivered to Holder by the Company), accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price").
4. Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of (a)
this Warrant, (b) a duly executed form of Election to Purchase, and (c) payment
of the Shares Purchase Price. Upon each exercise of this Warrant, the Holder
shall be deemed to be the holder of record of the Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed. As soon as practicable after each such exercise of this Warrant,
the Company shall issue and deliver to the Holder a certificate or certificates
for the Shares issuable upon such exercise, registered in the name of the Holder
or its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Shares subject to purchase hereunder.
5. The Company shall maintain a register on which the names and addresses
of the persons to whom this Warrant is issued and shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Subject to compliance with applicable securities laws and any other
restrictions set forth herein, this Warrant shall be transferable on the books
of the Company only upon delivery thereof with the form of Assignment at the end
hereof duly completed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of transfer,
the Company shall deliver a new Warrant or Warrants exchanged, at the option of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, unless such transfer is registered under the Securities Act of 1933, as
amended (the "Act"), or the Company shall have received an opinion of counsel as
set forth in paragraph (f) of Section 10 hereof.
6. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. The Company covenants and agrees that all of the Shares
which may be issued pursuant to this Warrant will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
7. (a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the shares of Common Stock into a greater
number of shares or (iii) combine or reclassify the outstanding shares of Common
Stock into a lesser number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price then in
effect by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding immediately after giving effect to such action, and of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall become effective
automatically concurrently with the time of such declaration, distribution,
subdivision, reclassification or combination and shall be made successively
whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (a) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the initial Exercise Price in effect on the date hereof and dividing
the product so obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 7 shall be made to the
nearest one-hundredth of a cent and to the nearest whole Share.
8. (a) In case of any consolidation with or merger of the Company with or
into another corporation, or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, appropriate provisions shall be made so that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of Shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease or conveyance and, in any such case, effective provision
shall be made in its Articles of Incorporation or otherwise, if necessary, in
order to effect such agreement. Such agreement shall provide for adjustments
which shall be as nearly equivalent as practicable to the adjustments in
Section 7.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares) or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) in
the Shares of Common Stock (other than a change in par value, or from par value
to no par value or from no par value to par value], or as a result of a
subdivision or combination, but including any change in the Shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
by the holder of the number of Shares for which this Warrant might have been
exercised immediately prior to such reclassification, change, consolidation or
merger. Thereafter, appropriate provision (as reasonably determined by the Board
of Directors) shall be made for adjustment which shall be as nearly equivalent
as practicable to the adjustments in Section 7.
(c) The above provisions of this Section 8 shall similarly apply to
successive reclassifications and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
9. The issue of any stock or other certificate upon the exercise of this
Warrant shall be made without charge to the Holder for any tax in respect of the
issue of such certificate. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificates unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
10. (a) Unless a registration statement under the Act is in effect as to
this Warrant, the Company shall have the right to limit, restrict or prohibit
exercise of this Warrant, and other Warrants in the same series as set forth in
Section 2 hereof, during any period of time, if no exemption from registration
is available under the Act for the issuance of such Shares or to the extent
necessary to comply with available exemptions. The Company shall not be required
to incur any expense which, in the good faith discretion of the Company's Board
of Directors, is unreasonable in order to make such exemption available. Unless
registered under the Act, this Warrant and the Shares or other securities issued
upon exercise of this Warrant shall not be transferrable unless, in the opinion
of counsel reasonably satisfactory to the Company, an exemption from
registration under applicable securities laws is available. The Warrant, Shares
and other securities issued upon the exercise of this Warrant shall be subject
to a stop-transfer order and the certificate or certificates evidencing any such
Shares or securities shall bear the following legend and any other legend which
counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(b) The Company agrees to register the shares issuable upon exercise
of this Warrant under the Securities Act of 1933 on Form S-3, as soon as
practical after Form S-3 becomes available for use by the Company for such
registration. The Company agrees to use its best efforts to maintain the
effectiveness of such registration for at least 180 consecutive days. The
Company shall provide the Holder of this Warrant with at least thirty (30) days
written notice of its intention to file such a Registration Statement. Unless
the Holder notifies the Company prior to the end of such thirty (30) day period,
that the Holder does not wish all of these shares to be registered, all of such
shares shall be so registered.
(c) If, on the original Expiration Date set forth in Section 2
hereof, no registration statement under the Act has been in effect with respect
to the Shares for a period of at least one hundred and eighty (180) consecutive
days prior to such Expiration Date, then the Expiration Date of this Warrant
shall be extended until such date as a registration statement shall have been in
effect for one hundred and eighty (180) consecutive days.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
12. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
13. This Warrant shall be governed by and construed in accordance with the
laws of the State of Incorporation of the Company.
14. The Company warrants the due authorization, execution and delivery of
this Warrant as of the day of , 1996.
CORECARE SYSTEMS, INC.
[SEAL]
By:___________________
Rose S. DiOttavio, President
ATTEST:
By:_____________________________
Joan Biddle, Asst. Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock issuable
upon the exercise thereof and requests that certificates for such Shares be
issued in his/her/its name and delivered to him/her/it at the following address:
_______________________________________________________________________________;
Date:__________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of _______________________ Shares(*)
purchasable upon exercise thereof
to_______________________________________________________________, whose address
is__________________________________________________________________ and hereby
irrevocably constitute and appoint _________________________________________
his/her/its Attorney to transfer said Warrant on the book of the Company, with
full power of substitution.
Date:___________________
________________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.10
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
This Warrant is Detachable from the Promissory Note of CoreCare Systems, Inc.
of Even Date Herewith to Which It Was Originally Attached
CORECARE SYSTEMS, INC.
Series WB Warrant for the Purchase of Shares of Common Stock
No. WB-1 50,000 Shares
THIS CERTIFIES THAT, for value received, SAGE EQUITIES, INC., a New York
corporation (the "Holder"), is entitled to subscribe for and purchase from
CORECARE SYSTEMS, INC., a Nevada corporation (the "Company"), at any time and
from time to time prior to the Expiration Date set forth below (the "Exercise
Period"), all or any part of Fifty Thousand (50,000) fully paid and
nonassessable shares (the "Shares") of the Company's Common Stock, $.001 par
value per share (the "Common Stock"), at a price initially equal to Two Dollars
($2.00) per Share (the "Exercise Price"), subject to adjustment from time to
time as provided herein. The number of Shares to be received upon the exercise
of this Warrant and the Exercise Price to be paid for each such Share may be
adjusted from time to time as hereinafter set forth.
1. Transfer of Warrant; Definitions. Transfer, assignment or hypothecation
of this Warrant by the Holder may be made only in accordance with and subject to
the terms, conditions and other provisions of this Warrant. The term "Holder",
as used herein, shall include the original Holder and only such persons to whom
this Warrant is transferred in strict conformity with the terms and conditions
set forth or incorporated by reference herein. As used herein, the term
"Warrant" shall mean and include this Warrant and any Warrant or Warrants
hereafter issued in consequence of the exercise or transfer of this Warrant, in
whole or in part.
2. Expiration Date. The Expiration Date of this Warrant shall be October
17, 1997, provided that prior to such date the Company has filed and processed
to effectiveness a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), in respect of the Shares (a "Registration Statement" or
"Statement"), which Registration Statement remained effective and current so
that Shares could be sold pursuant to the Statement in accordance with the Act
for not less than ninety (90) days (the "Registration Condition"). If the
Registration Condition has not been satisfied prior to October 17, 1997, the
Expiration Date shall be the tenth day following the date upon which the
Registration Condition is first satisfied. The Company shall give the Holder
prompt notice of the filing and the effectiveness of any Registration Statement.
3. Manner of Exercise. This Warrant may be exercised from time to time
during the Exercise Period as to the whole or any lesser number of whole Shares
by the surrender of this Warrant (with the form of Election to Purchase at the
end hereof duly executed) to the Company at its offices located at 9425 Stenton
Avenue, Erdenheim, PA 19038, Attn: President (or such other place as is
designated in writing and delivered to the Holder by the Company), accompanied
by a certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Shares covered by
such exercise (the "Shares Purchase Price").
4. Effectiveness of Exercise. Exercise of this Warrant shall be deemed to
have been effected as of the close of the business day on which the Company has
received the last of (a) this Warrant, (b) a duly executed form of Election to
Purchase, and (c) payment of the Shares Purchase Price. Upon each exercise of
this Warrant, the Holder shall be deemed to be the holder of record of the
Shares issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed. As soon as practicable after each
such exercise of this Warrant, the Company shall issue and deliver to the Holder
a certificate or certificates for the Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Shares subject to purchase hereunder.
5. Registration and Transfer of Warrants. The Company shall maintain a
register on which the names and addresses of the persons to whom this Warrant is
issued and shall be entitled to treat the registered holder of any Warrant on
the Warrant Register as the owner in fact thereof for all purposes and shall not
be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person, and shall not be liable for any
registration or transfer of Warrants which are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts
that its participation therein amounts to bad faith. Subject to compliance with
applicable securities laws and any other restrictions set forth herein, this
Warrant shall be transferable on the books of the Company only upon delivery
thereof with the form of Assignment at the end hereof duly completed by the
Holder or by the Holder's duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced and may be required to be deposited with the Company
in its discretion. Upon any registration of transfer, the Company, at its own
cost and expense, shall deliver a new Warrant or Warrants exchanged, at the
option of the Holder thereof, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock upon surrender to the
Company or its duly authorized agent. Notwithstanding the foregoing, the Company
shall have no obligation to cause Warrants to be transferred on its books to any
person, unless the Holder of such Warrants shall furnish to the Company evidence
of compliance with the Act and applicable state securities law in accordance
with the provisions Paragraph 13(i) hereof.
6. Reservation of Stock and Other Covenants. The Company covenants and
agrees that it shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. If any shares of Common Stock, reserved or to be
reserved for the purpose of providing for the exercise of this Warrant, require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued to the holder, the Company
covenants and agrees that it will in good faith, and as expeditiously as
possible, endeavor to effect such registration or secure such approval, as the
case may be. The Company covenants and agrees that all of the Shares which may
be issued pursuant to this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company will not take any action which
would cause the Exercise Price to be below the then par value, if any, per share
of the Common Stock or, in the case of no par stock, below the amount for which
such shares may be issued as fully paid and nonassessable.
7. Adjustments to Exercise Price. The Exercise Price shall be subject to
adjustment from time to time as follows:
(a) Except as hereinafter provided, if the Company shall at any time
after the date hereof issue or sell any shares of Common Stock, including shares
held in the Company's treasury, for a consideration per share less than the
Exercise Price in effect immediately prior to the issuance or sale of such
shares, or without consideration, then, and thereafter successively upon each
issuance or sale, the Exercise Price in effect immediately prior to each such
issuance or sale shall be reduced to a price determined by DIVIDING
(i) an amount equal to the sum of (A) the total number of shares
of Common Stock outstanding immediately prior to such issuance
or sale multiplied by the Exercise Price in effect immediately
prior to such issuance or sale, plus (B) the consideration, if
any, received by the Company upon such issuance or sale, BY
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance of sale.
(b) If the Company shall at any time after the date hereof (i) issue
or sell any securities, other than the Warrant, dated October 17, 1995 (the
"CHMI Warrant"), issued by the Company to Choate Health Management, Inc.
("CHMI"), convertible into or exchangeable for shares of Common Stock less than
the Exercise Price in effect immediately prior to the issuance or sale of such
convertible securities, or (ii) in any manner offer, issue or sell any rights to
subscribe for or to purchase shares of Common Stock or convertible securities,
or grant any options for the purchase of shares of Common Stock or convertible
securities, other than pursuant to the CHMI Warrant, for a purchase price per
share of Common Stock for shares of Common Stock issuable or deliverable upon
the exercise of such rights or options, or upon the conversion or exchange of
the convertible securities to which such rights or options relate, less than the
Exercise Price in effect immediately prior to the offering of such rights or the
granting of such options, or without consideration, the Exercise Price in effect
immediately prior to the issuance of such options or rights or securities shall
be reduced to a price determined by making a computation in accordance with the
provisions of subparagraph (a) of this Paragraph 7, provided that:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such
securities shall be considered to have been delivered at the
time of issuance of such securities, and for a consideration
equal to the consideration (determined in the same manner as
consideration received on the issuance or sale of Common
Stock) received by the Company for such securities, plus the
consideration, if any, to be received by the Company upon the
exchange or conversion thereof;
(ii) The aggregate maximum number of shares of Common Stock
deliverable under any such options or rights shall be
considered to have been delivered at the time such options or
rights were issued, and for a consideration equal to the
minimum purchase price per share of Common Stock provided for
in such option or rights, plus the consideration (determined
in the same manner as consideration received on the issuance
or sale of Common Stock), if any, received by the Company for
such options or rights; and
(iii) On the expiration of such options or rights, or the
termination of such right to convert or exchange, the Exercise
Price shall forthwith be re-adjusted to such Price as would
have been obtained had the adjustments made upon this issuance
of such options, rights or convertible or exchangeable
securities been made upon the basis of the delivery of only
the number of shares of Common Stock actually delivered upon
the exercise of such options or rights upon conversion or
exchange of such securities.
(c) For purposes of any computation to be made in accordance with
the provisions of this Paragraph 7, the following provisions shall be
applicable:
(i) In case of the issuance or sale of shares of Common Stock for
consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the
amount of cash received by the Company for such shares (or, if
shares of Common Stock are offered by the Company for
subscription, the subscription price, or, if shares of Common
Stock shall be sold to underwriters or dealers for public
offering without subscription offering, the initial public
offering price) without deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing
similar services or any expenses incurred in conjunction
therewith;
(ii) In case of the issuance or sale (otherwise than as a dividend
or other distribution on any stock of the Company or on
conversion or exchange of other securities of the Company) of
shares of Common Stock for a consideration part or all of
which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be
the value of such consideration, as determined by the Board of
Directors of the Company, at or about, but as of, the date of
the adoption of the resolution authorizing such issuance,
irrespective of accounting treatment. The reclassification of
securities other than Common Stock shall be deemed to involve
the issuance for a consideration other than cash of such
Common Stock immediately prior to the close of business on the
date fixed for the determination of security holders entitled
to receive such Common Stock;
(iii) Shares of Common Stock issuable by way of dividend or other
distribution of any stock of the Company shall be deemed to
have been issued (A) immediately after the opening of business
on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other
distribution and (B) without consideration: and
(iv) The number of shares of Common Stock at any time outstanding
(A) shall not include any shares then owned or held by or for
the account of the Company, but (B) shall include the
aggregate number of shares deliverable in respect of the
options, rights and convertible and exchangeable securities
referred to in subparagraph (b) of this Paragraph 7 at all
times during which such options, rights or securities remain
outstanding and unexercised, unconverted or unexchanged, as
the case may be, and thereafter to the extent such options,
rights or securities have been exercised, converted or
exchanged.
(d) If the Company shall hereafter (i) subdivide or reclassify the
outstanding shares of Common Stock into a larger number of shares, (ii) combine
or reclassify the outstanding shares of Common Stock into a smaller number of
shares, or (iii) issue by way of stock dividend on its Common Stock or by
reclassification of its shares of Common Stock (including any such
reclassification in connection with the consolidation or merger in which the
Company is the continuing or surviving Company) any shares of capital stock of
the Company, the Exercise Price in effect at the time of the effective date of
such subdivision, combination or reclassification shall be adjusted so that the
Holder shall be entitled to receive upon exercise of this Warrant the number of
shares of capital stock of the Company which he would have owned or been
entitled to receive had this Warrant been exercised immediately prior to such
time. If, as a result of an adjustment made pursuant to this provision, the
Holder thereafter shall exercise this Warrant or shall be entitled to receive
shares of two or more classes of capital stock of the Company, the Board of
Directors (whose determination shall be conclusive) shall determine in good
faith the allocation of the adjusted Exercise Price between or among shares of
such classes of capital stock.
(e) Whenever the Exercise Price is adjusted as herein provided, the
Company shall (i) forthwith execute a certificate signed by the President or a
Vice President of the Company and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company, showing in detail the
facts requiring such adjustment and the Exercise Price and the number of shares
of Common Stock deliverable after such adjustment and (ii) cause a notice,
stating that such adjustment has been effected and stating the adjusted Exercise
Price and the number of shares of Common Stock deliverable, to be sent to the
Holder at its address appearing in the records of the Company. Each such
certificate shall be kept on file in the principal office of the Company.
(f) No adjustment of the Exercise Price shall be made in connection
with the issuance or the sale of Common Stock upon the exercise of options or
rights upon the conversion or exchange of convertible securities in any case
where the adjustment provided in subparagraph (a) hereof was made upon the
issuance of such options or convertible securities by reason of the provisions
of subparagraph (b) above.
(g) Notwithstanding anything contained herein to the contrary, no
adjustments in the Exercise Price or in the number of the Shares issuable upon
exercise of this Warrant shall be made by reason of or in connection with (i)
the issuance or exercise of the CHMI Warrant; (ii) the issuance of or conversion
into Common Stock of any of the 13,250 shares of Series E Preferred Stock
issuable by the Company in connection with the Agreement and Plan of Merger
between the Company and Westmeade Healthcare, Inc., dated as of July 27, 1995;
or (iii) the issuance or exercise of options or warrants exercisable for shares
of Common Stock, issued to employees of the Company or its subsidiaries (other
than executive officers or directors of the Company), not to exceed in the
aggregate 250,000 shares.
8. Adjusted Number of Shares. Upon any adjustment of the Exercise Price
hereinabove provided for (including any readjustment in accordance with the
provisions of subsection (b)(iii) of Paragraph 7 above), the number of shares of
Common Stock issuable upon exercise of this Warrant shall be changed to the
number of shared determined by DIVIDING
(a) The aggregate Exercise Price payable for the purchase of all
shares issuable upon exercise of this Warrant, immediately prior to such
adjustment, BY
(b) The Exercise Price in effect immediately after such adjustment.
9. Reclassification, Merger, or Sale of Assets. In case of any
reclassification or change of outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination as described in
subparagraph (d) of Paragraph 7 hereof), or in case of any consolidation of the
Company with, or a merger into, another corporation (other than a consolidation
or merger in which the Company is the continuing corporation and which does not
result in any reclassification or change of the outstanding shares of Common
Stock), or in case of any transfer or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Holder shall thereafter have the right to purchase the kind and amount of shares
of stock and other securities and property receivable by a holder of the number
of shares of Common Stock which the Holder would have had the right to purchase
immediately prior to such reclassification, change, consolidation, merger,
transfer or conveyance, at a price equal to the aggregate Exercise Price then in
effect.
10. Notice of Certain Events. If, at any time or from time to time, after
the date of this Warrant and before the Expiration Date, any of the following
events shall occur:
(a) The Company shall declare to the holders of its Common Stock any
cash dividend at a rate in excess of the rate of the last cash dividend
theretofore paid; or
(b) The Company shall declare any dividend payable in stock upon its
Common Stock or make any distribution (other than a cash dividend) to the
holders of its Common Stock; or
(c) The Company shall offer to the holders of its Common Stock any
additional shares of stock of the Company or any right to subscribe thereto; or
(d) Any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with any other
corporation, or transfer of all or substantially all of the property of the
Company shall be proposed; or
(e) A dissolution, liquidation or windup of the Company (whether
voluntary or involuntary) shall be proposed;
then, in any one or more of such events, the Company shall cause written notice
of such event to be delivered to the Holder at the address thereof last
furnished to the Company, at least sixty (60) days prior to the date on which
(i) the stock transfer books of the company shall close, or a record for the
determination of holders of Common Stock entitled to any such dividend,
distribution or subscription rights shall be taken, or (ii) such
reclassification, reorganization, consolidation, merger, transfer, dissolution,
liquidation or winding up shall be consummated, as the case may be. Such notice
shall specify the record date for the determination of holders of Common Stock
entitled to participate in any such dividend, distribution or subscription
rights, or entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, transfer, dissolution, liquidation or winding up, as the
case may be.
11. Taxes on Exercise. The issue of any stock or other certificate upon
the exercise of this Warrant shall be made without charge to the Holder for any
tax in respect of the issue of such certificate. The Company shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of any certificate in a name other than that
of the Holder, and the Company shall not be required to issue or deliver any
such certificates unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
12. No Rights as Stockholder. Prior to the exercise of this Warrant, the
Holder shall not be entitled to any rights of a stockholder of the Company,
including without limitation the right to vote, to receive dividends or other
distributions or to exercise any pre-emptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
13. Registration.
(a) Certain Definitions.
As used in this Warrant, the following terms shall have the
following meanings:
For purposes of this Paragraph 13, the term "Common Stock" shall
include any securities issued with respect to such Stock, by reason of stock
dividend, stock split, recapitalization, merger, consolidation or other
corporate action.
"Warrant Shares" shall mean the shares of the Company's Common Stock
issuable upon exercise of this Warrant and stock dividend, stock split,
recapitalization, merger, consolidation or other corporate action.
"Holder" shall mean the original Holder and its successors and
assigns, provided, however, that anyone who acquires any of the Common Stock in
a distribution pursuant to a registration statement filed by the Company under
the Securities Act (as hereinafter defined) or in a sale pursuant to Rule 144
under the Securities Act shall not thereby be deemed to be a "Holder".
"Commission" shall mean the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities Act.
"Transfer" shall mean the sale, assignment or other transfer of any
shares of the Common Stock, this Warrant or the Warrant Shares, whether or not
such transfer would constitute a "sale" as that term is defined in Section 2(3)
of the Securities Act.
"Registration Expenses" shall mean the expenses so described in
subparagraph (f) of this Paragraph 13.
"Securities Act" or "Act" (as defined in Paragraph 2 hereof) shall
mean the United States Securities Act of 1933. as amended.
"Selling Expenses" shall mean the expenses so described in
subparagraph (f) of this Paragraph 13.
"Underwriter" shall mean each person who is or may be deemed to be
an "underwriter", as that term is defined in Section 2(11) of the Securities
Act, in respect of shares of the Common Stock or Conversion Shares which shall
have been registered by the Corporation under the Securities Act pursuant to any
of the provisions of this Paragraph 12
(b) Incidental Registration.
If the Company or any of its security holders shall at any time or
times hereafter determine to register under the Securities Act any shares of its
capital stock or other securities, it will notify each Holder in each case of
such determination at least thirty (30) days prior to such registration, and
upon any Holder's written request given within thirty (30) days after receipt by
such Holder from the Company of such notification, the Company will use its best
efforts to cause any of the aWarrant Shares then held by such Holder to be
registered under the Securities Act.
(c) Registration With CHMI Warrant Exercise.
If during the term of this Warrant the holders of the CHMI Warrant
exercise their rights under Section 12(b) of the CHMI Warrant to demand a
registration of of the Common Stock of the Company, the Company will give
written notice thereof to the Holders promptly upon such exercise. Upon any
Holder's written request given within thirty (30) days after the receipt by such
Holder from the Company of such notification, the Company will use its best
efforts to cause the Warrant Shares then held by such Holder to be registered
under the Securities Act as part of the demand registration under the CHMI
Warrant. Any right to registration claimed by one or more Holders under this
Paragraph 13(c) shall take priority over any right claimed by any other person
to have shares of the Common Stock of the Company registered in connection with
or as a part of the demand registration granted to CHMI under the CHMI Warrant.
(d) Exception.
The Company shall not be required to effect a registration of any of
the Warrant Shares requested by a Holder under subparagraph (b) or subparagraph
(c) of this Paragraph 13, if, in the unqualified opinion of counsel for the
Company which is reasonably acceptable to counsel for Holder, such Holder may
then sell all shares of the Common Stock or Warrant Shares as to which such
Holder had requested registration under the provisions of the Securities Act
without registration thereunder.
(e) Registration Procedures.
If and whenever the Company is required by the provisions of this
Paragraph 13 to effect the registration of any of the Warrant Shares under the
Securities Act, the Company shall, as expeditiously as possible:
(1) Prepare and file with respect to such Warrant Shares and
cause such registration statement to become and remain
effective;
(2) Prepare and file with the Commission such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be
necessary to keep such registration statement effective
for one year from the date of its effectiveness and to
comply with the provisions of the Securities Act with
respect to the disposition of all Warrant Shares covered
by such registration statement in accordance with the
intended method of disposition by the Holder or Holders
thereof set forth in such registration statement for
such period;
(3) Furnish to each selling Holder such number of copies of
the prospectus contained in such registration statement
(including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such
other documents as such Holder may reasonably request in
order to facilitate the disposition of the Warrant
Shares owned by such Holder.
(4) Use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under the
securities or blue sky laws of such jurisdictions as
each selling Holder shall reasonably request, and do any
and all other acts and things which may be necessary or
advisable to enable such Holder to consummate the
disposition of the Warrant Shares owned by such Holder
in such jurisdictions during the period provided in
subparagraph (e)(2); provided, however, that in no event
shall the Company be obligated to qualify to do business
in any jurisdiction where it is not at the time so
qualified or to take any action which would subject it
to the service of process of suits other than those
arising out of the offer or sale of the Warrant Shares
covered by such registration statement in any
jurisdiction where it is not at the time so subject;
(5) Notify each Holder of any Warrant Shares covered by such
registration statement at any time when a prospectus
relating thereto is required by delivery under the
Securities Act of the happening of any event as a result
of which the prospectus contained in such registration
statement, as then in effect, includes an untrue
statement of a material fact or omits to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading in light
of the circumstances then existing;
(6) At the request of any selling Holder, prepare and
furnish to such Holder a reasonable number of copies of
any supplement to or an amendment of such prospectus
that may be necessary so that, as thereafter delivered
to the purchasers of such Warrant Shares, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances
then existing;
(7) Provide a transfer agent for the Warrant Shares at least
by the effective date of the first registration of any
such Warrant Shares; and
(8) Promptly notify all selling Holders of any stop order or
similar proceeding initiated by state or federal
regulatory bodies and take all necessary steps
expeditiously to remove such stop order or similar
proceeding.
(f) Description of Expenses.
All expenses incurred by the Company in complying with any of the
foregoing provisions of this Paragraph 13, including without limitation all
registration and filing fees, printing expenses, any premium involved in
securing a policy or policies of registration insurance, fees and disbursements
of counsel for the Company and accounts' fees and expenses incident to or
required by any such registration are herein called "Registration Expenses". All
of the Registration Expenses shall be borne by the Company. All underwriting
commissions or discounts to be incurred by any Holder are herein called "Selling
Expenses". The Selling Expenses shall be borne by the Holder or Holders (1) pro
rata with other participants with respect to common expenses incurred in any
firm commitment underwriting, and (2) as incurred directly by such Holders when
they sell otherwise. Fees and expenses of special counsel for any Holder shall
also be borne by such Holder. The Company may require as a condition precedent
to the inclusion of Warrant Shares of any Holder in any registration statement
under this Paragraph 13 that the Company shall have received an undertaking
reasonably satisfactory to it from such Holder to pay all Selling Expenses to be
incurred by or for account of such Holder, and such Holder shall have furnished
to the Company such information regarding such Warrant Shares held by such
Holder, the intended method of disposition thereof and other information as
shall be required by the Company in connection with the action to be taken as
the Company shall reasonably request.
(g) Indemnification, Underwriting Agreements.
(1) The Company shall indemnify and hold harmless each
Holder, each underwriter of the Common Stock and Warrant
Shares and each controlling person of any of them, from
and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they
or any of them may become subject under the Securities
Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will
reimburse each Holder and each of the underwriters and
each such controlling person, if any, for any legal or
other expenses incurred by them or any of them in
connection with investigating or defending any action
whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liability or
actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in the registration statement, any preliminary
prospectus or in the prospectus (or the registration
statement or prospectus as from time to time amended or
supplemented by the Company) 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 in order to make the statements therein not
misleading, unless such untrue statement or omission was
made in such registration statement, preliminary or
amended preliminary prospectus or prospectus in reliance
upon and in conformity with information furnished in
writing to the Company in connection therewith by such
Holder or such underwriter or such controlling person
expressly for use therein. Promptly after receipt by
such Holder or any underwriter or any person controlling
such Holder or such underwriter of notice of the
commencement of any action in respect of which indemnity
may be sought against the Company, such Holder or such
underwriter, as the case may be, will notify the Company
in writing of the commencement thereof, and subject to
the provisions hereinafter stated, the Company shall
assume the defense of such action (including the
employment of counsel, who shall be counsel satisfactory
to such Holder or such underwriter or such controlling
person, as the case may be), and the payment of expenses
insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought
against the Company. Such Holder or any such underwriter
or any such controlling person shall have the right to
employ separate counsel in any such action and to
participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of
investigation) shall not be at the expense of the
Company unless the employment of such counsel has been
specifically authorized by the Company. The Company
shall not be liable to indemnify any person for any
settlement of any such action effected without the
Company's consent.
(2) Each Holder whose Warrant Shares are to be included in a
registration statement shall, as a condition of such
inclusion, indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed
the registration statement, each person, if any, who
controls the Warrant, each other selling Holder and each
person, if any, who controls such other selling Holder
from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they
or any of them may become subject under the Securities
Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will
reimburse the Company and each such director, officer,
person controlling the Company, Holder or person
controlling such Holder for any legal or other expenses
reasonably incurred by them or any of them in connection
with investigating or defending any actions whether or
not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise
out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the
registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to
time amended or supplemented) 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 in order to make the statements therein not
misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity
with information furnished in writing to the Company in
connection therewith by such Holder expressly for use
therein. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity
may be sought against such indemnifying Holder, the
Company (or other recipient of notice) will notify the
indemnifying Holder in writing of the commencement
thereof, and the indemnifying Holder shall, subject to
the provisions hereinafter stated, assume the defense of
such action (including the employment of counsel, who
shall be counsel satisfactory to the Company) and the
payment of expenses insofar as such action shall relate
to an alleged liability in respect of which indemnity
may be sought against such Holder. The Company and each
such director, officer, person controlling the Company,
Holder or person controlling the Holder, shall have the
right to employ separate counsel in any such action and
to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of
the indemnifying Holder unless the employment of such
counsel has been specifically authorized by such
indemnifying Holder. Such indemnifying Holder shall not
be liable to indemnify any person for any settlement of
any such action effected without his consent.
(h) Registration and Reporting Requirements.
The Corporation agrees that so long as it shall have securities
registered pursuant to the Securities Act, or pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended, it shall file all reports required
to be filed pursuant to the Securities Exchange Act of 1934, as amended, so as
to be in compliance with the then current public information requirements
specified in Rule 144, as amended, or any successor rule promulgated under the
Securities Act.
(i) Transfer Restrictions.
Unless registered under the Act, this Warrant and the Shares or
other securities issued upon exercise of this Warrant shall not be transferable
unless, in the opinion of counsel reasonably satisfactory to the Company, an
exemption from registration under applicable securities laws is available. This
Warrant, the Shares and other securities issued upon the exercise of this
Warrant shall be subject to a stop-transfer order and the certificate or
certificates evidencing any such Shares or securities shall bear the following
legend and any other legend which counsel for the Company may deem necessary or
advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
14. Loss, Theft, etc. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Warrant and upon surrender
and cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
15. Notices and Communications. All notices and other communications
required or provided for hereunder shall be in writing and shall be deemed to
have been sufficiently given for all purposes hereof if delivered by hand, if
sent, postage prepaid, by registered or certified mail, return receipt
requested, or if sent by any nationally-recognized commercial courier service,
with all fees and expenses prepaid, if to the Holder, addressed to Mr. Leonard
Fassler, President, Sage Equities, Inc., 700 Canal Street, Stamford, Connecticut
06902, and if to the Company addressed to Mr. Thomas Fleming, President,
CoreCare Systems, Inc., Whitemarsh Professional Center, 9425 Stenton Avenue,
Erdenheim, Pennsylvania 19038, or to such other address with respect to either
party as such party shall notify the other in writing, in the manner provided
herein.
16. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company warrants the due authorization, execution
and delivery of this Warrant this 17 day of October, 1995.
(SEAL) CORECARE SYSTEMS, INC.
By: /s/ Rose S. DiOttavio
---------------------
Name: Rose S. DiOttavio
Title: President
Attest:
/s/
- -------------------------
Name:
Title: Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock of CoreCare
Systems, Inc. issuable upon the exercise thereof and requests that certificates
for such Shares be issued in his/her/its name and delivered to him/her/it at the
following address:
______________________________________________________________________;
Date:______________
_______________________________________________________________________
Signature(s)(** )
________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of ______________Shares(*) of Common Stock of
CoreCare Systems, Inc. purchasable upon exercise thereof to
______________________, whose address is_____________________________ and hereby
irrevocably constitutes and appoints ___________________________________________
his/her/its Attorney to transfer said Warrant on the books of the Company, with
full power of substitution.
Date:___________________
________________________________________________________________________
Signature(s)(**)
- --------
(*) If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, insert on request that a new Warrant to
purchase the balance of such shares be issued in the name of, and delivered to,
the Holder at the address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.11
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
CORECARE SYSTEMS, INC.
Series WA Warrant for the Purchase of Shares of Common Stock
No. WA - 1
THIS CERTIFIES THAT, for value received, CHOATE HEALTH MANAGEMENT, INC.
("Holder") is entitled to subscribe for and purchase from CORECARE SYSTEMS,
INC., a Nevada corporation (the "Company"), at any time and prior to the
Expiration Date set forth below (the "Exercise Period"), the number of shares of
fully paid and nonassessable shares (the "Shares") of the Company's Common
Stock, $.001 par value per share (the "Common Stock"), which, upon full exercise
hereof, would constitute the Holder hereof as the holder of ten percent (10%) of
the Common Stock outstanding on the date of such exercise, at a price determined
in accordance with Section 7 and Section 8 below (the "Exercise Price"), subject
to the other terms and conditions set forth herein. In determining the number of
shares of Common Stock outstanding for purposes of the previous sentence, all
outstanding securities of the Company convertible into Common Stock shall be
deemed to have been converted at their then effective conversion rates.
(i) Transfer, assignment or hypothecation of this Warrant by the Holder
may be made only in accordance with and subject to the terms, conditions and
other provisions of this Warrant. The term "Holder," as used herein, shall
include the original Holder and only such persons to whom this Warrant is
transferred in strict conformity with the terms and conditions set forth herein.
As used herein, the term "Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued in consequence of the exercise or transfer
of this Warrant, in whole or in part.
(ii) The Expiration Date of this Warrant shall be October 17, 2000,
provided that prior to such date the Company has filed and processed to
effectiveness a Registration Statement under the Securities Act of 1933, as
amended (the "Act"), in respect of the Shares issuable hereunder (a
"Registration Statement" or "Statement"), which Registration Statement shall
have remained effective and current so that Shares could be sold pursuant to the
Statement in accordance with the Act for not less than ninety (90) days (the
"Registration Condition"). If the Registration Condition has not been satisfied
prior to October 17, 2000, the Expiration Date shall be the tenth day following
the date upon which the Registration Condition is first satisfied. The Company
shall give Holder prompt notice of the filing and the effectiveness of any
Registration Statement.
(iii) This Warrant may be exercised from time to time during the Exercise
Period as to the whole or any lesser number of whole Shares by the surrender of
this Warrant (with the form of Election to Purchase at the end hereof duly
executed) to the Company at its offices located at 9425 Stenton Avenue,
Erdenheim, PA 19038, Attn: President (or such other place as is designated in
writing and delivered to Holder by the Company), accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price").
(iv) Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of (a)
this Warrant, (b) a duly executed form of Election to Purchase, and (c) payment
of the Shares Purchase Price. Upon each exercise of this Warrant, the Holder
shall be deemed to be the holder of record of the Shares issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed. As soon as practicable after each such exercise of this Warrant,
the Company shall issue and deliver to the Holder a certificate or certificates
for the Shares issuable upon such exercise, registered in the name of the Holder
or its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the Holder to purchase the balance of the
Shares subject to purchase hereunder.
(v) The Company shall maintain a register on which the names and addresses
of the persons to whom this Warrant is issued and shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Subject to compliance with applicable securities laws and any other
restrictions set forth herein, this Warrant shall be transferable on the books
of the Company only upon delivery thereof with the form of Assignment at the end
hereof duly completed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of transfer,
the Company shall deliver a new Warrant or Warrants exchanged, at the option of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, unless the Holder of such Warrants shall furnish to the Company evidence
of compliance with the Act and applicable state securities law in accordance
with the provisions of Section 10 hereof.
(vi) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. The Company covenants and agrees that all of the Shares
which may be issued pursuant to this Warrant will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
(vii) The Exercise Price, before any adjustments pursuant to subparagraphs
(a) and (c) below, shall be as follows: Until October 17, 1997, Two ($2.00)
Dollars per share; from October 18, 1997 until October 17, 1998 Two and 50/100
($2.50) Dollars per share; from October 18, 1998, until October 17, 1999, Three
($3.00) Dollars per share; and from October 18, 1999 until the Expiration Date,
Three and 50/100 ($3.50) Dollars per share.
(a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of
Common Stock, (ii) subdivide or reclassify the shares of Common
Stock into a greater number of shares or (iii) combine or reclassify
the outstanding shares of Common Stock into a lesser number of
shares, the Exercise Price in effect at the time of the record date
for such dividend or distribution on the effective date of such
subdivision, combination or reclassification shall be adjusted so
that it shall equal the price determined by multiplying the Exercise
Price then in effect by a fraction, the denominator of which shall
be the number of shares of Common Stock outstanding immediately
after giving effect to such action, and of which the numerator shall
be the number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall become effective
automatically concurrently with the time of such declaration,
distribution, subdivision, reclassification or combination and shall
be made successively whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (a) above, the number
of Shares purchasable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Shares
initially issuable upon exercise of this Warrant by the initial
Exercise Price in effect on the date hereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 7 shall be made to the
nearest one-hundredth of a cent and to the nearest whole Share.
(viii) The Exercise Price determined pursuant to Section 7 shall be
subject to adjustment from time to time as follows:
(a) Except as hereinafter provided, if the Company shall at
any time after the date hereof issue or sell any Shares of Common
Stock, including shares held in the Company's treasury, for a
consideration per share less than the Exercise Price in effect
immediately prior to the issuance or sale of such shares, or without
consideration then, and thereafter successively upon each issuance
or sale, the Exercise Price in effect immediately prior to each such
issuance or sale shall be reduced to a price determined by dividing
(i) an amount equal to the sum of (A) the total number of Shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the exercise price in effect immediately prior to such
issuance or sale, plus (B) the consideration, if any, received by
the Company upon such issuance or sale, by (ii) the total number of
Shares of Common Stock outstanding immediately after such issuance
or sale.
(b) If the Company shall at any time after the date hereof (i)
issue or sell any securities convertible into or exchangeable for
Shares of Common Stock at a price less than the Exercise Price in
effect immediately prior to the issuance or sale of such convertible
securities, or (ii) in any manner offer, issue or sell any rights to
subscribe for or to purchase shares of Common Stock or convertible
securities, or grant any options for the purchase of shares of
Common Stock or convertible securities, for a purchase price per
share of Common Stock for shares of Common Stock issuable or
deliverable upon the exercise of such rights or options, or upon the
conversion or exchange of the convertible securities to which such
rights or options relate, less than the Exercise Price in effect
immediately prior to the offering of such rights or the granting of
such options, or without consideration, the Exercise Price in effect
immediately prior to the issuance of such options or rights or
securities shall be reduced to a price determined by making a
computation in accordance with the provisions of subparagraph (a) of
this Section 8, provided that:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon the conversion of or exchange for any such
securities shall be considered to have been delivered at the
time of issuance of such securities, and for a consideration
equal to the consideration (determined in the same manner as
consideration received on the issuance or sale of Common
Stock) received by the Company for such securities, plus the
consideration, if any, to be received by the Company upon the
exchange or conversion thereof;
(ii) The aggregate maximum number of shares of Common Stock
deliverable under any such options or rights shall be
considered to have been delivered at the time such options or
rights were issued, and for a consideration equal to the
minimum purchase price per share of Common Stock provided for
in such option or rights, plus the consideration (determined
in the same manner as consideration received on the issuance
or sale of Common Stock), if any, received by the Company for
such options or right; and
(iii) On the expiration of such options or rights, or the
termination of such right to convert or exchange, the Exercise
Price shall forthwith be re-adjusted to such Price as would
have been obtained had the adjustments made upon this issuance
of such options, rights or convertible or exchangeable
securities been made upon the basis of the delivery of only
the number of shares of Common Stock actually delivered upon
the exercise of such options or rights upon conversion or
exchange of such securities.
(c) For purposes of any computation to be made in accordance
with the provisions of this Section 8, the following provisions
shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock
for consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to
be the amount of cash received by the Company for such shares
(or, if shares of Common Stock are offered by the Company for
subscription, the subscription price, or, if shares of Common
Stock shall be sold to underwriters or dealers for public
offering without subscription offering, the initial public
offering price) without deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase
thereof by underwriters or dealers or others performing
similar services or any expenses incurred in conjunction
therewith;
(ii) In case of the issuance or sale (otherwise than as a
divided or other distribution on any stock of the Company or
on conversion or exchange of other securities of the Company)
of shares of Common Stock for a consideration part or all of
which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be
the value of such consideration as determined by the Board of
Directors of the Company, at or about, but as of, the date of
the adoption of the resolution authorizing such issuance,
irrespective of accounting treatment. The reclassification of
securities other than Common Stock shall be deemed to involve
the issuance for a consideration other than cash of such
Common Stock immediately prior to the close of business on the
date fixed for the determination of security holders entitled
to receive such Common Stock;
(iii) Shares of Common Stock issuable by way of dividend or
other distribution of any stock of the Company shall be deemed
to have been issued (A) immediately after the opening of
business on the day following the date fixed for the
determination of shareholders entitled to receive such
dividend or other distribution and (B) without consideration;
and
(iv) The number of shares of Common Stock at any time
outstanding (A) shall not include any shares then owned or
held by or for the account of the Company, but (B) shall
include the aggregate number of shares deliverable in respect
of the options, rights and convertible and exchangeable
securities referred to in subparagraph (b) of this Section 8
at all times during which such options, rights or securities
remain outstanding and unexercised, unconverted or
unexchanged, as the case may be, and thereafter to the extent
such options, rights or securities have been exercised,
converted or exchanged.
(d) Whenever the Exercise Price is adjusted as herein
provided, the Company shall (i) forthwith execute a certificate
signed by the President or a Vice President of the Company and by
the Treasurer or an Assistant Treasure or the Secretary or an
Assistant Secretary of the Company showing in detail the fact
requiring such adjustment and the Exercise Price and the number of
shares of Common Stock deliverable after such adjustment and (ii)
cause a notice, stating that such adjustment has been effected and
stating the adjusted Exercise Price and the number of shares of
Common Stock deliverable, to be sent to the Holder at its address
appearing in the records of the Company. Each such certificate shall
be kept on file in the principal office of the Company.
(e) No adjustment of the Exercise Price shall be made in
connection with the issuance or the sale of Common Stock upon the
exercise of options or rights upon the conversion or exchange of
convertible securities in any case where the adjustment provided in
subparagraph (a) hereof was made upon the issuance of such options
or convertible securities by reason of the provisions of
subparagraph (b) above.
(f) Notwithstanding anything contained herein to the contrary,
no adjustments in the Exercise Price or in the number of the Shares
issuable upon exercise of this Warrant shall be made by reason of or
in connection with (i) the issuance or exercise of the warrant for
50,000 shares of Common Stock issued to Sage Equities, Inc.
contemporaneously herewith; (ii) the conversion into Common Stock of
any shares of any class of the Company's Preferred Stock outstanding
prior to the date hereof, (iii) the issuance of or conversion into
Common Stock of any of the 13,250 shares of Series E Preferred Stock
issuable in connection with the Agreement and Plan of Merger among
the Company and Westmeade Healthcare, Inc., dated as of July 27,
1995, or (iv) the issuance or exercise of options or warrants
exercisable for shares of Common Stock, issued to employees of the
Company or its subsidiaries (other than executive officers or
directors of the Company), not to exceed in the aggregate 250,000
shares.
(g) Upon any increase in the Exercise Price due to the passage
of time pursuant to the introductory paragraph of Section 7 hereof,
all previous adjustments to the Exercise Price made pursuant to
either Section 7 or Section 8 hereof (other than adjustments which
have become subject to readjustment due to the termination or
expiration of options or rights as set forth in subparagraph
8(b)(iii)) shall be taken into account to adjust the new Exercise
Price which comes into effect pursuant to the introductory paragraph
of Section 7, as if the events causing such adjustments had taken
place immediately upon the effectiveness of the new Exercise Price.
(ix) Upon any adjustment of the Exercise Price hereinabove provided for
(including any readjustment in accordance with the provisions of subsection
(b)(iii) of Section 8 above), the number of shares of Common Stock issuable upon
exercise of this Warrant shall be changed to the number of shared determined by
DIVIDING
(a) The aggregate Exercise Price payable for the purchase of all
shares issuable upon exercise of this Warrant, immediately prior to
such adjustment, BY
(b) The Exercise Price if effect immediately after such adjustment.
(x) (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger of consolidation in which the
Company is the continuing or surviving corporation), or in case of any sale,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, appropriate provisions shall be made
so that the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such consolidation,
merger, sale, lease or conveyance by a holder of the number of Shares of Common
Stock for which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance and, in any such case,
effective provision shall be made in its Articles of Incorporation or otherwise,
if necessary, in order to effect such agreement. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Sections 7 and 8.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares) or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) in
the Shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but including
any change in the Shares into two or more classes or series of Shares), the
Holder shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash or any combination thereof receivable by the holder of the number of Shares
for which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger. Thereafter, appropriate
provision (as reasonably determined by the Board of Directors) shall be made for
adjustment which shall be as nearly equivalent as practicable to the adjustments
in Sections 7 and 8.
(c) The above provisions of this Section 10 shall similarly apply to
successive reclassification and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(xi) The issue of any stock or other certificate upon the exercise of this
Warrant shall be made without charge to the Holder for any tax in respect of the
issue of such certificate. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificates unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
(xii) (a) The Company shall use its best efforts to register the Shares
for sale under the Act not later than October 31, 1996, and to maintain a
Registration Statement in effect with respect to the Shares for not less than
ninety (90) days. In addition to this undertaking, the holder of this Warrant
shall have the right to include Shares in any registered secondary offering of
Common Stock of the Company by the Company or executive officers and directors
of the Company on terms not less favorable than are afforded to executive
officers and directors of the Company, and to the same extent (i.e.,
proportionately, based on their total ownership of Common Stock) as all
executive officers and directors of the Company as a group participate in such
secondary offering of Common Stock.
(b) If the Company has not registered the Shares for sale under the
Act on or before October 31, 1996, then at any time thereafter, the holders of a
majority in interest of the then unregistered Shares (this Warrant being deemed
exercised for purposes of this paragraph (b)) held by all holders shall have the
right to notify the Company in writing that such Holders intend to offer or
cause to be offered for sale any of the Shares (but not less than 10% in the
aggregate of the Shares held by such notifying Holders) and shall have the right
to demand the Company to cause such Shares to be registered under the Act. In
such event, the Company will notify all other Holders of such notice from a
majority of the Holders. Upon written request of any Holder given within fifteen
(15) days after receipt by such Holder of such notification from the Company,
the Company will use its best efforts to cause such of the Shares as may be
requested by any Holders thereof to be registered under the Act as expeditiously
as possible; provided that the Company shall be obligated to register shares
pursuant to this paragraph (b) on not more than one occasion and provided
further that the Company shall not be required to effect any such registration
within ninety (90) days of the Closing of an underwritten primary public
offering by the Company.
(c) The Company shall not be required to effect the registration of
any of the shares requested by a Holder under subparagraph (b) if, in the
unqualified opinion of counsel for the Company which is reasonably acceptable to
counsel for the Holder, such Holder may then sell all shares as to which such
Holder had requested registration under the provisions of the Securities Act
without registration thereunder.
(d) Each registration pursuant to paragraph (b) above shall be
subject to the registration procedures, provisions regarding expenses and
indemnification and other matters set forth on Exhibit A hereto.
(e) The Company agrees that so long as it shall have an effective
registration statement under the Act with respect to any of the Shares (and for
one year thereafter) and for so long as the Company shall have any securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended, it shall file all reports required to be filed pursuant to the
Securities Exchange Act of 1934, as amended, so as to be in compliance with the
then current public information requirements specified in Rule 144 (as amended)
or any successor rule promulgated under the Securities Act.
(f) Unless registered under the Act, the Warrants and Shares or
other securities issued upon exercise of the Warrants shall not be transferrable
unless, in the opinion of counsel reasonably satisfactory to the Company, an
exemption from registration under applicable securities laws is available. The
Warrants, Shares and other securities issued upon the exercise of this Warrant
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Shares or securities shall bear the following legend and any
other legend which counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(xiii) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
(xiv) The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
13. This Warrant shall be governed by and construed in accordance with the
laws of the State of incorporation of the Company.
14. The Company warrants the due authorization, execution and delivery of
this Warrant this 17 day of October, 1995.
CORECARE SYSTEMS, INC.
[SEAL]
By: /s/ Rose S. DiOttavio
---------------------
Rose S. DiOttavio, President
ATTEST:
By:/s/
----------------------------
Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock issuable
upon the exercise thereof and requests that certificates for such Shares be
issued in his/her/its name and delivered to him/her/it at the following address:
_____________________________________________________________________________;
Date:__________________
_______________________________________________________________________________
Signature(s)(**)
________________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of _______________________ Shares(*)
purchasable upon exercise thereof to____________________________, whose address
is__________________________________________________________________ and hereby
irrevocably constitute and appoint _________________________________________
his/her/its Attorney to transfer said Warrant on the book of the Company, with
full power of substitution.
Date:___________________
________________________________________________________________________________
Signature(s)(**)
______________________________________________________________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the names(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.12
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM REGISTRATION UNDER ALL SUCH LAWS IS AVAILABLE.
CORECARE SYSTEMS, INC.
Warrant for the Purchase of Shares of Common Stock
No. WD - 1
THIS CERTIFIES THAT, for value received, HEALTHPARTNERS FUNDING, L.P.,
("Holder") is entitled to subscribe for and purchase from CORECARE SYSTEMS,
INC., a Nevada corporation (the "Company"), at any time after issuance hereof
and prior to the Expiration Date set forth below (the "Exercise Period"),
FIFTEEN THOUSAND (15,000) fully paid and nonassessable shares (the "Shares") of
the Company's Common Stock, $.001 par value per share (the "Common Stock"),
subject to the adjustments set forth in Sections 7 and 8 below, at a price of
One Dollar ($1.00) Per Share (the "Exercise Price"), subject to the other terms
and conditions set forth herein.
1. Transfer, assignment or hypothecation of this Warrant by the Holder may
be made only in accordance with and subject to the terms, conditions and other
provisions of this Warrant. The term "Holder," as used herein, shall include the
original Holder and only such other persons to whom this Warrant is transferred
in strict conformity with the terms and conditions set forth herein. As used
herein, the term "Warrant" shall mean and include this Warrant and any Warrant
or Warrants hereafter issued in consequence of the exercise or transfer of this
Warrant, in whole or in part.
2. The Expiration Date of this Warrant shall be December 31, 2000.
3. This Warrant may be exercised from time to time during the Exercise
Period as to the whole or any lesser number of whole Shares by the surrender of
this Warrant (with the form of Election to Purchase at the end hereof duly
executed) to the Company at its offices located at 9425 Stenton Avenue,
Erdenheim, PA 19038, Attn: President (or such other place as is designated in
writing and delivered to Holder by the Company), accompanied by a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Shares covered by such exercise
(the "Shares Purchase Price"). The Shares Purchase Price may also be paid by the
Holder's cancelling any principal indebtedness of the Company to the original
Holder hereof.
4. Exercise of this Warrant shall be deemed to have been effected as of
the close of the business day on which the Company has received the last of (a)
this Warrant, (b) a duly executed form of Election to Purchase, and (c) payment
of the Shares Purchase Price. If the Shares Purchase Price is paid by
cancellation of indebtedness as set forth in the final sentence of Section 3
hereof, the Holder shall deliver to the Company such documentary evidence of
cancellation as shall be satisfactory to the Company. Upon each exercise of this
Warrant, the Holder shall be deemed to be the holder of record of the Shares
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed. As soon as practicable after each such
exercise of this Warrant, the Company shall issue and deliver to the Holder a
certificate or certificates for the Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Shares subject to purchase hereunder.
5. The Company shall maintain a register on which the names and addresses
of the persons to whom this Warrant is issued and shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. Subject to compliance with applicable securities laws and any other
restrictions set forth herein, this Warrant shall be transferable on the books
of the Company only upon delivery thereof with the form of Assignment at the end
hereof duly completed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited with the Company in its discretion. Upon any registration of transfer,
the Company shall deliver a new Warrant or Warrants exchanged, at the option of
the Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the Company
or its duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, unless such transfer is registered under the Securities Act of 1933 or
the Company shall have received an opinion of counsel as set forth in Section 12
hereof.
6. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Warrant, such number of Shares as shall, from time to time,
be sufficient therefor. The Company covenants and agrees that all of the Shares
which may be issued pursuant to this Warrant will, upon issuance, be fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
7. (a) In case the Company shall (i) declare a dividend or make a
distribution on outstanding shares of its Common Stock in shares of Common
Stock, (ii) subdivide or reclassify the shares of Common Stock into a greater
number of shares or (iii) combine or reclassify the outstanding shares of Common
Stock into a lesser number of shares, the Exercise Price in effect at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price then in
effect by a fraction, the denominator of which shall be the number of shares of
Common Stock outstanding immediately after giving effect to such action, and of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall become effective
automatically concurrently with the time of such declaration, distribution,
subdivision, reclassification or combination and shall be made successively
whenever any event specified above shall occur.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to subparagraph (a) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise of this
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(c) All calculations under this Section 7 shall be made to the
nearest one-hundredth of a cent and to the nearest whole Share.
8. (a) Except as hereinafter provided, if the Company shall at any time
after the date hereof issue or sell any shares of Common Stock, including shares
held in the Company's treasury, for a consideration per share less than the
Exercise Price in effect immediately prior to the issuance or sale of such
shares, or without consideration then, and thereafter successively upon each
issuance or sale, the Exercise Price in effect immediately prior to each such
issuance or sale shall be reduced to a price determined by dividing (i) an
amount equal to the sum of (A) the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the
Exercise Price in effect immediately prior to such issuance or sale, plus (B)
the consideration, if any, received by the Company upon such issuance or sale,
by (ii) the total number of shares of Common Stock outstanding immediately after
such issuance or sale.
(b) If the Company shall at any time after the date hereof (i) issue
or sell any securities convertible into or exchangeable for shares of Common
Stock at a price less than the Exercise Price in effect immediately prior to the
issuance or sale of such convertible securities, or (ii) in any manner offer,
issue or sell any rights to subscribe for or to purchase shares of Common Stock
or convertible securities, or grant any options for the purchase of shares of
Common Stock or convertible securities, for a purchase price per share of Common
Stock for shares of Common Stock issuable or deliverable upon the exercise of
such rights or options, or upon the conversion or exchange of the convertible
securities to which such rights or options relate, less than the Exercise Price
in effect immediately prior to the offering of such rights or the granting of
such options, or without consideration, the Exercise Price in effect immediately
prior to the issuance of such options or rights or securities shall be reduced
to a price determined by making a computation in accordance with the provisions
of subparagraph (a) of this Section 8, provided that:
(i) The aggregate maximum number of shares of Common Stock
deliverable upon the conversion of or exchange for any such
securities shall be considered to have been delivered at the time of
issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration
received on the issuance or sale of Common Stock) received by the
Company for such securities, plus the consideration, if any, to be
received by the Company upon the exchange or conversion thereof;
(ii) The aggregate maximum number of shares of Common Stock
deliverable under any such options or rights shall be considered to
have been delivered at the time such options or rights were issued,
and for a consideration equal to the minimum purchase price per
share of Common Stock provided for in such option or rights, plus
the consideration (determined in the same manner as consideration
received on the issuance or sale of Common Stock), if any, received
by the Company for such options or rights; and
(iii) On the expiration of such options or rights, or the
termination of such right to convert or exchange, the Exercise Price
shall forthwith be re-adjusted to such price as would have been
obtained had the adjustments made upon this issuance of such
options, rights or convertible or exchangeable securities been made
upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon the exercise of such options or
rights upon conversion or exchange of such securities.
(c) For purposes of any computation to be made in accordance with
the provisions of this Section 8, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for
consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares (or, if shares of Common
Stock are offered by the Company for subscription, the subscription
price, or, if shares of Common Stock shall be sold to underwriters
or dealers for public offering without subscription offering, the
initial public offering price) without deducting therefrom any
compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing
similar services or any expenses incurred in conjunction therewith;
(ii) In case of the issuance or sale (otherwise than as a divided or
other distribution on any stock of the Company or on conversion or
exchange of other securities of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor other than cash shall
be deemed to be the value of such consideration as determined by the
Board of Directors of the Company, at or about, but as of, the date
of the adoption of the resolution authorizing such issuance,
irrespective of accounting treatment. The reclassification of
securities other than Common Stock shall be deemed to involve the
issuance for a consideration other than cash of such Common Stock
immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such Common
Stock;
(iii) Shares of Common Stock issuable by way of dividend or other
distribution of any stock of the Company shall be deemed to have
been issued (A) immediately after the opening of business on the day
following the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution and (B)
without consideration; and
(iv) The number of shares of Common Stock at any time outstanding
(A) shall not include any shares then owned or held by or for the
account of the Company, but (B) shall include the aggregate number
of shares deliverable in respect of the options, rights and
convertible and exchangeable securities referred to in subparagraph
(b) of this Section 8 at all times during which such options, rights
or securities remain outstanding and unexercised, unconverted or
unexchanged, as the case may be, and thereafter to the extent such
options, rights or securities have been exercised, converted or
exchanged.
(d) Whenever the Exercise Price is adjusted as herein provided, the
Company shall (i) forthwith execute a certificate signed by the President or a
Vice President of the Company and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company showing in detail the
fact requiring such adjustment and the Exercise Price and the number of shares
of Common Stock deliverable after such adjustment and (ii) cause a notice,
stating that such adjustment has been effected and stating the adjusted Exercise
Price and the number of shares of Common Stock deliverable, to be sent to the
Holder at its address appearing in the records of the Company. Each such
certificate shall be kept on file in the principal office of the Company.
(e) No adjustment of the Exercise Price shall be made in connection
with the issuance or the sale of Common Stock upon the exercise of options or
rights upon the conversion or exchange of convertible securities in any case
where the adjustment provided in subparagraph (a) hereof was made upon the
issuance of such options or convertible securities by reason of the provisions
of subparagraph (b) above.
(f) Notwithstanding anything contained herein to the contrary, no
adjustments in the Exercise Price or in the number of the shares issuable upon
exercise of this Warrant shall be made by reason of or in connection with (i)
the exercise of any options, warrants or similar rights outstanding prior to the
date hereof or (ii) the conversion into Common Stock of any shares of any class
or series of the Company's Preferred Stock, any of the Company's convertible
notes or any other instrument that is convertible into the Company's Common
Stock outstanding prior to the date hereof.
9. Upon any adjustment of the Exercise Price hereinabove provided for
(including any readjustment in accordance with the provisions of subsection
(b)(iii) of Section 8 above), the number of shares of Common Stock issuable upon
exercise of this Warrant shall be changed to the number of shared determined by
DIVIDING
(a) The aggregate Exercise Price payable for the purchase of all
shares issuable upon exercise of this Warrant, immediately prior to
such adjustment, BY
(b) The Exercise Price in effect immediately after such adjustment.
10. (a) In case of any consolidation with or merger of the Company with or
into another corporation, or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, appropriate provisions shall be made so that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of Shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease or conveyance; and, in any such case, effective provision
shall be made in the Articles of Incorporation or otherwise, if necessary, in
order to effect the foregoing. Such provisions shall provide for adjustments
which shall be as nearly equivalent as practicable to the adjustments in Section
7 of this Warrant.
(b) In case of any reclassification or change in the Shares of
Common Stock issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination, but including any change in the
Shares into two or more classes or series of shares) or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property) in
the Shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but including
any change in the Shares into two or more classes or series of Shares), the
Holder shall have the right thereafter to receive upon exercise of this Warrant
solely the kind and amount of shares of stock and other securities, property,
cash or any combination thereof receivable by the holder of the number of Shares
for which this Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger. Thereafter, appropriate
provision (as reasonably determined by the Board of Directors) shall be made for
adjustment which shall be as nearly equivalent as practicable to the adjustments
in Section 7 hereof.
(c) The above provisions of this Section 10 shall similarly apply to
successive reclassification and changes in Shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
11. The issue of any stock or other certificate upon the exercise of this
Warrant shall be made without charge to the Holder for any tax in respect of the
issue of such certificate. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificates unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
12. (a) Unless registered under the Securities Act of 1933 and applicable
state laws, this Warrant and the Shares or other securities issued upon exercise
of this Warrant shall not be transferrable unless, in the opinion of counsel
reasonably satisfactory to the Company, an exemption from registration under
applicable securities laws is available. The Warrant, Shares and other
securities issued upon the exercise of this Warrant shall be subject to a
stop-transfer order and the certificate or certificates evidencing any such
Shares or securities shall bear the following legend and any other legend which
counsel for the Company may deem necessary or advisable:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS SO REGISTERED OR UNLESS IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(b) This Warrant has been issued pursuant to exemptions under
federal and/or state securities laws available, in part, because the initial
Holder hereof is an "accredited investor" as that term is defined in Regulation
D under the Securities Act of 1933. The Company may require the Holder, upon
exercise of this Warrant, to produce evidence reasonably satisfactory to the
Company that the Holder is then an accredited investor.
13. The Company covenants and agrees that it shall provide written notice
to the Holder of any action taken by the Company that would adversely effect the
rights or interests of the Holder in this Warrant.
14. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Warrant and upon surrender and
cancellation of any Warrant if mutilated, and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
15. The Holder of any Warrant shall not have, solely on account of such
status, any rights of a shareholder of the Company, either at law or in equity,
or to any notice of meetings of shareholders or of any other proceedings of the
Company.
16. This Warrant shall be governed by and construed in accordance with the
laws of the State of incorporation of the Company.
17. The Company warrants the due authorization, execution and delivery of
this Warrant as of the ________ day of March, 1996.
CORECARE SYSTEMS, INC.
[SEAL]
By:____________________________
Rose S. DiOttavio, President
ATTEST:
By:___________________________
Secretary
ELECTION TO PURCHASE
The undersigned Holder hereby irrevocably elects to exercise the within Warrant
to purchase _____________________________ Shares(*) of Common Stock issuable
upon the exercise thereof and requests that certificates for such Shares be
issued in his/her/its name and delivered to him/her/it at the following address:
_______________________________________________________________________________;
Date:__________________
______________________________________________________________________________
Signature(s)(**)
____________________________________________________________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the within Warrant to the extent of _______________________ Shares(*)
purchasable upon exercise thereof to____________________________, whose address
is__________________________________________________________________ and hereby
irrevocably constitute and appoint _________________________________________
his/her/its Attorney to transfer said Warrant on the book of the Company, with
full power of substitution.
Date:___________________
_______________________________________________________________________________
Signature(s)(**)
_______________________________________________________________________________
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the names(s) of the Holder as set forth
on the first page of this Warrant.
EXHIBIT 3.13
INVESTOR NOTEHOLDER AGREEMENT AND CONSENT
THIS AGREEMENT AND CONSENT is by and among ____________________________
(the "Noteholder"), WESTMEADE HEALTHCARE, INC. (the "Company") and CORECARE
SYSTEMS, INC. ("CoreCare").
1. Background.
Pursuant to an Agreement and Plan of Merger dated July 25, 1995 (the
"Merger Agreement"), CoreCare, the Company and a wholly-owned subsidiary of
CoreCare (the "Subsidiary") have agreed to a merger (the "Merger") of the
Subsidiary with and into the Company, with the Company to be the surviving
corporation. Pursuant to the terms of the Merger, the Company will become a
wholly-owned subsidiary of CoreCare, and the holders of the Investor Notes and
the stockholders of the Company will receive shares of the capital stock of
CoreCare. Pursuant to the terms of the Merger Agreement, the holders of the
Investor Notes will receive shares of CoreCare's Series E Preferred Stock (the
"Preferred Shares") in exchange for all of the obligations of the Company
pursuant to the Investor Notes. The Merger Agreement provides, as a condition to
closing of the Merger, that all of the holders of the Investor Notes consent to
the transactions contemplated by the Merger Agreement, including the exchange of
their Investor Notes for the Preferred Shares.
2. Identification of Notes.
The Noteholder is the holder of an aggregate $177,556.50 principal
amount of the Investor Notes, as more fully set forth on Schedule A hereto,
which shows the dates and principal amounts of each of such Investor Notes (the
"Notes"). The Noteholder hereby represents and warrants to the Company and
CoreCare that the Noteholder is the sole owner of the Notes and has not
assigned, transferred or pledged or agreed to assign, transfer or pledge any of
the Notes or any interest in any of the Notes to any other person or entity, and
that the Notes are not subject to any lien, security interest or other
encumbrance whatsoever.
3. Consent.
The Noteholder hereby consents to the Merger and the other
transactions set forth in the Merger Agreement. Such consent shall constitute
the required consent under the Notes and any and all of other agreements and
instruments pursuant to which the Notes were issued, or under which the
Noteholder has any rights with respect to the Notes, or pursuant to which the
Noteholder has any rights as a shareholder of the Company (the "Note
Agreements").
4. Agreement to Exchange Notes for CoreCare Stock.
The Noteholder hereby agrees that, upon effectiveness of the Merger
under the Pennsylvania Business Corporation Law of 1988, as amended, and in
accordance with the terms of the Merger Agreement: (i) the Noteholder will
accept the number of Preferred Shares set forth in Schedule A hereto in exchange
for the outstanding principal and interest of the Notes; (ii) all of the
obligations of the Company under the Notes shall be void and extinguished and
converted into the right to receive such number of Preferred Shares; and (iii)
the Noteholder hereby waives, relinquishes, and releases any and all rights and
claims it may have under, and any and all obligations of the Company under, the
Notes and the Note Agreements, including without limitation principal, interest
(both ordinary and default rates) expenses, fees, and any other amounts, damages
and liabilities, which were due or may have become due with respect to the Notes
or any of the Note Agreements.
5. Acknowledgments and Representations.
(a) The Noteholder acknowledges that the exchange of Preferred
Shares for the Notes pursuant to the Merger Agreement and this Agreement has not
been registered under any federal or state securities laws, and therefore,
further transfer the Preferred Shares is severely restricted. The Preferred
Shares cannot be sold or transferred by the Noteholder unless they are
subsequently registered under applicable law or an exemption from registration
is available. The Noteholder may be required to bear the risk of its investment
in CoreCare for an indefinite period of time.
(b) The undersigned represents and warrants that the undersigned is
accepting the Preferred Stock in exchange for the Notes solely for the
undersigned's own account and for the purpose of investment and not with a view
to or for sale in connection with any distribution.
(c) The Noteholder agrees that the Noteholder will not sell, offer
to sell or transfer any shares of the Preferred Shares or any interest therein
without registration under applicable federal and state securities laws, unless
an exemption from such registration is applicable to such sale or transfer.
(d) The Noteholder represents and warrants that the Noteholder is an
"accredited investor" as that term is defined in Regulation D under the
Securities Act of 1933.
(e) The undersigned has received and reviewed CoreCare's Exchange
Disclosure Materials, including a description of the Merger, a copy of
CoreCare's Registration Statement of Form 10-SB and a description of the Series
E Convertible Preferred Stock. The Investor is basing his decision to consent to
the Merger and accept the Preferred Shares in exchange for the Notes upon the
information contained in the Exchange Disclosure Materials and the information
contained in the Merger Agreement.
6. Registration Rights.
(a) At any time from and after a date which is one year after the
effective date of the Merger, and prior to a date which is four years after the
effective date of the Merger, the holders of at least 51% of the outstanding
shares of Registrable Stock (as defined below) shall have the right on one
occasion to demand that CoreCare prepare and file a registration statement on
Form S-3 under the Securities Act of 1933 covering the Registrable Stock. Upon
receiving such a demand CoreCare will
i) promptly give written notice of the proposed registration
to the holders of all other shares of Registrable Stock, specifying that such
holders shall have the right to include some or all of their shares of
Registrable Stock in such registration statement by giving written notice to
CoreCare within fifteen days of the receipt by the holder of the notice from
CoreCare; and
ii) as soon as possible, effect such registration as to all
shares of Registrable Stock which the holders thereof have requested to be
included in such registration Statement; provided, however, that CoreCare shall
not be obligated to effect such registration if (A) Form S-3 is not available
for such offering; (B) the holders propose to sell shares of Registrable Stock
at an aggregate price to the public (net of any underwriter's discounts or
commissions) of less than $500,000; or (C) CoreCare shall furnish to all the
holders of Registrable Stock a certificate of the President of CoreCare stating
that in the good faith judgment of the Board of Directors, effecting such
registration would be materially detrimental to CoreCare and its shareholders
(without taking into account the costs of such registration), in which event
CoreCare shall have the right to defer the filing of such registration statement
for a period of not more than sixty (60) days after receipt of the initial
demand; provided that CoreCare shall not utilize the right specified in this
clause (C) more than once.
(b) All expenses incurred in connection with a registration under
this Section 6, including, without limitation, all registration, filing,
qualification, printing, accounting and legal costs and fees, shall be borne by
CoreCare, except for any underwriter's commissions or discounts and except for
the fees and expenses of any counsel for the holders of Registrable Stock.
(c) In the event that CoreCare proposes to file a Registration
Statement under the Securities Act of 1933 with respect to any of its shares of
capital stock (other than a Registration Statement specified in paragraph (a)
above, and excluding Registration Statements filed on Forms S-4 or S-8, or any
successor forms), then the Company shall in each case give written notice of
such proposed filing to each of the holders of Registrable Stock at least 45
days before the anticipated filing date, and such notice shall offer to such
holders the opportunity to include in such Registration Statement such number of
shares of Registrable Stock as may be requested by the holders on the same terms
and conditions as the securities of CoreCare or other holders included therein.
If any holder desires to include such holders' Registrable Stock in such
Registration Statement, the holder shall so notify CoreCare in writing within
twenty (20) days following the notice of CoreCare to the holder. Such notice of
the holder shall set forth the number of Registrable Stock requested by the
holder to be included in the Registration Statement and such other matters as
CoreCare shall reasonably request.
(d) If, in the sole reasonable judgment of the managing underwriter
of any public offering made in connection with a Registration Statement which is
the subject of paragraph (c) hereof, the amount of securities to be registered
pursuant to the rights set forth in paragraph (c) shall be determined to be, in
the aggregate, an amount which would adversely affect the success of CoreCare's
registration of its securities, then the amount of securities to be registered
on behalf of persons other than CoreCare to be included in the Registration
Statement, including the Registrable Stock, shall be reduced on a pro rata
basis, in accordance with the number of shares originally requested to be
registered by all such holders.
(e) The registration rights provided in paragraph (c) hereof shall
terminate four (4) years after the Effective Date of the Merger, provided that
the holders of the Registrable Stock shall have been provided with the
opportunity to register their shares pursuant to paragraph (c) on at least two
(2) occasions. If the holders of the Registrable Stock have not been provided
with the opportunity to register their shares pursuant to paragraph (c) on at
least two (2) occasions prior to the date which is four (4) years after the
Effective Date of the Merger, then the registration rights provided in paragraph
(c) hereof shall terminate upon the holders having been provided with the
opportunity to register their shares pursuant to paragraph (c) on a second
occasion.
(f) If and whenever the CoreCare is required by the provisions of
this Section 6 to effect the registration of any Registrable Stock CoreCare
will: (i) furnish to the holders for whom such shares of Registrable Stock are
registered or are to be registered such numbers of copies of the preliminary
prospectus included in such Registration Statement and the prospectus included
in such Registration Statement at the time it is ordered effective by the
Securities and Exchange Commission as such holders may reasonably request in
order to facilitate the disposition of the Registrable Stock; (ii) indemnify and
hold harmless each selling holder of Registrable Stock and each other person, if
any, who controls such holder within the meaning of the Securities Act of 1933
and each other person (including underwriters) who participates in the offering
of such underlying securities, against any loses, claims, damages or
liabilities, joint or several, to which such holder or controlling person or
participating person may become subject under the Securities Act of 1933 or
otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
Effective Date thereof, in any Registration Statement under which the shares of
Registrable Stock were registered, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement thereto, 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 therein not misleading, and will reimburse such holder and each such
controlling person or participating person for any legal or other expenses
reasonably incurred by such holder or such controlling person or participating
person in connection with the investigation or defending any such loss, damage,
liability or proceeding; provided, however, that CoreCare will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to CoreCare by any holder
of Registrable Stock, or any controlling or participating person, as the case
may be, specifically for use in the preparation of the Registration Statement,
preliminary or final prospectus, or any amendment or supplement; and provided
further, that prior to the filing of the Registration Statement, CoreCare shall
have received a similar agreement from each selling holder of Registrable Stock
to indemnify CoreCare and its controlling persons against losses, claims,
damages and liabilities, to which CoreCare or such controlling persons may
become subject due to any written information provided by a holder for use in
such Registration Statement, preliminary prospectus, prospectus, amendment or
supplement.
(g) "Registrable Securities" as used herein shall mean any shares of
Series E Convertible Preferred Stock issued in connection with the Merger, any
shares of CoreCare's Common Stock received upon conversion of such shares of
Series E Convertible Preferred Stock, and any shares of any other class into
which such preferred stock or common stock shall have been converted or for
which they may have been exchanged; provided, however, that with respect to the
shares to be included in any Registration Statement, such shares shall include
only Common Stock and the holders of any Preferred Stock shall be required to
convert such shares into Common Stock upon including their Registrable Stock in
any Registration Statement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Noteholder has executed this Agreement and Consent this _____ day of
__________________________, 1995.
__________________________
By:_______________________
CORECARE SYSTEMS, INC.
By:_______________________
WESTMEADE HEALTHCARE, INC.
By:_______________________
SCHEDULE "A"
Notes
EXHIBIT 3.14
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made this 30th day of June, 1995 by
and between Corecare Systems, Inc., a Nevada corporation, having its offices
located at Whitemarsh Professional Center, 9425 Stenton Avenue, Erdenheim,
Pennsylvania 19118 (the "Company") and Marlene Todaro and Anthony Todaro,
residing at 517 Ludlow Station Road, Asbury, New Jersey 08802 (collectively the
"Investor").
(A) The Company covenants and agrees with the Investor that in the event
the Company proposes to file a Registration Statement ("Registration Statement")
under the Securities Act of 1933, as amended (the "Act") with respect to any of
its shares of capital stock (other than in connection with an offering solely to
the Company's employees pursuant to option, bonus or similar plans, then the
Company shall in each case give written notice of such proposed filing to the
Investor at least forty-five (45) days before the anticipated filing date, and
such notice shall offer to the Investor the opportunity to include in such
Registration Statement such number of shares of capital stock of the same class
then owned by the Investor ("Registrable Shares") which shares were acquired
pursuant to a Stock Purchase Agreement dated of even date hereof (the "Purchase
Agreement"), as may be requested by the Investor. The Company shall cause the
managing underwriter of such proposed offering to permit the Investor to include
such Registrable Shares in the proposed offering on the same terms and
conditions as the securities of the Company included therein. If the Investor
selects to include such Registrable Shares in such Registration Statement, the
Investor shall so notify the Company in writing within 15 days following the
notice of the Company as aforesaid. Such notice of the Investor shall set forth
the number of Registrable Shares requested by the Investor to be included in
the Registration Statement and such other matters as the Company may reasonably
request. Failure of the Investor to so notify the buyer within such 15 day
period shall be deemed the election of the Investor not to include any
Registrable Shares within such Registration Statement. In the event the
managing underwriter determines in good faith that inclusion of all of the
Investors' Registrable Shares in such Registration Statement will have a
material adverse effect on the Company's ability to complete the sale of capital
stock for its own account, then notwithstanding the provisions of this Paragraph
A, the Investor shall agree to reduce the amount of Registrable Shares it
intends to register in the Registration Statement, but in no event shall
Investor be required to reduce the amount of Registrable Shares to be included
in the Registration Statement to less than 350,000 Registrable Shares.
(B) The Company may require the Investor to furnish to the Company such
information regarding the Investor, the distribution of the Registrable Shares
and such other matters as the Company may reasonably request in writing.
(C) The registration rights provided in paragraph (A) above for any of the
Registrable Shares shall terminate on the closing of a firm commitment
underwritten public offering of at least $5,000,000.00 of the Company's capital
stock in an offering registered with the United States Securities and Exchange
Commission and in which the Registrable Shares owned by the Investor may be
included, provided, however, that if the Investor is required to hold back
Registrable Shares from inclusion in the said public offering at the request of
the Managing Underwriter in accordance with Paragraph A hereof, the registration
rights provided in Paragraph A shall terminate on June 30, 1999, unless the
Investor shall be unable to sell their Registrable Shares under Rule 144 as a
result of a breach of this Agreement by the Company, in which case the
registration rights provided for in Paragraph A shall terminate on June 30,
2003.
(D) All expenses incident to the Company's performance of or compliance
with the provisions set forth herein (other than underwriting discounts,
commissions and expenses relating to the Registrable Shares, if any, and the
fees and disbursements of the Investor's counsel) will be borne by the Company.
(E) With a view to making available to the Investor the benefits of Rule
144 promulgated under the Act and any other rule or regulation of the SEC that
may at any time permit an Investor to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after ninety (90) days after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(ii) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Investor to utilize Form S-3 for the sale of their Registrable Shares, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(iii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(iv) furnish to any Investor, so long as the Investor owns any
Registrable Shares, forthwith upon request (1) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (2) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company, and
(3) such other information as may be reasonably requested in availing any
Investor of any rule or regulation of the SEC which permits the selling of any
such securities without registration or pursuant to such form.
(F) In case the Company shall receive from the Investor or Investors of at
least twenty percent (20%) of the then outstanding Registrable Shares a written
request or requests that the Company effect a registration on Form S-3 and any
related qualification or compliance with respect to all or a part of the
Registrable Shares owned by such Investor or Investors, the Company will:
(i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Investors; and
(ii) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Investor or
Investors' Registrable Shares as are specified on such request, together with
all or such portion of the Registrable Shares of any other Investor or Investors
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section (F): (1) if
Form S-3 is not available for such offering by the Investors; (2) if the
Investors, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable Shares
and such other securities (if any) at an aggregate price to the public (net of
any underwriters' discounts or commissions) of less than $250,000; (3) if the
Company shall furnish to the Investors a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than sixty (60) days after
receipt of the request of the Investor or Investors under this Section (F);
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period and not more than three (3) times in the
aggregate; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected one registration on Form S-3 for the
Investors pursuant to this Section (F); or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(iii) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Shares and other securities so
requested to be registered as soon as practicable after receipt of the request
or requests of the Investors. All expenses incurred in connection with a
registration requested pursuant to Section (F), including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Investor or
Investors and counsel for the Company shall be borne by the Company.
(iv) The registration rights provided in Paragraph (F) shall
terminate on June 30, 1999.
(G) The rights to cause the Company to register Registrable Shares
pursuant to this Agreement may be assigned (but only with all related
obligations) by an Investor to a transferee or assignee as long as such
transferee or assignee acquires at least 100,000 of such transferor's
Registrable Shares, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
registered under the Act. The foregoing share limitation shall not apply,
however, to the transfer by gift, will or intestate succession of any Investor
to his spouse or lineal descendants or ancestors, if all such transferees or
assignees agree in writing to appoint a single representative as their
attorney-in-fact for the purpose of receiving any notices and exercising their
rights under this Agreement.
(H) Each Investor hereby agrees that, during the period of duration
specified by the Company and an underwriter of Common Stock or other securities
of the Company, but in no event more than one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; provided, however, that:
(i) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(ii) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
In order to enforce the foregoing covenants, the Company may impose
stop-transfer instructions with respect to the Registrable Shares of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
(I) Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the Registrable Shares then outstanding. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Shares then outstanding, each future holder
of all such Registrable Shares and the Company.
(J) Without limiting any indemnification provisions contained in the
Purchase Agreement or otherwise, in the event of any registration with respect
to any Shares pursuant hereto, the Company and the Investor (the "Indemnifying
Party") will each indemnify and hold harmless the other (the "Indemnified
Party") and each person, if any, who controls such Indemnified Party within the
meaning of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") against any losses, claims, damages or liabilities,
joint or several (which shall include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which such indemnified
party or such controlling person may become subject under the Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or liability (or
actions in respect thereof) arise out of or are based upon any untrue statement
of any material fact contained, during the effective period thereof, in any such
Registration Statement, any preliminary or final prospectus or in any
preliminary or final offering circular, or any amendment or supplement thereto,
or arise out of or are based upon the omission to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that all of the foregoing shall only arise to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
omission made in the Registration Statement, preliminary prospectus, prospectus,
preliminary offering circular or offering circular, or any amendment or
supplement, in reliance upon and in conformity with written information
furnished by the indemnifying party specifically for use in the preparation
thereof.
(K) In the event any other stockholder of the Company, or persons holding
securities, options or warrants exercisable, convertible or exchangeable for
shares of the Company's common stock have been or are given registration rights
in addition to or greater than those provided to the Investor herein, then the
Company shall promptly notify the Investor and shall immediately be deemed to
have granted to the Investor such additional rights as if they were set forth
herein.
(L) This Agreement shall inure to the benefit of the Investor and binding
upon the Company and its successors and assigns, whether by merger,
consolidation or acquisition of all or substantially all of the assets of the
Company.
IN WITNESS WHEREOF, the undersigned, by their respective duly authorized
officers, have executed this Agreement the date and year first aforesaid.
ATTEST: CORECARE SYSTEMS, INC.
/s/ By: /s/ Rose S. DiOttavio
___________________________ ---------------------
Rose DiOttavio, President
WITNESS:
/s/ Anthony Todaro
------------------
ANTHONY TODARO
/s/ Marlene Todaro
------------------
MARLENE TODARO
EXHIBIT 3.15
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made this 27 day of October, 1995 by and between
CORECARE SYSTEMS, INC., a Nevada corporation ("CoreCare"), and DAVID LOVITZ, an
individual ("Lovitz").
WHEREAS, CoreCare, Lovitz and Westmeade Healthcare, Inc., a
Pennsylvania corporation, entered into an Employment Agreement dated the date
hereof (the "Employment Agreement"); and
WHEREAS, CoreCare desires to provide to Lovitz certain registration
rights pertaining to the capital stock of CoreCare issued to Lovitz pursuant to
the Employment Agreement and the capital stock of CoreCare issued to Lovitz upon
the exercise of the options issued to Lovitz pursuant to the Employment
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. At any time from and after the third anniversary of the date
hereof, Lovitz shall have the right on one occasion to demand that CoreCare
prepare and file a registration statement under the Securities Act of 1933
covering the shares of CoreCare's capital stock issued to Lovitz pursuant to
Section 4(f) of the Employment Agreement and the shares of CoreCare's capital
stock issued upon exercise of the options issued to Lovitz pursuant to Section
4(g) of the Employment Agreement (such shares of CoreCare's capital stock herein
collectively referred to as the "Registrable Stock"). Upon receiving such a
demand, CoreCare will, as soon as possible thereafter, effect such registration
as to all shares of Registrable Stock which Lovitz has requested to be included
in such registration statement; provided, however, that CoreCare shall not be
obligated to effect such registration if CoreCare shall furnish to Lovitz a
certificate of the President of CoreCare stating that in the good faith judgment
of the Board of Directors of CoreCare, effecting such registration would be
materially detrimental to CoreCare and its shareholders (without taking into
account the costs of such registration), in which event CoreCare shall have the
right to defer the filing of such registration statement for a period of not
more than sixty (60) days after receipt of the initial demand; provided further
that CoreCare shall not utilize the right specified in the foregoing proviso
more than once.
2. All expenses incurred in connection with a registration under
this Agreement, including, without limitation, all registration, filing,
qualification, printing, accounting and legal costs and fees, shall be borne by
CoreCare, except for any underwriter's commissions or discounts and except for
the fees and expenses of any counsel for Lovitz.
3. If CoreCare shall at any time or times after the date of this
Agreement propose to register any shares of its capital stock under the
Securities Act of 1933 on behalf of either or both of Thomas Fleming, or an
affiliate (other than CoreCare) of Thomas Fleming ("Fleming") or Rose DiOttavio,
or an affiliate (other than CoreCare) of Rose DiOttavio ("DiOttavio"), CoreCare
will notify Lovitz in each case of such proposal at least thirty (30) days prior
to the filing of such registration statement. Upon Lovitz's written request
given within twenty (20) days of receipt by Lovitz from CoreCare of such
notification, CoreCare will use its best efforts to cause any of the Registrable
Stock to be registered under the Securities Act of 1933 pursuant to such
registration statement. In the case of an underwritten offering, if the managing
underwriter of such offering determines in good faith that inclusion of all of
the Registrable Stock in such registration statement will have a material
adverse effect on the completion of the sale of the capital stock for either
CoreCare's account or the account of Fleming or DiOttavio, then Lovitz shall
agree to reduce the amount of shares he intends to register pursuant to such
registration statement; provided, however, that in such event Fleming and
DiOttavio shall have reduced the number of shares which each of them intend to
register in such registration statement so that each of Lovitz, Fleming and
DiOttavio are permitted to register the same proportion of shares each such
individual originally intended to register.
4. If, and whenever, CoreCare is required by the provisions of this
Agreement to effect the registration of any Registrable Stock, CoreCare will:
(i) furnish to Lovitz such number of copies of the preliminary prospectus
included in such registration statement and the prospectus included in such
registration statement at the time it is ordered effective by the Securities and
Exchange Commission as Lovitz may reasonably request in order to facilitate the
disposition of the Registrable Stock; (ii) indemnify and hold harmless Lovitz
and each other person (including underwriters) who participates in the offering
of such underlying securities, against any losses, claims, damages or
liabilities, joint or several, to which Lovitz or such participating person may
become subject under the Securities Act of 1933 or otherwise, insofar as such
losses, claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which the shares of Registrable Stock were registered, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, 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 therein not misleading, and will
reimburse Lovitz and each such participating person for any legal or other
expenses reasonably incurred by Lovitz or such participating person in
connection with the investigation or defending any such loss, damage, liability
or proceeding; provided, however, that CoreCare will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to CoreCare by Lovitz specifically for use in
the preparation of the registration statement, preliminary or final prospectus,
or any amendment or supplement; and provided further, that prior to the filing
of the registration statement, CoreCare shall have received a similar agreement
from Lovitz to indemnify CoreCare and its controlling persons against losses,
claims, damages and liabilities to which CoreCare or such controlling persons
may become subject due to any written information provided by Lovitz for use in
such registration statement, preliminary prospectus, final prospectus, amendment
or supplement.
5. The rights granted to Lovitz pursuant to this Agreement are in
addition to, and not in lieu of, any and all registration rights Lovitz may have
under the Employment Agreement.
6. This Agreement may be assigned in accordance with the provisions
of Section 12 of the Employment Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Agreement on the day and year first above written.
/s/ David Lovitz
----------------
David Lovitz
CORECARE SYSTEMS, INC.
/s/ Rose DiOttavio
------------------
Rose DiOttavio
EXHIBIT 3.16
CORECARE SYSTEMS, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
TABLE OF CONTENTS
SECTION 1. SALE AND PURCHASE OF THE NOTE AND WARRANT; CLOSING............ 1
1.1 Sale of Note and Warrant...................................... 1
1.2 Purchase Price................................................ 2
1.3 Closing....................................................... 3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 3
2.1 Organization and Good Standing................................ 3
2.2 Authorization................................................. 3
2.3 No Conflict with Law or Documents............................. 4
2.4 Capital Stock of Company...................................... 4
2.5 The Note, Warrant and Warrant Shares.......................... 4
2.6 Consents and Approvals........................................ 5
2.7 Private Offering.............................................. 6
2.8 Articles of Incorporation and By-Laws......................... 6
2.9 Subsidiaries.................................................. 6
2.10 SEC Filings................................................... 7
2.11 Litigation.................................................... 7
2.12 Compliance with Laws.......................................... 7
2.13 Financial Statements.......................................... 9
2.14 Real and Personal Property.................................... 10
2.15 Dividends and Other Distributions............................. 11
2.16 Tax Matters................................................... 11
2.17 Agreements Affecting the Company's Capital Stock.............. 11
2.18 Patents, Trademarks, Proprietary Rights....................... 12
2.19 Insurance..................................................... 12
2.20 Employee Benefit Plans........................................ 12
2.21 Contracts and Agreements...................................... 15
2.22 Absence of Certain Developments............................... 16
2.23 Contracts with Insiders....................................... 17
2.24 Use of Proceeds............................................... 17
2.25 Environmental Compliance...................................... 17
2.26 Accounts Receivable........................................... 18
2.27 Books and Records............................................. 18
2.28 Certain Payments.............................................. 19
2.29 U.S. Real Property Holding Company............................ 19
2.30 Labor Agreements and Actions.................................. 19
2.31 Entire Business; Etc.......................................... 20
2.32 Conditions Affecting Company and Subsidiaries................. 20
2.33 Information................................................... 20
SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES.................... 20
3.1 Pre-Existing Entity........................................... 21
3.2 Principal Place of Business................................... 21
3.3 Purchase Without View to Distribute........................... 21
3.4 Restrictions on Transfer...................................... 21
3.5 Access to Information......................................... 21
3.6 Additional Representations of the Purchaser................... 21
SECTION 4. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS 22
4.1 Representations and Warranties................................ 22
4.2 Performance................................................... 22
4.3 Opinion of Counsel to the Company............................. 22
4.4 Proceedings; Certified Copies................................. 22
4.5 Investigation................................................. 22
4.6 No Proceeding or Litigation................................... 23
4.7 No Material Adverse Change.................................... 23
4.8 .............................................................. 23
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS 23
5.1 Representations and Warranties................................ 23
5.2 Performance................................................... 23
5.3 No Proceeding or Litigation................................... 23
SECTION 6. COVENANTS OF THE COMPANY PRIOR TO CLOSING..................... 24
6.1 Payment of Expenses........................................... 24
6.2 Operation of Business in Ordinary Course...................... 24
6.3 Conditions Precedent.......................................... 24
SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING........................ 24
7.1 Rule 144...................................................... 24
7.2 Financial Statements and Reports.............................. 25
7.3 Inspection.................................................... 26
7.4 Maintenance of Existence; Insurance........................... 26
7.5 Compliance with Laws.......................................... 26
7.6 Notices....................................................... 26
7.7 Financial Control............................................. 26
7.8 Board of Directors............................................ 27
7.9 Negative Covenants............................................ 27
SECTION 8. THE NOTE...................................................... 27
8.1 Registration, Transfer and Exchange of the Note............... 27
8.2 Transfer Taxes................................................ 29
SECTION 9. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY
OF NOTE, WARRANT AND WARRANT SHARES........................... 29
9.1 Compliance with 1933 Act...................................... 29
9.2 Restrictive Legend............................................ 29
9.3 Restrictions on Transferability............................... 29
9.4 Termination of Restrictions on Transferability................ 30
SECTION 10. REGISTRATION RIGHTS........................................... 30
10.1 Piggyback Registration........................................ 30
10.2 Demand Registration........................................... 31
10.3 Form S-3 Registration......................................... 32
10.4 Registration Procedures....................................... 33
10.5 Information to be Furnished by Holders of Eligible Securities. 35
10.6 Expenses of Registration...................................... 35
10.7 Indemnification and Contribution.............................. 36
10.8 Underwriting Agreement........................................ 38
10.9 Transfer of Registration Rights............................... 38
SECTION 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS........ 38
SECTION 12. MISCELLANEOUS................................................. 38
12.1 Owner of Warrant and Warrant Shares........................... 38
12.2 Successors.................................................... 38
12.3 Broker or Finder.............................................. 39
12.4 Governing Law................................................. 39
12.5 Notice........................................................ 39
12.6 Full Agreement................................................ 40
12.7 Headings...................................................... 40
12.8 Business Days................................................. 40
12.9 Amendment..................................................... 40
EXHIBITS
"A" - Form of Note
"B" - Form of Warrant
"C" - Articles of Incorporation
"D" - Bylaws
NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement") made as of this 2nd
day of August, 1996 by and between CORECARE SYSTEMS, INC. (the "Company"), and
MENTOR SPECIAL SITUATION FUND, L.P. (the "Purchaser").
BACKGROUND
The Company is issuing its 12% Subordinated Note due December 31, 2000 (as
defined in Section 1.1 hereof) in the aggregate principal amount of $499,466.67.
In addition, the Company is issuing a Warrant (as defined in Section 1.1 hereof)
to purchase 333,333 shares, subject to adjustment as provided in the Warrant, of
its Common Stock, $.001 par value per share (the Company's Common Stock is
referred to herein as "Common Stock").
The Purchaser, desiring to purchase the Note and Warrant, hereby
subscribes for the Note and Warrant on the terms and conditions set forth
herein.
Intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. SALE AND PURCHASE OF THE NOTE AND WARRANT; CLOSING
1.1 Sale of Note and Warrant.
(a) The Company shall authorize the issuance of its 12%
Subordinated Note Due December 31, 2000 in the aggregate principal amount of
$499,466.67 (the "Note"). The Note will be dated the date of issuance and will
bear interest on the unpaid principal amount at the rate of 12% per annum from
the date of its issuance, payable quarterly in arrears on the first business day
following each March 31, June 30, September 30 and December 31, commencing
October 1, 1996. The principal of the Note shall be payable in three (3) equal
installments on December 31, 1998, December 31, 1999 and December 31, 2000,
except as otherwise set forth therein. The Note will be subordinated to certain
indebtedness of the Company to banks and other institutional lenders for
borrowed money, and will have the other terms and provisions provided herein and
in the form of Note attached hereto as Exhibit A.
(b) The Company shall authorize the issuance of a warrant
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit B to purchase 333,333 shares of Common Stock, subject
to adjustment as provided in such warrant, at a purchase price of $1.50 per
share (the "Warrant"). The shares of Common Stock purchasable upon exercise of
the Warrant and the June Warrant (as defined in Section 1.2(a) and the
Consulting Warrant (as defined in Section 4.8) are hereinafter referred to as
the "Warrant Shares".
(c) Subject to the terms and conditions herein set forth, on
the Closing Date (as defined in Section 1.3), the Company shall sell, issue and
deliver to the Purchaser, for the purchase price provided for in Section 1.2,
the Note and Warrant, and the Purchaser shall purchase such Note and Warrant at
such Purchase Price.
(d) The Note and Warrant to be delivered to the Purchaser on
the Closing Date will be in typewritten form and will be registered for the
Purchaser's account in the Purchaser's name or such nominee name as shall be
specified by such Purchaser. The Company will bear all of its own expenses in
connection with the preparation and issuance to the Purchaser of the Note and
Warrant.
1.2 Purchase Price.
(a) The aggregate purchase price of the Note and Warrant to be
issued and sold to the Purchaser on the Closing Date shall be $500,000 (the
"Purchase Price"), which includes payment for the Warrant to purchase 200,000
shares of Common Stock issued to the Purchaser by the Company on June 10, 1996
(the "June Warrant").
(b) $300,000 of the Purchase Price for the Note, Warrant and
June Warrant purchased by the Purchaser shall be paid to the Company by wire
transfer of immediately available funds to an account designated by the Company
and the remaining $200,000 shall be paid by the cancellation and delivery of the
Company's 15% Promissory Note issued to Purchaser on June 10, 1996.
(c) The Company and the Purchaser agree to allocate the
Purchase Price among the Note, Warrant and June Warrant as follows:
(i) to the Note, an amount equal to 100% of the
principal amount thereof, and
(ii) to the Warrant and the June Warrant, an amount
equal to $.001 per each Warrant Share issuable under such Warrant and the June
Warrant;
(d) The Purchaser and the Company shall prepare and file their
respective Federal income tax returns in a manner which is consistent with the
allocation of the Purchase Price to the Warrant, the June Warrant and the Note
as provided in clause (c) above and consistent with the treatment on the Federal
income tax return of each other party of matters related to such allocation.
1.3 Closing. The closing of the issuance and sale of the Note and
Warrant to the Purchaser hereunder shall be held at the offices of Drinker
Biddle & Reath, 1000 Westlakes Drive, Suite 300, Berwyn, Pennsylvania as soon as
practicable following the satisfaction or waiver of all the closing conditions
set forth in Section 4. As used herein "Closing" shall mean the closing of the
issuance and sale of the Note and Warrant to the Purchaser hereunder and the
"Closing Date" shall mean the date on which such Closing takes place.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as set forth on the disclosure letter from the Company to the
Purchaser of even date herewith (the "Disclosure Letter"), the Company
represents and warrants to the Purchaser as follows:
2.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all requisite power and authority, and all necessary
licenses and permits, to own and lease its properties and assets and to conduct
its business as now conducted. The Company is qualified to do business as a
foreign corporation and is in good standing in all states where the conduct of
its business or its ownership or leasing of property requires such
qualification, except where the failure to so qualify would not have a material
adverse effect on the Company's business, properties, assets, prospects,
operations or condition (financial or otherwise).
2.2 Authorization. The Company has all requisite power and authority
to execute and deliver this Agreement, the Note, the Warrant, and the other
agreements and documents required to be executed and delivered by it to the
Purchaser prior to or at the Closing, including without limitation, the
Financial Advisory Agreement and Consulting Warrant described in Section 4.8
(collectively, the "Transaction Documents") and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company of each Transaction Document have been duly authorized by all requisite
corporate action, and this Agreement has been duly executed and delivered by the
Company and constitutes (and, when executed and delivered as contemplated herein
each other Transaction Document will constitute) its valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws relating to or affecting the enforcement
of creditors' rights generally, and except that the availability of specific
performance, injunctive relief or other equitable remedies is subject to the
discretion of the court before which any such proceeding may be brought.
2.3 No Conflict with Law or Documents. The execution, delivery and
performance of each Transaction Document by the Company will not violate any
provision of law, any rule or regulation of any governmental authority, or any
judgment, decree or order of any court binding on the Company, and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties,
assets or outstanding stock of the Company under its Articles of Incorporation
or By-Laws, or any indenture, mortgage, lease, agreement or other instrument to
which the Company is a party or by which it or any of its properties is bound.
2.4 Capital Stock of Company. The authorized capital stock of the
Company is as described in Section 2.4 of the Disclosure Letter. Section 2.4 of
the Disclosure Letter also contains a complete and accurate description of all
outstanding shares of the Company's Common Stock and preferred stock and all
shares which have been reserved for issuance under any outstanding warrants,
options, convertible securities or other rights. All of the Company's
outstanding shares of Common Stock have been duly and validly issued and are
fully paid and non-assessable. Each series of the Company's preferred stock has
been duly authorized by all requisite corporate action and all outstanding
preferred shares have been validly issued and are fully paid and non-assessable.
The number of shares of Common Stock issuable upon the exercise or conversion of
the securities described in Section 2.4 of the Disclosure Letter is not subject
to adjustment by reason of the issuance and sale of the Note, the Warrant, the
June Warrant or the Consulting Warrant hereunder, or the Warrant Shares upon
exercise of the Warrant, the June Warrant or the Consulting Warrant, and no
other shares of Common Stock have been reserved by the Company for issuance.
There are no preemptive or similar rights to purchase or otherwise acquire
shares of capital stock of the Company pursuant to any provision of law or the
Articles of Incorporation or By-Laws of the Company or by agreement or
otherwise. There are no outstanding subscriptions, warrants, options or other
rights or commitments of any character to subscribe for or purchase from the
Company, or obligating the Company to issue, any shares of capital stock of the
Company or any securities convertible into or exchangeable for such shares.
2.5 The Note, Warrant and Warrant Shares. The Note, when issued and
delivered against payment therefor in accordance with this Agreement, will be
duly authorized and executed by the Company and will constitute the valid and
legally binding obligation of the Company, enforceable against it in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium, reorganization and other similar laws relating to or
affecting the enforcement of creditors' rights generally, and except that the
availability of specific performance, injunctive relief or other equitable
remedies is subject to the discretion of the court before which any such
proceeding may be brought. The June Warrant was, and the Warrant and Consulting
Warrant when issued and delivered against payment therefor in accordance with
this Agreement and the Financial Advisory Agreement will be, duly authorized and
executed by the Company and the Warrant and Consulting Warrant will (and the
June Warrant does) constitute the valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and except that the availability of specific performance, injunctive
relief or other equitable remedies is subject to the discretion of the court
before which any such proceeding may be brought. The requisite number of shares
of duly authorized and unissued Common Stock of the Company have been duly
authorized and reserved for issuance upon the exercise of the Warrant, the
Consulting Warrant and the June Warrant, and no further corporate action is
required for the valid issuance of Common Stock upon the exercise of the
Warrant, the Consulting Warrant or the June Warrant. The Warrant Shares will, at
the time of the Closing and thereafter, not be subject to preemptive or similar
rights of any person, and when issued against payment therefor in accordance
with the terms of the Warrant, the Consulting Warrant and the June Warrant, will
be duly and validly issued, fully paid and nonassessable.
2.6 Consents and Approvals. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of, or declaration to or filing with, any federal, state, local or foreign
governmental or regulatory authority or other person, not made or obtained, is
required in connection with the execution or delivery of this Agreement or any
other Transaction Document by the Company, the offer, issuance, sale or delivery
of the Note, Warrant, Consulting Warrant or Warrant Shares, or the carrying out
by the Company of the other transactions contemplated hereby. The issuance and
sale by the Company of the Note and Warrant and Consulting Warrant as
contemplated hereby will not require any action by or in respect of, or filing
with, any governmental body, agency or official, nor any consent or approval of
the Company's shareholders as such or of any other individual or entity. All
post-closing conditions contained in the Agreement and Plan of Recapitalization,
dated January 19, 1995, pursuant to which the Company acquired CoreCare, Inc.
have been satisfied in full by the Company and all other parties thereto.
2.7 Private Offering. Assuming the accuracy of the Purchaser's
representations and warranties contained in Section 3 herein, the offer,
issuance and delivery to the Purchaser pursuant to the terms of this Agreement
of the Note and Warrant and, assuming compliance by the Purchaser with the terms
of this Agreement and applicable law, the Warrant Shares, are exempt from
registration under the Securities Act of 1933, as amended (the "1933 Act"), and
neither the registration of the Note nor the qualification of an indenture with
respect thereto under the Trust Indenture Act of 1939, as amended, is required
in connection with such transaction. Based on the representations of the
Purchaser contained in Section 3, it is not necessary, under the circumstances
contemplated by this Agreement, to register the Note, Warrant or Warrant Shares
under the 1933 Act or the Pennsylvania Securities Act of 1972. In addition, the
offer, issuance and delivery to Mentor Management Company of the Consulting
Warrant is exempt from registration under the 1933 Act and the Pennsylvania
Securities Act of 1972.
2.8 Articles of Incorporation and By-Laws. The copies of the
Company's Articles of Incorporation and By-Laws, each as amended to date,
attached hereto as Exhibits C and D, are true and correct copies of such
documents and are in full force and effect.
2.9 Subsidiaries.
(a) The Disclosure Letter states the name of each of the
Company's direct or indirect majority-owned Subsidiaries (each, a "Subsidiary",
and collectively, the "Subsidiaries"). The Disclosure Letter also states (i)
each Subsidiary's jurisdiction of incorporation and the percentage of its voting
stock owned by the Company and each other Subsidiary and (ii) the name of each
of the Company's corporate or joint venture affiliates (other than Subsidiaries)
and the nature of the affiliation. The Company and each Subsidiary has good and
marketable title to all of the shares it purports to own of the stock of each
Subsidiary, free and clear in each case of any mortgage, lien, security
interest, charge or encumbrance, and all such shares have been duly issued and
are fully paid and nonassessable and are not subject to any preemptive rights.
There are no outstanding warrants, options or other rights or commitments of any
character to subscribe for or purchase from the Company or any Subsidiary, or
obligating any Subsidiary to issue, any shares of capital stock of such
Subsidiary or any securities convertible into or exchangeable for such shares.
(b) Each Subsidiary (i) is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) has all requisite power and authority and all necessary
material licenses and permits to own and lease its properties and assets and to
carry on its business as now conducted and (iii) is qualified to do business as
a foreign corporation and is in good standing in all jurisdictions where the
conduct of its business or its ownership or leasing of property requires such
qualification and where the failure to so qualify would not have a material
adverse effect on its business, properties, assets, prospects, operations or
condition (financial or otherwise).
(c) Included in the Disclosure Letter is an organizational
chart showing the corporate structure of the Company and its Subsidiaries which
chart presents a true and accurate description of such structure.
2.10 SEC Filings. The Company is not subject to the reporting
requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
2.11 Litigation. The Disclosure Letter lists all pending or, to the
Company's knowledge, after due inquiry, threatened litigation involving the
Company or its Subsidiaries. There is no pending or, to the knowledge of the
Company, after due inquiry, threatened suit, action or litigation, or
administrative, arbitration or other proceeding or governmental inquiry or
investigation questioning the validity of this Agreement or any other
Transaction Document or the transactions contemplated hereby, or involving or
affecting the Company or any Subsidiary, or any directors or officers of the
Company or any Subsidiary in their capacities as such, or any properties or
assets of the Company or any Subsidiary, nor is there, to the knowledge of the
Company, after due inquiry, any basis for any such suit, action, litigation,
proceeding, inquiry or investigation. There are no unsatisfied judgments,
penalties or awards against or affecting the Company or any Subsidiary or any
assets or properties of the Company or any Subsidiary.
2.12 Compliance with Laws. (a) The Company and each Subsidiary is,
to the Company's knowledge, after due inquiry, in compliance in all material
respects with all laws, ordinances, rules and regulations of governmental
authorities applicable to or affecting it, its properties or its business, and
neither the Company nor any Subsidiary has received notice of any claimed
default or violation with respect to such laws, ordinances, rules and
regulations or has any reason to expect any such notice.
(b) All federal, foreign, state, local and other governmental
consents, licenses, permits, franchises, grants, exemptions, orders,
certificates of need (and similar) governmental approvals, and authorizations
(collectively, "Authorizations") required for the operation of the business of
the Company and each Subsidiary as currently conducted, or necessary to own,
lease or operate their respective properties, have been duly obtained and are in
full force and effect without any default or violation thereunder by Company or
any Subsidiary or, to the knowledge of Company, after due inquiry, by any other
party thereto and Company has not received any notice of any claim or charge
that the Company or any Subsidiary is in violation of or in default under any
such Authorization or is aware of any basis for such claim or charge. (i) No
proceeding is pending or, to the knowledge of the Company, after due inquiry,
threatened by any person to adversely modify, revoke or deny the renewal of any
Authorization of the Company or any Subsidiary; and (ii) the Company has not
been notified that any such Authorization may not in the ordinary course be
renewed upon its expiration or that by virtue of the transactions contemplated
hereby any such Authorization may not be granted or renewed.
(c) Without limiting the generality of the foregoing, the
Company and each Subsidiary have, to the knowledge of the Company, after due
inquiry, complied with all applicable laws, rules and regulations with respect
to their employment of, other agreements with and commitments to (whether
written or oral), physicians and other persons who are members of the Company's
or any Subsidiary's medical staff, including, without limitation, all federal,
state and local laws, rules and regulations with respect to the employment of
professionals by non-professionals, and with respect to the payment for, or
referral of, services to be reimbursed by funds provided by Medicare or
Medicaid.
(d) The Company and each Subsidiary have timely filed with all
federal and state health care-related agencies all reports, applications and
registrations which they were required by law to file. The Disclosure Letter
contains a complete and correct description of all currently effective
registrations, licenses and certificates issued to the Company and each of its
Subsidiaries, including all certificates of need. The Company is not aware of
any defect or challenge relating to, or the potential withdrawal of, any
registration, license or certificate described in the Disclosure Letter. Each
medical facility operated by the Company or its Subsidiaries is validly
registered and licensed and is in full compliance with the conditions of
participation for the Medicare and Medicaid programs.
(e) The Disclosure Letter contains a list of the effective
accreditations and certifications issued to the Company and its Subsidiaries by
any nongovernmental accrediting or certifying organization and the expiration
date of each such accreditation or certification, which list represents all such
accreditations and/or certifications required for their business. No accrediting
or certifying nongovernmental organization, or any other person, has advised the
Company of any defect or challenge relating to, or the potential withdrawal of,
any accreditation or certification described in the Disclosure Letter.
2.13 Financial Statements.
(a) (i) The audited consolidated balance sheets and related
audited statements of consolidated operations, cash flow and stockholders'
equity of the Company and its Subsidiaries as at and for the fiscal years of the
Company ended December 31, 1994 and 1995, and (ii) the unaudited consolidated
balance sheet and related unaudited statements of operations, cash flow and
stockholders' equity of the Company and its Subsidiaries as at and for the four
months ended April 30, 1996, copies of which are included in the Disclosure
Letter delivered to Purchaser pursuant hereto, in each case, present fairly in
all material respects the consolidated financial position of the Company and its
Subsidiaries at such dates and the consolidated results of their operations and
their consolidated cash flows for the periods then ended, in conformity with
generally accepted accounting principles, consistently applied ("GAAP").
(b) Since April 30, 1996 ("the Balance Sheet Date") there has
been no material adverse change in the business, properties, assets, operations
or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole.
(c) The consolidated balance sheet of the Company and its
Subsidiaries at the Balance Sheet Date (the "Balance Sheet") reflects all
liabilities and obligations of the Company and of each Subsidiary, whether
absolute, accrued, contingent or otherwise as of the date thereof, that are of a
nature required to be set forth on a consolidated balance sheet under GAAP.
(d) At the time of the issuance and sale of the Note and
Warrant to the Purchaser hereunder, neither the Company nor any of its
Subsidiaries will have any liabilities or obligations, whether absolute,
accrued, contingent, or otherwise, other than (i) indebtedness in respect of the
Note, (ii) current liabilities reflected on the Balance Sheet not paid since the
date of the Balance Sheet, (iii) current liabilities incurred after the Balance
Sheet Date in the ordinary course of business and (iv) the other indebtedness of
the Company or of its Subsidiaries described in the Disclosure Letter or Balance
Sheet.
(e) The Balance Sheet reflects reserved or other appropriate
provisions at least equal to reasonably anticipated liabilities, losses and
expenses of the Company and its Subsidiaries as of the date thereof, including
without limitation those with respect to income and other taxes (including
alternative minimum tax), bad debts, salaries, vacation pay, and plans and
programs (including medical and other benefit programs) for the benefit of
present and former employees.
2.14 Real and Personal Property.
(a) The Disclosure Letter describes each interest in real
property owned or leased by the Company and each Subsidiary, including the
location and a brief description thereof. Such real estate and the premises
located thereon occupied by the Company and its Subsidiaries are sufficient for
their business and operational requirements. The Company and each Subsidiary
have good and marketable title in fee simple to all of the real property
reflected on the Balance Sheet as owned by them and own all right, title and
interest in all leasehold estates and other rights purported to be granted to
them by the leases and other agreements listed in the Disclosure Letter, subject
to no liens, mortgages, security interests, pledges, encumbrances, or charges of
any kind except: (1) liens, if any, for taxes or assessments or other government
charges or levies not yet due and payable; and (2) such minor utility and
municipal easements and restrictions, if any, as do not materially interfere
with the use of such properties or materially and adversely affect the value or
marketability of such properties. All of the buildings and structures to the
extent of the premises owned or leased by the Company or any Subsidiary are
structurally sound with no known defects and are in good operating condition and
repair. No such building or structure, or any appurtenance thereto or equipment
therein, or the operation or maintenance thereof, violates any restrictive
covenant or any law or regulation (including without limitation any law or
regulation relating to health, safety, subdivision and zoning), or encroaches on
any property owned by others. All governmental permits, approvals, certificates
of occupancy and licenses required in connection with the operation and, if
applicable, ownership of such real property and all improvements thereon and the
conduct of the Company's and each Subsidiary's business thereon have been duly
obtained, and are in full force and effect and no proceedings are pending or, to
the knowledge of Company, after due inquiry, threatened which could lead to a
revocation or other impairment of any thereof. No condemnation proceeding is
pending or, to the knowledge of Company, after due inquiry, threatened with
respect to any real property identified in the Disclosure Letter.
(b) (i) Company and each Subsidiary have good and marketable
title to all of their properties and assets (not including real property)
reflected on the Balance Sheet free and clear of any restriction, mortgage, deed
of trust, pledge, lien, security interest or other charge, claim or encumbrance,
except for those liens described in the Disclosure Letter (the liens disclosed
in the Disclosure Letter pursuant to Sections 2.14(a) and (ii) are hereinafter
referred to as "Permitted Liens"). All properties and assets owned or leased by
the Company and its Subsidiaries are in the possession or under the control of
the Company and its Subsidiaries, are in good condition and repair, ordinary
wear and tear accepted, are suitable for the purposes for which they are being
used, and are of a condition, nature and quantity sufficient for the conduct of
the business of the Company and its Subsidiaries as presently conducted.
2.15 Dividends and Other Distributions. Since the Balance Sheet
Date, neither the Company nor any Subsidiary has declared, set aside, or made
any payment of a dividend or made any other distribution in respect of the
Company's or any Subsidiary's capital stock, repurchased or redeemed any of the
Company's or any Subsidiary's capital stock, or made any other payments to any
holder of 5% or more of the Company's outstanding Common Stock other than salary
paid to such stockholder for bona fide services to the Company or a Subsidiary
as an officer or employee or reimbursement of reasonable expenses incurred in
the ordinary course of business.
2.16 Tax Matters. The Company and each Subsidiary has filed all U.S.
Federal, state, local, foreign and other tax returns which were required to be
filed on or before the date hereof and has paid all taxes which have become due
and payable. All such reports and returns (copies of which have been made
available to the Purchaser) were materially accurate and complete when filed and
reflect all taxes required to be paid by the Company and its Subsidiaries for
the periods reported therein. The provision for taxes made on the Balance Sheet
at the Balance Sheet Date was sufficient for the payment of all accrued and
unpaid taxes of the Company and its Subsidiaries with respect to the periods
then ended. No additional material assessments, deficiencies or penalties in
respect of taxes have been made or claimed in writing against the Company or any
Subsidiary which remain unpaid. No tax returns or reports of the Company or any
Subsidiary are or ever have been under audit. The Company's aggregate net
operating loss carryovers for federal income tax purposes are $4,614,000, which
amount is not subject to adjustment other than immaterial adjustments as a
result of audits of the Company or in connection with the preparation of tax
returns, and has been properly reported to all applicable regulatory and taxing
authorities. There currently are no limitations on the utilization of the net
operating losses or capital losses under any section of The Internal Revenue
Code of 1986, as amended (the "Code"), including Section 382, or of the Treasury
regulations. There will not be any limitation on the utilization of the net
operating losses or capital losses solely by reason of transactions contemplated
by this Agreement and the Transaction Documents.
2.17 Agreements Affecting the Company's Capital Stock. There are no
agreements currently in effect, written or oral, between the Company and any
holder of its capital stock or, to the knowledge of the Company, after due
inquiry, among any holders of its capital stock, relating to the acquisition,
disposition or voting of the capital stock of the Company. Except for the
provisions of Section 10 of this Agreement there are no agreements, either
written or oral, which obligate the Company to effect the registration of any of
its securities under the 1933 Act.
2.18 Patents, Trademarks, Proprietary Rights. Set forth in the
Disclosure Letter is a complete and accurate list identifying (indicating
ownership or license) all patents, copyrights, trademarks, servicemarks,
tradenames, permits, trade secrets, computer programs, software designs and
related materials and other intellectual property that are material to the
conduct of the Company's or a Subsidiary's business and which are either (i)
owned by the Company or such Subsidiary, or (ii) which the Company or such
Subsidiary has a license to use in its business (collectively, the "Intellectual
Property Rights"). Each of the Company and its Subsidiaries has good title to
and ownership of the Intellectual Property Rights shown on such Letter as being
owned by it, and valid and enforceable licenses to use all the Intellectual
Property Rights shown on such Letter as being licensed by it. The Intellectual
Property Rights are sufficient to enable the Company and each Subsidiary to
carry on its business as currently conducted in all material respects and, to
the Company's knowledge, after due inquiry, the Company's and each Subsidiary's
use and enjoyment of the Intellectual Property Rights does not violate any
license or conflict with or infringe the intellectual property rights of others.
There are no outstanding options, licenses or agreements of any kind to which
the Company or any Subsidiary thereof is a party or by which it may be bound
relating to or affecting any Intellectual Property, whether owned by the Company
or a Subsidiary thereof or another person (which term "person" as used herein
includes both individuals and entities of every kind and description).
2.19 Insurance. Set forth in the Disclosure Letter is a list of each
liability, casualty and other insurance policy of the Company and effect on the
date hereof, the amount and type of insurance provided to the Company by such
policy and the expiration date of such policy. All such insurance policies are
currently in full force and effect and all premiums due to the date hereof have
been paid or accrued by the Company. The Company has no pending claims before
any of its present or prior insurance carriers.
2.20 Employee Benefit Plans.
(a) The Disclosure Letter contains a complete and correct list
of all Employee Benefit Plans and Employee Pension Benefit Plans currently
maintained for the benefit of any employees of the Company or any Subsidiary by
the Company or any ERISA Affiliate or to which the Company or any ERISA
Affiliate currently contributes or is currently obligated to make payments with
respect to any employees of the Company or any Subsidiary.
(b) With respect to each Employee Benefit Plan listed on the
Disclosure Letter: (i) each Employee Benefit Plan has been administered in
compliance with its terms, and is in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other federal, foreign,
state and other applicable laws, rules and regulations, as they relate to such
plan (including, without limitation, funding, filing, terminating, reporting and
disclosure and COBRA continuation coverage obligations); (ii) the Company has
made or provided for all contributions to all Employee Benefit Plans as required
under the terms of such Plans; (iii) no Employee Pension Benefit Plan has been
the subject of a "reportable event" (as defined in Section 4043 of ERISA) that
is required to be reported to the PBGC and there have been no "prohibited
transactions" (as described in Section 4975 of the Code or in Part 4 of Subtitle
B of Title I of ERISA) with respect to any Employee Benefit Plan; (iv) there are
and during the past three years there have been no inquiries, proceedings,
claims or suits pending or, to the Company's knowledge, threatened by any
governmental agency or authority or by any participant or beneficiary against
any of the Employee Benefit Plans, the assets of any of the trusts under such
Plans or the Plan sponsor or the Plan administrator, or against any fiduciary of
any of such Employee Benefit Plans with respect to the design or operation of
the Employee Benefit Plans; (v) each Employee Pension Benefit Plan which is
intended to be "qualified" within the meaning of Section 401(a) of the Code is,
and has from its inception been so qualified, and any trust created pursuant to
any such Employee Pension Benefit Plan is exempt from federal income tax under
Section 501(a) of the Code and the IRS has issued each such Plan a favorable
determination letter which is currently applicable, provided that such letters
do not cover changes by the Tax Reform Act of 1986 or subsequent legislation;
and (vi) neither the Company nor any ERISA Affiliate is aware of any
circumstance or event which would jeopardize the tax-qualified status of any
such Employee Pension Benefit Plan or the tax-exempt status of any related
trust, or would cause the imposition of any liability, penalty or tax under
ERISA or the Code with respect to any Employee Benefit Plan.
(c) Neither the Company nor any ERISA Affiliate maintains a
Multiemployer Plan or an Employee Pension Benefit Plan which is a defined
benefit plan.
(d) With respect to each Employee Benefit Plan maintained by
the Company or any ERISA Affiliate: (i) no unsatisfied liabilities to
participants, the IRS, the DOL, the PBGC or to any other person or entity have
been incurred as a result of the termination of any Employee Benefit Plan; (ii)
no Employee Pension Benefit Plan, which is subject to the minimum funding
requirements of Part 3 of Subtitle B of Title I of ERISA or subject to Section
412 of the Code, has incurred any "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Code and there has been no
waived funding deficiency within the meaning of Section 303 of ERISA or Section
412 of the Code; (iii) there has been no event with respect to an Employee
Pension Benefit Plan which would require disclosure under Sections 4062(c),
4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed with the
DOL, IRS and PBGC and with plan participants and their beneficiaries with
respect to each Employee Benefit Plan required to be listed on the Disclosure
Letter have been filed and all annual reports (Form 5500 series) of such Plans
were certified without qualification by each Plan's accountants and actuaries.
(f) All Employee Benefit Plans required to be listed on the
Disclosure Letter may, without liability, be amended, terminated or otherwise
discontinued except as specifically prohibited by federal law.
(g) Any bonding required under ERISA with respect to any
Employee Benefit Plan required to be listed on the Disclosure Letter has been
obtained and is in full force and effect and no funds held by or under the
control of the Company are plan assets.
(h) Except as set forth in the Disclosure Letter, neither the
Company nor any ERISA Affiliate maintains any retired life and/or retired health
insurance plans which provide for continuing benefits or coverage for any
employee of the Company or any beneficiary of an employee of the Company after
such employee's termination of employment.
(i) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any employee of the Company to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee, or (iii) result in any liability of the Company under Title IV of
ERISA or otherwise.
(j) For purposes hereof:
(i) "COBRA" shall refer to Title V of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
(ii) "Code" shall refer to the Internal Revenue Code of
1986, as amended.
(iii) "DOL" shall refer to the Department of Labor.
(iv) "Employee Benefit Plan" shall have the meaning
ascribed to such term by Section 3(3) of ERISA.
(v) "Employee Pension Benefit Plan" shall have the
meaning ascribed to such term by Section 3(2) of ERISA.
(vi) "ERISA" shall refer to the Employee Retirement
Income Security Act of 1974, as amended.
(vii) "ERISA Affiliate" shall refer to any trade or
business, whether or not incorporated, under common control with the Company
within the meaning of Section 414(b), (c), (m) or (o) of the Code.
(viii) "IRS" shall refer to the Internal Revenue
Service.
(ix) "Multiemployer Plan" shall have the meaning
ascribed to such term by Section 4001(a)(3) of ERISA.
(x) "PBGC" shall refer to the Pension Benefit Guaranty
Corporation.
2.21 Contracts and Agreements.
(a) Set forth in the Disclosure Letter hereto is a list of the
following contracts and agreements (written or oral) to which the Company or any
Subsidiary is a party or by which it or its properties or assets are bound: (i)
all real and personal property leases, (ii) all employment contracts, (iii) all
non-competition agreements not otherwise contained in the employment contracts
described in clause (ii), (iv) all loan and security agreements, mortgages and
other evidences of indebtedness, (v) all agreements pursuant to which the
Company or such Subsidiary has agreed to act as guarantor or surety for the
payment or performance of the obligations of third parties, (vi) all material
managed care and third party payor contracts and other customer and supplier
contracts, (vii) all joint venture, partnership or strategic alliance agreements
to which the Company or any Subsidiary is a party, and (viii) any other
instruments, agreements or contracts to which the Company or any Subsidiary is a
party or by which it is bound that the Company considers material to the
Company's or any Subsidiary's business (individually, a "Material Contract" and
together the "Material Contracts"). True and correct copies of all agreements
listed in the Disclosure Letter have been provided to the Purchaser.
(b) Neither the Company nor any Subsidiary is (i) in default
under any Material Contract, (ii) in violation of its Certificate or Articles of
Incorporation or By-Laws, each as amended to date, or (iii) in default with
respect to any order, writ, injunction or decree of any court or governmental
agency binding on it, and no event has occurred which with notice or lapse of
time, or both, would create any default or violation described in clauses (i)
through (iii). No customer or supplier which was significant to the Company or
any Subsidiary during the period covered by the financial statements referred to
in Section 2.13 has terminated, materially reduced or threatened to terminate or
materially reduce its purchase from, or provisions of products or services to,
the Company or such Subsidiary, as the case may be.
(c) The Disclosure Letter lists all contracts by which the
Company or any Subsidiary is paid on the basis of a capitated reimbursement rate
or is otherwise "at risk" for the provision of health care goods and services at
a pre-established price, regardless of the volume of goods and services required
to satisfy the Company's or such Subsidiary's contractual obligation
(collectively, the "At Risk Contracts"). The Company has reserved amounts that
are adequate to cover the costs of any incurred but not yet reported or paid
claims for goods and services under the At Risk Contracts.
2.22 Absence of Certain Developments. Since the Balance Sheet Date,
neither the Company nor any Subsidiary has (i) incurred or become subject to any
material liabilities (absolute or contingent) except current liabilities
incurred, and liabilities under contracts entered into, in the ordinary course
of business; (ii) mortgaged, pledged or subjected to lien, charge or any other
encumbrance any of its assets, tangible or intangible, except Permitted Liens;
(iii) sold, assigned or transferred any of its tangible assets or cancelled any
debts or obligations except in the ordinary course of business, or acquired the
stock or assets of any other person or entity; (iv) suffered any extraordinary
losses, or waived any rights of substantial value (whether or not in the
ordinary course of business); (v) made any changes in officer compensation
except for annual increases consistent with past practices; (vi) entered into
any material transaction other than in the ordinary course of business, except
for the transactions contemplated by this Agreement; (vii) made any material
change in any of its Material Contracts, its Certificate or Articles of
Incorporation or Bylaws, or in any arrangements or agreements of any nature
relating to its officers and directors; (viii) granted any stock options or
other rights to acquire its capital stock or modified any outstanding stock
options, grants, awards or other rights to acquire its capital stock; (ix)
become aware of any change in the regulatory climate applicable to its business,
including any proposed legislation or regulations which could reasonably be
expected to materially adversely effect its business or financial condition or
(x) otherwise experienced any material change in its assets, financial condition
or results of operation.
2.23 Contracts with Insiders. No officer or director of the Company,
or holder of more than 5% of the Company's outstanding Common Stock, is a party
to any contract, agreement, or arrangement providing for the Company's or a
Subsidiary's employment of, furnishing of services to the Company or a
Subsidiary by, the rental of real or personal property by the Company or a
Subsidiary from, or otherwise requiring payments by the Company or a Subsidiary
to, any such person, or, to the Company's knowledge, any member of such person's
family, or any corporation, partnership or other entity in which such person,
or, to the Company's knowledge, any member of his family, has an interest or of
which such person, or, to the Company's knowledge, any member of his family, is
an officer, director, trustee, or beneficiary.
2.24 Use of Proceeds. The proceeds from the sale of the Note and
Warrant will be used by the Company for business acquisitions and working
capital purposes. None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Notes) will violate or result in a violation of Section 7 of the 1934 Act or any
regulations issued pursuant thereto, including without limitation, Regulations
G, T and X of the Board of Governors of the Federal Reserve System. The Company
does not own any "margin security" within the meaning of Regulation G. None of
the proceeds from the sale of the Note will be used to purchase or carry any
"security" within the meaning of the 1934 Act.
2.25 Environmental Compliance.
(a) Neither the Company nor any Subsidiary has generated,
stored, treated, discharged or disposed of any hazardous substances or hazardous
waste in violation of any applicable law or regulation, nor is the Company or
any Subsidiary aware of any allegations that any such violations have occurred.
Neither the Company nor any Subsidiary is aware of any claims, investigations,
litigation or administrative proceedings, whether actual or threatened, against
the Company or any Subsidiary relating to any environmental contamination of any
property owned, used or leased by any of them or arising out of any alleged
violation of any environmental law or regulation.
(b) To the Company's knowledge, after due inquiry, none of the
real property owned and/or occupied by the Company or any Subsidiary has ever
been used by present or previous owners and/or operators to generate,
manufacture, refine, transport, treat, store, handle or dispose of "Hazardous
Substances" or "Hazardous Wastes," as such terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et
seq., or applicable state and local laws, or any regulations issued under any
such laws. Neither the Company nor any Subsidiary uses or intends to use any of
its real property for such purposes. To the Company's knowledge, after due
inquiry, no lien has arisen on any assets of the Company or its Subsidiaries
under any such applicable federal, state or local law or regulation.
2.26 Accounts Receivable. All accounts and notes receivable of the
Company and its Subsidiaries represent valid obligations from sales made or
services rendered in the ordinary course of business, and are collectible in
full in the ordinary course of business, without any set-off or discount, except
to the extent of the amount of the reserve for possible losses set forth in the
Balance Sheet.
2.27 Books and Records. (a) The books and records of the Company and
its Subsidiaries accurately and fairly reflect their respective income,
expenses, assets and liabilities, and the Company and its Subsidiaries maintain
internal accounting controls which provide reasonable assurance that: (i)
transactions are executed in accordance with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of reliable
financial statements and to maintain accountability for earnings and assets;
(iii) access to assets is permitted only in accordance with management's
authorization; (iv) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (iv) all intercompany transactions,
charges and expenses among or between the Company, any Subsidiary, or any other
affiliate of the Company are accurately reflected in all financial statements.
(b) The books and records of the Company, including its
minutes books, financial records and books of account, are complete and accurate
in all material respects and have been maintained in accordance with sound
business practices. Complete and accurate copies as of the date hereof of all
such minute books and records have been made available to the Purchaser.
2.28 Certain Payments. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent or employee of any such person,
or to the Company's knowledge, any other person associated with or acting for or
on behalf of the Company or any of its Subsidiaries has directly or indirectly
(a) made any unlawful contributions, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property or services, (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions or special concessions already
obtained, for or in respect of the Company or any of its Subsidiaries, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company and its Subsidiaries, or (c) taken any other
action in violation of any provision of the Foreign Corrupt Practices Act of
1977, as amended.
2.29 U.S. Real Property Holding Company. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897- 2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of such Regulations.
2.30 Labor Agreements and Actions. Neither the Company nor any
Subsidiary thereof is bound by or subject to, any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, after due inquiry, has
sought to represent any of the employees, representatives or agents of the
Company or any such Subsidiary thereof. There is no strike or other labor
dispute involving the Company or any Subsidiary thereof pending, or to the
knowledge of the Company, after due inquiry, threatened, which could have a
material adverse effect on the business, assets, properties, prospects,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, nor is the Company aware of any labor
organization activity involving any of the employees of the Company or any
Subsidiary thereof. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate his, her or their
employment with the Company or any Subsidiary thereof, nor does the Company or
any such Subsidiary have a present intention to terminate the employment of any
of the foregoing. The employment of each employee of the Company or a Subsidiary
thereof is terminable at the will of the applicable employer without further
liability of such employer to such employee except for the payment of such
employee's normal salary accrued but not paid through the date of such
termination and amounts due pursuant to change of control or severance
provisions as set forth in the Disclosure Letter.
2.31 Entire Business; Etc.. All of the assets (including the
Company's and its Subsidiaries' interests under franchises, licenses,
Intellectual Property, leases and permits) necessary for the conduct of the
business of the Company and its Subsidiaries as presently conducted are held
exclusively by the Company or a Subsidiary thereof.
2.32 Conditions Affecting Company and Subsidiaries. There is no
fact, development or threatened development with respect to the markets,
products, services, clients, customers, facilities, computer software,
databases, personnel, vendors, suppliers, operations, assets or prospects of the
business of the Company or any of its Subsidiaries which are known to the
Company which is reasonably likely to materially adversely affect the business,
operation or prospects of the Company and its Subsidiaries considered as a
whole, other than such conditions as may affect as a whole the economy
generally.
2.33 Information. Neither this Agreement nor any document delivered
to the Purchaser pursuant hereto contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made,
not misleading. There is no fact known to the Company which could reasonably be
expected to materially adversely effect the business, assets, properties,
operations, prospects or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole which has not been set forth in this
Agreement, the Disclosure Letter or the other documents furnished to the
Purchaser on or prior to the date hereof in connection with the transactions
contemplated hereby.
SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser understands that the Note, Warrant and Warrant Shares
will not be registered under the 1933 Act, on the grounds that the sales
provided for in this Agreement are exempt pursuant to Section 4(2) of the 1933
Act and/or Regulation D promulgated under Section 4(2) of the 1933 Act, and that
the reliance of the Company on such exemptions is predicated in part on the
Purchaser's representations, warranties, covenants and acknowledgements set
forth in this Section 3.
3.1 Pre-Existing Entity. The Purchaser represents and warrants to
the Company that it was not organized for the specific purpose of purchasing the
Note and Warrant purchased by it hereunder.
3.2 Principal Place of Business. The Purchaser represents and
warrants to the Company that the address of its principal place of business is
P.O. Box 560 Yardley, Pennsylvania 19067.
3.3 Purchase Without View to Distribute. The Purchaser represents
and warrants to the Company that the Note and Warrant to be purchased by it are
being, and any Warrant Shares acquired upon exercise of such Warrant will be,
acquired by the Purchaser for its own account, not as a nominee or agent, and
not with a view to resale or distribution within the meaning of the 1933 Act,
and the rules and regulations thereunder, and the Purchaser will not distribute
the Note, Warrant or Warrant Shares in violation of the 1933 Act.
3.4 Restrictions on Transfer. The Purchaser (i) acknowledges that
the Note, Warrant and Warrant Shares are not registered under the 1933 Act and
that the Note, Warrant and Warrant Shares (if any) to be acquired by it must be
held indefinitely by it unless they are subsequently registered under the 1933
Act or an exemption from registration is available, (ii) is aware that any
routine sales under Rule 144 of the Securities and Exchange Commission under the
1933 Act of Note, Warrant, and Warrant Shares may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (iii) is aware that Rule 144 is not
presently available for use by the Purchaser for resale of any such Note,
Warrant and Warrant Shares and (iv) is aware that, except as provided in Section
10, the Company is not obligated to register under the 1933 Act any sale,
transfer or other disposition of the Note, Warrant or Warrant Shares.
3.5 Access to Information. The Purchaser confirms that the Company
has made available to it the opportunity to ask questions of and receive answers
from the Company's officers and directors concerning the terms and conditions of
the offering and the business and financial condition of the Company, and to
acquire, and the Purchaser has received to its satisfaction, such additional
information, in addition to that set forth herein, about the business and
financial condition of the Company and the terms and conditions of the offering
as it has requested.
3.6 Additional Representations of the Purchaser. The Purchaser
represents that (i) its financial situation is such that it can afford to bear
the economic risk of holding the Note, Warrant and Warrant Shares for an
indefinite period of time and suffer complete loss of its investment in the
Note, Warrant and Warrant Shares, (ii) its knowledge and experience in financial
and business matters are such that it is capable of evaluating the merits and
risks of its purchase of the Note, Warrant and Warrant Shares as contemplated by
this Agreement and (iv) the purchase of the Note, Warrant and Warrant Shares by
it has been duly and properly authorized and this Agreement has been duly
executed by it or on its behalf.
SECTION 4. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase and make payment for the Note
and Warrant subscribed for hereunder by it on the Closing Date is subject, at
its option, to the satisfaction of each of the following conditions:
4.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 2 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date, and the Company shall have so certified to the Purchaser in
writing.
4.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Company shall have so certified to the Purchaser in
writing.
4.3 Opinion of Counsel to the Company. On the Closing Date, the
Purchaser shall have received an opinion from counsel for the Company, dated the
Closing Date, addressed to the Purchaser covering such matters as may be
specified by the Purchaser, and which opinion of counsel shall be in form and
substance satisfactory to the Purchaser in its sole discretion.
4.4 Proceedings; Certified Copies. All proceedings to be taken in
connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident thereto,
shall be satisfactory in form and substance to the Purchaser. The Purchaser
shall have received such certified copies or other copies of such documents as
they may reasonably request.
4.5 Investigation. The results of the Purchaser's due diligence
investigation of the Company shall be satisfactory to the Purchaser in all
respects in its sole and absolute discretion.
4.6 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
4.7 No Material Adverse Change. There shall have been no material
adverse change since the Balance Sheet Date in the business, properties, assets,
operations, or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
4.8 Financial Advisory Agreement. The Company shall have complied
with all of the terms and conditions set forth in the Financial Advisory
Agreement, dated as of April 1, 1996 (the "Financial Advisory Agreement"),
between the Company and Mentor Management Company ("MMC") including, without
limitation, the issuance of a Warrant to MMC to purchase 125,000 shares of
Common Stock at an exercise price of $1.50 per share in substantially the form
of Exhibit B hereto (the "Consulting Warrant"), and payment of any and all fees
owed to MMC under such Financial Advisory Agreement.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Note and Warrant subscribed for
by the Purchaser on the Closing Date is subject, at the Company's option, to the
satisfaction of each of the following conditions:
5.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date and the Purchaser shall have so certified to the Company in
writing.
5.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Purchaser on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Purchaser shall have so certified to the Company in
writing.
5.3 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
SECTION 6. COVENANTS OF THE COMPANY PRIOR TO CLOSING
6.1 Payment of Expenses. The Company shall (i) pay the expenses
incurred by it in connection with the issuance and sale of the Note and Warrant,
and the execution, delivery and performance of this Agreement; (ii) regardless
of whether or not the Closing occurs, pay the legal fees and expenses incurred
by the Purchaser with respect to the negotiation and preparation of this
Agreement, the Note, the Warrant and other Transaction Documents (such payment
to be made at Closing assuming Closing occurs); and (iii) pay the costs, fees
and expenses incurred by the Purchaser in connection with the enforcement of
this Agreement, or of the Note, Warrant or any other Transaction Document
against the Company.
6.2 Operation of Business in Ordinary Course. Prior to the Closing,
the Company and each Subsidiary will operate its business and the business of
each of its other Subsidiaries only in the usual and normal course, and will
not, without the consent of the Purchaser, engage in any of the transactions
described in Section 2.22 hereof.
6.3 Conditions Precedent. The Company and the Purchaser shall each
use its best efforts to cause the conditions specified in Section 4 to be
satisfied by the Closing Date.
SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING
7.1 Rule 144.
(a) The Company covenants that (i) the Company will use its
best efforts to comply with the current public information requirements of Rule
144(c)(1) under the 1933 Act; and (ii) at all such times as Rule 144 is
available for use by the holders of the Note, Warrant or Warrant Shares, the
Company will furnish each such holder upon request with all information within
the possession of the Company required for the preparation and filing of
Form 144.
(b) At all times during which the Company is neither subject
to the reporting requirements of Section 13 or 15(d) of the 1934 Act, nor exempt
from reporting pursuant to Rule 12g3-2(b) under the 1934 Act, it will provide as
promptly as practicable (in any event not later than twenty (20) days after
initial request) in written form, upon the written request of the Purchaser or a
prospective buyer of the Note or Warrant Shares from such Purchaser, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company further covenants, upon written request, as promptly
as practicable (in any event not later than twenty (20) days after initial
request) to cooperate with and assist the Purchaser or any member of the
National Association of Securities Dealers, Inc. System for Private Offerings
Resales and Trading through Automated Lindake ("PORTAL") in applying to
designate and thereafter maintain the eligibility of such securities for trading
through PORTAL. The Company's obligations under this Section shall at all times
be contingent upon the Purchaser's obtaining from a prospective buyer an
agreement to take all reasonable precautions to safeguard the Rule 144A
Information from disclosure to anyone other than a person who will assist such
buyer in evaluating the purchase of the Warrant Shares.
(c) If at any time the Company files an application to list
any of its shares of capital stock on NASDAQ or any national securities exchange
it will include in such listing application the Warrant Shares.
7.2 Financial Statements and Reports. The Company and the Purchaser
agree that so long as any amounts remain outstanding under the Note, the Company
shall deliver to the Purchaser the following:
(a) (i) within ninety (90) days after the end of each fiscal
year, an audited consolidated balance sheet, and related, audited consolidated
statements of income, cash flow, and stockholders' equity of the Company and its
Subsidiaries as at the end of and for such fiscal year prepared in accordance
with GAAP, and accompanied by the opinion of an independent public accountant
and (ii) within forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year, a consolidated balance sheet and a
consolidated statement of income and cash flow of the Company and its
Subsidiaries as at the end of and for such quarter and for the year to date,
accompanied by a narrative analysis of the Company's business and operations for
such quarter prepared by the Company's Chief Financial Officer in form
acceptable to Purchaser; and
(b) promptly after the same are sent, copies of all proxy
statements, financial statements and reports which the Company sends to its
stockholders, and promptly after the same are filed, copies of all financial
statements and reports which the Company files with the Securities and Exchange
Commission, including but not limited to 10-K's, 10-Q's and 8-K's, and any
prospectus or registration statement.
7.3 Inspection. From and after the Closing Date, the Company shall
permit the Purchaser and its representatives, so long as any amounts remain
outstanding under the Note, to visit and inspect the properties of the Company
and each of its Subsidiaries during normal business hours, to examine (and audit
if necessary) its books of account and records, and to discuss its affairs,
finances, and accounts with its executive officers in each case for any purpose
reasonably related to the Purchaser's investment in the Company.
7.4 Maintenance of Existence; Insurance. The Company will keep, and
will cause each of its Subsidiaries to keep, its corporate existence, rights and
franchises in full force and effect, and its properties in good repair, working
order and condition, normal wear and tear excepted. The Company will maintain,
and will cause each of its Subsidiaries to maintain, public liability, property
damage and workmen's compensation insurance and insurance on all its insurable
property against fire and other hazards with responsible insurance carriers to
substantially the same extent presently maintained.
7.5 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all laws and regulations
applicable to the conduct of its business, including without limitation ERISA,
environmental laws, employee safety laws, Medicare and Medicaid statutes and
regulations and laws governing certification, professional licensure,
certificate of need requirements, fraud and abuse and physician/health care
provider self-referrals, and will indemnify and hold harmless each holder of a
Note, a Warrant, or Warrant Share against any failure or alleged failure by the
Company to do so.
7.6 Notices. For as long as any amounts remain outstanding under the
Note, the Company shall provide Purchaser with written notice signed by its
President or Chief Financial Officer of any material litigation, disputes, labor
controversies, defaults by Company under any Material Contracts, or other events
which have had or may have a material adverse effect on the business,
properties, assets, prospects, operations or condition (financial or otherwise)
of the Company or its Subsidiaries, taken as a whole, as soon as practicable
after the occurrence thereof but in no event later than ten (10) days
thereafter.
7.7 Financial Control. The Company shall maintain financial control
and reporting systems in accordance with GAAP and in compliance with the
requirements of Securities and Exchange Commission Regulation S-X.
7.8 Board of Directors. For as long as any amounts remain
outstanding under the Note, the Purchaser's nominee, Edward F. Sager, Jr., shall
have the right to attend each meeting of the Board of Directors of the Company
as an observer, and the Company shall give him the same notice of meetings and
other materials that are given to the directors and copies of the minutes of
each meeting.
7.9 Negative Covenants. The Company covenants that, as long as the
Note remains outstanding and unpaid, the Company shall not declare or pay any
dividends or make any other distribution (whether in cash or property) on any
shares of its capital stock now or hereafter outstanding, or purchase, redeem,
retire or otherwise acquire for value any shares of its capital stock or
warrants or options therefor or other securities now or hereafter outstanding,
if, at the time of such payment, purchase, redemption or retirement or
immediately after giving effect thereto, any Event of Default (as defined in the
Note) or any condition which, with notice or lapse of time, or both, would
constitute an Event of Default, shall exist, without the prior written consent
of the Purchaser.
SECTION 8. THE NOTE
8.1 Registration, Transfer and Exchange of the Note.
(a) The Company shall keep at its principal offices a register
in which it shall provide for the registration of ownership of the Note and for
the transfer of the Note. The ownership of the Note shall be proved by reference
to the register and, prior to due presentment for registration of transfer, the
Company may treat the person in whose name the Note shall be registered as the
absolute owner thereof for the purpose of receiving payment of amounts of
principal of and interest on such Note and for all other purposes. All payments
made to any registered holder or upon its order shall be valid and, to the
extent of the amount or amounts so paid, effectual to satisfy and discharge the
liability for monies payable upon the Note. Any demand, request, waiver, consent
or vote of the registered holder of the Note shall be conclusive and be binding
upon such holder and upon all future holders and owners of such Note or any Note
issued in exchange therefor or in place thereof.
(b) Upon surrender for registration of transfer of the Note at
the principal offices of the Company and compliance with Sections 8 and 9
hereof, the Company shall execute and register in the name of the designated
transferee or transferees, one or more new Notes in such denomination or
denominations (in minimum amounts of $1000 and in multiples of $1000) as may be
requested, in aggregate principal amount equal to the unpaid principal amount of
the Note so surrendered and substantially in the form thereof, with appropriate
insertions and variations, and dated and bearing interest from, the date to
which interest has been paid on the Note so surrendered unless no interest has
been paid on the Note so surrendered, in which case the new Note shall be dated
the date of the Note surrendered and the Company shall, in the same manner
aforesaid, issue a new Note to the transferor in an amount equal to the
untransferred unpaid principal amount of the Note surrendered for transfer.
(c) At any time upon the request of the holder of the Note and
upon surrender of such Note for such purpose at the principal offices of the
Company, the Company will execute and register in the holder's name in exchange
therefor new Notes, in such denomination or denominations (in minimum amounts of
$1000 and in multiples of $1000) as may be requested, in aggregate principal
amount equal to the unpaid principal amount of the Note so surrendered and
substantially in the form thereof, with appropriate insertions and variations,
and dated, and bearing interest from, the date to which interest has been paid
on the Note so surrendered unless no interest has been paid on the Note so
surrendered, in which case the new Notes shall be dated the date of the Note so
surrendered.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it that the Note has been mutilated, destroyed, lost or stolen,
and, in the case of any destroyed, lost or stolen Note, a bond of indemnity
reasonably satisfactory to the Company, or in the case of a mutilated Note, upon
surrender and cancellation thereof, the Company shall execute and register in
the holder's name a new Note in exchange and substitution for the Note so
mutilated, destroyed, lost or stolen in an aggregate principal amount equal to
the unpaid principal amount of the Note so mutilated, destroyed, lost or stolen
and substantially in the form thereof, with appropriate insertions and
variations, and dated and bearing interest from the date to which interest has
been paid on the Note so mutilated, destroyed, lost or stolen unless no interest
has been paid on the Note so mutilated, destroyed, lost or stolen, in which case
the new Note shall be dated the date of the Note so mutilated, destroyed, lost
or stolen.
(e) All Notes presented or surrendered for exchange or
transfer as provided in this Section 8.1 shall, if required by the Company, be
accompanied by a written instrument or instruments of transfer, duly executed by
the registered holder thereof or its attorney duly authorized in writing. No
charge shall be made by the Company in respect of any transfer or exchange of
Notes, but the holder shall bear any applicable transfer tax.
(f) All Notes issued pursuant to this Section 8.1 shall
contain the restrictive legends on the Note surrendered for transfer or exchange
or which has been mutilated, lost, destroyed or stolen, unless such legends may
be removed under Section 9.4 hereof.
8.2 Transfer Taxes. The Company will pay, and hold the Purchaser
harmless against, liability for the payment of any transfer or similar taxes
payable in connection with the issuance and sale of the Note, Warrant and
Warrant Shares pursuant hereto.
SECTION 9. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF
NOTE, WARRANT AND WARRANT SHARES
9.1 Compliance with 1933 Act. The Note, Warrant and Warrant Shares
shall not be transferable, except upon the conditions specified in this Section
9, which conditions are intended to insure compliance with the provisions of the
1933 Act and applicable state securities laws in respect of any such transfer.
9.2 Restrictive Legend. The Note and Warrant, and each certificate
representing the Warrant Shares and any shares of Common Stock or other
securities issued in respect of such Warrant Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation, similar event, shall (unless
otherwise permitted by the provisions of Section 9.4 below) be stamped or
otherwise imprinted with the following legend:
"[THIS NOTE HAS] OR [THIS WARRANT HAS] OR [THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY
[T]HEREOF IS SUBJECT TO THE PROVISIONS OF A NOTE AND WARRANT PURCHASE AGREEMENT
BETWEEN CORECARE SYSTEMS, INC. AND MENTOR SPECIAL SITUATION FUND, L.P."
9.3 Restrictions on Transferability. The Company shall not be
required to register the transfer of the Note or Warrant or any Warrant Shares
on the books of the Company unless the Company shall have been provided with an
opinion of counsel reasonably satisfactory to it prior to such transfer to the
effect that registration under the 1933 Act or any applicable state securities
law is not required in connection with the transaction resulting in such
transfer; provided, however, that no such opinion of counsel shall be necessary
in order to effectuate a transfer in accordance with the provisions of Rule
144(k) promulgated under the 1933 Act. Each Note or certificate for Warrant
Shares issued upon any transfer as above provided shall bear the restrictive
legend set forth in Section 9.2 above, except that such restrictive legend shall
not be required if the opinion of counsel reasonably satisfactory to the Company
referred to above is to the further effect that such legend is not required in
order to establish compliance with the provisions of the 1933 Act and any
applicable state securities law, or if the transfer is made in accordance with
the provisions of Rule 144(k) under the 1933 Act.
9.4 Termination of Restrictions on Transferability. The conditions
precedent imposed by this Section 9 upon the transferability of the Note,
Warrant and Warrant Shares shall cease and terminate as to any of the Note,
Warrant or Warrant Shares when (i) such securities shall have been registered
under the 1933 Act and sold or otherwise disposed of in accordance with the
intended method of disposition by the seller or sellers thereof set forth in the
registration statement covering such securities, (ii) at such time as an opinion
of counsel satisfactory to the Company shall have been rendered as required
pursuant to the second sentence of Section 9.3 to the effect that the
restrictive legend on such securities is no longer required, or (iii) when such
securities are transferable in accordance with the provisions of Rule 144(k)
promulgated under the 1933 Act. Whenever the conditions imposed by this Section
9 shall terminate as hereinabove provided with respect to any of the Note,
Warrant or Warrant Shares, the holder of any such securities bearing the legend
set forth in this Section 9 as to which such conditions shall have terminated
shall be entitled to receive from the Company, without expense (except for the
payment of any applicable transfer tax) and as expeditiously as possible, new
Notes in accordance with Section 8.1(b) or (c) hereof, new Warrants in
accordance with the terms thereof, or new stock certificates not bearing such
legend.
SECTION 10. REGISTRATION RIGHTS
10.1 Piggyback Registration.
(a) If at any time the Company proposes for any reason to
register any of its equity securities under the 1933 Act, other than on Form S-8
or Form S-4 or their then equivalents relating to shares of Common Stock to be
issued solely in connection with any acquisition of any entity or business or
shares of Common Stock issuable in connection with stock option or other
employee benefit plans, it shall each such time promptly give written notice to
the registered holders of the Eligible Securities (as defined in Section
10.2(c)) of its intention to do so, and, upon the written request, given within
30 days after receipt of any such notice, of a holder to register any of its
Eligible Securities, the Company shall (subject to Section 10.1(b) hereof) use
its best efforts to cause all Eligible Securities with respect to which holders
shall have so requested registration to be registered under the 1933 Act
promptly upon receipt of the written request of such holders for such
registration, all to the extent required to permit the sale or other disposition
by the holders of the Eligible Securities so registered in the manner
contemplated by such holders.
(b) In the event that any registration pursuant to this
Section 10.1 shall be, in whole or in part, an underwritten offering of
securities of the Company, the Company shall arrange for the Eligible Securities
requested to be registered pursuant to this Section 10.1 to be included in the
underwriting on the same terms and conditions as the comparable securities, if
any, otherwise being sold through such underwriters under such registration;
provided, however, that if the managing underwriter, determines and advises in
writing that the inclusion of any or all Eligible Securities in the registration
statement covered by the requests for registration made under this Section 10.1
would be detrimental to the offering of the securities being sold by the Company
for its own account in such registration, then the requisite number of Eligible
Securities shall be excluded from registration hereunder on a basis pro rata
among the holders of the Eligible Securities and any other selling
securityholders requesting such registration in accordance with the number of
shares requested to be registered by all such holders, provided, that such pro
rata cut back shall be subject to the right of Anthony and Marlene Todaro to
have at least 350,000 of their shares included in such registration (if so
requested by them) as provided in the Registration Rights Agreement between the
Company and the Todaros dated June 30, 1995. For purposes of computing the
number of Eligible Securities held by each holder of Eligible Securities that
must be excluded from registration, a Warrant shall be considered equal to the
number of Warrant Shares issuable upon the exercise thereof. Notwithstanding the
foregoing, the right of the holders of Eligible Securities to have their shares
included in any registration statement pursuant to this Section 10.1 shall, in
the case of a demand registration filed by the Company at the request of Choate
Health Management, Inc. ("CHMI") pursuant to Section 12(b) of the Company's
Series WA Warrant issued to CHMI on October 17, 1995 (the "CHMI Warrant"), be
subject to the right of CHMI and Sage Equities, Inc. ("Sage") to have their
shares included in such registration as provided in the CHMI Warrant and in
Section 13(c) of the Company's Series WB Warrant issued to Sage on
October 17, 1995.
10.2 Demand Registration.
(a) During any period of time after the earlier of (i) the
first anniversary of the consummation of the Company's initial public offering
of Common Stock under the 1933 Act and (ii) December 31, 1998, the registered
holders of Eligible Securities may at any time request in writing that the
Company cause a registration statement to be filed under the 1933 Act with
respect to such of their Eligible Securities as they shall specify in such
request, provided that at such time such holders have purchased, or have
notified the Company that they intend to purchase, in the aggregate at least 50%
of the Warrant Shares originally issuable under the Warrant, the Consulting
Warrant and the June Warrant. The Company shall promptly give written notice of
such request to the other holders of Eligible Securities and afford them the
opportunity of including in the requested registration statement such of their
Eligible Securities as they shall specify in a written notice given to the
Company within thirty (30) days after their receipt of the Company's notice of
the request for the filing of a registration statement. Following receipt of
such notices, the Company shall promptly use its best efforts to cause all
Eligible Securities with respect to which holders shall have so requested
registration to be registered under the 1933 Act, all to the extent required to
permit the sale or other disposition by the holders of the Eligible Securities
so registered in the manner contemplated by such holders. In no event shall the
Company include its shares or the shares of any other securityholders in such
demand registration unless all shares requested to be included by the holders of
Eligible Securities have been included therein.
(b) The Company shall not be required to file and cause to
become effective more than one (1) registration statement at the demand of the
holders of Eligible Securities made under this Section 10.2.
(c) The term "Eligible Securities" shall mean, on any date,
(i) the Warrant Shares issued and issuable upon exercise of the Warrant, the
June Warrant and the Consulting Warrant (ii) plus all shares of Common Stock or
other securities of the Company issued in respect of such Warrant Shares (and
such other securities of the Company) by way of a stock split, stock dividend,
recapitalization, merger or consolidation, (iii) but exclusive of any Warrant
Shares or other securities described in clause (i) or (ii) sold in a public
offering registered under 1933 Act or sold pursuant to Rule 144.
(d) Provided the Company has honored its obligations under
Section 10.1, no demand registration right granted in this Section may be
exercised during any period of time beginning on the date the Company delivers
notice to the holders of Eligible Securities of its intention to file a
registration statement with the Securities and Exchange Commission registering
any of its securities for sale to the public pursuant to Section 10.1(a) and
ending on the earlier to occur of (i) sixty (60) days after the date on which
the registration statement is declared effective by the Securities and Exchange
Commission or otherwise becomes effective or (ii) the 150th day after the date
the Company delivers its notice of filing to the holders of Eligible Securities
(provided that during such 150 day period the Company proceeds diligently and in
good faith to complete such offering) or (iii) the abandonment by the Company of
the offering.
10.3 Form S-3 Registration.
In addition to the rights provided the holders of Eligible
Securities in Sections 10.1 and 10.2, if, at any time after December 31, 1998,
the registration of Eligible Securities under the 1933 Act can be effected on
Form S-3 (or any similar form promulgated by the Securities and Exchange
Commission), then one or more of the registered holders of the Eligible
Securities may at any time or from time to time request in writing that the
Company cause a registration statement on Form S-3 to be filed under the 1933
Act with respect to such of their Eligible Securities as they shall specify in
such request. The Company shall promptly give written notice of such request to
the other holders of Eligible Securities and afford them the opportunity of
including in the requested registration statement on Form S-3 such of their
Eligible Securities as they shall specify in a written notice given to the
Company within thirty (30) days after their receipt of the Company's notice of
the request for the filing of a registration statement on Form S-3. Following
receipt of such notices, the Company shall promptly use its best efforts to
cause all Eligible Securities with respect to which holders shall have so
requested registration to be registered on Form S-3 under the 1933 Act, all to
the extent required to permit the sale or other disposition by holders of the
Eligible Securities so registered in the manner contemplated by such holders.
10.4 Registration Procedures. If and whenever the Company is under
an obligation pursuant to the provisions of Section 10 of this Agreement to use
its best efforts to effect the registration of any Eligible Securities the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Eligible Securities and
use its best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for at least one year and to comply with the
provisions of the 1933 Act with respect to the sale or other disposition of all
Eligible Securities covered by such registration statement for such period;
(c) furnish to each selling stockholder such numbers of copies
of each prospectus (including each preliminary prospectus) in conformity with
the requirements of the 1933 Act, and such other documents as such seller may
reasonably request in order to facilitate the public sale or other disposition
of such Eligible Securities;
(d) use its best efforts to register or qualify the Eligible
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter, if any, or if there
is no managing underwriter, the holders of a majority of the Eligible
Securities, shall request, (provided that the Company shall not be required to
consent to general service of process for all purposes in any jurisdiction where
it is not then qualified) and do any and all other acts or things which may be
reasonably necessary or advisable to enable such seller to consummate the public
sale or other disposition in such jurisdictions of such Eligible Securities;
(e) notify each seller of the Eligible Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act within the appropriate period
mentioned in clause (b) of this Section 10.4, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Eligible
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(f) furnish, at the request of any holder or holders of
Eligible Securities requesting registration pursuant to this Section 10, on the
date that such Eligible Securities are delivered to the underwriters for sale
pursuant to such registration or, if such Eligible Securities are not being sold
through underwriters, on the date that the registration statement with respect
to such Eligible Securities becomes effective, (a) an opinion, dated such date,
of the independent counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the holder or
holders making such request, stating that such registration statement has become
effective under the 1933 Act and that (1) to the best of the knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act; (2) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form in all
material respects with the requirements of the 1933 Act and the applicable rules
and regulations of the Securities and Exchange Commission thereunder (except
that such counsel need express no opinion as to financial statements contained
therein); (3) such counsel has no reason to believe that either the registration
statement or the prospectus, or any amendment or supplement thereto, contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (except that such counsel need express no opinion as to financial
statements contained therein); (4) the description in the registration statement
or the prospectus, or any amendment or supplement thereto, of all legal and
governmental matters and all contracts and other legal documents or instruments
are accurate and fairly present the information required to be shown; (5) such
counsel does not know of any legal or governmental proceedings, pending or
contemplated, required to be described in the registration statement or
prospectus, or any amendment or supplement thereto, which are not described as
required, nor of any contracts or documents or instruments of a character
required to be described in the registration statement or prospectus, or any
amendment or supplement thereto, or to be filed as exhibits to the registration
statement which are not described and filed as required, and (6) such other
legal matters with respect to such registration as any such holder or holders
requesting such opinion may reasonably request; and (b) a comfort letter, dated
such date, from the independent certified public accountants of the Company,
addressed to the underwriters, if any, and to the holder or holders making such
request, in the customary form.
10.5 Information to be Furnished by Holders of Eligible Securities.
Each prospective seller of Eligible Securities registered or to be registered
under any registration statement shall furnish to the Company such information
and execute such documents regarding the Eligible Securities held by such seller
and the intended method of disposition thereof as the Company shall reasonably
request in connection with the action to be taken by the Company.
10.6 Expenses of Registration.
(a) All expenses incurred by the Company in complying with
Section 10 (other than the underwriting discounts and commissions), including,
without limitation: (i) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.);
(ii) the fees and expenses of complying with securities and blue sky laws; (iii)
expense allowances of the underwriters; (iv) printing expenses, (v) fees and
disbursements of Company counsel; and (vi) the fees and expenses of the
independent public accountants (including the expense of any special audits in
connection with any such registration), are herein called "Registration
Expenses." All underwriting discounts and commissions applicable to the Eligible
Securities covered by any such registration, are herein called "Selling
Expenses."
(b) The Company shall pay all Registration Expenses in
connection with each registration pursuant to this Section 10. All Selling
Expenses in connection with each registration pursuant to Section 10 and any
legal fees and expenses of special counsel for the sellers shall be borne by the
seller or sellers therein in proportion to the number of Eligible Securities
included by each in such registration, or in such other proportions as they may
agree upon.
10.7 Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each holder
of Eligible Securities, its executive officers, directors and controlling
persons (within the meaning of the 1933 Act) and each person who participates as
an underwriter or controlling person of an underwriter (within the meaning of
the 1933 Act) with respect to a registration statement pursuant to Section 10
against any loss, claims, damages or liabilities to which any of them may become
subject under the 1933 Act or otherwise insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement of any material fact contained in a registration statement
including Eligible Securities owned by such holder, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse any of them for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable hereunder in any such case if any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
omission made in such registration statement, prospectus or amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company for such purpose by such holder or by its
representative or by any underwriter on behalf of such holder.
(b) Each holder of Eligible Securities joining in any
registration statement of the Company pursuant to Section 10 of this Agreement
shall indemnify and hold harmless the Company, its executive officers,
directors, and controlling persons (within the meaning of the 1933 Act) and each
person who participates as an underwriter or controlling person of an
underwriter (within the meaning of the 1933 Act) with respect to a registration
statement pursuant to Section 10 against any losses, claims, damages, or
liabilities to which any of them may become subject under the 1933 Act or
otherwise insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, made in reliance upon and in conformity with written
information furnished to the Company by such holder or by its representative or
by any underwriter on behalf of such holder for such purpose, and will reimburse
any of them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending, any such loss, claim, damage,
liability or action; provided, that such holder's liability hereunder shall not
exceed the net proceeds realized by such holder from the Eligible Securities
sold by it in the offering made pursuant to the registration statement.
(c) Promptly after receipt by an indemnified party under this
Section 10.7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
10.7, but the omission so to notify the indemnifying party will not relieve such
party of any liability that such party may have to any indemnified party other
than under this Section 10.7. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel subsequent to any assumption
of the defense by the indemnifying party shall not be at the expense of the
indemnifying party unless the employment of such counsel has been specifically
authorized in writing by the indemnifying party. The indemnifying party shall
not be liable to indemnify any person for any settlement of any such action
effected without the indemnifying party's written consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 10.7(a) is
applicable but for any reason is held to be unavailable from the Company with
respect to all holders of Eligible Securities or any such holder, the Company
and the holder or holders of Eligible Securities, as the case may be, shall
contribute to the aggregate losses, claims, damages and liabilities (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted) to which the Company and one or more of the holders of Eligible
Securities may be subject in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the holder or holders of
Eligible Securities on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities. Notwithstanding
the foregoing, no holder of Eligible Securities shall be required to contribute
any amount in excess of the net proceeds received by such holder from the
Eligible Securities as the case may be, sold by such holder pursuant to the
registration statement. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each person, if any, who controls a holder of Eligible
Securities within the meaning of the Securities Act shall have the same rights
to contribution as such holder.
(e) The obligations of the Company and holders of Eligible
Securities under this Section 10.7 shall survive the completion of any offering
of Eligible Securities in a registration statement under this Section 10 or
otherwise.
10.8 Underwriting Agreement. If Eligible Securities are sold
pursuant to a registration statement in an underwritten offering pursuant to
Section 10, the Company and the Purchaser if participating therein agree to
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of an issuer of, or, as
the case may be, the seller of the securities being registered and customary
covenants and agreements to be performed by such issuer or seller, including,
without limiting the generality of the foregoing, customary provisions with
respect to indemnification by the Company of the underwriters of such offering.
10.9 Transfer of Registration Rights. The registration rights
conferred on the holders of Eligible Securities shall inure to the benefit of
any transferee of Eligible Securities.
SECTION 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the issuance and sale of the Note
and Warrant hereunder.
SECTION 12. MISCELLANEOUS
12.1 Owner of Warrant and Warrant Shares. The Company may deem and
treat the person in whose name the Warrant and Warrant Shares, as the case may
be, are registered as the absolute owner thereof for all purposes whatsoever,
and the Company shall not be affected by any notice to the contrary.
12.2 Successors. This Agreement shall be binding upon and except as
provided herein, shall inure to the benefit of the respective successors,
executors, personal representatives, heirs and assigns of each of the parties
hereto.
12.3 Broker or Finder. Each party to this Agreement represents and
warrants that, to the best of its knowledge, no broker or finder has acted for
such party in connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company shall
indemnify each Purchaser against, and hold it harmless from, any liability,
cost, or expense (including reasonable attorneys' fees and expenses) resulting
from any agreement, arrangement, or understanding made by the Company, and each
Purchaser shall indemnify the Company against, and hold the Company harmless
from, any liability, cost, or expense (including reasonable attorneys fees and
expenses) resulting from any agreement, arrangement, or understanding made by
such Purchaser with any third party, for brokerage or finder's fees or other
commissions in connection with this Agreement or any of the transactions
contemplated hereby.
12.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania.
12.5 Notice. Any notice or other communications required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, or by telegram, telex or telecopy, addressed as
follows or to such other address or addresses as may hereafter be furnished in
writing by notice similarly given by one party to the other:
To the Company Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19038
Facsimile: (215) 836-0128
Attention: Thomas T. Fleming
To Purchaser: P.O. Box 560
Yardley, PA 19067
Facsimile: (215) 736-8882
Attention: Edward F. Sager, Jr.
Notice to any holder of a Note, Warrant, or Warrant Shares other than the
Purchaser shall be given in a like manner to such holder at the address
reflected in the Company's records.
12.6 Full Agreement. This Agreement, together with the Note and
Warrant and the Exhibits, Schedules and Disclosure Letter attached hereto or
delivered herewith, and the other documents delivered herewith, sets forth the
entire understanding of the parties with respect to the transactions
contemplated hereby.
12.7 Headings. The headings of the sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
12.8 Business Days. Should any installment of interest on or
principal of any of the Note become due and payable upon other than a business
day, the maturity thereof shall be extended to the succeeding business day and,
in the case of an installment of principal, interest shall be payable thereon at
the rate per annum specified in such Note during such extension.
12.9 Amendment. This Agreement may be modified, amended or changed
only with the written consent of the Company and (i) the holders of Notes
aggregating a majority of the aggregate principal amount then outstanding, or
(ii) if no Notes are then outstanding, the holders of a majority of the Warrant
Shares. In computing ownership of Warrant Shares, the owner of outstanding
unexercised Warrants shall be deemed the owner of the underlying Warrant Shares.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement as of the date first set forth above.
CORECARE SYSTEMS, INC.
By:/s/ Rose S. DiOttavio
----------------------
Rose S. DiOttavio
MENTOR SPECIAL SITUATION FUND, L.P.
By: Mentor Partners,
its general partner
By:/s/ Edward F. Sager, Jr.,
-------------------------
Edward F. Sager, Jr.,
a general partner
EXHIBIT 3.17
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH MUST BE ESTABLISHED BY SUCH REGISTERED HOLDER OR
TRANSFEREE TO THE SATISFACTION OF CORECARE SYSTEMS, INC.
____________________________________
Void after 5:00 P.M. (Eastern Time), June 10, 2001,
except as otherwise provided herein.
Series A No. Warrant to Purchase
200,000 Shares of Common Stock
Date: June 10, 1996
WARRANT
TO PURCHASE COMMON STOCK OF
CORECARE SYSTEMS, INC.
THIS CERTIFIES that, Mentor Special Situation Fund, L.P. (herein called
"Warrant Holder") or registered assigns, is entitled to purchase from Corecare
Systems, Inc. (herein called the "Company"), a corporation organized and
existing under the laws of Nevada, at any time after June 10, 1996 and until
5:00 P.M. (Eastern Time) on June 10, 2001, 200,000 fully paid and nonassessable
shares of Common Stock of the Company, $.001 par value per share (the "Common
Stock"), subject to adjustment as provided herein, at a purchase price of $1.00
per share.
1. Definitions. For the purpose of the Warrants:
(a) "Capital Stock" shall mean the Company's common stock, and any
other stock of any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(b) "Exercise Period" shall mean the period beginning June 11, 1996
and ending June 10, 2001.
(c) "Warrants of this Series" or "Warrants" shall mean the original
Warrants to purchase 200,000 shares of Common Stock of the Company issued
pursuant to the terms of the 15% Bridge Note of the Company issued to the
Warrant Holder on April 12, 1996 (the "Bridge Note"), and any and all Warrants
which are issued in exchange or substitution for any outstanding Warrant
pursuant to the terms of that Warrant.
(d) "Warrant Price" shall mean the price per share at which shares
of Common Stock of the Company are purchasable hereunder, as such prices may be
adjusted from time to time hereunder.
(e) "Warrant Shares" shall mean the stock purchased upon exercise of
Warrants.
(f) "Additional Shares of Capital Stock" shall mean all shares of
Capital Stock issued by the Company other than those shares of Common Stock of
the Company issuable upon the exercise of options issued to officers, directors
and employees of, or consultants or advisors to, the Company under option plans
approved by the Board of Directors.
2. Method of Exercise of Warrants. This Warrant may be exercised in whole
or in part (but not as to fractional shares) on one or more occasions during the
Exercise Period by the surrender of the Warrant, with the Purchase Agreement
attached hereto as Rider A properly completed and duly executed, at the
principal office of the Company at Whitemarsh Professional Center, 9425 Stenton
Avenue, Erdenheim, PA 19038, or such other location which shall at that time be
the principal office of the Company (the "Principal Office"), and upon payment
to it of the purchase price for the shares to be purchased upon such exercise.
The purchase price shall be paid, by delivering a certified check or bank draft
or immediately available funds to the order of the Company for the entire
purchase price. The persons entitled to the shares so purchased shall be treated
for all purposes as the holders of such shares as of the close of business on
the date of exercise and certificates for the shares of stock so purchased shall
be delivered to the persons so entitled within a reasonable time, not exceeding
ten (10) days, after such exercise. Unless this Warrant has expired, a new
Warrant of like tenor and for such number of shares as the holder of this
Warrant shall direct, representing in the aggregate the right to purchase a
number of shares with respect to which this Warrant shall not have been
exercised, shall also be issued to the holder of this Warrant within such time.
3. Exchange. This Warrant is exchangeable, upon the surrender thereof by
the holder thereof at the Principal Office of the Company, for new Warrants of
like tenor registered in such holder's name and representing in the aggregate
the right to purchase the number of shares purchasable under the Warrant being
exchanged, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said holder at the time
of such surrender.
4. Transfer. Subject to compliance with the Securities Act of 1933 and the
rules and regulations promulgated thereunder and under applicable state
securities laws, this Warrant is transferable, in whole or in part, at the
Principal Office of the Company by the holder thereof, in person or by duly
authorized attorney, upon presentation of the Warrant, properly endorsed, for
transfer. Each holder of this Warrant, by holding it, agrees that the Warrant,
when endorsed in blank, may be deemed negotiable, and that the holder thereof,
when the Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with the Warrant as the absolute owner thereof for any
purpose and as the person entitled to exercise the rights represented by the
Warrant, or to the transfer thereof on the books of the Company, any notice to
the contrary notwithstanding.
5. Certain Covenants of the Company. The Company covenants and agrees that
all shares which may be issued upon the exercise of Warrants of this Series,
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof;
and will, upon issuance, be listed on each national securities exchange, if any,
on which the other outstanding shares of the Company are then listed, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such action as may be required to
assure that the par value per share of the Common Stock is at all times equal to
or less than the then effective purchase price per share of the Common Stock
issuable pursuant to the Warrants. The Company further covenants and agrees that
during the period within which the rights represented by the Warrants may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue upon exercise of the purchase rights evidenced by the Warrants,
a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by the Warrants.
6. Adjustment of Purchase Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrants of this Series and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Reclassification, Consolidation or Merger. At any time while
Warrants of this Series remain outstanding and unexpired, in case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon the exercise
of the Warrants) or in case of any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value per share, or from no par value per share to par value, or as a
result of a subdivision or combination of outstanding securities issuable upon
the exercise of the Warrants), or in the case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company, or such successor or purchasing corporation, as the case
may be, shall, without payment of any additional consideration therefor, execute
new Warrants providing that the holders of the Warrants shall have the right to
exercise such new Warrants (upon terms not less favorable to the holders than
those then applicable to the Warrants) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation, merger,
sale or transfer by the holder of one share of Common Stock issuable upon
exercise of the Warrants had the Warrants been exercised immediately prior to
such reclassification, change, consolidation, merger, sale or transfer. Such new
Warrants shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6. The
provisions of this subsection 6(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
while Warrants of this Series remain outstanding and unexpired, shall subdivide
or combine its Capital Stock, the Warrant Price shall be proportionately
reduced, in case of subdivision of such shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Capital
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier, or shall be proportionately increased, in the case of combination of
such shares, as of the effective date of such combination, or, if the Company
shall take a record of holders of its Capital Stock for the purpose of so
combining, as of such record date, whichever is earlier.
(c) Stock Dividends. If the Company at any time while Warrants of
this Series are outstanding and unexpired shall pay a dividend in shares of, or
make other distribution of shares of, its Capital Stock, then the Warrant Price
shall be adjusted, as of the date the Company shall take a record of the holders
of its Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such payment or
other distribution), to that price determined by multiplying the Warrant Price
in effect immediately prior to such payment or other distribution by a fraction
(a) the numerator of which shall be the total number of shares of Capital Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Capital Stock
outstanding immediately after such dividend or distribution. The provisions of
this subsection 6(c) shall not apply under any of the circumstances for which an
adjustment is provided in subsections 6(a) or 6(b).
(d) Issuance of Additional Shares of Capital Stock. If the Company
at any time while the Warrants remain outstanding and unexpired shall issue any
Additional Shares of Capital Stock (otherwise than as provided in the foregoing
subsections (a) through (c) above) at a price per share less, or for other
consideration lower, than the Warrant Price in effect immediately prior to such
issuance, or without consideration, then upon such issuance the Warrant Price
shall be reduced to that price determined by multiplying the Warrant Price in
effect immediately prior to such event by a fraction:
(i) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of shares of Common Stock which the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at the then effective Warrant Price, and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of such Additional Shares of Common Stock
so issued.
The provisions of this subsection 6(d) shall not apply under any of
the circumstances for which an adjustment is provided in subsections 6(a), 6(b),
or 6(c). No adjustment of a Warrant Price shall be made under this subsection
6(d) upon the issuance of any Additional Shares of Capital Stock which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if (a) any such adjustments shall
previously have been made upon the issuance of any such warrants, options or
other rights or upon the issuance of any convertible securities (or upon the
issuance of any warrants, options or any rights therefor) pursuant to
subsections 6(e) or 6(f) hereof, or (b) such warrants, options, other
subscription or purchase rights or convertible securities are outstanding as of
June 10, 1996 (original date of issuance of this warrant).
(e) Issuance of Warrants, Options or Other Rights. If the Company at
any time while the Warrants remain outstanding and unexpired shall issue any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Capital Stock and the price per share for which Additional Shares of
Capital Stock may at any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Warrant Price in effect hereunder
immediately prior to such issuance, then upon such issuance the Warrant Price
shall be adjusted as provided in subsection 6(d) hereof on the basis that:
(i) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights shall be deemed
to have been issued as of the date of actual issuance of such warrants, options
or other rights, and
(ii) the aggregate consideration for such maximum number of
Additional Shares of Capital Stock issuable pursuant to such warrants, options
or other rights, shall be deemed to be the consideration received by the Company
for the issuance of such warrants, options, or other rights plus the minimum
consideration to be received by the Company for the issuance of Additional
Shares of Capital Stock pursuant to such warrants, options, or other rights.
(f) Issuance of Convertible Securities. If the Company at any time
while the Warrants remain outstanding and unexpired shall issue any securities
convertible into Common Stock and the consideration per share for which
Additional Shares of Capital Stock may at any time thereafter be issuable
pursuant to the terms of such convertible securities shall be less than the
Warrant Price in effect immediately prior to such issuance, then upon such
issuance the Warrant Price shall be adjusted as provided in subsection 6(d)
hereof on the basis that (i) the maximum number of Additional Shares of Capital
Stock necessary to effect the conversion or exchange of all such convertible
securities shall be deemed to have been issued as of the date of issuance of
such convertible securities, and (ii) the aggregate consideration for such
maximum number of Additional Shares of Capital Stock shall be deemed to be the
consideration received by the Company for the issuance of such convertible
securities plus the minimum consideration received by the Company for the
issuance of such Additional Shares of Capital Stock pursuant to the terms of
such convertible securities. No adjustment of the Warrant Price shall be made
under this subsection upon the issuance of any convertible securities which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights pursuant to
subsection 6(e) hereof.
(g) Adjustment of Number of Shares. Upon each adjustment in a
Warrant Price pursuant to subsections 6(a) through 6(h), the number of shares of
Common Stock purchasable hereunder at that Warrant Price shall be adjusted, to
the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(h) Liquidating Dividends, Etc. If the Company at any time while
Warrants of this Series are outstanding and unexpired makes a distribution of
its assets to the holders of its Capital Stock as a dividend in liquidation or
by way of return of capital or other than as a dividend payable out of earnings
or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (f)), the holder of this Warrant shall be
entitled to receive upon the exercise hereof, in addition to the shares of
Common Stock receivable upon such exercise, and without payment of any
consideration other than the Warrant Price, an amount in cash equal to the value
of such distribution per share of Common Stock multiplied by the number of
shares of Common Stock which, on the record date for such distribution, are
issuable upon exercise of this Warrant (with no further adjustment being made
following any event which causes a subsequent adjustment in the number of shares
of Common Stock issuable upon the exercise hereof), and an appropriate provision
therefor should be made a part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
(i) Other Provisions Applicable to Adjustments Under this Section.
The following provisions will be applicable to the making of adjustments in a
Warrant Price hereinabove provided in this Section 6:
(i) Computation of Consideration. To the extent that any
Additional Shares of Capital Stock or any convertible securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Capital Stock or any convertible securities shall be
issued for a cash consideration, the consideration received by the Company
therefor shall be deemed to be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Capital Stock or
convertible securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Capital Stock or
convertible securities are sold to underwriters or dealers for public
offering without a subscription offering, or through underwriters or
dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with the issue thereof. To the extent that such issuance shall
be for a consideration other than cash, then, the amount of such
consideration shall be deemed to be the fair value of such consideration
at the time of such issuance as determined in good faith by the Company's
Board of Directors. The consideration for any Additional Shares of Capital
Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration received by
the Company for issuing such warrants, options or other rights, plus the
additional consideration payable to the Company upon the exercise of such
warrants, options or other rights. The consideration for any Additional
Shares of Capital Stock issuable pursuant to the terms of any convertible
securities shall be the consideration paid or payable to the Company in
respect of the subscription for or purchase of such convertible
securities, plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or exchange in such
convertible securities. In case of the issuance at any time of any
Additional Shares of Capital Stock or convertible securities in payment or
satisfaction of any dividend upon any class of stock preferred as to
dividends in a fixed amount, the Company shall be deemed to have received
for such Additional Shares of Capital Stock or convertible securities a
consideration equal to the amount of such dividend so paid or satisfied.
(ii) Readjustment of Warrant Price. Upon the expiration of the
right to convert or exchange any convertible securities, or upon the
expiration of any rights, options or warrants, the issuance of which
convertible securities, rights, options or warrants effected an adjustment
in a Warrant Price, if any such convertible securities shall not have been
converted or exchanged, or if any such rights, options or warrants shall
not have been exercised, the number of shares of Capital Stock deemed to
be issued and outstanding by reason of the fact that they were issuable
upon conversion or exchange of any such convertible securities or upon
exercise of any such rights, options, or warrants shall no longer be
computed as set forth above, and such Warrant Price shall forthwith be
readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the Warrant Price made pursuant to the
provisions of this Section 6 after the issuance of such convertible
securities, rights, options or warrants) had the adjustment of the Warrant
Price made upon the issuance or sale of such convertible securities or
issuance of rights, options or warrants been made on the basis of the
issuance only of the number of Additional Shares of Capital Stock actually
issued upon conversion or exchange of such convertible securities, or upon
the exercise of such rights, options or warrants, and thereupon only the
number of Additional Shares of Capital Stock actually so issued, if any,
shall be deemed to have been issued and only the consideration actually
received by the Company (computed as set forth in subsection (i) hereof)
shall be deemed to have been received by the Company. If the purchase
price provided for in any rights, options or warrants, or the additional
consideration (if any) payable upon the conversion or exchange of any
convertible securities, or the rate at which any convertible securities
are convertible into or exchangeable for shares of Common Stock changes at
any time (other than under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of the change
shall be adjusted to the Warrant Price that would have been in effect at
such time had such rights, options, warrants or convertible securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iii) Treasury Shares. The number of shares of Capital Stock
at any time outstanding shall not include any shares thereof then directly
or indirectly owned or held by or for the account of the Company or any
Subsidiary.
(iv) Other Action Affecting Capital Stock. In case after the
date hereof the Company shall take any action affecting the outstanding
number of shares of Capital Stock, other than an action described in any
of the foregoing subsections (a) to (i) hereof, inclusive, which in the
opinion of the Company's Board of Directors would have a materially
adverse effect upon the rights of the holders of the Warrants, the Warrant
Price shall be adjusted in such manner and at such time as the Board of
Directors on the advice of the Company's independent public accountants
may in good faith determine to be equitable in the circumstances.
7. Notice of Adjustments. Whenever any of the Warrant Price or the number
of shares of Common Stock purchasable under the terms of the Warrants at that
Warrant Price shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Warrant Price and number of shares of
Common Stock purchasable at that Warrant Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the registered holders of the Warrants.
In the event the Company shall, at a time when the Warrants are
exercisable, take any action which pursuant to paragraphs (a) through (g) of
Section 6 may result in an adjustment of any of the Warrant Price or the number
of shares of Common Stock purchasable at that Warrant Price upon exercise of the
Warrants, the Company will give to the registered holders of the Warrants at
their last addresses known to the Company written notice of such action ten (10)
days in advance of its effective date in order to afford to such holders of the
Warrants an opportunity to exercise the Warrants and to purchase shares of
Common Stock of the Company prior to such action becoming effective.
8. Payment of Taxes. All shares of Common Stock issued upon the exercise
of a Warrant shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any name
other than that of the registered holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.
9. Fractional Shares. No fractional shares of the Company's Common Stock
will be issued in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor equal in amount
to the product of the applicable fraction multiplied by the Warrant Price paid
by the holder for its Warrant Shares upon such exercise.
10. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
evidence reasonably satisfactory to it that any Warrant of this Series has been
mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or
stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or
in the case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Warrant Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
11. Computations. The certificate of any firm of independent public
accountants of recognized standing selected by the Company shall be conclusive
evidence of the correctness of any computation under Warrants of this Series.
12. Headings. The descriptive headings of the several sections of these
Warrants are inserted for convenience only and do not constitute a part of these
Warrants.
13. 1933 Act Registration. Neither this Warrant nor the Warrant Shares
have been or will (except as provided below) be registered under the Securities
Act of 1933 (the "Acti), and are "restricted securities" as defined in Rule 501
promulgated under the Act. The Warrant Holder, by accepting that Warrant, agrees
(a) to make no sale or other transfer of this Warrant or Warrant Shares issuable
upon exercise of rights arising hereunder except in conformity with the Act, and
(b) that certificates representing Warrant Shares will need a legend in form
satisfactory to the Company's counsel which endures the foregoing restriction.
The Warrant Holder will have the same rights to require registration of the
Warrant Shares under the Act as are afforded to Mentor Special Situation Fund,
LP ("MSSF") in any agreement between the Company and MSSF, except as otherwise
expressly set forth in one such agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on the date of this Warrant.
CORECARE SYSTEMS, INC.
By:/s/ Rose S. DiOttavio
----------------------
Rose S. DiOttavio
President
Rider A
PURCHASE AGREEMENT
Date: ____________________
TO:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase __________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by this Warrant.
Signature:_________________________
Address:___________________________
* * *
ASSIGNMENT
For Value Received, ___________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered by such Warrant, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated: Signature:__________________________
Witness:____________________________
EXHIBIT 3.18
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH MUST BE ESTABLISHED BY SUCH REGISTERED HOLDER OR
TRANSFEREE TO THE SATISFACTION OF CORECARE SYSTEMS, INC.
____________________________________
Void after 5:00 P.M. (Eastern Time),
August 2, 2001, except as otherwise provided herein.
Series A No. Warrant to Purchase
333,333 Shares of Common Stock
Date: August 2, 1996
WARRANT
TO PURCHASE COMMON STOCK OF
CORECARE SYSTEMS, INC.
THIS CERTIFIES that, Mentor Special Situation Fund, L.P. (herein called
"Warrant Holder") or registered assigns, is entitled to purchase from Corecare
Systems, Inc. (herein called the "Company"), a corporation organized and
existing under the laws of Nevada, at any time after August 2, 1996 and until
5:00 P.M. (Eastern Time) on August 2, 2001, 333,333 fully paid and nonassessable
shares of Common Stock of the Company, $.001 par value per share (the "Common
Stock"), subject to adjustment as provided herein, at a purchase price of $1.50
per share.
1. Definitions. For the purpose of the Warrants:
(a) "Additional Shares of Capital Stock" shall mean all shares of
Capital Stock issued by the Company after the date hereof other than those
shares of Common Stock of the Company issuable upon the exercise of options
issued to officers, directors and employees of, or consultants or advisors to,
the Company under option plans approved by the Board of Directors.
(b) "Capital Stock" shall mean the Company's common stock, and any
other stock of any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(c) "Exercise Period" shall mean the period beginning August 3, 1996
and ending August 2, 2001.
(d) "Warrants of this Series" or "Warrants" shall mean the original
Warrants to purchase 333,333 shares of Common Stock of the Company issued
pursuant to the terms of the Note and Warrant Purchase Agreement between the
Company and the Warrant Holder dated August 2, 1996 (the "Note and Warrant
Agreement"), and any and all Warrants which are issued in exchange or
substitution for any outstanding Warrant pursuant to the terms of that Warrant.
(e) "Warrant Price" shall mean the price per share at which shares
of Common Stock of the Company are purchasable hereunder, as such prices may be
adjusted from time to time hereunder.
(f) "Warrant Shares" shall mean the stock purchased upon exercise of
Warrants.
2. Method of Exercise of Warrants. (a) This Warrant may be exercised in
whole or in part (but not as to fractional shares) on one or more occasions
during the Exercise Period by the surrender of the Warrant, with the Purchase
Agreement attached hereto as Rider A properly completed and duly executed, at
the principal office of the Company at Whitemarsh Professional Center, 9425
Stenton Avenue, Erdenheim, PA 19038, or such other location which shall at that
time be the principal office of the Company (the "Principal Office"), and upon
payment to it of the Warrant Price for the shares to be purchased upon such
exercise. The Warrant Price shall be paid, at the Warrant Holder's Option, (i)
by delivering a certified check or bank draft or immediately available funds to
the order of the Company for the entire Warrant Price, or (ii) by surrendering
to the Company shares of Common Stock of the Company owned by the Warrant Holder
having an aggregate current market value (determined as provided in paragraph
(c) below) equal to the Warrant Price being paid in shares, or (iii) by any
combination thereof determined by the Warrant Holder. The persons entitled to
the shares so purchased shall be treated for all purposes as the holders of such
shares as of the close of business on the date of exercise and certificates for
the shares of stock so purchased shall be delivered to the persons so entitled
within a reasonable time, not exceeding ten (10) days, after such exercise.
Unless this Warrant has expired, a new Warrant of like tenor and for such number
of shares as the holder of this Warrant shall direct, representing in the
aggregate the right to purchase a number of shares with respect to which this
Warrant shall not have been exercised, shall also be issued to the holder of
this Warrant within such time.
(b) In addition to and without limiting the rights of the Warrant
Holder under any other terms set forth herein, the Warrant Holder shall have,
upon written request by the Warrant Holder delivered or transmitted to the
Company together with this Warrant, the right (the "Conversion Right") to
require the Company to convert this Warrant into shares of Common Stock as
follows: upon exercise of the Conversion Right, the Company shall deliver to the
Warrant Holder (without payment by the Warrant Holder of any Warrant Price) that
number of shares of Common Stock that is equal to the quotient obtained by
dividing (x) the value of this Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Warrant Price in effect
immediately prior to the exercise of the Conversion Right from the aggregate
current market value (determined as provided in paragraph (c) below) of the
shares of Common Stock issuable upon exercise of this Warrant immediately prior
to the exercise of the Conversion Right) by (y) the current market value of one
share of Common Stock (determined as provided in paragraph (c) below)
immediately prior to the exercise of the Conversion Right. The Conversion Right
may be exercised by the Warrant Holder by surrender of this Warrant at the
principal office of the Company, together with a written statement specifying
that the Warrant Holder thereby intends to exercise the Conversion Right.
Certificates for shares of Common Stock issuable upon exercise of the Conversion
Right shall be delivered to the Warrant Holder promptly following the Company's
receipt of this Warrant together with the aforesaid written statement.
(c) For purposes of this Section, the current market value of a
share of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on The NASD Stock Market, the current market value
shall be the average of the closing prices of the Common Stock's sales on
all domestic securities exchanges on which such Common Stock may at the
time be listed, or if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or if on any day such Common Stock is
not so listed, the average of the representative bid and asked prices
quoted on the NASDAQ System as of 4:00 p.m., New York time, on such day,
or if on any day such Common Stock is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each case
averaged over a period of five (5) days consisting of the day as of which
the "current market value" is being determined and the four (4)
consecutive business days prior to such day; and
(ii) If the Common Stock is not so listed or admitted to the
unlisted trading privileges and bid and asked prices are not so reported,
the current market value of a share shall be an amount determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
3. Exchange. This Warrant is exchangeable, upon the surrender thereof by
the holder thereof at the Principal Office of the Company, for new Warrants of
like tenor registered in such holder's name and representing in the aggregate
the right to purchase the number of shares purchasable under the Warrant being
exchanged, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said holder at the time
of such surrender.
4. Transfer. Subject to compliance with the Securities Act of 1933 and the
rules and regulations promulgated thereunder and under applicable state
securities laws, this Warrant is transferable, in whole or in part, at the
Principal Office of the Company by the holder thereof, in person or by duly
authorized attorney, upon presentation of the Warrant, properly endorsed, for
transfer. Each holder of this Warrant, by holding it, agrees that the Warrant,
when endorsed in blank, may be deemed negotiable, and that the holder thereof,
when the Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with the Warrant as the absolute owner thereof for any
purpose and as the person entitled to exercise the rights represented by the
Warrant, or to the transfer thereof on the books of the Company, any notice to
the contrary notwithstanding.
5. Certain Covenants of the Company. The Company covenants and agrees that
all shares which may be issued upon the exercise of Warrants of this Series,
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof;
and will, upon issuance, be listed on each national securities exchange, if any,
on which the other outstanding shares of the Company are then listed, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such action as may be required to
assure that the par value per share of the Common Stock is at all times equal to
or less than the then effective purchase price per share of the Common Stock
issuable pursuant to the Warrants. The Company further covenants and agrees that
during the period within which the rights represented by the Warrants may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue upon exercise of the purchase rights evidenced by the Warrants,
a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by the Warrants.
6. Adjustment of Purchase Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrants of this Series and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Reclassification, Consolidation or Merger. At any time while
Warrants of this Series remain outstanding and unexpired, in case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon the exercise
of the Warrants) or in case of any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value per share, or from no par value per share to par value, or as a
result of a subdivision or combination of outstanding securities issuable upon
the exercise of the Warrants), or in the case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company, or such successor or purchasing corporation, as the case
may be, shall, without payment of any additional consideration therefor, execute
new Warrants providing that the holders of the Warrants shall have the right to
exercise such new Warrants (upon terms not less favorable to the holders than
those then applicable to the Warrants) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation, merger,
sale or transfer by the holder of one share of Common Stock issuable upon
exercise of the Warrants had the Warrants been exercised immediately prior to
such reclassification, change, consolidation, merger, sale or transfer. Such new
Warrants shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6. The
provisions of this subsection 6(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
while Warrants of this Series remain outstanding and unexpired, shall subdivide
or combine its Capital Stock, the Warrant Price shall be proportionately
reduced, in case of subdivision of such shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Capital
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier, or shall be proportionately increased, in the case of combination of
such shares, as of the effective date of such combination, or, if the Company
shall take a record of holders of its Capital Stock for the purpose of so
combining, as of such record date, whichever is earlier.
(c) Stock Dividends. If the Company at any time while Warrants of
this Series are outstanding and unexpired shall pay a dividend in shares of, or
make other distribution (without consideration) of shares of, its Capital Stock,
then the Warrant Price shall be adjusted, as of the date the Company shall take
a record of the holders of its Capital Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by multiplying the
Warrant Price in effect immediately prior to such payment or other distribution
by a fraction (a) the numerator of which shall be the total number of shares of
Capital Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of Capital
Stock outstanding immediately after such dividend or distribution. The
provisions of this subsection 6(c) shall not apply under any of the
circumstances for which an adjustment is provided in subsections 6(a) or 6(b).
(d) Issuance of Additional Shares of Capital Stock. If the Company
at any time while the Warrants remain outstanding and unexpired shall issue any
Additional Shares of Capital Stock (otherwise than as provided in the foregoing
subsections (a) through (c) above) at a price per share less, or for other
consideration lower, than the Warrant Price in effect immediately prior to such
issuance, or without consideration, then upon such issuance the Warrant Price
shall be reduced to that price determined by multiplying the Warrant Price in
effect immediately prior to such event by a fraction:
(i) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of shares of Common Stock which the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at the then effective Warrant Price, and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of such Additional Shares of Common Stock
so issued.
The provisions of this subsection 6(d) shall not apply under any of
the circumstances for which an adjustment is provided in subsections 6(a), 6(b),
or 6(c). No adjustment of a Warrant Price shall be made under this subsection
6(d) upon the issuance of any Additional Shares of Capital Stock which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if (A) any such adjustments shall
previously have been made upon the issuance of any such warrants, options or
other rights or upon the issuance of any convertible securities (or upon the
issuance of any warrants, options or any rights therefor) pursuant to
subsections 6(e) or 6(f) hereof, or (B) such warrants, options, other
subscription or purchase rights or convertible securities are outstanding as of
August 2, 1996 (original date of issuance of this warrant) and described in the
Disclosure Letter delivered by the Company to MSSF (as defined in Section 13) on
the date hereof pursuant to the Note and Warrant Agreement.
(e) Issuance of Warrants, Options or Other Rights. If the Company at
any time while the Warrants remain outstanding and unexpired shall issue any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Capital Stock and the price per share for which Additional Shares of
Capital Stock may at any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Warrant Price in effect hereunder
immediately prior to such issuance, then upon such issuance the Warrant Price
shall be adjusted as provided in subsection 6(d) hereof on the basis that:
(i) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights shall be deemed
to have been issued as of the date of actual issuance of such warrants, options
or other rights, and
(ii) the aggregate consideration for such maximum number of
Additional Shares of Capital Stock issuable pursuant to such warrants, options
or other rights, shall be deemed to be the consideration received by the Company
for the issuance of such warrants, options, or other rights plus the minimum
consideration to be received by the Company for the issuance of Additional
Shares of Capital Stock pursuant to such warrants, options, or other rights.
(f) Issuance of Convertible Securities. If the Company at any time
while the Warrants remain outstanding and unexpired shall issue any securities
convertible into Common Stock and the consideration per share for which
Additional Shares of Capital Stock may at any time thereafter be issuable
pursuant to the terms of such convertible securities shall be less than the
Warrant Price in effect immediately prior to such issuance, then upon such
issuance the Warrant Price shall be adjusted as provided in subsection 6(d)
hereof on the basis that (i) the maximum number of Additional Shares of Capital
Stock necessary to effect the conversion or exchange of all such convertible
securities shall be deemed to have been issued as of the date of issuance of
such convertible securities, and (ii) the aggregate consideration for such
maximum number of Additional Shares of Capital Stock shall be deemed to be the
consideration received by the Company for the issuance of such convertible
securities plus the minimum consideration received by the Company for the
issuance of such Additional Shares of Capital Stock pursuant to the terms of
such convertible securities. No adjustment of the Warrant Price shall be made
under this subsection upon the issuance of any convertible securities which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights pursuant to
subsection 6(e) hereof.
(g) Adjustment of Number of Shares. Upon each adjustment in a
Warrant Price pursuant to subsections 6(a) through 6(h), the number of shares of
Common Stock purchasable hereunder at that Warrant Price shall be adjusted, to
the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(h) Liquidating Dividends, Etc. If the Company at any time while
Warrants of this Series are outstanding and unexpired makes a distribution of
its assets to the holders of its Capital Stock as a dividend in liquidation or
by way of return of capital or other than as a dividend payable out of earnings
or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (f)), the holder of this Warrant shall be
entitled to receive upon the exercise hereof, in addition to the shares of
Common Stock receivable upon such exercise, and without payment of any
consideration other than the Warrant Price, an amount in cash equal to the value
of such distribution per share of Common Stock multiplied by the number of
shares of Common Stock which, on the record date for such distribution, are
issuable upon exercise of this Warrant (with no further adjustment being made
following any event which causes a subsequent adjustment in the number of shares
of Common Stock issuable upon the exercise hereof), and an appropriate provision
therefor should be made a part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
(i) Other Provisions Applicable to Adjustments Under this Section.
The following provisions will be applicable to the making of adjustments in a
Warrant Price hereinabove provided in this Section 6:
(i) Computation of Consideration. To the extent that any
Additional Shares of Capital Stock or any convertible securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Capital Stock or any convertible securities shall be
issued for a cash consideration, the consideration received by the Company
therefor shall be deemed to be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Capital Stock or
convertible securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Capital Stock or
convertible securities are sold to underwriters or dealers for public
offering without a subscription offering, or through underwriters or
dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with the issue thereof. To the extent that such issuance shall
be for a consideration other than cash, then, the amount of such
consideration shall be deemed to be the fair value of such consideration
at the time of such issuance as determined in good faith by the Company's
Board of Directors. The consideration for any Additional Shares of Capital
Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration received by
the Company for issuing such warrants, options or other rights, plus the
additional consideration payable to the Company upon the exercise of such
warrants, options or other rights. The consideration for any Additional
Shares of Capital Stock issuable pursuant to the terms of any convertible
securities shall be the consideration paid or payable to the Company in
respect of the subscription for or purchase of such convertible
securities, plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or exchange in such
convertible securities. In case of the issuance at any time of any
Additional Shares of Capital Stock or convertible securities in payment or
satisfaction of any dividend upon any class of stock preferred as to
dividends in a fixed amount, the Company shall be deemed to have received
for such Additional Shares of Capital Stock or convertible securities a
consideration equal to the amount of such dividend so paid or satisfied.
(ii) Readjustment of Warrant Price. Upon the expiration
of the right to convert or exchange any convertible securities, or upon
the expiration of any rights, options or warrants, the issuance of which
convertible securities, rights, options or warrants effected an adjustment
in a Warrant Price, if any such convertible securities shall not have been
converted or exchanged, or if any such rights, options or warrants shall
not have been exercised, the number of shares of Capital Stock deemed to
be issued and outstanding by reason of the fact that they were issuable
upon conversion or exchange of any such convertible securities or upon
exercise of any such rights, options, or warrants shall no longer be
computed as set forth above, and such Warrant Price shall forthwith be
readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the Warrant Price made pursuant to the
provisions of this Section 6 after the issuance of such convertible
securities, rights, options or warrants) had the adjustment of the Warrant
Price made upon the issuance or sale of such convertible securities or
issuance of rights, options or warrants been made on the basis of the
issuance only of the number of Additional Shares of Capital Stock actually
issued upon conversion or exchange of such convertible securities, or upon
the exercise of such rights, options or warrants, and thereupon only the
number of Additional Shares of Capital Stock actually so issued, if any,
shall be deemed to have been issued and only the consideration actually
received by the Company (computed as set forth in subsection (i) hereof)
shall be deemed to have been received by the Company. If the purchase
price provided for in any rights, options or warrants, or the additional
consideration (if any) payable upon the conversion or exchange of any
convertible securities, or the rate at which any convertible securities
are convertible into or exchangeable for shares of Common Stock changes at
any time (other than under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of the change
shall be adjusted to the Warrant Price that would have been in effect at
such time had such rights, options, warrants or convertible securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iii) Treasury Shares. The number of shares of Capital
Stock at any time outstanding shall not include any shares thereof then
directly or indirectly owned or held by or for the account of the Company
or any Subsidiary.
(iv) Other Action Affecting Capital Stock. In case after
the date hereof the Company shall take any action affecting the
outstanding number of shares of Capital Stock, other than an action
described in any of the foregoing subsections (a) to (i) hereof,
inclusive, which in the opinion of the Company's Board of Directors would
have a materially adverse effect upon the rights of the holders of the
Warrants, the Warrant Price shall be adjusted in such manner and at such
time as the Board of Directors on the advice of the Company's independent
public accountants may in good faith determine to be equitable in the
circumstances.
7. Notice of Adjustments. Whenever any of the Warrant Price or the number
of shares of Common Stock purchasable under the terms of the Warrants at that
Warrant Price shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Warrant Price and number of shares of
Common Stock purchasable at that Warrant Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the registered holders of the Warrants.
In the event the Company shall, at a time when the Warrants are
exercisable, take any action which pursuant to paragraphs (a) through (g) of
Section 6 may result in an adjustment of any of the Warrant Price or the number
of shares of Common Stock purchasable at that Warrant Price upon exercise of the
Warrants, the Company will give to the registered holders of the Warrants at
their last addresses known to the Company written notice of such action ten (10)
days in advance of its effective date in order to afford to such holders of the
Warrants an opportunity to exercise the Warrants and to purchase shares of
Common Stock of the Company prior to such action becoming effective.
8. Payment of Taxes. All shares of Common Stock issued upon the exercise
of a Warrant shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any name
other than that of the registered holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.
9. Fractional Shares. No fractional shares of the Company's Common Stock
will be issued in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor equal in amount
to the product of the applicable fraction multiplied by the Warrant Price paid
by the holder for its Warrant Shares upon such exercise.
10. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
evidence reasonably satisfactory to it that any Warrant of this Series has been
mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or
stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or
in the case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Warrant Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
11. Computations. The certificate of any firm of independent public
accountants of recognized standing selected by the Company shall be conclusive
evidence of the correctness of any computation under Warrants of this Series.
12. Headings. The descriptive headings of the several sections of these
Warrants are inserted for convenience only and do not constitute a part of these
Warrants.
13. 1933 Act Registration. Neither this Warrant nor the Warrant Shares
have been or will (except as provided below) be registered under the Securities
Act of 1933 (the "Act"), and are "restricted securities" as defined in Rule 501
promulgated under the Act. The Warrant Holder, by accepting that Warrant, agrees
(a) to make no sale or other transfer of this Warrant or Warrant Shares issuable
upon exercise of rights arising hereunder except in conformity with the Act, and
(b) that certificates representing Warrant Shares will need a legend in form
satisfactory to the Company's counsel which reflects the foregoing restriction.
The Warrant Holder will have the same rights to require registration of the
Warrant Shares under the Act as are afforded to Mentor Special Situation Fund,
L.P. ("MSSF") in any agreement between the Company and MSSF, including, without
limitation, the Note and Warrant Agreement, except as otherwise expressly set
forth in any such agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on the date of this Warrant.
CORECARE SYSTEMS, INC.
By: /s/ Rose S. DiOttavio
---------------------
Rose S. DiOttavio, President
Rider A
PURCHASE AGREEMENT
Date: ____________________
TO:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase __________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by this Warrant.
Signature:_______________________
Address:_________________________
* * *
ASSIGNMENT
For Value Received, ___________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered by such Warrant, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated: Signature:______________________
Witness:________________________
EXHIBIT 3.19
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH MUST BE ESTABLISHED BY SUCH REGISTERED HOLDER OR
TRANSFEREE TO THE SATISFACTION OF CORECARE SYSTEMS, INC.
____________________________________
Void after 5:00 P.M. (Eastern Time),
August 2, 2001, except as otherwise provided herein.
Series A No. Warrant to Purchase
125,000 Shares of Common Stock
Date: August 2, 1996
WARRANT
TO PURCHASE COMMON STOCK OF
CORECARE SYSTEMS, INC.
THIS CERTIFIES that, Mentor Management Company, (herein called "Warrant
Holder") or registered assigns, is entitled to purchase from Corecare Systems,
Inc. (herein called the "Company"), a corporation organized and existing under
the laws of Nevada, at any time after August 2, 1996 and until 5:00 P.M.
(Eastern Time) on August 2, 2001, 125,000 fully paid and nonassessable shares of
Common Stock of the Company, $.001 par value per share (the "Common Stock"),
subject to adjustment as provided herein, at a purchase price of $1.50 per
share.
1. Definitions. For the purpose of the Warrants:
(a) "Additional Shares of Capital Stock" shall mean all shares of
Capital Stock issued by the Company after the date hereof other than those
shares of Common Stock of the Company issuable upon the exercise of options
issued to officers, directors and employees of, or consultants or advisors to,
the Company under option plans approved by the Board of Directors.
(b) "Capital Stock" shall mean the Company's common stock, and any
other stock of any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets of the Company
without limit as to amount or percentage.
(c) "Exercise Period" shall mean the period beginning August 3, 1996
and ending August 2, 2001.
(d) "Warrants of this Series" or "Warrants" shall mean the original
Warrants to purchase 125,000 shares of Common Stock of the Company issued
pursuant to the terms of the Financial Advisory Agreement between the Company
and the Warrant Holder dated as of April 1, 1996 (the "Financial Advisory
Agreement"), and any and all Warrants which are issued in exchange or
substitution for any outstanding Warrant pursuant to the terms of that Warrant.
(e) "Warrant Price" shall mean the price per share at which shares
of Common Stock of the Company are purchasable hereunder, as such prices may be
adjusted from time to time hereunder.
(f) "Warrant Shares" shall mean the stock purchased upon exercise of
Warrants.
2. Method of Exercise of Warrants. (a) This Warrant may be exercised in
whole or in part (but not as to fractional shares) on one or more occasions
during the Exercise Period by the surrender of the Warrant, with the Purchase
Agreement attached hereto as Rider A properly completed and duly executed, at
the principal office of the Company at Whitemarsh Professional Center, 9425
Stenton Avenue, Erdenheim, PA 19038, or such other location which shall at that
time be the principal office of the Company (the "Principal Office"), and upon
payment to it of the Warrant Price for the shares to be purchased upon such
exercise. The Warrant Price shall be paid, at the Warrant Holder's Option, (i)
by delivering a certified check or bank draft or immediately available funds to
the order of the Company for the entire Warrant Price, or (ii) by surrendering
to the Company shares of Common Stock of the Company owned by the Warrant Holder
having an aggregate current market value (determined as provided in paragraph
(c) below) equal to the Warrant Price being paid in shares, or (iii) by any
combination thereof determined by the Warrant Holder. The persons entitled to
the shares so purchased shall be treated for all purposes as the holders of such
shares as of the close of business on the date of exercise and certificates for
the shares of stock so purchased shall be delivered to the persons so entitled
within a reasonable time, not exceeding ten (10) days, after such exercise.
Unless this Warrant has expired, a new Warrant of like tenor and for such number
of shares as the holder of this Warrant shall direct, representing in the
aggregate the right to purchase a number of shares with respect to which this
Warrant shall not have been exercised, shall also be issued to the holder of
this Warrant within such time.
(b) In addition to and without limiting the rights of the Warrant
Holder under any other terms set forth herein, the Warrant Holder shall have,
upon written request by the Warrant Holder delivered or transmitted to the
Company together with this Warrant, the right (the "Conversion Right") to
require the Company to convert this Warrant into shares of Common Stock as
follows: upon exercise of the Conversion Right, the Company shall deliver to the
Warrant Holder (without payment by the Warrant Holder of any Warrant Price) that
number of shares of Common Stock that is equal to the quotient obtained by
dividing (x) the value of this Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Warrant Price in effect
immediately prior to the exercise of the Conversion Right from the aggregate
current market value (determined as provided in paragraph (c) below) of the
shares of Common Stock issuable upon exercise of this Warrant immediately prior
to the exercise of the Conversion Right) by (y) the current market value of one
share of Common Stock (determined as provided in paragraph (c) below)
immediately prior to the exercise of the Conversion Right. The Conversion Right
may be exercised by the Warrant Holder by surrender of this Warrant at the
principal office of the Company, together with a written statement specifying
that the Warrant Holder thereby intends to exercise the Conversion Right.
Certificates for shares of Common Stock issuable upon exercise of the Conversion
Right shall be delivered to the Warrant Holder promptly following the Company's
receipt of this Warrant together with the aforesaid written statement.
(c) For purposes of this Section, the current market value of a
share of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on The NASD Stock Market, the current market value
shall be the average of the closing prices of the Common Stock's sales on
all domestic securities exchanges on which such Common Stock may at the
time be listed, or if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or if on any day such Common Stock is
not so listed, the average of the representative bid and asked prices
quoted on the NASDAQ System as of 4:00 p.m., New York time, on such day,
or if on any day such Common Stock is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each case
averaged over a period of five (5) days consisting of the day as of which
the "current market value" is being determined and the four (4)
consecutive business days prior to such day; and
(ii) If the Common Stock is not so listed or admitted to the
unlisted trading privileges and bid and asked prices are not so reported,
the current market value of a share shall be an amount determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
3. Exchange. This Warrant is exchangeable, upon the surrender thereof by
the holder thereof at the Principal Office of the Company, for new Warrants of
like tenor registered in such holder's name and representing in the aggregate
the right to purchase the number of shares purchasable under the Warrant being
exchanged, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said holder at the time
of such surrender.
4. Transfer. Subject to compliance with the Securities Act of 1933 and the
rules and regulations promulgated thereunder and under applicable state
securities laws, this Warrant is transferable, in whole or in part, at the
Principal Office of the Company by the holder thereof, in person or by duly
authorized attorney, upon presentation of the Warrant, properly endorsed, for
transfer. Each holder of this Warrant, by holding it, agrees that the Warrant,
when endorsed in blank, may be deemed negotiable, and that the holder thereof,
when the Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with the Warrant as the absolute owner thereof for any
purpose and as the person entitled to exercise the rights represented by the
Warrant, or to the transfer thereof on the books of the Company, any notice to
the contrary notwithstanding.
5. Certain Covenants of the Company. The Company covenants and agrees that
all shares which may be issued upon the exercise of Warrants of this Series,
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof;
and will, upon issuance, be listed on each national securities exchange, if any,
on which the other outstanding shares of the Company are then listed, and
without limiting the generality of the foregoing, the Company covenants and
agrees that it will from time to time take all such action as may be required to
assure that the par value per share of the Common Stock is at all times equal to
or less than the then effective purchase price per share of the Common Stock
issuable pursuant to the Warrants. The Company further covenants and agrees that
during the period within which the rights represented by the Warrants may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of issue upon exercise of the purchase rights evidenced by the Warrants,
a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by the Warrants.
6. Adjustment of Purchase Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of the Warrants of this Series and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(a) Reclassification, Consolidation or Merger. At any time while
Warrants of this Series remain outstanding and unexpired, in case of any
reclassification or change of outstanding securities issuable upon exercise of
the Warrants (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon the exercise
of the Warrants) or in case of any consolidation or merger of the Company with
or into another corporation (other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from par value
to no par value per share, or from no par value per share to par value, or as a
result of a subdivision or combination of outstanding securities issuable upon
the exercise of the Warrants), or in the case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as an
entirety, the Company, or such successor or purchasing corporation, as the case
may be, shall, without payment of any additional consideration therefor, execute
new Warrants providing that the holders of the Warrants shall have the right to
exercise such new Warrants (upon terms not less favorable to the holders than
those then applicable to the Warrants) and to receive upon such exercise, in
lieu of each share of Common Stock theretofore issuable upon exercise of the
Warrants, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation, merger,
sale or transfer by the holder of one share of Common Stock issuable upon
exercise of the Warrants had the Warrants been exercised immediately prior to
such reclassification, change, consolidation, merger, sale or transfer. Such new
Warrants shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6. The
provisions of this subsection 6(a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
while Warrants of this Series remain outstanding and unexpired, shall subdivide
or combine its Capital Stock, the Warrant Price shall be proportionately
reduced, in case of subdivision of such shares, as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Capital
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier, or shall be proportionately increased, in the case of combination of
such shares, as of the effective date of such combination, or, if the Company
shall take a record of holders of its Capital Stock for the purpose of so
combining, as of such record date, whichever is earlier.
(c) Stock Dividends. If the Company at any time while Warrants of
this Series are outstanding and unexpired shall pay a dividend in shares of, or
make other distribution (without consideration) of shares of, its Capital Stock,
then the Warrant Price shall be adjusted, as of the date the Company shall take
a record of the holders of its Capital Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by multiplying the
Warrant Price in effect immediately prior to such payment or other distribution
by a fraction (a) the numerator of which shall be the total number of shares of
Capital Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of Capital
Stock outstanding immediately after such dividend or distribution. The
provisions of this subsection 6(c) shall not apply under any of the
circumstances for which an adjustment is provided in subsections 6(a) or 6(b).
(d) Issuance of Additional Shares of Capital Stock. If the Company
at any time while the Warrants remain outstanding and unexpired shall issue any
Additional Shares of Capital Stock (otherwise than as provided in the foregoing
subsections (a) through (c) above) at a price per share less, or for other
consideration lower, than the Warrant Price in effect immediately prior to such
issuance, or without consideration, then upon such issuance the Warrant Price
shall be reduced to that price determined by multiplying the Warrant Price in
effect immediately prior to such event by a fraction:
(i) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of shares of Common Stock which the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at the then effective Warrant Price, and
(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such Additional
Shares of Common Stock plus the number of such Additional Shares of Common Stock
so issued.
The provisions of this subsection 6(d) shall not apply under any of
the circumstances for which an adjustment is provided in subsections 6(a), 6(b),
or 6(c). No adjustment of a Warrant Price shall be made under this subsection
6(d) upon the issuance of any Additional Shares of Capital Stock which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if (A) any such adjustments shall
previously have been made upon the issuance of any such warrants, options or
other rights or upon the issuance of any convertible securities (or upon the
issuance of any warrants, options or any rights therefor) pursuant to
subsections 6(e) or 6(f) hereof, or (B) such warrants, options, other
subscription or purchase rights or convertible securities are outstanding as of
August 2, 1996 (original date of issuance of this warrant) and described in the
Disclosure Letter delivered by the Company to Mentor Special Situation Fund,
L.P. ("MSSF") on the date hereof pursuant to the Note and Warrant Purchase
Agreement between the Company and MSSF dated as of the date hereof (the "Note
and Warrant Agreement").
(e) Issuance of Warrants, Options or Other Rights. If the Company at
any time while the Warrants remain outstanding and unexpired shall issue any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Capital Stock and the price per share for which Additional Shares of
Capital Stock may at any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Warrant Price in effect hereunder
immediately prior to such issuance, then upon such issuance the Warrant Price
shall be adjusted as provided in subsection 6(d) hereof on the basis that:
(i) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, options or other rights shall be deemed
to have been issued as of the date of actual issuance of such warrants, options
or other rights, and
(ii) the aggregate consideration for such maximum number of
Additional Shares of Capital Stock issuable pursuant to such warrants, options
or other rights, shall be deemed to be the consideration received by the Company
for the issuance of such warrants, options, or other rights plus the minimum
consideration to be received by the Company for the issuance of Additional
Shares of Capital Stock pursuant to such warrants, options, or other rights.
(f) Issuance of Convertible Securities. If the Company at any time
while the Warrants remain outstanding and unexpired shall issue any securities
convertible into Common Stock and the consideration per share for which
Additional Shares of Capital Stock may at any time thereafter be issuable
pursuant to the terms of such convertible securities shall be less than the
Warrant Price in effect immediately prior to such issuance, then upon such
issuance the Warrant Price shall be adjusted as provided in subsection 6(d)
hereof on the basis that (i) the maximum number of Additional Shares of Capital
Stock necessary to effect the conversion or exchange of all such convertible
securities shall be deemed to have been issued as of the date of issuance of
such convertible securities, and (ii) the aggregate consideration for such
maximum number of Additional Shares of Capital Stock shall be deemed to be the
consideration received by the Company for the issuance of such convertible
securities plus the minimum consideration received by the Company for the
issuance of such Additional Shares of Capital Stock pursuant to the terms of
such convertible securities. No adjustment of the Warrant Price shall be made
under this subsection upon the issuance of any convertible securities which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants, options or other rights pursuant to
subsection 6(e) hereof.
(g) Adjustment of Number of Shares. Upon each adjustment in a
Warrant Price pursuant to subsections 6(a) through 6(h), the number of shares of
Common Stock purchasable hereunder at that Warrant Price shall be adjusted, to
the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(h) Liquidating Dividends, Etc. If the Company at any time while
Warrants of this Series are outstanding and unexpired makes a distribution of
its assets to the holders of its Capital Stock as a dividend in liquidation or
by way of return of capital or other than as a dividend payable out of earnings
or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (f)), the holder of this Warrant shall be
entitled to receive upon the exercise hereof, in addition to the shares of
Common Stock receivable upon such exercise, and without payment of any
consideration other than the Warrant Price, an amount in cash equal to the value
of such distribution per share of Common Stock multiplied by the number of
shares of Common Stock which, on the record date for such distribution, are
issuable upon exercise of this Warrant (with no further adjustment being made
following any event which causes a subsequent adjustment in the number of shares
of Common Stock issuable upon the exercise hereof), and an appropriate provision
therefor should be made a part of any such distribution. The value of a
distribution which is paid in other than cash shall be determined in good faith
by the Board of Directors.
(i) Other Provisions Applicable to Adjustments Under this Section.
The following provisions will be applicable to the making of adjustments in a
Warrant Price hereinabove provided in this Section 6:
(i) Computation of Consideration. To the extent that any
Additional Shares of Capital Stock or any convertible securities or any
warrants, options or other rights to subscribe for or purchase any
Additional Shares of Capital Stock or any convertible securities shall be
issued for a cash consideration, the consideration received by the Company
therefor shall be deemed to be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Capital Stock or
convertible securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Capital Stock or
convertible securities are sold to underwriters or dealers for public
offering without a subscription offering, or through underwriters or
dealers for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with the issue thereof. To the extent that such issuance shall
be for a consideration other than cash, then, the amount of such
consideration shall be deemed to be the fair value of such consideration
at the time of such issuance as determined in good faith by the Company's
Board of Directors. The consideration for any Additional Shares of Capital
Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration received by
the Company for issuing such warrants, options or other rights, plus the
additional consideration payable to the Company upon the exercise of such
warrants, options or other rights. The consideration for any Additional
Shares of Capital Stock issuable pursuant to the terms of any convertible
securities shall be the consideration paid or payable to the Company in
respect of the subscription for or purchase of such convertible
securities, plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or exchange in such
convertible securities. In case of the issuance at any time of any
Additional Shares of Capital Stock or convertible securities in payment or
satisfaction of any dividend upon any class of stock preferred as to
dividends in a fixed amount, the Company shall be deemed to have received
for such Additional Shares of Capital Stock or convertible securities a
consideration equal to the amount of such dividend so paid or satisfied.
(ii) Readjustment of Warrant Price. Upon the expiration
of the right to convert or exchange any convertible securities, or upon
the expiration of any rights, options or warrants, the issuance of which
convertible securities, rights, options or warrants effected an adjustment
in a Warrant Price, if any such convertible securities shall not have been
converted or exchanged, or if any such rights, options or warrants shall
not have been exercised, the number of shares of Capital Stock deemed to
be issued and outstanding by reason of the fact that they were issuable
upon conversion or exchange of any such convertible securities or upon
exercise of any such rights, options, or warrants shall no longer be
computed as set forth above, and such Warrant Price shall forthwith be
readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the Warrant Price made pursuant to the
provisions of this Section 6 after the issuance of such convertible
securities, rights, options or warrants) had the adjustment of the Warrant
Price made upon the issuance or sale of such convertible securities or
issuance of rights, options or warrants been made on the basis of the
issuance only of the number of Additional Shares of Capital Stock actually
issued upon conversion or exchange of such convertible securities, or upon
the exercise of such rights, options or warrants, and thereupon only the
number of Additional Shares of Capital Stock actually so issued, if any,
shall be deemed to have been issued and only the consideration actually
received by the Company (computed as set forth in subsection (i) hereof)
shall be deemed to have been received by the Company. If the purchase
price provided for in any rights, options or warrants, or the additional
consideration (if any) payable upon the conversion or exchange of any
convertible securities, or the rate at which any convertible securities
are convertible into or exchangeable for shares of Common Stock changes at
any time (other than under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of the change
shall be adjusted to the Warrant Price that would have been in effect at
such time had such rights, options, warrants or convertible securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iii) Treasury Shares. The number of shares of Capital
Stock at any time outstanding shall not include any shares thereof then
directly or indirectly owned or held by or for the account of the Company
or any Subsidiary.
(iv) Other Action Affecting Capital Stock. In case after
the date hereof the Company shall take any action affecting the
outstanding number of shares of Capital Stock, other than an action
described in any of the foregoing subsections (a) to (i) hereof,
inclusive, which in the opinion of the Company's Board of Directors would
have a materially adverse effect upon the rights of the holders of the
Warrants, the Warrant Price shall be adjusted in such manner and at such
time as the Board of Directors on the advice of the Company's independent
public accountants may in good faith determine to be equitable in the
circumstances.
7. Notice of Adjustments. Whenever any of the Warrant Price or the number
of shares of Common Stock purchasable under the terms of the Warrants at that
Warrant Price shall be adjusted pursuant to Section 6 hereof, the Company shall
promptly make a certificate signed by its President or a Vice President and by
its Treasurer or Assistant Treasurer or its Secretary or Assistant Secretary,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company's Board of Directors
made any determination hereunder), and the Warrant Price and number of shares of
Common Stock purchasable at that Warrant Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be mailed (by
first class and postage prepaid) to the registered holders of the Warrants.
In the event the Company shall, at a time when the Warrants are
exercisable, take any action which pursuant to paragraphs (a) through (g) of
Section 6 may result in an adjustment of any of the Warrant Price or the number
of shares of Common Stock purchasable at that Warrant Price upon exercise of the
Warrants, the Company will give to the registered holders of the Warrants at
their last addresses known to the Company written notice of such action ten (10)
days in advance of its effective date in order to afford to such holders of the
Warrants an opportunity to exercise the Warrants and to purchase shares of
Common Stock of the Company prior to such action becoming effective.
8. Payment of Taxes. All shares of Common Stock issued upon the exercise
of a Warrant shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect of the issue or delivery thereof. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock in any name
other than that of the registered holder of the Warrant surrendered in
connection with the purchase of such shares, and in such case the Company shall
not be required to issue or deliver any stock certificate until such tax or
other charge has been paid or it has been established to the Company's
satisfaction that no tax or other charge is due.
9. Fractional Shares. No fractional shares of the Company's Common Stock
will be issued in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor equal in amount
to the product of the applicable fraction multiplied by the Warrant Price paid
by the holder for its Warrant Shares upon such exercise.
10. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company of
evidence reasonably satisfactory to it that any Warrant of this Series has been
mutilated, destroyed, lost or stolen, and in the case of any destroyed, lost or
stolen Warrant, a bond of indemnity reasonably satisfactory to the Company, or
in the case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Warrant Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
11. Computations. The certificate of any firm of independent public
accountants of recognized standing selected by the Company shall be conclusive
evidence of the correctness of any computation under Warrants of this Series.
12. Headings. The descriptive headings of the several sections of these
Warrants are inserted for convenience only and do not constitute a part of these
Warrants.
13. 1933 Act Registration. Neither this Warrant nor the Warrant Shares
have been or will (except as provided below) be registered under the Securities
Act of 1933 (the "Act"), and are "restricted securities" as defined in Rule 501
promulgated under the Act. The Warrant Holder, by accepting that Warrant, agrees
(a) to make no sale or other transfer of this Warrant or Warrant Shares issuable
upon exercise of rights arising hereunder except in conformity with the Act, and
(b) that certificates representing Warrant Shares will need a legend in form
satisfactory to the Company's counsel which reflects the foregoing restriction.
The Warrant Holder will have the same rights to require registration of the
Warrant Shares under the Act as are afforded to MSSF in any agreement between
the Company and MSSF, including, without limitation, the Note and Warrant
Agreement, except as otherwise expressly set forth in any such agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on the date of this Warrant.
CORECARE SYSTEMS, INC.
By:/s/ Rose S. DiOttavio
----------------------
Rose S. DiOttavio
Rider A
PURCHASE AGREEMENT
Date: ____________________
TO:
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to purchase __________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by this Warrant.
Signature:_____________________
Address:_______________________
* * *
ASSIGNMENT
For Value Received, ___________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered by such Warrant, to:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
- ---------------- ------- -------------
Dated: Signature:_____________________
Witness:_______________________
EXHIBIT 3.20
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH MUST BE
ESTABLISHED BY SUCH REGISTERED HOLDER OR TRANSFEREE TO THE SATISFACTION OF
CORECARE SYSTEMS, INC.
15% BRIDGE NOTE
$200,000 April 12, 1996
Erdenheim, Pennsylvania
FOR VALUE RECEIVED, CORECARE SYSTEMS, INC., a Nevada corporation (the
"Company"), hereby promises to pay to MENTOR SPECIAL SITUATION FUND, L.P., a
Pennsylvania limited partnership, or its registered assigns ("Payee"), on the
Maturity Date (determined as provided in Section 1), the principal sum of Two
Hundred Thousand and 00/100 Dollars ($200,000), together with interest
(calculated on the basis of the actual number of days elapsed in a year
consisting of 365 days) on the unpaid balance of said principal sum from the
date hereof until the Note is paid in full (or exchanged as provided in Section
1) at the rate of fifteen percent (15%) per annum, payable monthly in arrears on
the first business day of each month, commencing May 1, 1996, and interest on
any overdue principal or interest (to the extent lawful), at the rate of two
percent (2%) per month, compounded monthly until paid in full. Presentation,
demand, protest and notice of dishonor are hereby waived by the Company. The
Company shall use the proceeds of this Note for working capital purposes.
1. Maturity Date. The "Maturity Date" of this Note shall be the earlier of
(a) the effective date of the refinancing of the Company's Lakewood Retreat
facility and Westmeade at Warwick facility as outlined in the Financial Advisory
Agreement between Mentor Management Company and the Company, dated April 1,
1996, (b) the effective date of the issuance and sale by the Company of $500,000
aggregate principal amount of Subordinated Notes and Warrants (the "Note and
Warrant Closing"), or (c) sixty (60) days after the date of issuance of this
Note. If neither of the events described in clauses (a) or (b) above occurs on
or before the 60th day after the date of issuance of this Note, then on such
60th day the Company shall, at its option, either (i) pay to Payee the entire
outstanding principal amount hereof plus all accrued and unpaid interest hereon
or (ii) issue to Payee, in exchange for the cancellation and return of this
Note, (A) a new note, in the form of Exhibit A hereto, in a principal amount
equal to the unpaid principal balance hereof plus all accrued and unpaid
interest hereon, which note shall mature on the 180th day after the date of
issuance of this Note (the "New Note") and (B) a warrant, in the form of Exhibit
B hereto, to purchase one (1) share of Common Stock, par value $.001 per share,
of the Company for each dollar of principal under the New Note, exercisable for
a period of five (5) years after the date of issuance (the "Warrant"). The
issuance of the New Note and Warrant in exchange for this Note shall be made
without charge to the holder for any tax in respect of the issue thereof.
2. Payments of Principal and Interest. Payments of principal and interest
shall be made in lawful money of the United States of America by wire transfer
of immediately available funds to MENTOR SPECIAL SITUATION FUND, L.P. or at such
other place as the holder of this Note shall designate to Company in writing.
3. Prepayment. Company may prepay this Note in $25,000 installments at any
time without premium or penalty.
4. Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder: (a) default by Company in any payment
of interest or principal hereunder when due, which default is not cured within
five (5) days after written notice from Payee (excluding any failure to pay
principal as a result of the issuance of the New Note and Warrant in exchange
for this Note as provided in Section 1); (b) sale of all or substantially all of
Company's assets, or any formal action in contemplation of the dissolution,
liquidation or termination of Company's existence; (c) default by Company under
any agreement for borrowed money which default continues for more than five (5)
days, or any acceleration of the maturity of any of Company's liabilities for
borrowed money; or (d) institution of any proceedings by or against Company
under any law relating to bankruptcy, insolvency, reorganization or other form
of debtor relief or Company's making an assignment for the benefit of creditors,
or the appointment of a receiver, trustee, conservator or other judicial
representative for Company or Company's property.
Upon the occurrence of any Event of Default, all amounts payable hereunder
shall, at the holder's option but without notice or demand, become immediately
due and payable, and the holder shall thereupon have all rights and remedies
provided hereunder, in any other agreement between Company and Payee or
otherwise available at law or in equity.
5. Waiver. No failure or delay on the part of the holder to insist on
strict performance of Company's obligations hereunder or to exercise any remedy
shall constitute a waiver of the holder's rights in that or any other instance.
No waiver of any of the holder's rights shall be effective unless in writing,
and any waiver of any default or any instance of non-compliance shall be limited
to its express terms and shall not extend to any other default or instance of
non-compliance.
6. Expenses. Company shall pay the legal fees and expenses of counsel
incurred by the Payee with respect to the negotiation, preparation, execution
and delivery of this Note and all exhibits hereto. In addition, Company shall
pay all reasonable costs and expenses (including attorney's fees) incurred by
the holder relating to the enforcement of this Note.
7. Successors and Assigns. This Note shall be binding upon and inure to
the benefit of the Company and its successors and assigns, and the registered
holder of this Note and its successors and registered assigns.
8. Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram, fax or telecopy (confirmed by air mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by the Company or Payee. Any
such notice shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor, in all other cases:
If to Company: Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19038
Facsimile: (215) 836-0128
Attention: Thomas T. Fleming
If to Payee: P.O. Box 560
Yardley, PA 19067
Facsimile: (215) 736-8882
Attention: Edward F. Sager, Jr.
9. Governing Law. This Note is made and delivered in the Commonwealth of
Pennsylvania, and shall be construed and enforced in accordance with, and shall
be governed by, the laws of the Commonwealth of Pennsylvania.
10. Commitment Fee. The Company hereby pays to Mentor Management Company
("MMC") a fee in the amount of $10,000, which amount shall be credited against
the financial advisory fee or fees, if any, owed to MMC by Company at the Note
and Warrant Closing.
11. Representations. The Company hereby represents and warrants to Payee
that the execution, delivery and performance of this Note, the New Note and the
Warrant have been duly authorized by all requisite corporate action, and no
consent, approval or authorization of any person, not made or obtained, is
required in connection with such execution, delivery or performance.
INTENDING TO BE LEGALLY BOUND, Corecare Systems, Inc. has caused this
Bridge Note to be executed in its corporate name by its duly authorized officer
and to be dated as of the day and year first above written.
CORECARE SYSTEMS, INC.
By:/s/ Rose S. DiOttavio
----------------------
Name: Rose S. DiOttavio
Title: President
EXHIBIT 3.21
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH MUST BE
ESTABLISHED BY SUCH REGISTERED HOLDER OR TRANSFEREE TO THE SATISFACTION OF
CORECARE SYSTEMS, INC.
12% SUBORDINATED PROMISSORY NOTE
$499,466.67 August 2, 1996
Erdenheim, Pennsylvania
FOR VALUE RECEIVED, CORECARE SYSTEMS, INC., a Nevada corporation (the
"Company"), hereby promises to pay to MENTOR SPECIAL SITUATION FUND, L.P., a
Pennsylvania limited partnership, or its registered assigns ("Payee"), on or
before December 31, 2000 in installments as hereinafter provided, the principal
sum of Four Hundred Ninety-Nine Thousand Four Hundred Sixty-Six and 67/100
Dollars ($499,466.67), together with interest (calculated on the basis of the
actual number of days elapsed in a year consisting of 365 days) on the unpaid
balance of said principal sum from the date hereof until the Note is paid in
full, whether before or after maturity, at the rate of twelve percent (12%) per
annum, payable quarterly in arrears on the first business day following each
March 31, June 30, September 30 and December 31, commencing October 1, 1996, and
interest on any overdue principal or interest (to the extent lawful), at the
rate of one percent (1%) per month, cumulative and compounding monthly until
paid in full. Presentation, demand, protest and notice of dishonor are hereby
waived by the Company.
1. Note and Warrant Agreement. This Note is issued pursuant to a Note and
Warrant Purchase Agreement of even date herewith between Company and Payee (the
"Note and Warrant Agreement"), and is subject to the provisions and entitled to
the benefits of the Note and Warrant Agreement. The registered holder of this
Note is sometimes referred to herein as the "Note holder" or "holder of the
Note". All other capitalized terms used herein and not otherwise defined shall
have the meanings given such terms in the Note and Warrant Agreement.
2. Payments of Principal. Except as otherwise provided in Section 3 below,
the principal amount hereof shall be due and payable as follows: (a) $166,488.89
on December 31, 1998, (b) $166,488.89 on December 31, 1999 and (c) $166,488.89
on December 31, 2000 at which time all accrued and unpaid interest shall be due
and payable ("Maturity"). Payments of principal and interest shall be made in
lawful money of the United States of America by wire transfer of immediately
available funds to MENTOR SPECIAL SITUATION FUND, L.P. at such place as it shall
designate to Company in writing.
3. Prepayment. Company may prepay this Note in $100,000 installments at
any time without premium or penalty, but with all accrued and unpaid interest on
the amount prepaid. The Company shall prepay this Note in full, including all
accrued and unpaid interest owed hereunder, on the earlier to occur of (a) the
date on which the Company either repays in full, or makes any prepayment on, the
debt owed to U.S. Trust or Madison Bank as set forth on Exhibit A hereto or (b)
the date on which the Company consummates an underwritten public offering of its
Common Stock under the Securities Act of 1933 in which the net proceeds to the
Company from the offering are at least $5,000,000.
4. Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder: (a) default by Company in any payment
of interest or principal hereunder when due, which default is not cured within
thirty (30) days after the due date; (b) sale of all or substantially all of
Company's or any Subsidiary's assets (excluding Lakewood Retreat, Inc.), or any
formal action in contemplation of the dissolution, liquidation or termination of
Company's or any Subsidiary's existence (excluding Lakewood Retreat, Inc.)
unless, with respect to any Subsidiary sale or liquidation, Payee consents to
such sale or liquidation or the proceeds of such sale or liquidation are applied
in full to the prepayment of this Note; (c) default by Company under any
agreement for borrowed money which default continues for more than thirty (30)
days, or any acceleration of the maturity of any of Company's liabilities for
borrowed money; (d) (i) the admission by Company or any Subsidiary of its
inability to pay its debts as they mature, or (ii) the institution of any
proceedings by or against Company or any Subsidiary under any law relating to
bankruptcy, insolvency, reorganization or other form of debtor relief, which, in
the case of involuntary proceedings only, have not been dismissed within
forty-five (45) days after commencement, or (iii) Company's or any Subsidiary's
making an assignment for the benefit of creditors, or the appointment of a
receiver, trustee, conservator or other judicial representative for Company or
its property or any Subsidiary or its property; or (e) breach by Company of any
warranty, covenant or agreement herein or in any other agreement now or
hereafter existing between Company and Payee including, without limitation, (i)
the Note and Warrant Agreement, (ii) the Warrant to purchase 333,333 shares of
Common Stock issued to Payee on the date hereof, and (iii) the Warrant to
purchase 200,000 shares of Common Stock issued to Payee on June 10, 1996, which
breach is not cured by Company within thirty (30) days after notice by Payee.
Upon the occurrence of any Event of Default, all amounts payable hereunder
shall, at the holder's option but without notice or demand, become immediately
due and payable, and the holder shall thereupon have all rights and remedies
provided hereunder, in any other agreement between Company and Payee or
otherwise available at law or in equity.
5. Waiver. No failure or delay on the part of the holder to insist on
strict performance of Company's obligations hereunder or to exercise any remedy
shall constitute a waiver of the holder's rights in that or any other instance.
No waiver of any of the holder's rights shall be effective unless in writing,
and any waiver of any default or any instance of non-compliance shall be limited
to its express terms and shall not extend to any other default or instance of
non-compliance.
6. Expenses. Upon an Event of Default, Company shall pay all reasonable
costs and expenses (including attorney's fees) incurred by the holder relating
to the enforcement of this Note.
7. Successors and Assigns. This Note shall be binding upon and inure to
the benefit of the Company and its successors and assigns, and the registered
holder of this Note and its successors and registered assigns.
8. Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram, fax or telecopy (confirmed by mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by the Company or Payee. Any
such notice shall be deemed to have been given as of the date received, in the
case of personal delivery, or on the date shown on the receipt or confirmation
therefor, in all other cases:
If to Company: Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19038
Facsimile: (215) 836-0128
Attention: Thomas T. Fleming
If to Payee: P.O. Box 560
Yardley, PA 19067
Facsimile: (215) 736-8882
Attention: Edward F. Sager, Jr.
9. Governing Law. This Note is made and delivered in the Commonwealth of
Pennsylvania, and shall be construed and enforced in accordance with, and shall
be governed by, the laws of the Commonwealth of Pennsylvania.
10. Maximum Interest Rate. If the effective interest rate on this Note
would otherwise violate any applicable usury law, then the interest rate shall
be reduced to the maximum permissible rate and any payment received by the
holder in excess of the maximum permissible rate shall be treated as a
prepayment of the principal of this Note.
11. Subordination of the Note.
(a) The Company covenants and agrees, and each Noteholder by such
holder's acceptance of a Note likewise covenants and agrees, that the Note shall
be issued subject to the provisions of this Section 11 and each holder of a
Note, whether acquired upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. To the extent set
forth in this Section 11, the Note shall be subordinated and subject in right of
payment to the prior payment in full of all "Senior Indebtedness" of Company. As
used herein, the term "Senior Indebtedness" means (i) the existing indebtedness
of the Company to those banks and other institutional lenders as set forth on
Exhibit A (some of which represents guarantees by the Company of its
Subsidiaries' indebtedness as noted on such Exhibit A), (ii) all other amounts,
including costs and expenses, payable by Company to any holder of Senior
Indebtedness with respect to Senior Indebtedness and (iii) all renewals,
extensions refunding and modifications of any indebtedness referred to above or
any other financing or refinancing of Senior Indebtedness, up to an aggregate
amount under clauses (i), (ii) and (iii) of $5,169,684. Notwithstanding anything
herein to the contrary, Senior Indebtedness does not include (A) accounts
payable to trade creditors of Company however treated or classified on Company's
balance sheet, (B) rental obligations under operating leases, (C) any debt owed
to any officer, director or stockholder of Company or any Subsidiary, (D) any
obligation of Company issued or contracted for as payment in consideration of
the purchase by Company of the capital stock or substantially all of the assets
of another person or in consideration for the merger or consolidation with
respect to which Company is a party (including, without limitation, any debt
owed to the former shareholders of Penn Interpersonal Communications, Inc.,
American Institute for Behaviorial Counseling, Inc. or Bio Diagnostic
Technologies, Inc.) other than bank financing obtained by Company for any such
transaction, or (E) any indebtedness which by its terms is subordinated to the
Note or which is subordinated to all indebtedness to which the Note is
subordinated in substantially like terms as the Note.
(b) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding up or total or partial liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings (an "Event of Dissolution"), all principal of,
premium, if any, and interest due or to become due upon all Senior Indebtedness
shall first be paid in full. Payment of such Senior Indebtedness shall be made
or provided for in money or money's worth before any payment is made on account
of the principal or premium of or interest on the indebtedness evidenced by the
Note. Upon any such Event of Dissolution, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or securities
(other than shares of stock of the Company as reorganized or readjusted or
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinate, at least to
the extent provided in this Section with respect to the Note, to the payment of
all Senior Indebtedness at the time outstanding and to any securities issued in
respect of such Senior Indebtedness under any such plan of reorganization or
readjustment), to which the holder of the Note would be entitled, except for the
provisions of this Section, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution ("Paying Person") directly to the holders of Senior
Indebtedness or their representatives, or to the trustees under any indenture
pursuant to which any instruments evidencing any of such Senior Indebtedness may
have been issued, to the extent necessary to pay all Senior Indebtedness in
full, in money or money's worth, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness, before any payment
or distribution is made to the Noteholder on account of the indebtedness
evidenced by the Note. The Noteholder, by his or its acceptance of the Note,
hereby authorizes the Company and each such Paying Person, on behalf of such
holder and any successor holder of the Note, to make such payment or
distribution to the holders of Senior Indebtedness. Such payment or distribution
shall be made pro rata to each such holder on the basis of the respective
amounts of Senior Indebtedness held by such holder.
(c) In the event that, notwithstanding the foregoing provisions of
this Section 11, any such payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
shares of stock of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinate, at least to the extent
provided in this Section 11 with respect to the Note, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect of such Senior Indebtedness under any such plan of reorganization or
readjustment) shall be received by the Noteholder in respect of the indebtedness
evidenced by the Note before all Senior Indebtedness is paid in full or
provision made for such payment in accordance with its terms, such payment or
distribution shall be held by such Noteholder for the benefit of, and shall be
paid over or delivered by such Noteholder to, the holders of such Senior
Indebtedness or their representatives, or to the trustees under any indenture
pursuant to which any instruments evidencing any of such Senior Indebtedness may
have been issued, as their respective interests may appear, for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all such Senior Indebtedness in full or in accordance with its terms,
after giving effect to any concurrent or previous payment or distribution to or
for the holders of such Senior Indebtedness.
(d) If a payment default shall occur under the terms of any Senior
Indebtedness and a holder of any such Senior Indebtedness with respect to which
such payment default shall have occurred shall notify the Company and the holder
of the Note in writing stating that such default has occurred and requesting
that no payment of principal of or interest on the Note shall be made until such
payment default has been cured or waived by such holder of Senior Indebtedness,
then the Company shall cease making payments of principal and interest on the
Note until such default is cured or waived provided, however, that if during the
one hundred and twenty (120) day period following the date of such default, the
holder of Senior Indebtedness has not accelerated its loan, commenced
foreclosure proceedings or otherwise undertaken to act on such default, then
Company shall be required to continue making payments under the Note, including
any which had not been paid during such 120 day period.
(e) Subject to the payment in full of all Senior Indebtedness, the
Noteholder shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company made
on or in respect of the Senior Indebtedness until the principal of and interest
on the Note shall be paid in full; and for the purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Noteholder as such would be entitled except
for the provisions of this Section 11, and no payment over pursuant to the
provisions of this Section 11 to the holders of Senior Indebtedness by the
Noteholder as such, shall as between the Company, its creditors other than the
holders of Senior Indebtedness, and the Noteholder be deemed to be a payment by
the Company to or on account of Senior Indebtedness, and no payments or
distributions to the Noteholder as such of cash, property or securities payable
or distributable to the holders of Senior Indebtedness to which the Noteholder
as such shall become entitled pursuant to the provisions of this Section shall
as between the Company, its creditors other than the holders of Senior
Indebtedness, and the Noteholder be deemed to be a payment by the Company to the
Noteholder of or on account of the Note, it being understood that the provisions
of this Section are and are intended solely for the purpose of defining the
relative rights of the holder of the Note, on the one hand, and the holders of
Senior Indebtedness, on the other hand.
(f) Nothing contained in this Section 11 or elsewhere in this Note
is intended to or shall impair as between the Company, its creditors other than
the holders of Senior Indebtedness, and the holder of the Note the obligation of
the Company, which is absolute and unconditional, to pay to the Noteholder the
principal of and interest on the Note, as and when the same shall become due and
payable in accordance with its terms, or to affect the relative rights of the
Noteholder and creditors of the Company other than the holders of Senior
Indebtedness, nor shall anything herein prevent the Noteholder from exercising
any remedies otherwise permitted by applicable law upon the occurrence of an
Event of Default hereunder, subject to the rights, if any, under this Section of
the holders of Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
(g) If any institutional lender to Company at any time so requires,
Payee shall, upon request of Company, execute any intercreditor or subordination
agreement(s) with any such institutional lender on terms not materially more
adverse to Payee than the subordination terms contained in this Note.
12. Transfer of Note: This Note is not registered under the Securities Act
of 1933 or under the securities laws of any state, and this Note may not be sold
or transferred except in accordance with such laws and the provisions of
Sections 8 and 9 of the Note and Warrant Agreement, which provisions are
incorporated herein by reference.
INTENDING TO BE LEGALLY BOUND, Corecare Systems, Inc. has caused this
Promissory Note to be executed in its corporate name by its duly authorized
officer and to be dated as of the day and year first above written.
CORECARE SYSTEMS, INC.
By:/s/ Rose S. DiOttavio
----------------------
Name: Rose S. DiOttavio
Title: President
EXHIBIT A
Holders of Senior Indebtedness
EXHIBIT 3.22
PROMISSORY NOTE
$1,775,000.00
June 27, 1996
FOR VALUE RECEIVED, WESTMEADE HEALTHCARE, INC., a Pennsylvania
corporation, having an address at c/o CoreCare Systems, Inc., 9425 Stenton
Avenue, Erdenheim, Pennsylvania 19038 ("Borrower") does promise to pay to the
order of FINOVA CAPITAL CORPORATION, a Delaware corporation, having an address
at 3200 Park Center Drive, Costa Mesa, California 92626, or any subsequent
holder of this Note ("Lender") the principal sum of One Million Seven Hundred
Seventy-Five Thousand Dollars ($1,775,000.00) lawful money of the United States
of America, together with interest thereon at the interest rate set forth in
Article I, Section B of this Note (the "Interest Rate"). This Note evidences a
loan (the "Loan") made by Lender to Borrower and is secured by, among other
things, a Mortgage, Assignment of Leases, Rents and Other Income and Security
Agreement on certain property located at 1460 Meetinghouse Road, Warwick,
Pennsylvania, which is dated the date hereof and is made between Borrower and
Lender (hereinafter, the "Mortgage") covering the Mortgaged Property (as such
term is defined in the Mortgage), an Assignment of Leases, Rents, Guarantees,
Profits, Issues and Other Income dated the date hereof made by Borrower as
collateral for the Loan (hereinafter, the "Assignment"). (This Note, the
Mortgage, the Assignment and such other documents evidencing such other security
which may now or hereafter be given as further security for, or in connection
with, the Loan, are herein collectively referred to as the "Loan Documents").
The outstanding principal amount of this Note, together with all accrued but
unpaid interest thereon, and all other sums due hereunder (including delinquency
charges) or under the Loan Documents shall be due and payable on June 27, 2001
(the "Maturity Date"), or on such earlier date as may be required under the
terms of this Note or any of the Loan Documents.
ARTICLE XIV
INTEREST RATE AND MONTHLY PAYMENTS
A. MONTHLY PAYMENTS.
Repayment of the Loan shall be calculated in equal monthly installments of
principal and interest based on an amortization schedule of twenty (20) years
from the date hereof at the Interest Rate; provided, however, that the
outstanding principal amount of this Note, together with accrued and unpaid
interest thereon, and all other sums due hereunder (including delinquency
charges) or under the Loan Documents shall be due and payable on the Maturity
Date. On the date hereof, Borrower shall pay to Lender interest on the
outstanding principal amount of the Loan from the date hereof through and
including June 30, 1996. Thereafter, principal and interest on this Note shall
be payable monthly in arrears commencing August 1, 1996, and on the first day of
each and every month thereafter until the Maturity Date (each date on which
payments of principal and interest are due being herein referred to as a "Due
Date"). The monthly payments of principal and interest under this Note required
on each Due Date during the term of this Loan shall be in the amount of Eighteen
Thousand Two Hundred Forty-Eight and 92/100 Dollars ($18,248.92) and shall be
paid without offset, claim or deduction. Interest on the outstanding principal
balance of this Note shall be computed on the basis of a 360-day year and the
actual number of days elapsed. Any payment due hereunder on a day which is not a
Business Day (hereinafter defined) in the jurisdiction in which payment is to be
made shall be made on the next following day which is a Business Day in that
jurisdiction. The term "Business Day" as used herein shall mean any day other
than a Saturday or Sunday on which banks are open for business in the relevant
jurisdiction.
B. INTEREST RATE.
The annual Interest Rate on the outstanding principal balance of this Note
until the Maturity Date shall be fixed for the term of the Loan at Ten and
94/100 percent (10.94%) which is equal to the sum of four hundred twenty-five
(425) basis points over the Treasury Constant Maturity Rate as published by the
Federal Reserve Bank for five (5) year Treasury Notes as published most recently
prior to the date of this Note.
C. DEFINITION.
Loan Year. "Loan Year" shall mean each twelve (12) month period commencing
on June 27, 1996, and on June 27 of each subsequent year, and ending on the
following June 26 from the date hereof until the Maturity Date.
ARTICLE XV
GENERAL CONDITIONS
A. METHOD OF PAYMENT.
All payments under this Note shall be made to Lender at the address set
forth at the beginning of this Note, or in such other manner as Lender shall
specify by written notice to Borrower.
B. APPLICATION OF PAYMENTS RECEIVED.
Except as otherwise provided in this Note, all payments received by Lender
on this Note shall be applied by Lender as follows:
FIRST, to the payment of delinquency charges, if any;
SECOND, to accrued and unpaid interest then due and owing; and
THIRD, to the reduction of principal of this Note.
C. PREPAYMENT.
(1) No prepayment of the Loan (in whole or in part) shall be permitted
during the first three (3) Loan Years. Thereafter, Borrower shall be permitted
to prepay the Loan in whole but not in part provided that: (a) Borrower has
given Lender thirty (30) days' prior written notice (which notice shall be
irrevocable) of Borrower's intent to prepay the Loan (the "Notice Date"); (b)
Borrower shall pay to Lender all outstanding principal, interest and other
balances and sums due with respect to the Loan; and, (c) Borrower has paid the
prepayment premium set forth in this Article II, Section C and have complied
with all other conditions set forth in this Section.
(2) (a) In the event of prepayment of the Loan as a result of acceleration
of the balance of the Loan upon default thereunder by Borrower, a prepayment
premium based on the following formula shall also be due and payable in addition
to any other remedies available to Lender.
(b) Upon prepayment of the Loan, Borrower shall pay to Lender a
prepayment premium equaling the then present value of the product obtained by
multiplying: (i) the decline, if any (if there is no decline, then this amount
shall be zero (0)), between (A) the yield to maturity (expressed as a
percentage) at the date hereof of U.S. Treasury Notes with a maturity date
similar to that of this Note and (B) the yield at the time of prepayment of U.S.
Treasury Notes with a maturity date equal to the then remaining term of the
Loan, as such yield is reported in The Wall Street Journal or similar
publication on the fifth (5th) Business Day preceding the date of prepayment; by
(ii) the number of whole and fractional years remaining between the date of
prepayment and the Maturity Date and by (iii) the outstanding balance of the
Loan, inclusive of all accrued interest thereon plus an amount equal to two
percent (2%) of the then outstanding principal balance of the Loan as of the
Notice Date.
(3) Any payment on this Note after acceleration shall be deemed a
prepayment irrespective of when made and Lender shall be entitled to a
prepayment premium in connection therewith as set forth herein. Notwithstanding
any of the foregoing, in the event of the application of insurance or
condemnation proceeds to the outstanding balance of the Loan pursuant to the
provisions of the Mortgage, this Note may be prepaid, in whole or in part,
without prepayment premium.
D. DELINQUENCY CHARGES.
In the event Borrower fails to pay any amount of principal and/or interest
on this Note or any other amounts required hereunder or under the Mortgage or
the other Loan Documents for five (5) days after such payment becomes due,
whether by acceleration or otherwise, Lender may, at its option, whether
immediately or at the time of final payment of the amounts due on this Note, the
Mortgage or the other Loan Documents, impose on demand a delinquency charge
equal to the greater of (i) five percent (5%) per annum in excess of the
Interest Rate hereunder, on the amount of such payment, computed from the Due
Date to the date of receipt of such payment by Lender in good funds or (ii) five
percent (5%) of the amount of such past due payment notwithstanding the date on
which such payment is actually paid to Lender; provided, however, that if any
such delinquency charge is in excess of the amount permitted to be charged to
Borrower under applicable Federal or state law, Lender shall be entitled to
collect a delinquency charge at the highest rate permitted by such law. Until
any and all such delinquency charges are paid in full, the amount thereof shall
be added to the indebtedness evidenced by this Note (even if such addition
causes the principal amount to exceed the face amount of this Note) and shall be
secured by the Loan Documents and by any other collateral held by Lender to
secure such indebtedness. Borrower agrees that any such delinquency charges
shall not be deemed to be additional interest or a penalty, but shall be deemed
to be liquidated damages because of the difficulty in computing the actual
amount of damages in advance.
E. ACCELERATION.
(1) If:
(a) Borrower fails to pay any sum of principal or interest due on
this Note for five (5) days after receipt of notice from
Lender of such failure; or
(b) Borrower shall fail to pay any other sum required to be paid
by Borrower under this Note for five (5) days after receipt of
notice from Lender of such failure; or
(c) an "Event of Default", as said term is defined in any of the
Loan Documents, shall exist subject to applicable notice,
grace and right to cure provisions;
then, and in any such event, Lender may, at its option, declare the entire
unpaid balance of this Note together with interest accrued thereon, and all
other sums due hereunder (including delinquency charges) and under the other
Loan Documents to be immediately due and payable and Lender may proceed to
exercise any rights or remedies that it may have under this Note or the other
Loan Documents or such other rights and remedies which Lender may have at law,
equity or otherwise.
(2) In the event of such acceleration, Borrower may discharge its
obligations to Lender by paying:
(a) the unpaid balance hereof as of the date of such payment, plus
(b) accrued and unpaid interest, and all other sums due hereunder
(including delinquency charges computed in the manner set
forth above), plus
(c) a prepayment premium computed as provided in Section C of this
Article II, plus
(d) all sums due under the other Loan Documents.
F. COSTS AND EXPENSES ON DEFAULT.
After any event of acceleration shall have occurred pursuant to Section E
of Article II herein, in addition to principal, interest and delinquency
charges, Lender shall be entitled to collect all reasonable costs of collection,
including, but not limited to, reasonable attorneys' fees, incurred in
connection with the protection or realization of collateral or in connection
with any of Lender's collection efforts, whether or not suit on this Note or any
foreclosure proceeding is filed, and all such reasonable costs and expenses
shall be payable on demand and until paid shall be added to the indebtedness
evidenced by this Note (even if such addition causes the principal amount to
exceed the face amount of this Note) and shall also be secured by the Loan
Documents and by all other collateral held by Lender as security for Borrower's
obligations to Lender.
G. NO WAIVER BY LENDER.
No failure on the part of Lender to exercise any right or remedy
hereunder, whether before or after the happening of a default, shall constitute
a waiver thereof, and no waiver of any past default shall constitute waiver of
any future default or of any other default. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, or acceptance of a past due
installment, or indulgence granted from time to time shall be construed to be a
waiver of the right to insist upon prompt payment thereafter or to impose
delinquency charges retroactively or prospectively, or shall be deemed to be a
novation of this Note or as a reinstatement of the debt evidenced hereby or as a
waiver of such right of acceleration or any other right, or be construed so as
to preclude the exercise of any right which Lender may have, whether by the laws
of the jurisdiction governing this Note, by agreement or otherwise; and Borrower
and each endorser or guarantor hereby expressly waive the benefit of any statute
or rule of law or equity which would produce a result contrary to or in conflict
with the foregoing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom such agreement is sought
to be enforced.
H. WAIVER BY BORROWER.
To the extent permitted by law and except as otherwise expressly provided
herein, Borrower hereby waives presentment, protest, demand, diligence, notice
of dishonor and of nonpayment, and waives and renounces all rights to the
benefits of any statute of limitations and any moratorium, appraisement,
exemption and homestead now provided or which may hereafter be provided by any
federal or state statute, including but not limited to exemptions provided by or
allowed under the Bankruptcy Code of 1978, as amended, both as to itself
personally and as to all of its property, whether real or personal, against the
enforcement and collection of the obligations evidenced by this Note and any and
all extensions, renewals and modifications hereof, binding itself,
unconditionally and as original promisor for the payment of this Note. LENDER
AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
ANY OF THE LOAN DOCUMENTS OR WITH RESPECT TO THE TRANSACTION CONTEMPLATED
THEREBY WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, THE
PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
I. COMPLIANCE WITH USURY LAWS.
It is the intention of the parties to conform strictly to the usury laws,
whether state or Federal, that are applicable to this Note. All agreements
between Borrower and Lender, whether now existing or hereafter arising and
whether oral or written, are hereby expressly limited so that in no contingency
or event whatsoever, whether by acceleration of maturity hereof or otherwise,
shall the amount paid or agreed to be paid to Lender, or collected by Lender,
for the use, forbearance or detention of the money to be loaned hereunder or
otherwise, or for the payment or performance of any covenant or obligation
contained herein or in the other Loan Documents exceed the maximum amount
permissible under applicable Federal or state usury laws. If, under any
circumstances whatsoever, fulfillment of any provision hereof or of the other
Loan Documents, at the time performance of such provision shall be due, shall
involve an amount exceeding the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the limit of such validity; and
if, under any circumstances, Lender shall ever receive an amount deemed interest
by applicable law, which would exceed the highest lawful rate, such amount that
would be excessive interest under applicable usury laws shall be applied to the
reduction of the principal amount owing hereunder or to other indebtedness
secured by the Loan Documents and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal and such other
indebtedness, the excess shall be deemed to have been a payment made by mistake
and shall be refunded to Borrower or to any other person making such payment on
Borrower's behalf. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness of Borrower evidenced hereby,
outstanding from time to time shall, to the extent permitted by applicable law,
and to the extent necessary to preclude exceeding the limit of validity
prescribed by law, be amortized, pro-rated, allocated and spread from the date
of disbursement of the proceeds of this Note until payment in full of the Loan
evidenced hereby and thereby so that the actual rate of interest on account of
such indebtedness is uniform throughout the term hereof and thereof. The terms
and provisions of this paragraph shall control and supersede every other
provision of all agreements between Borrower and Lender.
J. NOTICE.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been sufficiently given or served for all purposes when
delivered in person or sent by national overnight courier service or by
registered or certified mail, return receipt requested, to either party hereto
at its address above stated (in the case of Lender, to the attention of Sharon
E. O'Connell, Director of Lease Administration, with copies to FINOVA Capital
Corporation at 1850 North Central Avenue, Phoenix, Arizona 85004, to the
attention of Frederick C. Bauman, Esquire and to Schnader Harrison Segal &
Lewis, Suite 3600, 1600 Market Street, Philadelphia, Pennsylvania 19103, to the
attention of Jerald M. Goodman, Esquire; in the case of Borrower, c/o CoreCare
Systems, Inc., 9425 Stenton Avenue, Erdenheim, Pennsylvania 19038 to the
attention of Thomas T. Fleming, Chairman with a copy to Connolly, Epstein,
Chicco, Foxman, Engelmyer & Ewing, 9th Floor, 1515 Market Street, Philadelphia,
Pennsylvania 19102-1909, to the attention of Gary S. Lewis, Esquire or at such
other address of which it shall have notified the party giving such notice or
other communication in writing as aforesaid. Any written notice or other
communication shall be deemed to have been received on the date delivered or two
(2) days after mailing or one (1) day after sending by overnight courier.
K. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(1) THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF ARIZONA. FOR PURPOSES OF THIS SECTION K(1), THE LOAN
DOCUMENTS SHALL BE DEEMED TO BE PERFORMED AND MADE IN THE STATE OF ARIZONA.
(2) BORROWER HEREBY AGREES THAT ALL ACTIONS FOR PROCEEDINGS INITIATED BY
BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE LOAN DOCUMENTS SHALL BE
LITIGATED IN THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA OR, IF LENDER INITIATES
SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS, ANY COURT IN WHICH LENDER
SHALL INITIATE SUCH ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION, BORROWER
HEREBY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR PROCEEDING COMMENCED BY LENDER IN ANY OF SUCH COURTS AND HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED
THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS
OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE BORROWER
AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS NOTE. BORROWER
WAIVES ANY CLAIM THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD BORROWER,
AFTER BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT,
PROCESS OR PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER
THE MAILING THEREOF, BORROWER SHALL BE DEEMED TO BE IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED
FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM
FOR BORROWER SET FORTH IN THIS SECTION K(2) SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT, BY LENDER, OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING, BY LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY
SUCH JUDGMENT OR ACTION.
L. MISCELLANEOUS.
(1) The captions of the sections of this Note are for the purpose of
convenience only and are not intended to be a part of this Note and shall not be
deemed to modify, explain, enlarge or restrict any of the provisions hereof.
(2) The remedies provided in this Note, the Mortgage and in the other Loan
Documents or otherwise available to Lender for enforcing the payment of the
principal sum together with interest and performance of the covenants,
conditions and agreements herein and therein contained are cumulative and
concurrent and may be pursued singly or successively or together at the sole
discretion of Lender, and may be exercised from time to time as often as
occasion therefor shall occur until Lender has been paid all sums due in full.
(3) If this Note is executed by more than one person as Borrower, the
obligation of each shall be joint and several. Whenever used (as appropriate):
the singular number shall include the plural, the plural the singular, the use
of any gender shall include all genders, and the words "Borrower" and "Lender"
shall include, and the rights and obligations herein contained shall inure to
the benefit of and bind, their respective heirs, executors, administrators,
successors, vendees and assigns.
(4) The terms and provisions of this Note are severable. In the event of
the unenforceability or invalidity of any one or more of the terms, covenants,
conditions or provisions of this Note under federal, state or other applicable
law, such unenforceability or invalidity shall not render any other term,
covenant, condition or provision hereunder unenforceable or invalid.
(5) In the event any waiver by Borrower hereunder is prohibited by law or
unenforceable, such waiver shall be and be deemed to be deleted herefrom.
(6) This Note expresses the entire agreement between the Borrower and
Lender concerning the subject matter hereof and no modification of this Note
shall be effective unless expressed in a mutually signed writing. None of
Lender's rights, powers, privileges or immunities under this Note can be waived
unless (and then only to the extent that) such waiver is expressed in a writing
signed by an authorized Lender officer.
(7) This Note shall be binding upon the Borrower and its successors and
assigns and shall inure to the benefit of Lender and its successors and assigns.
(8) The Borrower hereby express the intent to be legally bound by this
writing.
(9) Time is of the essence of each and every provision of this Note.
IN WITNESS WHEREOF, this Note has been duly executed as of the date first
above written.
ATTEST: [Corporate Seal] WESTMEADE HEALTHCARE, INC.
a Pennsylvania corporation
By:/s/ Joan K. Biddle By: /s/ Rose S. DiOttavio
------------------ ---------------------
Name: Joan K. Biddle Name: Rose S. DiOttavio
Title: Assistant Secretary Title: Vice - President
EXHIBIT 3.23
MORTGAGE,
ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME
AND
SECURITY AGREEMENT
Dated June 27, 1996
from
WESTMEADE HEALTHCARE, INC.
to
FINOVA CAPITAL CORPORATION
Affecting:
1460 Meetinghouse Road
Warwick Township, Bucks County, Pennsylvania
THIS INSTRUMENT COVERS GOODS WHICH ARE
OR ARE TO BECOME FIXTURES RELATED TO THE
REAL ESTATE DESCRIBED HEREIN AND IS TO BE
RECORDED IN THE MORTGAGE RECORDS AND IS ALSO TO BE
INDEXED IN THE INDEX OF FINANCING STATEMENTS
OR OF FIXTURE FILINGS. THIS INSTRUMENT
CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
________________________________________________________________________________
This instrument was prepared by and after recording should
be returned to:
Jerald M. Goodman, Esquire
SCHNADER HARRISON SEGAL & LEWIS
1600 Market Street, Suite 3600
Philadelphia, Pennsylvania 19103
MORTGAGE,
ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME
AND
SECURITY AGREEMENT
THIS MORTGAGE is made this 27th day of June, 1996, between WESTMEADE
HEALTHCARE, INC., a Pennsylvania corporation, as the Mortgagor, whose address is
c/o CoreCare Systems, Inc., 9425 Stenton Avenue, Erdenheim, Pennsylvania 19038,
and FINOVA CAPITAL CORPORATION, a Delaware corporation, as the Mortgagee, whose
address is 3200 Park Center Drive, Costa Mesa, California 92626.
Background
A. Mortgagor is the holder of the fee simple estate in the real property
known as and located at 1460 Meetinghouse Road, Warwick Township, Bucks County,
Pennsylvania (the "Land") as more particularly described on Exhibit A attached
hereto and incorporated herein.
B. Mortgagor owns and operates on the Land a thirty-two (32) bed
residential psychiatric treatment facility for children and adolescents (the
"Facility").
C. For value received, Mortgagor has executed and delivered to Mortgagee a
promissory note dated the even date herewith (the "Note") in the principal
amount of One Million Seven Hundred Seventy-Five Thousand Dollars ($1,775,000),
lawful money of the United States, with interest thereon to be paid in
accordance with the terms contained in the Note.
D. As security for the repayment of the debt evidenced by the Note,
Mortgagor has agreed to: (i) grant to Mortgagee a first priority mortgage lien
on the Land; (ii) assign to Mortgagee Mortgagor's interest as lessor under any
leases of the Land or the Facility pursuant to provisions contained herein and
pursuant to that certain Assignment of Leases, Rents, Guarantees, Profits,
Issues and Other Income (the "Assignment of Leases") dated the even date
herewith; (iii) grant to Mortgagee a perfected security interest in all personal
property and fixtures used in connection with the operation of the Facility, and
in all proceeds thereof (excluding, however, Permitted Security Interests)
(hereinafter defined) pursuant to provisions hereof and certain Uniform
Commercial Code Financing Statements(the "Financing Statements") dated the even
date herewith; (iv) cause CoreCare Systems, Inc., a Nevada corporation
("CoreCare"), Thomas T. Fleming ("Fleming") and Rose S. DiOttavio ("DiOttavio")
(CoreCare, Fleming and DiOttavio shall hereinafter be referred to collectively
as the "Guarantors" or sometimes hereinafter individually as a "Guarantor"),
individually as well as jointly and severally, to execute and deliver to the
Mortgagee those certain Suretyship Agreements (collectively, the "Guaranty
Agreements") dated the even date herewith, pursuant to which the Guarantors
guarantee the payment and performance of the obligations of the Mortgagor under
the Note, this Mortgage and the other Loan Documents (hereinafter defined).
Together with the Note, this Mortgage and that certain Commitment Letter dated
May 16, 1996 and accepted by Mortgagor on May 28, 1996 (in the event of any
inconsistency between the terms of such commitment letter and the terms of this
Mortgage, the terms of this Mortgage shall prevail), the Assignment of Leases,
the Financing Statements, the Guaranty Agreements and any other documents,
certificates, affidavits and other agreements described in or delivered in
connection with any of the foregoing, shall hereinafter be referred to
collectively, as the "Loan Documents" or individually, as a "Loan Document". The
terms and conditions of the Loan Documents are hereby incorporated into this
Mortgage by reference thereto.
Conveyance
NOW, THEREFORE, Mortgagor, in consideration of the indebtedness evidenced
by the Loan Documents and to secure payment of the same, with interest and in
accordance with their respective terms and conditions, together with all other
sums recoverable by Mortgagee under the terms of the Loan Documents (the
"Indebtedness") and for performance of the agreements, conditions, covenants,
provisions and stipulations contained herein and therein, has granted,
bargained, sold, released, mortgaged, warranted and conveyed and by these
presents does grant, bargain, sell, release, mortgage, warrant and convey unto
Mortgagee, its successors and assigns, all of the following real and personal
property and property interests (together, the real and personal property and
property interests described below, constitute, and shall hereinafter be
referred to collectively as the "Mortgaged Property"):
ALL THOSE CERTAIN lots, pieces or parcels of real property which comprise
the Land and which are more particularly described on Exhibit A attached hereto
and incorporated herein;
TOGETHER WITH all tenements, hereditaments and appurtenances now or
hereafter thereunto belonging or in anywise appertaining, and the buildings and
improvements now or hereafter located on the Land including, without limitation,
the Facility, and all right, title and interest, if any, of the Mortgagor in and
to the streets and roads abutting the Land to the center lines thereof, and
strips and gores within or adjoining the Land, the air space and right to use
said air space above the Land, all rights of ingress and egress by motor
vehicles to parking facilities on or within the Land, all easements now or
hereafter affecting the Land, royalties and all rights appertaining to the use
and enjoyment of the Land, including, without limitation, alley, drainage,
mineral, water, oil and gas rights (the Land, together with said buildings and
improvements, the property and other rights, privileges and interests encumbered
or conveyed hereby, are hereinafter collectively referred to as the "Premises");
TOGETHER WITH all fixtures and articles of personal property and all
appurtenances and additions thereto and substitutions or replacements thereof,
now or at any time hereafter owned or leased by the Mortgagor and now or
hereafter attached to, contained in, or used in connection with the Premises or
placed on any part of the Premises, though not attached thereto, including, but
not limited to, all screens, awnings, shades, blinds, curtains, draperies,
carpets, rugs, beds, desks, chairs, tables, dressers, lamps, furniture and
furnishings, heating, lighting, plumbing, ventilating, air conditioning,
refrigerating, incinerating and elevator plants, stoves, ranges, vacuum cleaning
systems, call systems, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes, appliances,
equipment, fittings and fixtures, and the trademarks, trade names including
without limitation, the name "Westmeade Center at Warwick", franchises,
royalties, good will and books and records relating to the business operated on
the Premises. Without limiting the foregoing, the Mortgagor hereby grants to the
Mortgagee a security interest in all of the Mortgagor's present and future
"fixtures", "equipment" and "general intangibles" (as said quoted terms are
defined in or encompassed by the Uniform Commercial Code of the Commonwealth of
Pennsylvania) and the Mortgagee shall have, in addition to all rights and
remedies provided herein, and in any other agreements, commitments and
undertakings made by the Mortgagor to the Mortgagee, all of the rights and
remedies of a "secured party" under the applicable law, this Mortgage shall be
deemed to be a "security agreement" (as defined in the aforesaid Uniform
Commercial Code). If the lien of this Mortgage is subject to a security interest
covering any such personal property, then all of the right, title and interest
of the Mortgagor in and to any and all such property is hereby assigned to the
Mortgagee together with the benefits of all deposits and payments now or
hereafter made thereon by the Mortgagor;
TOGETHER WITH all unearned premiums, accrued, accruing or to accrue under
insurance policies now or hereafter obtained by the Mortgagor and all proceeds
of the conversion, voluntary or involuntary, of the Mortgaged Property or any
part thereof into cash or liquidated claims, including, without limitation,
proceeds of hazard and title insurance and all awards and compensation
heretofore and hereafter made to the present and all subsequent owners of the
Mortgaged Property by any governmental or other lawful authorities for the
taking by eminent domain, condemnation or otherwise, of all or any part of the
Mortgaged Property or any easement therein, including awards for any change of
grade of streets;
TOGETHER WITH all right, title and interest of the Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and replacements
of, and all additions and appurtenances to, the Mortgaged Property, hereafter
acquired by, or released to the Mortgagor or constructed, assembled or placed by
the Mortgagor on the Mortgaged Property, and all conversions of the security
constituted thereby, immediately upon such acquisition, release, construction,
assembling, placement or conversion, as the case may be, and in each such case,
without any further mortgage, grant, conveyance, assignment or other act by the
Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely and with the same effect, as though now owned by the Mortgagor and
specifically described herein;
TOGETHER WITH all transferable occupancy certificates, and other
transferable licenses, certificates, permits and authorizations necessary or
desirable for the operation of the Facility as a thirty-two (32) bed residential
psychiatric treatment facility for children and adolescents and necessary or
desirable to ensure that the Mortgagor is eligible for Medicare and Medicaid
payments and reimbursements with respect to the Facility to the extent
applicable;
TOGETHER WITH all rents, issues, profits, leases, subleases, lease
guarantees, licenses, tenancies, revenues, income, contract rights, accounts
receivable, (including credit card and charge card receivables), royalties,
demands, refunds, general intangibles, actions and rights of action, and all
other amounts due or to become due to Mortgagor from any federal, state or local
governmental agency (including, without limitation, to the extent applicable,
all Medicaid and Medicare payments or reimbursements), and all other amounts due
or to become due to Mortgagor from any occupant or other person for the use,
operation, occupancy of, or otherwise with respect to the Premises.
TOGETHER WITH all right, title and interest in and to all depositary
accounts, certificates of deposit and other accounts and cash contained therein
and all right title and interest in and to the Letter of Credit (hereinafter
defined);
TOGETHER WITH all substitutions for alterations, repairs and replacements
of any of the foregoing and any and all proceeds (whether cash proceeds or
non-cash proceeds), products, renewals, accessions and additions of any of the
Mortgaged Property;
WITH RESPECT OF any portion of the Mortgaged Property which is not real
estate under the laws of the Commonwealth of Pennsylvania, the Mortgagor hereby
grants, bargains, sells and conveys to the Mortgagee all right, title and
interest of the Mortgagor, if any, in such property for the purposes set forth
hereunder;
EXCLUDING THEREFROM (a) accounts receivable generated by the Mortgagor in
the course of its business, and all books, records and computer information
relating thereto and all proceeds thereof and "Eligible Receivables" and
"Related Security" of the Facility as such terms are defined in the Factoring
Agreement (hereinafter defined) (collectively, the "Factoring Agreement
Collateral") encumbered pursuant to that certain Receivables Purchase and Sale
Agreement dated as of January 24, 1996 between Mortgagor and Healthpartners
Funding, L.P. ("Healthpartners") (the Factoring Agreement") and such
replacements, renewals, restructurings or refinancings of the Factoring
Agreement to the extent secured by the Factoring Agreement Collateral and (b)
purchase money security interests and leases of furniture, machinery and
equipment in the ordinary course of Mortgagor's business (the matters described
in subsections (a) and (b) of this paragraph are hereinafter referred to
collectively as the "Permitted Security Interests").
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its
successors and assigns forever, and the Mortgagor hereby binds itself and
covenants, warrants, represents and agrees as follows:
ARTICLE XVI
COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE MORTGAGOR
Section 16.1 Payment of Indebtedness. The Mortgagor will punctually pay
the Indebtedness in immediately available funds as provided herein and in the
Note, all in the coin and currency of the United States of America which is
legal tender for the payment of public and private debts or equivalents thereof.
Section 16.2 Title to the Mortgaged Property. The Mortgagor warrants that:
(a) it is lawfully seized and possessed of the fee simple estate in the Land
subject to no mortgage, lien, charge or encumbrance except those exceptions to
title set forth in the title insurance policy insuring the lien of this Mortgage
which have been accepted by the Mortgagee, including, the lien of real estate
taxes not yet due and payable and those easements and agreements of record which
do not materially adversely affect the use of the Facility or title to the Land
or impair the lien of this Mortgage (the "Permitted Liens"); (b) it has full
power and lawful authority, and has taken all necessary corporate action, to
grant, bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, set
over and confirm unto the Mortgagee the Mortgaged Property in the manner and
form herein set forth; (c) it has full power and lawful authority to encumber
the Mortgaged Property in the manner and form herein set forth; (d) it will own
all fixtures and articles of personal property now or hereafter affixed and/or
used in connection with the Premises, including any substitutions or
replacements thereof, free and clear of liens, security interests and claims
except for Permitted Liens and Permitted Security Interests; (e) this Mortgage
is and will remain a valid and enforceable first priority lien on the Mortgaged
Property; and (f) it will preserve such title, and will forever warrant and
defend the same to the Mortgagee, its successors and assigns and will forever
warrant and defend the validity and priority of the lien hereof against the
claims of all persons and parties whomsoever.
Section 16.3 Maintenance of the Mortgaged Property. The Mortgagor shall
maintain or cause to be maintained the Mortgaged Property in good repair
ordinary wear and tear excepted, shall comply with the requirements of any
governmental authority claiming jurisdiction over the Mortgaged Property within
ten (10) days after an order containing such requirement has been issued by any
such authority (or the Mortgagor shall commence to comply with such requirement
and proceed with diligence thereafter to complete such requirement if permitted
by such governmental authority to do so under such order without fine, penalty
or interest) and shall permit the Mortgagee to enter upon the Premises and
inspect the Mortgaged Property at all reasonable hours and upon reasonable prior
notice. The Mortgagor shall not, without the prior written consent of the
Mortgagee, threaten, commit, permit or suffer to occur any waste or removal of
the Mortgaged Property or any part thereof; provided, however, that fixtures and
articles of personal property of Mortgagor, may be removed from the Premises if
the Mortgagor concurrently therewith replaces the same with similar items of
equal or greater value, free of any lien, security interests, charge or claim of
superior title. The Mortgagor shall not, without the prior written consent of
the Mortgagee which consent shall not be unreasonably withheld, threaten,
commit, permit or suffer to occur any structural alteration or demolition or any
other alteration or demolition which would, in the Mortgagee's reasonable
judgment, materially impair the value of the security covered by this Mortgage.
Section 16.4 Insurance; Restoration. (a) The Mortgagor shall keep the
Mortgaged Property insured against damage by fire and the other hazards covered
by an "all risk" or equivalent insurance policy for the full insurable value
thereof (which, unless the Mortgagee shall otherwise agree in writing, shall
mean the full repair and replacement value thereof without reduction for
depreciation or co-insurance). In addition, the Mortgagee may require the
Mortgagor to carry such other insurance on the Mortgaged Property, in such
amounts as may from time to time be reasonably required by the Mortgagee,
against insurable casualties which at the time are commonly insured against in
the case of premises similarly situated, due regard being given to the size and
the type of the building, the construction, location, utilities and occupancy or
any replacements or substitutions therefor. The Mortgagor shall additionally
keep the Mortgaged Property insured against loss by flood if the Mortgaged
Property is located in an area identified by the Secretary of Housing and Urban
Development as an area having special flood hazards and in which flood insurance
has been made available under the National Flood Insurance Act of 1968 (and any
successor act thereto) in an amount at least equal to the outstanding
Indebtedness or the maximum limit of coverage available with respect thereto
under said Act, whichever is less, and will assign and deliver the policy or
policies of such insurance to the Mortgagee, so and in such manner and form that
the Mortgagee and its successors and assigns shall at all times have and hold
the said policy or policies as collateral and further security for the payment
of the Indebtedness until the full payment of the Indebtedness. In addition,
from time to time, upon the occurrence of any change in the use, operation or
insurable value of the Premises, or in the availability of insurance in the area
in which the Premises is located, the Mortgagor shall, within ten (10) days
after demand by the Mortgagee, secure such additional amounts or such other
types of insurance as the Mortgagee may reasonably require. The Mortgagor shall
not obtain any separate or additional insurance which is contributing in the
event of loss unless it is properly endorsed and otherwise reasonably
satisfactory to the Mortgagee in all respects. The proceeds of insurance paid on
account of any damage or destruction to the Mortgaged Property or any part
thereof shall be paid over to the Mortgagee to be applied as hereinafter
provided.
(b) The Mortgagee shall have the option in its sole discretion to
apply any insurance proceeds it may receive pursuant to this Section 1.04 to the
payment of the Indebtedness or to allow all or a portion of such proceeds to be
used for the restoration of the Premises provided, however, that as long as: (i)
there has occurred no Event of Default which remains uncured after the
expiration of applicable notice, grace and cure periods or any event which,
after notice or lapse of time or both would constitute an Event of Default (an
"Incipient Default") hereunder, and (ii) the Mortgagee determines that less than
fifty percent (50%) of the Premises has been damaged or destroyed, then the
Mortgagee shall apply any insurance proceeds received by the Mortgagee hereunder
to be used for the restoration of the Premises. Any application to the
Indebtedness shall be to the then unpaid installments of principal due under the
Note in the inverse order of their maturity, such that the regular payments
under the Note shall not be reduced or altered in any manner. No prepayment
premium or charge shall be payable in connection with a prepayment made from
proceeds of a casualty insurance policy.
(c) The Mortgagor shall: (i) provide public liability insurance with
respect to the Premises providing for limits of liability of not less than an
aggregate of $5,000,000 and $3,000,000 per occurrence and not less than
$1,000,000 for property damage on an occurrence basis; (ii) provide professional
liability insurance coverage in such amount deemed reasonably necessary by the
Mortgagee; (iii) provide rent loss and business interruption insurance in such
amounts deemed reasonably necessary by the Mortgagee; and, (iv) provide such
other additional insurance as Mortgagee may, from time to time, deem reasonably
necessary, in such amounts as is customarily obtained in connection with
premises similarly situated, due regard being given to the use and location of
the Premises.
(d) All insurance policies required pursuant to this Section 1.04
and all other insurance policies maintained by the Mortgagor with respect to the
Premises (collectively, the "Insurance Policies") shall be endorsed in form and
substance acceptable to the Mortgagee to name the Mortgagee as an insured, loss
payee or mortgagee thereunder, as its interest may appear, with loss payable to
the Mortgagee, without contribution, under a mortgagee clause reasonably
approved by the Mortgagee. All of the Insurance Policies and endorsements shall
be fully paid for and contain such provisions and expiration dates and be in
such form and issued by such insurance companies licensed to do business in the
Commonwealth of Pennsylvania, as are acceptable to the Mortgagee in its sole
discretion. Without limiting the foregoing, each Insurance Policy shall provide
that such policy may not be canceled or materially changed except upon thirty
(30) days' prior written notice of intention of non-renewal, cancellation or
material change to the Mortgagee and that no act or thing done by the Mortgagor
shall invalidate the policy as against the Mortgagee. In the event the Mortgagor
fails to maintain insurance in compliance with this Section 1.04, the Mortgagee
may, but shall not be obligated to, obtain such insurance and pay the premium
therefor and the Mortgagor shall, on demand, reimburse the Mortgagee for all
sums, advances and expenses incurred in connection therewith. The Mortgagee's
failure to give such notice shall not create or impose any liability on the
Mortgagee or reduce its rights hereunder. The Mortgagor shall deliver copies of
all original Insurance Policies certified by the insurance company or authorized
agent as being true copies to the Mortgagee together with the endorsements
thereto required hereunder. In the event the Mortgagor maintains a blanket
policy with respect to the Insurance Policies, then Mortgagor shall deliver a
duly executed Certificate of Insurance with the endorsements thereto required as
provided hereunder in lieu of the policies. Notwithstanding anything to the
contrary contained herein or any provision of applicable law of any State, the
proceeds of Insurance Policies coming into the possession of the Mortgagee shall
not be deemed trust funds and the Mortgagee shall be entitled to dispose of such
proceeds as herein provided.
Section 16.5 Maintenance of Existence. So long as any amount of the
Indebtedness is outstanding, the Mortgagor will do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights,
licenses, trade names and privileges under the laws of the jurisdiction of its
formation and will comply with all regulations, rules, ordinances, statutes,
orders and decrees of any governmental authority or court applicable to the
Mortgagor or to the Mortgaged Property or any part thereof.
Section 16.6 Taxes and Other Charges. (a) The Mortgagor shall pay and
discharge when due and prior to the imposition of any penalty or interest charge
all taxes of every kind and nature, water rates, sewer rents and assessments,
levies, permits, inspection and license fees and all other charges imposed upon
or assessed against the Mortgaged Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Premises or arising in
respect of the occupancy, use or possession thereof and, unless the Mortgagor is
making monthly deposits with the Mortgagee in accordance with Section 1.14
hereof, the Mortgagor shall, upon request by Mortgagee, exhibit to the Mortgagee
within ten (10) days after such request, validated receipts or other
satisfactory evidence of the payment of such taxes, assessments, water rates,
sewer rents, levies, fees and other charges which may be or become a prior lien
on the Mortgaged Property. Should the Mortgagor default in the payment of any of
the foregoing taxes, assessments, water rates, sewer rents or other charges, the
Mortgagee may, but shall not be obligated to, pay the same or any part thereof
after five (5) days' notice to Mortgagor and the Mortgagor shall, on demand,
reimburse the Mortgagee for all amounts so paid. Notwithstanding anything in
this Section 1.06(a) to the contrary, in the event the Mortgagor may lawfully
pay any of such taxes, assessments, water rates, sewer rents or other charges in
installments, the Mortgagor shall not be deemed to be in default hereunder as a
result of electing to make such installment payments, provided (i) the Mortgagor
shall take all actions required to obtain the right to make such payments in
installments and (ii) payment of such amounts in installments shall not result
in any additional charge, fee or penalty. In the event that any such taxes,
assessments, water rates, sewer rents or other charges are customarily billed in
installments by the taxing authority, municipal government or utility company,
as the case may be, the Mortgagor shall not be deemed to be in default hereunder
if all such amounts are paid in accordance with such installment bills.
(b) Nothing in this Section 1.06 shall require the payment or
discharge of any obligation imposed upon the Mortgagor by subsection (a) of this
Section 1.06 so long as the Mortgagor shall in good faith and at its own expense
contest the same or the validity thereof by appropriate legal proceedings, which
proceedings must operate to prevent the collection thereof or other realization
thereon and the sale or forfeiture of the Mortgaged Property or any part thereof
to satisfy the same; provided that during such contest the Mortgagor shall, at
the option of the Mortgagee, either deposit in escrow with the Mortgagee the
amount of such contested payment or post a bond in the amount of such contested
payment to provide security to the Mortgagee, assuring the discharge of the
Mortgagor's obligation thereunder and of any additional interest charge, penalty
or expense arising from or incurred as a result of such contest; and provided,
further, that if, at any time, payment of any obligation imposed upon the
Mortgagor by subsection (a) of this Section 1.06 shall become necessary to
prevent a lien foreclosure sale of the Mortgaged Property or any portion thereof
because of non-payment, then Mortgagor shall pay the same in sufficient time to
prevent such foreclosure sale.
Section 16.7 Mechanics' and Other Liens. The Mortgagor shall pay, from
time to time when the same shall become due, all lawful claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Mortgaged Property or any part thereof,
or on the revenues, rents, issues, income or profits arising therefrom and, in
general, the Mortgagor shall do, or cause to be done, at the cost of the
Mortgagor and without expense to the Mortgagee, everything necessary to fully
preserve the lien of this Mortgage. In the event the Mortgagor fails to make
payment of such claims and demands, the Mortgagee may, but shall not be
obligated to, make payment thereof, and the Mortgagor shall, on demand,
reimburse the Mortgagee for all sums so expended. Notwithstanding anything to
the contrary contained in this Section 1.07, the Mortgagor may post a bond in
lieu of payment of any such claims or demands, provided (a) the Mortgagor shall
be contesting such claim or demand in good faith, and (b) the bond shall prevent
the creation (or shall effect the satisfaction and removal) of any lien upon the
Premises and the Mortgaged Property.
Section 16.8 Condemnation Awards. The Mortgagor, promptly upon obtaining
knowledge of the institution of any proceeding for the condemnation of the
Premises or any portion thereof, shall notify the Mortgagee of the pendency of
such proceeding. The Mortgagee may participate in any such proceeding and the
Mortgagor from time to time shall deliver to the Mortgagee all instruments
requested by the Mortgagee to permit such participation. All awards and
compensation for the taking or purchase in lieu of condemnation of the Premises
or any part thereof are hereby assigned to and shall be paid to the Mortgagee.
The Mortgagor hereby authorizes the Mortgagee to collect and receive such awards
and compensation, to give proper receipts and acquittances therefor, and in the
Mortgagee's sole discretion shall apply the same toward the payment of the
Indebtedness, notwithstanding the fact that the Indebtedness may not then be due
and payable, or to the restoration of the Premises provided, however, that so
long as: (i) there has occurred no Event of Default which remains uncured after
the expiration of applicable notice, grace and cure periods or Incipient Default
hereunder, and (ii) the Mortgagee determines that such taking will not have a
materially adverse impact upon the size or configuration of the Premises and
that restoration of the Premises is physically and economically feasible, then
the Mortgagee shall apply such award or compensation received by the Mortgagee
hereunder to be used for the restoration of the Premises. In the event that any
portion of the condemnation award or compensation shall be used to reduce the
Indebtedness, the same shall be applied to the then unpaid installments of
principal due under the Note in the inverse order of their maturity, such that
the regular payments under the Note shall not be reduced or altered in any
manner. No prepayment premium or charge shall be payable in connection with a
prepayment made from proceeds of a condemnation. The Mortgagor, upon request by
the Mortgagee, shall make, execute and deliver any and all instruments requested
for the purpose of confirming the assignment of the aforesaid awards and
compensation to the Mortgagee free and clear of any liens, charges or
encumbrances of any kind or nature whatsoever. The Mortgagee shall not be
limited to the interest paid on the proceeds of any award or compensation, but
shall be entitled to the payment by the Mortgagor of interest at the applicable
rate provided for in the Note.
Section 16.9 Mortgage Authorized. The Mortgagor hereby warrants and
represents that: (a) the execution and delivery of this Mortgage and the Note
have been duly authorized and that there is no provision in its certificate of
incorporation or by-laws, or any amendments thereto, or in any agreement to
which the Mortgagor is a party or by which its assets are bound, requiring
further consent for such action by any other entity or person; (b) it is duly
organized, validly existing and in good standing under the laws of Commonwealth
of Pennsylvania; (c) it has all necessary licenses, authorizations,
registrations and approvals and full power and authority to own its properties
and carry on its business as presently conducted; and (d) the execution and
delivery by and performance of its obligations under this Mortgage and the Loan
Documents will not result in the Mortgagor being in default under any provision
of its certificate of incorporation or by-laws, or any amendments thereto, or of
any mortgage, loan, credit or other agreement to which the Mortgagor is a party.
Section 16.10 Costs of Defending and Upholding the Lien. If any action or
proceeding is commenced to which action or proceeding the Mortgagee is made a
party or in which it becomes necessary to defend or uphold the lien of this
Mortgage, the Mortgagor shall, on demand, reimburse the Mortgagee for all
reasonable expenses (including, without limitation, reasonable attorneys' fees
and reasonable appellate attorneys' fees) incurred by the Mortgagee in any such
action or proceeding. In any action or proceeding to foreclose this Mortgage or
to recover or collect the Indebtedness, the provisions of the law relating to
the recovering of costs, disbursements and allowances shall prevail unaffected
by this covenant.
Section 16.11 Additional Advances and Disbursements. Subject to
Mortgagor's rights under Section 1.07, the Mortgagor shall pay when due all
payments and charges on all liens, encumbrances, ground and other leases, and
security interests which may be or become superior or inferior to the lien of
this Mortgage, and, in default thereof, the Mortgagee shall have the right, but
shall not be obligated, to pay, upon notice to Mortgagor, such payments and
charges and the Mortgagor shall, on demand, reimburse the Mortgagee for amounts
so paid. Notwithstanding the foregoing, the Mortgagee's failure to give notice
of payment to the Mortgagor shall not impair any of the Mortgagee's rights under
this Mortgage including, without limitation, the right to make such payment, and
shall not affect the Mortgagor's obligation to reimburse the Mortgagee, on
demand for the amounts paid by the Mortgagee, together with interest at the
Default Interest Rate (hereinafter defined) from the date such sum is advanced
or expense is incurred by the Mortgagee. In addition, upon default of the
Mortgagor in the performance of any other terms, covenants, conditions or
obligations to be performed by Mortgagor under any such prior or subordinate
lien, encumbrance, lease or security interest, the Mortgagee shall have the
right, but shall not be obligated, to cure such default in the name and on
behalf of the Mortgagor provided that Mortgagee has given to Mortgagor five (5)
days prior notice thereof. All sums advanced and reasonable expenses incurred at
any time by the Mortgagee pursuant to this Section 1.11 or as otherwise provided
under the terms and provisions of this Mortgage or under applicable law shall
bear interest from the date that such sum is advanced or expense incurred, to
and including the date of reimbursement, computed at a rate (the "Default
Interest Rate") equal to five percent (5%) per annum in excess of the Interest
Rate (as such term is defined in the Note), subject to the provisions set forth
in the Note. The Mortgagor agrees that any such charge shall not be deemed to be
additional interest or a penalty, but shall be deemed to be liquidated damages
because of the difficulty in computing the actual amount of damages in advance,
and all such advances or disbursements together with interest thereon as
provided in this Section 1.11 shall be secured by the lien of this Mortgage.
Section 16.12 Costs of Enforcement. The Mortgagor shall pay all reasonable
expenses (including reasonable attorneys' fees and reasonable appellate
attorneys' fees) of or incidental to the enforcement of any provision hereof, or
the enforcement, compromise or settlement of this Mortgage or the Indebtedness,
and for the curing thereof, or for defending or asserting the rights and claims
of the Mortgagee in respect thereof, by litigation or otherwise. To the extent
permitted by law, all rights and remedies of the Mortgagee shall be cumulative
and may be exercised singly or concurrently. Notwithstanding anything herein
contained to the contrary, the Mortgagor, to the extent permitted by law: (a)
HEREBY WAIVES TRIAL BY JURY IN ANY PROCEEDING IN CONNECTION WITH THIS MORTGAGE
OR THE INDEBTEDNESS OR ANY OF THE LOAN DOCUMENTS; (b) will not (i) at any time
insist upon, or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Mortgaged Property or any part thereof, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage, nor (ii) claim, take or insist upon
any benefit or advantage of any law now or hereafter in force providing for the
valuation or appraisal of the Mortgaged Property, or any part thereof, prior to
any sale or sales thereof which may be made pursuant to any provision herein, or
pursuant to the decree, judgment or order of any court of competent
jurisdiction, nor (iii) after any such sale or sales, claim or exercise any
right under any statute heretofore or hereafter enacted to redeem the property
so sold or any part thereof; (c) hereby expressly waives all benefit or
advantage of any such law or laws; and (d) covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to the Mortgagee,
but to suffer and permit the execution of every power herein granted as though
no such law or laws had been made or enacted. The Mortgagor, for itself and all
who may claim under it, waives, to the extent that it lawfully may, all right to
have the Mortgaged Property marshaled upon any foreclosure hereof.
THE MORTGAGOR ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY COUNSEL IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS MORTGAGE AND THAT IT
UNDERSTANDS THE PRECEDING PROVISION WHICH CONTAINS WAIVERS BY MORTGAGOR OF
CERTAIN RIGHTS AND REMEDIES.
Section 16.13 Taxes on the Mortgagee. The Mortgagor shall pay any and all
taxes, charges, filing, registration and recording fees, excises and levies
imposed upon the Mortgagee by reason of its ownership of the Note or the
security created by this Mortgage or any mortgage supplemental hereto, any
security instrument with respect to any fixtures or personal property owned by
the Mortgagor at the Premises and any instrument of further assurance, other
than income, franchise and doing business taxes, and shall pay all stamp taxes
and other taxes required to be paid on the Note. In the event the Mortgagor
fails to make such payment within five (5) days after written notice thereof
from the Mortgagee, then the Mortgagee shall have the right, but shall not be
obligated, to pay the amount due, and the Mortgagor shall, on demand, reimburse
the Mortgagee for said amount.
Section 16.14 Escrow Deposits. Upon the occurrence of an Event of Default
(hereinafter defined) and if the Mortgagor is not otherwise making such payments
to the Mortgagee under this Mortgage, the Mortgagee, at its option, may require
that the Mortgagor deposit with the Mortgagee, monthly, one-twelfth (1/12th) of
the annual charges for insurance premiums, real estate and personal property
taxes, assessments, water, sewer and other charges which might become a lien
upon the Mortgaged Property and the Mortgagor shall, accordingly, make such
deposits. In addition, if required by the Mortgagee, the Mortgagor shall
simultaneously therewith deposit with the Mortgagee a sum of money which
together with the monthly installments aforementioned will be sufficient to make
each of the payments aforementioned at least thirty (30) days prior to the date
such payments are due. Should said charges not be ascertainable at the time any
deposit is required to be made with the Mortgagee, the deposit shall be made on
the basis of the Mortgagee's estimate of the charges for the current year or, at
the Mortgagee's election, on the basis of the charges for the prior year, and
when the charges are fixed for the then current year, the Mortgagor shall
deposit any deficiency with the Mortgagee. All funds so deposited with the
Mortgagee shall be held by it without interest, may be commingled by the
Mortgagee with its general funds and, may be applied in payment of the charges
for which such funds shall have been deposited or to the payment of the
Indebtedness or any other charges affecting the security of the Mortgagee, as
the Mortgagee sees reasonably fit, but no such application shall be deemed to
have been made by operation of law or otherwise until actually made by the
Mortgagee as herein provided. If deposits are being made with the Mortgagee, the
Mortgagor shall furnish the Mortgagee with bills for the charges for which such
deposits are required to be made hereunder and/or such other documents necessary
for the payment of same, at least fifteen (15) days prior to the date on which
the charges first become payable. In the event the Mortgagor fails to pay any
such amount, the Mortgagee may, but shall not be obligated to, make payment
thereof, and the Mortgagor shall, on demand, reimburse the Mortgagee for all
sums so expended.
Section 16.15 Late Charges. In the event the Mortgagor fails to pay any
amount of principal and/or interest under the Note or any other amounts required
thereunder or under the Loan Documents for five (5) days after such payment
becomes due, whether by acceleration or otherwise, the Mortgagee may, at its
option, whether immediately or at the time of final payment of the amounts
secured by this Mortgage, impose on demand a delinquency charge equal to the
greater of:
(a) the Default Interest Rate, computed from the original due date
to the date of receipt of such payment by Mortgagee in good funds, or
(b) five percent (5%) of the amount of such past due payment
notwithstanding the date on which such payment is actually paid to
Mortgagee; provided, however, that if any such delinquency charge under
subsections (a) or (b) hereof is in excess of the amount permitted to be
charged to the Mortgagor under applicable law, the Mortgagee shall be
entitled to collect a delinquency charge at the highest rate permitted by
such law.
Until any and all such delinquency charges are paid in full, the amount thereof
shall be added to the Indebtedness owing by the Mortgagor to the Mortgagee and
shall be secured by this Mortgage and any other collateral held by the Mortgagee
to secure such Indebtedness. The Mortgagor agrees that any such delinquency
charges shall not be deemed to be additional interest or a penalty, but shall be
deemed to be liquidated damages because of the difficulty in computing the
actual amount of damages in advance.
Section 16.16 Financial Statements.
(a) The Mortgagor hereby represents and warrants that the financial
statements heretofore delivered by the Mortgagor and the Guarantors were true
and correct as of the date thereof and that there has been no material adverse
change in the financial condition of the Mortgagor or any of the Guarantors
since that date.
(b) During the term of this Mortgage, the Mortgagor shall:
(i) furnish to the Mortgagee quarterly itemized cost basis
operating statements for the Facility reflecting profit and loss and including a
balance sheet for the Facility within forty-five (45) days after the end of each
fiscal quarter plus annual operating and financial statements within ninety (90)
days of the end of the period covered by such statement;
(ii) furnish to the Mortgagee copies of the quarterly
financial statements for the Mortgagor for all fiscal quarters within forty-five
(45) days after the end of each fiscal quarter;
(iii) furnish to the Mortgagee copies of the annual audited
financial statements for the Mortgagor for all fiscal years within ninety (90)
days after the end of each fiscal year;
(iv) furnish to the Mortgagee copies of the annual federal tax
return filed by the Mortgagor within thirty (30) days of the date of filing
thereof;
(v) provide and cause CoreCare to provide, directly or
indirectly, to the Mortgagee copies of its quarterly financial statements for
each fiscal quarter during the term of this Mortgage, no later than forty-five
(45) days after the end of each such fiscal quarter;
(vi) provide and cause CoreCare to provide, directly or
indirectly, to the Mortgagee copies of its financial statements for all fiscal
years ending within the term of this Mortgage, no more than ninety (90) days
after the end of the each such fiscal year;
(vii) provide and cause Fleming and DiOttavio to provide,
directly or indirectly, to the Mortgagee, copies of their respective annual
personal financial statements for all fiscal years ending within the term of
this Mortgage within sixty (60) days after the end of each fiscal year; and
(viii) provide and cause the Guarantors to provide directly or
indirectly to the Mortgagee, copies of their respective annual federal tax
returns within thirty (30) days of the date of filing thereof.
All such financial statements shall be prepared, in accordance with generally
accepted accounting principles, consistently applied and, in the case of such
annual financial statements, shall be audited and accompanied within ninety (90)
days after the applicable statement period by a report containing no material
qualifications of an independent certified public accountant satisfactory to the
Mortgagee. All quarterly and annual financial statements of the Mortgagor and
the Guarantors shall include balance sheets, statements of income and expenses
and statements of cash flow. The financial statements of the Mortgagor shall
include calculations of Cash Flow and Debt Service (as those terms are defined
in Section 1.17 hereof). The Mortgagor shall permit the Mortgagee to examine in
the city where the Mortgagor's main office is located, or at the Premises (at
the option of the Mortgagee), such records, books and papers of the Mortgagor
which reflect upon the financial condition of the Mortgagor and the income and
expense relative to the Premises, and the business conducted thereon. All
financial statements of the Mortgagor and the Guarantors shall be delivered in
duplicate, and, at the Mortgagee's option, shall be accompanied by the
certificate of the chief financial or accounting officer of the Mortgagor or of
CoreCare, dated within five (5) days of the delivery of such statements to the
Mortgagee, stating that to the best of his knowledge, such financial statements
are true, complete and correct and that he knows of no Event of Default or
Incipient Default, which has occurred and is continuing, or if such Event of
Default or Incipient Default has occurred is continuing, specifying the nature
and period of existence thereof and what action the Mortgagor has taken or
proposes to take with respect thereto, and, except as otherwise specified,
stating that to the best of his knowledge, the Mortgagor and the Guarantors have
fulfilled all of their respective obligations under the Loan Documents which are
required to be fulfilled on or prior to the date of such certificate. The
Mortgagee may require such financial and operating statements more frequently if
the Mortgagee determines in its reasonable discretion, that the operating
performance of the Facility or the repayment of the Indebtedness is not
progressing in a satisfactory manner in the Mortgagee's reasonable judgment and
the Mortgagor shall comply with such requirement within thirty (30) days after
being so notified.
(c) The Mortgagor shall furnish to the Mortgagee copies of all Form
10-Ks, 10-Qs and Form 8-Ks filed by CoreCare with the United States Securities
and Exchange Commission ("SEC"). Copies of all such filings with the SEC shall
be delivered to the Mortgagee within thirty (30) days after such filing with the
SEC.
Section 16.17 Restrictive Covenants. (a) The Mortgagor shall not amend,
modify or terminate any existing lease or enter into any other lease or sublease
of the Premises (or a portion thereof) without the prior written consent of the
Mortgagee which consent shall not be unreasonably withheld provided that: (i)
any such amendments to any existing lease involve provisions which the Mortgagee
determines in its reasonable discretion, to be no less favorable than the
provisions previously in effect, including, for purposes of example but not
limitation, amendments which do not decrease the lease term or the amount of
rent payable under such lease; and, (ii) the Mortgagee in its reasonable
discretion, determines that such amendment will not materially adversely affect
or impair the value of the Mortgaged Property, the lien of the Mortgage or any
other security given to the Mortgagee for repayment of the obligation evidenced
by the Loan Documents or impair the ability of the Mortgagee to be repaid in
full by the Maturity Date (as defined in the Note); (b) without the prior
written consent of the Mortgagee, the Mortgagor shall not: (i) execute any
conditional bill of sale, chattel mortgage, security agreement or other security
instruments covering any furniture, furnishings, fixtures and equipment,
intended to be incorporated in the Premises or the appurtenances thereto, or
covering articles of personal property placed in the Premises, or purchase any
of such furniture, furnishings, fixtures and equipment so that ownership of the
same will not vest unconditionally in the Mortgagor, free from encumbrances on
delivery to the Premises, except for Permitted Security Interests; (ii) execute
or permit to exist any lease of all or substantially all of the Premises; (iii)
further assign the rents affecting the Premises; (iv) except as otherwise
permitted hereunder, sell, transfer, convey or assign any interest in the
Mortgaged Property or any part thereof, nor sell, convey or transfer or permit
the sale, conveyance or transfer, whether directly or indirectly, of more than
twenty-five percent (25%) of the legal, equitable or beneficial interest in, the
Mortgagor either directly or indirectly, except sales or transfers to entities
which are affiliated with Mortgagor shall be permitted so long as the transferee
assumes all of the Mortgagor's obligations under the Loan Documents and the
Mortgagor and the Guarantors are not released from their respective obligations
under the Loan Documents; and (v) permit any sale by the Mortgagor or CoreCare
of substantially all of their respective assets, or permit a material change in
the ownership of the equity interest of the Mortgagor (for purposes of
subsection 1.17(b)(v), a material change shall mean a change in more than
twenty-five percent (25%) of such ownership interest of the Mortgagor, in the
aggregate over the term of the Loan).
(c) At the end of each calendar quarter throughout the term of the
Loan (hereinafter defined), the Mortgagor shall have maintained a Debt Service
Coverage Ratio (hereinafter defined) of at least 2.5 to 1.0. For purposes of
this Mortgage, "Debt Service Coverage Ratio" shall mean the ratio of (i) Cash
Flow (hereinafter defined) determined as set forth below to (ii) Debt Service
(hereinafter defined).
For purposes of this Mortgage, "Cash Flow" shall mean, for any given
accounting period, the aggregate income from operations of the Mortgagor (as
determined in accordance with generally accepted accounting principles applied
on a basis consistent with prior periods) plus amortization, depreciation,
interest expense and income taxes. In no instance will any capital expenditure
or extraordinary income (payments for the receivables under the Factoring
Agreement shall not be deemed to be extraordinary income and shall be deemed to
be income for Cash Flow purposes) be accounted for in determining Cash Flow. For
purposes of this Mortgage, "Debt Service" shall mean, for any given period, all
regularly scheduled principal and interest payments due under the Loan and any
other debts permitted pursuant to the terms of the Loan Documents or otherwise
permitted in writing by the Mortgagee. Amounts owed or payable to Healthpartners
under the Factoring Agreement shall not be deemed to be debt for the purposes
hereof only to the extent such amounts are not characterized as debt on the
financial statements of the Mortgagor.
(d) In addition to the Debt Service Coverage Ratio required under
Section 1.17(c) hereof, at the end of each calendar quarter throughout the term
of the Loan, the Mortgagor shall have maintained, a Supplemental Debt Service
Ratio (hereinafter defined) of at least 2.0 to 1.0. For purposes of this
Mortgage, "Supplemental Debt Service Coverage Ratio" shall mean the ratio of (i)
Cash Flow (as defined in Section 1.17(c) above) to (ii) Debt Service (as defined
in Section 1.17(c) above) plus the amount of management fees or other amounts
due or payable by the Mortgagor under any management agreement.
Section 16.18 Estoppel Certificates. The Mortgagor shall, within ten (10)
business days upon request, furnish to the Mortgagee a written statement, duly
acknowledged, setting forth the amount due on this Mortgage, the terms of
payment and Maturity Date of the Note, the date to which interest has been paid,
whether any offsets or defenses exist against the Indebtedness and, if any are
alleged to exist, the nature thereof shall be set forth in detail provided,
however, that the failure of the Mortgagor to set forth in such written
statement any such offsets or defenses shall not be deemed to be a waiver by the
Mortgagor of such offset or defense.
Section 16.19 Lease Securities. Lease securities of tenants of the
Premises, if any, shall not be commingled with any other funds of the Mortgagor.
Within ten (10) days after written request by the Mortgagee, the Mortgagor,
shall furnish to the Mortgagee satisfactory evidence of compliance with this
Section 1.19 together with a statement of all lease securities deposited by any
such tenant and copies of all leases not theretofore delivered to the Mortgagee,
certified by the Mortgagor.
Section 16.20 Assignment of Rents, Issues and Profits. The Mortgagor,
hereby assigns to the Mortgagee, as further security for the payment of the
Indebtedness, the rents, issues and profits of the Premises, together with all
leases and other documents evidencing such rents, issues and profits and any
lease guarantees, now or hereafter in effect and any and all deposits held as
security under said leases, and shall, upon demand, deliver to the Mortgagee a
true and correct copy of such lease or other document. Nothing contained in this
Section shall be construed to bind the Mortgagee to the performance of any of
the covenants, conditions or provisions contained in any such lease, or other
document or otherwise to impose any obligation on the Mortgagee (including,
without limitation, any liability under the covenant of quiet enjoyment
contained in any lease or in any law of the Commonwealth of Pennsylvania in the
event that any tenant shall have been joined as a party defendant in any action
to foreclose thereby of all right, title and interest and equity of redemption
in the Premises), except that the Mortgagee shall be accountable for any money
actually received pursuant to such assignment. Upon the occurrence of the Event
of Default, the Mortgagor hereby further grants to the Mortgagee the right,
subject to applicable law (a) to enter upon and take possession of the Premises
for the purpose of collecting the said rents, issues and profits, (b) to
dispossess by the usual summary proceedings any tenant defaulting in the payment
to the Mortgagee, (c) to let the Premises, or any part thereof, and (d) to apply
said rents, issues and profits, after payment of all necessary charges and
expenses, on account of the Indebtedness. Such assignment and grant shall
continue in effect until the Indebtedness is paid, the execution of this
Mortgage constituting and evidencing the irrevocable consent of the Mortgagor to
the entry upon and taking possession of the Premises by the Mortgagee pursuant
to such grant, whether foreclosure has been instituted or not and without
applying for a receiver. To the extent the provisions of this Section 1.20
conflict with the provisions of the Assignment of Leases, the provisions of the
Assignment of Leases shall govern.
Section 16.21 Indemnity Against Liens. The Mortgagor shall indemnify and
hold harmless the Mortgagee from and against any loss or liability, cost, or
expense, including, without limitation, any judgments, attorneys' fees, costs of
appeal bonds and printing costs, arising out of or relating to any proceeding
instituted by any person claiming a statutory or equitable lien of any kind
against the Premises.
Section 16.22 Waiver of Homestead and Other Exemptions. To the extent
lawfully permitted, the Mortgagor hereby waives all rights to any homestead or
other exemption to which the Mortgagor would otherwise be entitled under any
present or future constitutional, statutory, or other provision of Pennsylvania
or federal law.
Section 16.23 Restrictions on Additional Debt and Encumbrances. Except for
the Permitted Security Interests and Permitted Liens, the entire Indebtedness,
at the option of the Mortgagee, will become immediately due and payable upon the
creation, filing or recording of any mortgage, lien, encumbrance or other
security interest on the Mortgaged Property or any part thereof in connection
with any other financing by the Mortgagor or in the event that Mortgagor incurs
any additional debt obligations (except for obligations relating to Permitted
Security Interests) with respect to, or in connection with, its ownership and
operation of the Facility (including, without limitation, any contingent or
guarantor liability) unless the prior written consent of the Mortgagee is
obtained. Notwithstanding the foregoing, the Mortgagor shall have the right
(which can be exercised one or more times) to replace, refinance or restructure
the Factoring Agreement by using the Factoring Agreement Collateral as security
therefor. Although the Loan is not intended to be secured by the Factoring
Agreement Collateral, the Mortgagee agrees to execute, at the Mortgagor's
expense, any documents reasonably requested by the Mortgagor or any lender
lending against the Factoring Agreement Collateral verifying that the Mortgagee
claims no security interest in the Factoring Agreement Collateral. Nothing
herein, however, shall authorize or permit the Mortgagor to use the Factoring
Agreement Collateral to secure any financing in an amount greater than the
maximum amount presently provided for under the Factoring Agreement.
Section 16.24 Management of the Facility; Compliance with Laws. (a) Except
as permitted by Section 1.26 of this Mortgage, the Mortgagor shall continuously
use and operate the Facility as a thirty-two (32) bed residential psychiatric
treatment facility for children and adolescents with related or accessory uses
now or hereafter customary in connection therewith (the "Permitted Use"). The
Mortgagor shall maintain the Facility so that the same are and shall continue to
be eligible to receive all federal, state and local Medicare and/or Medicaid
payments and reimbursements to the extent applicable.
(b) The Mortgagor hereby represents and warrants that the Mortgagor
is in compliance with and will continue to comply with (i) all laws and
ordinances relating to the maintenance and use of the Facility (including,
without limitation, all laws and ordinances relating to the use of the Facility
for the Permitted Use) and with all requirements, orders and notices of
violations thereof issued by any governmental authority, the violation of which
would result in the revocation of any federal, state or local government
certificate, license, permit, authorization or approval, or in the imposition of
any civil or criminal penalties or would impair the eligibility of the Mortgagor
to secure all Medicare and/or Medicaid payments and reimbursements with respect
to the Facility, to the extent applicable, and (ii) all other laws and
ordinances relating to the maintenance and use of the Premises and with all
other requirements, orders and notices of violations thereof issued by any
governmental authority.
(c) To the extent applicable, the Mortgagor shall procure and
maintain in full force and effect all federal, state and local government
certificates, licenses, permits, authorizations and approvals that are necessary
to operate the Premises for the Permitted Use and to ensure that the Mortgagor
is eligible to secure all Medicare and/or Medicaid payments and reimbursements
with respect to the Facility, to the extent applicable. The Mortgagor shall
comply with (i) all such federal, state and local governmental certificates,
licenses, permits, authorizations and approvals, the violation of which would
result in the revocation of such certificates, licenses, permits, authorization
and approvals, or in the imposition of any civil or criminal penalties, or would
impair the Mortgagor's eligibility to secure all Medicare and/or Medicaid
payments and reimbursements with respect to the Facility, to the extent
applicable, and (ii) all other federal, state and local governmental
certificates, licenses, permits, authorizations and approvals. The Mortgagor
will not knowingly use or permit the Premises or any portion thereof to be used,
and will not permit any condition to exist at the Premises, in violation of any
certificates, permits, licenses, authorizations or approvals issued and in
effect from time to time with respect to the Premises or any portion thereof or
in violation of the provisions of, or which would wholly or partially
invalidate, any insurance policy in effect with respect to the Premises or any
portion thereof or of any rules or regulations of insurance underwriters, and
shall maintain and use the Premises in full compliance with all of the
foregoing. The Mortgagor shall keep such certificates, permits, licenses,
authorizations and approvals in full force and effect and will timely pay all
fees and other amounts required to be paid in connection therewith.
Section 16.25 Subordination of Distributions and Management Fees. All
distributions, management fees or other compensation or payments payable by the
Mortgagor to the shareholders of the Mortgagor, to the Guarantors and/or the
shareholders of CoreCare and to entities owned or controlled by the Guarantors
shall be subordinate to all payments due under the Loan Documents and all
amounts secured by this Mortgage and to the lien, terms, covenants and
conditions of this Mortgage and any renewal, extension, modification,
replacement or consolidation thereof. Notwithstanding anything to the contrary
hereinabove set forth, provided that no Event of Default or Incipient Default
has occurred and is continuing, the Mortgagor may make such distributions and
other payments to the shareholders of the Mortgagor, the Guarantors, the
shareholders of CoreCare, and to entities owned or controlled by the Guarantors
only to the extent that the amount of all such distributions or payments shall
be limited to the amount necessary for the Mortgagor to maintain compliance with
the Debt Service Coverage Ratio as provided in this Mortgage.
Section 16.26 Ownership, Operation of the Facility and Restrictions on
Transfers. The identity of the Mortgagor and the ownership by CoreCare of the
Mortgagor are material inducements to the Mortgagee in entering into this
Mortgage. Accordingly, (a) the Facility shall be owned and operated by the
Mortgagor during the entire period during which the Indebtedness remains
outstanding unless the Mortgagee, in its sole discretion, consents to a
substitute operator; (b) except as otherwise expressly permitted hereunder,
CoreCare shall remain the sole shareholder of the Mortgagor during the entire
period during which the Indebtedness remains outstanding; (c) the entire
Indebtedness, at the option of the Mortgagee, will become immediately due and
payable (i) if more than twenty-five percent (25%) of the ownership interest in
the Mortgagor is pledged, hypothecated, levied upon, encumbered or transferred
in any manner without the prior written consent of the Mortgagee, or (ii) if the
Mortgaged Property or any part thereof or any interest therein is sold,
transferred, conveyed or assigned without the prior written consent of the
Mortgagee.
Section 16.27 Inspection Reports and Renewals. The Mortgagor shall furnish
to the Mortgagee within thirty (30) days of issuance: (a) to the extent
applicable, all inspection reports and surveys of the Facility conducted for
licensure and for Medicare and Medicaid purposes; and (b) evidence certifying
the renewal of licensing of the Facility for the Permitted Use and by all
applicable governmental authorities. The Mortgagor shall immediately notify the
Mortgagee of any change in the licensing of the Facility upon receipt of notice
thereof.
Section 16.28 Use of Proceeds. The proceeds of the Indebtedness evidenced
by the Note and secured by this Mortgage (the "Loan") shall be used by the
Mortgagor solely to: (a) retire the Mortgagor's existing line of credit; (b)
retire existing mortgage debt encumbering the Facility (c) provide the Mortgagor
with working capital; and (d) pay certain closing and ancillary costs including
without limitation, investment banking fees.
Section 16.29 Governmental Consents. With the exception of notices to, or,
where required, the consent of state health authorities (which notices have been
given or which consents have been obtained), no prior consent, approval or
authorization of, registration, qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental or public
authority or agency is required for (a) the valid execution and delivery of this
Mortgage by the Mortgagor and (b) if applicable, the receipt of Medicare and
Medicaid payments and reimbursements by the Mortgagor.
Section 16.30 Compliance with Laws. The Mortgagor holds free from any
burdensome restrictions or conflicts with the rights of others, all licenses,
permits, certificates, authorizations and approvals necessary for the operation
of the Facility for the Permitted Use. To the best of the Mortgagor's knowledge,
the Facility and the operation and use thereof are in compliance with (a) all
applicable municipal, county, state and federal laws, regulations, ordinances,
standards and orders including without limitation, the Americans with
Disabilities Act, 42 U.S.C. ss.ss. 12101-12213 (the "ADA"), and with all
applicable municipal, health, building and zoning laws and regulations
(including, without limitation, health care laws and the fire safety code), the
violation of which would result in the revocation of any federal, state or
local, governmental certificate, license, permit, authorization or approval, or
in the imposition of any civil or criminal penalties or would impair the
Mortgagor's eligibility to secure all Medicare and/or Medicaid payments and
reimbursements with respect to the Facility to the extent applicable, and (b)
all other laws, regulations, ordinances, standards and orders and with all
applicable and municipal, health, building and zoning laws and regulations
(including, without limitation, health care laws and fire safety code). There is
no action pending or recommended by the appropriate state or federal agency
having jurisdiction thereof, either to revoke, withdraw or suspend any license
to operate the Facility.
Section 16.31 Governmental Work Orders. There is no outstanding material
deficiencies or work orders of any authority having jurisdiction over the
Facility requiring conformity to any applicable statute, regulation, ordinance
or by-law pertaining to the type of Facility presently being operated on the
Premises, including but not limited to the Medicare and Medicaid programs.
Section 16.32 Compliance with Law re: Fixtures and Furnishings. Mortgagor
has not received any notice of any material claim requirement or demand of any
licensing or certifying agency supervising or having authority over the Premises
to rework or redesign the Facility or to provide additional furniture, fixtures,
equipment or inventory so as to conform to or comply with any existing law, code
or standard including without limitation, the ADA.
Section 16.33 Environmental Protection and Indemnification. (a) The
Mortgagor represents and covenants that to the best of the Mortgagor's
knowledge, and except as disclosed on that certain Phase I Environmental Site
Assessment of the Premises dated May, 1996 prepared by Keating Environmental
Management, Inc. (the "Assessment Report"): (i) the Premises are presently and
have been at all times free of unlawful contamination from any substance or
material presently identified to be toxic or hazardous according to any federal,
state, local or municipal law, statute, ordinance, regulation, directive or
order of any applicable governmental entity relating to the physical or
environmental condition of the Premises, including, without limitation, 42
U.S.C. Section 9601, et. seq., as amended (collectively, the "Environmental
Laws") including, without limitation, any asbestos, polychlorinated biphenyls,
radioactive substance, methane, volatile hydrocarbons, industrial solvents or
any other material or substance which has in the past or could presently or at
any time in the future pose, cause or constitute a health, safety or hazard to
the environment, public health, any person or property; (ii) the Mortgagor has
not caused or suffered to occur, and the Mortgagor will not hereafter cause or
suffer to occur, an unlawful discharge, disposal, spillage, loss, seepage or
filtration of oil or petroleum, chemical liquids or solids, liquid or gaseous
products, hazardous waste, hazardous substance or material (a "Spill") at, upon,
under or within the Premises, or any portion thereof or any contiguous real
estate; (iii) neither the Mortgagor nor, to the best of the Mortgagor's
knowledge, any other party has been, is or will be involved in operations at or
near the Premises which violate the Environmental Laws and which could lead to
the imposition on the Mortgagor or any other owner or occupier of the Premises
of liability or the creation of a lien on the Premises or any portion thereof,
under the Environmental Laws and (iv) the Mortgagor shall dispose of any
hazardous or toxic (including without limitation, medical and radioactive
wastes) substances (as defined in the Environmental Laws) in accordance with the
Environmental Laws;
(b) The Mortgagor shall comply strictly and in all respects with the
requirements of the Environmental Laws and related regulations and shall notify
the Mortgagee promptly in the event of any Spill upon the Premises or any
portion thereof, and shall promptly forward to the Mortgagee copies of all
orders, notices, permits, applications or other communications and reports in
connection with any such Spill or any other matters relating to the
Environmental Laws, as they may affect the Premises or any portion thereof;
(c) In the event the Mortgagee, in the exercise of its reasonable
judgment, based upon its information and belief that there have occurred changes
in the physical condition of the Premises or the surrounding area or in the
Environmental Law, determines that an environmental site assessment or
environmental audit report is warranted, the Mortgagor, promptly upon the
written request of the Mortgagee from time to time, shall provide the Mortgagee
with an environmental site assessment or environmental audit report, or an
update of such an assessment or report, all in scope, form and content
reasonably satisfactory to the Mortgagee;
(d) The Mortgagor shall indemnify and hold harmless the Mortgagee
from and against all loss, liability, damage and expense, including reasonable
attorney's fees, suffered or incurred by the Mortgagee, whether as holder of
this Mortgage, as mortgagee in possession or as successor in interest to the
Mortgagor as owner of the Premises or any portion thereof by virtue of
foreclosure or acceptance of a deed in lieu of foreclosure (i) under or on
account of the Environmental Laws, including the assertion of any lien
thereunder; (ii) with respect to any Spill affecting the Premises or any portion
thereof whether or not the same orig- inates or emanates from the Premises or
any portion thereof or any such contiguous real estate, including any loss of
value of the Premises as a result of a Spill; and (iii) with respect to any
other matter affecting the Premises or any portion thereof or any portion
thereof within the jurisdiction of the Environmental Protection Agency of the
United States of America or any similar agency or department of the Commonwealth
of Pennsylvania. The term "Mortgagee" shall include any assignee or designee of
Mortgagee which becomes the owner of the Premises or any portion thereof.
(e) In the event of any Spill affecting the Premises, whether or not
the same originates or emanates from the Premises or any portion thereof or any
contiguous real estate, and/or if the Mortgagor shall fail to comply with any of
the requirements of the Environmental Laws or related regulations, the Mortgagee
may at its election, but without the obligation so to do, cause such work to be
performed at the Premises and/or take any and all other actions as the Mortgagee
shall deem reasonably necessary or advisable in order to remedy said Spill or
cure said failure of compliance, and any amounts paid as a result thereof,
together with interest thereon at the Default Interest Rate from the date of
payment by the Mortgagee, shall be immediately due and payable by the Mortgagor
to the Mortgagee and until paid shall be added to and become a part of the
Indebtedness and shall have the benefit of the lien hereby created as a part
thereof.
(f) All future leases or concession agreements at the Premises shall
contain a provision prohibiting the deposit, storage, disposal, dumping,
injecting, spilling, leaking or other placement or release by any tenant at,
upon or in the Premises of a hazardous or toxic waste or material except in
compliance with the Environmental Laws.
(g) The Mortgagor has obtained all permits, licenses, and other
authorizations that are required under the Environmental Laws to operate the
Facility for the Permitted Use. Mortgagor has no knowledge of any violation by
the Mortgagor or any other party of the Environmental Laws with respect to the
Premises.
(h) The Mortgagor has no knowledge or information that the Mortgagor
is or may be potentially responsible or liable for any environmental cleanup,
removal, remedial action, or corrective action under the Environmental Laws. The
Mortgagor (i) has not been demanded, ordered, required, or requested to
undertake, (ii) has not undertaken, and (iii) does not have knowledge of any
facts or circumstances that might give rise to a demand, order, requirement, or
request to undertake, any test, investigation, assessment, examination,
treatment, or restoration with respect to any Spill on any real property now or
in the past owned, leased or used by or on behalf of the Mortgagor including
without limitation the Premises.
(i) The Mortgagor has disclosed to the Mortgagee all information of
which the Mortgagor has knowledge regarding any violation or alleged violation
by the Mortgagor of the Environmental Laws with respect to any property now or
in the past owned, leased or used by or on behalf of the Mortgagor.
(j) The provisions of this Section 1.33 shall survive the repayment
of the Indebtedness and the satisfaction of this Mortgage.
Section 16.34 Subordination of the Mortgagor's Debt to the Guarantors. The
Mortgagor shall cause the Guarantors to render all indebtedness of the Mortgagor
to the Guarantors to be subordinated and junior in right of payment and
performance to the prior payment in full of all amounts owed to the Mortgagee
under the Loan Documents and to the complete performance by the Mortgagor of all
obligations to the Mortgagee under the Loan Documents. Notwithstanding anything
to the contrary hereinabove set forth, provided that no Event of Default or
Incipient Default has occurred and is continuing, the Mortgagor may continue to
pay to the Guarantors any payments owed by the Mortgagor to the Guarantors in
connection with any such indebtedness.
Section 16.35 Loan Brokerage. The Mortgagor shall indemnify, defend and
hold harmless the Mortgagee against loss or damage suffered by the Mortgagee as
a result of any claim by any person or entity for any brokerage commission,
finder's fee, or other similar fee alleged to be due as a result of the Loan
based upon the actions of the Mortgagor, the Guarantors or their respective
affiliates.
Section 16.36 Limitation on Management Agreement Fees. The Mortgagor
shall, during the term of the Loan, pay only such fees for the operation and
management of the Facility which do not exceed those provided for in any
management agreement which has been approved by the Mortgagee. All other terms
and conditions of any management agreement must be satisfactory to the
Mortgagee. The Mortgagee shall have the right to approve all modifications,
amendments or extensions or any management agreement.
Section 16.37 Letter of Credit. At all times while any amount of the
Indebtedness shall be outstanding and continuing for ninety (90) days after the
date of repayment of the Indebtedness or until the Mortgagee determines that
certain criteria have been achieved by the Mortgagor and the Guarantors, the
Mortgagor shall secure an irrevocable stand-by letter of credit in the amount of
One Hundred Seventy-Five Thousand Dollars ($175,000) naming the Mortgagee as the
beneficiary thereof (the "Letter of Credit"). The Letter of Credit shall be
delivered to Lender as the beneficiary thereof, and shall require as a condition
to payment only presentation of a sight draft at a designated office of the
issuer in the continental United States. The Letter of Credit shall be issued by
a bank rated "B" or better by Thompson Bank Watch and shall be otherwise
acceptable to the Mortgagee in its sole and absolute discretion (an "Eligible
Bank"). The Mortgagor shall pay all fees and expenses incurred in securing and
maintaining the Letter of Credit. During the term of the Loan, each Letter of
Credit shall have an expiration date of not less than one (1) year from the date
of issuance thereof. At least thirty (30) days prior to the expiration of any
Letter of Credit, the Mortgagor shall deliver to the Mortgagee a replacement
Letter of Credit having an expiration date of at least one (1) year from the
date of issuance thereof, except that the final Letter of Credit shall not be
required to extend more than ninety (90) days beyond the Maturity Date (as
defined in the Note), and which replacement Letter of Credit shall be effective
as of the expiration date of the then issued Letter of Credit so that there
shall be no lapse in the maintenance of a Letter of Credit at all times during
the term of the Loan so long as a Letter of Credit is required. Proceeds of the
draw of the Letter of Credit shall not be subject to withholding tax. The
occurrence of an Event of Default or the failure by the Mortgagor to maintain or
renew the Letter of Credit in accordance with the terms of this Section 1.37 at
any time during the term of the Loan shall entitle the Mortgagee to present the
Letter of Credit to the Eligible Bank for automatic payment thereunder.
Notwithstanding anything to the contrary set forth in this Section 1.37 above,
(a) the amount of the Letter of Credit shall be reduced to Eighty-Seven Thousand
Five-Hundred Dollars ($87,500), provided that there exists no uncured Event of
Default or Incipient Default, and further provided that the Mortgagee
determines, based upon the Mortgagee's review of all required financial
information of the Mortgagor and the Guarantors that the Mortgagor has achieved
a Debt Service Coverage Ratio, after payment of management fees payable by the
Mortgagor, of at least 2.0 to 1.0 for two (2) consecutive Loan Years (as defined
in the Note); and, (b) the Letter of Credit shall be released and no longer
required provided that there exists no uncured Event of Default or Incipient
Default and further provided that the Mortgagee determines, based upon the
Mortgagee's review of all required financial information of the Mortgagor and
Guarantors, that the Mortgagor has achieved a Debt Service Coverage Ratio, after
payment of management fees payable by the Mortgagor, of at least 2.5 to 1.0 for
three (3) consecutive Loan Years.
Section 16.38 Value of Mortgaged Property. The Mortgagor shall maintain
the Mortgaged Property and shall not cause the value of the Mortgaged Property
to decline. At all times during the term of the Loan, the outstanding balance of
the Indebtedness shall be equal to more than seventy percent (70%) of the
appraised value of the Mortgaged Property and the business conducted thereon, as
determined by an appraiser acceptable to the Mortgagee, in its reasonable
discretion.
ARTICLE XVII
DEFAULT AND REMEDIES
Section 17.1 Events of Default. The following occurrences shall, after the
expiration of any applicable notice and grace periods, constitute "Events of
Default" under this Mortgage: (a) default when and as the same shall become due
and payable in payment of principal or interest on the Note whether by maturity
or acceleration, which default has continued for a period of five (5) days after
receipt from the Mortgagee of written notice of such default; or (b) default
when and as the same shall become due and payable in payment of any other
amounts due under the Note, this Mortgage or any other Loan Document, which
default has continued for a period of five (5) days after receipt from the
Mortgagee of written notice of such default; or (c) default in the due
observance or performance of any of the terms, covenants or conditions contained
in the Loan Documents for more than fifteen (15) days after receipt from the
Mortgagee of written notice of such default, provided, however, that any default
which in Mortgagee's sole discretion is not capable of cure within such fifteen
(15) day period shall not constitute an Event of Default if the Mortgagor within
such fifteen (15) day period shall commence action to cure such default and, in
Mortgagee's sole judgment, diligently continue the foregoing action and
prosecute the same to completion as soon as practicable after the expiration of
such fifteen (15) day period and if the continued failure of performance will
not, in Mortgagee's opinion, result in criminal or civil liability of Mortgagee,
result in the foreclosure of any lien upon the Mortgaged Property or any portion
thereof or otherwise jeopardize the Mortgagee's security for the Indebtedness,
and provided further, that such grace period set forth in this subsection (c)
shall not apply to any other Event of Default expressly set forth in this
Section 2.01 or to any Event of Default defined as such in the Note or any other
Loan Document, or to any other covenant or condition with respect to which a
grace period is expressly provided elsewhere; or (d) should any representation
made herein or in any Loan Document or other document given in connection
herewith prove to be untrue in any material respect when made; or (e) default
beyond any applicable grace period under any obligation set forth in the Note
other than for the payment of principal or interest; or (f) except as otherwise
indicated in Section 1.23 hereof, the further assignment or encumbrance by the
Mortgagor of the leases, rents, issues or profits of the Premises or any part
thereof without the prior written consent of the Mortgagee; or (g) the leasing
by the Mortgagor of all or part of the Premises without the prior written
consent of Mortgagee; or (h) except as otherwise indicated in Section 1.06(b)
hereof, the failure of the Mortgagor to pay when due and before any fine,
penalty, interest or cost may be added thereto all franchise taxes and charges,
and other governmental charges, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, of any kind and nature whatsoever, including,
without limitation, assessments for public improvements or benefits that are
assessed, levied, confirmed, imposed or become a lien upon the Mortgaged
Property, or the Mortgagor, with the Mortgagee's consent, which shall not be
unreasonably withheld, enters into any agreement either written or oral which
has the effect of deferring the payments of any taxes or other charges that are
or can be assessed, levied, confirmed, imposed or become a lien on the Mortgaged
Property or become payable during the term of the Note or this Mortgage; or (i)
except as otherwise indicated in Sections 1.17, 1.23 and 1.26 hereof, the
conveyance, assignment, sale or attempted sale, or other disposition of the
Mortgaged Property or any portion thereof, or the further mortgage, pledge or
other encumbrance by the Mortgagor of the Mortgaged Property or any part thereof
or any interest herein without the prior written consent of the Mortgagee; or
(j) if a receiver, liquidator or trustee of the Mortgagor, the Guarantors or of
any shareholder of the foregoing entities (if applicable) or of any of their
properties, shall be appointed; or (k) if a petition in bankruptcy, an
insolvency proceeding, or a petition for reorganization shall have been filed
against the Mortgagor, the Guarantors or any shareholder of the foregoing
entities (if applicable) and the same is not withdrawn, dismissed, canceled or
terminated within sixty (60) days; or (l) if the Mortgagor, the Guarantors or
any shareholder of the foregoing entities (if applicable) is adjudicated
bankrupt or insolvent or a petition for reorganization is granted (without
regard for any grace period provided for herein); or (m) if there is an
attachment or sequestration of any of the property of the Mortgagor, the
Guarantors or any shareholder of the foregoing entities (if applicable) which in
the reasonable discretion of Mortgagee has a material adverse effect on the
security of the Loan, or of any personal property or fixtures used in connection
with the operation of the Facility and same is not promptly discharged or
bonded; or (n) if the Mortgagor, the Guarantors or any shareholder of the
foregoing entities (if applicable) files or consents to the filing of any
petition in bankruptcy or commences or consents to the commencement of any
proceeding under the Federal Bankruptcy Code or any other law, now or hereafter
in effect, relating to the reorganization of any of the foregoing entities or
persons or the arrangement or readjustment of the debts of any of the foregoing
entities or persons; or (o) if the Mortgagor, the Guarantors or any shareholder
of any of the foregoing entities (if applicable) shall make an assignment for
the benefit of creditors or shall admit in writing the inability to pay their
debts generally as they become due or shall consent to the appointment of a
receiver, trustee or liquidator of the Mortgagor, the Guarantors or any
shareholder of the foregoing entities (if applicable) or of all or any
substantial part of their property (notwithstanding anything to the contrary
herein stated, the occurrence of any of the events listed in subsections (j)
through (o) hereof by or with regard to any shareholder of CoreCare shall not
constitute an Event of Default hereunder unless such occurrence with respect to
such shareholder causes or, in the Mortgagee's reasonable judgment, may cause
the bankruptcy or insolvency of CoreCare as well); (p) if defaults shall occur
under or any attempted withdrawal, cancellation or disclaimer of liability under
any guaranty which guarantees payment of the Indebtedness or under any agreement
giving security for said guaranty shall occur beyond any applicable grace
period; or (q) if the Mortgagor or CoreCare shall cause or institute any
proceeding for the dissolution or termination of the Mortgagor or CoreCare; or
(r) if the Mortgagor or CoreCare cease to do business; or (s) if there is a
change in the ownership interests of the Mortgagor except as permitted by
Section 1.26 hereof; or (t) if any condemnation, eminent domain or other taking
proceeding shall have been commenced against all or any portion of the Premises
unless, in the reasonable opinion of the Mortgagee, after the application of the
condemnation award to outstanding principal and interest on the Note, the income
which will be generated thereafter shall be sufficient to sustain a debt service
ratio for the Premises not less favorable to the Mortgagee than that which
existed at the time of such condemnation; or (u) if the Mortgagor shall fail to
provide or to maintain insurance in accordance with the requirements of this
Mortgage, or shall fail to pay the premiums thereof in a timely manner as
required by this Mortgage; or (v) if there shall occur any material uninsured
damage to or loss, theft or destruction to the Mortgaged Property or any portion
thereof or to any other collateral furnished to the Mortgagee as security for
the Indebtedness which in the Mortgagee's opinion would have a materially
adverse effect upon the Mortgagor's ability to perform its obligations under the
Loan Documents; or (w) if there shall exist any violation of Sections 1.17, 1.26
or 1.33 hereof; or (x) if there shall exist on the Premises any condition which
violates the Environmental Laws or any Spill occurs or any claim is filed,
instituted or raised against the Mortgagor in connection therewith; (y) if a
default by the Mortgagor shall occur under any mortgage, deed of trust or
security agreement affecting the Premises which is senior or subordinate to the
lien of this Mortgage or if the Mortgagor or the Guarantors default under any
other mortgage, deed of trust or security agreement or the beneficiary,
mortgagee or secured party, as the case may be, thereunder, shall commence a
foreclosure action in connection under said mortgage, deed of trust or security
agreement; or (z) if the Mortgagor, the Guarantors or any other entity which is
affiliated with, controlled by or under common control or ownership with the
Guarantors shall default under any note, credit or other agreement, secured or
unsecured evidencing other indebtedness owed to the Mortgagee; or (aa) if the
Guarantors shall, except as specifically permitted hereunder, mortgage, pledge
or otherwise encumber or sell, transfer, convey or assign all or substantially
all of their respective assets; or (bb) if any of the Guarantors shall default
or fail to perform under the terms of the Guaranty Agreements; or (cc) if at any
time while the Indebtedness is outstanding, the Mortgage shall fail to maintain
the Letter of Credit as required by Section 1.37 of this Mortgage; or (dd) if
there shall exist any violation of Section 1.38 hereof; or (ee) if there shall
occur the revocation or lapse of any license, permit, certificate, authorization
or approval or the termination of any approval of any governmental agency having
jurisdiction over the Premises or any portion thereof (including, without
limitation, such licenses, approvals, permits, certificates, authorizations and
governmental approvals that are necessary to operate the Facility) which has a
materially adverse effect on the operation of the Facility; or (ff) if any
person or entity other than the Mortgagor shall be responsible for the
management and operation of the Premises except as permitted under Section 1.26
hereof; (gg) if any interest in the Mortgagor is voluntarily pledged,
hypothecated, levied upon, encumbered, or transferred in any manner except as
otherwise permitted hereunder; or (hh) except as otherwise permitted hereunder,
if Mortgagor or the Guarantors shall (1) mortgage, pledge, or otherwise encumber
or sell, transfer, convey or assign all or substantially all of their assets, or
(2) if Mortgagor or CoreCare shall consolidate or merge with or into any other
person or entity except that it shall not be an Event of Default if, as a result
of such a consolidation or merger, the Mortgagor or CoreCare is the surviving
entity; or (ii) if any default shall occur under any of the Loan Documents.
Section 17.2 Remedies. (a) Upon the occurrence of any Event of Default,
the Mortgagee may take such action, without notice or demand, as it deems
advisable to protect and enforce its rights against the Mortgagor and in and to
the Mortgaged Property, including, but not limited to, the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as the Mortgagee may determine, in its sole discretion, without impairing
or otherwise affecting the other rights and remedies of the Mortgagee: (1)
declare the entire unpaid Indebtedness to be immediately due and payable; or (2)
enter into or upon the Premises (without having to seek or obtain the
appointment of a receiver), either personally or by its agents, nominees or
attorneys, or by a receiver appointed by a court, and dispossess the Mortgagor
and its agents and servants therefrom, and thereupon may (i) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal with all
and every part of the Premises and conduct the business thereon; (ii) complete
any construction on the Premises in such manner and form as the Mortgagee deems
advisable; (iii) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property; (iv) exercise all rights and
powers of the Mortgagor with respect to the Premises, whether in the name of the
Mortgagor or otherwise, including, without limitation, the right to make,
cancel, enforce or modify leases, obtain and evict tenants, and demand, sue for,
collect and receive all earnings, revenues, rents, issues, profits and other
income of the Premises from the Premises and every part thereof; and (v) apply
the receipts from the Premises to the payment of the Indebtedness, after
deducting therefrom all expenses (including reasonable attorneys' fees) incurred
in connection with the aforesaid operations and all amounts necessary to pay the
taxes, assessments, insurance and other charges in connection with the Mortgaged
Property, as well as just and reasonable compensation for the services of the
Mortgagee and the receiver, their counsel, agents and employees; or (3)
institute proceedings for the complete foreclosure of this Mortgage; or (4) with
or without entry, to the extent permitted and pursuant to the procedures
provided by applicable law, institute proceedings for the partial foreclosure of
this Mortgage for the portion of the indebtedness then due and payable, subject
to the continuing lien of this Mortgage for the balance of the Indebtedness not
then due; or (5) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained herein,
or in the Note or any other Loan Document or for mandatory or prohibitory
injunctive relief, or other equitable relief requiring the Mortgagor to cure or
refrain from repeating any default; or (6) recover judgment on the Note either
before, during or after any proceedings for the enforcement of this Mortgage; or
(7) apply for the appointment of a trustee, receiver, liquidator or conservator
of the Mortgaged Property upon ex parte application to any court of competent
jurisdiction, without regard for the adequacy of the security for the
Indebtedness and without regard for the solvency of the Mortgagor or the
Guarantor or of any person, firm or other entity liable for the payment of the
Indebtedness; or (8) with or without accelerating the maturity of the
Indebtedness, the Mortgagee may sue from time to time for any payment due under
any Loan Documents; or (9) present for immediate payment the Letter of Credit
and apply the proceeds thereof as the Mortgagee deems appropriate in its sole
discretion; or (10) pursue such other remedies as the Mortgagee may have under
applicable law or in equity.
(b) The purchase money proceeds or avails of any sale made under or
by virtue of this Article II, together with any other sums which then may be
held by the Mortgagee under this Mortgage, whether under the provisions of this
Article II or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of any such sale,
including cost of evidence of title in connection with the sale and
reasonable compensation to the Mortgagee, its agents and counsel, and of
any judicial proceedings, wherein the same may be made, and of all
expense, liabilities and advances made or incurred by the Mortgagee under
this Mortgage, together with interest as provided herein on all advances
made by the Mortgagee and all taxes or assessments except any taxes,
assessments or other charges subject to which the Mortgaged Property shall
have been sold.
Second: To the payment of the whole amount then due, owing or unpaid
upon the Note for principal, together with any and all applicable interest
and late charges.
Third: To the payment of any other sums required to be paid by the
Mortgagor pursuant to any provision of the Loan Documents.
Fourth: To the payment of the surplus, if any, to whosoever may be
lawfully entitled to receive the same.
The Mortgagee and any receiver of the Mortgaged Property, or any part thereof,
shall be liable to account for only those rents, issues, profits, proceeds and
avails actually received by it.
(c) To the extent permitted by Pennsylvania law, the Mortgagor
waives any right to any hearing or notice of hearing prior to the appointment of
a receiver. Such receiver and his agents shall be empowered (i) to take
possession of the Mortgaged Property and any businesses conducted by the
Mortgagor or any other person thereon and any business assets used in connection
therewith, (ii) to exclude the Mortgagor and Mortgagor's agents, servants, and
employees from the Premises, (iii) to collect the rents, issues, profits, and
income therefrom (including, without limitation, Medicare and Medicaid payments
and reimbursements), (iv) to complete any construction which may be in progress,
if any, (v) to do such maintenance and make such repairs and alterations as the
receiver deems reasonably necessary, (vi) to use all stores of materials,
supplies, and maintenance equipment owned by the Mortgagor on the Premises and
replace such items at the expense of the receivership estate, (vii) to pay all
taxes and assessments against the Mortgaged Property, all premiums for insurance
thereon, all utility and other operating expenses, and all sums due under any
prior or subsequent encumbrance when due, and (viii) generally to do anything
which the Mortgagor could legally do if the Mortgagor were in possession of the
Mortgaged Property. All expenses incurred by the receiver or his agents shall
constitute a part of the Indebtedness secured by this Mortgage. Any revenues
collected by the receiver shall be applied first to the expenses of the
receivership, including reasonable attorneys' fees incurred by the receiver and
by the Mortgagee, together with interest thereon at the Default Interest Rate
from the date incurred until repaid, then to the payment of the whole amount
then due, owing or unpaid upon the Note for principal, together with any and all
applicable interest and late charges, and the balance to the payment of any
other sums required to be paid by the Mortgagor pursuant to any provision of
this Mortgage or the Note or in such other manner as a court may direct. Unless
sooner terminated with the express consent of the Mortgagee, any such
receivership will continue until the Indebtedness has been discharged in full,
or until title to the Mortgaged Property has passed after foreclosure sale and
all applicable periods of redemption have expired.
(d) In the case of a sale under this Mortgage, the Mortgaged
Property, real, personal and mixed, may be sold in one parcel or more than one
parcel.
(e) Upon any foreclosure sale made under or by virtue of this
Article II, the Mortgagee may bid for and acquire the Mortgaged Property or any
part thereof and in lieu of paying cash therefor may make settlement for the
purchase price after deducting therefrom the expenses of the sale and the costs
of the action and any other sum which the Mortgagee is authorized to deduct
under this Mortgage.
(f) No recovery of any judgment by the Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of the Mortgagor shall affect in any manner or to any extent (except as
it may affect the amount thereof), the lien of this Mortgage upon the Mortgaged
Property or any part thereof, or any liens, rights, powers or remedies of the
Mortgagee hereunder, but such liens, rights, powers and remedies of the
Mortgagee shall continue unimpaired as before.
(g) In the event of any foreclosure sale made under or by virtue of
this Article II, the entire Indebtedness, if not previously due and payable,
immediately thereupon shall, anything in the Note, this Mortgage or any other
Loan Documents to the contrary notwithstanding, become due and payable.
(h) The Mortgagor waives the right of inquisition on any property
levied upon under a judgment obtained in proceedings to collect the Indebtedness
hereby secured or in proceedings on this Mortgage, and hereby voluntarily
condemns the same, and authorizes the Prothonotary or Clerk of court to enter
such condemnation upon a writ of execution, and agrees that such property may be
sold under said writ; and further waives and releases any and all benefits that
may accrue to the Mortgagor by virtue of any law to exempt the Mortgaged
Property or any part thereof, from levy or sale under execution, now in force,
or hereafter to be passed. A foreclosure sale shall constitute a foreclosure
sale of all equity whatsoever of the Mortgagor in the Mortgaged Property and the
Mortgagee shall, if it is the purchaser at the sale, hold the Mortgaged Property
and any part thereof so purchased free of any equity of redemption by reason of
any circumstances whatsoever and not as collateral for any obligation.
THE FOLLOWING PARAGRAPH SETS FORTH A WARRANTY OF AUTHORITY FOR AN
ATTORNEY TO CONFESS JUDGMENT AGAINST THE MORTGAGOR. IN GRANTING THIS WARRANT OF
ATTORNEY TO CONFESS JUDGMENT AGAINST THE MORTGAGOR, THE MORTGAGOR HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND (ON THE ADVICE OF THE SEPARATE
COUNSEL OF THE MORTGAGOR) UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS THE
MORTGAGOR HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER
THE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF
PENNSYLVANIA.
(i) Upon the occurrence of an Event of Default hereunder (of which
an affidavit on behalf of the Mortgagee shall be sufficient evidence), then and
in any such event, any Attorney of any Court of Record of Pennsylvania or
elsewhere is hereby authorized and empowered to appear for the Mortgagor, and as
attorney for the Mortgagor to sign an agreement for entering an amicable action
of ejectment for possession of the Mortgaged Property or any part thereof and to
confess judgment therein against the Mortgagor, in favor of the Mortgagee,
whereupon a writ for possession may immediately issue for the possession of the
Mortgaged Property, without any prior complaint, writ or proceeding whatsoever;
and for so doing this Mortgage, or a copy hereof verified by affidavit, shall be
his sufficient warrant. This power may be exercised as often as the Mortgagee
shall require and shall not be exhausted by one or more or by any imperfect
exercise thereof.
Section 17.3 Payment of Indebtedness After Default. Upon occurrence of any
Event of Default and the acceleration of the maturity hereof, if, at any time
prior to foreclosure sale, the Mortgagor or any other person tenders payment of
the amount necessary to satisfy the Indebtedness, the same shall constitute an
evasion of the payment terms hereof and shall be deemed to be a voluntary
prepayment hereunder, in which case such payment must include the premium
required under the prepayment provision contained in the Note. This provision
shall be of no force or effect if at the time that such tender of payment is
made, the Mortgagor has the right under this Mortgage or the Note to prepay the
Indebtedness without penalty or premium.
Section 17.4 Possession of the Premises. Upon the occurrence of any Event
of Default hereunder, it is agreed that the then owner of the Premises, if it is
the occupant of the Premises of any part thereof, shall immediately surrender
possession of the Premises so occupied to the Mortgagee, and if such occupant is
permitted to remain in possession, the possession shall be as tenant of the
Mortgagee and, on demand, such occupant (a) shall pay to the Mortgagee monthly,
in advance, a reasonable rental for the space so occupied, and (b) in default
thereof may be dispossessed by the usual summary proceedings. The covenants
herein contained may be enforced by a receiver of the Mortgaged Property or any
part thereof. Nothing in this Section 2.04 shall be deemed to be a waiver of the
provisions of this Mortgage prohibiting the sale or other disposition of the
Premises without the Mortgagee's consent.
Section 17.5 Interest After Default. If any payment due hereunder or under
the Note is not paid when due, either at stated or accelerated maturity or
pursuant to any of the terms hereof, then and in such event, the Mortgagor shall
pay interest thereon from and after the date on which such payment first becomes
due at the interest rate provided for in Section 1.11 whether or not any action
shall have been taken or proceeding commenced to recover the same or to
foreclose this Mortgage. Nothing in this Section 2.05 or in any other provision
of this Mortgage shall constitute an extension of the time of payment of the
Indebtedness.
Section 17.6 Mortgagor's Actions After Default. After the happening of any
Event of Default and immediately upon the commencement of any action, suit or
other legal proceeding by the Mortgagee to obtain judgment for the Indebtedness,
or of any other nature in aid of the enforcement of the Note or of this
Mortgage, the Mortgagor will (a) waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceedings, and (b) if
required by the Mortgagee, consent to the appointment of a receiver or receivers
of the Mortgaged Property and of all the earnings, revenues, rents, issues,
profits and income thereof.
Section 17.7 Control by Mortgagee After Default. To the extent permitted
by law, notwithstanding the appointment of any receiver, liquidator or trustee
of the Mortgagor, or of any of its property, or of the Mortgaged Property or any
part thereof, the Mortgagee shall be entitled to retain possession and control
of all property now and hereafter covered by this Mortgage.
Section 17.8 Attorney-in-Fact. To the extent permitted by law, the
Mortgagor hereby appoints the Mortgagee as the Mortgagor's attorney-in-fact
which power shall be coupled with an interest and shall be irrevocable as long
as any part of the Indebtedness remains unpaid. Such appointment shall be for
the sole purpose of executing (following the Mortgagor's failure to do so after
demand by the Mortgagee) forms, affidavits or returns which may be required to
be executed and delivered by the Mortgagor in connection with a foreclosure sale
of the Mortgaged Property.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Credits Waived. The Mortgagor will not claim nor demand nor
be entitled to any credit or credits against the Indebtedness for so much of the
taxes assessed against the Mortgaged Property or any part thereof, and no
deductions shall otherwise be made or claimed from the taxable value of the
Mortgaged Property or any part thereof by reason of this Mortgage or the
Indebtedness.
Section 18.2 No Release. The Mortgagor agrees, that in the event the
Mortgaged Property is sold and the Mortgagee enters into any agreement with the
then owner of the Mortgaged Property extending the time of payment of the
Indebtedness, or otherwise modifying the terms hereof, the Mortgagor shall
continue to be liable to pay the Indebtedness according to the tenor of any such
agreement unless expressly released and discharged in writing by the Mortgagee.
Nothing in this Section 3.02 shall be deemed to be a waiver of Sections 1.17,
1.26 or 2.01(i) hereof.
Section 18.3 Notices. All notices, demands, waivers, consents, approvals
and other communications hereunder shall be in writing and shall be deemed to
have been sufficiently given or served for all purposes when delivered in person
or sent by national overnight courier service or by registered or certified
mail, return receipt requested, to any party hereto at its address above stated
(in the case of the Mortgagee, to the attention of Sharon E. O'Connell, Director
of Lease Administration, with copies to FINOVA Capital Corporation at 1850 North
Central Avenue, Phoenix, Arizona 85004 to the attention of Frederick C. Bauman,
Esq., and to Schnader, Harrison, Segal & Lewis, Suite 3600, 1600 Market Street,
Philadelphia, Pennsylvania 19103, to the attention of Jerald M. Goodman, Esq.;
and in the case of the Mortgagor, to the attention of Thomas T. Fleming,
Chairman, with a copy to Connolly, Epstein, Chicco, Foxman, Engelmyer & Ewing,
1515 Market Street, 9th Floor, Philadelphia, Pennsylvania 19102, to the
attention of Gary S. Lewis, Esq.) or at such other address of which it shall
have notified the party giving such notice, demand, waiver, consent, approval or
other communication in writing as aforesaid. Any written notice, demand, waiver,
consent, approval or other communication shall be deemed to have been received
on the date delivered or two (2) days after mailing or sending by overnight
courier.
Section 18.4 Binding Obligations. The provisions and covenants of this
Mortgage shall run with the Land, shall be binding upon the Mortgagor, and shall
inure to the benefit of the Mortgagee, subsequent holders of this Mortgage, and
their respective successors and assigns. For the purpose of this Mortgage, the
term "Mortgagor" shall mean the Mortgagor named herein, any subsequent owner of
the Mortgaged Property, and their respective heirs, executors, legal
representatives, successors and assigns. If there is more than one Mortgagor,
all their undertakings hereunder shall be deemed joint and several.
Section 18.5 Captions. The captions of the Sections of this Mortgage are
for the purpose of convenience only and are not intended to be a part of this
Mortgage and shall not be deemed to modify, explain, enlarge or restrict any of
the provisions hereof.
Section 18.6 Further Assurances. The Mortgagor shall do, execute,
acknowledge and deliver, at the sole cost and expense of the Mortgagor, all and
every such further acts, deeds, conveyances, mortgages, assignments, estoppel
certificates, notices of assignment, transfers and assurances as the Mortgagee
may reasonably require from time to time in order to better assure, convey,
assign, transfer and confirm unto the Mortgagee, the rights now or hereafter
intended to be granted to the Mortgagee under this Mortgage, any other
instrument executed in connection with this Mortgage, or any other instrument
under which the Mortgagor may be or may hereafter become bound to convey,
mortgage or assign to the Mortgagee for carrying out the intention of
facilitating the performance of the terms of this Mortgage. The Mortgagor hereby
appoints the Mortgagee its attorney-in-fact to execute, acknowledge and deliver
for and in the name of the Mortgagor any and all of the instruments mentioned in
this Section 3.06 and this power, being coupled with an interest, shall be
irrevocable as long as any part of the Indebtedness remains unpaid. Mortgagee
shall not exercise its rights as attorney-in-fact hereunder unless Mortgagee
shall have determined, in its reasonable discretion, that Mortgagor has failed
to comply with its obligations under the first sentence of this Section 3.06.
Section 18.7 Severability. Any provision of this Mortgage that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provisions in any other jurisdiction.
Section 18.8 General Conditions. (a) All covenants hereof shall be
construed as affording to the Mortgagee rights additional to and not exclusive
of the rights conferred under any applicable law.
(b) This Mortgage cannot be altered, amended, modified or discharged
orally and no executory agreement shall be effective to modify or discharge it
in whole or in part, unless it is in writing and signed by the party against
whom enforcement of the modification, alteration, amendment or discharge is
sought.
(c) No remedy herein conferred upon or reserved to the Mortgagee is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission of the Mortgagee in exercising any right or power accruing
upon any Event of Default shall impair any such right or power, or shall be
construed to be a waiver of any such Event of Default or any acquiescence
therein. Acceptance of any payment after the occurrence of an Event of Default
shall not be deemed to waive or cure such Event of Default; and every power and
remedy given by this Mortgage to the Mortgagee may be exercised from time to
time as often as may be deemed expedient by the Mortgagee. Nothing in this
Mortgage or in the Note shall affect the obligation of the Mortgagor to pay the
Indebtedness in the manner and at the time and place therein respectively
expressed.
(d) No waiver by the Mortgagee will be effective unless it is in
writing and then only to the extent specifically stated. Without limiting the
generality of the foregoing, any payment made by the Mortgagee for insurance
premiums, taxes, assessments, water rates, sewer rentals or any other charges
affecting the Mortgaged Property, shall not constitute a waiver of the
Mortgagor's default in making such payments and shall not obligate the Mortgagee
to make any further payments.
(e) The Mortgagee shall have the right to appear in and defend any
action or proceeding, in the name and on behalf of the Mortgagor or the
Mortgagee, which the Mortgagee in its discretion, feels may adversely affect the
Mortgaged Property or this Mortgage. The Mortgagee shall also have the right to
institute any action or proceeding which the Mortgagee in its discretion, feels
should be brought to protect its interest in the Mortgaged Property or its
rights hereunder. All costs and expenses incurred by the Mortgagee in connection
with such actions or proceedings, including, without limitation, reasonable
attorneys' fees, and appellate attorneys' fees, shall be paid by the Mortgagor,
on demand.
(f) In the event of the passage after the date of this Mortgage of
any law of any governmental authority having jurisdiction, deducting from the
value of land for the purpose of taxation any lien thereon, or changing in any
way the laws for the taxation of mortgages or debts secured thereby for federal,
state or local purposes, or the manner of the collection of any such taxes, so
as to affect this Mortgage, the Mortgagor shall promptly pay to the Mortgagee,
on demand, all taxes, costs and charges for which the Mortgagee is or may be
liable as a result thereof, provided that if for any reason payment by the
Mortgagor of any such new or additional taxes, costs or charges would be
unlawful, the Mortgagee may at its option, without demand or notice, declare the
Indebtedness to be immediately due and payable, or the Mortgagee may at its
option, pay that amount or portion of such taxes, costs and charges of which
payment by the Mortgagor would be unlawful, and the Mortgagor shall concurrently
therewith pay the remaining lawful portions or balance of such taxes, costs and
charges.
(g) The Mortgagor hereby appoints the Mortgagee as its
attorney-in-fact in connection with the personal property and fixtures covered
by this Mortgage, where permitted by law, to file on its behalf any financing
statements or other statements in connection therewith with the appropriate
public office signed only by the Mortgagee, as secured party. This power, being
coupled with an interest, shall be irrevocable so long as any part of the
Indebtedness remains unpaid.
(h) The information set forth on the cover hereof is hereby
incorporated herein.
(i) The Mortgagor acknowledges that it has received a true and
correct copy of this Mortgage.
(j) For the purposes of this Mortgage, all defined terms contained
herein shall be construed, whenever the context of this Mortgage so requires, so
that the singular shall be construed as the plural and so that the masculine,
feminine and neuter shall be construed interchangeably as circumstances
required.
(k) This Mortgage contains a final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written
understandings.
Section 18.9 Promotion Material. The Mortgagor authorizes the Mortgagee to
issue press releases, advertisements and other promotional materials in
connection with the Mortgagee's own business promotional and marketing
activities, describing the Loan and the matters giving rise to the Loan.
Section 18.10 Release. If the Indebtedness is fully paid in accordance
with the terms and provisions of this Mortgage and the Note, and if the
covenants and agreements contained herein and in the Note and in any other Loan
Documents are kept and performed, then this Mortgage shall become null and void
and shall be released at the expense of the Mortgagor.
Section 18.11 Legal Construction. The terms and conditions hereof shall be
governed, construed and interpreted by and enforced under the laws of the
Commonwealth of Pennsylvania.
Section 18.12 Usury Savings Clause. Nothing in this Mortgage, the Note or
in any other agreement between the Mortgagor and the Mortgagee shall require the
Mortgagor to pay, or the Mortgagee to accept, interest in an amount which would
subject the Mortgagee to any penalty under the applicable law. In the event that
the payment of any interest due hereunder or under the Note or any such other
agreement would subject the Mortgagee to any penalty under applicable law, then
ipso facto the obligations of the Mortgagor to make payment shall be reduced to
the highest rate authorized under applicable law.
Section 18.13 Future Advances. This Mortgage is intended to secure all
advances, including future advances, under the Note.
IN WITNESS WHEREOF, this Mortgage has been duly executed as of the day and
year first above written.
ATTEST: [Corporate Seal] WESTMEADE HEALTHCARE, INC.,
a Pennsylvania corporation
By: /s/ Rose S. DiOttavio
----------------------
By: /s/ Joan K. Biddle Name: Rose S. DiOttavio
------------------ Title: Vice-President
Name: Joan K. Biddle
Title: Assistant Secretary
I hereby certify that the address of the within named Mortgagee is:
FINOVA Capital Corporation
3200 Park Center Drive
Costa Mesa, California 92626
/s/
_________________________________
On behalf of the within Mortgagee
ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA )
) SS:
COUNTY OF PHILADELPHIA )
On this 27 day of June __, 1996, before me, the undersigned officer,
personally appeared Rose S. DiOttavio, who acknowledged himself to be the
Vice-President of Westmeade Healthcare, Inc., a Pennsylvania corporation, which
is the Mortgagor in the within instrument, and that he as such officer, being
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/
____________________________
Notary Public
My commission expires:
EXHIBIT A
Legal Description of Mortgaged Premises
EXHIBIT 6.1
AGREEMENT
This Agreement is made by and among CoreCare Systems, Inc. ("CoreCare"),
CoreCare Acquisition, Inc. - III ("Acquisition III"), CoreCare Acquisition, Inc.
- - IV ("Acquisition IV"), Penn Interpersonal Communications Inc. ("Penn"),
Anthony Todaro, Ph.D. and Marlene Todaro ("Secured Parties").
Background
Pursuant to a Stock Acquisition Agreement of even date herewith (the
"Acquisition Agreement"), CoreCare is acquiring all of the capital stock of Penn
from the Secured Parties in exchange for its Promissory Note in the amount of
$300,000 (the "Note"), principal and interest on the Note to be due and payable
upon demand on or after April 1, 1996.
Pursuant to an Agreement and Plan of Merger of even date herewith (the
"Merger Agreement"), American Institute for Behavioral Counseling, Inc. will
merge with and into Acquisition III and Bio Diagnostic Technologies, Inc. will
merge with and into Acquisition IV. Acquisition III and Acquisition IV are
wholly owned subsidiaries of CoreCare. CoreCare, Acquisition III, Acquisition IV
and Penn are referred to collectively as the "CoreCare Parties".
Pursuant to certain Pledge Agreements of even date herewith (the "Pledge
Agreements"), CoreCare is pledging the capital stock of Acquisition III,
Acquisition IV and Penn to secure the obligations of the CoreCare Parties under
certain employment agreements between Acquisition III and Secured Parties (the
"Employment Agreements"), under the Note, under the Merger Agreement, under the
Acquisition Agreement and other agreements and instruments executed in
connection with the Merger Agreement and Acquisition Agreement.
Pursuant to certain Guaranty Agreements (the "Guaranties"), the CoreCare
Parties have guaranteed their respective obligations under the above-described
agreements and Note and the below-described Security Agreements.
Pursuant to certain Security Agreements of even date herewith (the
"Security Agreements"), Acquisition III, Acquisition IV and Penn are granting
Secured Parties security interests in certain of their assets as security for
the obligations of the CoreCare parties under the Employment Agreement, Note,
Merger Agreement and Acquisition Agreement, the Guaranties and other agreements
and instruments.
Now therefore, for good and valuable consideration, and intending to
be legally bound hereby, the parties agree as follows:
1. The Background set forth above is part of the parties'
agreement.
2. This Agreement shall be deemed an amendment to the Merger
Agreement, Acquisition Agreement, Employment Agreements, Pledge Agreements,
Security Agreements, Guaranties and Note.
3. Until all amounts due and payable under the Note have been
paid, the Board of Directors of each of Penn, Acquisition III and Acquisition IV
shall consist of four (4) directors, two of whom shall be the Secured Parties
and two of whom shall be chosen by CoreCare. CoreCare agrees to vote all shares
of the capital stock of Penn, Acquisition IV and Acquisition III held by
CoreCare in each election of any director of and of Penn, Acquisition III and
Acquisition IV solely in compliance with the last sentence. After all amounts
under the Note have been paid, the Board of Directors of such corporations shall
consist of such persons (and such number of persons) as may be determined by
CoreCare in its sole discretion, provided that Anthony Todaro shall continue to
be a member of the Board of Directors of each such corporation during the term
of his Employment Agreement with Acquisition III, and CoreCare shall vote all
shares in accordance with this provision.
4. Until all amounts due under the Note have been paid in
full, no cash payments shall be made from Penn, Acquisition III or Acquisition
IV to CoreCare, or any other Affiliate (as that term is defined in Rule 144
under the Securities Act of 1933) of CoreCare, including dividends,
distributions, payments in respect of expenses, or any other payments, except
(i) pursuant to an agreement which has been approved by a majority of an the
Board of Directors of the corporation making such payment, (ii) any payments to
which Secured Parties have consented or (iii) payments made for goods or
services actually provided and ordinarily used in the conduct of the business of
Penn, Acquisition III or Acquisition IV, or their predecessors (other than
management services), to the extent such payments are no greater than those
which would have been paid to unaffiliated third parties for similar goods or
services. Notwithstanding the previous sentence for purposes of financial
statement or income tax reporting, CoreCare shall have the right to allocate
expenses and overhead charges to Penn, Acquisition III and Acquisition IV, and
to make book entries charging management or similar fees, in CoreCare's sole
discretion; provided, however, that until payment in full of the Note, no such
allocations or book entries shall be an obligation of any such corporations.
5. In the event that Secured Parties exercise their rights
under the Pledge Agreements and/or the Security Agreements, for a period of one
(1) year after the initial exercise of such rights, neither CoreCare, nor any
Affiliate of CoreCare shall own, operate or manage any practice of psychology or
psychiatry or business or practice providing any other services being provided
by Acquisition III, Acquisition IV or Penn at the time of exercise of such
rights, within ten (10) miles of Easton, Pennsylvania or, within New Jersey
within twenty (20) miles of any location at which either Acquisition III or
Acquisition IV is conducting its business or practice in New Jersey at the time
of the exercise of such rights; provided, however, that the foregoing shall not
apply to any practice which is owned, operated or managed by CoreCare, or which
CoreCare had entered into negotiations to purchase, operate or manage and as to
which negotiations CoreCare notified the Secured Parties in writing prior to the
date CoreCare receives the notice of the exercise of such rights.
6. A copy of this Agreement shall be filed with the corporate
records of each of Penn, Acquisition III and Acquisition IV.
7. The CoreCare parties agree that upon breach hereof by any
of the CoreCare Parties, Secured Parties shall be entitled to injunctive and
other appropriate equitable relief, in addition to any remedies available at
law.
In the event of a breach hereof, the CoreCare Parties agree to
pay all expenses incurred by the Secured Parties in enforcing their rights
hereunder, including reasonable attorneys fees actually incurred.
CORECARE SYSTEMS, INC.
By: /s/ Rose DiOttavio
---------------------------------------
CORECARE ACQUISITION, INC. - III
By: /s/ Rose DiOttavio
---------------------------------------
CORECARE ACQUISITION, INC. - IV
By: /s/ Rose DiOttavio
---------------------------------------
PENN INTERPERSONAL COMMUNICATIONS, INC.
By: /s/ Anthony Todaro
---------------------------------------
/s/ Anthony Todaro
---------------------------------------
Anthony Todaro, Ph.D.
/s/ Marlene Todaro
---------------------------------------
Marlene Todaro
EXHIBIT 6.2
RECEIVABLES PURCHASE AND SALE AGREEMENT
This Receivables Purchase and Sale Agreement (the "Agreement") is entered
into as of January 24, 1996, between HealthPartners Funding, L.P., a Delaware
limited partnership (the "Purchaser") and Westmeade Healthcare, Inc., a
Pennsylvania corporation (the "Seller").
WITNESSETH
WHEREAS, Purchaser is in the business of purchasing receivables; and
WHEREAS, Seller is desirous of selling to Purchaser certain of its receivables
generated in the ordinary course of Seller's business; and
WHEREAS, Purchaser and Seller wish to confirm the terms and conditions pursuant
to which certain receivables of Seller will be sold to Purchaser during the term
of this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
The following definitions shall apply to the following terms wherever used
in the Purchase Documents (such definitions to be equally applicable to both the
singular and plural forms of such terms), except where the terms are expressly
defined otherwise or where the context clearly requires otherwise:
Affiliate (or a Person "affiliated with" a specified Person). Any Person
directly or indirectly, through one or more intermediaries, controlling or
controlled by, or under direct or indirect common control with, another Person.
A person shall be deemed to control another Person for the purposes of this
definition if such first Person possesses, directly or indirectly, the power to
direct, or to cause the direction of, the management and policies of the second
Person, whether through the ownership of voting securities, through common
directors, trustees or officers, by contract or otherwise.
Agreement. This Receivables Purchase and Sale Agreement, with any and all
exhibits and schedules attached hereto, and any and all amendments, supplements
and modifications hereof.
Authorized Persons. The Persons designated in writing from time to time by
the Seller on behalf of Seller with respect to all matters involving this
Agreement.
Bankruptcy Event. With respect to any Person, when: (a) a receiver,
custodian, liquidator or trustee of any of its assets is appointed by court
order; (b) an order for relief under any bankruptcy, reorganization or
insolvency Law is entered after the filing of a petition by or against it; (c)
any of its assets are sequestered or attached by court order; (d) a petition to
reorganize or rehabilitate it under any bankruptcy, reorganization or insolvency
Laws is filed against it and is not dismissed within thirty (30) days of the
filing thereof; (e) such Person requests reorganization, arrangement,
composition, readjustment, dissolution, rehabilitation, liquidation or similar
relief under any provision of any present or future Law or consents to the
filing of any petition against it under such Law; or (f) such Person makes a
general assignment for the benefit of its creditors, admits in writing its
inability to pay its debts generally as they become due, generally fails to pay
its debts as they become due, consents to the appointment of a receiver, trustee
or liquidator of all or any part of its assets, or otherwise commits any similar
act.
Batch. A group of Eligible Receivables periodically submitted by Seller to
Purchaser for Purchase pursuant to the terms hereof or a group of Eligible
Receivables actually purchased, as applicable.
Business Day. A day other than Saturday or Sunday on which the United
States Post Office is open for regular business in Washington, D.C.
Claim Date. The date of submission of a claim to the Insurer obligated to
pay a Receivable.
Collection Period. The period from the Purchase Date of a Batch through
and including one hundred twenty (120) days from such Purchase Date; provided
that at the option of the Purchaser the Collection Period may be extended
pursuant to a written notification to Seller together with the terms of such
extension.
Collections. All cash collections or cash proceeds received by the
Purchaser or by the Seller on behalf of the Purchaser in respect of any
Purchased Receivables or Related Security or other Receivables of Seller, as
appropriate.
Commitment. Two Million Five Hundred Thousand and No/100 Dollars
($2,500,000.00).
Delinquent Purchased Receivable. A Purchased Receivable which, (i) remains
unpaid in whole or in part more than one hundred twenty (120) days after the
Claim Date thereof or at the expiration of the Collection Period applicable
thereto or (ii) is not recoverable as determined in good faith by Purchaser.
Eligible Insurer. An Insurer approved by the Purchaser.
Eligible Receivable. A Receivable which satisfies all of the following
criteria:
(a) such Receivable is a bona fide undisputed contractual or other
obligation owed to Seller by an Eligible Insurer or under a Government Program
(or assigned to Seller by a Patient) that arises from the Seller having
performed Medical Services with respect to a Patient entitled to insurance
benefits under an insurance policy between the Patient and the Insurer;
(b) the insurance claim related thereto has been verified by a process
approved by the Purchaser and has been forwarded to the Insurer for payment; and
(c) such Receivable is not an Excluded Receivable.
Excluded Receivables. The following Receivables shall not constitute
Eligible Receivables;
(a) Receivables that are evidenced by promissory notes or other
instruments or chattel paper;
(b) Receivables that represent amounts due from Affiliates or employees of
the Seller;
(c) Receivables that are subject to any Lien;
(d) Receivables that represent amounts due from a payor located outside
the United States of America;
(e) Receivables payable in any currency other than United States dollars;
(f) Receivables that represent amounts due from an Insurer with respect to
which a Bankruptcy Event has occurred and is continuing.
Government Programs. Medicare, Medicaid, Title V Maternal and Child Health
Services Block Grant Program and the Title XX Social Services Block Grant
Program.
Initial Offer. As defined in Section 2.1.
Initial Payment. With respect to a Batch, an amount equal to eighty
percent (80%) of the Purchase Price for a Batch, payable on the Purchase Date.
Insurer. A Person that insures a Patient against certain of the costs
incurred in the receipt by such Patient of Medical Services, or that has an
agreement with Seller to compensate Seller for providing services to a Patient.
Investment. At any time, that portion of the Purchase Price actually paid
by the Purchaser to Seller for Purchased Receivables which have not been
re-assigned by Purchaser to Seller, less all Collections with respect thereto
which have been received by the Purchaser.
Law or Laws. Statute(s), law(s), ordinance(s), regulation(s), order(s),
writ(s), injunction(s) or decree(s) of any political or governmental body or
tribunal (federal, state, county, municipal, foreign or domestic, or otherwise)
having competent jurisdiction.
Lien. Any claim, mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including without limitation, any agreement to allow or give
any of the foregoing), any conditional sale or other title retention agreement,
or any lease in the nature thereof, or the interest of the lessor under any
capitalized lease obligation.
Medical Services. Medical and health care services provided to a Patient,
including, but not limited to, medical and health care services provided to a
Patient and performed by Seller which are covered by a policy of insurance
issued by an Insurer, and includes physician services, nurse and therapist
services, dental services, hospital services, skilled nursing facility services,
comprehensive outpatient rehabilitation services, home health care services,
residential and out-patient behavioral healthcare services, and medicine or
health care equipment provided by Seller to a Patient for a necessary or
specifically requested valid and proper medical or health purpose.
Medicare and Medicaid. As the context may require, the Medicare program
existing pursuant to 42 U.S.C. Section 1395 et seq., and regulations adopted
under the authority thereof, the Medicaid program adopted by any state pursuant
to 42 U.S.C. Section 1396 et seq., and regulations adopted under the authority
thereof, and every intermediary, carrier and administrator of any of such
programs.
Net Outstanding Balance. As of any date, the balance of the Verified Net
Claim Payment Amount applicable to a Purchased Receivable.
Offer. Each offer by the Seller to sell Eligible Receivable(s) to the
Purchaser pursuant to an Offer Letter, including the Initial Offer.
Offer Letter. A letter from the Seller to the Purchaser supplying the
information specified in the form attached hereto as Exhibit A or in such other
form as Purchaser may direct.
Patient. Any Person receiving Medical Services from Seller and all Persons
legally liable to pay Seller for such Medical Services other than Insurers.
Person. An individual, corporation, partnership, joint venture, trust,
incorporated organization, or any juridical and/or business entity, or a
government or any agency or political subdivision thereof.
Purchase Date. For Eligible Receivable(s), the effective date of an Offer,
which shall be a Business Day at least two (2), and no more than seven (7)
Business Days after receipt by the Purchaser of an Offer Letter with respect to
such Eligible Receivable(s).
Purchase Discount. An amount equal to sixty-five one hundredths percent
(0.65%) per fifteen (15) day period of the outstanding "Batch Payoff" (the
Investment plus accrued Purchase Discounts) for a Batch of Eligible Receivables
purchased under this Agreement.
Purchase Documents. This Agreement, each Offer Letter, each Purchased
Receivables Statement and all future amendments, supplements or modifications of
each of the foregoing, and all other documents, certificates and agreements
executed or delivered (or to be executed or delivered) pursuant to any of the
foregoing documents.
Purchase Price. For each Batch of Eligible Receivables purchased by the
Purchaser hereunder, the Verified Net Claim Payment Amount thereof on the
Purchase Date.
Purchased Receivables. Eligible Receivables, and the Related Security
therefor, which have been purchased by the Purchaser pursuant to an Offer Letter
by payment of the Initial Payment therefor.
Receivable. An "account" (as defined in the Uniform Commercial Code as in
effect in the State of Maryland) generated by the Seller in the ordinary course
of its business of providing Medical Services.
Related Security. (a) All of the Seller's interest in all rights,
security, guarantees, indemnities, payment or performance bonds, insurance
policies, warranties and other agreements and arrangements supporting or
securing payment of a Receivable; (b) all of the Seller's rights as a provider
of Medical Services, other services, seller of goods or unpaid seller or lienor,
including, without limitation, attachment, replevin and reclamation; (c) all
files, records (including, without limitation, computerized records and all
applicable medical records, subject to applicable confidentiality laws that
prohibit disclosure of any such records to Purchaser), books, ledger cards
(including, without limitation, computer programs, tapes and related electronic
data processing software) and writings of the Seller or in which it has interest
in any way relating to the foregoing; and (d) all proceeds and products of the
foregoing or any Receivable.
Replacement Date. The fifth (5th) Business Day after any Purchased
Receivable ceases to be an Eligible Receivable or becomes a Delinquent Purchased
Receivable.
Reserve. With respect to a Batch, an amount equal to the Purchase Price
for such Batch less the Initial Payment applicable thereto, which Reserve shall
be held and applied in the manner set forth in Section 2.3.
Settlement Date. Friday of each week if such day is a Business Day or any
other mutually agreed upon day.
Termination Event. (a) The Seller fails to remit immediately to the
Purchaser all or any portion of any Collection with respect to a Purchased
Receivable which it may receive; (b) the occurrence of a Bankruptcy Event with
respect to the Seller; (c) the Seller fails to assign to the Purchaser
additional Eligible Receivable after the Purchaser has exercised the option
described in Section 2.6 hereof; or (d) the Seller fails to honor any other
obligations set forth in this Agreement.
Verified Net Claim Payment Amount. The dollar amount payable to Seller by
an Eligible Insurer or Government Program obligated on a Receivable, a claim for
which has been submitted to the Eligible Insurer or Government Program and
verified by a verifier selected in good faith by Purchaser, less any and all
deductions deemed applicable by Purchaser in its sole, good faith discretion,
and verified by Purchaser.
2. Purchase, Sale and Collection of Receivables.
2.1 Revolving Purchases. On the date on which all conditions precedent
described in Section 4 hereof have been satisfied, the Seller may offer Batches
of Eligible Receivables for sale to the Purchaser on any Business Day (the first
such offer is referred to herein as the "Initial Offer").
2.2 Offer Procedures.
(a) At least two (2) Business Days prior to the Purchase Date of any Offer, the
Seller shall deliver to the Purchaser with respect to each Offer (i) an Offer
Letter, duly executed by Authorized Persons of the Seller, certifying that each
Receivable subject to such Offer Letter is an Eligible Receivable and containing
the other information specified therein, and attached to which shall be a
printout or listing describing the Insurer, the gross claim amount of each
Eligible Receivable in the Batch subject to the Offer Letter, the Verified Net
Claim Payment Amount of the Batch if then available and such other information
as the Purchaser shall require and (ii) an Assignment of Receivables in the form
attached hereto as Exhibit B, duly executed by Authorized Persons of the Seller.
(b) Each Offer of Eligible Receivables for sale to the Purchaser shall be
subject to the condition that the Purchaser's total Investment in Purchased
Receivables shall at no time exceed the Commitment. The Purchaser may, in its
sole discretion, accept or reject all or part of any Offer. If the Purchaser
accepts all or any part of any Offer, the Purchaser shall (i) if not earlier
determined determine the Verified Net Claim Payment Amount of the Batch, (ii)
advise Seller thereof, (iii) notify the Seller of such acceptance no later than
10:00 a.m. on the Purchase Date, and (iv) make the Initial Payment therefor to
the Seller no later than 2:00 p.m. on the Purchase Date. Seller understands and
agrees that except for its rights in the Reserve applicable to a Batch as set
forth herein, payment of the Initial Payment shall complete the transfer to the
Purchaser of full legal and beneficial title to and full and absolute ownership
of the Purchased Receivables and all Related Security therefor and Seller shall
have no further ownership rights therein. Notwithstanding the foregoing, with
respect to any Purchased Receivable which represents an obligation under a
Government Program, Seller shall retain the right to receipt of payment and any
right to demand or otherwise make a claim under such a Government Program.
2.3 Reserve. Each Reserve account applicable to a Batch shall be held as
additional security for Seller's obligations hereunder (and Seller hereby grants
a Security Interest therein to Purchaser) and may be credited, charged, or
applied against such obligations of Seller, including adjustments to the
Purchase Discount. A Reserve (or a portion thereof as provided below) shall be
released and paid to Seller on the earlier to occur of (i) the Settlement Date
next following receipt by Purchaser of the aggregate Verified Net Claim Payment
Amount of the respective Batch or (ii) the Settlement Date next following the
expiration of the Collection Period applicable to the Batch; provided that if at
the expiration of the Collection Period, Purchaser shall have received
Collections in an amount (a) less than the sum of the Initial Payment plus the
Purchase Discount (as the same may be adjusted) for the Batch, the Reserve
account shall be canceled, all uncollected Purchased Receivables in the Batch
shall be re-assigned to Seller without recourse or warranties of any kind and,
at its option, Purchaser may offset the difference between the Collections
received and the sum of the Initial Payment plus the Purchase Discount from any
other Reserve account for any other Batch of Purchased Receivables or from
amounts due Seller from the purchase of other Batches or Purchaser may exercise
the Replacement Option in Section 2.6, or (b) more than the sum of the Initial
Payment plus the Purchase Discount (as adjusted) but less than the Verified Net
Claim Payment Amount for such Batch, Purchaser shall release to Seller such
portion of the Reserve account equal to the excess received, the balance of the
Reserve account applicable to the Batch shall be canceled and all uncollected
Purchased Receivables in the Batch shall be re-assigned to Seller without
recourse or warranties of any kind. Seller understands and agrees that a Reserve
account may represent accounting entries and not cash balances.
2.4 Reserve Settlement. On each Settlement Date, Purchaser shall release
any amounts in any Reserve account that Seller is then entitled to pursuant to
the terms hereof. Such settlement shall be accompanied by a settlement statement
in a form prepared by Purchaser. If any Settlement Date is also a Purchase Date
or Replacement Date, the aggregate amount to be remitted to Seller by Purchaser
shall be netted or credited against any amounts then due Purchaser.
2.5 Reports. At such times during a Collection Period as Seller shall
request but not more frequently than weekly, Purchaser shall submit to Seller,
or cause a third party to submit to Seller, a Purchased Receivables Statement or
other acceptable report reporting the status of Collections with respect to all
Batches of Purchased Receivables, together with a reconciliation of Purchaser's
Investment in Purchased Receivables as of the date of the report.
2.6 Replacement Option.
(a) If the Net Outstanding Balance of any Purchased Receivable is either (i)
reduced or cancelled as a result of any defective, rejected, repossessed or
returned services, any cash discount or any retainage or any other adjustment,
or (ii) reduced or cancelled as a result of any dispute, setoff or by agreement,
in respect of any claim by the Insurer thereof or by a Patient against the
Seller, then the Purchaser shall have the option of requiring the Seller to
replace such Purchased Receivable by assigning to the Purchaser, on the next
Replacement Date, additional Eligible Receivables with an aggregate Verified Net
Claim Payment Amount on such Replacement Date of at least one hundred percent
(100%) of the amount of such reduction, adjustment or cancellation.
(b) If any Purchased Receivable ceases to be an Eligible Receivable or any
Purchased Receivable becomes a Delinquent Purchased Receivable (unless such
Delinquent Purchased Receivable is the result of the bankruptcy, insolvency or
financial inability to pay of the Insurer thereof as demonstrated by the Seller
to the reasonable satisfaction of the Purchaser), then the Purchaser shall have
the option of requiring the Seller to replace such Purchased Receivable by
assigning to the Purchaser, on the next Replacement Date, additional Eligible
Receivables with an aggregate Verified Net Claim Payment Amount on such
Replacement Date equal to at least one hundred percent (100%) of the Net
Outstanding Balance of the replaced Purchased Receivable.
(c) On the Purchase Date following the Replacement Date, in lieu of the
provisions of paragraphs (a) and (b) above, the Purchaser may elect to reduce
the aggregate Purchase Price for Eligible Receivables purchased by the Purchaser
on such date by one hundred three percent (103%) of the Net Outstanding Balance
then remaining unpaid on any Purchased Receivable being replaced.
(d) If the Purchaser elects to exercise the replacement option described above
with respect to any Purchased Receivable(s), the Purchaser will,
contemporaneously with the assignment of the required amount of additional
Eligible Receivables on the Replacement Date, re-assign the replaced Purchased
Receivable(s) to the Seller without recourse or warranties of any kind.
2.7 No Assumption. The Purchaser does not, and shall not be deemed to,
assume any obligations of the Seller relating to any Receivables or the
transactions giving rise to any Receivables.
2.8 Receivables Purchase Transaction; Not a Loan. The transactions
contemplated by this Agreement are purchases of Receivables. The Purchase Price
paid for the Purchased Receivables by the Purchaser does not constitute a loan
to the Seller, and the Seller shall not have any obligation to repay such
Purchase Price or any other obligation with respect to Purchased Receivables
except as specified herein. The Purchaser's ownership of the Purchased
Receivables constitutes full and absolute ownership of all right, title and
interest in such Receivables free and clear of any redemption or conditional
ownership by Seller.
2.9 Security Interest in Other Assets. As additional security for Seller's
obligations hereunder, Seller hereby grants a Security Interest in such other
assets of Seller as Purchaser and Seller shall agree, which agreement shall be
evidenced by a Financing Statement executed by Purchaser and Seller.
3. Representations and Warranties of the Seller. To induce the Purchaser to
enter into this Agreement, the Seller represents and warrants to the Purchaser
as follows:
3.1 Existence. The Seller is a corporation or other entity duly organized
or formed, validly existing and in good standing under the laws of its state of
incorporation or formation. The Seller is duly qualified to transact business,
and is in good standing, in each jurisdiction where the nature of its business
or properties requires such qualification. The Seller has all requisite power,
authority, licenses, permits and approvals material to the ownership and
operation of its properties and to the carrying on of its business.
3.2 Capacity. The Seller has all requisite power and authority to execute
and deliver, and to perform under this Agreement and the other Purchase
Documents.
3.3 Authorization. The execution and delivery of, and performance by the
Seller under, this Agreement and the other Purchase Documents, have been duly
authorized by all requisite corporate action of Seller; are not in contravention
of any applicable Law; are not in contravention of the terms of its Articles or
Certificate of Incorporation or other formation documents or bylaws (if a
corporation), the terms of any credit or loan agreement, indenture, lease,
franchise, marketing agreement, license, mortgage or deed of trust, or other
material agreement, undertaking or arrangement (written or oral) to which the
Seller is a party or by which it (or any of its assets) may be bound; and will
not give rise to the creation of any Lien upon any of the assets of the Seller.
3.4 Validity. This Agreement and the other Purchase Documents, when
executed and delivered by all parties thereto, will constitute the valid, legal
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.
3.5 Consent. No consent, approval or authorization of, registration with
or declaration to any tribunal, Person or entity, including, without limitation,
the Patients or the Insurers obligated on the Purchased Receivables, or approval
by the shareholders of the Seller (if Seller is a corporation), is required in
connection with the execution and delivery of this Agreement and the other
Purchase Documents or in connection with the performance by the Seller of any
covenant or agreement contained herein or therein.
3.6 Defaults Under Other Documents. The Seller is not, nor will the
execution, delivery, performance of or compliance with the terms of this
Agreement and the other Purchase Documents cause the Seller to be, in default or
in violation (nor has any event or condition occurred which, with notice or
lapse of time or both, would constitute a default violation) under (a) its
Articles or Certificate of Incorporation or other formation documents or by laws
(if a corporation), or (b) any material credit or loan agreement, indenture,
lease, franchise, marketing agreement, license, mortgage or deed of trust, or
other material agreement, undertaking or arrangement (written or oral) to which
it is a party or by which it (or its assets) may be bound.
3.7 Compliance with Laws. The Seller is not, and the execution, delivery
and performance of, and compliance with, the terms of this Agreement and the
other Purchase Documents will not cause the Seller to be, in violation of any
Laws in any respect that could have any material adverse effect whatsoever upon
(a) the validity, performance or enforceability of any of the terms of this
Agreement and the other Purchase Documents, or (b) the financial condition or
business operations of the Seller.
3.8 Place of Business. The place of business of the Seller, or the
Seller's chief executive office if the Seller has more than one place of
business, is located at the address of the Seller set forth herein, and the
Seller keeps its books and records regarding its Receivables at that address.
3.9 Receivables. The Seller (a) is the sole owner of all right, title and
interest in and to all of its Receivables (including the Purchased Receivables)
free and clear of any Lien and (b) has not sold, assigned, hypothecated, pledged
or granted any Lien or security interest in all or any portion of such
Receivables.
4. Conditions Precedent. The Seller shall not be deemed to have made the Initial
Offer until all requirements set forth in this Section 4 are satisfied and the
Purchaser has received the documentation set forth in this Section 4 :
4.1 Formation Documents and Certificates. Copies of the Articles of
Incorporation, or other formation documents, and all amendments thereto, of the
Seller, to be accompanied by (i) a certificate of the Secretary of State of its
jurisdiction of incorporation or formation, dated as of a date no more than ten
(10) days prior to the date of the Initial Offer, to the effect that such copies
are correct and complete, and (ii) a certificate of its Secretary, dated as of
the date of the Initial Offer, that each such copy is correct and complete and
that no changes have occurred therein after the date of the foregoing official
certificate.
4.2 Bylaws. Copies of the bylaws, and all amendments thereto, of the
Seller, to be accompanied by a certificate, dated as of the date of the Initial
Offer, of its Secretary that such copies are correct and complete.
4.3 Good Standing. A certificate of the Secretary of State of the
jurisdiction of incorporation of Seller, bearing a date not more than (10) days
prior to the date of the Initial Offer, to the effect that Seller is a
corporation duly organized and in good standing under the Laws of the State of
its incorporation.
4.4 Incumbency. Certificates of incumbency of all officers of the Seller
who will be authorized to execute or attest any of the Purchase Documents on
behalf of the Seller, executed by the Secretary of the Seller, dated as of the
date of the Initial Offer.
4.5 Resolutions. Copies of resolutions of the Board of Directors of the
Seller, approving the execution of this Agreement and the other Purchase
Documents and authorizing the performance of the obligations of the Seller
contemplated in this Agreement and in the other Purchase Documents, accompanied
by certificates of Seller's Secretary, dated as of the date of the Initial
Offer, that such copies are complete and correct copies of resolutions duly
adopted at a meeting of (which may be held by conference telephone or similar
communication equipment by means of which all Persons participating in a meeting
can hear each other if permitted by applicable Law) or by the unanimous written
consent of (if permitted by applicable Law) such Board of Directors, and that
such resolutions have not been amended, modified or revoked in any respect, and
are in full force and effect as of the date of the Initial Offer.
4.6 Financing Statements. All financing statements requested by the
Purchaser to evidence the sale of Receivables pursuant to this Agreement or
otherwise required by this Agreement, duly executed by the Seller and filed in
the appropriate jurisdictions.
4.7 Opinion of Counsel. Unless waived by Purchaser, the opinion of counsel
to the Seller, addressed to the Purchaser, to the effect that such counsel has
examined this Agreement and such other documents and matters as such counsel
deemed necessary to reach the conclusions stated in the opinion, which
conclusions shall include the following: (i) the Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation; (ii) to the best knowledge of such counsel, the Seller is duly
qualified to transact business, and is in good standing, in each jurisdiction
where the nature of its business or properties requires such qualifications;
(iii) the Seller has all requisite power and authority to execute and deliver
and perform under, this Agreement; (iv) the execution and delivery of, and
performance by the Seller under, this Agreement (A) have been duly authorized by
all requisite action, (B) to the best knowledge of such counsel, are not in
contravention of any applicable Law, and (C) are not in contravention of
Seller's Articles or Certificate of Incorporation or other formation documents,
or bylaws (if a corporation), or to the best knowledge of such counsel, the
terms of any credit or loan agreement, indenture, lease, franchise, marketing
agreement, license, mortgage or deed of trust, or other material agreement,
undertaking or arrangement (written or oral) to which Seller is a party or by
which it (or any of its assets) may be bound; (v) this Agreement, when executed
and delivered by all parties hereto, will constitute the valid, legal and
binding obligation of the Seller, enforceable, subject to customary
qualifications, in accordance with its terms; (vi) to the best knowledge of such
counsel, no consent, approval or authorization of, registration with or
declaration to any tribunal, Person or entity, including without limitation, the
Patients or Insurers obligated on the Receivables, is required in connection
with the execution and delivery of this Agreement, the sale of the Receivables
to the Purchaser in accordance with the terms hereof or in connection with the
performance by the Seller of any covenant or agreement contained herein; (vii)
no approval by the shareholders of the Seller is required in connection with the
execution and delivery of this Agreement or in connection with the performance
by the Seller of any covenant or agreement contained herein; (viii) Receivables
owned by the Seller are not subject to any Lien, other than the Purchaser's
interest therein; and (ix) upon the filing of UCC-1 Financing Statements in the
appropriate offices Purchaser will have a valid and perfected security interest
in Seller's Receivables.
4.8 Closing Certificate. A certificate of the Seller, duly executed by
Authorized Persons of each entity, dated as of the date of the Initial Offer,
certifying that the representations and warranties contained herein are true and
correct as of such date, and that no Termination Event has occurred as of such
date.
4.9 UCC Searches. Copies of Certificates on form UCC-11 of the Secretary
of State of each jurisdiction where the Seller has its chief executive office or
keeps its books and records regarding Receivables, and copies of all financing
statements listed thereon, evidencing that no Person (other than the Purchaser)
has an interest in or Lien on any Receivables owned by the Seller, whether such
interest or Lien arises because such Receivables are proceeds of inventory or
otherwise.
4.10 Other Documents. Any and all other documents or certificates
reasonably requested by the Purchaser in connection with the purchase of
Eligible Receivables pursuant to this Agreement.
4.11 Commitment Fee. Seller shall have paid Purchaser a fee equal to one
and one-quarter percent (1.25%) of the aggregate Purchase Price paid by
Purchaser pursuant to the Initial Offer.
5. Covenants of the Seller.
5.1 Collection by the Seller. From and after the date of the Initial
Offer, the Seller, as independent contractor on behalf of the Purchaser in
accordance with the requirements of this Agreement, shall assist Purchaser and
its representatives in collecting all payments on the Purchased Receivables and,
if required by Purchaser, all other receivables of Seller, and cause such
Collections to be remitted to the Purchaser as provided herein. If under any
bankruptcy, insolvency, fraudulent transfer or other law affecting the rights of
creditors generally, the Purchaser is required by a court to return to any
Person any amount of Collections previously received by the Purchaser, the
Seller agrees to promptly assign to the Purchaser, without setoff, deduction or
counterclaim of any kind, additional Eligible Receivables with a Verified Net
Claim Payment Amount on such date of at least one hundred percent (100%) of such
amount of Collections required to be returned.
5.2 Operations. The Seller shall assist in collecting the Purchased
Receivables in an orderly and efficient manner consistent with good business
practices and in accordance with all applicable Laws. The Seller shall not
modify the terms of any Purchased Receivables so as to impair the value or
collectibility thereof.
5.3 Payment of Collections. The Seller shall instruct all Insurers
obligated to pay Purchased Receivables and if required by Purchaser, all other
Receivables of Seller, to make all payments thereon to such lockbox or other
account(s) as the Purchaser, or any lender to the Purchaser, may direct,
provided that payments from payors under Government Programs shall be made to
such account(s) or otherwise in compliance with all applicable Laws, rules or
regulations applicable to such payments. If the Seller shall receive any
payments on any Purchased Receivables, such payments shall be promptly
delivered, uncashed by the Seller and without commingling such payments with
other funds of the Seller, to the Purchaser or as directed by the Purchaser.
5.4 Records. The Seller shall at all times maintain full and accurate
books and records regarding the Purchased Receivables and Collections thereon in
accordance with generally accepted accounting principles. Such books and records
shall be marked to indicate the ownership interest of the Purchaser in the
Purchased Receivables. Subject to any prohibitions or any Law, such books and
records, together with other financial and business information concerning
Seller and all applicable medical records, shall be available for inspection,
audit and copying by the Purchaser and its representatives during reasonable
business hours.
5.5 Relationship of Parties. The Seller shall have the status of and act
as an independent contractor in the collection of Purchased Receivables on
behalf of the Purchaser, and shall in no event be, or be deemed to be, an agent
of the Purchaser. Furthermore, this Agreement shall not be construed to create a
partnership or joint venture between the Purchaser and the Seller.
5.6 Duty of Care. In the administration and collection of the Purchased
Receivables and in all actions contemplated by this Agreement, the Seller shall
use the same degree of care that the Seller uses in the collection of any other
accounts receivable owned by the Seller.
5.7 Notice of Changes. The Seller shall notify Purchaser in writing at
least thirty (30) Business Days prior to the date of change of its name, the
location of its chief executive office, its principal place of business, or the
place where it keeps its books and records. No later than fifteen (15) days
after the occurrence of any of the aforementioned changes, the Seller shall
deliver to the Purchaser acknowledgment copies of amendments on form UCC-3
reflecting such change duly executed and duly filed before the effective date of
the change in each jurisdiction in which UCC-1 filings were made in order to
evidence the sale of Receivables pursuant to this Agreement.
5.8 Patient Compliance. Seller shall ensure that Patients have satisfied
all conditions precedent to the Insurer's obligation to pay at least the
Verified Net Claim Payment Amount under insurance policies relating to Purchased
Receivables.
5.9 Merger, Acquisition or Sale of Assets. Seller shall not enter into any
merger or consolidation with or acquire all or substantially all of the assets
of any Person, and will not sell, lease, or otherwise dispose of any of its
assets except in the ordinary course of its business.
6. Certain Rights.
6.1 Notice to Insurers. At any time after the date of the Initial Offer,
the Purchaser may (i) terminate any duties of the Seller with respect to
assisting in the collection of the Purchased Receivables, and (ii) upon five (5)
days prior written notice to Seller, notify any Insurers obligated on the
Purchased Receivables (other than payors under Government Programs if such
notification would be ineffectual or unlawful) (A) of the sale and assignment of
the Purchased Receivables to the Purchaser, and (B) to make all payments on the
Purchased Receivables directly to the Purchaser or its designee. Upon the
receipt of such notice, the Seller shall promptly deliver to the Purchaser or
its designee all books and records (including, without limitation, computerized
records and all applicable medical records) relating to the Purchased
Receivables.
6.2 Termination. At any time, upon either (i) immediately upon the
occurrence of a Termination Event, or (ii) upon thirty (30) days prior written
notice to the Seller from the Purchaser, the Purchaser may terminate this
Agreement and the Commitment of the Purchaser to purchase Eligible Receivables;
provided that if a Termination Event occurs, this Agreement shall be terminated
automatically, without any further action by the Purchaser. At any time, after
two (2) years from the date hereof, upon thirty (30) days prior written notice
to Purchaser, the Seller may terminate this Agreement. From and after
termination, the Seller shall not make any further Offers; provided however, the
Seller shall continue to comply with all of its obligations hereunder, including
obligations with respect to outstanding Purchased Receivables. During the term
of this Agreement, each month Seller shall sell to Purchaser Eligible
Receivables having an aggregate Verified Net Payment Amount of at least Three
Hundred Thousand and No/100 Dollars ($300,000.00).
7. General Provisions.
7.1 Assigns. Seller may not assign any of its rights or duties hereunder
without the prior written consent of the Purchaser and any attempt to do so
shall be void. Purchaser may, without the consent of Seller, assign all or any
portion of its rights hereunder by way of participations or otherwise to such
other entities that such Purchaser may select.
7.2 Modifications and Waivers. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege hereunder. All
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties hereto may otherwise have at law or in
equity. No waiver shall be valid in the absence of the written and signed
consent of the party against which enforcement of such is sought.
7.3 Notice. Except as otherwise specifically provided herein, any notice
hereunder shall be in writing (including telegraphic or telecopy communication)
and, if mailed, shall be deemed to be given three (3) days after being sent by
registered or certified mail, postage prepaid, or if telegraphed when delivered
to the telegraph company, or if telecopied when transmitted, or otherwise when
delivered in person to the addressee and a receipt given for, in all such
instances addressed to the parties as set forth on the signature page hereof, or
as such other address as the addressee may, by written notice received by the
other party hereto, designate as the appropriate address for purposes of notice
hereunder.
7.4 Amendment. This Agreement may be amended, supplemented or modified,
and the observance of any term or provision hereof may be waived, only with the
written consent of the Seller and the Purchaser.
7.5 CHOICE OF LAW. THIS AGREEMENT, AND THE VALIDITY AND
ENFORCEMENT HEREOF, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF MARYLAND.
7.6 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or invalidity without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provisions in any other jurisdiction.
7.7 ENTIRETY. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY,
RELATING TO THE SUBJECT MATTER HEREOF. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
7.8 Execution. This Agreement may be executed in one or more counterparts,
each of which for all purposes is to be deemed an original. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
7.9 Survival. All covenants, agreements, undertakings, indemnities,
representations, and warranties made herein shall survive both the execution and
the termination hereof, and shall not be affected by any investigation made by
any party.
7.10 Money. All references herein to "Dollars," "dollars," the sign "$"
"money," "payments," or other similar financial or monetary terms are references
to currency of the United States of America.
7.11 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not be deemed to limit, amplify or
modify the terms of this Agreement.
7.12 Sections, Etc. All references to "Section," "Sections," "Subsection,"
"Paragraph" or "paragraphs" contained herein are, unless specifically indicated
otherwise, reference to articles, sections, subsections and paragraphs of this
Agreement. All references to "Exhibits" and "Schedules" contained herein are
references to Exhibits and Schedules attached hereto, all of which are made a
part hereof for all purposes, the same as if set forth herein verbatim, it being
understood that if any Exhibit or Schedule attached hereto which is to be
executed and delivered, contains blanks or is otherwise required to be updated
from time to time, the same shall be completed correctly and in accordance with
the terms and provisions contained herein and as contemplated herein prior to or
at the time of the execution and delivery thereof.
7.13 Third Party Beneficiaries. It is expressly agreed and understood
among the parties to this Agreement that no provisions of this Agreement are
intended to benefit any third party and no third party is entitled to rely upon
any provisions contained herein; provided that any participant or assignee of
the Purchaser shall be entitled to the benefits hereof.
7.14 Further Assurances. The Seller shall furnish to Purchaser at
Purchaser's request such additional information concerning the Purchased
Receivables or Related Security as Purchaser may from time to time reasonably
request in order to establish compliance with the terms and conditions of this
Agreement, and execute, acknowledge and deliver, or cause to be executed,
acknowledged or delivered, such supplements hereto and such further instruments
and documents as may reasonably be required or appropriate and permitted by Law
to further express the intention, or to facilitate the performance, of this
Agreement.
7.15 Fees and Expenses. The Seller shall pay to the Purchaser (or any
assignee or participant) the out-of-pocket costs, fees and expenses (including
reasonable attorney's fees and auditing fees) incurred by the Purchaser (or any
assignee or participant) incident to the exercise of the rights of the Purchaser
and the enforcement of the Seller's obligations hereunder, or the bankruptcy or
insolvency of the Seller, within fifteen (15) days of the receipt of notice
thereof. Upon request, Seller will reimburse Purchaser (or any assignee or
participant) certain routine expenses, including credit research, filing
searches, filing fees, wire transfer costs, overnight mail and travel expenses.
7.16 Indemnity. The Seller hereby indemnifies and holds harmless Purchaser
(or any assignee or participant) against any and all liabilities, obligations,
losses, damages, penalties, action, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Purchaser (or any assignee or participant)
due to any action or inaction of the Seller, or through the Seller, in any way
relating to, or arising out of, this Agreement or any of the transactions
contemplated herein. The indemnities contained in this Section shall survive any
termination of this Agreement.
7.17 Limited Power of Attorney. The Seller hereby irrevocably constitutes
and appoints Purchaser (or any assignee or participant) as its agent and
attorney-in-fact for so long as any Purchased Receivables are uncollected for
the limited purposes of (i) preparing, executing on behalf of Seller and filing
for record any notices or other instruments which Purchaser (or any assignee or
participant) determines is necessary to protect its interests in Purchased
Receivables, (ii) preparing, executing on behalf of Seller and/or delivering all
documents, instruments or information pertaining to any Related Security which
Purchaser (or any assignee or participant) determines is necessary, including
without limitation, delivering any medical records or other records or
information to an Insurer to aid in the collection of a Purchased Receivable
(subject to applicable law governing the confidentiality of medical records),
and (iii) receiving and endorsing for Seller any drafts, checks or other payment
instruments and cash evidencing Purchased Receivables or any Related Security or
any other Receivables of Seller then being collected by Purchaser (or any
assignee or participant) and depositing the same in accordance with the
provisions of this Agreement. If requested by Purchaser (or any assignee or
participant), Seller shall execute and deliver to Purchaser (or any assignee or
participant) a separate Power of Attorney in favor of Purchaser (or any assignee
or participant) evidencing the foregoing Power of Attorney which may be filed of
record and provided to third parties if so determined by Purchaser (or any
assignee or participant).
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
PURCHASER:
HEALTHPARTNERS FUNDING, L.P.
c/o HealthPartners Financial Corporation
2001 L Street NW, Suite 402
Washington, DC, 20036
By: HEALTHPARTNERS FINANCIAL CORPORATION,
General Partner
By: ________________________________
John K. Delaney, President
SELLER:
By: WESTMEADE HEALTHCARE, INC.
a Pennsylvania corporation
By:____________________________________
Name:
Title:
EXHIBIT A
Form of Offer Letter
TO: HealthPartners Funding, L.P.
c/o HealthPartners Financial Corporation
2001 L Street NW, Suite 402
Washington, DC, 20036
Attn: John K. Delaney
FROM: Westmeade Healthcare, Inc.
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19038
PURCHASE DATE:___________________, 199___
Pursuant to that certain Receivables Purchase and Sale Agreement dated
December___ , 1995 (the "Agreement") between the Purchaser and the undersigned
Seller, the undersigned Seller hereby offers for sale the Batch of Eligible
Receivables described on Schedule A* attached hereto (the "Subject
Receivables").
The Seller hereby certifies that:
(a) All of the Subject Receivables constitute Eligible Receivables which have
not heretofore been sold and relate to Patients or residents currently being
provided Medical Services by Seller;
(b) The Seller has fully performed all of its obligations under the Agreement;
(c) The place of business of the Seller, or the Seller's chief executive office
if the Seller has more than one place of business, is located at the address
given for the Seller in the Agreement, and the Seller keeps its books and
records regarding its Receivables at such address;
(d) The representations and warranties made by the Seller in the Agreement are
true and correct in all material respects as if made as of the date of this
Offer Letter;
(e) Acceptance of this Offer, in whole or in part, and payment of the Initial
Payment, shall transfer full legal and beneficial title to and full absolute
ownership of and to all of the Subject Receivables purchased, and all Related
Security therefor; and
(f) No Termination Event has occurred.
- ----------
* Schedule A must describe the name of the Patient, the Insurer, the gross
dollar amount of each Subject Receivable and the Verified Net Claim Payment
Amount of each Subject Receivable.
Capitalized terms used herein and not otherwise defined shall have the
meaning set forth in the Agreement.
WESTMEADE HEALTHCARE, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
Date of Offer Letter:
EXHIBIT B
Assignment of Receivables
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned Seller hereby assigns, sells and
conveys to HEALTHPARTNERS FUNDING, L.P. the Subject Receivables specified in the
Offer Letter dated ______________, 199____ and listed on Schedule A attached
hereto, together with all Related Security therefor, all in accordance with and
subject to the terms of that certain Receivables Purchase and Sale Agreement
dated _____, 199_, (the "Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Agreement or the
Offer Letter referred to herein.
Effective Date:__________________199____
WESTMEADE HEALTHCARE, INC.
By:_________________________________
Name:_______________________________
Title:_________________________________
SCHEDULE A
EXHIBIT 6.3
SEE EXHIBIT 3.22
EXHIBIT 6.4
SEE EXHIBIT 3.23
EXHIBIT 6.5
PROMISSORY NOTE
$______ Philadelphia, Pennsylvania
_________________
FOR VALUE RECEIVED, CORECARE SYSTEMS, INC., a Nevada corporation (the
"Maker"), with a principal office located at 9425 Stenton Avenue, Erdenheim, PA
19038, hereby promises to pay to ________________, with an address at
___________________________________ (or such other address as the Payee
hereunder may provide by notice to Maker from time to time) or any assignee of
this Note who is registered as the owner thereof by the Maker on a register
maintained for that purpose (hereafter referred to as the "Payee"), the
principal sum of ______________________ ($_________), together with interest on
the principal amount outstanding from the date hereof until payment in full. An
assignee of the Payee shall have the right to have a new Note of like tenor,
issued and registered in such assignee's name upon surrender of this Note,
endorsed for transfer to the assignee.
The principal amount of this Note together with all interest then accrued
but unpaid shall be payable one year from the date hereof (the "Due Date").
Interest on the outstanding principal balance hereof shall accrue at a rate
equal to SEVEN PERCENT (7%) per annum, simple interest, until all principal and
other amounts due hereunder have been paid in full. Prior to payment in full,
accrued interest shall be paid quarterly, on March 1, 1996, June 1, 1996,
September 1, 1996 and at the Due Date.
All interest shall be calculated on the basis of a 364-day year, and a
91-day quarterly period, counting the actual number of days elapsed from the
beginning of the period. Interest on any overdue payments of principal and
interest due hereunder shall accrue and be payable at the rate of ten percent
(10%) percent per annum, based on the actual number of days elapsed from the
date such principal or interest payment was due to the date of actual payment.
The principal of this Note may be prepaid in whole or in part, without
premium or penalty, provided that Maker shall give the Payee not less than ten
(10) days' prior written notice of its intention to prepay.
All principal and interest payments hereunder are payable in lawful money
of the United States of America to the Payee at the address first shown above,
or at such other address as may be directed by Payee, in immediately available
funds.
The Maker hereby waives presentment, demand, dishonor, protest, notice of
protest, diligence and any other notice or action otherwise required to be given
or taken under the law in connection with the delivery, acceptance, performance,
default, enforcement or collection of this Note, and expressly agrees that this
Note, or any payment hereunder, may be extended, modified or subordinated (by
forbearance or otherwise) from time to time, without in any way affecting the
liability of the Maker.
In the event that (a) the Maker shall fail to pay when due, any payment of
principal or interest due hereunder and such failure to pay is not cured within
ten (10) days of the date such payment was due, or (b) if the Maker shall (i)
make a general assignment for the benefit of creditors; (ii) be adjudicated a
bankrupt or insolvent; (iii) file a voluntary petition in bankruptcy; (iv) take
advantage of any bankruptcy or insolvency law or statute of the United States of
America or any state or jurisdiction thereof now or hereafter in effect; (v)
have a petition or proceeding filed against the Maker under any bankruptcy or
insolvency law or statute of the United States of America or any state or
jurisdiction thereof, which petition or proceeding is not dismissed within
forty-five (45) days from the date of commencement thereof; or (vi) or have a
receiver, trustee, custodian, conservator or other person appointed by any court
to take charge of the Maker's affairs, assets or business and such appointment
is not vacated or discharged within forty-five (45) days thereafter; then, and
upon the happening of any such event, the Payee, at Payee's option, by written
notice to the Maker, may declare the entire indebtedness evidenced by this Note
immediately due and payable, whereupon the same shall forthwith mature and
become immediately due and payable without presentment, demand, protest or
further notice.
In the event that Maker shall fail to pay when due any principal or
interest payment, and the Payee shall exercise or endeavor to exercise any of
its remedies hereunder, the Maker shall pay all reasonable costs and expenses
incurred in connection therewith, including, without limitation, reasonable
attorneys' fees, and the Payee may take judgment for all such amounts in
addition to all other sums due hereunder.
No consent or waiver by the Payee with respect to any action or failure to
act by Maker which, without such consent or waiver, would constitute a breach of
any provision of this Note shall be valid and binding unless in writing and
signed by the Payee. No such consent or waiver given by Payee on any one
occasion shall be construed to constitute a consent or waiver by Payee on any
subsequent occasion. No forbearance in the exercise of any right or remedy of
Payee shall be construed as a waiver of such right or remedy.
All agreements between the Maker and the Payee are expressly limited to
provide that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Payee for the use, forbearance
or detention of the indebtedness evidenced hereby exceed the maximum amount
which the Payee is permitted to receive under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then, without the necessity of any action by
Payee or Maker, the obligation to be fulfilled shall automatically be reduced to
the limit of such validity, and if from any circumstance the Payee should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance hereof, and not to the payment of interest. As used
herein, the term "applicable law" shall mean the law in effect as of the date
hereof, provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Note shall be
governed by such new law as of its effective date. This provision shall control
every other provision of all agreements between the Maker and the Payee.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, except to the extent that such laws are
superseded by Federal enactments.
If any covenant or other provision of the Note is invalid, illegal, or
incapable of being enforced by reason of any rule of law or public policy, all
other covenants and provisions of the Note shall nevertheless remain in full
force and effect, and no covenant or provision shall be deemed dependent upon
any other covenant or provision.
IN WITNESS WHEREOF, the Maker, by its duly authorized officer, has
executed this Note under seal as of the date first above written.
CORECARE SYSTEMS, INC.
(CORPORATE SEAL)
By:___________________________
Rose DiOttavio, President
ATTEST:
______________________________
Joan Biddle, Asst. Secretary
EXHIBIT 6.6
PROMISSORY NOTE
$ 450,000. Dated: August 22,1996
DEBTOR: CoreCare Systems, Inc. of Whitemarsh Professional Center 9425 Stenton
Avenue, Erdenheim, Pennsylvania 19038
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY, the person or
persons who sign as debtor below (each jointly and severally liable if more than
one person and hereinafter referred to as "Debtor"), promises to pay to the
order of Madison Bank ("Lender") at 1767 Sentry Parkway West, Blue Bell,
Pennsylvania 19422 the Principal sum of Four Hundred Fifty Thousand ($450,000)
Dollars in lawful money of the United States, to be paid as follows:
The outstanding principal amount of this Promissory Note, and all accrued and
unpaid interest, shall be due and payable on December 23, 1996 (the "Maturity
Date"); provided, however, that if the maturity date of the letter of credit
issued by United States Trust Company of New York as security for this loan is
extended to January 10, 1997, the Maturity Date shall be extended to December
31, 1996.
Interest from the date of this Note shall accrue on the unpaid Principal balance
hereof at the rate of 1.5 percent above the reference rate designated by Lender
from time to time as its Prime Rate and shall be payable monthly as billed.
SECURITY INTEREST: As security for the prompt payments as and when due of all
amounts due under this Note, including any renewals extensions and/or
modifications thereof, together with all other existing and future liabilities
and obligations of Debtor, or any of them, to Lender whether absolute or
contingent, of any nature whatsoever and out of whatever transactions arising
(hereinafter collectively referred to as the "Liabilities"), in addition to any
other security agreement or document granting Lender any rights in any of
Obligor's ("Obligor", as used herein, shall include Debtor and all other persons
liable, either absolutely or contingently, on the Liabilities, including
endorsers, sureties and guarantors) property for the purpose of securing the
Liabilities, Obligor acknowledges Lender's right of set-off and further hereby
grants to Lender a lien and security interest in and to all property of Obligor,
or any of them, which at any time Lender shall have in its possession, or which
is in transit to it, including without limitation any balance or share belonging
to Obligor, or any of them, of any deposit agency trust escrow or other account
or accounts with Lender and any other amounts which may be owing from time to
time by Lender to Obligor or any of them. Said lien and security interest shall
be independent of Lender's right of set-off, which, if exercised, shall be
deemed to occur at the time Lender first restricts access of Obligor to property
in Lender's possession, although such set-off may be entered upon Lender's books
and records at a later time.
As additional security for Debtor's obligations hereunder, and as a condition to
the advance of any funds by Lender hereunder, Debtor shall obtain from United
States Trust Company of New York an irrevocable letter of credit in the amount
of $475,000. naming Lender as beneficiary.
If checked, Debtor agrees that this Note is a renewal of the Promissory Note
dated ___________, 19__, and that, whether or not additional funds are advanced
herewith this Note is not intended to create a totally new debt. If Lender was
given a purchase money or other security interest in connection with the prior
Promissory Note, that security interest shall be retained by Lender in
connection with this Note.
UNCONDITIONAL LIABILITY: Obligor's liability shall be unconditional and without
regard to the liability of any other Obligor, and shall not be affected by any
indulgence extension of time renewal waiver or modification of this Note, or the
release, substitution and/or addition of collateral security for this Note.
Obligor consents to any and all extensions of time, renewals, waivers or
modifications, as well as to the release, substitution or addition of Obligors
and/or collateral security, without notice to Obligor and without affecting
Obligor's liability hereunder or under the Liabilities.
This Note is entitled to the benefits of any loan agreement(s), surety and/or
guaranty agreement(s), security agreement(s), mortgage(s), assignment(s), and/or
other such loan documents (referred to as the "Loan Documents") issued in
connection with the Liabilities, whether executed previously to or concurrently
with, or to be executed subsequent to, this Note, and which may be amended,
modified, renewed or substituted without affecting in any way the validity or
enforceability of this Note.
EVENTS OF DEFAULT: Each of the following shall be an "Event of Default"
hereunder: (1) the nonpayment when due, or if this is a demand obligation, upon
demand, of any amount payable under this Note or of any amount when due under or
on any of the Liabilities, or the failure of any Obligor to observe or perform
any agreement of any nature whatsoever with Lender including, but not limited
to, those contained in the Loan Documents; (2) if any Obligor becomes insolvent
or makes an assignment for the benefit of creditors, or if any petition is filed
by or against any Obligor under any provision of any state or federal law or
statute alleging that such Obligor is insolvent or unable to pay debts as they
mature or under any provision of the Federal Bankruptcy Code; (3) the entry of
any judgment against any Obligor or any of Obligor's property which remains
unsatisfied for fifteen (15) days; (4) the issuing of any attachment, levy or
garnishment against any property of any Obligor; (5) the occurrence of any
substantial change in the financial condition of any Obligor which, in the sole,
reasonable good faith judgment of Lender is materially adverse; (6) the sale of
all or substantially all of the assets, or change in ownership, or the
dissolution, liquidation, merger, consolidation or reorganization of any Obligor
which is a corporation or partnership, without the express prior written consent
of Lender; (7) the death, incarceration or adjudication of legal incompetence of
any Obligor who is a natural person; (8) if any information or signature
furnished to Lender by any Obligor at any time in connection with any of the
Liabilities, or in connection with any guaranty or surety agreement applicable
to any of the Liabilities, is false or incorrect; or (9) the failure of any
Obligor to timely furnish to Lender such financial and other information as
Lender may reasonably request or require.
LENDER'S RIGHTS UPON DEFAULT: Notwithstanding anything to the contrary contained
herein or elsewhere, or the fact that Debtor may be required to make Principal
and/or interest payments from time to time, if this Note is payable upon demand,
Lender may demand payment of all outstanding Principal and accrued interest at
any time, whether or not an Event of Default shall have occurred. In any event,
upon the occurrence of any Event of Default, Lender may do any or all of the
following:
(1) accelerate the maturity of this Note and demand immediate payment of all
outstanding Principal and accrued interest. Debtor agrees to pay interest at the
rate provided in this Note on all such sums until Lender has actually received
payment in full thereof, even if Lender has obtained judgment against Debtor
therefore.
(2) pursuant to the Warrant of Attorney contained herein, confess judgment
against Debtor, or any of them.
(3) exercise Lender's right of set-off and all of the rights, privileges and
remedies of a secured party under the Pennsylvania Uniform Commercial Code and
all of its rights and remedies under any security agreement, pledge agreement,
assignment, mortgage, power, this Note or any other note, or other agreement,
instrument or document issued in connection with or arising out of any of the
Liabilities, all of which remedies shall be cumulative and not alternative. The
net proceeds of any collateral held by Lender as security for any of the
Liabilities shall be applied first to the expenses of Lender in preparing the
collateral for sale, selling and the like, including, without limitation,
reasonable attorney's fees and expenses incurred by Lender (including fees and
expenses of any litigation incident to any of the foregoing), and second, in
such order, as Lender may, in its sole discretion, elect, to the complete
satisfaction of all of the Liabilities together with all interest thereon.
Obligor waives and releases any right to require Lender to collect any of the
Liabilities to Lender from any other collateral under any theory of marshaling
of assets or otherwise, and specifically authorizes Lender to apply any
collateral in which Obligor has any right, title or interest against any of the
Obligor's Liabilities to Lender in any manner that Lender may determine.
(4) Upon five (5) days written notice to Debtor, begin accruing interest, in
addition to the interest provided for above, if any, at a rate not to exceed
four percent (4%) per annum on the unpaid Principal balance; provided, however,
that no interest shall accrue hereunder in excess of the maximum amount of
interest then allowed by law. Debtor agrees to pay such accrued interest upon
demand.
WARRANT OF ATTORNEY: Debtor, and each of them if more than one, hereby
irrevocably authorizes and empowers any Attorney or any Clerk of any court of
record prior to, upon or after the occurrence of any Event of Default, as
specified above, to appear for and CONFESS JUDGMENT against Debtor, or any of
them, (a) for such sums as are due and/or may become due on the Liabilities
and/or (b) in any action of replevin instituted by Lender to obtain possession
of any collateral securing this Note or securing any of the Liabilities, in
either case with or without declaration, with costs of suit, without stay of
execution and with an amount not to exceed fifteen percent (15%) of the unpaid
principal amount of such judgment, but not less than One Thousand Dollars
($1,000.00), added for attorney's collection fees. Debtor: (1) waives the right
of inquisition on any real estate levied on, voluntarily condemns the same,
authorizes the Prothonotary or Clerk to enter upon the Writ of Execution said
voluntary condemnation and agrees that said real estate may be sold on a Writ of
Execution; (2) to the extent permitted by law, waives and releases all relief
from all appraisement, stay, exemption or appeal laws of any state now in force
or hereafter enacted; and (3) releases all errors in such proceedings. If a copy
of this Note, verified by affidavit by or on behalf of Lender shall have been
filed in such action, it shall not be necessary to file the original Note as a
Warrant of Attorney. The authority and power to appear for and enter judgment
against Debtor shall not be exhausted by the initial exercise thereof, and the
same may be exercised, from time to time, as often as Lender shall deem
necessary and desirable, and this Note shall be a sufficient Warrant therefore.
Lender may enter one or more judgments in the same or different counties for all
or part of the Liabilities, without regard to whether judgment has been entered
on more than one occasion for the same Liabilities. In the event any judgment
entered against Debtor hereunder is stricken or opened upon application by or on
Debtor's behalf for any reason whatsoever, Lender is hereby authorized and
empowered to again appear for and Confess Judgment against Debtor or any of
them, subject, however, to the limitation that such subsequent entry or entries
of judgment by Lender may only be done to cure any errors in prior proceedings,
only and to the extent that such errors are subject to cure in the later
proceedings.
PREPAYMENTS: Unless otherwise agreed to in writing by Debtor, this Note may be
prepaid in whole or in part, at any time without penalty. However, if the
Principal of this Note is repayable in installments, any such prepayments shall
be applied first to accrued interest to the date of prepayment and then on
account of the last remaining unpaid Principal payment to become due, and the
number of installments due hereunder shall be correspondingly reduced. No such
prepayments shall reduce the amounts of the scheduled installments nor relieve
Debtor from paying a scheduled installment on each installment payment date
until all Principal due together with accrued interest thereon has been paid in
full.
DISBURSEMENT OF PROCEEDS: Each Debtor hereby represents and warrants to Lender
that the Principal of this Note will be used solely for business or commercial
purposes and agrees that any disbursement of the Principal of this Note, or any
portion thereof, to any one or more Debtors, shall conclusively be deemed to
constitute disbursement of such Principal to and for the benefit of ail Debtors.
RIGHT TO COMPLETE NOTE: Lender may at any time and from time to time, without
notice to any Obligor: 1) date this Note as of the date when the loan evidenced
hereby was made; (2) complete any blank spaces according to the terms upon which
Lender has granted such loan, and (3) cause the signature of one or more persons
to be added as additional Debtors without in any way affecting or limiting the
liability of the existing Obligors to Lender.
MISCELLANEOUS: Debtor hereby waives protest, notice of protest, presentment,
dishonor, notice of dishonor and demand. Debtor hereby waives and releases all
errors, defects and imperfections in any proceeding instituted by Lender under
the terms of this Note. Debtor agrees to reimburse Lender for all costs,
including court costs and reasonable attorney's's fees of 15% (but in no event
less than $1,000) of the total amount due hereunder, incurred by Lender in
connection with the collection and enforcement hereof. Interest shall be
calculated hereunder for the actual number of days that the Principal is
outstanding, based on a year of three hundred sixty (360) days, unless otherwise
specified. If this Note bears interest at a rate based on the reference rate
designated by Lender or others from time to time as the Prime Rate Base Rate, or
otherwise, or the Discount Rate in effect from time to time as set by the
Federal Reserve Bank in whose district the Lender is located, changes in the
rate of interest hereon shall become effective on the days on which such
reference rate changes or that Federal Reserve Bank announces changes in its
Discount Rate, as applicable. The rights and privileges of Lender under this
Note shall inure to the benefit of its successors and assigns. All
representations, warranties and agreements of Obligor made in connection with
this Note shall bind Obligor's personal representatives, heirs, successors and
assigns. If any provision of this Note shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Note shall be construed as if such invalid
or unenforceable provision had never been contained herein. The waiver of any
Event of Default or the failure of Lender to exercise any right or remedy to
which it may be entitled shall not be deemed a waiver of any subsequent Event of
Default or of Lender's right to exercise that or any other right or remedy to
which Lender is entitled. This Note has been delivered to and accepted by Lender
in and shall be governed by the laws of the Commonwealth of Pennsylvania, unless
Federal law otherwise applies. The parties agree to the jurisdiction of the
federal and state courts located in Pennsylvania in connection with any matter
arising hereunder, including the collector and enforcement hereof.
Debtor has duly executed this Note the day and year first above written and has
hereunto set Debtor's hand and seal.
CoreCare Systems, Inc.
By: _____________________________
Name:_____________________________
Title:____________________________
Attest: __________________________
Name and Title: __________________
(Corporate Seal)
EXHIBIT 6.7
United States Trust Company 114 West 47th Street
of New York New York, NY 10036-1532
Telephone: 212 852-1000
U.S. TRUST DEMAND NOTE
Borrower(s): CoreCare Systems, Inc.
Principal Amount:
$1,100,000.00
For value received, the undersigned (the "Borrower") (jointly and
severally, if more than one) promise(s) to pay ON DEMAND to the order of UNITED
STATES TRUST COMPANY OF NEW YORK (the "Trust Company"), at its offices at 114
West 47th Street, New York, NY 10036-1532, or at such other place or places as
it may direct, in lawful money of the United States, the principal amount of ONE
MILLION ONE HUNDRED THOUSAND AND 00/100 Dollars.
$1,100,000.00, or the aggregate unpaid balance of all advances made from
time to time by the Trust Company to the Borrower and intended to be evidenced
by this Note, with interest on the unpaid balance from the date hereof until
payment in full at a rate per annum equal to 0 percent above the rate announced
from day to day by the Trust Company as its Prime Rate (the "Prime Rate"), such
interest to be determined daily and computed and charged, at such intervals as
the Trust Company determines, on the basis of the actual number of days elapsed
out of a 360-day year. The rate of interest on this Note shall change upon the
effective date of each change in the Prime Rate. If and to the extent that
payment is not received by the Trust Company within 30 calendar days of demand,
interest on the unpaid principal balance shall accrue and be payable at a rate
five percent per annum above the rate described above. The Trust Company shall
not be entitled to charge interest hereunder at a rate in excess of the maximum
rate allowed by law.
All advances made by the Trust Company to the borrower hereunder and all
payments made to the Trust Company on account of principal hereof shall be noted
by the Trust Company on its books and records. The amount shown on the books and
records of the Trust Company shall be conclusive evidence of the amount of the
Borrower's obligations to the Trust Company under this Note.
The Term "Liabilities" herein means this Note and any and all
indebtedness, obligations and liabilities of any kind, now or hereafter existing
of the Borrower to the Trust Company or in which the Trust Company has any
interest, irrespective of whether any such indebtedness, obligation or liability
arose directly between the Borrower and the Trust Company or was acquired by the
Trust Company from a third party or is absolute or contingent, due or not due,
joint and/or several, liquidated or unliquidated or arising from contract
(including any endorsement or guaranty), tort or by operation of law.
"Collateral" means the following property (except to the extent that the Trust
Company has agreed in writing that any specified deposit account or other
property shall not be subject to unrelated liabilities of the Borrower): (a) the
balance of every deposit account, now or hereafter existing; (b) all money,
instruments, securities, documents, chattel paper, credits, claims, demands and
any other property, rights and interests of the Borrower of any kind, tangible
or intangible, which shall at the time in question be in any account at the
Trust Company or otherwise in the possession, custody or control of the Trust
Company or anyone acting on its behalf for any purpose; and (c) the proceeds,
products and accessions of and to, and any property received in exchange for,
any of the foregoing. The Trust Company shall be deemed to have possession of
any property in transit to or set apart or held for it or any of its agents,
associates or correspondents.
As security for the Liabilities, the Borrower pledges to the Trust Company
all of the Collateral and grants to the Trust Company a security interest in and
a general continuing lien upon the Collateral. The Borrower shall deliver to the
Trust Company in negotiable form, forthwith upon receipt thereof, all property
(other than ordinary cash dividends or interest) received by the Borrower by
reason of its ownership of any of the Collateral. Property so required to be
delivered shall include but not be limited to securities received by reason of
stock dividends or stock splits.
The Trust Company may at any time and from time to time, at its discretion
and without notice to the Borrower: (a) transfer any Collateral to its own name
or the name of its nominee; (b) in the name of the Trust Company or the
Borrower: (i) demand, sue for, collect and receive any money, securities or
other property (including principal, premium, interest, dividends or other
income, stock dividends and rights to subscribe) at any time due, payable or
receivable on account of or in exchange for any Collateral, or (ii) in
connection with a reorganization, recapitalization or other readjustment or
otherwise, make any compromise or settlement with respect to or extend the time
of payment of or otherwise amend the terms of any Collateral, arrange for the
payment of any Collateral in installments, exchange or release any Collateral,
or deposit any Collateral with a committee or depositary, all on such terms as
the Trust Company may determine; or (c) take any other action necessary or
appropriate in connection with the custody or preservation of the Collateral,
all without notice, without discharging any of the Liabilities and without
incurring any liability to the Borrower except to account for property actually
received by the Trust Company. The Trust Company may apply toward the payment of
the Liabilities, or continue to hold as Collateral, any cash received from or
with respect to any Collateral.
The Trust Company shall have no obligations with respect to Collateral
except to use reasonable care in the custody and preservation thereof to the
extent required by law. The Borrower, and not the Trust Company, shall be
obligated to give any notice or take any other steps necessary to preserve
rights against any prior party to any instrument.
Upon non-payment of any of the Liabilities when due (whether by
acceleration or otherwise), the Trust Company, at any time thereafter, may vote
any securities forming part of the Collateral and shall further have and may
exercise with respect to the Collateral all other rights and remedies available
to it under law, including but not limited to those given, allowed or permitted
to a secured party by or under the Uniform Commercial Code. The Trust Company
shall have the sole right to determine the order in which Liabilities shall be
deemed discharged by the application of any Collateral or any amount realized on
any Collateral. Any requirement of reasonable notice imposed by law shall be
deemed met if such notice is in writing and is mailed, telegraphed or hand
delivered to the Borrower at least three business days prior to the sale,
disposition or other event giving rise to such notice requirement.
Notwithstanding the realization by the Trust Company upon all of the Collateral,
unless the Trust Company has proposed that it retain the Collateral in
satisfaction of the Liabilities and no written objection has been made thereto
within the time specified in any applicable section of the Uniform Commercial
Code, the Borrower shall continue to be liable for any balance of the
Liabilities (including interest to the date of payment) which shall thereafter
remain unpaid.
The Borrower shall pay all expenses (including attorneys' fees and other
legal expenses) incurred by the Trust Company in connection with: (a) the
enforcement of any of the provisions of this Note or any of the Liabilities, (b)
any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement of, any Collateral; or (c) the custody or preservation
of the Collateral. Any such expense incurred by the Trust Company shall be
deemed a part of the Liabilities for all purposes of this Note.
The rights and remedies given hereby are in addition to all others however
arising, but it is not intended that any right or remedy be exercised in any
jurisdiction in which such exercise would be prohibited by law. No action,
failure to act or knowledge of the Trust Company shall be deemed to constitute a
waiver of any power, right or remedy hereunder, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the exercise of any
other power, right or remedy. This Note shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against which such amendment or
waiver is sought to be charged. This Note shall supercede any inconsistent
provisions of any custody agreement or investment management agreement with the
Trust Company, whether heretofore or hereafter executed, except any provision of
any such agreement by which the Trust Company waives or limits its right to
proceed against property deposited thereunder in connection with the
satisfaction of unrelated liabilities of the Borrower.
The Borrower hereby waives presentment, demand for payment, protest,
notice of protest and notice of dishonor of this Note and any instruments
included in the Liabilities or the Collateral, and all other notices and demands
whatsoever. Interest upon any Liabilities unpaid hereunder when due shall be at
the rate payable on the indebtedness evidenced by this instrument.
Notwithstanding anything herein contained to the contrary, the Trust Company
shall not be entitled to collect or retain interest hereunder in excess of the
maximum amount permitted under any applicable law. The Borrower and the Trust
Company, in any litigation arising under this Note in which they shall be
adverse parties, waive trial by jury.
Any demand or notice to the Borrower shall, unless otherwise expressly
provided herein, be deemed duly made or given if made or given to the Borrower
(or, if the Borrower is a corporation or partnership, to any officer or partner)
by telephone, or in a writing delivered by hand to or telegraphed or mailed by
ordinary mail to the Borrower at the address indicated below or at such other
address as the Borrower may specify to the Trust Company in writing. The
Borrower shall give the Trust Company such information about the Borrower's
financial affairs as the Trust Company may request from time to time.
The Trust Company may transfer this Note and, in connection therewith, any
part or all of the Collateral. The transferee shall thereupon succeed to all the
Trust Company's rights hereunder and with respect to the Collateral so
transferred. Thereafter the Trust Company shall have no obligation to the
Borrower with respect to the Collateral or under this Note. The Trust Company
shall, however, retain all rights and powers with respect to Collateral not
transferred. Every agent or nominee of the Trust Company shall have the benefits
of this Note as if named herein and may exercise all the rights and powers given
to the Trust Company hereunder.
If there be more than one signatory to this Note, they shall be jointly
and severally liable hereunder, and the term "Borrower" shall refer to any or
all of the undersigned and the provisions hereof regarding the Liabilities or
Collateral shall apply to any of the Liabilities or any Collateral of any or all
of them. This Note shall be binding upon the heirs, legal representatives,
successors and assigns of each of the undersigned. If a partnership is a party
hereto, this Note shall continue in force notwithstanding any change (through
death, retirement or otherwise) in such partnership. This Note is to be
construed according to and the rights of the parties hereunder are to be
governed by the laws of the State of New York. Any litigation arising out of or
relating to this Note shall be conducted solely and exclusively in any federal
or state court located in the City of New York having jurisdiction over the
subject matter hereof, and to the extent permitted by law all parties hereto
consent to such jurisdiction and venue. The term "Uniform Commercial Code"
whenever used in this Note means the Uniform Commercial Code of the State of New
York.
CoreCare Systems, Inc.
- -------------------------------------- ----------------------------------
(Signature) (Signature)
By: , Title:
Address:____________________________ Address:________________________________
____________________________________ ________________________________
Date:_______________________________ Date:___________________________________
EXHIBIT 6.8
SECURITY AGREEMENT
SECURITY AGREEMENT made this 30th day of June, 1995, by and among:
CORECARE ACQUISITION, INC. - III and CORECARE ACQUISITION,
INC. - IV, having addresses at 933 Washington Avenue, Suite 1-C,
Green Brook, New Jersey 08812, (collectively the "Debtor").
and
ANTHONY TODARO AND MARLENE TODARO, having an address at 517 Ludlow
Station Road, Asbury, New Jersey (collectively the "Secured
Parties").
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger dated the date hereof
among Debtor, Secured Parties, CoreCare Systems, Inc. ("CoreCare"), American
Institute for Behavioral Management, Inc. ("AIBCI") and Bio Diagnostic
Technologies, Inc. ("Bio") (the "Plan of Merger") AIBCI and Bio are merging with
and into the Debtor; and
WHEREAS, pursuant to a Stock Acquisition Agreement dated the date hereof
by and among CoreCare and the Secured Parties (the "Stock Acquisition
Agreement"), CoreCare has purchased all of the capital stock of Penn
Interpersonal Communications, Inc. ("Penn") owned by the Secured Parties (the
"Stock"); and
WHEREAS, pursuant to the Stock Acquisition Agreement and the Plan of
Merger, CoreCare has concurrently herewith executed and delivered its promissory
note in the principal amount of $300,000.00 (the "Note"), a Registration Rights
Agreement, Stock Pledge Agreements pledging all of the capital stock of Debtor
and Penn (the "Stock Pledge Agreements"), and a guaranty (the "CoreCare
Guaranty") of certain of the obligations of Debtor and Penn; and
WHEREAS, pursuant to the Plan of Merger CoreCare Acquisition, Inc. - III
("Acq. III") is executing and delivering employment agreements between Acq. III
and each of Secured Parties, a lease between Acq. III and Marlene Todaro (the
"Employment Agreements") and Debtors are executing and delivering a guaranty of
certain obligations of CoreCare (the "Guaranty"); and
WHEREAS, as a condition of entering into the Plan of Merger, and as
security for the payment and satisfaction of all of the obligations of Debtor,
CoreCare and Penn under the Stock Acquisition Agreement, the Plan of Merger, the
Registration Rights Agreement, the Stock Pledge Agreements, the Lease, the
Employment Agreements, the Note, the CoreCare Guaranty and the Guaranty
(collectively, the "Agreements") and all other agreements and instruments
executed in connection with the Plan of Merger and the Stock Acquisition
Agreement (the obligations under the Agreements and under the other agreements
and instruments executed in connection therewith are collectively referred to as
the "Obligations"), the Secured Parties have required the Debtor to enter into
this Security Agreement; and
WHEREAS, in order to secure the prompt and complete payment and
performance when due of the Obligations, the Debtor has agreed to enter into
this Security Agreement for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
1. CREATION OF SECURITY INTEREST - The Debtor hereby assigns to the
Secured Parties, and mortgages and grants to each Secured Party a security
interest in the collateral described in paragraph 2 (the "Collateral") hereof to
secure payment and performance of the Obligations.
2. COLLATERAL - The Collateral under this Security Agreement is the
Debtor's personal property and goods, now owned and hereafter acquired, whether
or not in possession of Debtor and wheresoever situated or located, including
but not limited to receivables, furniture, fixtures and equipment used or
acquired for use in or arising from the Debtor's business, further described as
follows:
(a) Equipment and Fixtures - All right, title and interest of the
Debtor in and to equipment and fixtures, including but not limited to all
machinery, equipment, furniture, furnishings, and fixtures, materials and
supplies, and all parts, additions, replacement parts and attachments therefor
and all installations, apparatus, appliances, and accessories used in connection
therewith and all other items of like type and kind, presently owned, acquired
contemporaneously herewith and arising or acquired subsequent hereto, and
wherever located, and all proceeds thereof.
(b) Receivables - All right, title and interest of the Debtor in and
to accounts, contract rights, chattel paper, negotiable and non-negotiable
instruments and agreements, and general intangibles evidencing and/or securing
any monetary obligation presently existing and hereafter arising (hereinafter
called "Receivables").
(c) General Intangibles - The Debtor's intangibles, of whatsoever
kind or nature, including, but not limited to, trade secrets, files, client
lists, trade names, good will, licenses, contracts, agreements, rights and
leases, patents, copyrights, and all other items of like type and kind,
presently existing and hereafter arising or acquired, by way of replacement,
renewal, substitution, addition or otherwise, and all additions and accessions
thereto and all proceeds thereof.
(d) Cash, Etc. - All Debtor's right, title and interest in and to
all cash, securities, notes, deposit accounts and similar items presently
existing or hereafter acquired or existing.
3. GENERAL OBLIGATIONS OF THE DEBTOR - The Debtor hereby covenants,
represents and warrants to the Secured Parties that except as may be provided
under the terms of the Plan of Merger:
(a) The Collateral will be solely used for and in connection with
the operation and maintenance of the business of the Debtor in the ordinary
course.
(b) The Collateral will not be misused, abused, wasted or allowed to
deteriorate, but shall be kept in good condition and repair, reasonable wear and
tear from its sole use above excepted; and all costs and expenses incurred in
the repair, maintenance and preservation of such Collateral shall be paid, sold
by the Debtor;
(c) The Debtor shall, at its sole cost and expense, defend its
right, title and interest in and to the Collateral, and defend the Collateral
against any claims of infringement and all other claims or demands of any other
party and all other liabilities of any nature whatsoever.
(d) The Collateral shall be insured at all times by a responsible
insurance company in an amount reasonably acceptable to the Secured Parties and
against all reasonably expected risks to which it may be exposed, including fire
and extended coverage and those which Secured Parties may reasonably designate.
The policies shall be reasonably satisfactory to Secured Parties and payable to
Secured Parties and the Debtor as their interest appear, providing ten (10)
days' minimum advance cancellation notice to Secured Parties and with duplicate
policies deposited with Secured parties; and the parties agree that the proceeds
of such insurance shall be applied to repair or replace such Collateral.
(e) The Collateral shall be kept and remain in the Debtor's
possession and control at the Debtor's business premises or such other places
where it may be moved in the ordinary course of the Debtor's business or in
connection with its maintenance.
(f) The Debtor shall duly and promptly pay and discharge or cause to
be paid and discharged: (i) all taxes, assessments and governmental charges or
levies upon or against it or its profits, income, properties or assets; and (ii)
all lawful claims, whether for labor, materials, supplies, services or any other
thing which might or could, if unpaid, become a lien or charge upon the
properties or assets of the Debtor, unless and to the extent only that the same
are being diligently contested in good faith by appropriate proceedings.
(g) The Debtor shall keep and maintain the Collateral, and each part
thereof, free and clear of any assignment, security interest, mortgage, pledge,
lien, interest, adverse claim or other encumbrance, except for purchase money
security interests, as defined in the New Jersey Uniform Commercial Code and
except for liens in existence filed against any constituents or predecessors of
Debtor prior to Closing of the Plan of Merger.
(h) The Collateral, or any part thereof, will not be sold, leased,
licensed, assigned, conveyed, transferred, disposed of or become subjected to
any subsequent interest of any party created or suffered by the Debtor,
voluntarily or involuntarily, except in the ordinary course of the Debtor's
business or except as expressly authorized in writing by the Secured Parties.
(i) The Debtor, at its sole cost and expense, shall duly execute and
deliver, or cause to be duly executed and delivered, financing statements, and
such instruments and documents, and do and cause to be done such acts and
things, as the Secured Parties may at any time reasonably request, to enforce,
perfect and protect the security interest of Secured Parties in the Collateral
as herein provided and their rights and remedies with respect to the Collateral.
The Debtor will deliver, within ten (10) days from the date the Secured Parties
make a separate written request therefore, any and all certificates of title
with respect to the Collateral, and hereby authorize the Secured Parties to
cause a statement of the Secured Parties' interest to be noted as a lien or
encumbrance on such certificates.
(j) The obligations, liabilities, and indebtedness of the Debtor to
the Secured parties hereunder shall not be released, discharged or impaired in
any manner or to any extent if the Secured Parties, at any time or in any manner
(i) renew, extend, modify, change or waive the time of payment and/or the
manner, place or terms of payment of all or any part of the Obligations or any
renewal of any thereof, (ii) make any exchange, release, substitution, addition,
surrender, settlement or compromise with respect to the Collateral, or the
Obligations, or any parties primarily or secondarily liable thereon, (iii)
subordinate the Obligations and/or collateral to any other indebtedness of the
Debtor or security therefor which may exist at any time hereafter, or (iv)
substitute, impair, exchange or release any collateral security for the
Obligations.
(k) All information supplied and all statements, facts and
representations made by the Debtor to Secured Parties pursuant to this Security
Agreement, are true and correct in every material respect, an there are no facts
known to the Debtor which would impair the validity or render less valuable the
obligations of the Debtor to Secured Parties set forth in this Security
Agreement.
(l) The Debtor shall keep and maintain at all times true and
complete books, records and accounts in which complete, true and correct entries
shall be made of the Collateral and the Debtor's transactions, in accordance
with generally accepted accounting principles.
(m) The Debtor shall immediately notify the Secured Parties of any
act, condition or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default hereunder.
(n) The Debtor shall pay and reimburse the Secured Parties for all
reasonable costs and expenses (including reasonable attorneys' fees, legal
expenses, and advances and expenditures for removal of any encumbrance from the
Collateral, for curing, correcting or remedying any Event of Default hereunder,
for insurance and for the protection, preservation, maintenance or repair of the
collateral) incurred by the Secured Parties in connection with the exercise by
the Secured Parties of any of their rights and remedies under this Security
Agreement, or in enforcing, perfecting or protecting their interests under this
Security Agreement.
4. EVENT OF DEFAULT - The occurrence of any of the following events
("Events of Default") shall constitute a default on the part of the Debtor
hereunder:
(a) Failure of the Debtor, Penn or CoreCare to observe or perform
any of the Obligations;
(b) Occurrence of an event of default under the Obligations.
(c) Notwithstanding the foregoing, no act or omission ordinarily
giving rise to an event of Default hereunder shall be deemed an Event of Default
if such act or omission occurred as a result of the acts of omissions of the
Secured Parties in their capacities as officers of the Debtor.
5. SECURED PARTIES' RIGHTS AND REMEDIES - Upon the occurrence of an Event
of Default, in addition to all other rights and remedies provided hereunder, the
Secured Parties shall have and may exercise all of the rights and remedies
provided by the Uniform Commercial Code in effect in New Jersey at the date of
default, and any other applicable law. In conjunction with, in addition to, or
in substitution therefor, the Secured Parties shall have and may exercise the
following rights and remedies:
(a) The Secured Parties may enter upon the Debtor's premises to take
possession of, assemble and collect the Collateral.
(b) The Secured Parties may require the Debtor to assemble the
Collateral and make it available to Secured Parties at any reasonable place
Secured Parties designate, to allow the Secured parties to take possession of or
dispose of such Collateral.
(c) The Secured Parties may, in their sole discretion, sell, assign
and deliver all or part of the Collateral at public or private sale upon notice
or advertisement, and bid and become a purchaser at any such sale. If notice to
the Debtor is required, written notice mailed to the Debtor at least ten (10)
days prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made, shall constitute
reasonable notice. Secured Parties shall be entitled to the proceeds. The
Secured Parties may apply the proceeds of any disposition of the Collateral
available for satisfaction of the Obligations in the order, amounts, and manner
which Secured Parties may determine in their sole discretion.
(d) The Secured Parties may require the Debtor not to modify any
agreements giving rise to the Receivables nor to bring suit to enforce payment
of any Receivable without giving Secured Parties five (5) days' advance written
notice thereof or without first having received written consent to do so from
the Secured Parties. (e) The Secured Parties may declare any or all of the
Obligations immediately due and payable, without presentment, protest, demand or
notice of any kind, all of which are hereby expressly waived.
(f) Effective upon the occurrence of an Event of Default, Debtor
hereby designates and appoints the Secured Parties and their designees as
attorney-in-fact of the Debtor, irrevocably and with power of substitution, with
authority to receive, open and dispose of all mail addressed to the Debtor; to
notify the postal authorities to change the address for delivery of mail
addressed to Debtor to such other address for delivery of mail addressed to
Debtor to such other address as the Secured Parties designate; to endorse
Debtor's name on amy notes, acceptances, checks, drafts, money orders,
instruments or other evidences of payment or proceeds of the Collateral that may
come into Debtor's possession; to sign Debtor's name on any invoices, documents,
drafts against and notices to account debtors or other obligors of Debtor's and
requests for verification of accounts; to execute proofs of claim and loss; to
execute any endorsements, assignments or other instruments of conveyance or
transfer; to adjust and compromise any claims under insurance policies; to
execute releases; and to perform all other acts necessary and advisable, in
Secured Parties' sole discretion, to carry out and enforce its rights under this
Agreement. All acts of said attorney or designee are hereby ratified and
approved by Debtor and said attorney or designee shall not be liable for any
acts of commission or omission nor for any error of judgment or mistake of fact
or law. In the absence or unavailability of either Secured Party to act, the
other Secured Party, acting alone, may exercise the rights of the Secured
Parties under this subparagraph 5(f). This power of attorney is coupled with an
interest and is irrevocable so long as any of the Obligations remain unpaid or
unperformed.
(g) If an Event of Default occurs, the Debtor agrees to pay and be
liable for any and all expenses, including reasonable attorney's fees and court
costs, if any, incurred by the Secured Parties in exercising, enforcing or
consulting with counsel concerning any of their rights hereunder or under
applicable law and such amounts shall be deemed additional Obligations
hereunder.
6. SECURED PARTIES' OBLIGATIONS AND AGREEMENTS
(a) The Secured Parties agree that they must at all times act in
good faith in enforcing their rights hereunder.
(b) Secured Parties agree that after all amounts which may become
due under the Note have been paid in full, notwithstanding anything to the
contrary contained herein, Debtor may grant a security interest in and to any or
all of the Collateral to any bank or other lender which actually provides funds
(including a line of credit or letter of credit) to Debtor or CoreCare and
Secured Parties agree to subordinate the security interest in the Collateral
granted herein to the interest of such lender.
(c) Notwithstanding anything to the contrary contained herein,
Secured Parties agree that should Acq. III be required to pay sums with respect
to potential federal employment withholding tax liabilities pursuant to
paragraph (f) of Section 8 of the Agreement and Plan of Merger, the Company may
grant a security interest to any lender which provides funds to pay such
liability, and Secured Parties agree to subordinate the security interest in the
Collateral granted herein to the lien of such provider of funds up to the amount
borrowed to pay such liabilities plus interest payable on such loan and only
until such funds have been repaid.
(d) Unless an Event of Default shall have occurred and be continuing
and if all payments which may become due under the Note have been paid, this
Security Agreement shall terminate on the fifth anniversary hereof.
7. MISCELLANEOUS
(a) Neither any failure nor any delay on the part of the Secured
Parties in exercising any right, power or remedy hereunder or under applicable
law shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) This Security Agreement shall be binding upon, and shall inure
to the benefit of, the respective heirs, executors, administrators, successors
and assigns of the parties hereto. No Secured Party may assign its rights
hereunder without the prior consent of the Debtor, which consent shall not be
unreasonably withheld; provided, however, that nothing herein shall prohibit any
Secured Party from assigning his/her rights under this Security Agreement to any
other Secured Party.
(c) The obligations of the Debtor hereunder shall not be revoked,
impaired, or affected in any manner or to any extent by the death, dissolution
or change in the form or status of the Debtor, including, but not limited to, a
merger of the Debtor into another entity, a consolidation of the Debtor into a
new entity, or any other change in the form of the ownership of the business
conducted by the Debtor, or by the revocation or release of any liability
hereunder by or against any or all parties hereto.
(d) Each of the foregoing agreements, covenants and warranties on
the part of the Debtor shall be deemed and construed to be on a continuing basis
and shall survive the execution and delivery of this Security Agreement.
(e) All notices given hereunder shall be in writing and shall be
deemed to have been given when hand delivered against receipt or three (3) days
after deposit in the United States mail, as registered or certified mail, return
receipt requested, postage prepaid, addressed to the parties at their respective
address set forth on the first page hereof or such changed address as shall be
given by notice as provided herein. Copies shall be sent as follows:
(A) If to Debtor:
Rose DiOttavio
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, Pennsylvania 19118
With a copy to:
Gary Miller, Esq.
Connolly, Epstein, Chicco, Foxman,
Engelmyer & Ewing
1515 Market Street, Ninth Floor
Philadelphia, Pennsylvania 19102-1909
(B) If to Secured Parties:
Anthony and Marlene Todaro
517 Ludlow Station Road
Asbury, New Jersey
With a copy to:
Mark K. Lipton, Esq.
Podvey, Sachs, Meanor, Catenacci,
Hildner & Cocoziello
One Riverfront Plaza
Newark, New Jersey 07102-5947
(f) This Security Agreement may not be amended, modified or
terminated except in writing executed by all the parties hereto, and no waiver
of any provision or consent hereunder shall be effective unless executed in a
writing by the waiving or consenting party.
(g) The provisions of this Security Agreement shall be deemed
severable, so that if any provision hereof is declared invalid under the laws of
any State where it is in effect, or of the United States, all other provisions
of this Security Agreement shall continue in full force and effect.
(h) This Security Agreement shall be construed in accordance with
and governed by the internal laws of the State of New Jersey.
(i) This Agreement may be executed in any number of counterparts
each of which shall constitute an original and all of which together shall
constitute one agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Security Agreement the day and year
first above written.
ATTEST: CORECARE ACQUISITION,
INC. - III
/s/ By: /s/ Rose S. DiOttavio
- ----------------------------- ----------------------------------
Secretary
CORECARE ACQUISITION,
INC. - IV
/s/ By: /s/ Rose S. DiOttavio
- ----------------------------- ----------------------------------
Secretary
WITNESS:
/s/ Anthony Todaro
----------------------------------
WITNESS:
/s/ Marlene Todaro
----------------------------------
EXHIBIT 6.9
SECURITY AGREEMENT
SECURITY AGREEMENT made this 30th day of June, 1995, by and among:
PENN INTERPERSONAL COMMUNICATIONS, INC., having an address at 116
Northampton St., Easton, Pennsylvania 18042 (the "Debtor").
and
ANTHONY TODARO AND MARLENE TODARO, having an address at 517 Ludlow
Station Road, Asbury, New Jersey (collectively the "Secured
Parties").
RECITALS
WHEREAS, pursuant to a Stock Acquisition Agreement dated the date hereof
among Debtor, CoreCare Systems, Inc. "CoreCare" and the Secured Parties (the
"Stock Acquisition Agreement") CoreCare has purchased all of the capital stock
of Debtor owned by the Secured Parties (the "Stock"); and
WHEREAS, in connection with the Stock Acquisition Agreement, and an
Agreement and Plan of Merger among CoreCare Acquisition, Inc. - III and CoreCare
Acquisition, Inc. - IV (collectively, the "Acquisition Companies"), CoreCare,
the Secured Parties and certain other corporations wholly owned by Secured
Parties (the "Plan of Merger"), CoreCare has concurrently herewith executed and
delivered its promissory note (the "Note") in the principal amount of
$300,000.00, a Registration Rights Agreement, a Guaranty (the "CoreCare
Guaranty") of certain of the obligations of Debtor and the Acquisition Companies
to Secured Parties (including the obligations of CoreCare Acquisition, Inc. -
III ("Acquisition III") under Employment Agreements dated as of even date hereof
between Acquisition - III and the Secured Parties (the "Employment Agreements")
and a lease between Acquisition III and Marlene Todaro (the "Lease")), and Stock
Pledge Agreements pledging all of the capital stock of Debtor and the
Acquisition Companies; and
WHEREAS, as a condition of entering into the Stock Acquisition Agreement,
and as security for the payment and satisfaction of all of the obligations of
Debtor, CoreCare and the Acquisition Companies under the Stock Acquisition
Agreement, the Plan of Merger, the Registration Rights Agreement, the Stock
Pledge Agreements, the Lease, the Employment Agreements, the Note and the
CoreCare Guaranty (collectively the "Agreements") and all other agreements and
instruments executed in connection with the Plan of Merger and the Stock
Acquisition Agreement (the obligations under the Agreements and under the other
agreements and instruments executed in connection therewith collectively
referred to as the "Obligations"), the Secured Parties have required the Debtor
to enter into this Security Agreement; and
WHEREAS, in order to secure the prompt and complete payment and
performance when due of the Obligations, the Debtor has agreed to enter into
this Security Agreement for the benefit of the Secured Parties.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
1. CREATION OF SECURITY INTEREST - The Debtor hereby assigns to the
Secured Parties, and mortgages and grants to each Secured Party a security
interest in the collateral described in paragraph 2 (the "Collateral") hereof to
secure payment and performance of the Obligations.
2. COLLATERAL - The Collateral under this Security Agreement is the
Debtor's personal property and goods, now owned and hereafter acquired, whether
or not in possession of Debtor and wheresoever situated or located, including
but not limited to receivables, furniture, fixtures and equipment used or
acquired for use in or arising from the Debtor's business, further described as
follows:
(a) Equipment and Fixtures - All right, title and interest of the
Debtor in and to equipment and fixtures, including but not limited to all
machinery, equipment, furniture, furnishings, and fixtures, materials and
supplies, and all parts, additions, replacement parts and attachments therefor
and all installations, apparatus, appliances, and accessories used in connection
therewith and all other items of like type and kind, presently owned, acquired
contemporaneously herewith and arising or acquired subsequent hereto, and
wherever located, and all proceeds thereof.
(b) Receivables - All right, title and interest of the Debtor in and
to accounts, contract rights, chattel paper, negotiable and non-negotiable
instruments and agreements, and general intangibles evidencing and/or securing
any monetary obligation presently existing and hereafter arising (hereinafter
called "Receivables").
(c) General Intangibles - The Debtor's intangibles, of whatsoever
kind or nature, including, but not limited to, trade secrets, files, client
lists, trade names, good will, licenses, contracts, agreements, rights and
leases, patents, copyrights, and all other items of like type and kind,
presently existing and hereafter arising or acquired, by way of replacement,
renewal, substitution, addition or otherwise, and all additions and accessions
thereto and all proceeds thereof.
(d) Cash, Etc. - All Debtor's right, title and interest in and to
all cash, securities, notes, deposit accounts and similar items presently
existing or hereafter acquired or existing.
3. GENERAL OBLIGATIONS OF THE DEBTOR - The Debtor hereby covenants,
represents and warrants to the Secured Parties that except as may be provided
under the terms of the Stock Purchase Agreement:
(a) The Collateral will be solely used for and in connection with
the operation and maintenance of the business of the Debtor in the ordinary
course.
(b) The Collateral will not be misused, abused, wasted or allowed to
deteriorate, but shall be kept in good condition and repair, reasonable wear and
tear from its sole use above excepted; and all costs and expenses incurred in
the repair, maintenance and preservation of such Collateral shall be paid,
solely by the Debtor;
(c) The Debtor shall, at its sole cost and expense, defend its
right, title and interest in and to the Collateral, and defend the Collateral
against any claims of infringement and all other claims or demands of any other
party and all other liabilities of any nature whatsoever.
(d) The Collateral shall be insured at all times by a responsible
insurance company in an amount reasonably acceptable to the Secured Parties and
against all reasonably expected risks to which it may be exposed, including fire
and extended coverage and those which Secured Parties may reasonably designate.
The policies shall be reasonably satisfactory to Secured Parties and payable to
Secured Parties and the Debtor as their interest appear, providing ten (10)
days' minimum advance cancellation notice to Secured Parties and with duplicate
policies deposited with Secured parties; and the parties agree that the proceeds
of such insurance shall be applied to repair or replace such Collateral.
(e) The Collateral shall be kept and remain in the Debtor's
possession and control at the Debtor's business premises or such other places
where it may be moved in the ordinary course of the Debtor's business or in
connection with its maintenance.
(f) The Debtor shall duly and promptly pay and discharge or cause to
be paid and discharged: (i) all taxes, assessments and governmental charges or
levies upon or against it or its profits, income, properties or assets; and (ii)
all lawful claims, whether for labor, materials, supplies, services or any other
thing which might or could, if unpaid, become a lien or charge upon the
properties or assets of the Debtor, unless and to the extent only that the same
are being diligently contested in good faith by appropriate proceedings.
(g) The Debtor shall keep and maintain the Collateral, and each part
thereof, free and clear of any assignment, security interest, mortgage, pledge,
lien, interest, adverse claim or other encumbrance, except for purchase money
security interests, as defined in the New Jersey Uniform Commercial Code and
except for liens in existence prior to the Closing of the Stock Acquisition
Agreement.
(h) The Collateral, or any part thereof, will not be sold, leased,
licensed, assigned, conveyed, transferred, disposed of or become subjected to
any subsequent interest of any party created or suffered by the Debtor,
voluntarily or involuntarily, except in the ordinary course of the Debtor's
business or except as expressly authorized in writing by the Secured Parties.
(i) The Debtor, at its sole cost and expense, shall duly execute and
deliver, or cause to be duly executed and delivered, financing statements, and
such instruments and documents, and do and cause to be done such acts and
things, as the Secured Parties may at any time reasonably request, to enforce,
perfect and protect the security interest of Secured Parties in the Collateral
as herein provided and their rights and remedies with respect to the Collateral.
The Debtor will deliver, within ten (10) days from the date the Secured Parties
make a separate written request therefore, any and all certificates of title
with respect to the Collateral, and hereby authorize the Secured Parties to
cause a statement of the Secured Parties' interest to be noted as a lien or
encumbrance on such certificates.
(j) The obligations, liabilities, and indebtedness of the Debtor to
the Secured parties hereunder shall not be released, discharged or impaired in
any manner or to any extent if the Secured Parties, at any time or in any manner
(i) renew, extend, modify, change or waive the time of payment and/or the
manner, place or terms of payment of all or any part of the Obligations or any
renewal of any thereof, (ii) make any exchange, release, substitution, addition,
surrender, settlement or compromise with respect to the Collateral, or the
Obligations, or any parties primarily or secondarily liable thereon, (iii)
subordinate the Obligations and/or collateral to any other indebtedness of the
Debtor or security therefor which may exist at any time hereafter, or (iv)
substitute, impair, exchange or release any collateral security for the
Obligations.
(k) All information supplied and all statements, facts and
representations made by the Debtor to Secured Parties pursuant to this Security
Agreement, are true and correct in every material respect, an there are no facts
known to the Debtor which would impair the validity or render less valuable the
obligations of the Debtor to Secured Parties set forth in this Security
Agreement.
(l) The Debtor shall keep and maintain at all times true and
complete books, records and accounts in which complete, true and correct entries
shall be made of the Collateral and the Debtor's transactions, in accordance
with generally accepted accounting principles.
(m) The Debtor shall immediately notify the Secured Parties of any
act, condition or event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default hereunder.
(n) The Debtor shall pay and reimburse the Secured Parties for all
reasonable costs and expenses (including reasonable attorneys' fees, legal
expenses, and advances and expenditures for removal of any encumbrance from the
Collateral, for curing, correcting or remedying any Event of Default hereunder,
for insurance and for the protection, preservation, maintenance or repair of the
collateral) incurred by the Secured Parties in connection with the exercise by
the Secured Parties of any of their rights and remedies under this Security
Agreement, or in enforcing, perfecting or protecting their interests under this
Security Agreement.
4. EVENT OF DEFAULT - The occurrence of any of the following events
("Events of Default") shall constitute a default on the part of the Debtor
hereunder:
(a) Failure of the Debtor, the Acquisition Companies or CoreCare to
observe or perform any of the Obligations;
(b) Occurrence of an event of default under the Obligations.
(c) Notwithstanding the foregoing, no act or omission ordinarily
giving rise to an event of Default hereunder shall be deemed an Event of Default
if such act or omission occurred as a result of the acts of omissions of the
Secured Parties in their capacities as officers of the Debtor.
5. SECURED PARTIES' RIGHTS AND REMEDIES - Upon the occurrence of an Event
of Default, in addition to all other rights and remedies provided hereunder, the
Secured Parties shall have and may exercise all of the rights and remedies
provided by the Uniform Commercial Code in effect in New Jersey at the date of
default, and any other applicable law. In conjunction with, in addition to, or
in substitution therefor, the Secured Parties shall have and may exercise the
following rights and remedies:
(a) The Secured Parties may enter upon the Debtor's premises to take
possession of, assemble and collect the Collateral.
(b) The Secured Parties may require the Debtor to assemble the
Collateral and make it available to Secured Parties at any reasonable place
Secured Parties designate, to allow the Secured parties to take possession of or
dispose of such Collateral.
(c) The Secured Parties may, in their sole discretion, sell, assign
and deliver all or part of the Collateral at public or private sale upon notice
or advertisement, and bid and become a purchaser at any such sale. If notice to
the Debtor is required, written notice mailed to the Debtor at least ten (10)
days prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made, shall constitute
reasonable notice. Secured Parties shall be entitled to the proceeds. The
Secured Parties may apply the proceeds of any disposition of the Collateral
available for satisfaction of the Obligations in the order, amounts, and manner
which Secured Parties may determine in their sole discretion.
(d) The Secured Parties may require the Debtor not to modify any
agreements giving rise to the Receivables nor to bring suit to enforce payment
of any Receivable without giving Secured Parties five (5) days' advance written
notice thereof or without first having received written consent to do so from
the Secured Parties.
(e) The Secured Parties may declare any or all of the Obligations
immediately due and payable, without presentment, protest, demand or notice of
any kind, all of which are hereby expressly waived.
(f) Effective upon the occurrence of an Event of Default, Debtor
hereby designates and appoints the Secured Parties and their designees as
attorney-in-fact of the Debtor, irrevocably and with power of substitution, with
authority to receive, open and dispose of all mail addressed to the Debtor; to
notify the postal authorities to change the address for delivery of mail
addressed to Debtor to such other address for delivery of mail addressed to
Debtor to such other address as the Secured Parties designate; to endorse
Debtor's name on amy notes, acceptances, checks, drafts, money orders,
instruments or other evidences of payment or proceeds of the Collateral that may
come into Debtor's possession; to sign Debtor's name on any invoices, documents,
drafts against and notices to account debtors or other obligors of Debtor's and
requests for verification of accounts; to execute proofs of claim and loss; to
execute any endorsements, assignments or other instruments of conveyance or
transfer; to adjust and compromise any claims under insurance policies; to
execute releases; and to perform all other acts necessary and advisable, in
Secured Parties' sole discretion, to carry out and enforce its rights under this
Agreement. All acts of said attorney or designee are hereby ratified and
approved by Debtor and said attorney or designee shall not be liable for any
acts of commission or omission nor for any error of judgment or mistake of fact
or law. In the absence or unavailability of either Secured Party to act, the
other Secured Party, acting alone, may exercise the rights of the Secured
Parties under this subparagraph 5(f). This power of attorney is coupled with an
interest and is irrevocable so long as any of the Obligations remain unpaid or
unperformed.
(g) If an Event of Default occurs, the Debtor agrees to pay and be
liable for any and all expenses, including reasonable attorney's fees and court
costs, if any, incurred by the Secured Parties in exercising, enforcing or
consulting with counsel concerning any of their rights hereunder or under
applicable law and such amounts shall be deemed additional Obligations
hereunder.
6. SECURED PARTIES' OBLIGATIONS AND AGREEMENTS
(a) The Secured Parties agree that they must at all times act in
good faith in enforcing their rights hereunder.
(b) Secured Parties agree that after all amounts which may become
due under the Note have been paid in full, notwithstanding anything to the
contrary contained herein, Debtor may grant a security interest in and to any or
all of the Collateral to any bank or other lender which actually provides funds
(including a line of credit or letter of credit) to Debtor or CoreCare and
Secured Parties agree to subordinate the security interest in the Collateral
granted herein to the interest of such lender.
(c) Notwithstanding anything to the contrary contained herein,
Secured Parties agree that should Acquisition - III be required to pay sums with
respect to potential federal employment withholding tax liabilities pursuant to
paragraph (f) of Section 8 of the Agreement and Plan of Merger, the Company may
grant a security interest to any lender which provides funds to pay such
liability, and Secured Parties agree to subordinate the security interest in the
Collateral granted herein to the lien of such provider of funds up to the amount
borrowed to pay such liabilities plus interest payable on such loan and only
until such funds have been repaid.
(d) Unless an Event of Default shall have occurred and be continuing
and if all payments which may become due under the Note have been paid, this
Security Agreement shall terminate on the fifth anniversary hereof.
7. MISCELLANEOUS
(a) Neither any failure nor any delay on the part of the Secured
Parties in exercising any right, power or remedy hereunder or under applicable
law shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) This Security Agreement shall be binding upon, and shall inure
to the benefit of, the respective heirs, executors, administrators, successors
and assigns of the parties hereto. No Secured Party may assign its rights
hereunder without the prior consent of the Debtor, which consent shall not be
unreasonably withheld; provided, however, that nothing herein shall prohibit any
Secured Party from assigning his/her rights under this Security Agreement to any
other Secured Party.
(c) The obligations of the Debtor hereunder shall not be revoked,
impaired, or affected in any manner or to any extent by the death, dissolution
or change in the form or status of the Debtor, including, but not limited to, a
merger of the Debtor into another entity, a consolidation of the Debtor into a
new entity, or any other change in the form of the ownership of the business
conducted by the Debtor, or by the revocation or release of any liability
hereunder by or against any or all parties hereto.
(d) Each of the foregoing agreements, covenants and warranties on
the part of the Debtor shall be deemed and construed to be on a continuing basis
and shall survive the execution and delivery of this Security Agreement.
(e) All notices given hereunder shall be in writing and shall be
deemed to have been given when hand delivered against receipt or three (3) days
after deposit in the United States mail, as registered or certified mail, return
receipt requested, postage prepaid, addressed to the parties at their respective
address set forth on the first page hereof or such changed address as shall be
given by notice as provided herein.
Copies shall be sent as follows:
(A) If to Debtor:
Rose DiOttavio
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, Pennsylvania 19118
With a copy to:
Gary Miller, Esq.
Connolly, Epstein, Chicco, Foxman,
Engelmyer & Ewing
1515 Market Street, Ninth Floor
Philadelphia, Pennsylvania 19102-1909
(B) If to Secured Parties:
Anthony and Marlene Todaro
517 Ludlow Station Road
Asbury, New Jersey
With a copy to:
Mark K. Lipton, Esq.
Podvey, Sachs, Meanor, Catenacci,
Hildner & Cocoziello
One Riverfront Plaza
Newark, New Jersey 07102-5947
(f) This Security Agreement may not be amended, modified or
terminated except in writing executed by all the parties hereto, and no waiver
of any provision or consent hereunder shall be effective unless executed in a
writing by the waiving or consenting party.
(g) The provisions of this Security Agreement shall be deemed
severable, so that if any provision hereof is declared invalid under the laws of
any State where it is in effect, or of the United States, all other provisions
of this Security Agreement shall continue in full force and effect.
(h) This Security Agreement shall be construed in accordance with
and governed by the internal laws of the State of New Jersey.
(i) This Agreement may be executed in any number of counterparts
each of which shall constitute an original and all of which together shall
constitute one agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed and delivered this Security Agreement the day and year
first above written.
PENN INTERPERSONAL
COMMUNICATIONS, INC.
/s/ Marlene Todaro By: /s/ Anthony Todaro
- ------------------------------ -----------------------------------
Secretary ANTHONY TODARO, President
/s/ Anthony Todaro
- ------------------------------ -----------------------------------
WITNESS: ANTHONY TODARO
/s/ Marlene Todaro
- ------------------------------ -----------------------------------
WITNESS: MARLENE TODARO
EXHIBIT 6.10
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, made this 30th day of June, 1995, by and
among CORECARE SYSTEMS, INC. having its offices located at 9425 Stenton Avenue,
Erdenheim, Pennsylvania 19038 (the "Purchaser"); MARLENE TODARO AND ANTHONY
TODARO, residing at 517 Ludlow Station Road, Asbury, New Jersey 08802
(collectively, the "Secured Party"); and PODVEY, SACHS, MEANOR, CATENACCI,
HILDNER & COCOZIELLO, A PROFESSIONAL CORPORATION, having offices at One
Riverfront Plaza, Newark, New Jersey 07102 (the "Escrow Agent").
W I T N E S S E T H :
WHEREAS, concurrently herewith, pursuant to a certain Agreement and
Plan of Merger, dated June 30, 1995 (the "Plan of Merger") among Purchaser,
Secured Party, American Institute for Behavioral Counseling, Inc. ("AIBC"),
Bio Diagnostic Technologies, Inc. ("Bio"), CoreCare Acquisition, Inc. - III
("CAI-III") and CoreCare Acquisition, Inc. - IV ("CAI-IV") AIBC shall be merged
with and into CAI-III and Bio shall be merged with and into CAI-IV.
WHEREAS, the Secured Party owns all of the outstanding shares of the
capital stock of AIBC and Bio, and pursuant to the Plan of Merger, such shares
will be cancelled and extinguished; and
WHEREAS, CAI-III and CAI-IV are wholly-owned subsidiaries of
Purchaser;
WHEREAS, concurrently herewith, pursuant to a Stock Purchase
Agreement between Purchaser and Secured Party dated June 30, 1995, Purchaser
shall purchase all of the outstanding shares of the capital stock of Penn
Interpersonal Communications, Inc. ("Penn") from Secured Party in consideration
of Purchaser's promissory note to Secured Party in the principal amount of
$300,000 (the "Note");
WHEREAS, concurrently herewith, pursuant to the Plan of Merger and
the Stock Purchase Agreement, Purchaser shall enter into a Guaranty pursuant to
which Purchaser shall guaranty all of the obligations of Penn, CAI-III and
CAI-IV under the Stock Purchase Agreement, the Plan of Merger, the Lease between
CAI-III and Marlene Todaro and the Employment Agreements between CAI-III and
each of Marlene Todaro and Anthony Todaro (the "Guaranty").
WHEREAS, the Plan of Merger and the Stock Purchase Agreement
requires that the obligations of Purchaser under the Note and the Guaranty
(collectively, the "Obligations") be secured by a pledge by the Purchaser of all
of the outstanding shares of capital stock of Penn (the "Pledged Stock").
NOW, THEREFORE, it is hereby agreed as follows:
1. Security
(A) As collateral security for the payment in full and
complete performance of the Obligations, the Purchaser does hereby pledge to the
Secured Party and creates a security interest in and to all of the Purchaser's
right, title and interest in and to the Pledged Stock together with all
dividends or other payments, distributions or proceeds (whether of cash,
securities or other property) upon or in respect of the Pledged Stock and all
property receivable in substitution or exchange for the Pledged Stock, all of
which the Purchaser hereby covenants and agrees to cause to be paid or delivered
directly upon its issuance or distribution, together with executed stock or
other appropriate powers to the Escrow Agent to be held in pledge in accordance
with the terms of this Agreement, all of which shall be included within the
definition of Pledged Stock for purposes of this Agreement. Notwithstanding the
foregoing, if there is a distribution of cash described in the immediately
preceding sentence as the result of the occurrence of any event described in the
Obligations requiring a mandatory prepayment in full thereof, such distribution
up to the amount required to effect such prepayment shall be made directly to
the Secured Party as payment in full of the Note and the Secured Party shall not
be entitled to receive any amount of such distribution in excess thereof.
(B) The certificates representing the Pledged Stock are being
delivered concurrently herewith to the Escrow Agent, together with stock powers
duly executed in blank by the Purchaser sufficient to effect the transfer of
said certificates.
2. Appointment of Escrow Agent
The Secured Party hereby appoints the Escrow Agent as its
agent for purposes of taking possession of the Pledged Stock (and the Purchaser
consents to such appointment) in order to perfect the Secured Party's security
interest therein. The Escrow Agent acknowledges receipt of the above
certificates and stock powers for the Pledged Stock.
3. Purchaser's Rights So Long As No Default
Unless there shall occur an Event of Default, as defined in
Section 4 hereof, the purchaser shall have all voting rights with respect to the
Pledged Stock, except as limited by the Stock Purchase Agreement, Plan of Merger
or any other agreement executed by the parties hereto in connection therewith
(collectively, the "Agreements").
4. Rights And Remedies Upon Default
(a) In case an Event of Default (as such term is defined in
the Agreements or any of the Obligations) shall have occurred and be continuing
and the Secured Party desires to exercise its rights under this Agreement as to
the Pledged Stock, then the Secured Party shall give notice (the "Default
Notice") to such effect to the Escrow Agent with a copy to the Purchaser.
(b) If within five business days after the giving of the
Default Notice, the Purchaser shall not have objected to the delivery of the
Pledged Stock to the Secured Party by notice (the "Objection Notice") given to
the Escrow Agent, then the Escrow Agent, without further instructions from any
party hereto, shall deliver the Pledged Stock and stock or other powers
attendant thereto to the Secured Party.
(c) If the Escrow Agent shall receive an Objection Notice
within such five day period and the parties shall fail to resolve the matter
within ten days from the date of giving of the Objection Notice, then such
dispute as to the alleged Event of Default and requirement to deliver the
Pledged Stock and stock and other powers shall be settled by submission to a
court of competent jurisdiction, and the Escrow Agent shall not be a necessary
party to such proceeding. The Escrow Agent shall deliver the Pledged Stock and
stock or other powers in accordance with the final judgment of such court or the
written instructions of the Purchaser and the Secured Party.
(d) In case an Event of Default shall have occurred, and a
Default Notice is given pursuant to clause (a) of this Section 4 hereof, and
either no Objection Notice is given in accordance with clause (b) of this
Section 4 or a final judgment is rendered by a court of competent jurisdiction
in favor of the Secured Party in the proceeding contemplated in clause (c) of
this Section 4, then the Secured Party shall have the right, but not the
obligation, to:
(i) vote all or any of the Pledged Stock, and give all
consents, waivers and ratifications with respect thereto and otherwise act in
all matters with respect thereto as the outright owner thereof, the Purchaser
hereby irrevocably constituting and appointing the Secured Party its proxy and
attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser hereby agreeing to
execute at any time in the future such additional instrument or instruments to
confirm the proxy and power hereby granted;
(ii) receive all dividends and all other distributions
of any kind on the Pledged Stock;
(iii) exercise any and all rights of collection,
conversion or exchange, and any and all other rights, privileges, options or
powers of the owner of the Pledged Stock pertaining or relating thereto, the
Purchaser hereby irrevocably constituting and appointing Secured Party its proxy
and attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser agreeing to execute at
any time in the future such additional instrument or instruments to confirm the
proxy and power hereby granted; and
(iv) sell the Pledged Stock at any public or private
sale and by one or more contracts, in one or more lots, at the same or different
time or times and places and with adjournments thereof, to such persons or
entities, for cash or credit or for future delivery and upon such other terms,
as the Secured Party may in his discretion deem best in each such matter. The
Secured Party shall give the Purchaser ten days prior notice of the time and
place of any public sale or the time after which a private sale may be made,
which notice the Purchaser and the Secured Party agree to be reasonable. If any
of the Pledged Stock is sold on credit or for future delivery, the Secured Party
shall not be liable for the failure of the purchaser to pay for same and, in the
event of such failure, the Secured Party may resell such Pledged stock. The
Secured Party shall have the power to deliver to the purchaser or purchasers
good and sufficient transfers of any of the Pledged Stock sold, and the
Purchaser hereby irrevocably appoints the Secured Party its true and lawful
attorney in the Purchaser's name and stead to execute and deliver all necessary
or proper instruments of transfer. Any sale or sales made by reason of this
Agreement, whether under the power of sale herein granted or pursuant to
judicial proceedings, shall divest all right, title, interest, estate, claim and
demand of the Secured Party whatsoever, either at law or in equity, of, in and
to the Pledged Stock sold. No purchaser at any such sale or sales, and no one
claiming under such purchaser, shall be bound to see to the application of the
purchase money or be bound to inquire as to the authorization, necessity,
expediency or regularity of any such sale or sales, and the receipt of the
Secured party for the purchase money paid on such sale or sales shall be
sufficient discharge therefor to any purchaser of any of the Pledged Stock.
At any such sale or sales (except private sales), the Secured Party
may bid for and purchase all or any of the Pledged Stock so sold, and may hold,
retain and dispose of such Pledged Stock without further accountability in
respect thereof except for payment of the purchase price. The Secured Party may
make payment of the purchase price for any of the Pledged Stock by credit
against the then outstanding amount of the obligations under the Note.
Neither the Purchaser nor anyone claiming through or under it,
including its heirs, successors and assigns, shall or will set up, claim or seek
to take advantage of any appraisement, valuation, stay, extension, redemption or
other law now or hereafter in force, in order to prevent, delay or otherwise
hinder the enforcement of the lien and pledge hereunder, or the absolute sale or
other disposition of the Pledged Stock or the final and absolute putting into
possession thereof of the purchaser or purchasers or other transferees thereof.
The Purchaser, for itself and all who may claim through or under it, including
his or its heirs, successors and assigns, hereby waives the benefit of all such
laws and hereby waives all right of appraisement and redemption to which it may
be entitled under any state or Federal law and any and all right to have the
Pledged Stock or any part thereof marshalled upon any foreclosure, sale or other
enforcement thereof.
(e) In addition to any of the rights of the Secured Party
herein provided, or provided under any other agreement or instrument between the
Secured Party and the Purchaser, the Secured Party shall have all of the rights
and remedies of a secured party under the Uniform commercial Code as enacted in
New Jersey.
(f) The Secured Party shall apply the proceeds of any sale of
the whole or any part of the Pledged Stock, together with any other moneys at
the time held by the Secured Party or the Escrow Agent under the provisions of
this Agreement after deducting all reasonable costs and expenses of collection,
sale and delivery (including without limitation, reasonable counsel fees and
expenses) incurred by the Secured Party in connection with such sale, to the
payment of all amounts due and payable by the Purchaser to the Secured Party
pursuant to the Obligations. Upon payment in full of all such amounts, the
Secured Party shall pay over any balance of such proceeds and other moneys to
the Purchaser. In the event such proceeds are insufficient to pay such
Obligations, the Purchaser shall remain liable for the deficiency.
(g) The rights and remedies of the Secured party under this
Agreement and the Obligations are cumulative and not exclusive of any other
right or remedy which the Secured Party may have, and the Secured Party may
exercise any right or remedy which he may have under any such agreement or
instrument without exercising any of his rights under other agreement or
instrument.
(h) No delay or failure on the part of the Secured Party in
exercising any right, privilege or option hereunder, or under the Note, or any
other agreement or instrument between the Secured party and the Purchaser shall
operate as a waiver of any provisions thereof, or as a waiver of any Event of
Default specified therein; nor shall any single or partial exercise by the
Secured Party of any such right, privilege or option preclude any other or
further exercise thereof, or the exercise of any other right, privilege or
option. No waivers shall be binding unless in writing and signed by the party
against whom such waiver is to be enforced.
c(i) The Purchaser agrees that all of the Pledged Stock
constitutes equal security for payment and performance of all of the Obligations
and agrees that the Secured Party shall be entitled to sell or otherwise deal
with any or all of the Pledged Stock, in any order or simultaneously as the
Secured party shall determine in his sole discretion, free of any requirement
for the marshalling of assets or other restriction upon the Secured party in
dealing with the Pledged Stock.
5. Termination of Escrow
(a) Upon the payment in full of all Obligations, the Purchaser
shall be entitled to the return of the Pledged Stock.
(b) If all of the Obligations have been satisfied in full, the
Purchaser shall by notice to the Escrow Agent with a copy to the Secured Party
request the Escrow Agent to deliver to the Purchaser the Pledged Stock and the
stock or other powers. If the Secured Party objects to such delivery, it shall
give notice to the Escrow Agent and the Purchaser within five business days of
the giving of the Purchaser's notice requiring such delivery.
(c) If the Escrow Agent does not receive any notice from the
Secured Party within the said five day period, the Escrow Agent shall, without
further instructions, deliver the Pledged Stock, together with the stock or
other powers, to the Purchaser.
(d) If the Escrow Agent receives such notice of objection from
the Secured Party within such five day period, and the Purchaser and Secured
Party shall fail to resolve the matter within ten days from the giving of the
notice of objection by the Secured Party, then the dispute shall be settled by
submission to a court of competent jurisdiction and the Escrow Agent shall not
be a necessary party to such proceeding. The Escrow Agent shall deliver the
Pledged Stock and stock powers in accordance with the final judgment of such
court or the written instructions of the Purchaser and the Secured Party.
6. Scope of Authority And Duties Of Escrow Agent
(a) The Escrow Agent shall not in any way be bound or affected
by any notice of modification or cancellation of this Agreement unless notice
thereof is given to the Escrow Agent by the Secured Party and the Purchaser nor
shall the Escrow Agent be bound by any modification of its obligations hereunder
unless the same shall be consented to by the Escrow Agent in writing. The Escrow
Agent shall be entitled to rely upon any judgment, certification, demand or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein, the propriety or
validity of the signatures thereof, or the jurisdiction of the court issuing any
such judgment.
(b) The Escrow Agent shall not be under any duty to give the
property held by it hereunder any greater degree of care than it gives its own
similar property.
(c) The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine, and it may assume that any person
purporting to give any notice or receipt of advice or make any statement in
connection with the provisions hereof has been duly authorized to do so.
(d) The Escrow Agent may act in reliance upon advice of
counsel in reference to any matter connected herewith, and shall not be liable
for any mistake of fact or error of judgment, or for any acts or omissions of
any kind except as such act or omission constitutes willful misconduct or gross
negligence.
(e) The Escrow Agent shall not have any responsibility for the
payment of taxes except with funds furnished to the Escrow Agent for that
purpose.
(f) This Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. Except as
otherwise expressly provided herein, the Escrow Agent shall not refer to, and
shall not be bound by, the provisions of any other agreement.
(g) Except with respect to claims based upon the Escrow
agent's gross negligence or willful misconduct, the Secured Party shall
indemnify and hold the Escrow Agent harmless from any claims made against the
Escrow Agent by the Purchaser, and the Purchaser shall indemnify and hold the
Escrow Agent harmless from any claim made against the Escrow Agent by the
Secured Party, and the Secured Party, on the one hand, and the Purchaser, on the
other, jointly and severally shall indemnify and hold the Escrow Agent harmless
from any claim of any third party, arising out of or related to this Agreement,
such indemnification to include all costs and expenses incurred by the Escrow
Agent not limited to, reasonable attorneys' fees.
(h) The escrow Agent shall not be required to institute or
defend any action involving any matters referred to herein or which affect it or
its duties or liability under this Agreement unless or until requested to do so
by any party to this Agreement and then only upon receiving full indemnity in
character satisfactory to the Escrow Agent against claims, liabilities and
expenses in relation thereto.
(i) The Purchaser and Secured Party hereby acknowledge that
the Escrow Agent is merely serving as a depository hereunder and that the Escrow
Agent is counsel to the Secured Party. The Purchaser and Secured Party agree
that the Escrow Agent shall be entitled to continue to serve as counsel to the
Secured Party even if a dispute arises between the Purchaser and the Secured
Party. The Escrow Agent shall not be treated as being in a conflict situation
with respect to its representation of the Secured Party by virtue of the Escrow
Agent's agreeing to serve hereunder.
7. Issuances of Additional Shares
Until the Pledged Stock has been returned to the Purchaser,
Penn shall not issue any additional shares of its capital stock or enter into
any agreement to do so.
8. Termination
This Agreement and the rights and obligations hereunder shall
automatically terminate and be of no further force and effect on the fifth
anniversary of the date of this Agreement, unless an Event of Default shall have
occurred and is continuing on such date. Upon termination of this Agreement,
Purchaser shall be entitled to the return of the Pledged Stock pursuant to the
procedures set forth in Section 5 hereof.
9. Applicable Law
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.
10. Notices
All notices and other communications required or permitted
hereunder shall be in writing addressed to each of the parties at their
respective address set forth on the first page hereof or such changed address as
shall be given by notice as herein provided. All such notices shall be given by
(a) personal delivery against receipt therefor or (b) mailing the same certified
or registered mail, return receipt requested. All notices shall be deemed given
when received. Copies of all notices shall be given to the Escrow Agent and
shall be addressed to the attention of Mark K. Lipton, Esquire.
11. Execution of Further Documents
The Purchaser shall execute any and all instruments and
documents, including but not limited to financing statements for filing pursuant
to the laws of the State of New Jersey, which the Secured Party or his counsel
may reasonably request at any time and which the Secured Party or his counsel
deem reasonably necessary in order to complete, perfect or continue the first
lien of the Secured Party in the Pledged Stock. The Purchaser shall pay all
costs of any filings of financing statements, and all fees, if any, to the
Escrow Agent for serving as such.
12. Miscellaneous
(a) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(b) Headings. The headings of this Agreement are for
convenience of reference only and shall not constitute a part hereof.
(c) Oral Termination or Modification. This Agreement may not
be modified, changed, amended or terminated, except in writing signed by the
parties to this Agreement.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
WITNESS:
/s/ Marlene Todaro /s/ Anthony Todaro
- -------------------------------- -----------------------------------
ANTHONY TODARO
WITNESS:
/s/ Anthony Todaro /s/ Marlene Todaro
- -------------------------------- -----------------------------------
MARLENE TODARO
ATTEST: CORECARE SYSTEMS, INC.
/s/ By: /s/ Rose DiOttavio
- -------------------------------- -----------------------------------
Rose S. DiOttavio, President
PODVEY, SACHS, MEANOR, CATENACCI
HILDNER & COCOZIELLO, A
PROFESSIONAL CORPORATION
Escrow Agent
WITNESS:
By: /s/ Mark K. Lipton
- -------------------------------- -----------------------------------
Mark K. Lipton
As to the provisions of Section 7
ATTEST: PENN INTERPERSONAL COMMUNICATIONS, INC.
/s/ Marlene Todaro By: /s/ Rose DiOttavio
- -------------------------------- -----------------------------------
Secretary Rose S. DiOttavio
Title: President
-----------------------------
EXHIBIT 6.11
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, made this 30th day of June, 1995, by and
among CORECARE ACQUISITION, INC. - IV, having its offices located at P.O. Box
876, 933 Washington Avenue, Suite 1-C, Greenbrook, New Jersey 08812 (the
"Purchaser"); MARLENE TODARO AND ANTHONY TODARO, residing at 517 Ludlow Station
Road, Asbury, New Jersey 08802 (collectively, the "Secured Party"); and PODVEY,
SACHS, MEANOR, CATENACCI, HILDNER & COCOZIELLO, A PROFESSIONAL CORPORATION,
having offices at One Riverfront Plaza, Newark, New Jersey 07102 (the "Escrow
Agent").
W I T N E S S E T H :
WHEREAS, concurrently herewith, pursuant to a certain Agreement and
Plan of Merger, dated June 30, 1995 (the "Plan of Merger"), the Secured Party
will exchange 1,000 shares of common stock of Bio Diagnostic Technologies, Inc.
(the "Company") for shares of the common stock of CoreCare Systems, Inc. and the
Company shall be merged with and into the Purchaser. The shares of the Company's
common stock referred to above constitute all of the capital stock of the
Company owned by the Secured Party (the "Pledged Stock"); and
WHEREAS, pursuant to the Plan of Merger, the Purchaser is also
entering into a Security Agreement and Guaranty with or in favor of the Seller;
and
WHEREAS, the Plan of Merger requires that other obligations of
Purchaser under the Plan of Merger, the Security Agreement, the Guaranty and the
other agreements and instruments executed by Purchaser in connection therewith
(collectively the "Obligations") be secured by a pledge of the Stock being
acquired as evidenced by this Pledge Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. Security
(A) As collateral security for the payment in full and
complete performance of the Obligations, the Purchaser does hereby pledge to the
Secured Party and creates a security interest in and to all of the Purchaser's
right, title and interest in and to the Pledged Stock together with all
dividends or other payments, distributions or proceeds (whether of cash,
securities or other property) upon or in respect of the Pledged Stock and all
property receivable in substitution or exchange for the Pledged Stock, all of
which the Purchaser hereby covenants and agrees to cause to be paid or delivered
directly upon its issuance or distribution, together with executed stock or
other appropriate powers to the Escrow Agent to be held in pledge in accordance
with the terms of this Agreement, all of which shall be included within the
definition of Pledged Stock for purposes of this Agreement. Notwithstanding the
foregoing, if there is a distribution of cash described in the immediately
preceding sentence as the result of the occurrence of any event described in the
Obligations requiring a mandatory prepayment in full thereof, such distribution
up to the amount required to effect such prepayment shall be made directly to
the Secured Party as payment in full of the Note and the Secured Party shall not
be entitled to receive any amount of such distribution in excess thereof.
(B) The certificates representing the Pledged Stock are being
delivered concurrently herewith to the Escrow Agent, together with stock powers
duly executed in blank by the Purchaser sufficient to effect the transfer of
said certificates.
2. Appointment of Escrow Agent
The Secured Party hereby appoints the Escrow Agent as its
agent for purposes of taking possession of the Pledged Stock (and the Purchaser
consents to such appointment) in order to perfect the Secured Party's security
interest therein. The Escrow Agent acknowledges receipt of the above
certificates and stock powers for the Pledged Stock.
3. Purchaser's Rights So Long As No Default
Unless there shall occur an Event of Default, as defined in
Section 4 hereof, the purchaser shall have all voting rights with respect to the
Pledged Stock, except as limited by the Agreement or any other agreement
executed by the parties hereto in connection therewith.
4. Rights And Remedies Upon Default
(a) In case an Event of Default (as such term is defined in
the Agreement or any of the Obligations) shall have occurred and be continuing
and the Secured Party desires to exercise its rights under this Agreement as to
the Pledged Stock, then the Secured Party shall give notice (the "Default
Notice") to such effect to the Escrow Agent with a copy to the Purchaser.
(b) If within five business days after the giving of the
Default Notice, the Purchaser shall not have objected to the delivery of the
Pledged Stock to the Secured Party by notice (the "Objection Notice") given to
the Escrow Agent, then the Escrow Agent, without further instructions from any
party hereto, shall deliver the Pledged Stock and stock or other powers
attendant thereto to the Secured Party.
(c) If the Escrow Agent shall receive an Objection Notice
within such five day period and the parties shall fail to resolve the matter
within ten days from the date of giving of the Objection Notice, then such
dispute as to the alleged Event of Default and requirement to deliver the
Pledged Stock and stock and other powers shall be settled by submission to a
court of competent jurisdiction, and the Escrow Agent shall not be a necessary
party to such proceeding. The Escrow Agent shall deliver the Pledged Stock and
stock or other powers in accordance with the final judgment of such court or the
written instructions of the Purchaser and the Secured Party.
(d) In case an Event of Default shall have occurred, and a
Default Notice is given pursuant to clause (a) of this Section 4 hereof, and
either no Objection Notice is given in accordance with clause (b) of this
Section 4 or a final judgment is rendered by a court of competent jurisdiction
in favor of the Secured Party in the proceeding contemplated in clause (c) of
this Section 4, then the Secured Party shall have the right, but not the
obligation, to:
(i) vote all or any of the Pledged Stock, and give all
consents, waivers and ratifications with respect thereto and otherwise act in
all matters with respect thereto as the outright owner thereof, the Purchaser
hereby irrevocably constituting and appointing the Secured Party its proxy and
attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser hereby agreeing to
execute at any time in the future such additional instrument or instruments to
confirm the proxy and power hereby granted;
(ii) receive all dividends and all other distributions
of any kind on the Pledged Stock;
(iii) exercise any and all rights of collection,
conversion or exchange, and any and all other rights, privileges, options or
powers of the owner of the Pledged Stock pertaining or relating thereto, the
Purchaser hereby irrevocably constituting and appointing Secured Party its proxy
and attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser agreeing to execute at
any time in the future such additional instrument or instruments to confirm the
proxy and power hereby granted; and
(iv) sell the Pledged Stock at any public or private
sale and by one or more contracts, in one or more lots, at the same or different
time or times and places and with adjournments thereof, to such persons or
entities, for cash or credit or for future delivery and upon such other terms,
as the Secured Party may in his discretion deem best in each such matter. The
Secured Party shall give the Purchaser ten days prior notice of the time and
place of any public sale or the time after which a private sale may be made,
which notice the Purchaser and the Secured Party agree to be reasonable. If any
of the Pledged Stock is sold on credit or for future delivery, the Secured Party
shall not be liable for the failure of the purchaser to pay for same and, in the
event of such failure, the Secured Party may resell such Pledged stock. The
Secured Party shall have the power to deliver to the purchaser or purchasers
good and sufficient transfers of any of the Pledged Stock sold, and the
Purchaser hereby irrevocably appoints the Secured Party its true and lawful
attorney in the Purchaser's name and stead to execute and deliver all necessary
or proper instruments of transfer. Any sale or sales made by reason of this
Agreement, whether under the power of sale herein granted or pursuant to
judicial proceedings, shall divest all right, title, interest, estate, claim and
demand of the Secured Party whatsoever, either at law or in equity, of, in and
to the Pledged Stock sold. No purchaser at any such sale or sales, and no one
claiming under such purchaser, shall be bound to see to the application of the
purchase money or be bound to inquire as to the authorization, necessity,
expediency or regularity of any such sale or sales, and the receipt of the
Secured party for the purchase money paid on such sale or sales shall be
sufficient discharge therefor to any purchaser of any of the Pledged Stock.
At any such sale or sales (except private sales), the Secured Party
may bid for and purchase all or any of the Pledged Stock so sold, and may hold,
retain and dispose of such Pledged Stock without further accountability in
respect thereof except for payment of the purchase price. The Secured Party may
make payment of the purchase price for any of the Pledged Stock by credit
against the then outstanding amount of the obligations under the Note.
Neither the Purchaser nor anyone claiming through or under it,
including its heirs, successors and assigns, shall or will set up, claim or seek
to take advantage of any appraisement, valuation, stay, extension, redemption or
other law now or hereafter in force, in order to prevent, delay or otherwise
hinder the enforcement of the lien and pledge hereunder, or the absolute sale or
other disposition of the Pledged Stock or the final and absolute putting into
possession thereof of the purchaser or purchasers or other transferees thereof.
The Purchaser, for itself and all who may claim through or under it, including
his or its heirs, successors and assigns, hereby waives the benefit of all such
laws and hereby waives all right of appraisement and redemption to which it may
be entitled under any state or Federal law and any and all right to have the
Pledged Stock or any part thereof marshalled upon any foreclosure, sale or other
enforcement thereof.
(e) In addition to any of the rights of the Secured Party
herein provided, or provided under any other agreement or instrument between the
Secured Party and the Purchaser, the Secured Party shall have all of the rights
and remedies of a secured party under the Uniform commercial Code as enacted in
New Jersey.
(f) The Secured Party shall apply the proceeds of any sale of
the whole or any part of the Pledged Stock, together with any other moneys at
the time held by the Secured Party or the Escrow Agent under the provisions of
this Agreement after deducting all reasonable costs and expenses of collection,
sale and delivery (including without limitation, reasonable counsel fees and
expenses) incurred by the Secured Party in connection with such sale, to the
payment of all amounts due and payable by the Purchaser to the Secured Party
pursuant to the Obligations. Upon payment in full of all such amounts, the
Secured Party shall pay over any balance of such proceeds and other moneys to
the Purchaser. In the event such proceeds are insufficient to pay such
Obligations, the Purchaser shall remain liable for the deficiency.
(g) The rights and remedies of the Secured party under this
Agreement and the Obligations are cumulative and not exclusive of any other
right or remedy which the Secured Party may have, and the Secured Party may
exercise any right or remedy which he may have under any such agreement or
instrument without exercising any of his rights under other agreement or
instrument.
(h) No delay or failure on the part of the Secured Party in
exercising any right, privilege or option hereunder, or under the Note, or any
other agreement or instrument between the Secured party and the Purchaser shall
operate as a waiver of any provisions thereof, or as a waiver of any Event of
Default specified therein; nor shall any single or partial exercise by the
Secured Party of any such right, privilege or option preclude any other or
further exercise thereof, or the exercise of any other right, privilege or
option. No waivers shall be binding unless in writing and signed by the party
against whom such waiver is to be enforced.
(i) The Purchaser agrees that all of the Pledged Stock
constitutes equal security for payment and performance of all of the Obligations
and agrees that the Secured Party shall be entitled to sell or otherwise deal
with any or all of the Pledged Stock, in any order or simultaneously as the
Secured party shall determine in his sole discretion, free of any requirement
for the marshalling of assets or other restriction upon the Secured party in
dealing with the Pledged Stock.
5. Termination of Escrow
(a) Upon the payment in full of all Obligations, the Purchaser
shall be entitled to the return of the Pledged Stock.
(b) If all of the Obligations have been satisfied in full, the
Purchaser shall by notice to the Escrow Agent with a copy to the Secured Party
request the Escrow Agent to deliver to the Purchaser the Pledged Stock and the
stock or other powers. If the Secured Party objects to such delivery, it shall
give notice to the Escrow Agent and the Purchaser within five business days of
the giving of the Purchaser's notice requiring such delivery.
(c) If the Escrow Agent does not receive any notice from the
Secured Party within the said five day period, the Escrow Agent shall, without
further instructions, deliver the Pledged Stock, together with the stock or
other powers, to the Purchaser.
(d) If the Escrow Agent receives such notice of objection from
the Secured Party within such five day period, and the Purchaser and Secured
Party shall fail to resolve the matter within ten days from the giving of the
notice of objection by the Secured Party, then the dispute shall be settled by
submission to a court of competent jurisdiction and the Escrow Agent shall not
be a necessary party to such proceeding. The Escrow Agent shall deliver the
Pledged Stock and stock powers in accordance with the final judgment of such
court or the written instructions of the Purchaser and the Secured Party.
6. Scope of Authority And Duties Of Escrow Agent
(a) The Escrow Agent shall not in any way be bound or affected
by any notice of modification or cancellation of this Agreement unless notice
thereof is given to the Escrow Agent by the Secured Party and the Purchaser nor
shall the Escrow Agent be bound by any modification of its obligations hereunder
unless the same shall be consented to by the Escrow Agent in writing. The Escrow
Agent shall be entitled to rely upon any judgment, certification, demand or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein, the propriety or
validity of the signatures thereof, or the jurisdiction of the court issuing any
such judgment.
(b) The Escrow Agent shall not be under any duty to give the
property held by it hereunder any greater degree of care than it gives its own
similar property.
(c) The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine, and it may assume that any person
purporting to give any notice or receipt of advice or make any statement in
connection with he provisions hereof has been duly authorized to do so.
(d) The Escrow Agent may act in reliance upon advice of
counsel in reference to any matter connected herewith, and shall not be liable
for any mistake of fact or error of judgment, or for any acts or omissions of
any kind except as such act or omission constitutes willful misconduct or gross
negligence.
(e) The Escrow Agent shall not have any responsibility for the
payment of taxes except with funds furnished to the Escrow Agent for that
purpose.
(f) This Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. Except as
otherwise expressly provided herein, the Escrow Agent shall not refer to, and
shall not be bound by, the provisions of any other agreement.
(g) Except with respect to claims based upon the Escrow
agent's gross negligence or willful misconduct, the Secured Party shall
indemnify and hold the Escrow Agent harmless from any claims made against the
Escrow Agent by the Purchaser, and the Purchaser shall indemnify and hold the
Escrow Agent harmless from any claim made against the Escrow Agent by the
Secured Party, and the Secured Party, on the one hand, and the Purchaser, on the
other, jointly and severally shall indemnify and hold the Escrow Agent harmless
from any claim of any third party, arising out of or related to this Agreement,
such indemnification to include all costs and expenses incurred by the Escrow
Agent not limited to, reasonable attorneys' fees.
(h) The escrow Agent shall not be required to institute or
defend any action involving any matters referred to herein or which affect it or
its duties or liability under this Agreement unless or until requested to do so
by any party to this Agreement and then only upon receiving full indemnity in
character satisfactory to the Escrow Agent against claims, liabilities and
expenses in relation thereto.
(i) The Purchaser and Secured Party hereby acknowledge that
the Escrow Agent is merely serving as a depository hereunder and that the Escrow
Agent is general counsel to the Purchaser. The Purchaser and Secured Party agree
that the Escrow Agent shall be entitled to continue to serve as general counsel
to the Purchaser even if a dispute arises between the Purchaser and the Secured
Party. The Escrow Agent shall not be treated as being in a conflict situation
with respect to its representation of the Purchaser by virtue of the Escrow
Agent's agreeing to serve hereunder.
7. Applicable Law
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.
8. Notices
All notices and other communications required or permitted
hereunder shall be in writing addressed to each of the parties at their
respective address set forth on the first page hereof or such changed address as
shall be given by notice as herein provided. All such notices shall be given by
(a) personal delivery against receipt therefor or (b) mailing the same certified
or registered mail, return receipt requested. All notices shall be deemed given
when received. copies of all notices shall be given to the Escrow Agent and
shall be addressed to the attention of Mark K. Lipton, Esquire.
9. Execution of Further Documents
The Purchaser shall execute any and all instruments and
documents, including but not limited to financing statements for filing pursuant
to the laws of the State of New Jersey, which the Secured Party or his counsel
may reasonably request at any time and which the Secured Party or his counsel
deem reasonably necessary in order to complete, perfect or continue the first
lien of the Secured Party in the Pledged Stock. The Purchaser shall pay all
costs of any filings of financing statements, and all fees, if any, to the
Escrow Agent for serving as such.
10. Miscellaneous
(a) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(b) Headings. The headings of this Agreement are for
convenience of reference only and shall not constitute a part hereof.
(c) Oral Termination or Modification. This Agreement may not
be modified, changed, amended or terminated, except in writing signed by the
parties to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
WITNESS:
/s/ /s/ Anthony Todaro
- ------------------------------- ---------------------------------
ANTHONY TODARO
WITNESS:
/s/ /s/ Marlene Todaro
- ------------------------------- ---------------------------------
MARLENE TODARO
ATTEST: CORECARE ACQUISITION, INC. - IV
By: /s/ Rose DiOttavio
- ------------------------------- ---------------------------------
Secretary Rose S. DiOttavio, President
PODVEY, SACHS, MEANOR, CATENACCI
HILDNER & COCOZIELLO, A
PROFESSIONAL CORPORATION
Escrow Agent
WITNESS:
By: /s/ Mark K. Lipton
- ------------------------------- ---------------------------------
Mark K. Lipton
EXHIBIT 6.12
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, made this 30th day of June, 1995, by and
among CORECARE SYSTEMS, INC. having its offices located at 9425 Stenton Avenue,
Erdenheim, Pennsylvania 19038 (the "Purchaser"); MARLENE TODARO AND ANTHONY
TODARO, residing at 517 Ludlow Station Road, Asbury, New Jersey 08802
(collectively, the "Secured Party"); and PODVEY, SACHS, MEANOR, CATENACCI,
HILDNER & COCOZIELLO, A PROFESSIONAL CORPORATION, having offices at One
Riverfront Plaza, Newark, New Jersey 07102 (the "Escrow Agent").
W I T N E S S E T H :
WHEREAS, concurrently herewith, pursuant to a certain Agreement and
Plan of Merger, dated June 30, 1995 (the "Plan of Merger") among Purchaser,
Secured Party, American Institute for Behavioral Counseling, Inc. ("AIBC"), Bio
Diagnostic Technologies, Inc. ("Bio"), CoreCare Acquisition, Inc. - III
("CAI-III") and CoreCare Acquisition, Inc. - IV ("CAI-IV") AIBC shall be merged
with and into CAI-III and Bio shall be merged with and into CAI-IV.
WHEREAS, the Secured Party owns all of the outstanding shares of the
capital stock of AIBC and Bio, and pursuant to the Plan of Merger, such shares
will be cancelled and extinguished; and
WHEREAS, CAI-III and CAI-IV are wholly-owned subsidiaries of
Purchaser;
WHEREAS, concurrently herewith, pursuant to a Stock Purchase
Agreement between Purchaser and Secured Party dated June 30, 1995, Purchaser
shall purchase all of the outstanding shares of the capital stock of Penn
Interpersonal Communications, Inc. ("Penn") from Secured Party in consideration
of Purchaser's promissory note to Secured Party in the principal amount of
$300,000 (the "Note");
WHEREAS, concurrently herewith, pursuant to the Plan of Merger and
the Stock Purchase Agreement, Purchaser shall enter into a Guaranty pursuant to
which Purchaser shall guaranty all of the obligations of Penn, CAI-III and
CAI-IV under the Stock Purchase Agreement, the Plan of Merger, the Lease between
CAI-III and Marlene Todaro and the Employment Agreements between CAI-III and
each of Marlene Todaro and Anthony Todaro (the "Guaranty").
WHEREAS, the Plan of Merger and the Stock Purchase Agreement
requires that the obligations of Purchaser under the Note and the Guaranty
(collectively, the "Obligations") be secured by a pledge by the Purchaser of all
of the outstanding shares of capital stock of CAI-III (the "Pledged Stock").
NOW, THEREFORE, it is hereby agreed as follows:
1. Security
(A) As collateral security for the payment in full and
complete performance of the Obligations, the Purchaser does hereby pledge to the
Secured Party and creates a security interest in and to all of the Purchaser's
right, title and interest in and to the Pledged Stock together with all
dividends or other payments, distributions or proceeds (whether of cash,
securities or other property) upon or in respect of the Pledged Stock and all
property receivable in substitution or exchange for the Pledged Stock, all of
which the Purchaser hereby covenants and agrees to cause to be paid or delivered
directly upon its issuance or distribution, together with executed stock or
other appropriate powers to the Escrow Agent to be held in pledge in accordance
with the terms of this Agreement, all of which shall be included within the
definition of Pledged Stock for purposes of this Agreement. Notwithstanding the
foregoing, if there is a distribution of cash described in the immediately
preceding sentence as the result of the occurrence of any event described in the
Obligations requiring a mandatory prepayment in full thereof, such distribution
up to the amount required to effect such prepayment shall be made directly to
the Secured Party as payment in full of the Note and the Secured Party shall not
be entitled to receive any amount of such distribution in excess thereof.
(B) The certificates representing the Pledged Stock are being
delivered concurrently herewith to the Escrow Agent, together with stock powers
duly executed in blank by the Purchaser sufficient to effect the transfer of
said certificates.
2. Appointment of Escrow Agent
The Secured Party hereby appoints the Escrow Agent as its
agent for purposes of taking possession of the Pledged Stock (and the Purchaser
consents to such appointment) in order to perfect the Secured Party's security
interest therein. The Escrow Agent acknowledges receipt of the above
certificates and stock powers for the Pledged Stock.
3. Purchaser's Rights So Long As No Default
Unless there shall occur an Event of Default, as defined in
Section 4 hereof, the purchaser shall have all voting rights with respect to the
Pledged Stock, except as limited by the Stock Purchase Agreement, Plan of Merger
or any other agreement executed by the parties hereto in connection therewith
(collectively, the "Agreements").
4. Rights And Remedies Upon Default
(a) In case an Event of Default (as such term is defined in
the Agreements or any of the Obligations) shall have occurred and be continuing
and the Secured Party desires to exercise its rights under this Agreement as to
the Pledged Stock, then the Secured Party shall give notice (the "Default
Notice") to such effect to the Escrow Agent with a copy to the Purchaser.
(b) If within five business days after the giving of the
Default Notice, the Purchaser shall not have objected to the delivery of the
Pledged Stock to the Secured Party by notice (the "Objection Notice") given to
the Escrow Agent, then the Escrow Agent, without further instructions from any
party hereto, shall deliver the Pledged Stock and stock or other powers
attendant thereto to the Secured Party.
(c) If the Escrow Agent shall receive an Objection Notice
within such five day period and the parties shall fail to resolve the matter
within ten days from the date of giving of the Objection Notice, then such
dispute as to the alleged Event of Default and requirement to deliver the
Pledged Stock and stock and other powers shall be settled by submission to a
court of competent jurisdiction, and the Escrow Agent shall not be a necessary
party to such proceeding. The Escrow Agent shall deliver the Pledged Stock and
stock or other powers in accordance with the final judgment of such court or the
written instructions of the Purchaser and the Secured Party.
(d) In case an Event of Default shall have occurred, and a
Default Notice is given pursuant to clause (a) of this Section 4 hereof, and
either no Objection Notice is given in accordance with clause (b) of this
Section 4 or a final judgment is rendered by a court of competent jurisdiction
in favor of the Secured Party in the proceeding contemplated in clause (c) of
this Section 4, then the Secured Party shall have the right, but not the
obligation, to:
(i) vote all or any of the Pledged Stock, and give all
consents, waivers and ratifications with respect thereto and otherwise act in
all matters with respect thereto as the outright owner thereof, the Purchaser
hereby irrevocably constituting and appointing the Secured Party its proxy and
attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser hereby agreeing to
execute at any time in the future such additional instrument or instruments to
confirm the proxy and power hereby granted;
(ii) receive all dividends and all other distributions
of any kind on the Pledged Stock;
(iii) exercise any and all rights of collection,
conversion or exchange, and any and all other rights, privileges, options or
powers of the owner of the Pledged Stock pertaining or relating thereto, the
Purchaser hereby irrevocably constituting and appointing Secured Party its proxy
and attorney-in-fact with full power of substitution so to do, said proxy being
deemed to be coupled with an interest, and the Purchaser agreeing to execute at
any time in the future such additional instrument or instruments to confirm the
proxy and power hereby granted; and
(iv) sell the Pledged Stock at any public or private
sale and by one or more contracts, in one or more lots, at the same or different
time or times and places and with adjournments thereof, to such persons or
entities, for cash or credit or for future delivery and upon such other terms,
as the Secured Party may in his discretion deem best in each such matter. The
Secured Party shall give the Purchaser ten days prior notice of the time and
place of any public sale or the time after which a private sale may be made,
which notice the Purchaser and the Secured Party agree to be reasonable. If any
of the Pledged Stock is sold on credit or for future delivery, the Secured Party
shall not be liable for the failure of the purchaser to pay for same and, in the
event of such failure, the Secured Party may resell such Pledged stock. The
Secured Party shall have the power to deliver to the purchaser or purchasers
good and sufficient transfers of any of the Pledged Stock sold, and the
Purchaser hereby irrevocably appoints the Secured Party its true and lawful
attorney in the Purchaser's name and stead to execute and deliver all necessary
or proper instruments of transfer. Any sale or sales made by reason of this
Agreement, whether under the power of sale herein granted or pursuant to
judicial proceedings, shall divest all right, title, interest, estate, claim and
demand of the Secured Party whatsoever, either at law or in equity, of, in and
to the Pledged Stock sold. No purchaser at any such sale or sales, and no one
claiming under such purchaser, shall be bound to see to the application of the
purchase money or be bound to inquire as to the authorization, necessity,
expediency or regularity of any such sale or sales, and the receipt of the
Secured Party for the purchase money paid on such sale or sales shall be
sufficient discharge therefor to any purchaser of any of the Pledged Stock.
At any such sale or sales (except private sales), the Secured Party
may bid for and purchase all or any of the Pledged Stock so sold, and may hold,
retain and dispose of such Pledged Stock without further accountability in
respect thereof except for payment of the purchase price. The Secured Party may
make payment of the purchase price for any of the Pledged Stock by credit
against the then outstanding amount of the obligations under the Note.
Neither the Purchaser nor anyone claiming through or under it,
including its heirs, successors and assigns, shall or will set up, claim or seek
to take advantage of any appraisement, valuation, stay, extension, redemption or
other law now or hereafter in force, in order to prevent, delay or otherwise
hinder the enforcement of the lien and pledge hereunder, or the absolute sale or
other disposition of the Pledged Stock or the final and absolute putting into
possession thereof of the purchaser or purchasers or other transferees thereof.
The Purchaser, for itself and all who may claim through or under it, including
his or its heirs, successors and assigns, hereby waives the benefit of all such
laws and hereby waives all right of appraisement and redemption to which it may
be entitled under any state or Federal law and any and all right to have the
Pledged Stock or any part thereof marshalled upon any foreclosure, sale or other
enforcement thereof.
(e) In addition to any of the rights of the Secured Party
herein provided, or provided under any other agreement or instrument between the
Secured Party and the Purchaser, the Secured Party shall have all of the rights
and remedies of a secured party under the Uniform Commercial Code as enacted in
New Jersey.
(f) The Secured Party shall apply the proceeds of any sale of
the whole or any part of the Pledged Stock, together with any other moneys at
the time held by the Secured Party or the Escrow Agent under the provisions of
this Agreement after deducting all reasonable costs and expenses of collection,
sale and delivery (including without limitation, reasonable counsel fees and
expenses) incurred by the Secured Party in connection with such sale, to the
payment of all amounts due and payable by the Purchaser to the Secured Party
pursuant to the Obligations. Upon payment in full of all such amounts, the
Secured Party shall pay over any balance of such proceeds and other moneys to
the Purchaser. In the event such proceeds are insufficient to pay such
Obligations, the Purchaser shall remain liable for the deficiency.
(g) The rights and remedies of the Secured Party under this
Agreement and the Obligations are cumulative and not exclusive of any other
right or remedy which the Secured Party may have, and the Secured Party may
exercise any right or remedy which he may have under any such agreement or
instrument without exercising any of his rights under other agreement or
instrument.
(h) No delay or failure on the part of the Secured Party in
exercising any right, privilege or option hereunder, or under the Note, or any
other agreement or instrument between the Secured Party and the Purchaser shall
operate as a waiver of any provisions thereof, or as a waiver of any Event of
Default specified therein; nor shall any single or partial exercise by the
Secured Party of any such right, privilege or option preclude any other or
further exercise thereof, or the exercise of any other right, privilege or
option. No waivers shall be binding unless in writing and signed by the party
against whom such waiver is to be enforced.
(i) The Purchaser agrees that all of the Pledged Stock
constitutes equal security for payment and performance of all of the Obligations
and agrees that the Secured Party shall be entitled to sell or otherwise deal
with any or all of the Pledged Stock, in any order or simultaneously as the
Secured Party shall determine in his sole discretion, free of any requirement
for the marshalling of assets or other restriction upon the Secured Party in
dealing with the Pledged Stock.
5. Termination of Escrow
(a) Upon the payment in full of all Obligations, the Purchaser
shall be entitled to the return of the Pledged Stock.
(b) If all of the Obligations have been satisfied in full, the
Purchaser shall by notice to the Escrow Agent with a copy to the Secured Party
request the Escrow Agent to deliver to the Purchaser the Pledged Stock and the
stock or other powers. If the Secured Party objects to such delivery, it shall
give notice to the Escrow Agent and the Purchaser within five business days of
the giving of the Purchaser's notice requiring such delivery.
(c) If the Escrow Agent does not receive any notice from the
Secured Party within the said five day period, the Escrow Agent shall, without
further instructions, deliver the Pledged Stock, together with the stock or
other powers, to the Purchaser.
(d) If the Escrow Agent receives such notice of objection from
the Secured Party within such five day period, and the Purchaser and Secured
Party shall fail to resolve the matter within ten days from the giving of the
notice of objection by the Secured Party, then the dispute shall be settled by
submission to a court of competent jurisdiction and the Escrow Agent shall not
be a necessary party to such proceeding. The Escrow Agent shall deliver the
Pledged Stock and stock powers in accordance with the final judgment of such
court or the written instructions of the Purchaser and the Secured Party.
6. Scope of Authority And Duties Of Escrow Agent
(a) The Escrow Agent shall not in any way be bound or affected
by any notice of modification or cancellation of this Agreement unless notice
thereof is given to the Escrow Agent by the Secured Party and the Purchaser nor
shall the Escrow Agent be bound by any modification of its obligations hereunder
unless the same shall be consented to by the Escrow Agent in writing. The Escrow
Agent shall be entitled to rely upon any judgment, certification, demand or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein, the propriety or
validity of the signatures thereof, or the jurisdiction of the court issuing any
such judgment.
(b) The Escrow Agent shall not be under any duty to give the
property held by it hereunder any greater degree of care than it gives its own
similar property.
(c) The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine, and it may assume that any person
purporting to give any notice or receipt of advice or make any statement in
connection with the provisions hereof has been duly authorized to do so.
(d) The Escrow Agent may act in reliance upon advice of
counsel in reference to any matter connected herewith, and shall not be liable
for any mistake of fact or error of judgment, or for any acts or omissions of
any kind except as such act or omission constitutes willful misconduct or gross
negligence.
(e) The Escrow Agent shall not have any responsibility for the
payment of taxes except with funds furnished to the Escrow Agent for that
purpose.
(f) This Agreement sets forth exclusively the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. Except as
otherwise expressly provided herein, the Escrow Agent shall not refer to, and
shall not be bound by, the provisions of any other agreement.
(g) Except with respect to claims based upon the Escrow
Agent's gross negligence or willful misconduct, the Secured Party shall
indemnify and hold the Escrow Agent harmless from any claims made against the
Escrow Agent by the Purchaser, and the Purchaser shall indemnify and hold the
Escrow Agent harmless from any claim made against the Escrow Agent by the
Secured Party, and the Secured Party, on the one hand, and the Purchaser, on the
other, jointly and severally shall indemnify and hold the Escrow Agent harmless
from any claim of any third party, arising out of or related to this Agreement,
such indemnification to include all costs and expenses incurred by the Escrow
Agent not limited to, reasonable attorneys' fees.
(h) The escrow Agent shall not be required to institute or
defend any action involving any matters referred to herein or which affect it or
its duties or liability under this Agreement unless or until requested to do so
by any party to this Agreement and then only upon receiving full indemnity in
character satisfactory to the Escrow Agent against claims, liabilities and
expenses in relation thereto.
(i) The Purchaser and Secured Party hereby acknowledge that
the Escrow Agent is merely serving as a depository hereunder and that the Escrow
Agent is counsel to the Secured Party. The Purchaser and Secured Party agree
that the Escrow Agent shall be entitled to continue to serve as counsel to the
Secured Party even if a dispute arises between the Purchaser and the Secured
Party. The Escrow Agent shall not be treated as being in a conflict situation
with respect to its representation of the Secured Party by virtue of the Escrow
Agent's agreeing to serve hereunder.
7. Issuances of Additional Shares
Until the Pledged Stock has been returned to the Purchaser,
CAI-III shall not issue any additional shares of its capital stock or enter into
any agreement to do so.
8. Termination
This Agreement and the rights and obligations hereunder shall
automatically terminate and be of no further force and effect on the fifth
anniversary of the date of this Agreement, unless an Event of Default shall have
occurred and is continuing on such date. Upon termination of this Agreement,
Purchaser shall be entitled to the return of the Pledged Stock pursuant to the
procedures set forth in Section 5 hereof.
9. Applicable Law
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.
10. Notices
All notices and other communications required or permitted
hereunder shall be in writing addressed to each of the parties at their
respective address set forth on the first page hereof or such changed address as
shall be given by notice as herein provided. All such notices shall be given by
(a) personal delivery against receipt therefor or (b) mailing the same certified
or registered mail, return receipt requested. All notices shall be deemed given
when received. Copies of all notices shall be given to the Escrow Agent and
shall be addressed to the attention of Mark K. Lipton, Esquire.
11. Execution of Further Documents
The Purchaser shall execute any and all instruments and
documents, including but not limited to financing statements for filing pursuant
to the laws of the State of New Jersey, which the Secured Party or his counsel
may reasonably request at any time and which the Secured Party or his counsel
deem reasonably necessary in order to complete, perfect or continue the first
lien of the Secured Party in the Pledged Stock. The Purchaser shall pay all
costs of any filings of financing statements, and all fees, if any, to the
Escrow Agent for serving as such.
12. Miscellaneous
(a) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns.
(b) Headings. The headings of this Agreement are for
convenience of reference only and shall not constitute a part hereof.
(c) Oral Termination or Modification. This Agreement may not
be modified, changed, amended or terminated, except in writing signed by the
parties to this Agreement.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
WITNESS:
/s/ Marlene Todaro /s/ Anthony Todaro
- ---------------------------------- -----------------------------------
ANTHONY TODARO
/s/ Anthony Todaro /s/ Marlene Todaro
- ---------------------------------- -----------------------------------
MARLENE TODARO
ATTEST: CORECARE SYSTEMS, INC.
/s/ By: /s/ Rose S. DiOttavio
- ---------------------------------- -----------------------------------
Secretary Rose S. DiOttavio, President
PODVEY, SACHS, MEANOR, CATENACCI
HILDNER & COCOZIELLO, A
PROFESSIONAL CORPORATION
Escrow Agent
WITNESS:
By: /s/ Mark K. Lipton
- ---------------------------------- -----------------------------------
Mark K. Lipton
As to the provisions of Section 7
ATTEST: CORECARE ACQUISITION, INC. - III
/s/ By: /s/ Rose DiOttavio
- ---------------------------------- -----------------------------------
Title: President
---------------------------
EXHIBIT 6.13
GUARANTY
THIS GUARANTY (the "Guaranty") made this 30th day of June, 1995 by Penn
Interpersonal Communications, Inc., having an address at 1116 Northampton
Street, Easton, Pennsylvania 18042 ("Guarantor"), to Anthony Todaro and Marlene
Todaro, having an address at 517 Ludlow Station Road, Asbury, New Jersey 08802
("Creditors") and Creditors' heirs and assigns.
W I T N E S S E T H:
WHEREAS, CoreCare Acquisition, Inc. - III and CoreCare Acquisition, Inc. -
IV (the "Acquisition Companies"), which are wholly-owned subsidiaries of
CoreCare Systems, Inc. ("CoreCare"), have entered into an Agreement and Plan of
Merger (the "Plan of Merger") dated June 30, 1995 with American Institute for
Behavioral Counseling, Inc. ("AIBCI") and Bio Diagnostic Technologies, Inc.
("Bio") pursuant to which AIBCI and Bio will be merged with and into the
respective Acquisition Companies and Creditors will receive shares of CoreCare's
common stock in exchange for Creditors' shares of the common stock of AIBCI and
Bio; and
WHEREAS, CoreCare Acquisition - III has entered into employment agreements
dated June 30, 1995 (the "Employment Agreements") with Creditors and has also
entered into a lease (the "Lease") with Marlene Todaro dated June 30, 1995; and
WHEREAS, pursuant to a Stock Acquisition Agreement (the "Stock Acquisition
Agreement") dated the date hereof CoreCare will acquire all of the capital stock
of the Guarantor owned by the Creditors.
WHEREAS, pursuant to the terms of the Plan of Merger, Guarantor is
obligated to guarantee the obligations of CoreCare Acquisition, Inc. - III under
the Employment Agreements and the Lease and the obligations of the Acquisition
Companies under the Plan of Merger and all of the agreements and instruments
executed by the Acquisition Companies in connection with the Plan of Merger
including, without limitation, the Security Agreements and Guaranties entered
into with or in favor of Creditors by the Acquisition Companies (all of the
above collectively, the "Obligations").
NOW, THEREFORE, in order to induce Creditors to enter into the Plan of
Merger, the Stock Acquisition Agreement, the Employment Agreements and the Lease
and for other good and valuable consideration, Guarantor agrees as follows:
ARTICLE I
COVENANTS AND AGREEMENTS
(a) Guarantor hereby unconditionally guarantees to Creditors the
full and prompt performance of each and every Obligation of the Acquisition
Companies when and as the same become due and payable. In the event any of the
Obligations shall not be paid according to its terms, Guarantor shall
immediately pay, perform or cause the performance of the same, this Guaranty
being a guaranty of full payment and performance and not of collectibility. This
Guaranty is an absolute, unconditional and continuing guaranty and shall remain
in force until full and final payment and performance of the Obligations and is
no way conditioned upon any requirement that Creditors first attempt to collect
payment or seek performance of any of the Obligations from CoreCare, or any
other obligor or guarantor, or resort to any other security or other means of
obtaining payment or performance of and any of the Obligations or upon any other
contingency whatsoever.
(b) Upon the default or breach by the Acquisition Companies in the
full and punctual payment or performance of the Obligations, the liabilities and
obligations of Guarantor hereunder shall, at the option of Creditors, become
forthwith due and payable without demand or notice of any nature, all of which
are expressly waived by Guarantor. Each and every default in the payment or
performance of the Obligations shall give rise to a separate cause of action
under this Guaranty and separate suits may be brought hereunder as each cause of
action arises.
Section 1.2. Further Payments. Guarantor further agrees to pay
forthwith upon demand all costs and expenses (including reasonable attorneys'
fees and disbursements) incurred or expended in connection with this Guaranty
and the enforcement hereof.
Section 1.3. Freedom to Deal with the Acquisition Companies.
Creditors shall be at liberty, without giving notice to, or obtaining the
consent of, Guarantor and without relieving Guarantor of any liability
hereunder, to deal with the Acquisition Companies and with each other person,
who now is or after the date hereof becomes liable in any manner for any of the
Obligations, in such manner as Creditors, in their sole discretion, deem fit and
proper, and, to this end, Guarantor hereby gives to Creditors the full authority
in his discretion to do any and all of the following things, without notice to,
or obtaining the consent of, Guarantor:
(a) grant waivers, extensions or renewals under any of the
Obligations;
(b) waive the payment or performance of any of the Obligations;
(c) modify or amend any of the terms, provisions or agreements
contained in any of the Obligations, except that Creditors shall not increase
the Obligations without the consent of Guarantor;
(d) vary, exchange, release or discharge, wholly or partially, or
delay in or abstain from perfecting or enforcing any security or guaranty of the
Obligations by any guarantor or any other person or entity;
(e) accept partial payment or performance of any of the Obligations;
or
(f) compromise or make any settlement or other arrangement with the
Acquisition Companies or any other guarantor of the Obligations.
Section 1.4. Consent and Waiver. Guarantor hereby consents to all of
the terms and provisions of the Obligations, as the same may be from time to
time amended or modified. Guarantor hereby irrevocably waives:
(a) notice of the execution and delivery of the Obligations,
acceptance of this Guaranty and notice that Creditors or CoreCare have entered
into any of the Obligations in reliance hereon;
(b) notice of any amendment or any change in the terms of any of the
Obligations, or any other present or future agreement relating directly or
indirectly thereto;
(c) notice of any default under any of the Obligations or any other
present or future agreement relating directly or indirectly thereto;
(d) demand for performance, observance and enforcement of any
provisions applicable to CoreCare, or pursuit or exhaustion of any rights or
remedies against CoreCare, or any other guarantor or obligor who becomes liable
in any manner for any of the Obligations or resort to any security for the
Obligations, and any requirements of diligence or promptness on the part of
Creditors in connection therewith; and
(e) diligence, presentment, protest, notice of dishonor and notice
of default in the payment of any amount at any time payable by the Acquisition
Companies under or in connection with any of the Obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
Guarantor hereby represents and warrants that:
(a) The execution, delivery and performance under this Guaranty does
not and will not: (i) to its knowledge after reasonable inquiry violate any
provision of any existing law, statute, rule or regulation; (ii) to its
knowledge after diligent inquiry conflict with, result in a breach of or
constitute a default under: (1) any order, judgment, award or decree of any
court, governmental authority, bureau or agency; or (2) any mortgage, indenture,
lease, evidence of indebtedness, contract or other agreement or undertaking to
which any Guarantor is a party or by which Guarantor's properties or assets may
be bound; or (iii) to its knowledge after diligent inquiry result in the
creation or imposition of any lien upon or with respect to any property or asset
now or hereafter acquired by Guarantor other than the liens created hereby.
(b) This Guaranty constitutes the legal, valid and binding
obligation of the Guarantor, enforceable against Guarantor in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally or by general equity principles.
(c) To its knowledge after diligent inquiry, there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, or before or by
any court, public board or body, pending, or, within the knowledge of Guarantor,
threatened, wherein an unfavorable decision, ruling or finding would: (i) to the
extent not covered by insurance, result in any material adverse change in the
assets of Guarantor; (ii) materially adversely affect the transactions
contemplated by the aforesaid Plan of Merger, Stock Acquisition Agreement or
this Guaranty; or (iii) adversely affect the validity or enforceability of any
of the Obligations or this Guaranty.
(d) The entering into by Creditors of the Stock Acquisition
Agreement and Plan of Merger will result in material benefits to Guarantor.
(e) The address set forth on page 1 of this Guaranty is the correct
address of Guarantor's principal offices, and Guarantor hereby covenants and
agrees to provide Creditors with at least thirty (30) days' written notice
before changing of its offices.
ARTICLE III
COVENANTS AND AGREEMENTS OF THE GUARANTORS
Section 3.1. Assure Performance by Creditor. Guarantor shall cause
the Acquisition Companies to perform and observe fully all of the Obligations.
Section 3.2. Subrogation Rights. Guarantor shall not exercise any
rights which Guarantor may have acquired by way of subrogation under this
Guaranty or any rights of contribution or indemnification by reason of any
payments made hereunder or otherwise until the payment in full and performance
of all of the Obligations. Notwithstanding the foregoing, if Guarantor shall
receive any monies by reason of the exercise of such rights of subrogation,
contribution or indemnification prior to the payment in full and performance of
the Obligations, such amounts shall be held in trust by Guarantor for the
benefit of Creditors and shall be paid by Guarantor directly to Creditors and
applied to the payment of the Obligations.
Section 3.3. Subordination. Guarantor shall subordinate, upon terms
satisfactory to Creditors, any loans, debts or other liabilities owed by the
Acquisition Companies to Guarantor, to the Acquisition Companies' Obligations to
Creditors.
Section 3.4. Duty to Notify. Guarantor shall immediately notify
Creditors if it becomes aware of the occurrence of an Event of Default (as
hereinafter defined) or of any condition, event or act which, with the giving of
notice or passage of time or both, would constitute such an Event of Default.
ARTICLE IV
DEFAULT
Section 4.1. Events of Default. Any one or more of the following
shall constitute an event of default hereunder (an "Event of Default"):
(a) Guarantor shall have applied for or consented to the appointment
of a custodian, receiver, trustee or liquidator, or other court-appointed
fiduciary of all or a substantial part of Guarantor's properties; or a
custodian, receiver, trustee, liquidator or other court-appointed fiduciary
shall have been appointed with or without the consent of the Guarantor; or if
Guarantor shall have made a general assignment for the benefit of creditors; or
Guarantor shall have filed a voluntary petition in bankruptcy, or a petition or
answer seeking an arrangement with creditors or seeking to take advantage of any
insolvency law, or an answer admitting the material allegations of a petition in
any bankruptcy, or in a reorganization or insolvency proceeding; or if within
thirty (30) days after the commencement of any proceeding against Guarantor
seeking an arrangement, composition, readjustment or similar relief under the
Federal Bankruptcy Code or any present or future applicable Federal, state or
other statute or law, such proceeding shall not have been dismissed or if,
within forty-five (45) days after the appointment of any custodian, receiver,
trustee, liquidator or other court-appointed fiduciary of Guarantor or of all or
any substantial part of Guarantor's properties or assets, such order or
appointment shall have continued unstayed and in effect for any period of
forty-five (45) consecutive days;
(b) Failure of Guarantor to make any payments or perform any acts in
respect of the Obligations pursuant to the terms hereof;
(c) Failure of Guarantor to observe or perform any other covenant,
condition or agreement to be observed or performed by Guarantor pursuant to this
Guaranty and the continuance of such failure for a period of ten (10) days after
the earlier of (i) the occurrence of such failure or (ii) notice from Creditors
specifying the nature of such failure and requesting that it be cured;
(d) The occurrence of any Event of Default under any of the
Obligations (as such term may be defined therein).
Section 4.2. Remedies on Default. If any one or more Events of
Default shall occur under this Guaranty, then in each case, during the
continuance of such Event of Default, Creditors shall have all rights and
remedies, including, but not limited to the right to: (i) cause all amounts
payable hereunder and pursuant to the Agreements to be immediately due and
payable; (ii) take any other action available either at law or in equity to
enforce performance or collect any amounts due or thereafter to become due under
this Guaranty or the Obligations and exercise all rights and remedies of
Creditors thereunder; or (iii) enforce the observance of any of the covenants or
obligations of the Guarantor under this Guaranty.
Section 4.3. Remedies Cumulative. No remedy herein conferred upon or
reserved to Creditors or conferred under the Agreements is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to any remedy now or
hereafter existing at law or in equity or by statute. Delay or omission in the
exercise of any right, remedy or power accruing upon any Event of Default, or
failure by Creditors to insist upon the strict performance of any of the
covenants and agreements herein set forth shall not impair any such right,
remedy or power or be considered or taken as a waiver or relinquishment of the
right to insist upon and to enforce in the future, by injunction or other
appropriate legal or equitable remedy, strict compliance by the Guarantor with
all of the covenants and conditions hereof, or of the right to exercise any such
rights or remedies, if such default by Guarantor shall be continued or repeated.
Section 4.4. Defenses Barred. Guarantor shall not be entitled to
assert as a defense to any claim based upon this Guaranty: (i) any abatement,
deduction, set-off or counterclaim; (ii) any claim of waiver or laches, or any
demand for marshalling of assets or like procedure; or (iii) the pendency of any
bankruptcy, reorganization, insolvency, liquidation or other Federal or state
proceedings to which the Acquisition Companies are a party or by which the
Acquisition Companies are affected, whether or not any proceeding of the type
described in this clause (iii) would constitute a defense to, or operate as a
stay of, a claim or action by Creditors against the Acquisition Companies,
provided that nothing herein shall prevent Guarantor from asserting any such
claims in its individual capacity against Creditors in a separate proceeding
unrelated to any proceeding instituted by Creditors to enforce this Guaranty.
Section 4.5. No Additional Waiver Implied by One Waiver. In the
event any agreement contained in this Guaranty shall be breached by Guarantor
and thereafter waived by Creditors, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
ARTICLE V
MISCELLANEOUS
Section 5.1. Benefit of Guaranty; Successors and Assigns. This
Guaranty is entered into by Guarantor for the benefit of Creditors and their
heirs, legal representatives and assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors, legal representatives and assigns.
Section 5.2. Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when personally delivered or three (3) days after having been mailed by
registered or certified mail, postage prepaid, addressed to the parties hereto
at the addresses set forth on the first page hereof. Notices shall also be
effective if sent by overnight courier service which shall be deemed given one
day after sending as evidenced by receipt of courier service, or if given by
telefax with electronically generated receipt, followed by regular mail, which
shall be deemed given when received by the intended recipient as evidenced by
such electronically generated receipt.
Guarantor or Creditors, may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent, which notice shall be deemed given when
received.
Section 5.3. Severability. In the event any provision of this
Guaranty shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding not invalidate or render unenforceable any other
provision hereof.
Section 5.4. Applicable Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New Jersey.
Section 5.5. Entire Agreement. This Guaranty constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, of Guarantor relating to the subject matter hereof.
Section 5.6. Liability. Guarantor shall not hold Creditors liable
due to any action or failure to act by Creditors herein or in any document or
instrument except as a result of Creditors' willful misconduct. This provision
shall survive the termination or expiration of this Guaranty or any document or
instrument.
Section 5.7. Reasonable Costs and Expenses. If, prior hereto and/or
at any time or times hereafter, Creditors shall employ counsel to commence,
defend or intervene, file a petition, complaint, answer, motion or other
pleadings, or to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to the Agreements, the Obligations
or this Guaranty to enforce any rights of Creditors hereunder or thereunder
whether before or after the occurrence of any Event of Default, or to collect
any of the Obligations then, in any of such events, Guarantor agrees to pay
reasonable attorney's fees and any reasonable expenses, costs and charges
relating thereto, and such shall be part of the Obligations guaranteed by
Guarantor under this Guaranty.
Section 5.8. Acknowledgements. Guarantor acknowledges receipt of the
copies of the Agreements and any other document delivered in connection
therewith.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the day
and year first written above.
ATTEST: PENN INTERPERSONAL
COMMUNICATIONS, INC.
/s/ Marlene Todaro /s/ Anthony Todaro
- -------------------------------- ---------------------------------
, Secretary Anthony Todaro, President
EXHIBIT 6.14
GUARANTY
THIS GUARANTY (the "Guaranty") made this 30th day of June, 1995 by
CoreCare Acquisition, Inc. - III and CoreCare Acquisition, Inc. - IV, having
addresses at 933 Washington Avenue, Suite 1-C, Greenbrook, New Jersey 08812
(collectively referred to as "Guarantor") to Anthony Todaro and Marlene Todaro,
having an address at 517 Ludlow Station Road, Asbury, New Jersey 08802
("Creditors") and Creditors' heirs and assigns.
W I T N E S S E T H:
WHEREAS, CoreCare Systems, Inc. ("CoreCare") has entered into a Stock
Acquisition Agreement dated June 30, 1995 (the "Stock Acquisition Agreement")
pursuant to which it has acquired from Creditors all of the outstanding Capital
Stock of Penn Interpersonal Relations, Inc. ("Penn") and in payment therefor has
issued its promissory note in the amount of $300,000 (the "Note") to Creditors
and entered into a security agreement (the "Security Agreement") and pledge
agreements (the "Pledge Agreements") with Creditors and given its guaranty to
Creditors (the "CoreCare Guaranty"); and
WHEREAS, CoreCare is the owner of all of the Capital Stock of the
Guarantor;
WHEREAS, as a condition of selling the said Capital Stock to CoreCare, the
Creditors required that Guarantor guarantee all the obligations of CoreCare
under the Note, the Security Agreement, the Pledge Agreements and the CoreCare
Guaranty; and
WHEREAS, the acquisition of Penn will confer direct and indirect benefits
on Guarantor;
NOW, THEREFORE, in order to induce Creditors to enter into the Stock
Acquisition Agreement and for other good and valuable consideration, Guarantor
agrees as follows:
ARTICLE I
COVENANTS AND AGREEMENTS
(a) Guarantor hereby jointly and severally unconditionally
guarantees to Creditors the full and prompt payment of the Note and the
satisfaction of all other obligations of CoreCare under the Note, the Stock
Acquisition Agreement, the Security Agreement, the Pledge Agreements, the
CoreCare Guaranty and all other agreements and instruments entered into by
CoreCare in connection with the Stock Acquisition Agreement (collectively, the
"Obligations") when and as the same become due and payable. In the event that
either the Note or other Obligation shall not be paid according to its terms,
Guarantor shall immediately pay, perform or cause the performance of the same,
this Guaranty being a guaranty of full payment and performance and not of
collectibility. This Guaranty is an absolute, unconditional and continuing
guaranty and shall remain in force until full and final payment and performance
of the Obligations and is no way conditioned upon any requirement that Creditors
first attempt to collect payment or seek performance of any of the Obligations
from CoreCare, or any other obligor or guarantor, or resort to any other
security or other means of obtaining payment or performance of and any of the
Obligations or upon any other contingency whatsoever.
(b) Upon the default or breach by CoreCare in the full and punctual
payment or performance of the Obligations, the liabilities and obligations of
Guarantor hereunder shall, at the option of Creditors, become forthwith due and
payable without demand or notice of any nature, all of which are expressly
waived by Guarantor. Each and every default in the payment or performance of the
Obligations shall give rise to a separate cause of action under this Guaranty
and separate suits may be brought hereunder as each cause of action arises.
Section 1.2. Further Payments. Guarantor further agrees to pay
forthwith upon demand all costs and expenses (including reasonable attorneys'
fees and disbursements) incurred or expended in connection with this Guaranty
and the enforcement hereof.
Section 1.3. Freedom to Deal with CoreCare. Creditors shall be at
liberty, without giving notice to, or obtaining the consent of, Guarantor and
without relieving Guarantor of any liability hereunder, to deal with CoreCare
and with each other person, who now is or after the date hereof becomes liable
in any manner for any of the Obligations, in such manner as Creditors, in their
sole discretion, deem fit and proper, and, to this end, Guarantor hereby gives
to Creditors the full authority in his discretion to do any and all of the
following things, without notice to, or obtaining the consent of, Guarantor:
(a) grant waivers, extensions or renewals under any of the
Obligations;
(b) waive the payment or performance of any of the Obligations;
(c) modify or amend any of the terms, provisions or agreements
contained in any of the Obligations, except that Creditors shall not increase
the Obligations without the consent of Guarantor;
(d) vary, exchange, release or discharge, wholly or partially, or
delay in or abstain from perfecting or enforcing any security or guaranty of the
Obligations by any guarantor or any other person or entity;
(e) accept partial payment or performance of any of the Obligations;
or
(f) compromise or make any settlement or other arrangement with
CoreCare or any other guarantor of the Obligations.
Section 1.4. Consent and Waiver. Guarantor hereby consents to all of
the terms and provisions of the Obligations, as the same may be from time to
time amended or modified. Guarantor hereby irrevocably waives:
(a) notice of the execution and delivery of the Obligations,
acceptance of this Guaranty and notice that Creditors or CoreCare have entered
into any of the Obligations in reliance hereon;
(b) notice of any amendment or any change in the terms of any of the
Obligations, or any other present or future agreement relating directly or
indirectly thereto;
(c) notice of any default under any of the Obligations or any other
present or future agreement relating directly or indirectly thereto;
(d) demand for performance, observance and enforcement of any
provisions applicable to CoreCare, or pursuit or exhaustion of any rights or
remedies against CoreCare, or any other guarantor or obligor who becomes liable
in any manner for any of the Obligations or resort to any security for the
Obligations, and any requirements of diligence or promptness on the part of
Creditors in connection therewith; and
(e) diligence, presentment, protest, notice of dishonor and notice
of default in the payment of any amount at any time payable by CoreCare under or
in connection with any of the Obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
Guarantor hereby represents and warrants that:
(a) The execution, delivery and performance under this Guaranty does
not and will not: (i) to its knowledge after reasonable inquiry violate any
provision of any existing law, statute, rule or regulation; (ii) to its
knowledge after diligent inquiry conflict with, result in a breach of or
constitute a default under: (1) any order, judgment, award or decree of any
court, governmental authority, bureau or agency; or (2) any mortgage, indenture,
lease, evidence of indebtedness, contract or other agreement or undertaking to
which any Guarantor is a party or by which Guarantor's properties or assets may
be bound; or (iii) to its knowledge after diligent inquiry result in the
creation or imposition of any lien upon or with respect to any property or asset
now or hereafter acquired by Guarantor other than the liens created hereby.
(b) This Guaranty constitutes the legal, valid and binding
obligation of the Guarantor, enforceable against Guarantor in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally or by general equity principles.
(c) To its knowledge after diligent inquiry, there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, or before or by
any court, public board or body, pending, or, within the knowledge of Guarantor,
threatened, wherein an unfavorable decision, ruling or finding would: (i) to the
extent not covered by insurance, result in any material adverse change in the
assets of Guarantor; (ii) materially adversely affect the transactions
contemplated by the aforesaid Stock Acquisition Agreement or this Guaranty; or
(iii) adversely affect the validity or enforceability of any of the Obligations
or this Guaranty.
(d) Creditors' selling of stock to CoreCare pursuant to the Stock
Acquisition Agreement will result in material benefits to Guarantor.
(e) The address set forth on page 1 of this Guaranty is the correct
address of Guarantor's principal offices, and Guarantor hereby covenants and
agrees to provide Creditors with at least thirty (30) days' written notice
before changing of its offices.
ARTICLE III
COVENANTS AND AGREEMENTS OF THE GUARANTORS
Section 3.1. Assure Performance by CoreCare. Guarantor shall use its
best efforts to cause CoreCare to perform and observe fully all of the
Obligations.
Section 3.2. Subrogation Rights. Guarantor shall not exercise any
rights which Guarantor may have acquired by way of subrogation under this
Guaranty or any rights of contribution or indemnification by reason of any
payments made hereunder or otherwise until the payment in full and performance
of all of the Obligations. Notwithstanding the foregoing, if Guarantor shall
receive any monies by reason of the exercise of such rights of subrogation,
contribution or indemnification prior to the payment in full and performance of
the Obligations, such amounts shall be held in trust by Guarantor for the
benefit of Creditors and shall be paid by Guarantor directly to Creditors and
applied to the payment of the Obligations.
Section 3.3. Subordination. Guarantor shall subordinate, upon terms
satisfactory to Creditors, any loans, debts or other liabilities owed by
CoreCare to Guarantor, to CoreCare's Obligations to Creditors.
Section 3.4. Duty to Notify. Guarantor shall immediately notify
Creditors if it becomes aware of the occurrence of an Event of Default (as
hereinafter defined) or of any condition, event or act which, with the giving of
notice or passage of time or both, would constitute such an Event of Default.
ARTICLE IV
DEFAULT
Section 4.1. Events of Default. Any one or more of the following
shall constitute an event of default hereunder (an "Event of Default"):
(a) Guarantor shall have applied for or consented to the appointment
of a custodian, receiver, trustee or liquidator, or other court-appointed
fiduciary of all or a substantial part of Guarantor's properties; or a
custodian, receiver, trustee, liquidator or other court-appointed fiduciary
shall have been appointed with or without the consent of the Guarantor; or if
Guarantor shall have made a general assignment for the benefit of creditors; or
Guarantor shall have filed a voluntary petition in bankruptcy, or a petition or
answer seeking an arrangement with creditors or seeking to take advantage of any
insolvency law, or an answer admitting the material allegations of a petition in
any bankruptcy, or in a reorganization or insolvency proceeding; or if within
thirty (30) days after the commencement of any proceeding against Guarantor
seeking an arrangement, composition, readjustment or similar relief under the
Federal Bankruptcy Code or any present or future applicable Federal, state or
other statute or law, such proceeding shall not have been dismissed or if,
within forty-five (45) days after the appointment of any custodian, receiver,
trustee, liquidator or other court-appointed fiduciary of Guarantor or of all or
any substantial part of Guarantor's properties or assets, such order or
appointment shall have continued unstayed and in effect for any period of
forty-five (45) consecutive days;
(b) Failure of Guarantor to make any payments or perform any acts in
respect of the Obligations pursuant to the terms hereof;
(c) Failure of Guarantor to observe or perform any other covenant,
condition or agreement to be observed or performed by Guarantor pursuant to this
Guaranty and the continuance of such failure for a period of ten (10) days after
the earlier of (i) the occurrence of such failure or (ii) notice from Creditors
specifying the nature of such failure and requesting that it be cured;
(d) The occurrence of any Event of Default under any of the
Obligations (as such term may be defined therein).
Section 4.2. Remedies on Default. If any one or more Events of
Default shall occur under this Guaranty, then in each case, during the
continuance of such Event of Default, Creditors shall have all rights and
remedies, including, but not limited to the right to: (i) cause all amounts
payable hereunder and pursuant to the Agreements to be immediately due and
payable; (ii) take any other action available either at law or in equity to
enforce performance or collect any amounts due or thereafter to become due under
this Guaranty or the Agreements and exercise all rights and remedies of
Creditors thereunder; or (iii) enforce the observance of any of the covenants or
obligations of the Guarantor under this Guaranty.
Section 4.3. Remedies Cumulative. No remedy herein conferred upon or
reserved to Creditors or conferred under the Agreements is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to any remedy now or
hereafter existing at law or in equity or by statute. Delay or omission in the
exercise of any right, remedy or power accruing upon any Event of Default, or
failure by Creditors to insist upon the strict performance of any of the
covenants and agreements herein set forth shall not impair any such right,
remedy or power or be considered or taken as a waiver or relinquishment of the
right to insist upon and to enforce in the future, by injunction or other
appropriate legal or equitable remedy, strict compliance by the Guarantor with
all of the covenants and conditions hereof, or of the right to exercise any such
rights or remedies, if such default by Guarantor shall be continued or repeated.
Section 4.4. Defenses Barred. Guarantor shall not be entitled to
assert as a defense to any claim based upon this Guaranty: (i) any abatement,
deduction, set-off or counterclaim; (ii) any claim of waiver or laches, or any
demand for marshalling of assets or like procedure; or (iii) the pendency of any
bankruptcy, reorganization, insolvency, liquidation or other Federal or state
proceedings to which CoreCare is a party or by which CoreCare is affected,
whether or not any proceeding of the type described in this clause (iii) would
constitute a defense to, or operate as a stay of, a claim or action by Creditors
against CoreCare, provided that nothing herein shall prevent Guarantor from
asserting any such claims in its individual capacity against Creditors in a
separate proceeding unrelated to any proceeding instituted by Creditors to
enforce this Guaranty.
Section 4.5. No Additional Waiver Implied by One Waiver. In the
event any agreement contained in this Guaranty shall be breached by Guarantor
and thereafter waived by Creditors, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
ARTICLE V
MISCELLANEOUS
Section 5.1. Benefit of Guaranty; Successors and Assigns. This
Guaranty is entered into by Guarantor for the benefit of Creditors and their
heirs, legal representatives and assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors, legal representatives and assigns.
Section 5.2. Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when personally delivered or three (3) days after having been mailed by
registered or certified mail, postage prepaid, addressed to the parties hereto
at the addresses set forth on the first page hereof. Notices shall also be
effective if sent by overnight courier service which shall be deemed given one
day after sending as evidenced by receipt of courier service, or if given by
telefax with electronically generated receipt, followed by regular mail, which
shall be deemed given when received by the intended recipient as evidenced by
such electronically generated receipt.
Guarantor or Creditors, may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent, which notice shall be deemed given when
received.
Section 5.3. Severability. In the event any provision of this
Guaranty shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding not invalidate or render unenforceable any other
provision hereof.
Section 5.4. Applicable Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New Jersey.
Section 5.5. Entire Agreement. This Guaranty constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, of Guarantor relating to the subject matter hereof.
Section 5.6. Liability. Guarantor shall not hold Creditors liable
due to any action or failure to act by Creditors herein or in any document or
instrument except as a result of Creditors' willful misconduct. This provision
shall survive the termination or expiration of this Guaranty or any document or
instrument.
Section 5.7. Reasonable Costs and Expenses. If, prior hereto and/or
at any time or times hereafter, Creditors shall employ counsel to commence,
defend or intervene, file a petition, complaint, answer, motion or other
pleadings, or to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to the Agreements, the Obligations
or this Guaranty to enforce any rights of Creditors hereunder or thereunder
whether before or after the occurrence of any Event of Default, or to collect
any of the Obligations then, in any of such events, Guarantor agrees to pay
reasonable attorney's fees and any reasonable expenses, costs and charges
relating thereto, and such shall be part of the Obligations guaranteed by
Guarantor under this Guaranty.
Section 5.8. Acknowledgements. Guarantor acknowledges receipt of the
copies of the Agreements and any other document delivered in connection
therewith.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the day
and year first written above.
ATTEST: CORECARE ACQUISITION, INC.-III
/s/______________________________ /s/ Rose S. DiOttavio
, Secretary -----------------------------------
Rose S. DiOttavio, President
ATTEST: CORECARE ACQUISITION, INC.-IV
/s/______________________________ /s/ Rose S. DiOttavio
, Secretary -----------------------------------
Rose S. DiOttavio, President
EXHIBIT 6.15
GUARANTY
THIS GUARANTY (the "Guaranty") made this 30th day of June, 1995 by
CoreCare Systems, Inc., having an address at Whitemarsh Professional Center,
9425 Stenton Avenue, Erdenheim, Pennsylvania 19118 ("Guarantor"), to Anthony
Todaro and Marlene Todaro, having an address at 517 Ludlow Station Road, Asbury,
New Jersey 08802 ("Creditors") and Creditors' heirs and assigns.
W I T N E S S E T H:
WHEREAS, Guarantor's wholly-owned subsidiaries, CoreCare Acquisition, Inc.
- - III and CoreCare Acquisition, Inc. - IV (the "Acquisition Companies") have
entered into an Agreement and Plan of Merger (the "Plan of Merger") dated June
30, 1995 with American Institute for Behavioral Counseling, Inc. ("AIBCI") and
Bio Diagnostic Technologies, Inc. ("Bio") pursuant to which AIBCI and Bio will
be merged with and into the respective Acquisition Companies and Creditors will
receive shares of Guarantor's common stock in exchange for Creditors' shares of
the common stock of AIBCI and Bio; and
WHEREAS, CoreCare Acquisition - III has entered into employment agreements
dated June 30, 1995 (the "Employment Agreements") with Creditors and has also
entered into a lease (the "Lease") with Marlene Todaro dated June 30, 1995; and
WHEREAS, Guarantor is the owner of all of the issued and outstanding
shares of capital stock of the Acquisition Companies and, as a result, will
acquire the business of AIBCI and Bio, which will result in direct financial and
other benefits to Guarantor; and
WHEREAS, pursuant to the terms of the Plan of Merger, Guarantor is
obligated to guarantee the obligations of CoreCare Acquisition, Inc. - III under
the Employment Agreements and the Lease and the obligations of the Acquisition
Companies under the Plan of Merger and all of the agreements and instruments
executed by the Acquisition Companies in connection with the Plan of Merger
including, without limitation, the Security Agreements and Guaranties entered
into with or in favor of Creditors by the Acquisition Companies (all of the
above collectively, the "Obligations").
NOW, THEREFORE, in order to induce Creditors to enter into the Plan of
Merger, the Stock Acquisition Agreement, the Employment Agreements and the Lease
and for other good and valuable consideration, Guarantor agrees as follows:
ARTICLE I
COVENANTS AND AGREEMENTS
(a) Guarantor hereby unconditionally guarantees to Creditors the
full and prompt performance of each and every Obligation of the Acquisition
Companies when and as the same become due and payable. In the event any of the
Obligations shall not be paid according to its terms, Guarantor shall
immediately pay, perform or cause the performance of the same, this Guaranty
being a guaranty of full payment and performance and not of collectibility. This
Guaranty is an absolute, unconditional and continuing guaranty and shall remain
in force until full and final payment and performance of the Obligations and is
no way conditioned upon any requirement that Creditors first attempt to collect
payment or seek performance of any of the Obligations from CoreCare, or any
other obligor or guarantor, or resort to any other security or other means of
obtaining payment or performance of and any of the Obligations or upon any other
contingency whatsoever.
(b) Upon the default or breach by the Acquisition Companies in the
full and punctual payment or performance of the Obligations, the liabilities and
obligations of Guarantor hereunder shall, at the option of Creditors, become
forthwith due and payable without demand or notice of any nature, all of which
are expressly waived by Guarantor. Each and every default in the payment or
performance of the Obligations shall give rise to a separate cause of action
under this Guaranty and separate suits may be brought hereunder as each cause of
action arises.
Section 1.2. Further Payments. Guarantor further agrees to pay
forthwith upon demand all costs and expenses (including reasonable attorneys'
fees and disbursements) incurred or expended in connection with this Guaranty
and the enforcement hereof.
Section 1.3. Freedom to Deal with the Acquisition Companies.
Creditors shall be at liberty, without giving notice to, or obtaining the
consent of, Guarantor and without relieving Guarantor of any liability
hereunder, to deal with the Acquisition Companies and with each other person,
who now is or after the date hereof becomes liable in any manner for any of the
Obligations, in such manner as Creditors, in their sole discretion, deem fit and
proper, and, to this end, Guarantor hereby gives to Creditors the full authority
in his discretion to do any and all of the following things, without notice to,
or obtaining the consent of, Guarantor:
(a) grant waivers, extensions or renewals under any of the
Obligations;
(b) waive the payment or performance of any of the Obligations;
(c) modify or amend any of the terms, provisions or agreements
contained in any of the Obligations, except that Creditors shall not increase
the Obligations without the consent of Guarantor;
(d) vary, exchange, release or discharge, wholly or partially, or
delay in or abstain from perfecting or enforcing any security or guaranty of the
Obligations by any guarantor or any other person or entity;
(e) accept partial payment or performance of any of the Obligations;
or
(f) compromise or make any settlement or other arrangement with the
Acquisition Companies or any other guarantor of the Obligations.
Section 1.4. Consent and Waiver. Guarantor hereby consents to all of
the terms and provisions of the Obligations, as the same may be from time to
time amended or modified. Guarantor hereby irrevocably waives:
(a) notice of the execution and delivery of the Obligations,
acceptance of this Guaranty and notice that Creditors or CoreCare have entered
into any of the Obligations in reliance hereon;
(b) notice of any amendment or any change in the terms of any of the
Obligations, or any other present or future agreement relating directly or
indirectly thereto;
(c) notice of any default under any of the Obligations or any other
present or future agreement relating directly or indirectly thereto;
(d) demand for performance, observance and enforcement of any
provisions applicable to CoreCare, or pursuit or exhaustion of any rights or
remedies against CoreCare, or any other guarantor or obligor who becomes liable
in any manner for any of the Obligations or resort to any security for the
Obligations, and any requirements of diligence or promptness on the part of
Creditors in connection therewith; and
(e) diligence, presentment, protest, notice of dishonor and notice
of default in the payment of any amount at any time payable by the Acquisition
Companies under or in connection with any of the Obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
Guarantor hereby represents and warrants that:
(a) The execution, delivery and performance under this Guaranty does
not and will not: (i) to its knowledge after reasonable inquiry violate any
provision of any existing law, statute, rule or regulation; (ii) to its
knowledge after diligent inquiry conflict with, result in a breach of or
constitute a default under: (1) any order, judgment, award or decree of any
court, governmental authority, bureau or agency; or (2) any mortgage, indenture,
lease, evidence of indebtedness, contract or other agreement or undertaking to
which any Guarantor is a party or by which Guarantor's properties or assets may
be bound; or (iii) to its knowledge after diligent inquiry result in the
creation or imposition of any lien upon or with respect to any property or asset
now or hereafter acquired by Guarantor other than the liens created hereby.
(b) This Guaranty constitutes the legal, valid and binding
obligation of the Guarantor, enforceable against Guarantor in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally or by general equity principles.
(c) To its knowledge after diligent inquiry, there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, or before or by
any court, public board or body, pending, or, within the knowledge of Guarantor,
threatened, wherein an unfavorable decision, ruling or finding would: (i) to the
extent not covered by insurance, result in any material adverse change in the
assets of Guarantor; (ii) materially adversely affect the transactions
contemplated by the aforesaid Plan of Merger, Stock Acquisition Agreement or
this Guaranty; or (iii) adversely affect the validity or enforceability of any
of the Obligations or this Guaranty.
(d) Creditors' selling of stock to subsidiaries of Guarantor
pursuant to the aforesaid Plan of Merger and the entering by Creditors into the
Plan of Merger, Employment Agreements and Lease will result in material benefits
to Guarantor.
(e) The address set forth on page 1 of this Guaranty is the correct
address of Guarantor's principal offices, and Guarantor hereby covenants and
agrees to provide Creditors with at least thirty (30) days' written notice
before changing of its offices.
ARTICLE III
COVENANTS AND AGREEMENTS OF THE GUARANTORS
Section 3.1. Assure Performance by Creditor. Guarantor shall cause
the Acquisition Companies to perform and observe fully all of the Obligations.
Section 3.2. Subrogation Rights. Guarantor shall not exercise any
rights which Guarantor may have acquired by way of subrogation under this
Guaranty or any rights of contribution or indemnification by reason of any
payments made hereunder or otherwise until the payment in full and performance
of all of the Obligations. Notwithstanding the foregoing, if Guarantor shall
receive any monies by reason of the exercise of such rights of subrogation,
contribution or indemnification prior to the payment in full and performance of
the Obligations, such amounts shall be held in trust by Guarantor for the
benefit of Creditors and shall be paid by Guarantor directly to Creditors and
applied to the payment of the Obligations.
Section 3.3. Subordination. Guarantor shall subordinate, upon terms
satisfactory to Creditors, any loans, debts or other liabilities owed by the
Acquisition Companies to Guarantor, to the Acquisition Companies' Obligations to
Creditors.
Section 3.4. Duty to Notify. Guarantor shall immediately notify
Creditors if it becomes aware of the occurrence of an Event of Default (as
hereinafter defined) or of any condition, event or act which, with the giving of
notice or passage of time or both, would constitute such an Event of Default.
ARTICLE IV
DEFAULT
Section 4.1. Events of Default. Any one or more of the following
shall constitute an event of default hereunder (an "Event of Default"):
(a) Guarantor shall have applied for or consented to the appointment
of a custodian, receiver, trustee or liquidator, or other court-appointed
fiduciary of all or a substantial part of Guarantor's properties; or a
custodian, receiver, trustee, liquidator or other court-appointed fiduciary
shall have been appointed with or without the consent of the Guarantor; or if
Guarantor shall have made a general assignment for the benefit of creditors; or
Guarantor shall have filed a voluntary petition in bankruptcy, or a petition or
answer seeking an arrangement with creditors or seeking to take advantage of any
insolvency law, or an answer admitting the material allegations of a petition in
any bankruptcy, or in a reorganization or insolvency proceeding; or if within
thirty (30) days after the commencement of any proceeding against Guarantor
seeking an arrangement, composition, readjustment or similar relief under the
Federal Bankruptcy Code or any present or future applicable Federal, state or
other statute or law, such proceeding shall not have been dismissed or if,
within forty-five (45) days after the appointment of any custodian, receiver,
trustee, liquidator or other court-appointed fiduciary of Guarantor or of all or
any substantial part of Guarantor's properties or assets, such order or
appointment shall have continued unstayed and in effect for any period of
forty-five (45) consecutive days;
(b) Failure of Guarantor to make any payments or perform any acts in
respect of the Obligations pursuant to the terms hereof;
(c) Failure of Guarantor to observe or perform any other covenant,
condition or agreement to be observed or performed by Guarantor pursuant to this
Guaranty and the continuance of such failure for a period of ten (10) days after
the earlier of (i) the occurrence of such failure or (ii) notice from Creditors
specifying the nature of such failure and requesting that it be cured;
(d) The occurrence of any Event of Default under any of the
Obligations (as such term may be defined therein).
Section 4.2. Remedies on Default. If any one or more Events of
Default shall occur under this Guaranty, then in each case, during the
continuance of such Event of Default, Creditors shall have all rights and
remedies, including, but not limited to the right to: (i) cause all amounts
payable hereunder and pursuant to the Agreements to be immediately due and
payable; (ii) take any other action available either at law or in equity to
enforce performance or collect any amounts due or thereafter to become due under
this Guaranty or the Obligations and exercise all rights and remedies of
Creditors thereunder; or (iii) enforce the observance of any of the covenants or
obligations of the Guarantor under this Guaranty.
Section 4.3. Remedies Cumulative. No remedy herein conferred upon or
reserved to Creditors or conferred under the Agreements is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to any remedy now or
hereafter existing at law or in equity or by statute. Delay or omission in the
exercise of any right, remedy or power accruing upon any Event of Default, or
failure by Creditors to insist upon the strict performance of any of the
covenants and agreements herein set forth shall not impair any such right,
remedy or power or be considered or taken as a waiver or relinquishment of the
right to insist upon and to enforce in the future, by injunction or other
appropriate legal or equitable remedy, strict compliance by the Guarantor with
all of the covenants and conditions hereof, or of the right to exercise any such
rights or remedies, if such default by Guarantor shall be continued or repeated.
Section 4.4. Defenses Barred. Guarantor shall not be entitled to
assert as a defense to any claim based upon this Guaranty: (i) any abatement,
deduction, set-off or counterclaim; (ii) any claim of waiver or laches, or any
demand for marshalling of assets or like procedure; or (iii) the pendency of any
bankruptcy, reorganization, insolvency, liquidation or other Federal or state
proceedings to which the Acquisition Companies are a party or by which the
Acquisition Companies are affected, whether or not any proceeding of the type
described in this clause (iii) would constitute a defense to, or operate as a
stay of, a claim or action by Creditors against the Acquisition Companies,
provided that nothing herein shall prevent Guarantor from asserting any such
claims in its individual capacity against Creditors in a separate proceeding
unrelated to any proceeding instituted by Creditors to enforce this Guaranty.
Section 4.5. No Additional Waiver Implied by One Waiver. In the
event any agreement contained in this Guaranty shall be breached by Guarantor
and thereafter waived by Creditors, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
ARTICLE V
MISCELLANEOUS
Section 5.1. Benefit of Guaranty; Successors and Assigns. This
Guaranty is entered into by Guarantor for the benefit of Creditors and their
heirs, legal representatives and assigns. This Guaranty shall be binding upon
Guarantor, and Guarantor's successors, legal representatives and assigns.
Section 5.2. Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when personally delivered or three (3) days after having been mailed by
registered or certified mail, postage prepaid, addressed to the parties hereto
at the addresses set forth on the first page hereof. Notices shall also be
effective if sent by overnight courier service which shall be deemed given one
day after sending as evidenced by receipt of courier service, or if given by
telefax with electronically generated receipt, followed by regular mail, which
shall be deemed given when received by the intended recipient as evidenced by
such electronically generated receipt.
Guarantor or Creditors, may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent, which notice shall be deemed given when
received.
Section 5.3. Severability. In the event any provision of this
Guaranty shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding not invalidate or render unenforceable any other
provision hereof.
Section 5.4. Applicable Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New Jersey.
Section 5.5. Entire Agreement. This Guaranty constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, of Guarantor relating to the subject matter hereof.
Section 5.6. Liability. Guarantor shall not hold Creditors liable
due to any action or failure to act by Creditors herein or in any document or
instrument except as a result of Creditors' willful misconduct. This provision
shall survive the termination or expiration of this Guaranty or any document or
instrument.
Section 5.7. Reasonable Costs and Expenses. If, prior hereto and/or
at any time or times hereafter, Creditors shall employ counsel to commence,
defend or intervene, file a petition, complaint, answer, motion or other
pleadings, or to take any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) relating to the Agreements, the Obligations
or this Guaranty to enforce any rights of Creditors hereunder or thereunder
whether before or after the occurrence of any Event of Default, or to collect
any of the Obligations then, in any of such events, Guarantor agrees to pay
reasonable attorney's fees and any reasonable expenses, costs and charges
relating thereto, and such shall be part of the Obligations guaranteed by
Guarantor under this Guaranty.
Section 5.8. Acknowledgements. Guarantor acknowledges receipt of the
copies of the Agreements and any other document delivered in connection
therewith.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the day
and year first written above.
ATTEST: CORECARE SYSTEMS, INC.
/s/ _____________________________ /s/ Rose S. DiOttavio
, Secretary ----------------------------------
, President
EXHIBIT 6.16
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Agreement") dated as of June , 1996, by
and between ELIOTT KREMS AND ROBERT H. KOEN (collectively the "Landlord") and
WESTMEADE CENTER AT WYNDMOOR, INC. ("Tenant").
W I T N E S S E T H
WHEREAS, by Lease Agreement (the "Old Lease") dated March 16, 1989
between Landlord and Westmeade Healthcare, Inc., a copy of which is attached
hereto as Exhibit A and made a part hereof, Landlord leased to Westmeade
Healthcare, Inc., and Westmeade Healthcare, Inc. leased from Landlord certain
"Premises" (as that term is defined in the Old Lease); and
WHEREAS, by Settlement Agreement dated October 20, 1995 between
Landlord and Westmeade Healthcare, Inc. (the "Settlement Agreement"), a copy of
which is attached hereto as Exhibit B and made a part hereof, Landlord, inter
alia, agreed to accept and Westmeade Healthcare, Inc., inter alia, agreed to
make certain payments to cure certain delinquent payments under the Old Lease;
and
WHEREAS, the parties hereto wish to terminate the Old Lease and the
Settlement Agreement and enter into this new Lease Agreement in substitution
therefor.
NOW THEREFORE, in consideration of the matters recited above,
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereby agree as follows:
8. Substitution of New Lease for the Old Lease. The parties hereto
agree that, as of the date that this Agreement has been fully executed and
delivered to Tenant (the "New Commencement Date"), the Old Lease and Settlement
Agreement shall be deemed to have been terminated and neither party to the Old
Lease or the Settlement Agreement shall have any further liability to the other
thereunder. A new lease (the "New Lease"), represented by this Agreement, shall
take the place of the Old Lease and the Settlement Agreement in their entirety.
All of the terms, conditions and provisions of the Old Lease and the Settlement
Agreement shall apply to the New Lease except as otherwise expressly provided
herein. Notwithstanding the foregoing, it is expressly understood and agreed
that any security deposits and any escrowed or prepaid real estate taxes,
insurance or other sums held or enjoyed by Landlord under the Old Lease shall be
held by Landlord for the benefit of the Tenant under the New Lease for the same
purpose as such sums were held under the Old Lease.
The parties hereto agree to execute a memorialization of the New
Commencement Date.
9. New Term of the Lease. The "Term" (as defined in the Old Lease)
of the New Lease shall be modified so as to initially be for the period
commencing with the New Commencement Date and ending on December 31, 2000,
unless sooner terminated as provided in the Lease.
Tenant shall continue to have the two five (5) year options to
extend the term of the New Lease, subject to all terms and conditions of Section
1.01(C) of the Old Lease, except as follows:
(a) the initial term, which such extended terms shall
follow, shall refer to the term set forth in this
Section 2 of this Agreement; and
(b) the "basic rent" (as defined in the Old Lease) for each
"Lease Year" (as defined in the Old Lease) after
calendar year 2000 shall be equal to the basic rent for
the prior Lease Year, times 1.05 and increase by such
1.05 multiple for each year thereafter.
10. Rent. The "basic rent" (as defined in the Old Lease) for the
initial term shall be modified to be as follows:
Monthly Installments
Rent Period Annual Basic Rent of Basic Rent
----------- ----------------- -------------
From New $180,000 $15,000
Commencement
Date to
12/31/96
1/1/97 to
12/31/97 $204,000 $17,000
1/1/98 to
12/31/98 $204,000 $17,000
1/1/99 to
12/31/99 $204,000 $17,000
1/1/2000 to
12/31/2000 $228,000 $19,000
Notwithstanding the foregoing, it is expressly understood that
Tenant shall not be obligated to pay basic rent for the period from the New
Commencement Date through June 30, 1996, because basic rent for that period was
prepaid under the Old Lease and Tenant shall be credited for same hereunder.
It is expressly understood and agreed that all payments required
under Section 1.02.A of the Old Lease have been made and satisfied and Tenant
shall have no obligations under Section 1.02.A.
11. Extinguishment of Payment Obligations Under the Settlement Agreement.
Notwithstanding the fact that the Settlement Agreement shall apply to the New
Lease, except as expressly provided herein (e.g. as to the term of the New Lease
and basic rent), it is expressly understood, and agreed that any payments
required to be made to the Landlord under the Settlement Agreement, including
payments required in accordance with the "Payment Schedule" (as defined in the
Settlement Agreement) are hereby satisfied and extinguished, such obligations
having been replaced and superseded by, and rolled into, the obligations under
this Agreement (particularly this Section 4). Landlord waives any and all of its
rights and remedies arising from the fact that any payment required under the
Settlement Agreement was paid late or not at all. In consideration of the
extinguishment of the payment obligations under the Settlement Agreement, Tenant
agrees as follows:
(a) Tenant shall pay Landlord $50,000 pursuant to the following
schedule:
(i) $25,000 on or before July 1, 1996; and
(ii) $25,000 on or before July 15, 1996.
Such payments may be made by good personal check subject to
collection on initial presentation. If any payment date specified above is not
an ordinary business date, the payment shall be made on the next ordinary
business day.
(b) Tenant shall cause to be delivered to Landlord, on or before
July 15, 1996, 50,000 shares of the Common Stock of CoreCare Systems, Inc., a
Nevada corporation (the "Stock"). Landlord acknowledges that the Stock may be
so-called "restricted" stock and Landlord agrees to accept the Stock subject to
the restrictive legends contained thereon. Notwithstanding the foregoing, Tenant
shall have the right, but not the obligation, of paying the Landlord an
additional $50,000.00 in lieu of delivering the Stock to Landlord. If Tenant
makes such $50,000.00 additional payment, Tenant shall have no obligation to
deliver the Stock to Landlord.
12. Landlord's Authority to Execute. Landlord warrants and represents that
it has the authority to enter into this Agreement and that it does not need the
consent of any third party (including any holder of a mortgage on the Premises)
in connection herewith.
13. Right of First Refusal. It is expressly understood that Tenant shall
maintain and have the right of first refusal provided in Article 22 of the Old
Lease. Section 22.04 of the Old Lease, relating to the right of first refusal
granted to Chestnut Hill Buildings Corporation, is deleted from the New Lease
and Tenant's right of first refusal shall not be subject to any other right of
first refusal.
14. Construction of this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania.
This Agreement has been fully negotiated and neither this Agreement nor any
provision thereof shall be construed against the party which drafted the
Agreement or on whose behalf the Agreement was drafted.
15. Heirs and Assigns. All rights and liabilities herein given to, or
imposed upon, the respective parties hereto, shall extend to and bind the
several and respective heirs, executors, administrators, successors, and assigns
of said parties.
16. Entire Agreement. Except for the Old Lease and the Settlement
Agreement, this Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth or incorporated herein.
17. 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 document.
18. 1995 Real Estate Taxes. Notwithstanding anything herein to the
contrary, Tenant shall be responsible for paying, by July 30, 1996, any and all
real estate taxes, including school district taxes and county and township
taxes, which were required to have been paid by the tenant under the Old Lease
but which, in fact, were not paid.
19. Alyan Pump Co. Alyan Pump Co. ("Alyan") has asserted a claim against
Landlord and/or Westmeade Healthcare, Inc. in the amount of $3,389.88 (the
"Alyan Claim"). Responsibility for the Alyan Claim was addressed in the
Settlement Agreement. Despite the termination of all payment obligations under
the Settlement Agreement, as between Landlord and the Tenant, the Tenant shall
be responsible for the Alyan Claim, together with any interest owed thereunder.
Tenant, however, shall not be obligated to pay the Alyan Claim unless Landlord
is compelled to pay the Alyan Claim by Alyan. Tenant agrees to indemnify, defend
and hold Landlord harmless from any against all liability for the Alyan Claim.
20. Construction of the New Building. The Landlord under the Old Lease was
obligated to construct and/or renovate the "New Building" (as defined in the Old
Lease). Tenant acknowledges that the New Building has been constructed and/or
renovated and accepted by the Tenant in its present condition and that the
Tenant is in possession of the Premises. Landlord acknowledges that any and all
of the tenant's obligations under the Old Lease to pay for the Landlord's
construction and/or renovation of the New Building have been satisfied and
superseded by the Tenant's obligation to pay basic rent under the New Lease.
21. Security Deposit. It is agreed that the amount of the security deposit
being held by the Landlord under the Old Lease, and which is transferred to the
New Lease, is $13,000.00.
22. Insurance. All of the insurance provisions of the Old Lease are
expressly made applicable to the New Lease except that it is expressly
understood that the Tenant shall maintain casualty insurance of the building at
or on the Property for an amount not less than $1,350,000, with a deductible not
more than $5,000.
16. Late Charge. Section 15.01 of the Old Lease, as it relates to the New
Lease, is hereby amended so as to delete from the second line on page 38 of the
Old Lease the "5%" appearing therein and to substitute in its place "7.5%".
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered
this Agreement, this day of June, 1996.
WITNESS: LANDLORD
/s/Eliott Krems
_________________________ ------------------------------
ELIOTT KREMS
WITNESS:
/s/Robert Koen
_________________________ ------------------------------
ROBERT KOEN
TENANT
ATTEST: WESTMEADE CENTER AT WYNDMOOR, INC.
By: /s/Thomas Fleming
_________________________ ------------------------------
LIST OF EXHIBITS TO BE ATTACHED
Exhibit A Old Lease
Exhibit B Settlement Agreement
EXHIBIT A
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") dated as of March 16, 1989, by
and between ELIOTT KREMS AND ROBERT H. KOEN by Eliott Krems, as authorized
partner, having an address of P.O. Box 634, Feasterville, PA 19047 ("Landlord"),
and WESTMEADE HEALTHCARE, INC., a Pennsylvania corporation having an address of
436 west Stafford Street, Philadelphia, PA 19144 ("Tenant"),
W I T N E S S E T H:
THAT Landlord hereby demises and leases to Tenant, and Tenant hereby
hires and takes from Landlord, the real property (the "Land") situate, lying and
being in the Township of Springfield, County of Montgomery, State of
Pennsylvania, more particularly bounded and described in Exhibit A;
TOGETHER with the Building (as defined in Section 2.01; the Land and
the Building being collectively called the "Premises");
TO HAVE AND TO HOLD the Premises unto Tenant, its successors and
assigns, for the Term (as defined in Section 1.01), unless this Lease shall
sooner terminate as hereinafter provided.
AND Landlord and Tenant covenant and agree as follows:
ARTICLE 1
TERM; PRE-TERM PAYMENTS; RENT;
SUBORDINATION AND NON-DISTURBANCE; TENANT'S PROPERTY; UTILITIES
Section 1.01.
A. The term of this Lease (the "Term") shall commence (the
"Commencement Date") on the first first day of a month which is at least 30 days
after the date construction of the New Building (as hereinafter defined) has
been completed and a Certificate of Occupancy is issued for the New Building by
the local governmental agency having Jurisdiction over such matters; provided,
that Landlord shall give Tenant at least 45 days prior notice of the anticipated
Commencement Date. In the event the Commencement Date has not occurred within 12
months from the date of this Lease, Tenant shall have the option, by notice to
Landlord, of declaring this Lease to be terminated, whereupon neither party
shall have any further rights or obligations hereunder, except that Landlord
shall pay to Tenant, within 15 days thereafter, as liquidated damages and not as
a penalty and as Tenant's sole remedy for such termination, an amount equal to
(i) $75,000, minus (ii) any payments required have been made by Tenant pursuant
to Section 1.02A and Section 23.01 which were not made. Tenant shall not
additionally be entitled to return of its Security Deposit.
B. The Term initially shall be for 5 years from and after the
Commencement Date, unless sooner terminated as hereinafter provided.
C. Landlord hereby grants to Tenant an option to continue leasing
the Premises for 2 consecutive periods of 5 years each, the first such extension
period to commence on the day following the last day of the initial part of the
Term and the second such extension period to commence on the day following the
last day of the first extension period. Tenant shall exercise each renewal
option by giving to Landlord, at least 180 days prior to the expiration of the
current period of the Term, notice that Tenant intends to exercise said renewal
option. Upon Tenant's failure timely to give any such notice, all unexercised
renewal options shall immediately cease and be thereafter null and void. During
any renewal period, the terms and provisions of this Lease shall remain
unchanged, except respecting the basic rent, as provided in Section 1.02.
Section 1.02.
A. In order to defray certain of Landlord's costs associated with
construction of the New Building, commencing on the date hereof, and on the same
day in each of the next five succeeding months, Tenant shall make a payment to
Landlord of $6,500, each such payment to be considered additional rent
hereunder; provided, that if the Commencement Date shall occur prior to the date
any such payment falls due, such payment shall no longer be required.
B. Tenant shall pay to Landlord during the Term, in lawful money of
the United States of America, or by check subject to collection, at the address
of Landlord specified above or at such place as Landlord may from time to time
designate, a net annual basic rental, calculated in accordance with Section
1.02C, over and above the, other and additional payments to be paid by Tenant as
hereinafter provided, in equal monthly installments in advance on the first day
of each month. The net annual basic rental shall be paid to Landlord without
notice or demand and is hereinafter sometimes called the "basic rent".
C. (i) The basic rent for the first, second and third Lease Years
(as hereinafter defined) shall be equal the product obtained by multiplying .16
times the Total Project Cost (as, hereinafter defined); provided, that to the
extent the basic rent for the First Lease Year exceeds $160,000, payment of such
excess shall be deferred until the second and third Lease Years and shall be
paid in 24 equal monthly installments together with the monthly payments of
basic rent for the second and third Lease Years. As used herein, "Total Project
Cost" means the sum of all reasonable expenditures made by Landlord in
connection with the acquisition of the Premises and construction of the New
Building, including (without limitation) the purchase price for the Premises,
transfer taxes, title insurance premiums and other typical closing costs, and
acquisition and construction financing fees, construction period interest,
appraisal costs, construction costs, general contractor's fees, architectural
and engineering fees, attorneys' fees and the like, but not including any
attorneys' fees respecting the negotiation and preparation of this Lease or the
Assignment Agreement, of even date herewith, from David Lovitz and Paul Van
Ravensway to Landlord, respecting the Premises, any overhead of Landlord or any
affiliated person or company or any payments of real estate taxes. Any dispute
as to the Total Project Cost shall be resolved by arbitration in the manner
provided in Article 17.
(ii) The basic rent for each Lease Year after the third Lease
Year shall be equal to the basic rent for the prior Lease Year, times 1.05;
provided that any deferred basic rent from the first Lease Year shall be ignored
for the purpose of this Section 1.02C(ii).
Section 1.03.
A. This Lease is and shall be subject and subordinate to any first
lien priority mortgage now or hereafter covering the Premises, and to all
renewals, modifications, consolidations, replacements and extensions thereof (a
"Fee Mortgage"); provided that so long as Tenant is not in default hereunder,
Tenant's possession and enjoyment of the Premises shall not be disturbed by the
exercise of any right or remedy under a Fee Mortgage, including an action in
foreclosure. Furthermore, none of the personal property, equipment or trade
fixtures brought by Tenant onto the Premises ("Tenant's Property") shall be
subject to the lien or security interest of any Fee Mortgage. This Section 1.03
shall be self-operative and no further instrument of subordination or
non-disturbance shall be required, but in confirmation thereof, Tenant shall
execute, within 15 days after request, any instrument that Landlord may
reasonably require acknowledging the provisions of this Section 1.03A.
B. In the event of any act or omission of Landlord which would give
Tenant the right, immediately or after lapse of a period of time, to cancel or
terminate this Lease, or to claim a partial or total eviction, Tenant shall not
exercise such right (i) until it has given written notice of such act or
omission to the holder of any Fee Mortgage whose name and address shall
previously have been furnished to Tenant in writing, and (ii) until a reasonable
period for remedying such act or omission shall have elapsed following the
giving of such notice (which reasonable period shall in no event be less than
the period to which Landlord would be entitled, under this Lease or otherwise,
after similar notice, to effect such remedy, so long as the holder of the Fee
Mortgage ("Mortgagee") promptly commences and diligently prosecutes such remedy
to completion).
Section 1.04. Landlord hereby agrees that none of Tenant's Property shall
constitute real estate or a part of the Premises and shall not be subject to
levy, distraint, execution or claim by Landlord, except in the case of an Event
of Default and subject to any liens or security interests covering the same. The
holder of any security interest in Tenant's Property may enter upon the Premises
at reasonable times upon reasonable prior notice to Landlord, to inspect, take
possession of, protect and/or remove all or any part of Tenant's Property;
provided, that any damage caused by any such removal shall be promptly repaired
by such holder. If this Lease shall be terminated for any reason, Landlord shall
give any such holder who has furnished in writing its name and address to
Landlord written notice of such termination and 30 days within which to remove
any of Tenant's Property which is subject to a lien or security interest in
favor of such holder. This Section 1.04 shall be self-operative and no further
instrument of confirmation shall be required, but in confirmation thereof,
Landlord shall execute, within 15 days after request, any instrument that Tenant
may reasonably require acknowledging the provisions of this Section 1.04.
Section 1.05. The parties intend this to be a "net-net-net" lease pursuant
to which the rent payable during the Term shall be an absolutely net return to
Landlord, undiminished the real property taxes or insurance, or any of them or
any part thereof, or any other carrying charges, maintenance charges or any
other charges of any kind or nature whatsoever except under any mortgage now or
hereafter placed by Landlord upon the Premises or as herein provided, and
Landlord shall not be required to perform any services or furnish any utilities
of any kind or nature whatsoever, except as otherwise provided herein.
Section 1.06. Additional rent shall include any and all expenses
reasonably incurred by Landlord, including reasonable attorney's fees, for the
collection of monies due from Tenant and the enforcement of Tenant's obligations
under this Lease.
Section 1.07.
A. During the Term, Tenant shall be solely responsible for and shall
promptly pay any and all charges for water and sewer service, electricity, gas,
or any other utility used, consumed or supplied to the Premises during the Term,
including during the construction phase. All utilities shall be placed in the
name of Tenant.
B. Subject to Landlord's obligations respecting Structural Elements
(as hereinafter defined), it is expressly understood that in no event shall
Landlord be liable to Tenant for any interruption or failure of the supply of
any such utilities to the Premises, it being the sole obligation of Tenant to
take whatever action is necessary at its sole expense to restore such services,
and Tenant shall have no claim for damages nor shall there be any abatement of
basic rent in the event that if said services shall be discontinued or shall
fail to function for any reason.
ARTICLE 2
CERTAIN DEFINITIONS
Section 2.01. As used herein:
A. "Building" means any structures or improvements now or hereafter
erected or situated on the Land, the foundations and footings thereof, any and
all fixtures, equipment and machinery of every kind and nature whatsoever now or
hereafter affixed or attached thereto, or now or hereafter used or procured for
use in connection with the operation, use or occupancy thereof, and the
appurtenances thereto, but excluding there from Tenant's Property and all
fixtures and articles of personal property title to which, pursuant to any
sublease (as hereinafter defined) is vested in the subtenant (as hereinafter
defined) thereunder;
B. "Event of Default" has the meaning set forth in Article 15;
C. "Fee Mortgage" and "Mortgagee" have the respective meanings set
forth in Section 1.03;
D. "Lease Year" means the period commencing with the Commencement
Date and ending 12 full months thereafter and each successive 12-month period
thereafter during the Term.
E. "New Building" means renovation of the existing Building,
including construction of any improvements associate therewith the plans for
which shall be acceptable to Tenant.
F. "Prime Rate" means the prime commercial lending rate from time to
time announced by Fidelity Bank, National Association to be in effect at its
principal office in Philadelphia, Pennsylvania;
G. "Subleases" has the meaning set forth in Section 14.03 and
"subtenant" means the tenant under a sublease;
H. "Tenant's Property" has the meaning set forth in Section 1.03A.
I. "Termination of this Lease" means the expiration of the Term and
any sooner termination of the Term pursuant to any of the provisions hereof; and
J. "Unavoidable Delays" means delays due to strikes, lockouts, acts
of God, inability to obtain labor or materials, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualties or similar causes beyond
the reasonable control of Landlord or Tenant, as the case may be.
ARTICLE 3
PAYMENT OF TAXES, ASSESSMENTS, ETC.
Section 3.01. Subject to Section 5.01, Tenant shall pay (subject as
hereinafter provided), before any fine, penalty, interest or cost may be added
thereto for the non-payment thereof, all real estate taxes, assessments, water
and sewer rates and charges, vault charges, license and permit fees and other
governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and nature
(collectively, "impositions") which are assessed, levied, confirmed, imposed or
become a lien upon the Premises and the sidewalks or streets in front of or
adjoining the same, or which become payable, during the Term; provided, that if,
by law, any imposition is payable or at the option of the taxpayer may be paid
in installments (whether or not interest shall accrue on the unpaid balance
thereof), Tenant may pay the same (and any accrued interest on the unpaid
balance) in installments and shall pay only such installments as may become due
during the Term as the same respectively become due and before any fine,
penalty, additional interest or cost may be added thereto for non-payment
thereof; provided, further, that any imposition relating to a fiscal period of a
taxing authority, a part of which period is included within the Term and a part
of which is included in a period of time before or after the Term, shall
(whether or not such imposition shall be assessed, levied, confirmed, imposed or
become a lien upon the Premises, or shall become payable during the Term) be
appropriately pro-rated between Landlord and Tenant.
Section 3.02. Nothing in this Lease contained shall require Tenant
to pay any franchise, corporate, estate, inheritance, succession, capital levy,
stamp or transfer tax of Landlord, or any income, excess profits or revenue tax
or any other tax, assessment, charge or levy upon the basic rent, nor shall any
tax, assessment, charge or levy of the character hereinabove in this Section
3.02 described be deemed to be included within the term "imposition"; provided,
that if at any time under the laws of Pennsylvania or any political subdivision
thereof a tax or excise on rents is levied or assessed against Landlord or the
basic rent, as a substitution in whole or in part for taxes assessed or imposed
by Pennsylvania or any political subdivision thereof on land and buildings or on
land or buildings, the same shall be deemed to be included within the term
"imposition", and Tenant shall (but only to the extent that such substitution so
far as ascertainable relieves Tenant from the payment of an imposition as
provided in Section 3.01) pay and discharge such tax or excise on rents in
accordance with Section 3.01 in respect of the payment of impositions. In the
event of a dispute between Landlord and Tenant as to whether or to what extent a
tax is being substituted for taxes assessed or imposed on the Land and Buildings
or on the Land or Buildings, such dispute shall be determined by arbitration in
the manner provided in Article 17.
Section 3.03. If Tenant is currently paying impositions directly to
the taxing authorities, Tenant shall, upon request of Landlord, furnish to
Landlord within 60 days after the date when any imposition is payable, official
receipts of the appropriate taxing authority, or other evidence satisfactory to
Landlord, evidencing the payment thereof.
Section 3.04. Tenant shall have the right to contest the amount or
validity; in whole or in part, of any imposition by appropriate proceedings,
and, notwithstanding Section 3.01, Tenant may defer payment of such imposition
so long as such contest is being diligently prosecuted, unless the Premises or
any part thereof would by reason of such postponement or deferment be in danger
of being forfeited or lost. Upon the termination of such proceedings, Tenant
shall pay any imposition the payment of which was deferred during the
prosecution of such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection therewith. Landlord shall not
unreasonably withhold its consent to joining in any such proceedings or
permitting the same to be brought in its name if required by law. Landlord
shall not be subjected to any liability for the payment of any costs or expenses
in connection with any such proceedings unless Landlord intervenes and takes an
affirmative part therein and Tenant shall indemnify and save harmless Landlord
from any such costs or expenses, except in the case of such intervention. Tenant
shall be entitled to receive any refund of any such imposition and penalties or
interest thereon which have been paid by Tenant, or which have been paid by
Landlord and for which Landlord has been fully reimbursed by Tenant.
Section 3.05. Any certificate, advice or bill showing non-payment of
an imposition received from the appropriate official designated by law to make
or issue the same or to receive payment of any imposition shall be conclusive
evidence that such imposition is due and unpaid at the time of the making or
issuance of such certificate, advice or bill.
ARTICLE 4
INSURANCE
Section 4.01. Subject to Section 5.01, at all times during the Term
Tenant shall keep the Building insured for the mutual benefit of Landlord and
Tenant against:
A. loss or damage by fire, and such other risks as may be included
in the standard form of extended coverage insurance from time to time available,
in amounts sufficient to prevent Landlord or Tenant from becoming a co-insurer
within the terms of the applicable policies, and, in any event, in an amount not
less than 80% of the then full insurable value (as hereinafter defined) of the
Building;
B. loss or damage from leakage of sprinkler systems now or hereafter
installed in the Building, in such amount as Landlord may reasonably require;
C. loss or damage by explosion of high pressure steam boilers, air
conditioning equipment, pressure vessels, motors or similar apparatus now or
hereafter installed in the Building in such limits with respect to any one
accident as may reasonably be required by Landlord from time to time, but not
less than $500,000; and
D. Such other hazards and in such amounts as Landlord may reasonably
require; provided, that such insurance is then customarily maintained in
buildings of similar construction, use and class in the area in which the
Premises are located. "Full insurable value" the actual replacement cost of the
Building (excluding foundation and excavation costs) without physical
depreciation band shall be determined at the request of Landlord by an
architect, appraiser, appraisal company or one of the insurers, selected and
paid by Tenant and reasonably acceptable to Landlord. In the event of a dispute
between Landlord and Tenant as to the limits of the insurance to be carried
pursuant to this Section 4.01 or pursuant to Section 4.02, such dispute shall be
determined by arbitration in the manner provided in Article 17. In the event of
a dispute between Landlord and Tenant as to the character of any hazards which
Landlord may require's Tenant to insure against as provided in this paragraph D
of Section 4.01, or as to the limits of such insurance, such dispute shall be
determined by arbitration in the manner provided in Article 17.
Section 4.02. Tenant shall also maintain during the Term insurance for the
mutual benefit of Landlord and Tenant against:
A. loss of rental from the Building, under a rental value insurance
policy covering risk of loss due to the occurrence of any of the hazards
described in paragraphs A or B of Section 4.01, in an amount sufficient to
prevent Landlord and Tenant from becoming co-insurers, and in any event, in an
amount not less than the aggregate requirements for the period of 12 months
following the occurrence of the insured casualty for (i) the basic rent, (ii)
all impositions and (iii) premiums on insurance required to be carried pursuant
to this Article IV; and
B. claims for bodily injury or property damage, under a policy of
general public liability insurance, with such limits as may reasonably be
required by Landlord from time to time, but not less than $1,000,000 in respect
of injury or death and $300,000 per occurrence for property damage.
Section 4.03. All insurance to be obtained by Tenant under this Lease
shall be effected under valid enforceable policies issued by insurers of
recognized responsibility and reasonably acceptable to Landlord. Upon
commencement of the Term, evidence of the insurance procured by Tenant pursuant
to Sections 4.01 and 4.02 shall be delivered any Mortgagee or, if there be none,
to Landlord. If Landlord has not exercised its option pursuant to Section 5.01B,
at least 30 days prior to the expiration date of any policy, a certificate
evidencing the renewal of such insurance shall be delivered by Tenant to the
holder of the expiring certificate, together with satisfactory evidence of
payment of the premium thereon. To the extent reasonably obtainable, ail
policies referred to in Section 4.01 shall contain agreements by the insurers
that (a) any loss shall be payable to Landlord and to any Mortgagee to whom loss
may be payable as hereinafter provided, notwithstanding any act or negligence of
Tenant which might otherwise result in forfeiture of said insurance, (b) such
policies shall not be cancelled except upon 10 days' prior written notice to
each named insured and loss payee; (c) the coverage afforded thereby shall not
be affected by the performance of any work in or about the Premises; and (d) all
rights of subrogation through Tenant against Landlord shall be waived.
Section 4.04. So long as there shall be a Fee Mortgage, the rental value
policy referred to in paragraph A of Section 4.02 shall name the Mortgagee as
the loss payee thereunder or, if there shall be no Fee Mortgage, then Landlord
shall be named as the loss payee thereunder. Upon receipt of any proceeds under
such policy, the Mortgagee or Landlord, as the case may be, shall apply the same
first to the payment of the basic rent and then to the payment of impositions
and insurance premiums becoming due during restoration of the Building and any
balance of such proceeds shall be paid to Tenant.
Section 4.05. Except as provided in Section 4.04, all policies of
insurance required hereunder shall name Landlord and Tenant as the insureds as
their respective interests may appear. Subject to the limitations of this
Section 4.05 and Sections 4.06 and 4.07, all policies referred to in Section
4.01 shall also provide, if applicable, for any loss to be payable to any
Mortgagee, as its interests may appear, pursuant to a standard mortgagee clause
or endorsement. The loss, if any, under the policies referred to in Section 4.01
shall be adjusted with the insurance companies by Tenant, failing which Landlord
may make such adjustment.
Section 4.06. The loss, if any, under all policies referred to in Section
4.01 shall be payable (i) to Tenant to be held by Tenant in trust for
application to the cost of restoring, repairing, replacing or rebuilding the
Building; or (ii) if any Fee Mortgagee so requests, jointly to Tenant and such
Fee Mortgagee to be disbursed in accordance with Article 11.
Section 4.07. Nothing in this Article 4 shall prevent Tenant from taking
out insurance of the kind and in the amounts and with companies provided for
under Sections 4.01, 4.02 or 4.03 under a blanket insurance policy or policies
which can cover other properties owned or operated by Tenant (or any party
controlling, controlled by, or under common control with, Tenant) as well as the
Premises; provided, that any such policies of insurance provided for under
Section 4.01 (a) shall specify therein, or Tenant shall furnish Landlord and any
Mortgagee with a written statement from the insurers under such policies
specifying, the amount of the total insurance allocated to the Building, which
amount shall be not less than the amount required b Section 4.0l to be carried,
and (b) shall not contain any clause which would result in the insured
thereunder being required to carry insurance with respect to the property
covered thereby in an amount equal to a minimum specific percentage of the full
insurable value of such property in order to prevent the insured therein named
from becoming a co-insurer of any loss with the insurer under such policy.
Tenant shall furnish to Landlord and to any Mortgagee, within 30 days after the
filing thereof with any insurance rate making body, copies of the schedule or
make-up of all property covered by every such policy of blanket insurance.
Section 4.08. All insurance provided for under Section 4.01 may contain
loss deductible clauses in such maximum amounts as Landlord shall approve, which
approval shall not be unreasonably withheld. In the event of a dispute between
Landlord and Tenant as to the amount which may be deductible under a policy,
such dispute shall be determined by arbitration in the manner specified in
Article 17.
ARTICLE 5
ESCROWS FOR TAXES AND INSURANCE
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
ADDITIONAL RENT
Section 5.01
A. At the option of Landlord, Tenant shall pay to Landlord, on the
first day of each month, one-twelfth of the annual amount of all impositions
payable by Tenant pursuant to Article 3 (all as reasonably estimated by Landlord
or any Fee Mortgagee from time to time).
Such sums shall be held by Landlord or any Fee Mortgage to pay
the impositions as they become due and payable.
B. Landlord shall prepay all premiums for Tenant's insurance
obligations one year in advance, Tenant shall pay to Landlord on the first day
of each month one-twelfth of the annual amount of premiums on all insurance
required to be carried by Tenant from time to time under the terms hereof. Such
sums shall reimburse Landlord for said insurance premiums.
C. During any period for which Landlord has exercised an option
under this Section 5.01, Landlord shall, upon request of Tenant, (i) furnish to
Tenant within 60 days after the date when any imposition is payable, official
receipts of the appropriate taxing authority, or other evidence satisfactory to
Tenant, evidencing the payment thereof, and (ii) furnish to Tenant within 30
days after any insurance premium is payable, a receipt from the insurer
evidencing payment thereof.
Section 5.02. If Tenant shall at any time fail (a) to pay any imposition
in accordance with Article 3, (b) to take out, pay for, maintain or deliver any
of the insurance policies provided for in Article 4, (c) to cause any lien of
the character referred to in Article 12 to be discharged as therein provided,
(d) pay for any utilities as required by Section 1.07, or (e) to perform any
other act on its part to be performed under this Lease and the Event of Default
(as defined in Section 15.01) arising therefrom shall be continuing, then
Landlord may, but shall not be obligated so to do, and without notice or demand
upon Tenant and without waiving or releasing Tenant from any obligations of
Tenant in this Lease contained, (i) pay any imposition payable by Tenant
pursuant to Article 3, (ii) take out, pay for and maintain any of the insurance
policies provided for in Article 4, (iii) discharge any lien of the character
referred to in Article 12 as therein provided, (iv) pay any outstanding utility
charges as described in Section 1.07 or (v) perform any other act on Tenant's
part to be performed under this Lease.
Section 5.03. All sums paid by Landlord pursuant to Section 5.02 and all
incidental costs and expenses paid or incurred by Landlord in connection with
the performance of any act by Landlord pursuant to Section 5.02, together with
interest thereon from the date of making of such expenditure by Landlord at a
rate of 2% above the Prime Rate, shall be payable by Tenant to Landlord within
10 days after demand therefor accompanied by evidence reasonably establishing
that the expenditure has been made, or at the option of Landlord may be added to
the basic rent then due or thereafter becoming due under this Lease.
Section 5.04. All sums which may become payable to Landlord by Tenant as
in this Article 5 provided and all other charges and expenses of whatsoever
nature which Tenant is required to pay pursuant to this Lease, shall be deemed
additional rent hereunder and payable as provided in Section 5.03, and Landlord
shall have (in addition to any other right or remedy of Landlord) the same
rights and remedies in the event of the non-payment of any such sums by Tenant
as in the case of default by Tenant in the payment of the basic rent.
ARTICLE 6
COVENANTS AGAINST WASTE AND TO REPAIR AND
MAINTAIN THE PREMISES
Section 6.01. During the Term, Tenant shall not cause or permit any waste,
damage or injury to the Premises.
Section 6.02. During the Term, Tenant shall use all reasonable efforts to
keep the Premises and the adjoining sidewalks, curbs and any vaults clean and in
good condition free of accumulations of dirt, rubbish, snow and ice, and shall
make all repairs and replacements necessary to maintain the Building in a
condition appropriate for buildings of similar construction, use and class in
the area of the Premises, other than repairs to structural elements, roofing or
building wide mechanical systems (collectively, "Structural Elements"), all of
which Landlord shall maintain in good order and condition; provided, that to the
extent any repair to a Structural Element shall become necessary because of
Tenant's negligent misuse thereof, Tenant shall, within 10 days after demand and
evidence of payment is furnished to Tenant, reimburse to Landlord Landlord's
reasonable cost of making such repair. Any dispute under this Section 6.02 shall
be determined by arbitration in the manner provided in Article 17.
Section 6.03. During the Term, Tenant shall not remove or permit the
removal of any of the permanent (as opposed to trade) fixtures constituting a
part of the Premises (other than Tenant's Property or property of subtenants).
ARTICLE 7
COMPLIANCE WITH ORDERS, ORDINANCES, ETC.
Section 7.01. During the Term, Tenant shall promptly comply with (a) all
laws and ordinances and the orders, rules, regulations and requirements of all
federal, state and municipal governments and the appropriate departments,
commissions, boards and officers thereof, and the orders, rules and regulations
of any Board of Fire Underwriters which has jurisdiction, or any other body
exercising similar functions, which may be applicable to the Premises and the
sidewalks, curbs and vaults adjoining the same or to the use or manner of use of
the Premises, and (b) the requirements of all policies of public liability, fire
and all other policies of insurance at any time in force with respect to the
Premises as required under Sections 4.01 and 4.02, except to the extent the same
necessitate changes or additions to Structural Elements, which changes or
additions, subject to Section 6.02, shall be Landlord's responsibility.
Section 7.02. Landlord or Tenant, as appropriate, shall have the right to
contest by appropriate legal proceedings, in the name of Tenant or Landlord or
both, without liability, cost or expense to the other, the validity or
application of any law, ordinance, order, rule, regulation or requirement,
compliance therewith pending the prosecution of any such proceeding may legally
be held in abeyance without the incurrence of a lien, charge or liability of any
kind against the Premises or Tenant's leasehold interest therein and without
"subjecting" Tenant or Landlord to any criminal liability of whatsoever nature
for failure so to comply therewith. Landlord or Tenant, as appropriate, may
postpone compliance therewith until the final determination of any proceedings;
provided, that all such proceedings shall be prosecuted with due diligence and
dispatch, and if any lien, charge or civil liability is incurred by reason of
non-compliance, Landlord or Tenant, as appropriate, may nevertheless make the
contest and delay compliance as aforesaid; provided, further, that Landlord or
Tenant, as appropriate, furnishes to the other security, reasonably satisfactory
to the other, against any loss or injury by reason of such non-compliance or
delay and prosecutes the contest with due diligence. Landlord and Tenant shall
execute and deliver any papers which may be necessary or proper to permit the
other to contest the validity or application of any such law, ordinance, order,
rule, regulation or requirement.
ARTICLE 8
DAMAGE TO OR DESTRUCTION OF THE BUILDING
Section 8.01. In case of damage to or destruction of the Building by fire
or any other casualty, similar or dissimilar, insured or uninsured, during the
Term, Tenant shall, to the extent of the insurance proceeds made available to
it, restore, repair, replace or rebuild the Building as nearly as may be
possible to the condition, quality and class the same was in immediately prior
to such damage or destruction, or with such changes or alterations as Tenant
shall elect to make, which changes or alterations shall be subject to Landlord's
reasonable approval. Such restoration, repairs, replacement or rebuilding shall
be commenced with reasonable promptness and prosecuted with reasonable
diligence.
Section 8.02. The basic rent payable hereunder shall be abated from the
date of the casualty until the completion of the restoration, repairs,
replacement or rebuilding, but only to the extent of the net amount actually
received by Landlord under the rental value insurance referred to in Section
4.02A for application to the basic rent becoming due and payable during said
period.
ARTICLE 9
CONDEMNATION
Section 9.01. If, during the Term, there shall be a total taking or a
constructive total taking (as hereinafter defined) of the fee title to the
Premises in condemnation proceedings, by deed in lieu of condemnation or by any
right of eminent domain, this Lease shall terminate on the date of such taking
and the basic rent and other charges payable by Tenant hereunder shall be
apportioned and paid to the date of such taking. "Constructive total taking"
means a taking of such scope that the untaken portion of the Premises is, in
Tenant's reasonable opinion, insufficient to permit the restoration of the
existing Building so as to constitute a complete, serviceable building,
appropriate for the efficient conduct of Tenant's business thereat.
Section 9.02. In the event of any such total taking or constructive total
taking, the award or awards for said taking, less the cost of the determination
of the amount thereof (the "Condemnation Proceeds"), shall be paid as follows:
A. Landlord shall first be entitled to receive such portion of the
Condemnation Proceeds with interest thereon as shall equal the principal balance
and accrued interest on any Fee Mortgage or Mortgages.
B. Tenant shall then be entitled to receive such portion of the
Condemnation Proceeds with interest thereon as shall equal the value of its
leasehold estate hereunder.
C. Landlord shall then be entitled to receive the balance of the
Condemnation Proceeds.
Section 9.03. In the event of a taking less than a constructive total
taking, this Lease shall not terminate or be affected in any way, except as
provided in Section 9.05, and the Condemnation Proceeds shall be paid as
follows:
A. Tenant shall first be entitled to receive such portion of the
Condemnation Proceeds with interest thereon as shall be awarded for restoration
of the Building and such portion of the Condemnation Proceeds shall be payable
(i) in trust to Tenant for application by Tenant to the cost of restoring,
repairing, replacing or rebuilding the Building; or (ii) if any Fee Mortgagee so
requests, jointly to Tenant and such Fee Mortgagee to be disbursed in accordance
with Article 11.
B. Landlord shall then be entitled to receive such portion of the
Condemnation Proceeds with interest thereon as shall equal the fair market value
of the part of the Land so taken, plus consequential damages, if any, to the
portion of the Land not so taken, the Land to be valued as if vacant and
unencumbered by this Lease or any Fee Mortgage.
C. Tenant shall then be entitled to receive such portion of the
Condemnation Proceeds with interest thereon as shall equal the value of the
portion of the Building so taken and consequential damages awarded due to the
taking, if any, to the remainder of the Building.
D. Landlord and Tenant shall then share equally in any balance of
the Condemnation Proceeds.
Section 9.04. In the event of a taking less than a constructive total
taking, Tenant, subject to reimbursement as provided in Article 11, and to the
extent the Condemnation Proceeds made available to Tenant shall be sufficient
for the purpose, shall proceed with due diligence to restore, repair, replace or
rebuild the remaining part of the Building to substantially its former
condition, or with such changes or alterations as Tenant may elect to make so as
to constitute a complete, viable building, such changes or alterations being
subject to Landlord's reasonable approval.
Section 9.05. In the event of a taking of the character referred to in
Section 9.03, this Lease shall terminate as to the portion of the Premises so
taken and from and after the date of such taking a just proportion of the basic
rent, according to the extent and nature of such taking, shall abate for the
remainder of the term of this Lease. If Landlord and Tenant cannot agree on the
amount of such abatement of rent, such dispute shall be determined by
arbitration as provided in Article 17. Until the amount of the reduction of the
basic rent shall have been determined, Tenant shall continue to pay to Landlord
the basic rent provided for herein. When the amount of the abatement shall have
been agreed upon or determined, Landlord shall refund to Tenant the amount of
the basic rent paid from the date of the taking which is in excess of the amount
to which the basic rent has been reduced by such abatement.
Section 9.06. If the whole or any part of the Premises, or of Tenant's
leasehold estate under this Lease, shall be taken in condemnation proceedings or
by any right of eminent domain for temporary use or occupancy, the foregoing
provisions of this Article 9 shall not apply and Tenants shall continue to pay,
in the manner and at the times herein specified, the full amounts of the basic
rent and all additional rent and other charges payable by Tenant hereunder, and,
except only to the extent that they may be prevented from so doing pursuant to
the terms of the order of the condemning authority, Landlord and Tenant shall
perform and observe all of their respective obligations hereunder, as though
such taking had not occurred. Tenant shall be entitled to receive the entire
amount of the Condemnation Proceeds made for such taking, whether paid by way of
damages, rent or otherwise, unless such period of temporary use or occupancy
shall extend beyond the Term, in which case the Condemnation Proceeds shall be
apportioned between Landlord and Tenant upon receipt thereof as of the date of
termination of this Lease. Tenant shall, upon the expiration of any such period
of temporary use or occupancy during the Term, restore the Building, as nearly
as may be reasonably practicable, to the condition in which the same was
immediately prior to such taking. Any portion of the Condemnation Proceeds
received by Tenant as compensation for the cost of restoration of the Building
shall, if such period of temporary use or occupancy shall extend beyond the
Term, be paid to Landlord on the date of termination of this Lease to the extent
not theretofore received and disbursed by Tenant in connection with restoration
of the Building.
Section 9.07. If the order or decree in any condemnation or similar
proceeding shall fail separately to state the amount to be awarded to Landlord
and the amount to be awarded to Tenant under Section 9.02 or 9.03, or the amount
of the compensation for the restoration of the Building under Section 9.03 or
9.06, and if Landlord and Tenant cannot agree thereon within 30 days after the
final award or awards shall have been fixed and determined, any such dispute
shall be determined by arbitration in the manner provided in Article 17. In no
event shall Landlord have any responsibility or liability to Tenant arising from
any taking, except as herein expressly provided.
Section 9.08. Tenant and any Mortgagee shall have the right to participate
in any condemnation proceeding for the purpose of protecting their respective
rights hereunder.
ARTICLE 10
NEW BUILDING; RECONSTRUCTION;
MAINTENANCE OF STRUCTURAL ELEMENTS
Section 10.01. Promptly after the execution hereof Landlord shall
commence, and shall thereafter proceed with due diligence and continuity,
subject to unavoidable delays, to prepare final plans and obtain all necessary
permits and approvals for construction of the New Building and to construct the
New Building in accordance with Section 10.02. Tenant shall cooperate with
Landlord, at no cost to Tenant, in connection with the approval process and
Landlord's efforts to obtain all permits necessary for Tenant's occupancy.
Section 10.02. Construction of the New Building by Landlord, as well as
any reconstruction by Tenant pursuant to Articles 8 or 9 or construction
required of Landlord pursuant to Article 7, shall be subject to the following
conditions:
A. no work shall be undertaken until the party responsible there for
(the "Responsible Party") shall have procured and paid for, so far as the same
may be required from time to time, all municipal and other governmental permits
and authorizations of the various municipal departments and governmental
subdivisions having jurisdiction, and the other party shall join in the
application for such permits or authorizations whenever such action is
necessary;
B. construction of the New Building and any structural work, or any
work undertaken as a single project and involving an estimated cost aggregating
more than 5% of the then full insurable value of the Building, shall be
conducted under the supervision of an architect or engineer licensed as such in
Pennsylvania selected by the Responsible Party, and no such work shall be
undertaken until preliminary plans and outline specifications and budget
estimates therefor, prepared and approved in writing by such architect or
engineer, stating that the same comply with this Article 10, shall have been
approved by the other party, it being understood that once any plans have been
delivered to a party for its approval, such approval shall be deemed given
unless objections are raised within 10 days after delivery;
C. all work shall be of such a character that, when completed, the
value of the Building shall be not less than the value of the Building
immediately before any such work;
D. all work shall be done in a good and workmanlike manner and in
compliance with applicable building and zoning laws and with all other
applicable laws, ordinances, orders and requirements of all federal, state and
municipal governments and the appropriate departments, commissions, boards and
officers thereof and of the Joint Commission of Accreditation of Hospitals; the
cost of any work shall be paid in cash or its equivalent, so that the Premises
shall at all times be free of liens for labor and materials supplied or claimed
to have been supplied; and all work shall be prosecuted with reasonable
dispatch, unavoidable delays excepted;
E. workmen's compensation insurance covering all persons employed in
connection therewith and with respect to whom death or bodily injury claims
could be asserted against Landlord, Tenant or the Premises and general liability
and property damage insurance for the mutual benefit of Landlord and Tenant with
limits of not less than those required to be carried pursuant to Paragraph B of
Section 4.02 shall be maintained by the Responsible Party at all times when any
work is in process; and
F. builder's completed value risk insurance against "all risks of
physical loss", including collapse and transit coverage, shall be maintained by
the Responsible Party, with deductibles not to exceed $1,000, in non-reporting
form, covering the total value of work performed and equipment, supplies and
materials furnished, together with a "permission to occupy upon completion of
work or occupancy" endorsement.
Section 10.03. Landlord shall be responsible for maintaining 611
Structural Elements in good order and condition throughout the Term, except for
and injury or damage to the same caused by Tenant's negligence. Tenant shall
notify Landlord as Tenant becomes aware of the need for any, repairs to the
Structural Elements.
Section 10.04. Any dispute under this Article 10 shall be determined by
arbitration in the manner provided in Article 17.
Section 10.05. Any work performed by Landlord hereunder during the Term
shall be conducted in such a manner as to reasonably minimize disturbance to
Tenant and any subtenants.
ARTICLE 11
DISBURSEMENT OF DEPOSITED MONEYS
Section 11.01. All sums of the character referred to in Sections
4.06 and 9.03 (collectively, the "Deposited Sums") paid to or deposited with a
Mortgagee shall be disbursed in the manner provided in this Article 11.
Section 11.02. From time to time as any changes or alterations
undertaken as a single project progress, or as the restoration, repair,
replacement or rebuilding of the Building or any portion thereof damaged or
destroyed by fire or any other cause, or not taken in a proceeding of the
character described in Section 9.03 progresses (collectively, the "work"),
disbursement of the Deposited Sums shall be made in such manner and subject to
such requirements as the Mortgagee" shall reasonably impose in order to insure
that the work shall be completed in a good and workmanlike manner, shall be paid
for in full and shall be completed free of any lien against the Premises. At any
time after the completion of the work the balance of the Deposited Sums shall be
disbursed to Tenant.
MECHANICS' LIENS
Section 12.01. Tenant shall not suffer or permit any mechanics'
liens to be filed against the Premises, nor against Tenant's leasehold estate
hereunder, by reason of work, labor, services or materials supplied or claimed
to have been supplied to Tenant or anyone holding any interest in the Premises
or any part thereof through or under Tenant. For any construction involving a
cost in excess of $2,500, Tenant shall require all contractors to execute
recordable lien waivers with respect thereto. If any such mechanic's lien shall
at any time be filed against the Premises, Tenant shall, within 30 days after
notice of the filing thereof, cause the same to be discharged of record by
payment, deposit, bond, order of a court of competent jurisdiction or otherwise.
If Tenant shall fail to cause such lien to be discharged within the period
aforesaid, then Landlord may discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit or by
bonding proceedings, and in any such event Landlord shall be entitled, if
Landlord so elects, to compel the prosecution of an action for the foreclosure
of such lien by the lienor and to pay the amount of the judgment in favor of the
lienor with interest, costs and allowance. Nothing in this Lease contained shall
be deemed or construed in any way as constituting the consent or request
Landlord, express or implied by inference of or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor or the
furnishing of any materials for any specific improvement, alteration to or
repair of the Premises or any part thereof, nor as giving Tenant a right, power
or authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to the filing of any mechanic's
lien against Landlord's interest in the Premises.
ARTICLE 13
LAWFUL USE; SURRENDER OF THE PREMISES;
INSPECTION OF THE PREMISES
Section 13.01. Tenant shall use the Premises as a residential psychiatric
care facility and other lawful, related uses, which in no event shall include
treatment of patients of danger to themselves or others requiring a high level
of physical control and supervision or treatment of patients for alcohol or drug
addiction. In no event shall Tenant use or allow the Premises or any part
thereof to be used or occupied for any unlawful purpose or for any dangerous or
noxious trade or business, or in violation of any certificate of occupancy
affecting the use of the Premises. Furthermore, it is understood and agreed that
Tenant is aware of and will comply with the terms and conditions of the Decision
and Order by the Springfield Township Zoning Hearing Board at #88-11, as
amended.
Section 13.02. Subject to Landlord's obligations respecting Structural
Elements, upon the termination of this Lease, Tenant shall surrender to Landlord
the Premises in good order and repair, except in the event of termination upon a
constructive total taking in condemnation proceedings, reasonable wear and tear
excepted and also except as Tenant may have been prevented from maintaining the
Premises in good order and repair by occupation thereof by any entity having the
power of eminent domain which shall have taken the temporary use thereof and
shall then be in possession thereof. If Tenant fails to remove any of Tenant's
Property at the end of the Term, the basic rental hereunder shall continue
pending such removal. If not removed within 30 days, any remaining Tenant's
Property shall be deemed abandoned.
Section 13.03. Tenant shall permit Landlord and any Fee Mortgagee and
their respective authorized representatives to enter the Premises at all
reasonable times during usual business hours upon reasonable notice for the
purpose of inspecting the same and shall permit Landlord and its authorized
representatives to enter the Premises at all reasonable times during usual
business hours for the purpose of exhibiting the same to prospective purchasers
or mortgagees thereof.
Section 13.04. At all times during which Landlord shall be performing any
work at the Premises pursuant hereto, Landlord shall permit Tenant and its
authorized representatives to enter the Premises at all reasonable times to
inspect the progress of the work and Landlord shall honor all reasonable
requests in connection therewith.
ARTICLE 10
TRANSFER, ASSIGNMENT AND SUBLETTING
Section 14.01. Until a certificate of occupancy for the entire New
Building shall have been issued, Landlord may not transfer its fee title to the
Premises without Tenant's consent, other than for security purposes in
connection with a Fee Mortgage or to an entity in which Landlord shall retain a
controlling interest.
Section 14.02. Tenant may not assign this Lease without the consent of
Landlord respecting the creditworthiness of the proposed assignee, which consent
shall not be unreasonably withheld or delayed. Tenant shall submit to Landlord
such documents as Landlord may reasonably request to enable Landlord to
ascertain such creditworthiness, including credit history, payment ability,
proposed use and rental history. Respecting any such assignment, there shall be
delivered to Landlord (i) a duplicate original of the instrument or instruments
of transfer of this Lease in recordable form, containing the name and address of
the transferee thereof, and (ii) an instrument of assumption by said transferee
of all of Tenant's obligations under this Lease. Upon the assignment of this
Lease and compliance with the conditions referred to in the foregoing sentence,
the assignor shall be released from the performance of all of the obligations on
the part of Tenant thereafter to be performed hereunder except any obligation to
hold and apply insurance or other moneys held by the assignor at the date of the
assignment and any unperformed obligations which shall have matured prior to
such assignment; provided, that such release shall be effective only if, as and
when 6 months shall have elapsed after the effective date of such assignment
during which Landlord shall not have sent notice to the assignee of an Event of
Default hereunder.
Section 14.03. All subleases of portions of the Premises made by Tenant or
by any sublessee who shall have obtained a lease of the Premises from Tenant
(collectively, "subleases") shall contain, and if not included therein shall be
deemed to contain, provisions substantially as follows:
"The tenant covenants and agrees that if by reason of a
default under any underlying lease (including an underlying lease
through which the landlord derives its leasehold estate in the
Premises), such underlying lease and the leasehold estate of the
landlord in the premises demised hereby is terminated, the tenant
will attorn to the then holder of the reversionary interest in the
premises demised by this lease and will recognize such holder as the
tenant's landlord under this lease, unless the lessor under such
underlying lease shall, in any proceeding to terminate such
underlying lease, elect to terminate this lease and the rights to
the tenant hereunder. The tenant agrees to execute and deliver, at
any time the landlord or of the lessor under any such and from time
to time, upon the request of underlying lease any instrument which
may be necessary or appropriate to evidence such attornment and the
tenant hereby appoints the landlord or such lessor under such
underlying leased the attorney-in-fact irrevocably, of the tenant to
execute and deliver for and on behalf of the tenant any such
instrument The tenant further waives the provision of any statute or
rule of law now or hereafter in effect which may give or purport to
give the tenant any right of election to terminate this lease or to
surrender possession of the premises demised hereby in the event any
proceeding is brought by the lessor under any underlying lease to
terminate the same, and agrees that unless and until any such
lessor, in connection with any such proceeding, shall elect to
terminate this lease and the rights of the tenant hereunder, this
lease shall not be affected in any way whatsoever by any such
proceeding."
Nothing contained in this Article 14 shall be deemed to prevent Tenant from
subleasing all or any part or parts of the Premises so long as the consent of
Landlord shall have been obtained, which consent shall not be unreasonably
withheld or delayed and shall be given or denied based solely upon the proposed
subtenant's creditworthiness. Tenant shall submit to Landlord such documents as
Landlord may reasonably request to enable Landlord to ascertain such
creditworthiness.
ARTICLE 15
DEFAULT PROVISIONS -- CONDITIONAL LIMITATION; HOLDING OVER
Section 15.01. Subject to Sections 15.02 and 15.03, in case one or more of
the following events (an "Event of Default") shall have occurred and shall not
have been remedied:
A. default shall be made in the payment of the basic rent when due
and such default shall continue for a period of 10 days after notice thereof,
specifying such default, shall have been given to Tenant or default shall be
made in the payment of any item of additional rent and such latter default shall
continue for a period of 20 days after notice thereof, specifying such default,
shall have been given to Tenant; or
B. default shall be made in the performance of any other covenant or
agreement on the part of Tenant to be performed hereunder, and such default
shall continue for a period of 30 days after notice thereof, specifying such
default, shall have been given to Tenant; provided, that in the case of a
default which cannot with due diligence be remedied b Tenant within a period of
30 days, if Tenant proceeds as promptly as may be reasonably possible after the
service of such notice and with all due diligence to remedy the default and
thereafter to prosecute the remedying of such default with all due diligence,
the period of time after the giving of such notice within which to remedy the
default shall be extended for such period as may be necessary to remedy the same
with all due diligence; then Landlord may, at Landlord's option, charge Tenant a
late charge equal to 5% on any overdue payment of the basic rent and/or give to
Tenant a notice of election to end the Term and, if said notice is given, then
the Term and all right, title and interest of Tenant hereunder shall expire as
fully and completely as if the termination date specified in such notice were
the date herein specifically fixed for the expiration of the Term, and Tenant
will then quit and surrender the Premises to Landlord, but Tenant shall remain
liable as hereinafter provided.
Section 15.02. Upon the termination of this Lease pursuant to any of the
provisions of this Article 15, it shall be lawful for Landlord, without formal
demand or notice of any kind, to re-enter the Premises by summary dispossess
proceedings or any other action or proceeding authorized by law and to remove
Tenant therefrom without being liable for any damages therefor.
Section 15.03. Upon the termination of this Lease by reason of the
happening of any Event of Default, or in the event of the termination of this
Lease by summary dispossess proceeding or under any provision of law now or at
any time hereafter in force, by reason of or based upon or arising out of the
occurrence of an Event of Default, or upon Landlord recovering possession of the
Premises in the manner or in any of the circumstances hereinbefore mentioned, or
in any other manner or circumstances whatsoever pursuant to legal process, by
reason of or based upon or arising out of the occurrence of an Event of Default,
Landlord may, at Landlord's option, at any time and from time to time, relet the
Premises or any part or parts thereof, and receive and collect the rents
therefor, applying the same first to the payment of such expenses as Landlord
may have incurred in recovering possession of the Premises, and for putting the
same in good order or condition or preparing or altering the same for re-rental,
and expenses, commissions and charges paid by Landlord in and about the
reletting thereof and then to the fulfillment of the covenants and agreements of
Tenant hereunder. Any such relation herein provided for may be for the remainder
of the Term or for a longer or shorter period. In any such case and whether or
not the Premises, or any part thereof, be relet, Tenant shall pay to Landlord
the basic rent, additional rent and all other charges required to be paid by
Tenant up to the time of such termination of this Lease, or of such recovery of
possession of the Premises by Landlord, as the case may be, and thereafter
Tenant shall, if required by Landlord, pay to Landlord until the end of the Term
the equivalent of the amount of all the basic rent reserved herein, additional
rent and all other charges required to be paid by Tenant, less the net avails of
reletting, if any, and the same shall be due and payable by Tenant to Landlord
on the several rent days above specified, that is to say, upon each of such rent
days Tenant shall pay to Landlord the net amount of the deficiency then existing
after crediting any surplus of the net avails of reletting, if any, over the
amount of all the basic rent, additional rent and all other charges required to
be paid by Tenant which may have theretofore accrued. Under any of the
circumstances hereinbefore mentioned in which Landlord shall have the right to
hold Tenant liable upon the several rent days herein specified to pay Landlord
the equivalent of the amount of the basic rent, additional rent and all other
charges required to be paid by Tenant less the net avails of reletting, if any,
Landlord shall have the election in place and instead of holding Tenant so
liable, forthwith to recover against Tenant as damages for loss of the bargain
and not as a penalty an aggregate sum which, at the time of such termination of
this Lease, or of such recovery of possession of the Premises by Landlord, as
the case may be, represents the then present worth of the excess, if any, of the
aggregate of the basic rent, additional rent and all other charges payable by
Tenant hereunder that would have accrued for the balance of the Term over the
aggregate fair rental value of the Premises for the balance of the Term.
Section 15.04. Tenant waives the service of notice of Landlord's intention
to re-enter as provided for in any statute, or to institute legal proceedings to
that end, and also waives any and all right of redemption in case Tenant shall
be dispossessed by a judgment or by warrant of any court or judge. Landlord and
Tenant each waives and shall waive any and all right to a trial by a jury in the
event that summary proceedings or other proceedings available to Landlord by law
or by statute shall be instituted by Landlord. The terms "enter", "re-enter",
or "re-entry", as used in this Lease, are not restricted to their technical
legal meanings.
Section 15.05. Tenant hereby empowers any Prothonotary, Clerk of Court or
Attorney of any Court of Record to appear for Tenant in any and all actions
which may be brought for rent and/or the charges, payments, costs and expenses
reserved as rent, and/or to sign for Tenant an Agreement for entering in any
competent Court an amicable action or actions for the recovery of rent or other
charges, payments, costs and expenses, and in said suit or in said amicable
action or actions to confess judgment against Tenant for 811 or any part of the
rent specified in this Lease and then unpaid charges, payments, costs and
expenses reserved as rent or agreed to be paid by Tenant, and for interest and
costs, together with a reasonable attorney's commission. Such authority shall
not be exhausted by one exercise thereof, but judgment may be confessed as
aforesaid from time to time as often as Landlord shall have cause hereunder
therefor. Furthermore, upon termination of this Lease as a result of any Event
of Default, it shall be lawful for any attorney to file an agreement for
entering in any competent Court an amicable action and judgment in ejectment
against Tenant and all persons claiming under Tenant for the recovery by
Landlord of possession of the Premises, for which this Lease shall be sufficient
warrant, whereupon, if Landlord so desires, a Writ of Execution or of Possession
may issue forthwith, without any prior writ or proceeding whatsoever, and
provided that if for any reason after such action shall have been commenced the
same shall be determined and the possession of the Premises remain in or be
restored to Tenant, Landlord shall have the right upon any subsequent
termination or expiration of this Lease to bring one or more amicable action or
actions as hereinbefore set forth to recover possession of the Premises.
Anything else in this Section 15.05 to the contrary notwithstanding, Landlord
shall be entitled to exercise its remedies under this Section 15.05 only if an
Event of Default shall have occurred and be continuing, and Landlord shall have
served additional notice upon Tenant that Landlord intends to exercise its
rights under this Section 15.05, and 3 additional days shall have elapsed from
the giving of such notice and the Event of Default in question shall not have
been cured during such additional 30-day period.
Section 15.06. If Tenant holds possession of the Premises after the
termination of the Term, Landlord, in addition to the other remedies provided
herein, shall have the option, exercisable in writing within 30 days after the
date of termination as aforesaid, to treat Tenant as a trespasser, or to treat
Tenant as a tenant by the month. If Landlord elects to treat Tenant as a tenant
by the month, then commencing with the first day after the termination of the
Term, Tenant shall pay basic rent in an amount equal to one hundred fifty
percent (150%) of the basic rent paid during the last month of the Term. All the
other terms of this Lease, including the provisions of this Section 15.06, shall
remain in full force and effect. Said holdover term with Landlord's consent
shall terminate upon 30 days notice from one party to the other. If Landlord
fails to make an election as described herein, Tenant shall be deemed a tenant
by the month and treated as described above. Until Landlord shall give the
notice specified above in this Section 15.06, nothing contained herein shall be
construed as a consent by Landlord to the occupancy or possession of the
Premises by Tenant after the termination of the Term, and Landlord, upon said
termination, shall be entitled to the benefit of all applicable laws relating to
the speedy recovery of the possession of land and tenements held over by a
tenant, whether now or hereafter in force and affect.
ARTICLE 16
INDEMNIFICATION
Section 16.01. Each of Landlord and Tenant shall indemnify and save
harmless the other against and from any and all claims by or on behalf of any
person arising from the performance or non-performance of any of its respective
obligations hereunder, or, in the case of Tenant, arising from any act of
negligence or alleged act of negligence of any subtenants or their agents,
contractors, servants, employees, invitees, licensees or of trespassers;
provided, that Landlords obligations under this Section 16.01 shall be limited
to claims arising from its construction and repair obligations hereunder.
ARTICLE 17
ARBITRATION
Section 17.01. In such cases where this Lease provides for the
determination of any matter by arbitration, the same shall be settled and
finally determined by arbitration in accordance with the Rules of the American
Arbitration Association, or its successor, except that the arbitrators shall be
selected and shall rule as provided in Section 17.02, and the judgment upon the
award rendered therein may be entered in any court having jurisdiction thereof.
Section 17.02. In each instance under this Lease where it shall become
necessary to resort to arbitration such arbitration shall be conducted as
follows: the party desiring such arbitration shall give notice to that effect to
the other party, specifying therein the name and address of the person
designated to act as an arbitrator on its behalf. Within 15 days after the
service of such notice, the other party shall give notice to the first party
specifying the name and address of the person designated to act as arbitrator on
its behalf. If either party fails to notify the other party of the appointment
of its arbitrator, as aforesaid, within or by the time above specified, then the
appointment of the second arbitrator shall be made in the same manner as
hereinafter provided for the appointment of a third arbitrator in a case where
the two arbitrators appointed hereunder and the parties are unable to agree upon
such appointment. The arbitrators so chosen shall meet within 10 days after the
second arbitrator is appointed and if, within 15 days after such first meeting,
the said two arbitrators shall be unable to agree upon the valuation or a
decision as to the question being arbitrated, they shall appoint a third
arbitrator who shall be a competent and impartial person; and in the event of
their being unable to agree upon such appointment within 15 days after the time
aforesaid such third arbitrator shall be selected by the parties if they can
agree thereon within a further period of 15 days. If the parties do not so
agree, then either party, on behalf of both, may request such appointment by the
then Chairman of the Board of the local Chamber of Commerce (or any organization
successor thereto), or in his absence or failure, refusal or inability to act
within 30 days, then either party, on behalf of both, may apply to the Presiding
Judge of the highest court in Montgomery County for the appointment of such
third arbitrator, and the other party shall not raise any question as to the
court's full power and jurisdiction to entertain the application and make the
appointment. In the event of the failure, refusal or inability of any arbitrator
to act, his successor shall be appointed within 10 days by the party who
originally appointed him or in the event such party shall fail so to appoint
such successor, or in case of the third arbitrator, his successor shall be
appointed as hereinbefore provided. Any arbitrator acting under this Section
17.02 shall be qualified in the field in which the arbitration is involved and
shall have been actively engaged in such field in Montgomery County for a period
of at least 10 years before the date of his appointment as arbitrator hereunder.
All arbitrators chosen or appointed pursuant to this Section 17.02 shall be
sworn fairly and impartially to perform their duties as arbitrator. Within 20
days after the appointment of such third arbitrator each of the first two
arbitrators shall submit their valuation or determinations, as the case may be,
to the third arbitrator who must select one or the other of such valuations or
determinations, and the selection so made shall in all cases be binding and
conclusive upon the parties. Each party shall pay the fee and expense of its
respective arbitrator and both shall share the fee and expenses of the third
arbitrator, if any.
ARTICLE 18
REMEDIES
Section 18.01. The specified remedies to which Landlord may resort under
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which Landlord may be lawfully entitled in case
of any breach or threatened breach by Tenant of any provision of this Lease. The
failure of Landlord to insist in any one or more cases upon the strict
performance of any of the covenants of this Lease or to exercise any option
herein contained shall not be construed as a waiver or a relinquishment for the
future of such covenant or option. A receipt by Landlord of the basic rent or
additional rent with knowledge of the breach of any covenant hereof shall not be
deemed a waiver of such breach, and no waiver by Landlord of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord. In addition to the other remedies in this Lease provided,
Landlord shall be entitled to restraint by injunction of the violation, or
attempted or threatened violation, of any of the covenants, conditions or
provisions of this Lease.
ARTICLE 19
CERTIFICATES OF LANDLORD AND TENANT
Section 19.01. Either party shall at any time and from time to time, upon
not less than 10 days' prior notice from the other, execute, acknowledge and
deliver to the other a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications), and the dates to which the basic rent and other charges have
been paid in advance, and stating whether or not to the best knowledge of the
signer of such statement the other party is in default in keeping, observing or
performing any covenant or agreement contained in this Lease on its part to be
performed and, if there be a default, specifying each such default, it being
intended that any such statement delivered pursuant to this Section 19 may be
relied upon by the other party or any prospective purchaser or mortgagee, but
reliance on such statement may not extend to any default as to which the signer
shall have no actual knowledge, after reasonable inquiry.
ARTICLE 20
NOTICES
Section 20.01. Any notice, demand, request, approval or other
communication (a "notice") which, under the terms of this Lease or under any
statute, must or may be given by a party hereto, must be in writing, and must be
given by personal delivery against receipt or by mailing the same by registered
or certified mail, return receipt requested, addressed to the appropriate party
at its address above set forth. Either party, and the holder of any Fee Mortgage
who shall have made the request referred to in Section 20.02, may designate by
notice given in the manner herein specified a new or other address to which a
notice shall thereafter be so given. All notices shall be deemed given when
personally delivered or 48 hours after having been duly deposited in the mails.
Section 20.02. If and only if requested in writing by any Mortgagee (which
request shall be made in the manner provided in Section 20.01 and shall specify
an address to which notices shall be given) any notice hereunder shall also be
given contemporaneously to such Mortgagee in the manner herein specified.
ARTICLE 21
QUIET ENJOYMENT
Section 21.01. Tenant, upon paying the basic rent, additional rent and all
other charges herein provided for and upon observing and keeping all of the
covenants, agreements and provisions of this Lease on its part to be observed
and kept, shall lawfully and quietly hold, occupy and enjoy the Premises during
the Term without hindrance or molestation.
ARTICLE 22
RIGHT OF FIRST REFUSAL
Section 22.01. If at any time, from and after the date hereof and until
the Term shall expire or otherwise be terminated, Landlord shall receive a bona
fide, written offer to purchase the Premises which Landlord desires to accept
(an "Offer"), Landlord shall first notify Tenant ("Landlord's Notice") of such
Offer and shall deliver a copy of such Offer to Tenant therewith. Tenant shall
have 45 days after the date of Landlord's Notice to decide whether or not Tenant
is interested in purchasing the Premises in accordance with the terms and
conditions specified in the Offer. If Tenant notifies Landlord within such 45
day period that Tenant desires to so purchase the Premises, then Landlord and
Tenant shall proceed to closing on the sale of the Premises to Tenant on the
terms specified in the Offer, except that closing shall be held not more than 45
days after the date Tenant so notifies Landlord. Section 22.02. If Tenant shall
not notify Landlord that Tenant desires to purchase the Premises within such 45
day period, Landlord shall be free to accept the Offer and to sell the Premises
in accordance therewith.
Section 22.03. Any material change in an Offer pursuant to which Landlord
has sent Landlord's Notice shall constitute a new Offer subject to the
provisions of this Article 22.
Section 22.04. Tenant's rights under this Article 22 are subject to the
right of first refusal granted to Chestnut Hill Buildings Corporation, a copy of
the proposed form of which has been today delivered to Tenant.
ARTICLE 23
SECURITY
Section 23.01. On the date hereof, Tenant has deposited $10,000 with
Landlord. On the Commencement Date, Tenant shall deposit an additional
$16,000.00 with Landlord (the $26,000 total being called the "Security
Deposit"), which Landlord shall retain as security for the faithful performance
of all covenants, conditions and agreements of Tenant under this Lease, but in
no event shall Landlord be obliged to apply the same to rents or charges or
damages for the Tenant's failure to perform the said covenants, conditions and
agreement. If not applied toward the payment of rent in arrears or toward
payment of damages suffered by Landlord by reason of the Tenant's breach of the
covenants, conditions and agreements of this Lease, one-half of the Security
Deposit shall be applied to Tenant's payments of basic rent falling due during
the second Lease Year and the remaining balance of the Security Deposit shall be
returned to Tenant when this Lease is terminated in accordance herewith, and in
no event is such balance to be returned until Tenant has vacated the Premises
and delivered possession to Landlord in the condition required hereby. In the
event that Landlord terminates this Lease because of an Event of Default under
this Lease, Landlord may apply the Security Deposit to all damages suffered to
the date of said termination and may retain the security Deposit to apply to all
damages as may be suffered or shall accrue thereafter by reason of the Tenant's
default or breach.
ARTICLE 24
MEMORANDUM OF LEASE
Section 24.01. Simultaneously with the execution of this Lease, Landlord
and Tenant shall execute and acknowledge a Memorandum of Lease in the form of
Exhibit B, and shall cause the same to be placed of record in Montgomery County.
Tenant shall execute and deliver in escrow to Greg B. Emmons, Esquire, Stuckert
& Yates, 1 South State Street, Newtown, PA 18940, who is Landlord's attorney,
Releases of Claim, Title or Interest in the form of Exhibits C and D, the former
to be recorded by said attorney or successor upon the termination of the Term
or, if only Tenant's rights under Article 22 shall terminate, said attorney
shall record the latter. Said attorney or successor shall serve as the agreed
escrow officer without liability to either party, with the exception of such
officer's gross negligence or wanton misconduct in recording the Releases
described above in this Section 24.01.
ARTICLE 25
INVALIDITY OF PARTICULAR PROVISIONS; MERGER
Section 25.01. If any provision of this Lease or the application thereof
to any person or circumstance shall to any extent be invalid or enforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
Section 25.02. This Lease constitutes the entire agreement between
Landlord and Tenant with respect to the subject matter hereof, all prior
communications, whether written or oral, being merged herein.
ARTICLE 26
COVENANTS TO BIND AND BENEFIT THE
RESPECTIVE PARTIES
Section 26.01. The covenants and agreements herein contained shall bind
and inure to the benefit of Landlord and Tenant and their respective
representatives, successors and permitted assigns.
ARTICLE 27
BROKERS
Section 27.01. Landlord and Tenant each represent and warrant to the other
that it has not authorized any broker, agent or finder purporting to act on its
behalf in respect of this Lease transaction. Landlord and Tenant each hereby
agrees to indemnify and hold harmless the other from and against any liability
or damage resulting from a breach of its representation and warranty
contained in this Article 27.
ARTICLE 28
LANDLORD'S PLAQUES
Section 28.01. It is agreed to by Tenant that Landlord, at its sole cost,
shall be entitled to have displayed at the Premises such Plaque or Plaques as
reasonably requested by Landlord to honor, commemorate or provide as a memorial
to Landlord's selected charities or individuals.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and delivered
this Lease as of the day and year first above written.
LANDLORD
ELIOTT KREMS AND ROBERT KOEN
By: /s/ Eliott Krems
-----------------------------------------
Eliott Krems, Authorized Partner
TENANT
WESTMEADE HEALTHCARE, INC.
By: /s/__________________________________
President
Attest: /s/______________________________
Secretary
(SEAL)
ELIOTT MANAGEMENT
P.O. BOX 634 - FEASTERVILLE, PENNSYLVANIA 14047
PHONE 322-8331
October 23, 1991
Dear David:
This letter is to confirm that Westmeade Healthcare and Eliott Management
have agreed that the final number of the total project cost as spelled out in
our lease is one million four hundred thousand dollars.
Calculated by the formula in the lease, this would make the monthly rental
$18,667 for the first three years of the lease, plus the addition of deferred
rent, which totals $61,506. This number is derived by calculating the base rent
of $18,667 less payments of $13,333 during the initial twelve month period.
During year two, now in progress; your rental payments of $20,000 will
reduce the deferred rent to $45,510.
During year three your rental payments will reduce the deferred rent to
$21,498. I suggest we amend the lease to allow you to pay this balance out thru
years three and four. Thus starting November 1, 1991 your new monthly rental
payment will be $21,391. At the end of year four you will have paid all deferred
rent.
Please sign off below if you are in agreement with all the facts in this
letter.
Sincerely,
Eliott Krems
Accepted by: /s/David Lovitz
--------------------
David Lovitz
A.L.T.A. COMMITMENT
Number CA-3812 SCHEDULE C
EXHIBIT "A"
The land referred to in this Commitment is described as follows:
ALL THAT CERTAIN lot or piece of ground in accordance with a Plan made by Barton
& Martin Engineers, dated April 24, 1970, with buildings and improvements
thereon erected.
SITUATE in the Township of Springfield, Montgomery County, Pennsylvania.
BEGINNING at a point on the Northeast side of Stenton Avenue (70 feet wide) also
State Highway Route No. 67049 at the distance of 25 feet northwest along the
said side of Stenton Avenue as produced from its intersection with the Northwest
side of Birch Lane, as produced; thence from said point of beginning along said
side of Stenton Avenue, North 48 degrees 20 minutes West 256.42 feet to a point;
thence leaving said Stenton Avenue North 43 degrees 46 minutes 30 seconds East
143.50 feet to a concrete monument; thence North 82 degrees 57 minutes 30
seconds East 51.55 feet to a concrete monument; thence North 42 degrees 31
minutes 30 seconds East 88.39 feet to a concrete monument; thence South 51
degrees 28 minutes 15 seconds East 204.57 feet to a concrete monument on the
said side of Birch Lane; thence along same South 18 degrees 07 minutes 30
seconds West 22.10 feet to a point of curve; thence southwestwardly on a line
curving to the right with a radius of 333.10 feet an arc distance of 136.86 feet
to a point of tangent; thence South 41 degrees 40 minutes West 103.40 feet to a
point of curve; thence Southwestwardly and Northwestwardly on a line curving to
the right with a radius of 25 feet an arc distance of 39.27 feet to the first
mentioned point and place of beginning.
CONTAINING 1.628 Acres.
AND ALSO ALL THAT CERTAIN small triangular lot of ground in accordance with the
said Plan made by Barton & Martin Engineers, dated April 24, 1970.
BEGINNING at an interior point located 143.50 feet North 43 degrees 46 minutes
30 seconds East from a point on the Northeast side of Stenton Avenue (70' wide)
also State Highway Route No. 67049; said last mentioned point being at the
distance of 281.42 feet North 48 degrees 20 minutes West along said side of
Stenton Avenue as produced from its intersection with the Northwest side of
Birch Lane as produced; thence from said interior point of beginning (being a
concrete monument) North 71 degrees 57 minutes 55 seconds East 68.02 feet to an
iron pipe; thence South 42 degrees 31 minutes 30 seconds West 20.00 feet to a
concrete monument; thence South 82 degrees 57 minutes 30 seconds West 51.55 feet
to the first mentioned interior point and place of beginning.
CONTAINING 334 square feet.
BEING known and numbered as 8765 Stenton Avenue.
BEING the same premises which David T. Wendell et ux, et al, by Indenture
bearing date the 24th day of October A.D. 1962 and recorded in the Office for
the Recording of Deeds, in and for the County of Montgomery at Norristown, Pa.
in Deed Book 3266 page 57 &c., granted and conveyed unto Joseph Warren Darling
and Helene Manley Darling, his wife, in fee.
AND WHEREAS Helene Manley Darling departed this life on September 17, 1970
whereby title to said premises became vested in Joseph Warren Darling, by right
of survivorship.
AND WHEREAS Joseph Warren Darling has since intermarried with Cynthia H.
Darling.
SCHEDULE C CONTINUED
AND BEING the same premises which Joseph Warren Darling and Cynthia Darling, his
wife, by Indenture bearing date the 31st day of December A.D. 1976 and recorded
in the Office for the Recording of Deeds, in and for the County of Montgomery at
Norristown, Pa., in Deed Book 4171 page 502 &c., granted and conveyed all that
certain undivided 1/3rd interest to Venie Helene McNab Darling, in fee.
BEING PARCEL NUMBER: 52-00-16585-00-4.
EXHIBIT B
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this "Memorandum"), dated March ___, 1989
between ELIOTT KREMS AND ROBERT H. KOEN, by Eliott Krems, as authorized partner
having an address of P.O. Box 634, Feasterville, PA 19047 ("Landlord"), and
WESTMEADE HEALTHCARE, INC., a Pennsylvania corporation having an address of 436
West Stafford Street, Philadelphia, PA 19144 ("Tenant"),
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have today entered into that certain Lease
Agreement, dated as of the date hereof, respecting the real property situate,
lying and being in the Township of Springfield, County of Montgomery, State of
Pennsylvania, and more particularly described in Schedule I; and
WHEREAS, Landlord and Tenant desire to place third parties on notice as to
the existence of the Lease and certain provisions contained therein;
NOW, THEREFORE, for valuable consideration and intending to be legally
bound, Landlord and Tenant hereby recite that:
1. The Lease is in full force and effect and has not been amended or
modified.
2. The initial term of the Lease is for 5 years, commencing after the
construction of certain improvements on the land has been completed by Landlord
and Tenant has been notified thereof, and Tenant has the right to extend the
initial term for two 5-year periods.
3. Tenant has a right of first refusal to purchase the Premises in certain
circumstances.
4. Nothing herein is intended to modify or contradict any of the terms or
conditions of the Lease, all of which are incorporated herein by this reference.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum the
date first above written.
ELIOTT KREMS AND ROBERT H. KOEN
By: /s/Eliott Krems
---------------------------------------
Eliott Krems, Authorized Partner
WESTMEADE HEALTHCARE, INC.
By:/s/__________________________________
President
Attest:/s/______________________________
Secretary
(SEAL)
EXHIBIT C
RELEASE OF CLAIM, TITLE OR INTEREST
KNOW ALL MEN BY THESE PRESENTS, that WESTMEADE HEALTHCARE, INC.
("Westmeade"), as a party entitled to possess by Lease Agreement dated March 16,
1989, the premises set forth and described in Schedule I attached hereto, hereby
fully and completely releases, surrenders and quitclaims any and all claims,
title, interest or right under such Lease Agreement to the said described
premises, and which right has previously been set forth of record with the
Recorder of Deeds of Montgomery County pursuant to a certain Memorandum of Lease
recorded with the Montgomery County Recorder of Deeds at Deed Book No.____,
Page____, on the____day of March, 1989.
IN WITNESS WHEREOF, Weastmeade, intending to be legally bound hereby, has
caused these presents to be executed this 16th day of March, 1989, to be held in
escrow until such time as recording this Release is authorized by the terms and
conditions of the aforesaid Lease Agreement.
WESTMEADE HEALTHCARE, INC.
By:/s/_________________________________
President
Attest:/s/_____________________________
Secretary
(Seal)
EXHIBIT D
RELEASE OF CLAIM, TITLE OR INTEREST
KNOW ALL MEN BY THESE PRESENTS, that WESTMEADE HEALTHCARE, INC., as a
party entitled to possess by Lease Agreement dated March 16, 1989 the premises
as set forth and described in Schedule I attached hereto, hereby fully and
completely releases, surrenders and quitclaims any and all claims, title,
interest or right under its First Right of Refusal as set forth in Article 22 of
said Lease Agreement respecting the said described premises, and which Right has
previously been set forth of record with the Recorder of Deeds of Montgomery
County pursuant to a certain Memorandum of Lease recorded with the Montgomery
County Recorder of Deeds at Deed Book No.____, Page____, on the____day of
March, 1989.
IN WITNESS WHEREOF, WESTMEADE HEALTHCARE, INC., intending to be legally
bound hereby, has caused these presents to be executed this 16th day of March,
1989, to be held in escrow until such time as recording this Release is
authorized by the terms and conditions of the aforesaid Lease Agreement.
WESTMEADE HEALTHCARE, INC.
By:/s/________________________________
President
Attest:/s/____________________________
Secretary
(SEAL)
STATE OF PENNSYLVANIA :
: ss.
COUNTY OF :
On this the 16th day of March, 1989, before me, the undersigned officer,
personally appeared Eliott Krems, known to me to be the person whose name is
subscribed to the within instrument as authorized partner for Eliott Krems and
Robert H. Koen, and acknowledged that he executed the same for the purposes
therein contained.
In witness whereof, I hereunto set my hand and official seal.
___________________________
Notary Public
(SEAL)
STATE OF PENNSYLVANIA :
: ss.
COUNTY OF :
On this the 16th day of March, 1989, before me, the undersigned officer,
personally appeared David Lovitz, who acknowledged himself to be the President
of Westmeade Healthcare, Inc., a corporation, and that he as such President,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the corporation by himself as
President.
In witness whereof, I hereunto set my hand and official seal.
___________________________
Notary Public
(SEAL)
STATE OF PENNSYLVANIA :
: ss.
COUNTY OF :
On this the 16th day of March, 1989, before me, the undersigned officer,
personally appeared David Lovitz, who acknowledged himself to be the President
of Westmeade Healthcare, Inc., a corporation, and that he as such President,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the corporation by himself as
President.
In witness whereof, I hereunto set my hand and official seal.
___________________________
Notary Public
(SEAL)
SCHEDULE C
(Descriptions)
COMMITMENT
NUMBER 01 -828042
FILE NUMBER: MER 14,930-89-NM
ALL THAT CERTAIN lot or piece of ground with the buildings and improvements
therein erected situated in Springfield Township, Montgomery County,
Pennsylvania bounded and described as follows, to wit:
BEGINNING at a point of intersection of the line dividing Montgomery County from
Philadelphia County and in the bed of Stenton Avenue (51.5 feet wide) with the
Southeastwardly line of Birch Lane (30 feet wide) produced; thence extending
along the said County line in the bed of Stenton Avenue and parallel with the
Northwestwardly line of Stenton Avenue and 16.5 feet Southwestwardly at right
angles therefrom; North 48 degrees, 20 minutes West, 323.86 feet to a point;
thence North 43 degrees, 46 minutes, 30 seconds East, 178.90 feet to a point;
thence North 82 degrees, 57 minutes, 30 seconds East, 51.55 feet to a point;
thence North 42 degrees, 31 minutes, 30 seconds East, 88.39 feet to a point
thence south 51 degrees, 28 minutes, 15 seconds east, 287.86 feet to a point on
the outheastwardly side of Birch Lane (30 feet wide); thence along the said side
of Birch Lane the two following courses and distances: (1) South 37 degrees, 53
minutes, 30 seconds West, 78.94 feet to a point; (2) South 44 degrees, 11
minutes West, 243.10 feet to the first mentioned point and place of beginning.
CONTAINING 2.268 acres, more or less.
PARCEL NUMBER: 52-00-16585-00-4.
BEING part of the same premises which Kate Kelsey and Mary Kelsey, singlewomen
by Deed dated March 19, 1948 and recorded in Montgomery County in Deed Book
1916 page 550, granted and conveyed unto Joseph Warren Darling and Helene
Manley Darling, his wife, in fee.
ALSO BEING part of the same premises which Mary Beal, singlewoman, Albert
Reynolds Beal and Ann M. Beal, his wife, by Deed dated September 4, 1952 and
recorded in Montgomery County in Deed Book 2305 page 400, granted and conveyed
unto Joseph Warren Darling and Helen Manley Darling, his wife, in fee.
AND the said Helen Manley Darling died on September 17, 1970.
BEING the same premises which Joseph Warren Darling and Cynthia H. Darling, his
wife by Deed dated December 31, 1976 and recorded in Montgomery County in Deed
Book 4171 page 502, granted and conveyed a 1/3 interest unto Venie Helene McNab
Darling.
EXHIBIT B
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT is made this 20th day of October, 1995 by and
between ELIOTT KREMS and ROBERT H. KOEN ("Landlord") and WESTMEADE HEALTHCARE,
INC. ("Tenant").
WHEREAS, Landlord and Tenant entered into a Lease Agreement, dated as of
March 16, 1989 (the "Lease"), for certain premises known as 8765 Stenton Avenue,
Wyndmoor, PA 19118;
WHEREAS, Tenant is in default of certain payments due under the Lease;
WHEREAS, Landlord has agreed to allow Tenant to cure such default pursuant
to the terms and conditions hereunder; and
WHEREAS, Landlord and Tenant have agreed to amend the Lease pursuant to
the terms and conditions hereunder.
NOW THEREFORE, in consideration of the matters recited above, promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereby agree as follows:
1. Landlord acknowledges that Tenant entered into an Agreement and Plan of
Merger pursuant to which a wholly-owned subsidiary of CoreCare Systems, Inc., a
Nevada corporation, shall be merged with and into Tenant (the "Merger"), with
the Tenant being the surviving corporation in the Merger, and Landlord hereby
consents to the Merger.
2. Tenant agrees to make payments to Landlord in accordance with the
payment schedule (the "Payment Schedule") attached hereto as Exhibit "B".
Payments made in accordance with the Payment Schedule shall satisfy and
discharge all obligations to Landlord for all payments, fees, and other charges
due under the Lease through October, 1995 and shall cure all existing defaults
of Tenant arising under the Lease. Tenant shall have no liability to Landlord
for any obligations arising under the Lease prior to the effective date of the
Merger except for the payments set forth in the Payment Schedule.
3. Upon the first payment set forth in the Payment Schedule, Landlord
shall cause the judgments for money damages and possession entered against
Tenant in the Court of Common Pleas of Montgomery County, Case No. 95-11431, to
be marked satisfied and shall be deemed to release and discharge Tenant, all
subsidiaries and affiliates of Tenant, and all officers, directors, employees,
agents, attorneys, predecessors, successors and assigns of the foregoing, from
all existing defaults under the Lease and any and all claims, actions, suits,
agreements, promises, damages, demands, costs and expenses, including attorneys'
fees, whatsoever arising out of or relating to the Lease prior to the effective
date of the Merger except for the payments set forth in the Payment Schedule.
4. The Lease is hereby amended to provide that the Lease shall terminate
on December 31, 1998 and at such time the parties shall use their best efforts
to renegotiate the terms of the Lease with an option by the Tenant to buy the
premises. The Lease is further amended in accordance with the terms and
conditions set forth in Exhibit "B" attached hereto. Years two and three to be
at $17,000 plus incentives.
5. In all other respects the parties ratify the terms and conditions of
the Lease which remain in full force and effect except as modified hereunder.
Any additional modification must be in writing signed by all parties. Any
amendments to this Settlement Agreement must also be in writing signed by all
parties.
6. Except for the Lease, this Settlement Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as specifically set forth or
incorporated herein.
7. Attachments to this Settlement Agreement are an integral part of this
Settlement Agreement.
8. This Settlement Agreement shall be effective upon the effective date of
the Merger and shall be null and void if the Merger is not effectuated by
November 17, 1995.
9. This Settlement Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
10. No waiver of any of the provisions of this Settlement Agreement or the
Lease (i) shall be valid unless evidenced by a writing executed by each party to
be bound thereby, (ii) shall be deemed or shall constitute a waiver of any
provisions of this Settlement Agreement or the Lease or any other provisions
hereof or thereof (whether or not similar), or (iii) shall constitute a
continuing waiver unless otherwise expressly provided.
11. This Settlement Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
12. The parties hereto agree that, at any time and from time to time after
the date of this Settlement Agreement, they will execute, acknowledge and
deliver all such further or other assurances, documents, agreements and
amendments or supplements hereto or to the Lease or for carrying out the
intention of or facilitating the performance of this Settlement Agreement or the
Lease.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered
this Settlement Agreement, all this 20th day of October, 1995.
ATTEST: ELIOTT KREMS AND ROBERT KOEN
_________________________ BY: /s/Eliott Krems
---------------------------------
ATTEST: WESTMEADE HEALTHCARE, INC.
_____________________ BY: /s/Rose S. DiOttavio
---------------------------------
EXHIBIT A
Monthly Payment: $18,000
Terms
A) November 1, 1995 thru April 1, 1996
$15,000 monthly payment
$3,000 accrued
accrued fees of $18,000 to be paid at 12/31/96
B) May 1, 1996 thru December 1, 1996
$18,000 monthly payment
/s/ Eliott Krems
Exhibit B
Amounts owed thru 10/31/95 $90,310.62
Above assumes Westmeade/CoreCare Systems, Inc. pays all taxes due through
12/31/95 and that we will be responsible for [ ] $1,149.50 and [ ]
$3,289.88
Payment Plan
Cash at close: $25,310.00
Amount remaining: $65,000
Balloon Payment 12/31/96 $20,000
or ability to convert
balloon in Convertible
Preferred Shares with
conversion rate of
$2 per share at Krems'
option
Payment schedule of $45,000
starting 1/1/96
payment monthly of $3,750
/s/Eliott Krems
- ---------------
Eliott Krems
/s/Rose DiOttavio
- -----------------
CoreCare Systems, Inc.
EXHIBIT 6.17
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT effective as of October 27, 1995 between CoreCare
Systems, Inc. (the "Employer"), a Nevada corporation, Westmeade Healthcare, Inc.
("Westmeade"), a Pennsylvania corporation, and David Lovitz (the "Employee").
RECITAL:
WHEREAS, the Employee is currently an employee of Westmeade and holds the
position of President of Westmeade; and
WHEREAS, the Employer desires to induce the Employee to continue to render
services to Westmeade and to become employed by Employer in an executive
capacity for a term certain commencing on the date of the "Effective Time" of
the "Merger" as those terms are defined in the Agreement and Plan of Merger
dated as of July 25, 1995, as amended, among Westmeade, the Employer and
CoreCare Acquisition II, Inc. (hereinafter referred to as the "Merger
Agreement") and based upon the inducements hereinafter provided by the Employer,
the Employee desires to be employed by the Employer for the terms and conditions
hereinafter set forth; and
WHEREAS, the parties hereto desire to enter into this Agreement to provide
for the employment of the Employee by the Employer, for the Employee to continue
to render services to Westmeade, which shall be a wholly owned subsidiary of the
Employer as of the Effective Time of the Merger, and for certain other matters
in connection with the Employee's employment, all as set forth more fully in
this Agreement.
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. Duties. Employer agrees to employ Employee, and Employee agrees to
enter the employment of the Employer. The Employer and Westmeade agree that the
Employee shall be employed by the Employer after the date hereof to serve as
Senior Vice President-Strategic Development of the Employer, President of
Choate/CoreCare Alliance and President of Westmeade, the Employer's wholly owned
subsidiary, with the powers and responsibilities that are customarily exercised
by an executive holding those titles in a public corporation (the "Position").
Moreover, the Employee shall serve in any such other capacity or capacities as
may be determined from time to time by the Board of Directors of the Employer
(the "Board"). All of such additional offices shall be considered as part of the
Employee's Position. The Employee agrees to be so employed by the Employer and
to devote his best efforts and substantially all of his business time to advance
the interests of the Employer, excluding any periods of vacation and sick leave
to which the Employee is entitled, and to discharge adequately his duties
hereunder.
2. Term. The initial term of the Employee's employment hereunder shall
commence on the day of the "Effective Time" of the "Merger" as defined in the
Merger Agreement (hereinafter referred to as the "Effective Date") and shall
continue for a term of three years unless terminated earlier in accordance with
the provisions of this Agreement. This Agreement shall be renewed automatically
upon the expiration of its initial term and each renewal term for successive
terms of one year unless either party notifies the other party in writing at
least 90 days prior to the expiration of any term of such party's determination
not to renew this Agreement beyond the then existing term. Such initial term and
each renewal term are hereafter referred to collectively as "the term of this
Agreement". During the term of this Agreement, it shall not be a violation of
this Agreement for the Employee to (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (iii) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Employee's responsibilities as an employee of the Employer in accordance with
this Agreement.
3. Working Facilities. The Employee shall be furnished with a private
office, necessary secretarial and administrative assistance and other
facilities, amenities and services at least comparable to that presently or
hereafter furnished to the officers and key executives of the Employer with
similar positions to that held by the Employee.
4. Compensation.
(a) Base Salary. During the term of this Agreement, the Employee
shall be paid an annual salary of $110,000 ("Base Salary"), subject to the
provisions of Section 4(b) hereof; provided, however, that such Base Salary
shall be subject to increase on each anniversary of the Effective Date hereof by
the same percentage by which the Consumer Price Index-W for all urban consumers
has increased, if any, for the immediately preceding twelve month period. The
Employee's Base Salary shall be paid in accordance with the Employer's regular
payroll practices. Subject to the provisions of Section 4(b) hereof, the
Employee's Base Salary shall not be reduced during the term of this Agreement.
(b) Deferral of Initial Portion of Salary. During the first six
months after the Effective Date, the Employee shall be paid as if his annual
salary was $80,000. The unpaid portion of the Executive's Base Salary, i.e., an
aggregate of $15,000 (the "Deferred Salary"), shall be deferred until a certain
date (the "Deferral Repayment Date") which shall be the earlier of: (i) the
first day of the month following the first month in which the combined
operations of Westmeade's Wyndmoor and Warwick facilities is shown to have a
positive cash flow or (ii) the first anniversary of the Effective Date. At the
Deferral Repayment Date, the Deferred Salary shall be paid to the Employee at
the Employee's election either (i) in cash, (ii) in shares of common stock of
the Employer, the number of shares to be determined by dividing the total amount
of the Deferred Salary by the average of the closing bid and asked prices of a
share of the common stock of the Employer on the Effective Date, or (iii) any
combination of cash or shares, as set forth in (i) or (ii) hereof, as the
Employee may elect. Payment of the cash or shares payable pursuant to this
Section 4(b) shall be made in three equal, monthly installments commencing on
the Deferral Repayment Date.
(c) Bonus Program. The Employee shall be entitled to participate in
a bonus program to be established by the Employer pursuant to which the Board,
in its discretion, may award bonuses to key employees of the Employer based upon
the achievement of individual and corporate objectives and such other factors as
the Board shall determine. The Employee's bonus opportunity under this bonus
program shall at least be consistent with the level of similar bonus
opportunities as are afforded to executives of the Employer with similar
positions to that held by the Employee.
(d) Fringe Benefits. The Employee shall be entitled to continue to
participate in Westmeade's insurance, vacation and retirement and fringe benefit
programs as long as separate benefit programs are maintained for Westmeade
employees, and thereafter Employee shall be entitled to participate in all
insurance, vacation and retirement and fringe benefit programs of the Employer
to the extent and on the same terms and conditions as are accorded to other
officers and key executives of the Employer. In connection with the Employee's
participation under any employee benefit plan, practice or policy of the
Employer or its affiliates, the Employee shall be given credit under such plan
for all service in the employ of Westmeade and any predecessor thereto prior to
the Effective Date for purposes of eligibility and vesting, benefit accrual and
for all other purposes for which such service is either taken into account or
recognized under the terms of such plan, practice or policy.
(e) Reimbursement of Expenses. The Employee shall be reimbursed for
all normal items of travel and entertainment and miscellaneous expenses
reasonably incurred by him on behalf of the Employer or any subsidiary of the
Employer, provided that such expenses are documented and submitted in accordance
with the reimbursement policies of the Employer as in effect from time to time.
(f) Stock Award. The Employer shall issue to the Employee on the
Bonus Date (as defined below) an aggregate of 300,000 shares of common stock
(the "Bonus Shares") of the Employer. Subject to the terms and conditions of
this Section 4(f), the Bonus Shares shall be issued on the first to occur of the
following events (the "Bonus Date"):
(i) If the Employer shall consummate a Public Offering (as
defined below), such issuance shall occur upon the date of the initial closing
of the Public Offering. As used in this Agreement, the term "Public Offering"
shall mean any offering by the Employer of common stock to the public pursuant
to an effective registration statement under the Securities Act of 1933 (other
than a registration statement on Form S-8) or any comparable document under any
similar federal statute then in force, from which the Employer receives gross
proceeds of at least $2,000,000;
(ii) If the Employer shall effect a registered Secondary
Public Offering (as defined below), such issuance shall occur upon the date that
the Securities and Exchange Commission declares effective the registration
statement with respect to the Secondary Public Offering. As used in this
Agreement, the term "Secondary Public Offering" shall mean any offering by a
stockholder of the Employer of common stock of the Employer to the public that
is made pursuant to an effective registration statement Filed by the Employer
under the Securities Act of 1933 or any comparable document under any similar
federal statute then in force; or
(iii) If a Change of Control of the Employer (as defined
below) shall occur, such issuance shall occur on the date such Change of Control
is effected. As used in this Agreement, a "Change of Control" shall occur upon
the happening of any of the following events:
(1) any "person" or "group of persons" as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than Thomas T. Fleming or Rose S. DiOttavio or
Philadelphia Ventures II, L.P. or their respective heirs, successors, personal
representatives or affiliates, directly or indirectly purchases or otherwise
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
or has the right to acquire such beneficial ownership (whether or not such right
is exercisable immediately, with the passage of time, or subject to any
condition), of voting securities representing 30% or more of the combined voting
power of all outstanding voting securities of the Employer;
(2) the stockholders of the Employer shall approve an
agreement to merge or consolidate the Employer with or into another corporation
as a result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity are or are to be owned by the former stockholders
of the Employer (excluding from former stockholders, a stockholder who is or, as
a result of the transaction in question, becomes an "affiliate," as defined in
Rule 12b-2 under the Exchange Act, of any party to such consolidation or
merger); or
(3) the stockholders of the Employer shall approve the
sale of all or substantially all of the Employer's business and/or assets to a
person or entity that is not a wholly owned subsidiary of the Employer and as a
result of such transaction, less than 50% of the outstanding voting securities
of the person or entity to which such Employer's business and/or assets are sold
are or are to be owned by the former stockholders of the Employer (excluding
from former stockholders, a stockholder who is or, as a result of the
transaction in question, becomes an "affiliate," as defined in Rule 12b-2 under
the Exchange Act, of any party to such sale of Employer's business and/or
assets).
(iv) Upon the termination of this Agreement, such issuance of
the Bonus Shares shall occur upon the last day of the term of this Agreement.
For purposes of this Section 4(f)(iv) if the Employee's employment is terminated
pursuant to Section 6(b) or 7 hereof, the Agreement shall be deemed to terminate
on the last day of the term in which such termination occurs.
Upon the occurrence of any event under Section 4(f)(i),
4(f)(ii) or 4(f)(iii) or 4(f)(iv) hereof, the Employer shall use its best
efforts and shall take such actions as shall be required in order to permit the
Employee to sell immediately upon issuance of the Bonus Shares at least that
number of Bonus Shares that will permit the Employee to pay all income and
employment taxes that are required to be paid and/or withheld with respect to
the Employee as a result of the issuance of the Bonus Shares, either as part of
the Public Offering or the Secondary Public Offering or in connection with the
Change of Control transaction; provided, however, that the Employer shall have
the right to cause such Bonus Shares to be registered under a Form S-8
registration statement, if available, that shall include a re-offer prospectus
covering the Bonus Shares; and provided further, that subject to the
Registration Rights Agreement entered into between Employer and Employee on the
date hereof, the Employer shall not be obligated to effect a registration under
this Agreement with respect to the occurrence of any event under Section
4(f)(iv) hereof if the Employer is not eligible to use Form S-3 (as such form
relates to an offering by a person other than the issuer) or Form S-8.
(g) Incentive Stock Options. Pursuant to an incentive stock option
plan which satisfies the qualification requirements of Section 422 of the
Internal Revenue Code ("Section 422") and which has been adopted by the
Employer, the Employer shall grant to the Employee, no later than 60 days
following the Effective Date, incentive stock options, meeting the requirements
of Section 422, to purchase 300,000 shares of common stock of the Employer with
an exercise price of $1.00 per share (the "Options"); provided, however, if the
per share fair market value of the common stock of the Employer is greater than
$1.00 on the date of grant of the Options, the Employee shall have the right to
elect either to have the Options granted to him as non-qualified stock options
with an exercise price equal to $1.00 per share of Employer common stock or to
have the Options granted to him as incentive stock options with an exercise
price per share equal to the fair market value per share of Employer common
stock on the date the Options are granted. The Options shall be set forth in a
written stock option agreement that shall reflect, and be consistent with, the
provisions of this Section 4(g) as well as the requirements of Section 422.
Pursuant to the terms of such option agreement and subject to the limitation
hereafter set forth, eligible Options (as defined below) shall become
exercisable on and after the 120th day following the end of the Employer's 1996,
1997 and 1998 fiscal years (an "Exercise Commencement Date") and shall be
exercisable for a period of five years commencing on the Exercise Commencement
Date, provided that in no event shall any Option be exercisable more than ten
years after the date of grant. For purposes of this Section 4(g), the eligible
Options on the initial Exercise Commencement Date shall be the number of Options
equal to the quotient of (i) 10% of Westmeade's pre-tax income for its 1996
fiscal year (ii) divided by $1.00. Thus, for example, if Westmeade's pre-tax
income for its 1996 fiscal year is $640,000.00, the number of Options which
shall become eligible Options on the initial Exercise Commencement Date shall be
64,000. The same determination of eligible Options shall be made following the
end of Westmeade's 1997 and 1998 fiscal years with respect to its 1997 and 1998
pre-tax income. The eligible Options so determined shall become exercisable on
the appropriate Exercise Commencement Date. Notwithstanding the foregoing, no
more than 100,000 Options shall first become eligible Options on any Exercise
Commencement Date. In the event that the number of Options first becoming
eligible Options on any Exercise Commencement Date would exceed the 100,000
limit, the excess shall be carried over to the immediately following Exercise
Commencement Date. Such carryover shall continue until all of the eligible
Options become exercisable without exceeding the 100,000 limit. For purposes of
this Section 4(g), Westmeade's pre-tax income for any fiscal year shall be
conclusively determined by the Employer's auditors in accordance with generally
accepted accounting principles applied on a basis which is consistent with prior
periods.
(h) Other Stock Options. The Employer shall grant non-qualified
stock options and additional incentive stock options to the Employee from time
to time in accordance with the Employer's stock option plan(s) developed by the
Board for participation by officers of the Employer.
(i) Registration Rights Agreement. The shares of common stock of the
Employer issued pursuant to Sections 4(f) and 4(g) hereof shall be subject to
the provisions of the Registration Rights Agreement entered into between the
Employer and the Employee on the date hereof.
(j) Entire Compensation. The compensation provided for in this
Agreement shall constitute full payment for the services to be rendered by the
Employee to the Employer hereunder.
5. Death or Total Disability of the Employee.
(a) Death. In the event of the death of the Employee during the term
of this Agreement, this Agreement shall terminate effective as of the date of
the Employee's death, and the Employer shall not have any further obligation or
liability under this Agreement except that (i) the Employer shall pay to the
Employee's estate any portion of the Employee's Base Salary for the period up to
the Employee's date of death that remains unpaid, (ii) any bonuses for any
preceding year or for the current year that have been earned, but have not been
received prior to the date of death; (iii) all shares of common stock of the
Employer awarded under Section 4(f) hereof shall be issued to the Employee's
estate, and (iv) all options to purchase common stock of the Employer granted to
the Employee under Sections 4(g) and 4(h) hereof shall be exercisable by the
Employee's estate as permitted under the respective stock option agreements
relating to such options.
(b) Total Disability. In the event of the Total Disability (as that
term is hereinafter defined) of the Employee for a period of 90 consecutive days
at any time during the term of this Agreement, the Employer shall have the right
to terminate the Employee's employment hereunder by giving the Employee 90 days'
written notice thereof, and, upon expiration of such 90 day period, the Employer
shall not have any further obligation or liability under this Agreement except
that (i) the Employer shall pay to the Employee any portion of the Employee's
Base Salary for the period up to the date of termination that remains unpaid,
(ii) any bonuses for any preceding year or for the current year that have been
earned, but have not been received prior to the date of termination shall be
paid to the Employee, (iii) all shares of common stock of the Employer awarded
under Section 4(f) hereof shall be issued to the Employee and (iv) all options
to purchase common stock of the Employer granted to the Employee under Sections
4(g) and 4(h) hereof shall be exercisable by the Employee as permitted under the
respective stock option agreements relating to such options. Moreover, the
Employee shall continue to be entitled to receive any payments prescribed under
the Employer's disability insurance under which the Employee may be covered.
(i) If the Employee shall resume his duties within 90 days
after receipt of a notice of termination pursuant to this Section 5(b) and shall
continue to perform such duties for four consecutive weeks thereafter, this
Agreement shall continue in full force and effect, without any reduction in his
Base Salary and other benefits, and the notice of termination shall be
considered null and void and of no effect.
(ii) The term "Total Disability," when used herein, shall mean
a mental or physical condition which in the reasonable opinion of the Board
renders the Employee unable or incompetent to carry out the job responsibilities
he held or the tasks that he was assigned at the time the disability was
incurred.
6. Termination by the Employer.
(a) Termination for Cause. Prior to its termination under
Section 2 hereof, the Employer may terminate this Agreement with cause upon
satisfying the prior written notice and hearing requirements hereinafter
provided, unless Employee cures such cause prior to the end of the period set
forth below. The Employee shall not be deemed to have been terminated for cause
unless and until (i) there shall have been delivered to the Employee a written
notice setting forth in reasonable detail the respects in which the Employee is
charged with having engaged in conduct warranting termination for cause together
with a statement in reasonable detail of any evidence alleged to support such
charge, (ii) no sooner than ten days and no later than 30 days after delivery of
such notice, the Employee and his counsel shall have been afforded an
opportunity to appear before the Board and to confront any witnesses against
him, and (iii) there shall have been delivered to the Employee a copy of a
resolution, duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board called and held for
such purpose (after satisfying the notice and hearing requirements set forth
above), finding that in the good faith opinion of the Board the Employee was
guilty of conduct which constitutes "cause", as hereinafter defined, and
specifying the particulars thereof in reasonable detail. Upon receiving a copy
of such resolution, the Employee shall be given a period of 30 days within which
to cure such cause to the reasonable satisfaction of the Employer. Upon failing
to cure such cause, the Employee's employment shall terminate at the end of such
30-day period.
The term "cause" as contemplated by this Section 6 shall mean:
(i) habitual intoxication; (ii) abuse of a controlled substance; (iii)
conviction of a felony which conviction is no longer subject to any appeal; (iv)
adjudication as an incompetent; (v) failure to execute such duties as are within
the scope of this Agreement and are reasonably assigned to the Employee by the
Employer; (vi) a breach by the Employee of any material term of this Agreement;
(vii) engaging in conduct that, in the reasonable opinion of the Board, has
injured or would injure the business or reputation of the Employer (or any of
its subsidiaries) or would otherwise adversely affect its interests; or (viii)
misappropriation of any corporate funds or property of the Employer (or any of
its subsidiaries), theft embezzlement or fraud. Cause shall not include minor
infractions or mere differences in opinion over business policy. In the event
that the Employer shall discharge the Employee pursuant to this Section 6(a),
the Employer shall not have any further obligation or liability under this
Agreement, except that (i) the Employer shall pay to the Employee any portion of
the Employee's Base Salary for the period up to the date of termination that
remains unpaid, (ii) any bonuses for any preceding year or for the current year
that have been earned, but have not been received prior to the date of
termination shall be paid by the Employer; (iii) all shares of common stock of
the Employer awarded under Section 4(f) hereof shall be issued to the Employee,
and (iv) all options to purchase common stock of the Employer granted to the
Employee under Sections 4(g) and 4(h) hereof shall be exercisable by the
Employee as permitted under the respective stock option agreements relating to
such options.
Notwithstanding the foregoing, if the cause for termination
stated by the Employer in its notice to Employee consists of a willful act of
misconduct by Employee, then Employee shall have notice and an opportunity to be
heard as set forth above, but such cause shall not be deemed curable.
Notwithstanding anything set forth above, if the cause in Employer's notice of
termination to Employee consists of any act within clause (viii), Employer shall
be entitled to bar Employee from the premises of Employer pending the Employee's
appearance before the Board, although Employer will continue to pay Employee's
Base Salary during such periods.
(b) Other Termination. If the Employer shall terminate the
employment of the Employee for any reason other than cause as specified in
Section 6(a) hereof, the Employee shall be entitled to receive from the Employer
the same Base Salary, bonus, stock award, options and benefits that would be
payable to the Employee pursuant to Section 7 hereof upon the Employee's
termination of this Agreement in the event of the Employer's breach of this
Agreement.
7. Termination by Employee upon Breach of Agreement. Prior to its
termination under Section 5 or 6 hereof, the Employee's employment with the
Employer can be terminated by the Employee in the event of (i) the Employer's
breach of any material provision of this Agreement, including, without
limitation, the Employer's failure to provide the Base Salary or employee
benefits to which Executive is entitled, (ii) the Employer's reduction or change
in any material authority, responsibility, prerequisite or prerogative
associated with the Employee's Position without the Employee's written consent,
or (iii) the Employer's assigning the Employee, without the written consent of
the Executive, to a place of employment situated beyond a radius of 25 miles
from the place of employment to which the Employee is assigned as of the
Effective Date as long as the Employee shall give written notice to the Employer
of his intent to terminate setting forth the basis for such termination and the
Employer shall have 30 days after receipt of such notice to rectify or rebut the
claimed basis for termination. In the event the Employee shall terminate this
Agreement for a reason set forth in this Section 7, (i) the Employer shall pay
the Employee his Base Salary and bonus earned through the date of termination at
the rate in effect at the time notice of such termination is given; (ii) the
Employer shall pay to the Employee the Base Salary due for the unexpired term
under Section 4 hereof as if the Employee's employment had not been terminated;
(iii) the Employer shall pay to the Employee an amount equal to the bonuses due
for the unexpired term under Section 4 hereof as if the Employee's employment
had not been terminated, based on the bonus last paid to the Employee; (iv) all
shares of common stock of the Employer awarded under Section 4(f) hereof shall
be issued to the Employee in accordance with Section 4(f) hereof as if the
Employee's employment had not been terminated; (v) all options to purchase
common stock granted to the Employee under Section 4(g) and 4(h) hereof shall
become exercisable by the Employee, whether or not such options are then
exercisable, for a period equal to the unexpired term of this Agreement; (vi)
the Employer shall pay the amount of any forfeitures that result from
non-vesting under the Employer's employee benefit and welfare plans (qualified
or otherwise) and shall pay any such benefits earned by the Employee at the
earliest possible time and/or as directed by the Employee; and (vii) the
Employer shall continue to timely provide all of the other employee benefits and
payments due the Employee as provided under this Agreement for the unexpired
term of this Agreement (as though no termination had occurred). If the terms of
any welfare benefit plan of the Employer does not permit continued participation
by Employee, then the Employer shall arrange to provide the Employee a benefit
substantially similar to and no less favorable than the benefit Employee was
entitled to receive under such plan at the end of the period of coverage.
8. Non-Competition. If the Employee terminates his employment voluntarily
other than pursuant to Section 7 hereof, or is terminated for cause as defined
in Section 6(a) hereof, the Employee shall forfeit the Options awarded under
Section 4(g) hereof if he engages in a "competing business" with Westmeade or
the Employer within 25 miles of any location in which Westmeade or the Employer
conducts business at the time of termination, provided that this section shall
not prohibit the Employee from acting in a professional capacity as a therapist.
For purposes of this Section 8, the term "competing business" shall mean the
operation of a mental health facility or clinic.
9. Mitigation. The Employee shall not be required to mitigate the amount
of any payments provided for in Section 6 or 7 hereof by seeking other
employment or otherwise, (but shall not be prohibited from seeking such
employment), nor shall the amount of any payment provided for in Section 6 or 7
hereof be reduced by any compensation earned by the Employee as a result of
self-employment or employment by another employer after the termination of his
employment hereunder.
10. Vacation, Holidays, etc. Employee shall be entitled to four weeks
vacation with pay (or such greater length of time as may be approved from time
to time by the Board) during each fiscal year of the Employer, such vacation to
be taken by the Employee at such times as shall be consistent with the business
requirements of the Employer. In addition, Employee shall be entitled to such
holidays as are customary in the Employer.
11. Supersedes Other Agreements. This Agreement supersedes and is in lieu
of any and all other employment arrangements between the Employee and the
Employer or Westmeade and constitutes the sole and entire agreement with respect
thereto, but shall not supersede any existing confidentiality or nondisclosure
agreements between the Employee and the Employer or Westmeade. Any
representation, inducement, promise or agreement, whether oral or written,
between the Employee and the Employer or Westmeade which is not embodied herein
shall be of no force or effect.
12. Amendments. Any amendment to this Agreement shall be made in writing
and signed by the parties hereto.
13. Successors and Assignment. The provisions of this Agreement shall
extend to the successors, surviving corporations and assignees of the Employer
and to any purchaser of substantially all of the assets and business of the
Employer (hereinafter referred to as a "Successor"). The assignment by Employee
of this Agreement or any interest herein or of any money due or to become due by
reason of the terms hereof without the prior written consent of the Employer
shall be void. The Employer will require any Successor, by a written agreement
in form and substance satisfactory to the Employee, to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Employer would be required to perform it if no such succession had taken
place. The Employer may require the Employee to execute an instrument reasonably
acceptable to the Successor stating that the Employee will continue to be bound
by the terms of this Agreement when assumed by the Successor. Failure of the
Employer to obtain such written agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee to
compensation from the Employer in the same amount and on the same terms as he
would be entitled to hereunder pursuant to Section 7 hereof, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement, Employer shall mean the Employer and any successor to its business
and/or assets as aforesaid which executes and delivers the written agreement
provided for in this Section 13 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
14. Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, then such provision shall be deemed to be
modified or restricted to the extent and in the manner necessary to render the
same valid and enforceable, or shall be deemed excised from this Agreement, as
the case may require, and this Agreement shall be construed and enforced to the
maximum extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted or as if such provision had not
been originally incorporated herein, as the case may be.
15. Construction. This Agreement shall be construed and interpreted in
accordance with the internal laws of the Commonwealth of Pennsylvania and shall
be enforced in the Commonwealth of Pennsylvania.
16. Section Headings. The section headings contained in this Agreement are
for convenience of reference only and shall in no manner be construed as a part
of this Agreement.
17. Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given when mailed by certified
mail, return receipt requested, or delivered by a national overnight delivery
service addressed to the intended recipient as follows:
If to the Employee:
David Lovitz
8001 Ardmore Avenue
Wyndmoor, PA 19038
If to the Employer:
CoreCare Systems, Inc.
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19118
Attention: President
Any party may from time to time change his or its address for the purpose of
notices to that party by a similar notice specifying a new address, but no such
change shall be deemed to have been given until it is actually received by the
party sought to be charged with its contents.
18. Waivers. No claim or right arising out of a breach or default under
this Agreement shall be discharged in whole or in part by a waiver of that claim
or right unless the waiver is supported by consideration and is in writing and
executed by the aggrieved party hereto or his or its duly authorized agent. A
waiver by any party hereto of a breach or default by the other party hereto of
any provision of this Agreement shall not be deemed a waiver of future
compliance therewith, and such provisions shall remain in full force and effect.
19. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of, the Employer and Employee and their respective heirs,
personal and legal representatives, successors, and assigns. If the Employee
should die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee, or other designee or, if there be no such designee, to the Employee's
estate.
20. Indemnification. The Employer agrees to defend, indemnify and hold
harmless the Employee from and against any liabilities and expenses arising in
relation to this Agreement or the Employee's services as an officer of the
Employer or its subsidiaries or affiliates, to the fullest extent permitted by
applicable law. The foregoing indemnification obligation shall not be applicable
in the event the Employee is finally found by a court of competent jurisdiction,
with all appeals completed, to have been grossly negligent with respect to the
matter for which he is seeking indemnification. The Employer shall pay on a
regular basis, to the fullest extent permitted by law, in advance of the final
disposition of any action, suit or proceeding, any legal and other professional
fees and expenses incurred in connection herewith, upon receipt by the Employer
of a written undertaking by the Employee to repay such amounts if it shall
ultimately be deter-mined that the Employee is not entitled to be indemnified.
This indemnification obligation shall survive the termination of the Employee's
employment hereunder.
21. Counterparts. This Agreement is being executed in multiple
counterparts, each of which shall be deemed an original and together shall
constitute one and the same agreement, with one counterpart being delivered to
each party hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of
the date first above written.
CORECARE SYSTEMS, INC.
By: /s/ Rose DiOttavio
---------------------------------
Title: President
-----------------------------
WESTMEADE HEALTHCARE, INC.
By: /s/ David Lovitz
---------------------------------
Title: President
-----------------------------
/s/ David Lovitz
---------------------------------
David Lovitz
EXHIBIT 6.18
EMPLOYMENT AND NON-COMPETITION AGREEMENT
MARLENE TODARO
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated
June 30, 1995, is between American Institute for Behavioral Counseling, Inc., a
New Jersey corporation (formerly CoreCare Acquisition, Inc. - III) (the
"Employer") and Marlene Todaro (the "Employee").
WHEREAS, the Employee has served as an executive officer of the Employer's
predecessor; and
WHEREAS, the Employer's predecessor is merging with and into Employer, a
wholly owned subsidiary of CoreCare Systems, Inc. (the "Company"); and
WHEREAS, as a condition of such merger, the Company and the Employee
require that the Employee continue to serve as an executive officer of the
Employer and the Employee desires to continue to serve as such.
NOW, THEREFORE, it is hereby agreed as follows:
ss.1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
ss.2. DUTIES. The Employee shall be employed as the Vice-President of the
Employer. In such capacity, the Employee shall have such executive
responsibilities and duties as are assigned by the Employer's Board of Directors
(the "Board") and President of the Employer and are consistent with the position
of Vice-President of the Employer. The Employee agrees to devote her full time
and best efforts to the performance of her duties to the Employer. Employee
agrees to serve as Vice-President of Penn Interpersonal Communications, Inc. and
Bio Diagnostic Technologies, Inc. The Employee shall receive no additional
compensation in connection with such service, but shall be reimbursed for all
expenses incurred on behalf of such corporations to the extent set forth in
Section 5 hereof. All services which Employee performs for Penn Interpersonal
Communications, Inc. and Bio Diagnostic Technologies, Inc. shall be included in
as services performed for the Employer hereunder for purposes of determining
whether Employee has devoted her full time and best efforts to her duties for
the Employer.
ss.3. TERM. The initial term of employment of the Employee hereunder shall
commence on July 1, 1995 (the "Commencement Date") and shall continue for a
period of four (4) years (the "Initial Term") unless earlier terminated pursuant
to ss.6, and shall be renewed automatically for additional one (1) year terms
thereafter unless terminated by either party by written notice to the other
given at least ninety (90) days prior to the expiration of the then current
term.
ss.4. COMPENSATION AND BENEFITS. Until the termination of the Employee's
employment hereunder, in consideration for the services of the Employee
hereunder, the Employer shall compensate the Employee as follows:
(a) Base Salary. The Employer shall pay the Employee, in accordance
with the Employer's then current payroll practices, a base salary (the "Base
Salary"). The Base Salary will be paid at an annual rate of $50,000. There shall
be a minimum increase in the Employee's base salary annually during the term of
the Employee's employment hereunder equal to the percentage increase in the
Consumer Price Index for Urban Wage Earners for the New York and Northeastern
New Jersey area for the preceding four (4) calendar quarters for which
information has been published by the U.S. Department of Labor over the same
Consumer Price Index for the comparable prior four (4) calendar quarters.
(b) Management Incentive Bonus. The Employee shall also receive from
the Employer, for each of the fiscal years of the Employer ended after the date
hereof, a management incentive bonus (the "Incentive Bonus") equal to the Annual
Bonus Calculation (as defined below), provided that the Incentive Bonus payable
for the fiscal year of the Employer ending December 31, 1995 shall be prorated
based on the number of days elapsed from the Commencement Date until the end of
such fiscal year. The Incentive Bonus for each fiscal year shall be paid within
thirty (30) days after the completion of the Employer's audited financial
statements for such fiscal year. As used in this Agreement, (a) "Actual EBITDA"
means, with respect to any fiscal year of the Employer, EBITDA for such fiscal
year calculated on the basis of the Employer's audited financial statements for
such fiscal year; (b) "EBITDA Percentage" means ten (10%) percent; (c) "Annual
Bonus Calculation" means the EBITDA Percentage multiplied by the increase, if
any, in Actual EBITDA for the fiscal year for which the Incentive Bonus is being
computed and Prior Year EBITDA; (d) "Prior Year EBITDA" means the EBITDA for the
fiscal year of the Employer next preceding the fiscal year for which the
Incentive Bonus is being calculated; provided, however that for purposes of
establishing Prior Year EBITDA for fiscal year 1995, the EBITDA of the Employer
(and its predecessors or constituent companies) through June 30, 1995 shall be
annualized for said 1995 fiscal year and the sum of $28,000 added thereto; (e)
"EBITDA" means, with respect to any fiscal year, the sum of the consolidated net
income (or loss) of the Employer for such fiscal year, calculated in accordance
with generally accepted accounting principles consistently applied, but
excluding therefrom any extraordinary items of income or loss, plus all amounts
deducted in the computation of net income on account of (i) income taxes, (ii)
interest expense, (iii) amortization, (iv) depreciation, (v) any Incentive Bonus
paid to the Employee hereunder, and (vi) management fees paid to any
"affiliates" as such term is defined in the Securities Exchange Act of 1934, as
amended, of the Employer or its parent company during such year. Notwithstanding
anything herein to the contrary, for purposes of ss.4(b), ss.6(b) and ss.9 only,
the term "Employer" shall mean American Institute for Behavioral Counseling,
Inc., Penn Interpersonal Relations, Inc., and Bio Diagnostic Technologies, Inc.
(c) Vacation. The Employee shall be entitled to six (6) weeks
vacation each calendar year at full pay. The Employee shall be entitled to take
an additional three (3) weeks vacation annually without Base Salary, but shall
be entitled to all other benefits and compensation provided hereunder. Any
vacation shall be taken at the reasonable and mutual convenience of the Employer
and the Employee.
(d) Insurance; Other Benefits. Accident, life and health insurance
for the Employee shall be provided by the Employer under group accident, life
and health insurance plans maintained by the Employer for its full-time,
salaried employees as such employment benefits may be modified from time to time
by the Employer for all full-time salaried employees. The amount and extent of
such coverage shall be subject to the discretion of the Board, provided, that
the amount and extent of such coverage shall be no less favorable than such
coverage provided by the Company to the Employee immediately prior to the
execution of this Agreement. In the event that CoreCare Systems, Inc.
("CoreCare"), the parent of the Employer, procures for its executive officers or
its employees generally policies of insurance providing additional or greater
benefits than those provided to the Employee by the Employer, then the Employee
shall be entitled to such additional or greater benefits.
(e) Car Allowance. In connection with the Employee's employment, the
Employee shall from time to time be required to travel by automobile on the
Employer's business. Accordingly, the Employer shall provide to the Employee an
automobile expense allowance of $600.00 per month, payable on the first day of
each month during the term of this Agreement.
ss.5. EXPENSES. In addition to the foregoing, the Employer shall pay or
reimburse the Employee for all reasonable out-of-pocket expenses incurred by the
Employee in the performance of her duties hereunder upon presentation of
appropriate vouchers therefor.
ss.6. TERMINATION. The Employee's employment hereunder shall commence on
the Commencement Date and continue until the expiration of the Initial Term, and
any extension of such term pursuant to ss.3, except that the employment of the
Employee hereunder shall earlier terminate;
(a) Death or Disability. Upon the death of the Employee during the
term of her employment hereunder or, at the option of the Employer, in the event
of the Employee's disability, upon thirty (30) days' written notice from the
Employer. The Employee shall be deemed disabled if she is unable, due to
physical illness or injury or mental illness or incapacity, to perform her
regular full time duties as an officer of the Employer for 180 consecutive days
in any six (6) month period or an aggregate of 250 days in any twelve (12) month
period.
(b) For Cause. For "Cause" immediately upon written notice by the
Employer to the Employee; provided, that the Employer may not terminate the
Employee for Cause unless (i) such termination has been approved by the
affirmative vote or consent of a majority of the directors on the Board
(excluding the Employee) prior to the time of such termination and (ii) not
later than 30 days prior to the effective date of such termination, the Employee
shall be given the opportunity to appear before the Board, represented by
counsel, to address the grounds for such termination. For purposes of this
Agreement, a termination shall be for Cause if the Board shall determine that
any one or more of the following has occurred:
(i) acceptance of any unlawful bribe or kickback with respect
to the Employer's business; or
(ii) the Employee shall have been convicted by a court of
competent jurisdiction of, or pleaded guilty to, any felony which the Board
reasonably determines or in its discretion would materially affect or impair in
any way the Employee's ability to perform her duties hereunder; or
(iii) the Employee shall have committed a breach of any of the
covenants, terms and provisions of ss.9 hereof or a material breach of any of
the covenants, terms and provisions of ss.8 hereof; or
(iv) the Employee shall have breached any one or more of the
provisions of this Agreement (excluding ss.ss.8 and 9 hereof) and such breach
shall have continued for a period of thirty (30) days after written notice to
the Employee specifying such breach in reasonable detail; or
(v) the Employee shall have refused, after explicit written
notice, to obey any lawful resolution of or direction by the Board which is
consistent with this Agreement and her duties hereunder; or
(vi) the Employee has engaged in gross misconduct injurious to
the Employer.
(c) Resignation or Termination Without Cause. The Employee shall
notify the Employer ninety (90) days written notice in advance of the effective
date of her resignation. For purposes of this Agreement, the Employee shall be
deemed to have been terminated without Cause if the Employee terminates his
employment hereunder for Good Reason upon thirty (30) days written notice to the
Employer. The Employee shall be entitled to terminate her employment for Good
Reason if any of the following occur:
(i) the Employee is assigned duties which are inconsistent or
less prestigious than the position or responsibilities associated with her
position as Vice-President of the Employer and the other duties of the Employee
hereunder;
(ii) if the Employer shall merge or consolidate into or
transfer substantially all of its assets to, or become a majority owned
subsidiary of, another corporation, and the Employee is not then elected and/or
appointed to a position of responsibility and prestige in any such surviving,
new or purchasing corporation equivalent to that provided in Section 2 hereof;
(iii) the Employer shall have terminated the employment of
Anthony Todaro "without Cause" as defined in her Employment Agreement with the
Employer;
(iv) if the Board of Directors or any other member thereof or
any stockholder of the Employer or any affiliate thereof, except Anthony Todaro,
seeks to control or interfere with the day to day management of the Employer, it
being the intention of the parties that the Employee and Anthony Todaro shall
have day-to-day responsibility for the management of the Employer's business;
(v) the Employer requires the Employee to perform her duties
hereunder principally at any location more than fifteen (15) miles distant from
any office at which the Employer currently conducts business, and she notifies
the Employer within 30 days after such relocation that she is unwilling to
continue her employment hereunder at such location; and
(vi) prior to the payment in full of all principal and
interest owed to the Employee under a promissory note in the principal amount of
$300,000 made by CoreCare to the Employee and Anthony Todaro, she is removed or
not reelected as a Director of the Employer for any reason other than for Cause
as defined in ss.6(b) hereof.
(d) Rights and Remedies on Termination. (i) If the Employer shall
terminate the Employee's employment hereunder pursuant to ss.6(c) hereof, then
(A) the Employee shall be entitled to receive, as severance pay, payment, in
accordance with the Employer's then current payroll practices, of her Base
Salary in effect at the time of her termination and her Incentive Bonus for (1)
the remainder of the Initial Term or (2) if such termination occurs subsequent
to the Initial Term, the remainder of the then current one-year extension
thereof; provided, further that the Employee shall not be required to mitigate
her damages during such period and the Employer shall not be entitled to reduce
or offset the amount payable by the Employer under this ss.6(d)(i) by any income
received by the Employee pursuant to any new employment so long as the Employee
is complying with ss.9 hereof. The Employee shall also be entitled to receive
all benefits provided in ss.4(d) and ss.4(e) hereof notwithstanding anything
therein to the contrary.
(ii) If the Employee's employment hereunder is terminated
pursuant to ss.6(a) hereof, then the Employee (or her estate, as applicable)
shall be entitled to receive (A) payment, in accordance with the Employer's then
current payroll practices, of the Employee's Base Salary in effect at the time
of such termination through the date of termination and (B) within 30 days
following the completion of the Employer's financial statements for the fiscal
year during which such termination occurs, a prorated portion of the Incentive
Bonus (if any) for the fiscal year in which her termination occurs determined by
multiplying (1) the full amount of the Incentive Bonus (if any) that would have
been payable to the Employee pursuant to ss.4(b) hereof if her employment
hereunder had not been terminated by (2) a fraction, the numerator of which is
the number of days elapsed during such fiscal year prior to the Employee's
termination and the denominator of which is 365.
(iii) Except as otherwise set forth in this ss.6(d), the
Employee shall not be entitled to any severance or other compensation after
termination other than payment of any portion of her Base Salary and Incentive
Bonus through the date of her termination and any expense reimbursements under
ss.5 hereof for expenses incurred in the performance of her duties prior to
termination.
ss.7. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
improvements, and innovations (including all data and records pertaining
thereto) related to the Employer's business, whether or not patentable,
copyrightable, registrable as a trademark, or reduced to writing, that the
Employee may discover, invent or originate during the term of her employment
hereunder, either alone or with others and during working hours or by the use of
the facilities of the Employer ("Inventions"), shall be the exclusive property
of the Employer. The Employee shall promptly disclose all Inventions to the
Employer, shall execute at the request of the Employer any assignments or other
documents the Employer may deem necessary to protect or perfect its right
therein, and shall assist the Employer, at the Employer's expense, in obtaining,
defending and enforcing the Employer's rights therein. The Employee hereby
appoints the Employer as her attorney-in-fact to execute on her behalf any
assignments or other documents deemed necessary by the Employer to protect or
perfect its right to any Inventions.
ss.8. CONFIDENTIAL INFORMATION. The Employee recognizes and acknowledges
that certain assets of the Employer, including without limitation information
regarding customers referral sources and third-party payors, pricing policies,
methods of operation, proprietary computer programs, sales, products, profits,
costs, markets, key personnel, formulae, product applications, technical
processes, and trade secrets (hereinafter called "Confidential Information") are
valuable, special, and unique assets of the Employer and its affiliates. The
Employee shall not, during and for a period of one (1) year after her term of
employment, disclose any or any part of the Confidential Information to any
person, firm, corporation, association, or any other entity for any reason or
purpose whatsoever, directly or indirectly, except as may be required pursuant
to her employment hereunder, provided, that Confidential Information shall in no
event include (a) Confidential Information which was generally available to the
public at the time of disclosure by the Employer or (b) Confidential Information
which becomes publicly available other than as a consequence of the breach of
the Employee of her confidentiality obligations hereunder. In the event of the
termination of her employment, whether voluntary or involuntary and whether by
the Employer or the Employee, the Employee shall deliver to the Employer all
documents and data pertaining to the Confidential information and shall not take
with him any documents. The Employee shall deliver to the Employer all documents
and data pertaining to the Confidential Information and shall not take with him
any documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information. The obligations
set forth in this ss.8 shall be inapplicable in the event of a termination of
this Agreement for Good Reason by the Employee.
ss.9. NON-COMPETITION. During the term of the Employee's employment
hereunder, and until one (1) year after any termination of the Employee's
employment hereunder, the Employee will not engage, directly or indirectly,
alone or as a shareholder (other than as a holder of less than five percent (5%)
of the common stock of any publicly traded corporation), partner, officer,
director, employee, or consultant of any other business organization that is
engaged or becomes engaged in psychological counselling and related services or
the management of persons or business entities engaged in psychological
counseling at the time of the Employee's termination within ten (25) miles of
any location at which the Employer provides such services, (b) divert to any
competitor of the Employer any client of the Employer, or (c) solicit or
encourage any officer, key employee or consultant of the Employer to leave its
employ for alternative employment or hire or offer employment to, any person to
whom the Employer has offered employment. The Employee will continue to be bound
by the provisions of this ss.9 until their expiration and shall not be entitled
to any compensation from the Employer with respect thereto except as provided in
ss.6(d) hereof. If any time the provisions of this ss.9 shall be determined to
be invalid or unenforceable, by reason of being vague or unreasonable as to
area, duration or scope of activity, this ss.9 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Employee agrees that
this ss.9 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein. The obligations set forth
in this ss.9 shall be inapplicable in the event of a termination of this
Agreement for Good Reason by the Employee.
ss.10. MISCELLANEOUS.
(a) Indemnification. The By-Laws of the Employer shall indemnify the
Employee in her capacity as an officer, director and agent of the Employer, and
provide for advances of expenses of defense, to the fullest extent permitted
under New Jersey law and shall provide that such indemnification shall be a
contract right.
(b) D & O Insurance. In the event CoreCare procures for its
directors and officers, policies of directors and officers liability insurance,
the Employer shall provide substantially identical coverage for its directors
and officers.
(c) Transactional Expenses. All legal expenses and costs incurred by
the Employee arising from or related to the acquisition of the stock by the
Company, and this Employment Agreement and any other agreements entered into in
connection therewith shall be paid in full by the Employer.
(d) Reimbursement of Legal Fees. In the event the Employer breaches
any of its obligations under this Agreement, the Employee shall indemnify and
hold the Employer harmless from and against and shall promptly pay to the
Employee all reasonable legal fees and costs incurred in enforcing her rights
hereunder.
ss.11. GENERAL.
(a) Notices. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid or sent by written telecommunication or
telecopy, to the relevant address set froth below, or to such other address as
the recipient of such notice or communication shall have specified to the other
party hereto in accordance with this ss.11(a):
If to the Employee, to:
Marlene Todaro
517 Ludlow Station Road
Asbury, New Jersey 08802
With copies to:
Mark K. Lipton, Esq.
Podvey, Sachs, Meanor, Catenacci,
Hildner & Cocoziello
One Riverfront Plaza
Newark, New Jersey 07102
If to the Employer, to:
Marlene Todaro
P.O. Box 876
933 Washington Avenue
Suite 1-C
Greenbrook, New Jersey 08812
With copies to:
Gary Miller, Esq.
Connolly, Epstein, Chicco, Foxman,
Engelmyer & Ewing
1515 Market Street, Ninth Floor
Philadelphia, Pennsylvania 19102-1909
(b) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by the Employee of her obligations under ss.ss.7, 8
and 9 hereof, the Employer will have no adequate remedy at law, and accordingly
will be entitled to specific performance and other appropriate injunctive and
equitable relief.
(c) Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) Waivers. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(e) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Assigns. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties hereto, including any
entity which acquires substantially all of the assets or stock of the Employer.
(g) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by each of the parties hereto.
(h) Governing Law. This Agreement and the performance hereof shall
be construed and governed in accordance with the laws of the State of New
Jersey.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
AMERICAN INSTITUTE FOR BEHAVIORAL
COUNSELLING, INC.
By: /s/ Rose DiOttavio
-------------------------------
Rose DiOttavio
/s/ Marlene Todaro
-------------------------------
Marlene Todaro
EXHIBIT 6.19
EMPLOYMENT AND NON-COMPETITION AGREEMENT
ANTHONY TODARO
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated
June 30, 1995, is between American Institute for Behavioral Counseling, Inc., a
New Jersey corporation (formerly CoreCare Acquisition, Inc. - III) (the
"Employer") and Anthony Todaro (the "Employee").
WHEREAS, the Employee has served as an executive officer of the Employer's
predecessor; and
WHEREAS, the Employer's predecessor is merging with and into Employer, a
wholly owned subsidiary of CoreCare Systems, Inc. (the "Company"); and
WHEREAS, as a condition of such merger, the Company and the Employee
require that the Employee continue to serve as an executive officer of the
Employer and the Employee desires to continue to serve as such.
NOW, THEREFORE, it is hereby agreed as follows:
ss.1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
ss.2. DUTIES. The Employee shall be employed as the President and Chief
Executive Officer of the Employer. In such capacity, the Employee shall have
such executive responsibilities and duties as are assigned by the Employer's
Board of Directors (the "Board") and are consistent with the position of
President and Chief Executive Officer of the Employer. The Employee agrees to
devote his full time and best efforts to the performance of his duties to the
Employer. The Employee shall also serve as a Director of the Employer during the
initial and any extended term of this Agreement. Employee agrees to serve as
President and Chief Executive Officer of Penn Interpersonal Communications, Inc.
and Bio Diagnostic Technologies, Inc. The Employee shall receive no additional
compensation in connection with such service, but shall be reimbursed for all
expenses incurred on behalf of such corporations to the extent set forth in
Section 5 hereof. All services which Employee performs for Penn Interpersonal
Communications, Inc. and Bio Diagnostic Technologies, Inc. shall be included in
as services performed for the Employer hereunder for purposes of determining
whether Employee has devoted his full time and best efforts to his duties for
the Employer. It is also acknowledged that Employee shall perform professional
psychotherapy services from time to time in connection with the Employee's
business, for which Employee shall be entitled to no additional compensation,
even if Employee performs such services as an independent contractor.
ss.3. TERM. The initial term of employment of the Employee hereunder shall
commence on July 1, 1995 (the "Commencement Date") and shall continue for a
period of four (4) years (the "Initial Term") unless earlier terminated pursuant
to ss.6, and shall be renewed automatically for additional one (1) year terms
thereafter unless terminated by either party by written notice to the other
given at least ninety (90) days prior to the expiration of the then current
term.
ss.4. COMPENSATION AND BENEFITS. Until the termination of the Employee's
employment hereunder, in consideration for the services of the Employee
hereunder, the Employer shall compensate the Employee as follows:
(a) Base Salary. The Employer shall pay the Employee, in accordance
with the Employer's then current payroll practices, a base salary (the "Base
Salary"). The Base Salary will be paid at an annual rate of $170,000. There
shall be a minimum increase in the Employee's base salary annually during the
term of the Employee's employment hereunder equal to the percentage increase in
the Consumer Price Index for Urban Wage Earners for the New York and
Northeastern New Jersey area for the preceding four (4) calendar quarters for
which information has been published by the U.S. Department of Labor over the
same Consumer Price Index for the comparable prior four (4) calendar quarters.
(b) Management Incentive Bonus. The Employee shall also receive from
the Employer, for each of the fiscal years of the Employer ended after the date
hereof, a management incentive bonus (the "Incentive Bonus") equal to the Annual
Bonus Calculation (as defined below), provided that the Incentive Bonus payable
for the fiscal year of the Employer ending December 31, 1995 shall be prorated
based on the number of days elapsed from the Commencement Date until the end of
such fiscal year. The Incentive Bonus for each fiscal year shall be paid within
thirty (30) days after the completion of the Employer's audited financial
statements for such fiscal year. As used in this Agreement, (a) "Actual EBITDA"
means, with respect to any fiscal year of the Employer, EBITDA for such fiscal
year calculated on the basis of the Employer's audited financial statements for
such fiscal year; (b) "EBITDA Percentage" means ten (10%) percent; (c) "Annual
Bonus Calculation" means the EBITDA Percentage multiplied by the increase, if
any, in Actual EBITDA for the fiscal year for which the Incentive Bonus is being
computed and Prior Year EBITDA; (d) "Prior Year EBITDA" means the EBITDA for the
fiscal year of the Employer next preceding the fiscal year for which the
Incentive Bonus is being calculated; provided, however that for purposes of
establishing Prior Year EBITDA for fiscal year 1995, the EBITDA of the Employer
(and its predecessors or constituent companies) through June 30, 1995 shall be
annualized for said 1995 fiscal year and the sum of $28,000 added thereto; (e)
"EBITDA" means, with respect to any fiscal year, the sum of the consolidated net
income (or loss) of the Employer for such fiscal year, calculated in accordance
with generally accepted accounting principles consistently applied, but
excluding therefrom any extraordinary items of income or loss, plus all amounts
deducted in the computation of net income on account of (i) income taxes, (ii)
interest expense, (iii) amortization, (iv) depreciation, (v) any Incentive Bonus
paid to the Employee hereunder, and (vi) management fees paid to any
"affiliates" as such term is defined in the Securities Exchange Act of 1934, as
amended, of the Employer or its parent company during such year. Notwithstanding
anything herein to the contrary, for purposes of ss.4(b), ss.6(b) and ss.9 only,
the term "Employer" shall mean American Institute for Behavioral Counseling,
Inc., Penn Interpersonal Relations, Inc., and Bio Diagnostic Technologies, Inc.
(c) Vacation. The Employee shall be entitled to six (6) weeks
vacation each calendar year at full pay. The Employee shall be entitled to take
an additional three (3) weeks vacation annually without Base Salary, but shall
be entitled to all other benefits and compensation provided hereunder. Any
vacation shall be taken at the reasonable and mutual convenience of the Employer
and the Employee.
(d) Insurance; Other Benefits. Accident, life and health insurance
for the Employee shall be provided by the Employer under group accident, life
and health insurance plans maintained by the Employer for its full-time,
salaried employees as such employment benefits may be modified from time to time
by the Employer for all full-time salaried employees. The amount and extent of
such coverage shall be subject to the discretion of the Board, provided, that
the amount and extent of such coverage shall be no less favorable than such
coverage provided by the Company to the Employee immediately prior to the
execution of this Agreement. In the event that CoreCare Systems, Inc.
("CoreCare"), the parent of the Employer, procures for its executive officers or
its employees generally policies of insurance providing additional or greater
benefits than those provided to the Employee by the Employer, then the Employee
shall be entitled to such additional or greater benefits.
(e) Car Allowance. In connection with the Employee's employment, the
Employee shall from time to time be required to travel by automobile on the
Employer's business. Accordingly, the Employer shall provide to the Employee an
automobile expense allowance of $600.00 per month, payable on the first day of
each month during the term of this Agreement.
(f) Continuing Education Expenses. The Employer acknowledges that
the Employee is required to attend continuing education programs in order to
maintain his certification as a licensed therapist. Accordingly, the Employer
shall permit the Employee to attend up to eight (8) days of such programs
annually without reduction in the compensation provided to him hereunder and
shall also pay for all reasonable costs incurred by the Employee in attending
such programs.
ss.5. EXPENSES. In addition to the foregoing, the Employer shall pay or
reimburse the Employee for all reasonable out-of-pocket expenses incurred by the
Employee in the performance of his duties hereunder upon presentation of
appropriate vouchers therefor.
ss.6. TERMINATION. The Employee's employment hereunder shall commence on
the Commencement Date and continue until the expiration of the Initial Term, and
any extension of such term pursuant to ss.3, except that the employment of the
Employee hereunder shall earlier terminate;
(a) Death or Disability. Upon the death of the Employee during the
term of his employment hereunder or, at the option of the Employer, in the event
of the Employee's disability, upon thirty (30) days' written notice from the
Employer. The Employee shall be deemed disabled if he is unable, due to physical
illness or injury or mental illness or incapacity, to perform his regular full
time duties as an officer of the Employer for 180 consecutive days in any six
(6) month period or an aggregate of 250 days in any twelve (12) month period.
(b) For Cause. For "Cause" immediately upon written notice by the
Employer to the Employee; provided, that the Employer may not terminate the
Employee for Cause unless (i) such termination has been approved by the
affirmative vote or consent of a majority of the directors on the Board
(excluding the Employee) prior to the time of such termination and (ii) not
later than 30 days prior to the effective date of such termination, the Employee
shall be given the opportunity to appear before the Board, represented by
counsel, to address the grounds for such termination. For purposes of this
Agreement, a termination shall be for Cause if the Board shall determine that
any one or more of the following has occurred:
(i) acceptance of any unlawful bribe or kickback with respect
to the Employer's business; or
(ii) the Employee shall have been convicted by a court of
competent jurisdiction of, or pleaded guilty to, any felony which the Board
reasonably determines or in its discretion would materially affect or impair in
any way the Employee's ability to perform his duties hereunder; or
(iii) the Employee shall have committed a breach of any of the
covenants, terms and provisions of ss.9 hereof or a material breach of any of
the covenants, terms and provisions of ss.8 hereof; or
(iv) the Employee shall have breached any one or more of the
provisions of this Agreement (excluding ss.ss.8 and 9 hereof) and such breach
shall have continued for a period of thirty (30) days after written notice to
the Employee specifying such breach in reasonable detail; or
(v) the Employee shall have refused, after explicit written
notice, to obey any lawful resolution of or direction by the Board which is
consistent with this Agreement and his duties hereunder; or
(vi) the Employee has engaged in gross misconduct injurious to
the Employer.
(c) Resignation or Termination Without Cause. The Employee shall
notify the Employer ninety (90) days written notice in advance of the effective
date of his resignation. For purposes of this Agreement, the Employee shall be
deemed to have been terminated without Cause if the Employee terminates his
employment hereunder for Good Reason upon thirty (30) days written notice to the
Employer. The Employee shall be entitled to terminate his employment for Good
Reason if any of the following occur:
(i) the Employee is assigned duties which are inconsistent or
less prestigious than the position or responsibilities associated with his
position as President and Chief Executive Officer of the Employer and the other
duties of the Employee hereunder;
(ii) if the Employer shall merge or consolidate into or
transfer substantially all of its assets to, or become a majority owned
subsidiary of, another corporation, and the Employee is not then elected and/or
appointed to a position of responsibility and prestige in any such surviving,
new or purchasing corporation equivalent to that provided in Section 2 hereof;
(iii) the Employer shall have terminated the employment of
Marlene Todaro "without Cause" as defined in her Employment Agreement with the
Employer;
(iv) if the Board of Directors or any other member thereof or
any stockholder of the Employer or any affiliate thereof, except Marlene Todaro,
seeks to control or interfere with the day to day management of the Employer, it
being the intention of the parties that the Employee and Marlene Todaro shall
have day-to-day responsibility for the management of the Employer's business;
(v) the Employer requires the Employee to perform his duties
hereunder principally at any location more than fifteen (15) miles distant from
any office at which the Employer currently conducts business, and he notifies
the Employer within 30 days after such relocation that he is unwilling to
continue his employment hereunder at such location; and
(vi) prior to the payment in full of all principal and
interest owed to the Employee under a promissory note in the principal amount of
$300,000 made by CoreCare to the Employee and Marlene Todaro, he is removed or
not reelected as a Director of the Employer for any reason other than for Cause
as defined in ss.6(b) hereof.
(d) Rights and Remedies on Termination. (i) If the Employer shall
terminate the Employee's employment hereunder pursuant to ss.6(c) hereof, then
(A) the Employee shall be entitled to receive, as severance pay, payment, in
accordance with the Employer's then current payroll practices, of his Base
Salary in effect at the time of his termination and his Incentive Bonus for (1)
the remainder of the Initial Term or (2) if such termination occurs subsequent
to the Initial Term, the remainder of the then current one-year extension
thereof; provided, further that the Employee shall not be required to mitigate
his damages during such period and the Employer shall not be entitled to reduce
or offset the amount payable by the Employer under this ss.6(d)(i) by any income
received by the Employee pursuant to any new employment so long as the Employee
is complying with ss.9 hereof. The Employee shall also be entitled to receive
all benefits provided in ss.4(d) and ss.4(e) hereof notwithstanding anything
therein to the contrary.
(ii) If the Employee's employment hereunder is terminated
pursuant to ss.6(a) hereof, then the Employee (or his estate, as applicable)
shall be entitled to receive (A) payment, in accordance with the Employer's then
current payroll practices, of the Employee's Base Salary in effect at the time
of such termination through the date of termination and (B) within 30 days
following the completion of the Employer's financial statements for the fiscal
year during which such termination occurs, a prorated portion of the Incentive
Bonus (if any) for the fiscal year in which his termination occurs determined by
multiplying (1) the full amount of the Incentive Bonus (if any) that would have
been payable to the Employee pursuant to ss.4(b) hereof if his employment
hereunder had not been terminated by (2) a fraction, the numerator of which is
the number of days elapsed during such fiscal year prior to the Employee's
termination and the denominator of which is 365.
(iii) Except as otherwise set forth in this ss.6(d), the
Employee shall not be entitled to any severance or other compensation after
termination other than payment of any portion of his Base Salary and Incentive
Bonus through the date of his termination and any expense reimbursements under
ss.5 hereof for expenses incurred in the performance of his duties prior to
termination.
ss.7. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
improvements, and innovations (including all data and records pertaining
thereto) related to the Employer's business, whether or not patentable,
copyrightable, registrable as a trademark, or reduced to writing, that the
Employee may discover, invent or originate during the term of his employment
hereunder, either alone or with others and during working hours or by the use of
the facilities of the Employer ("Inventions"), shall be the exclusive property
of the Employer. The Employee shall promptly disclose all Inventions to the
Employer, shall execute at the request of the Employer any assignments or other
documents the Employer may deem necessary to protect or perfect its right
therein, and shall assist the Employer, at the Employer's expense, in obtaining,
defending and enforcing the Employer's rights therein. The Employee hereby
appoints the Employer as his attorney-in-fact to execute on his behalf any
assignments or other documents deemed necessary by the Employer to protect or
perfect its right to any Inventions.
ss.8. CONFIDENTIAL INFORMATION. The Employee recognizes and acknowledges
that certain assets of the Employer, including without limitation information
regarding customers referral sources and third-party payors, pricing policies,
methods of operation, proprietary computer programs, sales, products, profits,
costs, markets, key personnel, formulae, product applications, technical
processes, and trade secrets (hereinafter called "Confidential Information") are
valuable, special, and unique assets of the Employer and its affiliates. The
Employee shall not, during and for a period of one (1) year after his term of
employment, disclose any or any part of the Confidential Information to any
person, firm, corporation, association, or any other entity for any reason or
purpose whatsoever, directly or indirectly, except as may be required pursuant
to his employment hereunder, provided, that Confidential Information shall in no
event include (a) Confidential Information which was generally available to the
public at the time of disclosure by the Employer or (b) Confidential Information
which becomes publicly available other than as a consequence of the breach of
the Employee of his confidentiality obligations hereunder. In the event of the
termination of his employment, whether voluntary or involuntary and whether by
the Employer or the Employee, the Employee shall deliver to the Employer all
documents and data pertaining to the Confidential information and shall not take
with him any documents. The Employee shall deliver to the Employer all documents
and data pertaining to the Confidential Information and shall not take with him
any documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information. The obligations
set forth in this ss.8 shall be inapplicable in the event of a termination of
this Agreement for Good Reason by the Employee
ss.9. NON-COMPETITION. During the term of the Employee's employment
hereunder, and until one (1) year after any termination of the Employee's
employment hereunder, the Employee will not engage, directly or indirectly,
alone or as a shareholder (other than as a holder of less than five percent (5%)
of the common stock of any publicly traded corporation), partner, officer,
director, employee, or consultant of any other business organization that is
engaged or becomes engaged in psychological counselling and related services or
the management of persons or business entities engaged in psychological
counseling at the time of the Employee's termination within ten (25) miles of
any location at which the Employer provides such services, (b) divert to any
competitor of the Employer any client of the Employer, or (c) solicit or
encourage any officer, key employee or consultant of the Employer to leave its
employ for alternative employment or hire or offer employment to, any person to
whom the Employer has offered employment. The Employee will continue to be bound
by the provisions of this ss.9 until their expiration and shall not be entitled
to any compensation from the Employer with respect thereto except as provided in
ss.6(d) hereof. If any time the provisions of this ss.9 shall be determined to
be invalid or unenforceable, by reason of being vague or unreasonable as to
area, duration or scope of activity, this ss.9 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Employee agrees that
this ss.9 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein. The obligations set forth
in this ss.9 shall be inapplicable in the event of a termination of this
Agreement for Good Reason by the Employee.
ss.10. MISCELLANEOUS.
(a) Indemnification. The By-Laws of the Employer shall indemnify the
Employee in his capacity as an officer, director and agent of the Employer, and
provide for advances of expenses of defense, to the fullest extent permitted
under New Jersey law and shall provide that such indemnification shall be a
contract right.
(b) D & O Insurance. In the event CoreCare procures for its
directors and officers, policies of directors and officers liability insurance,
the Employer shall provide substantially identical coverage for its directors
and officers.
(c) Transactional Expenses. All legal expenses and costs incurred by
the Employee arising from or related to the acquisition of the stock by the
Company, and this Employment Agreement and any other agreements entered into in
connection therewith shall be paid in full by the Employer.
(d) Reimbursement of Legal Fees. In the event the Employer breaches
any of its obligations under this Agreement, the Employee shall indemnify and
hold the Employer harmless from and against and shall promptly pay to the
Employee all reasonable legal fees and costs incurred in enforcing his rights
hereunder.
ss.11. GENERAL.
(a) Notices. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have been
duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid or sent by written telecommunication or
telecopy, to the relevant address set froth below, or to such other address as
the recipient of such notice or communication shall have specified to the other
party hereto in accordance with this ss.11(a):
If to the Employee, to:
Anthony Todaro
517 Ludlow Station Road
Asbury, New Jersey 08802
With copies to:
Mark K. Lipton, Esq.
Podvey, Sachs, Meanor, Catenacci,
Hildner & Cocoziello
One Riverfront Plaza
Newark, New Jersey 07102
If to the Employer, to:
Anthony Todaro
P.O. Box 876
933 Washington Avenue
Suite 1-C
Greenbrook, New Jersey 08812
With copies to:
Gary Miller, Esq.
Connolly, Epstein, Chicco, Foxman,
Engelmyer & Ewing
1515 Market Street, Ninth Floor
Philadelphia, Pennsylvania 19102-1909
(b) Equitable Remedies. Each of the parties hereto acknowledges and
agrees that upon any breach by the Employee of his obligations under ss.ss.7, 8
and 9 hereof, the Employer will have no adequate remedy at law, and accordingly
will be entitled to specific performance and other appropriate injunctive and
equitable relief.
(c) Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) Waivers. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair such right,
power or privilege, nor shall any single or partial exercise of any such right,
power or privilege preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(e) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Assigns. This Agreement shall be binding upon and inure to the
benefit of the heirs and successors of each of the parties hereto, including any
entity which acquires substantially all of the assets or stock of the Employer.
(g) Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by each of the parties hereto.
(h) Governing Law. This Agreement and the performance hereof shall
be construed and governed in accordance with the laws of the State of New
Jersey.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
AMERICAN INSTITUTE FOR BEHAVIORAL
COUNSELLING, INC.
By:/s/ Rose S. DiOttavio
----------------------------------
Rose S. DiOttavio
/s/ Anthony Todaro
----------------------------------
Anthony Todaro
EXHIBIT 6.20
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into this 30 day of
June, 1995 by and among MANAGED CAREWARE,INC. (the "Company"), a Pennsylvania
corporation, and John Gentry, Psy.D. ("Consultant"), an individual residing at
43 Langhorne Road, Chalfont, PA 18914.
BACKGROUND
Consultant, CoreCare Systems, Inc. ("Corecare") the Company and a
subsidiary of CoreCare are parties to Agreement and Plan of Merger dated June
30, 1995 (the "Acquisition Agreement") pursuant to which CoreCare will become
the sole owner of the Company's outstanding capital stock. The Company wishes to
continue to have the benefit of Consultant's services on the terms set forth in
this Agreement, and Consultant is willing to provide such services. Because of
Consultant's knowledge of the Company's business, finances and proprietary
information, the execution of this Agreement by Consultant is a condition to
closing under the Acquisition Agreement and a material inducement Corecare's
entry into the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual consideration set forth
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
AGREEMENT
1. Engagement. The Company hereby engages Consultant as a
consultant/advisor to the Company, and Consultant hereby accepts such engagement
by the Company, for the period and under the terms and conditions set forth in
this Agreement.
2. Term. This Agreement shall be effective as of the date hereof and shall
remain in full force and effect for a term of five years or until terminated in
accordance with Section 8 hereof (the fifth anniversary hereof or the effective
date of such earlier termination hereinafter the "Termination Date").
3. Duties.
a. Consultant shall, on behalf of the Company, (i) design, write,
develop, produce and update such database software and other computer programs
relating to behavioral health services and CoreCare's internal organizational
and financial needs, and documentation therefor, as shall be requested by the
Company's President and board of directors from time to time, (ii) provide
assistance and consultation to the Company and affiliates of CoreCare, their
employees and their customers and licensees, if any, regarding the operation and
maintenance of all computer software and programs owned or used by the Company
relating to behavioral health services and CoreCare's internal organizational
and financial needs, (iii) train employees of the Company and CoreCare in the
development, use and maintenance of computer programs and software relating to
behavioral health services and CoreCare's internal organizational and financial
needs; (iv) assist in the development and operation of management information
systems of CoreCare and its affiliates and (v) research new technology relating
to behavioral health services and CoreCare's internal organizational and
financial needs.
b. Consultant shall perform up to one-half of his services each week
at the Company's principal office or at such other offices of the Company,
CoreCare or any affiliate of CoreCare in Pennsylvania which the Company may
require, provided that the Company's principal office shall not be located more
than one hour (one way) from Consultant's home office in Chalfont, Pennsylvania.
Consultant shall have the right to perform the remaining portion of his services
hereunder at his home office in Chalfont, Pennsylvania, or any other location in
Pennsylvania provided that Consultant gives the Company prior written notice of
such location and the phone and/or fax numbers for such location.
c. During the Term of this Agreement, Consultant shall devote his
best efforts to the performance of his duties on behalf of the Company for such
number of hours as are set forth in paragraph e. hereof. During the term of this
Agreement, except as explicitly provided herein, Consultant shall not (i) engage
in the design, writing, production, development, sale or distribution of any
software or computer programs (including, without limitation, source and object
code and all media containing such code) relating to behavioral health care
services, or documentation, instructions for the preparation of software or
documentation, or in any other activity related to the development or sale of
software or computer programs relating to behavioral health care services, for
himself or others, as a consultant, officer, employee or otherwise, except on
behalf of the Company, CoreCare and CoreCare's affiliates or (ii) be a
shareholder, officer, employee, director or partner of any entity which engages
in the activities set forth in clause (i). Nothing contained in this paragraph
or in Section 9 hereof shall be construed to prohibit consultant from writing,
publishing or editing books or articles regarding general computer and
programming techniques, concepts and ideas. Nothing contained in this Agreement
shall be construed to prohibit Consultant from designing, writing, producing or
developing software or computer programs for use only in his own clinical
practice.
d. Notwithstanding paragraph c., Consultant may continue to provide
services to the Penn Foundation with respect to customization and refinement of
software previously sold to or developed for the Penn Foundation by Consultant,
as required by Consultant's existing contract with the Penn Foundation, a
complete copy of which is attached to the Acquisition Agreement. Consultant
shall be entitled to retain all fees earned from his services for the Penn
Foundation. The Company acknowledges that Consultant may have obligations under
other contracts with parties other than the Penn Foundation for software
developed prior to the date hereof to maintain, refine or update such software.
All of such contracts have been disclosed by Consultant to the Company in the
Acquisition Agreement. The Company agrees that Consultant may perform such
services; provided, however, that the fees for services other than from the Penn
Foundation shall be the property of the Company and shall be paid over to the
Company immediately upon receipt by Consultant.
e. Consultant agrees to devote at least twenty hours each week to
his services on behalf of the Company during the one year period beginning with
the date hereof, unless and until this Agreement is terminated in accordance
with the terms hereof. After such one year period, Consultant agrees to devote
at least forty hours each week to his services on behalf of the Company, if the
Company requires more than twenty hours per week of such services. The Company
shall give Consultant at least forty-five days' notice before it shall begin
requiring him to devote more than twenty hours per week on behalf of the
Company. Consultant shall be permitted to perform his duties, at his option, in
no more than four business days per week, and shall not be required to be
available to the Company for more than four business days per week.
f. Consultant shall include all time spent on services performed in
developing, updating and maintaining software for the partnership among Dr.
Frank Giammattei and Mr. Richard Boyle (the "Orthopaedic Partnership") as time
devoted to the Company's affairs, and invoice the Company for all such time
provided: (i) Consultant remits to the Company all payment received by
Consultant for such services and (ii) Consultant and the Company have jointly
determined that such services for the Orthopaedic Partnership will be beneficial
to the Company and CoreCare, in light of Consultant's assignment to CoreCare of
a portion of his profit interest in the Orthopaedic Partnership. Consultant's
activities for the Orthopaedic Partnership as described in this paragraph shall
not violate paragraph 3 c. of this Agreement. Consultant agrees that during the
term of this Agreement, he shall not participate in developing, updating, or
marketing any software for the Orthopaedic Partnership other than software
useful in the conduct of orthopaedic medical practices nor will he participate
in the modification of software developed for the Orthopaedic Partnership to
make it useful for users other than Orthopaedic medical practices, without the
Company's consent.
4. Compensation.
a. The Company shall pay Consultant a fee of $50 (the "Base Fee")
for each hour Consultant devotes to his services on behalf of the Company until
the Termination Date. The hourly rate of the Base Fee shall increase, effective
on each anniversary date of this Agreement, by a percentage equal to the
percentage increase in the Urban Consumer Price Index for all wage earners in
the United States since the date of this Agreement (with respect to the first
such anniversary date) or since the previous anniversary date (with respect to
subsequent anniversary dates). Consultant shall submit to the Company invoices
for the time he has devoted to his services for the Company containing such
detail and in such form as may be reasonably acceptable to the Company. The
Company shall pay the Base Fee within seven business days of its receipt of a
reasonably acceptable invoice, provided that Consultant shall not submit
invoices more frequently than once every two weeks nor less frequently than
monthly. Consultant may invoice the Company for all travel time greater than 45
minutes (each way) which Consultant is required spend travelling to and from any
location where the Company has requested Consultant provide services. All travel
times shall be measured from and to Consultant's home office in Chalfont,
Pennsylvania.
b. The Company agrees that it will provide Consultant work requiring
at least twenty hours per week until the Termination Date. To the extent the
Company does not provide Consultant with work requiring at least twenty hours
per week, the Company shall nevertheless pay Consultant the Base Fee for twenty
hours of work, unless Consultant was unavailable to provide twenty hours of
service during such week. If the Company provides Consultant with twenty hours
of work in any week, the Company's obligations hereunder shall have been met,
notwithstanding that Consultant may not actually perform twenty hours of work.
In such event, Consultant shall invoice the Company for, and the Company shall
pay Consultant only for, the number of hours actually worked.
c. In addition to the Base Fees provided for in paragraph a., the
Company shall pay to Consultant the additional fees calculated as set forth in
this paragraph.
(i) The Company shall pay Consultant an additional fee of 10%
of all revenues actually received by the Company from the sale or licensing of
Company software products developed by the Consultant, whether developed before
or after the date hereof. The Company agrees, as an additional incentive to
Consultant to enter into this Agreement and continue to develop software on
behalf of the Company, to pay Consultant 5% of the revenues received by the
Company from software products developed by Consultant, for a period of ten
years after the Termination Date. If the Company terminates this Agreement
without cause (as defined in Section 8 hereof) before the fifth anniversary of
the date hereof, then Consultant shall be entitled to 10% of the revenues from
such software until the seventh anniversary of the date of this Agreement, and
5% of such revenues from the end of such seventh year until the date which is
ten years after the Termination Date.
(ii) The payments specified in this paragraph d. shall be paid
within thirty (30) days of the end of the month in which the revenues giving
rise to such payments are actually received by the Company. The revenues upon
which the such fees are calculated shall be net of allowances, refunds, and any
commissions or similar fees paid to independent sales representatives who are
not employees of the Company. Consultant shall have the right to inspect the
Company's books and records relating to the Company's revenues from time to
time, at reasonable times and upon prior notice to the Company, for the purpose
of ascertaining the Company's compliance with this paragraph c.
d. The Company and Consultant acknowledge that the relationship
between them created by this Agreement is that of independent contractors, and
not of employer/employee. Therefore Consultant and the Company agree that the
Company will not withhold income, wage, social security or other taxes from
payments made to Consultant, and Consultant shall be responsible for determining
and paying any self-employment taxes, income taxes, or other taxes, which he
deems may be applicable. The Company shall have no responsibility for
determining whether and in what amount any such taxes are applicable to the
payments hereunder.
e. Consultant acknowledges that as an independent Contractor he will
not have the right to be included in any employee benefit plans which may be
provided to employees of the Company or CoreCare from time to time. If, during
the term of this Agreement, the Company or CoreCare adopts a stock bonus, stock
option or similar incentive plan for its employees, the Company will use its
best efforts to provide Consultant with similar benefits.
5. Vacations, Etc.
Notwithstanding Consultant's commitments pursuant to Section 3
hereof, Consultant may be unavailable to the Company for up to twenty business
days (in addition to the one business day per week which Consultant may be
unavailable pursuant to paragraph 2e. hereof) in each consecutive twelve month
period beginning with the date hereof, for vacation, personal and similar
reasons. Consultant shall use his best efforts to schedule such time of
unavailability so as to not interfere with the Company's affairs. Consultant
shall give the Company at least two weeks' notice of any period of
unavailability which will extend beyond three business days except in the case
of illness or emergency. Consultant shall receive no base fee for such periods,
but such periods shall not affect his rights to the additional fees specified in
paragraph d. of Section 4.
6. Expenses. Company shall reimburse Consultant for reasonable expenses
incurred by him in connection with his performance of services hereunder upon
presentation of appropriately documented invoices, including original or copies
of bills, vouchers and itemized accounts as reasonably required by the Company.
Consultant shall not incur any individual expense of greater than $250.00 or any
expenses of greater than $1,000 in any calendar month without the prior written
approval of a member of the Company's Board of Directors (other than Consultant
if Consultant is a director). In no event shall the Company be required to
reimburse Consultant for any portion of Consultant's overhead expenses,
including any computer equipment that is not purchased specifically for the
Company's sole benefit. Consultant shall receive a mileage allowance for the use
of his vehicle while on Company business at the same rate CoreCare reimburses
its officers.
7. Death of Consultant.
The Company's obligation to pay the additional fees set forth in
paragraph c. of Section 4 shall survive Consultant's death, for a period of ten
(10) years from his death.
8. Termination.
a. This Agreement may be terminated by the Company for Cause, as
defined below, upon thirty days' written notice. For the purpose of this Section
8. Cause for termination shall exist upon the occurrence of one or more of the
following:
(i) Consultant's conviction of a crime punishable by death or
imprisonment of one year or more under the laws of the jurisdiction in which
convicted, or of a crime affecting the Company or Corecare or any of Corecare's
affiliates and involving theft, misappropriation of funds, fraud or deception,
regardless of the punishment;
(ii) Willful misconduct or gross negligence by Consultant in
the performance of his duties hereunder;
(iii) Chronic alcoholism or drug abuse if such condition
materially impairs or precludes performance of Consultant's duties;
(iv) Any judicial finding of fraud or embezzlement,
misappropriation of or self-dealing in funds, affecting the Company, Corecare,
any of Corecare's affiliate or any client or customer of any of the foregoing;
(v) Continuing misconduct in connection with the Company's or
Corecare's (or any affiliate of Corecare's) affairs or which is reasonably
expected to have an adverse affect upon the Company, Corecare or any affiliate
of Corecare; or
(vi) Any violation by Consultant of the terms or conditions of
this Agreement, including the refusal to perform services or failure to perform
services within a reasonable period of time (allowing for vacations and other
leave as set forth in Section 5 hereof).
Employee shall be entitled to cure the Cause for termination (except for
the cause specified in Clause (iv) during the thirty day period after the
Company gives notice of termination, and if such cause is completely cured, the
Company's notice of termination shall be void.
b. This Agreement, and all rights of Consultant to Base Fees (except
for work previously performed) shall terminate immediately upon Consultant's
death.
c. The Company may terminate this Agreement for any reason
whatsoever, or for no reason, upon ninety (90) days written notice to Gentry.
d. Consultant may terminate this Agreement upon twenty (20) days
written notice upon the Company's violation of any provision of Section 4
hereof; provided, however, that if the Company cures the violation within such
twenty (20) day period, Consultant's notice of termination shall be of no
effect.
e. Notwithstanding the requirement of the Company to give notice of
termination hereunder, from and after the date such notice is given the
Company's sole obligation hereunder shall be to pay Consultant Base Fees through
the Termination Date. After the giving of such termination notice, Consultant
shall be not be authorized to incur any expenses on behalf of the Company. After
the date of such termination notice, Consultant shall immediately return to the
Company all property of the Company which is in the possession, custody or
control of Consultant, including without all Materials (as defined in paragraph
9(c) hereof. During the period between the date of its giving termination notice
and the Termination Date, the Company shall pay a weekly Base Fee of at least in
such period equal to the average weekly Base Fees paid during the preceding six
week period, unless Consultant fails to perform work for the Company actually
available to him during such period.
9. Confidentiality; Ownership of Property and Documents.
a. During the Term of this Agreement and at all times thereafter,
regardless of the reason (or lack of reason) for termination of this Agreement
and regardless of which party initiates such termination or whether such
termination occurs as a result of the expiration of this Agreement, Consultant
shall not, directly or indirectly, acting alone or in conjunction with others
use for his personal benefit or the benefit of, or disclose or communicate to,
any person, firm or corporation any passwords used in connection with software
or computer programs of the Company, the contents of the Company's software, the
design of the Company's software (to the extent such design is unique to the
Company's software), the trade, technical or technological secrets of the
Company, CoreCare and CoreCare's affiliates, any details of organizational or
business affairs of the Company or CoreCare, any names of or information
regarding any past or present customers or referral sources or third party
payors of the Company, Corecare, any Corecare affiliate or any other information
relating to the business of Company, Corecare or any Corecare affiliate, other
than information which has become publicly known without breach of this
Agreement. Nothing contained in this paragraph a. shall be construed to prohibit
Consultant from communicating with or performing services for, any past or
present customers, referral sources or third party payors of the Company,
CoreCare or any CoreCare affiliate so long as either (i) such communications or
services are not related to behavioral health care services; or (ii) such
communications or services are after the term of this Agreement, and Consultant
does not use any confidential information or computer software of the Company in
performing such services.
b. All books, tapes, records, documents, client, customer and
referral source lists, supplier lists, and all copies (electronic and hardcopy)
of any software, programs (whether or not completed) documentation, program
designs and related materials or any other confidential information of the
Company, including all copies of passwords used in connection with the
development, maintenance or use of any software or computer programs, regardless
of whether developed, compiled or made by Consultant, made available to
Consultant or used by Consultant during the Term of this Agreement are and shall
remain the property of Company and shall be delivered to Company by Consultant
at the end of the Term hereof. On the Termination Date (or earlier pursuant to
paragraph e. of Section 8 hereof) Consultant shall immediately return to the
Company all copies of all the foregoing in Consultant's possession, custody and
control. Nothing contained in this paragraph b. shall be construed to require
Consultant to deliver to the Company any electronic copy or hardcopy of any
programs, documentation, program designs, software or related materials which
Consultant has not developed specifically for the Company in connection with his
duties hereunder.
c. Consultant, for himself and his heirs and assigns, shall promptly
and fully disclose and assign, transfer and set over, and does hereby assign,
transfer and set over to the Company, its successors and assigns, all of his
right, title and interest in and to all trade secrets, secret processes,
patents, patent applications, trademarks, trademark applications, service marks,
service mark applications, copyrights and copyright registrations (collectively
the "Intellectual Property Rights"), to all software, computer programs, source
and object codes, documentation relating to computer programs, software and
source and object codes, all design specifications relating to any of the
foregoing, and all passwords relating to any of the foregoing, whether or not
patentable or protectable and whether or not conceived, developed or reduced to
practice by Consultant alone or in conjunction with others, or both, prior to or
during the term of this Agreement, which relate to behavioral health care
services or were otherwise developed specifically for the Company (the "Company
Software"); and all embodiments and representations of the Company Software and
Intellectual Property Rights (collectively, the "Materials"). Consultant agrees
(i) that all Company Software covered by the previous sentence will be deemed to
be works made for hire on behalf of the Company and shall be the exclusive
property of the Company, (ii) except as provided in this Agreement, not to
disclose, utilize or exploit any such Company Software or Intellectual Property
Rights without the prior written consent of the Company, and (iii) at the
request of the Company to acknowledge to the Company in writing, the Company's
full right, title and interest in and to all such Company Software and
Intellectual Property Rights and, at the Company's cost and expense, to execute
all and any applications and registrations and to do such other acts deemed by
the Company to be necessary or desirable at any time or times in order to effect
the full ownership and enjoyment by the Company of all such Company Software or
Intellectual Property Rights. The Company agrees that the foregoing shall not
apply to any Company Software or Intellectual Property Rights created after the
Company is no longer providing Consultant with at least twenty hours of work
each week, even if Consultant continues to provide some services to the Company,
except for Company Software or Intellectual Property Rights which Consultant
acknowledges, in writing, are being created for the benefit of the Company.
d. The parties acknowledge that Consultant has delivered to
management of CoreCare, on behalf of the Company, all passwords for all programs
and software of the Company currently in existence or development. Until either
the Company or Consultant gives notice of termination of this Agreement, the
Company shall not (i) permit any person other management personnel of CoreCare
and the Company to have knowledge of such passwords, or (ii) permit any person
to utilize such passwords without Consultant's consent. Consultant agrees not to
use any passwords in connection with any existing or new software or programs
(whether completed, in development or in design) without providing management of
the Company with a copy thereof prior to first use. Any new passwords delivered
to the Company will be subject to the restrictions contained in this paragraph.
e. Paragraphs a. through c. of this Section 9 are not intended, and
shall not be construed, to prohibit Consultant's use of his knowledge of
generally applicable computer programming and software development concepts,
ideas and principles, even if such generally applicable principles were learned,
discovered or developed by Consultant in the course of his services for the
Company. Paragraphs a. through c. shall not be construed to prohibit
Consultant's independent development of software not relating to behavioral
health care, even if (after the Term hereof), Consultant utilizes portions of
any software, programs, design specifications or documentation which are owned
by the Company, so long as he does not substantially recreate the Company's
software, and programs. To the extent required to allow Consultant to operate in
accordance with the foregoing sentence, and for the purposes of the foregoing
sentence only, the Company hereby grants Consultant a non-exclusive,
non-assignable, royalty-free license to utilize portions of the Company's
programs, software, design specifications and documentation. Nothing contained
in this Agreement shall be construed to prevent Gentry from providing any
computer programming services or other services in the behavioral health care
field after termination of this Agreement so long as Gentry does not use any of
the Company Software or Intellectual Property Rights in the performance of such
services.
10. Enforcement.
a. The Company shall be entitled to seek all available remedies for
a breach of this Agreement by Consultant, including injunctive and other
equitable relief.
b. If the period of time, the area specified or the scope of
activity restricted in Section 9 should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months or
the area shall be reduced by the elimination of such portion thereof or the
scope of restricted activity shall be modified, or any or all of the foregoing
so that such restrictions may be enforced in such area and for such time as is
adjudged reasonable.
11. Prior Agreements. Consultant represents to the Company:
a. That there are no restrictions, agreements or understandings
whatsoever to which Consultant is a party which would prevent or make unlawful
his execution of this Agreement or the performance of his duties hereunder
except to the extent that his agreements with the Penn Foundation and the
Orthopedic Partnership, complete copies of which have been provided to the
Company, place limits on the amount of time Consultant has free to devote to the
Company.
b. That his execution of this Agreement and the performance of his
services hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written to which he is a party or by which he is bound;
and
c. That he is free and able to execute this Agreement. Consultant
and the Company agree that this Agreement supersedes any and all prior written
or oral agreements or understandings between the Consultant and the Company with
respect to Consultant's performance of duties on behalf of the Company, as an
officer, employee, consultant or otherwise, and any compensation to be received
by Consultant from the Company, as well as the ownership of any and all rights
specified in Section 9 hereof.
12. Notices. Any notice or demand required or permitted to be given to any
party under this Agreement shall be in writing and shall be deemed to have been
duly given, made and received three business days after mailing if mailed by
certified mail, postage prepaid, return receipt requested, addressed to the
party at the address set forth below, provided that any party may alter the
address to which notice or demand is directed by giving notice of such change of
address in conformity herewith.
a. For notice to Company:
c/o Corecare Systems, Inc.
at the address indicated below
b. For notice to Consultant:
43 Langhorne Road
Chalfont, PA 18914
with a copy to:
Richard D. Magee, Jr., Esquire
Aglow & Elliot
1795 S. Easton Road
P.O. Box 885
Doylestown, PA 18901
c. For notice to Corecare:
Corecare Systems, Inc.
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19118
Attention: President
with a copy to:
Connolly Epstein Chicco Foxman
Engelmyer & Ewing
Attention: Joseph Chicco
1515 Market Street, 9th Floor
Philadelphia, PA 19102
13. Miscellaneous.
a. At any time, and from time to time, after the signing of this
Agreement, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to carry court the
intent and purposes of this Agreement.
b. This Agreement shall be governed, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding
any conflicts-of-law doctrines or laws of any jurisdiction to the contrary.
c. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties and their heirs, personal representatives, successors
and assigns.
d. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
e. This Agreement shall not be interpreted in favor of or against
either party on account of such party having drafted or reviewed this Agreement.
f. Neither the failure nor any delay on the part of either party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence.
g. The provisions of this Agreement are independent of and separable
from each other, and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other or others of
them may be invalid or unenforceable in whole or in part.
h. This Agreement contains the entire understanding among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings, inducements or
conditions, express of implied, oral or written, except as herein contained. The
express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
IN WITNESS WHEREOF, the parties have set their hands and seal to this
Agreement on the day and year first above written.
CONSULTANT:
/s/ John Gentry
-----------------------------
MANAGED CAREWARE, INC.
By: /s/ Rose DiOttavio
-----------------------------
EXHIBIT 6.21
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of September 1, 1995 (this "Agreement"), by
and between CHOATE HEALTH MANAGEMENT, INC., a Massachusetts business corporation
("CHM"), and CORECARE SYSTEMS, INC., a Nevada corporation ("CoreCare").
PRELIMINARY STATEMENT
CoreCare owns and operates various inpatient and outpatient mental health
and/or substance abuse facilities and programs, all as identified on Schedule A
attached hereto and made a part hereof (collectively, the "Programs"). CoreCare
holds licenses to operate the Programs (the "Licenses") as provided in Schedule
A.
CHM has been organized to provide management, consulting and other
services to providers of health care. CoreCare desires to engage CHM, and CHM
desires to be engaged, to provide consulting services to CoreCare in connection
with the Programs and to provide the other services specified herein, all in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CHM and CoreCare agree as follows:
ARTICLE I
Appointment
1.1 CoreCare hereby engages CHM to provide certain consulting and
other services to CoreCare, commencing as of September 1, 1995 (the
"Commencement Date"), and CHM hereby accepts such engagement, on the terms and
conditions set forth in this Agreement. The nature of the consulting services to
be provided by CHM hereunder shall be as set forth in Section 2.1 hereof and
otherwise as may be agreed upon from time to time by CoreCare and CHM during the
term hereof.
ARTICLE II
Covenants and Agreements
2.1. The Services.
2.1.1 At the request of CoreCare, CHM shall (a) cooperate with and advise
CoreCare in its efforts to establish and implement policies and procedures for
operation of the Programs, (b) monitor the Programs to evaluate the
effectiveness of the policies and procedures established and implemented
therefor by CoreCare, (c) recommend to CoreCare additional mental health
services or programs which may be offered by CoreCare at existing or new
CoreCare facilities, and (d) cooperate with and advise CoreCare in its efforts
to develop and implement annual and long-range plans designed to operate the
Programs on a sound financial basis, to increase patient volume, and to increase
the Programs' market share in the communities in which they operate.
2.1.2 For the purpose of establishing baseline expectations and
communications between CoreCare and CHM, the parties hereby agree that CHM's
duties shall include the provision of the following reports and activities:
(a) CHM will produce quarterly a report specifically addressing
recommendations to CoreCare on increasing CoreCare revenue growth.
(b) CHM and CoreCare will develop a joint brochure describing the
Choate-CoreCare relationship; the brochure will be used in marketing and
will be completed solely at CoreCare expense, but will be mailed to CHM's
managed care mailing list annually.
(c) On an annual basis CoreCare and CHM will compare their respective
managed care contract lists and develop an action plan for expanding
CoreCare's managed care contract list; and CHM will endeavor to schedule
meetings to this end and report progress on a regular basis.
(d) Strategic planning sessions will be held with representatives of
CoreCare, as the parties shall deem appropriate to the CoreCare
development plan.
(e) CHM will provide technical assistance to coordinate the CHM and
CoreCare interface and to evaluate prospective hospital contracts; in
providing such technical assistance, CHM will perform financial modeling
and construct the proposal to the prospective Hospital; further, CHM will
provide the capability to produce materials such as forms, policies and
procedures, as well as statistical outcome measures that already exist in
CHM operations.
(f) CHM will advise CoreCare on the development and performance of the
CoreCare clinical infrastructure and profitability and for such purposes
will have unlimited access to CoreCare information according to
predetermined report formats mutually agreed upon, to insure efficient CHM
review.
(g) CHM will provide training to CoreCare staff at existing CHM sites.
(h) CHM will provide technical assistance on the review of any requests
for capitation agreements with CoreCare and help assess the financial
risk/reward to CoreCare on an as needed basis.
2.2 Access to Books and Records. Until the expiration of four years after
the furnishing of services called for by this Agreement, CHM, upon request,
shall make available to the Secretary of the United States Department of Health
and Human Services, to the United States Comptroller General, and to their duly
authorized representatives, this Agreement and such other books, documents and
records as are necessary to certify the nature and extent of the costs of
services provided to CoreCare under this Agreement. If CHM provides such
services through a subcontract worth $10,000 or more over a twelve month period
with an organization related to CHM within the meaning of subpart D of 42 CFR
Part 420, the subcontract shall also contain a clause permitting access by the
Secretary, the Comptroller General and their duly authorized representatives to
books and records of the related organization.
2.3 Crisis/Triage Service. CHM shall assist CoreCare in the development,
structuring, location and implementation of a 24-hour crisis/triage service (the
"Triage Service") which, if and when implemented, shall be included among the
Programs hereunder. CHM and CoreCare shall jointly analyze and agree upon the
amount, type, terms and structure of the funding necessary for the establishment
and operation of the Triage Service. CHM and CoreCare shall cooperate in seeking
and obtaining such funding for the Triage Service as they shall agree is to be
obtained from third party sources. To the extent that CHM and CoreCare agree
that funding for the development and/or operation of the Triage Service is to be
provided by CHM and/or CoreCare, the parties shall agree on the amount of such
funding, if any, to be provided by each of them and, if a portion of such
funding is to be provided by CHM, the amount, type and timing of the
compensation or other consideration to be paid or granted to CHM by CoreCare in
exchange therefor. CoreCare acknowledges that CHM has entered into discussions
with Spectrum AQE of Fort Washington, Pennsylvania ("Spectrum"), in connection
with the development of the Triage Service, and CoreCare hereby agrees that the
Triage Service may be developed through a joint venture or other arrangement in
which CoreCare, CHM and Spectrum are the participants.
2.4 Third-Party Agreements.
2.4.1 Throughout the term of this Agreement, CHM shall cooperate with
CoreCare in its negotiation of new contractual arrangements with one or more
general acute-care or psychiatric hospitals not owned or served by CoreCare as
of the Commencement Date (each, a "Hospital") for the provision of management
and support services to inpatient mental health and/or substance abuse programs
at such Hospitals (the "Hospital Programs").
2.4.2 Each agreement entered into by CoreCare with a Hospital (a
"Third-Party Services Agreement") shall provide for the delivery to each such
Hospital of management services by CHM, acting as the agent and on behalf of
CoreCare, pursuant to the terms of a separate management agreement to be entered
into with the Hospital by CHM and/or CoreCare contemporaneously with the
execution and delivery of the Third-Party Services Agreement (a "Third-Party
Management Agreement"). Each Third-Party Management Agreement shall be in form
and substance satisfactory to CHM. Under each Third-Party Management Agreement,
CHM shall furnish the Hospital with such clinical and/or administrative
personnel as CHM shall determine to be necessary for the proper staffing of the
Hospital Programs, and, as may be agreed upon by CHM and the Hospital, each of
such personnel shall be an employee either of the Hospital of CoreCare or of
CHM. If and to the extent reasonably required by CoreCare in connection with the
execution and delivery of a Third-Party Services Agreement with a Hospital, CHM
shall agree at such time with CoreCare that, for so long as the Third-Party
Services Agreement is in full force and effect, CHM will not provide to anyone
other than the Hospital, within a radius from the Hospital, not to exceed
fifteen (15) miles, to be agreed upon in each case by CHM and CoreCare, the same
kind of management services to be provided to the Hospital by CHM as agent of,
and acting on behalf of, CoreCare. CoreCare will use its best efforts to reduce
the restriction set forth in the proceeding sentence to five (5) miles.
2.4.3 CoreCare shall use its best efforts to cause each Hospital to enter
into a Third-Party Services Agreement containing terms reasonably requested by
CHM. CHM shall have the right not to accept the duties and responsibilities
under any Third-Party Services Agreement to which CHM reasonably objects to the
form or substance; provided, however that CHM shall not refuse any Third-Party
Service Agreements containing terms similar, in all material respects, to the
terms of contracts to which CHM is a party otherwise than in connection with
this Agreement. If CHM does not accept a particular Third-Party Services
Agreement and CoreCare enters into and performs such rejected Third-Party
Services Agreement (itself or through another agent), then the Minimum Guarantee
Amount (as defined in Section 3.2.1 hereof) shall be reduced by $200,000 for
each such Agreement rejected by CHM and accepted by CoreCare, and CHM shall not
be entitled to any management fee or other remuneration with respect to such
Third-Party Services Agreement. Notwithstanding anything otherwise set forth in
the preceding sentence, there shall be no reduction in the Minimum Guarantee
Amount with respect to a Third-Party Services Agreement rejected by CHM, if CHM
rejects the Agreement because its performance of the Agreement would violate
applicable law or applicable ethical standards.
2.4.4 With respect to the Third-Party Services Agreements and the related
Third-Party Management Agreements, CHM shall be entitled to receive thereunder,
and CoreCare shall pay or cause to be paid to CHM, a management fee (the
"Management Fee") in an amount equal to fifty percent (50%) of all revenue
derived by CoreCare therefrom in each successive twelve-month period measured
from the Commencement Date ("CoreCare Services Agreement Revenue"), as and when
amounts included in the calculation of such CoreCare Services Agreement Revenue
are paid to or for the benefit of CoreCare under the Third-Party Services
Agreements. If the aggregate compensation received by CHM during the one-year
period ending with the second, third, fourth or fifth anniversaries of the
Commencement Date, pursuant to the provisions of Section 3.1.1, Section 3.1.2
and Section 3.1.4 hereof (exclusive of any CHM Employee Compensation, as
hereafter defined, paid pursuant to Section 3.1.4), is less than $1,200,000, CHM
shall be entitled to receive, and CoreCare shall pay or cause to be paid to CHM,
an additional twenty-five percent (25%) of all revenue derived by CoreCare from
Third-Party Services Agreements and any related Third-Party Management
Agreements up to the amount of the guaranty for such one-year period specified
in Section 3.2 hereof. For purposes of this Agreement, the term "CoreCare
Services Agreement Revenue" shall mean, in respect of each Third-Party Services
Agreement, all management and other fees and amounts, including without
limitation any incentive fees and amounts, payable to CoreCare under or pursuant
to such Third-Party Services Agreement, but net of any amounts which are
reimbursements for expenses, and net of refunds and allowances. If any of the
clinical and/or administrative personnel furnished by CHM to a Hospital are or
become employees of CHM, CoreCare shall pay or cause to be paid to CHM as
pass-through expenses under or in respect of the related Third-Party Services
Agreement, an amount, in addition to the Management Fee, equal to the gross
amount of all salaries of CHM personnel, plus an amount to cover employee
benefits equal to twenty-five percent (25%) of such gross salaries (together,
the "CHM Employee Compensation).
2.4.5 The expiration or termination of this Agreement for any reason shall
not in any way offset or diminish the rights of CHM under, or the benefit of CHM
to the derived from or in respect of, any Third-Party Services Agreement or any
Third Party Management Agreement, including without limitation any Management
Fee, any CHM Employee Compensation or any other compensation or remuneration to
be paid to or received by CHM thereunder or with respect thereto, or which is
measured in reference thereto.
2.4.6 CHM agrees to provide to CoreCare timely reports with respect to the
financial and operational performance of all hospital Third-Party Services
Agreements and related Third-Party Management Agreements under its auspices.
2.5 Services Not Required. Except for the services specifically provided
for in this Agreement, CHM shall not be required to perform services customarily
provided by legal, accounting, engineering, architectural or other
non-management professional persons or firms, and, in that regard, shall not
render professional opinions or advice, nor prepare legal documents, tax returns
and other similar governmental reports or filings, audits, building plans and
specifications and the like.
2.6 Limitation of Liability.
2.6.1 Notwithstanding anything to the contrary contained in this
Agreement, CoreCare hereby does release, and shall indemnify CHM and any
subsidiary or affiliate of CHM, and the officers, Directors, stockholders and
employees of CHM and its subsidiaries and affiliates, and shall hold each of
them harmless from and against, any liability, claims, losses, costs, actions,
judgments or damages, and any expenses relating thereto (including reasonable
attorneys' fees and expenses), arising from CHM's performance under this
Agreement or under any Third-Party Management Agreement (including, without
limitation, any claims by, or liability to, third parties, CoreCare and its
subsidiaries and affiliates, any facility owned, operated or to which management
or consulting services are provided under contract by CoreCare, any of the
Programs or Hospital Programs, any patients of any facility owned, operated or
to which management or consulting services are provided under contract by
CoreCare or any patient of any of the Programs or any of the Hospital Programs);
provided, however, that this provision shall not apply to any liability, claim,
loss, cost, action, judgment or damage, or to any expense relating thereto
(including attorneys' fees and expenses), with respect to which there has been a
final judgment against CHM, or any subsidiary or affiliate of CHM, or against
any of the officers, Directors, stockholders or employees thereof, which is
based on willful misfeasance, bad faith, or gross negligence, or a reckless
disregard of CHM's obligations and duties under this Agreement or under any
Third-Party Management Agreement, and provided such willful, grossly negligent
or other act was not done or undertaken at the request or direction of a
Director, officer or other agent of CoreCare. It is understood that CHM makes no
warranties, express or implied, and does not assume any financial or other
responsibilities or liabilities in connection with this Agreement, except as
specifically provided in this Agreement.
2.6.2 Notwithstanding anything to the contrary contained in this
Agreement, CHM hereby does release, and shall indemnify CoreCare and any
subsidiary or affiliate of CoreCare, and the officers, Directors, stockholders
and employees of CoreCare and its subsidiaries and affiliates, and shall hold
each of them harmless from and against, any liability, claims, losses, costs,
actions, judgments or damages, and any expenses relating thereto (including
reasonable attorneys' fees and expenses), arising from CHM's performance under
this Agreement or under any Third-Party Management Agreement (including, without
limitation, any claims by, or liability to, third parties, CoreCare and its
subsidiaries and affiliates, any facility owned, operated or to which management
or consulting services are provided under contract by CoreCare, any of the
Programs, any patients of any facility owned, operated or to which management or
consulting services are provided under contract by CoreCare or any patient of
any of the Programs or any of the Hospital Programs); provided, however, that
this provision shall not apply to any liability, claim, loss, cost, action,
judgment or damage, or to any expense relating thereto (including attorneys'
fees and expenses), with respect to which there has been a final judgment
against CoreCare, or any subsidiary or affiliate of CoreCare, or against any of
the Directors, officers, Directors, stockholders or employees thereof, which is
based on willful misfeasance, bad faith, or gross negligence, or a reckless
disregard of CoreCare's obligations and duties under this Agreement or under any
Third-Party Services Agreement, and provided such willful, grossly negligent or
other act was not done or undertaken at the request or direction of a Director,
officer or other agent of CHM. It is understood that CoreCare makes no
warranties, express or implied, and does not assume any financial or other
responsibilities or liabilities in connection with this Agreement, except as
specifically provided in this Agreement.
2.7 Medical Matters. It is expressly understood by CoreCare and CHM that,
in the performance of their duties hereunder or pursuant hereto, neither
CoreCare nor CHM will engage in any activities which would be deemed to be the
practice of medicine or psychology, and nothing in this Agreement shall be
construed to require or permit CoreCare or CHM to engage in such activities.
2.8 Insurance.
2.8.1 CoreCare shall maintain, at CoreCare's own expense, general
comprehensive liability insurance in such amounts, with such coverages and with
such companies as may be commercially reasonable. All of the insurance required
to be maintained under this Section shall contain an endorsement naming CHM, as
its interest may appear, as an additional insured thereunder and shall not be
cancelable without ten (10) days prior written notice to CoreCare and CHM. Upon
request, CoreCare shall provide to CHM from time to time certificates of
insurance evidencing the coverages required to be maintained hereunder.
2.8.2 CHM shall maintain at all times during the term of this Agreement
professional liability insurance covering CHM and its employees, officers and
Directors with limits of one million ($1,000,000) dollars per occurrence and
three million ($3,000,000) dollars in the aggregate. If CHM has a "claims made"
form of insurance in effect at any time during the term of this Agreement, CHM
shall obtain "tail" coverage to cover any event that may have occurred during
the term of this Agreement. CHM shall maintain, at CHM's own expense, general
comprehensive liability insurance in such amounts, with such coverages and with
such companies as may be commercially reasonable. All of the insurance required
to be maintained under this Section shall contain an endorsement naming
CoreCare, as its interest may appear, as an additional insured thereunder and
shall not be cancelable without ten (10) days prior written notice to CHM and
CoreCare. Upon request, CHM shall provide to CoreCare from time to time
certificates of insurance evidencing the coverages required to be maintained
hereunder.
2.9 Hiring of CHM Personnel. Except for individuals who were employees of
CoreCare or its affiliates immediately prior to the Commencement Date or
immediately prior to becoming a CHM employee, CoreCare agrees not to engage or
employ, directly or indirectly, any person who may become an employee of CHM in
connection with any of the Hospital Programs, such prohibition to continue
during the term of this Agreement and for a period of one (1) year from the date
of termination or expiration of this Agreement. CoreCare and CHM agree to
collaborate on the recruitment and hiring of staff acceptable to client
Hospitals.
ARTICLE III
Payments and Remuneration
3.1 Compensation.
3.1.1 Throughout the term of this Agreement, CoreCare shall pay to CHM an
annual base fee for the consulting services rendered by CHM hereunder (the "Base
Consulting Fee"). During the initial term of this Agreement, the Base Consulting
Fee shall be paid by CoreCare to CHM in equal monthly installments of $10,000.00
on the first day of each month, in advance. Notwithstanding the foregoing,
CoreCare shall be entitled to defer the payment of $5,000.00 of each of the
first five installments of the Base Consulting Fee; provided, however, that any
amount so deferred shall be paid in full to CHM by CoreCare before the
expiration of 180 days after the Commencement Date. The first monthly
installment of the Base Consulting Fee shall be paid on the Commencement Date.
During any extended term of this Agreement, the Base Consulting Fee shall be in
an amount and shall be payable on such terms as may be agreed upon by the
parties. If any monthly installment of the Base Consulting Fee (or any deferred
portion thereof) is more than five (5) days overdue, CoreCare shall pay to CHM,
in addition to the overdue installment (or any deferred portion thereof),
interest thereon, accruing from the date on which the installment (or any
deferred portion thereof) became due until the date on which it is paid, at the
rate of twelve percent (12%) per annum.
3.1.2 In respect of each fiscal year or portion of a fiscal year of
CoreCare occurring during the term of this Agreement, CoreCare shall pay to CHM,
as additional compensation the ("Additional Consulting Fee") for the services
rendered by CHM hereunder, an amount in cash equal to ten percent (10%) of the
net operating profit of CoreCare and its subsidiaries and affiliates, if any, on
a consolidated basis for each such fiscal year or portion of a fiscal year
occurring during the term hereof. The consolidated net operating profit of
CoreCare for purposes of calculating the Additional Consulting Fee shall be as
set forth in the quarterly and annual financial statements of CoreCare prepared
by CoreCare or by CoreCare's independent certified public Accountants (as
defined in Section 3.2.4), provided, however, that such consolidated net
operating profit for each fiscal year shall be calculated using an annual level
of aggregate compensation for the President and Chief Executive Officer of
CoreCare equal to $150,000. CoreCare shall pay installments of the Additional
Consulting Fee quarterly based upon the consolidated net operating profit for
each fiscal quarter within ten (10) days after the completion of the
consolidated financial statements of CoreCare for the fiscal quarter in
question, except that, if such financial statements have not been delivered
within forty-five (45) days after the end of the relevant fiscal quarter of
CoreCare, CoreCare shall make an estimated payment to CHM (an "Estimated
Compensation Payment"), not later than the sixtieth (60th) day after the end of
such fiscal quarter, in an amount equal to ten percent (10%) of the consolidated
net operating profit of CoreCare and its subsidiaries and affiliates for the
most recently completed fiscal quarter for which financial statements have been
completed. If CoreCare shall have made an Estimated Compensation Payment to CHM
pursuant to the preceding sentence, then, not later than ten (10) days after the
completion of the consolidated financial statements of CoreCare for the fiscal
quarter in respect of which the Estimated Compensation Payment has been made,
CoreCare or CHM shall make such reconciling payment to the other party as may be
required in order to reflect properly the obligation of CoreCare to pay to CHM
hereunder ten percent (10%) of its net operating profit on a consolidated basis
for such fiscal quarter. Notwithstanding anything otherwise set forth herein, if
the term of this Agreement expires or this Agreement is terminated at a time
when there are thirty (30) days or more remaining in the then current fiscal
quarter of CoreCare, CoreCare shall make an Estimated Compensation Payment to
CHM in respect of such fiscal quarter within thirty (30) days after the date on
which this Agreement expires or terminates, and CoreCare or CHM, as the case may
be, shall make a reconciliation payment to the other party, as described in the
preceding sentence, not later than ten (10) days after the completion of the
consolidated financial statements of CoreCare for the fiscal quarter in progress
at the time of such expiration or termination. The payment for the last fiscal
quarter of any year shall be such amount that, when added to the previous
payments for such year pursuant to this paragraph, shall result in CoreCare
having paid 10% of its consolidated net operating profit for such year in the
aggregate.
3.1.3 If, at any time during the term of this Agreement, CHM elects to (i)
either identify or introduce to CoreCare any one or more entities or programs
any of the assets of or equity interest in which CoreCare, or any one or more
subsidiaries or affiliates of CoreCare, directly or indirectly, thereafter
purchases (a "Purchased Entity/Program") or (ii) either identify or introduce to
CoreCare any one or more entities or individuals which or who thereafter provide
to CoreCare, or to any one or more subsidiaries or affiliates of CoreCare, any
equity or debt financing for any purpose (a "Financing Entity"), then CoreCare
shall pay to CHM, in consideration of its providing such identification or
introduction, a fee (the "Introduction Fee") in an amount equal to ten percent
(10%), as the case may be, of (A) the purchase price payable for the assets of
or equity interest in the Purchased Entity/Program or (B) the amount of the
equity or debt financing to be provided by the Financing Entity. The
Introduction Fee shall be payable by CoreCare to CHM in full not later than the
date on which the closing occurs, as the case may be, for the acquisition of the
Purchased Entity/Program or for the provision of the debt or equity financing by
the Financing Entity (the "Purchase/Financing Closing"). The Introduction Fee
shall be payable in full at the time of the Purchase/Financing Closing,
irrespective of whether the purchase price of the Purchased Entity/Program is
payable in full at the Closing or the full amount of the debt or equity
financing is to be advanced by the Financing Entity at the Closing.
3.1.4 In consideration of the services rendered by CHM in obtaining
Third-Party Services Agreements and in providing management services under the
Third-Party Management Agreements, CoreCare shall pay or cause to be paid to
CHM, the Management Fee and the CHM Employee Compensation, if any, as and when
provided in Section 2.4 hereof.
3.2 Guaranty. It is the intention of CoreCare that CHM receive, in
consideration of all of the services agreed to be rendered by CHM under and
pursuant to this Agreement, a guaranteed minimum level of compensation.
Therefore, in order to induce CHM to enter into this Agreement, and having
determined that the compensation agreed to be paid by CoreCare represents the
fair market value of the services to be rendered by CHM, CoreCare agrees as
follows:
3.2.1 If, as of the first anniversary of the Guaranty Commencement Date
(as hereinafter defined), the aggregate compensation received by CHM during the
one-year period since the Guaranty Commencement Date, pursuant to the provisions
of Section 3.1.1, Section 3.1.2 and Section 3.1.4 hereof (exclusive of any CHM
Employee Compensation paid pursuant to Section 3.1.4), for any reason shall be
less than $600,000 for such one-year period, , then CoreCare shall pay to CHM,
within thirty (30) days after the first anniversary date, an amount, in cash,
equal to the difference between $600,000 and the compensation so received by CHM
during such period. For purposes of this Section 3.2, the "Guaranty Commencement
Date" shall mean December 1, 1995.
3.2.2 If, as of the second anniversary of the Guaranty Commencement Date,
the aggregate compensation received by CHM during the one-year period since the
first anniversary of the Guaranty Commencement Date, pursuant to the provisions
of Section 3.1.1, Section 3.1.2 and Section 3.1.4 hereof (exclusive of any CHM
Employee Compensation paid pursuant to Section 3.1.4), for any reason shall be
less than the greater of (a) $600,000 and (b) the Marginal Revenue Increase (as
defined in Section 3.2.4) for such one-year period (the greater of (a) and (b)
herein called the "Minimum Guarantee Amount"), then CoreCare shall pay to CHM,
within thirty (30) days after the second anniversary date, an amount, in cash,
equal to the difference between the Minimum Guarantee Amount and the
compensation so received by CHM during such period.
3.2.3 If, as of any of the second, third, fourth or fifth anniversaries of
the Guaranty Commencement Date, the aggregate compensation received by CHM
during the one-year period since the immediately preceding anniversary date,
pursuant to the provisions of Section 3.1.1, Section 3.1.2 and Section 3.1.4
hereof, for any reason shall be less than the $1,200,000, then CoreCare shall
pay to CHM, within thirty (30) days after the relevant anniversary date, an
amount, in cash, equal to the greater of (a) the Marginal Revenue Increase for
such one-year period or (b) an additional twenty-five percent (25%) of the
CoreCare Services Agreement Revenue (as provided in Section 2.4.4), to the
extent necessary to increase CHM's aggregate compensation for such one-year
period to $1,200,000.
3.2.4 For purposes of this Section 3.2, the term "Marginal Revenue
Increase" shall mean, with respect to any one-year period beginning with the
Guaranty Commencement Date or with any anniversary of the Guaranty Commencement
Date, a sum equal to ten percent (10%) of the amount, if any, by which (a) the
net revenues of CoreCare and its subsidiaries and affiliates for such one-year
period exceed (b) the net revenues of CoreCare and its subsidiaries and
affiliates for the preceding one-year period. For purposes of the foregoing
calculation, the "net revenues of CoreCare and its subsidiaries and affiliates"
for any one-year period (a) shall include all revenues generated from the
operations of CoreCare and its subsidiaries and affiliates and received by
CoreCare or by any of its subsidiaries or affiliates during such period, (b)
shall be net of all contractual allowances, refunds and write-offs for bad debt
and (c) shall be determined by independent certified public accountants which
are selected by CoreCare and are reasonably acceptable to CHM (the
"Accountants"). CoreCare shall give CHM such access as CHM from time to time may
reasonably request to the data and records on the basis of which the Accountants
have made or are preparing the calculations required pursuant to this Section
3.2.
3.2.5 The obligations of CoreCare set forth in this Section 3.2 are
unconditional and are not subject to set-off or deduction.
3.3 Expenses. CoreCare and CHM shall agree on an expense budget for each
year during the term of this Agreement. Within that budget, CoreCare shall
reimburse CHM for all out-of-pocket expenses incurred by CHM, or by the
Directors and officers of CHM, in the performance of services under the terms of
this Agreement. If the performance of such services requires travel by any of
CHM's officers or Directors or any of the CHM Personnel, such reimbursable
expenses shall include, without limitation, reasonable transportation costs and
hotel accommodations. Any amounts in excess of the maximum budgeted amount shall
require the prior approval of CoreCare, which approval shall not be unreasonably
withheld or delayed. Any expenses specifically approved in advance by CoreCare
before the full amount of the expense budget for any period has been expended
shall not reduce the then unused balance of the expense budget for that period.
Any reimbursement under this Section 3.3 for a pre-approved or budgeted expense
shall be made by CoreCare to CHM within ten (10) days after the submission by
CHM of an itemized statement for the applicable reimbursable expense.
3.4 Warrant. In consideration of the covenants and agreements of CHM
contained in this Agreement, and in further consideration of the services agreed
to be rendered by CHM hereunder and pursuant hereto, CoreCare hereby issues to
CHM a warrant, in the form attached to and made a part of this Agreement as
Exhibit I hereto (the "Warrant"). The Warrant grants to CHM the right to
purchase, during the initial term of this Agreement, a number of shares of the
CoreCare Common Stock which, if the Warrant were exercised in full, would
constitute CHM the holder of ten percent (10%) of the equity of CoreCare
outstanding at the time of full exercise. CoreCare hereby represents and
warrants that (a) it has taken all necessary corporate action in order to
authorize the execution, delivery and performance of the Warrant and (b) it has
reserved a sufficient number of authorized but unissued shares of the CoreCare
Common Stock to accommodate an exercise of the Warrant in full; and CoreCare
hereby covenants and agrees that, for so long as the Warrant is outstanding, it
will keep reserved a sufficient number of authorized but unissued shares of the
CoreCare Common Stock to accommodate such an exercise of the Warrant in full.
3.5 Amounts Paid.
3.5.1 The amounts paid and to be paid by CoreCare to CHM under this
Agreement have been determined by the parties through good-faith and arms-length
bargaining to be the fair market value of all of the consulting and other
services rendered by CHM hereunder. No amount paid or to be paid hereunder is
intended to be, nor shall it be construed to be, an inducement or payment for
referral of patients by CoreCare to CHM or any affiliate of CHM or by CHM or any
affiliate of CHM to CoreCare. In addition, no amount paid or advanced hereunder
includes any discount, rebate, kickback or other reduction in charge. The
parties shall comply in all respects with all applicable requirements of the
Medicare and Medicaid Fraud and Abuse "safe-harbor" regulations (the
"Safe-Harbor Regulations") as they may exist from time to time, including, but
not limited to, the requirements of the Safe-Harbor Regulations regarding
management agreements, and any amendments thereto, and shall comply with all
applicable directives, orders or other lawful pronouncements of any lawful
authority related to the Safe-Harbor Regulations.
3.5.2 Time is of the essence of the obligation of CoreCare to pay any and
all amounts required to be paid by CoreCare to CHM under this Agreement, and
CoreCare shall indemnify CHM and hold it harmless from and against any and all
costs incurred by CHM (including without limitation all reasonable attorneys'
fees and expenses) in connection with the collection of such amounts.
ARTICLE IV
Term and Termination
4.1 Term. The initial term of this Agreement shall begin on the
Commencement Date and, unless sooner terminated in accordance with Section 4.2
or Section 4.3, shall continue until the close of business on the last day of
the sixtieth (60th) month after the month in which the Commencement Date occurs.
The term of this Agreement shall be automatically extended for up to two (2)
additional successive three (3) year periods, unless, not more than 180 days and
not less than 120 days before the end of the then current term of this Agreement
(whether initial or extended), either CoreCare or CHM notifies the other party
in writing that this Agreement shall not be further extended, in which case this
Agreement shall expire at the end of the then current term.
4.2 Termination for Cause. Either party may terminate this Agreement at
any time for cause upon delivery of written notice to the other party.
4.2.1 CoreCare shall have cause for termination:
(a) If CHM shall default in the performance of any material
covenant, agreement, term or provision of this Agreement and such default shall
continue for a period of sixty (60) days after written notice to CHM from
CoreCare stating the specific default; or
(b) If bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any bankruptcy
law or similar law for the relief of debtors, are instituted by or against CHM,
are allowed against CHM or are consented to or are not dismissed, stayed or
otherwise nullified within thirty (30) days after such institution; or
(c) If any change in applicable law renders this Agreement, in whole
or material part, illegal or unenforceable.
4.2.2 CHM shall have cause for termination:
(a) If CoreCare shall default in the performance of any material
covenant, agreement, term or provision of this Agreement and such default shall
continue for a period of sixty (60) days after written notice to CoreCare from
CHM stating the specific default; or
(b) If bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any bankruptcy
law or similar law for the relief of debtors, are instituted by or against
CoreCare, any of the Programs or any of the facilities in which the Programs are
operated, and, if instituted against CoreCare, any of the Programs or any of the
facilities in which the Programs are operated, are allowed against them or are
consented to or are not dismissed, stayed or otherwise nullified within thirty
(30) days after such institution; or
(c) If at any time any Federal, state or local license, certificate,
approval or authorization required for the operation of any of the Programs
(including, without limitation, any of the Licenses) cannot be obtained or is at
any time suspended, terminated or revoked; or
(e) If any change in applicable law renders this Agreement, in whole
or material part, illegal or unenforceable; or
(f) If CoreCare shall fail or refuse to make, or cause to be made,
when due, any payment due to CHM, or to any subsidiary, affiliate or designee of
CHM, pursuant either to this Agreement, to any agreement entered into pursuant
to this Agreement (including without limitation any Third-Party Services
Agreement and any Third Party Management Agreement) or to any other agreement
between CoreCare and CHM (or any subsidiary, affiliate or designee of CHM), and
if CoreCare does not make such payment, or cause such payment to be made, within
five (5) days after receiving written notice of such default from CHM or its
subsidiary, affiliate or designee; or
(g) If CoreCare shall default in the performance of any material
covenant, agreement, term or provision of the Warrant and such default shall
continue for a period of ten (10) days after written notice to CoreCare from CHM
stating the specific default.
4.3 Consequences of Termination.
4.3.1 If CoreCare terminates this Agreement for cause pursuant to Section
4.2.1, the Warrant shall be deemed to have been revoked and to be of no further
force and effect on and as of the termination date, except as to CoreCare shares
which already have vested in CHM or with respect to which the Warrant already
has been exercised.
4.3.2 If either CoreCare or CHM terminates this Agreement for any reason,
the payment obligation of CoreCare under Section 3.2 shall be accelerated and
CoreCare shall pay to CHM, not later than the termination date of this
Agreement, the full amount that would have been payable to CHM under Section 3.2
in respect of the full one-year period, measured from the Commencement Date or
from the most recent anniversary of the Commencement Date, as the case may be,
within which the termination date occurs.
4.3.3 If either CoreCare or CHM terminates this Agreement for any reason,
CoreCare shall pay to CHM within forty-five (45) days of the termination date
all amounts then due but not theretofore paid or reimbursed to CHM pursuant to
Sections 3.1, 3.2 and 3.3. If any of such amounts is more than thirty (30) days
overdue, CoreCare shall pay to CHM, in addition to the amounts payable pursuant
to the first sentence of this Section 4.3.3, interest on such overdue amounts,
accruing from the date on which they became due until the date on which
they are paid, at the rate of twelve percent (12%) per annum.
4.3.4 Upon the expiration or termination of this Agreement, neither party
shall have any further right hereunder or any further obligation hereunder to
the other, except for the obligations, promises or covenants contained herein
which, pursuant to Section 7.14 or otherwise, are expressly made to extend
beyond the term of this Agreement.
ARTICLE V
Confidentiality; Non-Disclosure
5.1 Confidentiality.
5.1.1 CHM agrees to keep confidential, and, except in connection with the
performance of its covenants and agreements under this Agreement, agrees that it
will not otherwise use, any and all of the information concerning the Programs
and the Hospital Programs and their patients obtained as the result of the
provision of services hereunder or under any Third Party Management Agreement
and to exercise its best efforts to prevent any CHM employees from disclosing or
transmitting to any person or entity any of such information; provided, however,
that CHM may transmit such information to its counsel, auditors, lenders and
financial advisers, to its insurance carriers, to the insurance carriers of
CoreCare and to any regulatory authority having jurisdiction over the equipping,
construction, operation, maintenance or licensure of any of the Programs or
Hospital Programs or any of the facilities in which any of the Programs or
Hospital Programs are operated. In transmitting any confidential information to
any of the individuals or entities contemplated by the foregoing proviso, CHM
shall identify the information as confidential, shall advise the recipient of
such confidentiality and shall instruct the recipient to treat all of such
information as confidential information not to be disclosed to any individual or
entity except for CHM or CoreCare. Upon the expiration or termination of this
Agreement, any confidential information in the possession of CHM or any of its
employees shall be returned to CoreCare, other than such information in the
possession of CHM's counsel, auditors, lenders, financial advisers and insurance
carriers, such information in the possession of any regulatory authority or such
information which is part of CHM's medical record system.
5.1.2 CoreCare agrees to keep confidential, and, except in connection with
the performance of its covenants and agreements under this Agreement, agrees
that it will not otherwise use, (a) any and all of the documents and other
materials and information, including without limitation all print and computer
generated or readable materials and information, used or developed by CHM in
connection with its provision of services under this Agreement or under or in
connection with any of the Third-Party Services Agreements, (b) any and all of
the methods, techniques and procedures used or developed by CHM in providing
services to CoreCare or to any of the Programs or the Hospital Programs and
(c) any and all of the trademarks, tradenames and service marks of CHM. CoreCare
shall exercise its best efforts to prevent any of its employees or agents and
any of the personnel employed or engaged in providing services to any of the
Programs or any of the Hospital Programs from disclosing or transmitting to any
person or entity any of the information specified in clauses (a) through (c) of
the preceding sentence; provided, however, that CoreCare may transmit such
information to its counsel, auditors, lenders and financial advisers, to its
insurance carriers and to any regulatory authority having jurisdiction over the
equipping, construction, operation, maintenance or licensure of any of the
Programs or the Hospital Programs or any of the facilities in which any of the
Programs or Hospital Programs are operated. In transmitting any confidential
information to any of the individuals or entities contemplated by the foregoing
proviso, CoreCare shall identify the information as confidential, shall advise
the recipient of such confidentiality and shall instruct the recipient to treat
all of such information as confidential information not to be transmitted or
disclosed to any individual or entity except for CoreCare or CHM. Upon the
expiration or termination of this Agreement, any confidential information in the
possession of CoreCare or any of its employees shall be returned to CHM, other
than such information in the possession of CoreCare's counsel, auditors,
lenders, financial advisers and insurance carriers or such information in the
possession of any regulatory authority.
5.2 Non-Disclosure. The parties to this Agreement shall not disclose the
provisions of this Agreement, or the relationship of the parties created hereby,
orally or in writing, for any purpose, without the prior written consent of the
other party, except as required by law or judicial, regulatory or administrative
process.
ARTICLE VI
Relationship of the Parties
6.1 It is expressly understood and agreed by the parties that, in
providing services under this Agreement, CHM shall at all times act as an
independent contractor, not as an employee or agent of CoreCare, nor shall
CoreCare be an employee or agent of CHM. Further, it is expressly understood and
agreed by the parties that nothing contained in this Agreement shall be
construed to create a joint venture, partnership, association or other
affiliation or like relationship between the parties, or a relationship of
landlord and tenant, it being specifically agreed that their relationship is and
shall remain that of independent parties to a contractual relationship as set
forth in this Agreement. In no event shall either party be liable for the debts
or obligations of the other of them, except as otherwise specifically provided
in this Agreement. Neither CoreCare, nor any employee, agent or sub-contractor,
of CoreCare, shall have any claim under this Agreement or otherwise against CHM
for vacation pay, sick leave, retirement benefits, social security, worker's
compensation, disability or unemployment benefits, or employee benefits of
any kind.
ARTICLE VII
Miscellaneous
7.1 Cooperation. The parties agree to cooperate with one another in the
fulfillment of their respective obligations under this Agreement and to comply
with the requirements of law and with all ordinances, statutes, regulations,
directives, orders or other lawful enactments or pronouncements of any Federal,
state, municipal, local or other lawful authority applicable to the operation of
the Programs and the Hospital Programs.
7.2 Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to that term or any other term of
this Agreement.
7.3 Notices. All notices, requests, consents and other communications
required or permitted to be given under the terms of this Agreement shall be in
writing and shall be deemed to have been duly given if delivered personally in
hand or sent by prepaid telegram, or mailed first-class, postage prepaid, by
registered or certified mail, or delivered by Federal Express or similar courier
service, with all delivery fees prepaid, to the relevant party at the address
set forth below or to such other address as either party shall designate by
notice in writing to the other in accordance with this Section 7.3:
To CoreCare:
CoreCare Systems, Inc.
Whitemarsh Professional Center
9425 Stenton Avenue
Erdenheim, PA 19038
Attention: Mr. Thomas Fleming
President
with a copy to:
Joseph Chicco, Esq.
Connolly, Epstein, Chicco, Foxman,
Engelmyer & Ewing
1515 Market Street, 9th Floor
Philadelphia, PA 19102
To CHM:
Choate Health Management, Inc.
92 Montvale Avenue, Suite 3200
Stoneham, MA 02180
Attention: Stuart L. Koman, Ph.D.
President
David G. Fassler, M.D.
Chief Executive Officer
With a copy to:
Robert A. S. Silberman, Esq.
Edwards & Angell
101 Federal Street, 23rd Floor
Boston, MA 02110
Notices given pursuant to this Section 7.3 shall be deemed delivered when
received.
7.4 Section Headings. The Section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.5 Governing Law. This Agreement has been executed and delivered in, and
shall be construed and enforced in accordance with the laws of, the Commonwealth
of Massachusetts.
7.6 Assignment. No assignment of this Agreement or the rights and
obligations hereunder shall be valid without the specific written consent of
both parties hereto. A change in control of the voting stock of CoreCare or CHM
shall not be deemed to be an assignment of this Agreement; provided that,
immediately after such change in control, Thomas Fleming, in the case of a
change of control of CoreCare, and David Fassler and Stuart Koman, in the case
of a change of control of CHM, remain actively involved in senior management
positions of CoreCare and CHM, as the case may be, whether as directors,
officers or employees.
7.7 Entire Agreement. This Agreement supersedes all previous contracts or
agreements between the parties with respect to the subject matter hereof and
constitutes the entire Agreement between the parties with respect thereto.
7.8 Amendments. This Agreement may be amended only be an instrument in
writing signed in the manner provided in Section 7.10 below, effective as of the
date stipulated therein.
7.9 Invalidity of Particular Provisions. If any term or provisions of this
Agreement, or any application thereof to any person or circumstance shall to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and be
enforceable to the fullest extent permitted or not prohibited by law.
7.10 Execution. This Agreement and any amendments hereto shall be executed
in no fewer than two counterparts by an official of each party hereto
specifically authorized by its Board of Directors with respect to such
execution. Each counterpart so executed shall be deemed an original, but all
original counterparts shall together constitute one and the same instrument.
7.11 Vested Rights. No amendment, supplement or termination of this
Agreement shall affect or impair any right or obligation which has theretofore
matured hereunder.
7.12 Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
7.13 Further Actions. Each of the parties agrees that it shall hereafter
execute and deliver such further instruments and do such further acts and things
as may be reasonably required or useful to carry out the intent and purpose of
this Agreement and as are not inconsistent with the terms hereof.
7.14 Right of First Refusal.
7.14.1 During the term of this Agreement, CHM agrees to provide to
CoreCare (a) a right of first refusal to enter into a Third-Party Services
Agreement for the management of residential psychiatric treatment services
and/or Triage Services in Hospitals with which CHM has entered into negotiations
and which are located in Eastern Pennsylvania (that is, east of Harrisburg), New
Jersey or Delaware (the "Relevant Region") and (b) if CHM elects, during the
term of this Agreement, to develop and/or acquire an ownership interest in
residential psychiatric treatment services and/or Triage Services in Hospitals
in the Relevant Region, the right to participate with CHM, on an equal basis, in
the development and/or ownership of such services; provided, however, that the
foregoing rights of first refusal and participation shall be in effect and
continue only if CoreCare is not in default in any of its obligations under this
Agreement and if CHM is receiving not less than $600,000 (in the first year) or
$1,200,000 (in years after the first year) in payments under or pursuant to this
Agreement for each one-year period hereunder measured from the Guaranty
Commencement Date.
7.14.2 In furtherance of the provisions of Section 7.14.1, CHM hereby
assigns to CoreCare all rights it may have at the date hereof under any
contracts, agreements or understandings with Westmeade Healthcare, Inc.
("Westmeade"). CoreCare and CHM agree, however, that all fees or other amounts
due to CHM as of the closing date of CoreCare's acquisition of Westmeade
pursuant to any contract, agreement or understanding of CHM with Westmeade shall
be paid in full by CoreCare to CHM no later than thirty (30) days after the date
of such closing.
7.15 Survival. The covenants contained in the relevant portions of
Sections 2.2, 2.4, 2.6, 2.8, 2.9, 3.1.2, 3.1.3, 3.2, 3.3, 3.5, 4.3, 5.1 and 5.2
shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, CHM by its Chief Executive Officer hereunto duly
authorized and CoreCare by its President hereunto duly authorized have caused
this Agreement to be executed and delivered as of the date first written above.
CHOATE HEALTH MANAGEMENT, INC.
By:/s/ David G. Fassler
----------------------------------
David G. Fassler, M.D.
Chief Executive Officer
CORECARE SYSTEMS, INC.
By: /s/ Thomas Fleming
----------------------------------
Name: Thomas Fleming
Title: Chief Executive Officer
SCHEDULE A
CoreCare Programs
<TABLE>
<CAPTION>
Name and Address of Facility Type(s) of Service Provided Source and Type of Licensure
<S> <C> <C>
1. CoreCare Systems, Inc. Corporate Office None
Erdenheim, PA
2. Chestnut Hill Health & Wellness Center None
Fitness Center, Inc.
Erdenheim, PA
3. Lakewood Retreat, Inc. a) acute psychiatric residential a) PA Department of Public
East Stroudsberg, PA treatment facility (adult) Welfare - Personal Care
Boarding Home
b) Certification as Long-term b) PA Department of Health - Office
Structured Residence (adult) of Mental Health
4. American Institute of Outpatient counseling center Individual clinician licenses
Behavioral Counseling
Inc. and related companies
Easton, PA
Hampton and Greenbrook, NJ
5. Mangement Contracts with
Quakertown Hospital (a) Acute hospital (a) PA Department of Health
Upper Bucks Associates (b) Outpatient counseling center (b) Individual clinician licenses
Renewal Centers (c) Freestanding drug and (c) PA Office of Drug and Alcohol
alcohol rehabilitation
facility
6. Managed Care Ware Inc. Propriety Software None
Erdenheim, PA
7. Westmeade Health Care, a) Acute psychiatric residential a) PA Department of Public Welfare -
Inc. treatment facility (adult) Personal Care Boarding Home
Wyndmoor and Hartsville, b) Acute and long term psychiatric b) PA Department of Public Welfare -
PA residential treatment facility Community Residence for Mental
(Acquisition Agreements) Health
</TABLE>
EXHIBIT I
Stock Purchase Warrant
EXHIBIT 6.22
MANAGEMENT AGREEMENT
THIS AGREEMENT by and between Quakertown Community Hospital, a
non-profit corporation organized, existing under the laws of the Commonwealth of
Pennsylvania, Renewal Centers, a subsidiary of LifeQuest Corporation, (both
entities hereinafter referred to as "Behavioral Sciences") and, Care Group of
America, Inc., a business corporation organized and existing under the laws of
the Commonwealth of Pennsylvania (hereinafter referred to as the "Manager"), is
entered into to be effective as of January 1, 1995.
W I T N E S S E T H:
WHEREAS, Hospital is a community hospital located in Quakertown,
Pennsylvania, the governing body of which is its directors, who desire to
contract with Manager for the purpose of providing complete management services
in connection with the operation of Behavioral Sciences; and
WHEREAS, Manager desires to be so retained.
NOW THEREFORE, in consideration of the covenants and promises
hereinafter made, and intending to be legally bound hereby, the parties agree as
follows:
1. Retention of Manager. Behavioral Sciences hereby retains and
employs Manager to perform the duties and services to be performed by Manager
under this Agreement, and Manager agrees to perform such duties and services in
a businesslike manner in accordance with the policies and directives adopted by
Behavioral Sciences from time to time.
2. Control of Behavioral Sciences by Board of Directors. The Board
of Directors of Behavioral Sciences (hereinafter referred to as the Board) is
responsible for the overall operation and direction of the Behavioral Sciences
and for the development of policies with respect to Behavioral Sciences.
Notwithstanding the authority granted to Manager herein, Manager and Board agree
that Behavioral Sciences, through its C.E.O. of the Hospital, shall at all times
exercise control over the affairs of the Behavioral Sciences, shall establish
general operating policies to be carried out by Manager under this Agreement,
and shall be accountable and responsible for all medical, professional, and
ethical affairs of the Behavioral Sciences. Notwithstanding anything stated in
this Agreement to the contrary, this Agreement is not intended to nor does it
alter or amend any prior policies or resolutions of Behavioral Sciences.
Manager and Board agree through it's designee, the C.E.O.,: (a) that
Behavioral Sciences shall have the right and obligation to review periodically
operating decisions made by Manager on Behavioral Sciences's behalf; (b) that
the Behavioral Sciences shall have the right, upon notice to Manager, to change,
repeal, or alter policies adopted by Manager in connection with managing the
day-to-day operations of the Behavioral Sciences Program; and (c) that, in order
to provide the C.E.O. with an informed basis for reviewing Manager's performance
hereunder, Manager shall supervise the preparation of and shall deliver from
time to time the reports and financial statements required by the terms of this
Agreement, and by the C.E.O. from time to time. In order to carry out the
provisions of this Section, the C.E.O. agrees to schedule and hold regular,
periodic meetings and receive the various reports required of Manager by the
terms of this Agreement, and act upon any recommendations of Manager.
3. Duties of Manager. Manager shall provide complete management
services necessary for the operation of the Behavioral Sciences in accordance
with policies and directives of the respective Boards. Such management services
shall include but not be limited to the following:
(a) Financial services, including annual operating and capital
budget and fiscal controls for the Behavioral Sciences.
(b) Matters relating to third party reimbursement.
(c) Operational matters.
(d) Personnel matters.
(e) Medical staff relationships.
(f) Quality assurance program development and implementation.
(g) Assistance in maintaining all licenses and certification
required for the operation of the Behavioral Sciences.
(h) Development of new programs and activities related to the
Psychiatric Unit inpatient and outpatient services and The Renewal Centers
(Behavioral Sciences).
(i) Direction of Marketing and Public Relations in respect to
Behavioral Sciences.
4. Personnel. Manager will employ qualified personnel to fill the
positions listed on Exhibit "A" attached hereto; who will perform services on
the Behavioral Sciences on a full time basis. These individuals will be
employees of the Manager and not of the Behavioral Sciences. To the full extent
permitted by law, Hospital shall provide and maintain for Manager's employees
fringe benefits equal or comparable to those furnished to the Psychiatric Unit
and Renewal Centers employees. The names of the individuals intended initially
to fill the listed positions are also included in Exhibit "A".
5. Reports to C.E.O.
(a) General Requirements. For the purpose of keeping
Behavioral Sciences informed with respect to the operations of the Behavioral
Sciences Manager shall supervise the preparation of and shall deliver' to the
C.E.O. in a timely and accurate fashion, all of the following documents:
(i) Annual operating and capital budgets and cash-flow
projections as provided by Section 6(d).
(ii) An annual report to the C.E.O. describing the
operations, policies, and problems with respect to Behavioral Sciences, such
report to be delivered to the C.E.O. within forty-five (45) days after the end
of each Hospital fiscal year.
(iii) Upon the request of the C.E.O. from time to time,
an analysis of the relative profitability and efficiency of Behavioral Sciences
and to the extent information is available to or can reasonably be obtained by
the Manager.
(iv) For each regular, periodic meeting of the C.E.O.,
an interim report to the C.E.O. describing the operations, policies, and
problems with respect to Behavioral Sciences programming.
6. In addition, Manager shall supervise the preparation of and shall
deliver to the C.E.O. all other reports specifically required by the terms of
this Agreement or requested by the C.E.O. from time to time.
(a) Budgets and Cash-Flow Projections. Not later than thirty
(30) days prior to the end of each fiscal year of Behavioral Sciences during the
term of this Agreement, Manager shall supervise the preparation of and shall
deliver to the C.E.O. the following budgets with respect to the next fiscal
year:
(i) A capital expenditures budget outlining a program of
capital expenditures for the next fiscal year.
(ii) An operating budget setting forth an estimate of
operating revenue and expenses for the next fiscal year, which operating budget
shall be in reasonable detail and shall contain an explanation of anticipated
changes in utilization, patient charges, payroll, and other factors differing
significantly from the current year.
7. Behavioral Sciences's Representative. In any situation in which,
pursuant to the terms hereof, Behavioral Sciences shall be required or permitted
to take any action, or to give any approval, Manager shall be entitled to rely
upon the statement of the C.E.O. or such other representative thereof who shall
have been designated by the Boards of Behavioral Sciences in writing to act on
its behalf under this Agreement, to the effect that any such action or approval
has been taken or given. In the event no such representative is designated, such
actions shall be taken by and such approvals shall be obtained from the
respective Boards.
8. Independent Contractor. It is expressly understood and agreed by
the parties hereto that Manager shall at all times during the performance of
services pursuant to this Agreement be acting as an independent contractor and
that no act, or commission or omission of any party hereto shall be construed to
make or render the other party its principal, agent, partner, joint venturer or
associate.
9. Management Fee. Manager's fixed fee for its services hereunder
shall be as set forth on Exhibit "B" attached hereto, payable in equal monthly
installments on the first day of each month. The fixed compensation set forth
therein shall be increased annually by the greater (i) 5% or (ii) the percentage
rate equal to the National C.P.l. increase.
10. Term. The term of this Agreement shall be for a period
commencing January 1, 1995 and ending December 31, 1998 and shall renew for two
additional one year periods thereafter unless and until either party shall give
notice of its election to terminate this Agreement, which notice shall be given
not less than 120 days prior to the end of the then-current term, or unless this
Agreement, is terminated sooner pursuant to Section 19.
11. Standard of Care. In the performance of its services hereunder,
Manager shall exercise the same standards and degree of care used by a
reasonable person in managing his own affairs. Manager shall act in good faith
to perform its obligations hereunder, but shall have no liability to Behavioral
Sciences for any decisions made with respect to or any actions taken in
connection with the Behavioral Sciences operations so long as such decisions or
actions were made or taken in good faith and so long as such actions were made
in accordance with reasonable business practices or with practices prevalent in
the hospital industry.
12. Indemnification. Behavioral Sciences shall protect, indemnify
and save Manager harmless from and against all and any liability and expense of
any kind, including reasonable attorneys fees, arising from injuries or damages
to persons or property in connection with the operation of the Behavioral
Sciences business, unless such liability resulted from willful misconduct or
gross negligence by Manager, its employees or agents in the management of the
Behavioral Sciences.
13. Insurance. Commencing with the first day of Manager's
performance of its duties hereunder, Behavioral Sciences shall, solely at its
own expense, obtain and maintain in full force and effect throughout the term of
this Agreement the following policies of insurance:
(a) Comprehensive general liability policy, including personal
injury and property damage liability insurance naming Behavioral Sciences and
Manager as behavioral.
(b) Worker's Compensation and employee's liability insurance
and other similar insurance to the extent required by law.
(c) Professional liability insurance and, to the extent
available, Directors and Officers insurance, naming Behavioral Sciences and
Manager (or Manager's executive employees) as behavioral.
All such policies of insurance shall be in such amounts as are
deemed necessary by Behavioral Sciences and shall provide for waiver of
subrogation against Manager. Behavioral Sciences shall present such policies of
insurance to Manager for review upon request by Manager.
14. Prevention of Performance of Duties. Manager shall not be deemed
to be in violation of this Agreement if prevented from performing any of its
obligations hereunder for any reason beyond its control, including without
limitation, acts of God and of the public enemy, the elements, flood, strikes
and labor difficulties, limitations of Behavioral Sciences's financial
resources, or statutory regulations or rule of the federal, state or local
government or any agency thereof.
15. Systems and Methods of Manager. It is expressly understood that
the systems, methods, procedures and controls employed by Manager in the
performance of this Agreement are proprietary in nature to the extent they are
unique and not used by others generally and shall remain the property of the
Manager. Manager hereby grants the Behavioral Sciences a permanent, nonexclusive
license to utilize such systems, methods, procedures and controls; such license
shall be personal to Behavioral Sciences and may not be sublicensed or assigned.
Manager shall be under no restriction regarding the use of its systems, methods,
procedures and controls in other business activities, except as such activities
are specifically restricted herein.
16. Ownership of Licenses. It is expressly understood and agreed by
the parties hereto that Behavioral Sciences will be the holder and owner of all
licenses, accreditation certifications and contracts which Behavioral Sciences
obtains and shall be the "Provider" within the meaning of all agreements with
third party payors concerning reimbursement for hospital care and related
products and services.
17. Exclusivity. Subject to the provisions of Section 16 above,
during the term of this Agreement, Manager shall not, without the prior written
consent of the C.E.O. provide management or other services to any other provider
of Behavioral Sciences within a twenty-five (25) mile radius of Behavioral
Sciences. The provisions of this Section 17 shall not apply to any hospital
which is affiliated with the Behavioral Sciences or LifeQuest, a Pennsylvania
non-profit corporation.
18. Restriction on Solicitation of Employees.
(a) During the term of this Agreement, and for a period of one
(l) year thereafter, the Manager and the Behavioral Sciences agree that neither
shall hire any employee of the other and neither shall induce or attempt to
influence any employee of the other to terminate his or her employment with the
other.
(b) Notwithstanding the above, if this Agreement is terminated
by Hospital pursuant to subsection 19(a) or subsection 19(b), Behavioral
Sciences shall have the right to solicit and hire any of Manager's employees who
provide services to the Behavioral Sciences
19. Termination and Breach.
(a) General Breach. In the event that either party should be
in default in the performance of any material provision of this Agreement, and
such default is not cured within thirty (30) days after receipt of written
notice of such default from the other party, the nondefaulting party, at its
option, may terminate this Agreement by delivering written notice to such
defaulting party within five (5) days after expiration of said thirty (30) day
period. Upon notice of termination, each party hereto shall be liable to perform
its obligations herein up to the date of termination. The non-defaulting party
shall specify the date of termination.
(b) Immediate Termination for Cause. Behavioral Sciences shall
have the right to immediately or on any date certain terminate this Agreement in
the event that Manager or any of Manager's executive employees who provide
services under this Agreement, are convicted of a criminal or fraudulent act.
(c) Termination Without Cause. Behavioral Sciences shall have
the right to terminate this Agreement for any reason upon giving Manager sixty
(60) days prior written notice specifying the termination date. In the event
Behavioral Sciences elects to terminate the Agreement under this subsection
19(c), Behavioral Sciences shall pay to Manager on the date of termination an
amount equal to all compensation payable to Manager over the remaining term of
the Agreement without considering any future annual increases to which the
Manager would be entitled.
20. Access to Records. This Section 20 is included herein because of
the possible application of Section 1861(v) (1 )(l) of the Social Security Act
to this Agreement; if that statutory provision should be found inapplicable to
this Agreement under the terms of such section, then this Section 20 shall be
deemed not to be part of this Agreement and shall be null and void.
(a) Until the expiration of four (4) years after the
furnishing of services pursuant to this Agreement, Manager shall make available,
upon written request, to the Secretary of Health and Human Services or the
United States Comptroller General or any of their duly authorized
representatives, this Agreement, and any books, documents and records of the
Manager that are necessary to certify the nature and extent of costs incurred by
the Behavioral Sciences under this Agreement.
(b) If the Manager carries out any of the duties of this
Agreement with a value of Ten Thousand Dollars ($10,000) or more over a twelve
(12) month period through a subcontract with a related organization, it must be
approved by the Behavioral Sciences and must contain a clause to the effect that
until the expiration of four (4) years after the furnishing of services under
such subcontract, the related organization shall make available, upon written
request to the Secretary of Health and Human Services the United States
Comptroller General, or any of their duly authorized representatives, the
subcontract and books, documents and records of the related organization that
are necessary to verify the nature and extent of costs incurred by the Manager
and Behavioral Sciences under the subcontract.
21. Entire Agreement. This Agreement contains the entire
understanding of the parties. It may be amended or modified only by an agreement
in writing signed by both parties, provided that no amendment shall be made
which would cause this Agreement to violate any federal or state law, including
but not limited to, the federal Anti-kickback Statute, 42 U.S.C.
ss. 1320a-7b(b).
22. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
23. Notice. Any Notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by certified mail to the then
current address of Behavioral Sciences and Manager.
24. Binding Nature of Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Either party may assign or transfer its rights or
obligations under this Agreement with the prior written consent of the other
party hereto, which consent shall not be unreasonably withheld. Any assignment
or transfer of stock or any merger or consolidation shall be deemed an
assignment governed by this Section.
25. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
QUAKERTOWN COMMUNITY HOSPITAL
/s/_______________ BY: /s/________________________
Attest: C.E.O.
RENEWAL CENTERS
/s/_______________ BY: /s/_______________________
Attest: BOARD PRESIDENT
CARE GROUP OF AMERICA,INC.
/s/_______________ BY: /s/_______________________
Attest: PRESIDENT
EXHIBIT "A"
QUAKERTOWN COMMUNITY HOSPITAL
CONTRACTED POSITIONS:
V.P. of Psychiatric Services
Executive Director, Renewal Centers
Two Marketing Positions
EXHIBIT "B"
QUAKERTOWN COMMUNITY HOSPITAL
CONTRACTUAL PAYMENTS
Base Management Fee: $240,000/Yr.
Required Expense Absorbtion: $240,000/Yr
(Including Exhibit A)
Incentive Management Fee:
Base Performance Requirement ADC MIN/RATE
- ---------------------------- --- --------
Psychiatric Limit Census 9 $250/Day
Renewal Centers 15 $125/Day
--
TOTAL: 24
Incentive Performance Requirement ADC
- --------------------------------- ---
Psychiatric Limit Census 16
Renewal Census 20
--
TOTAL: 36
INCENTIVE FEE: $20,000/Mnth
Paripassu Arrangement: If average daily census exceeds base, manager will be
paid on pro-rata for each ADC.
B-1
EXHIBIT 6.23
July 29, 1996
Mary Litvin,
President, CEO
St. Luke's Quakertown Hospital
101 Park Avenue
Quakertown, PA 18951
RE: Contract Modification
Dear Mary:
On behalf of CoreCare Systems, Inc. (CRCS) and our subsidiary CoreCare
Behavioral Health Management, Inc. please accept this letter as an official
amendment to our existing services contract with St. Luke's Quakertown Hospital
and Renewal Centers pursuant to our 6/26/96 meeting.
As we discussed CRCS agrees to the following modifications:
a) that, pertaining to the annual management fee, such fee of $743,990
would be reduced to $683,990 starting July 6, 1996;
b) that, the Community Outreach Specialists for the contract be reduced
1 FTE effective July 6, 1996;
c) that, the responsibilities of the Vice President of Psychiatric
services be modified such that the new title will be Program and
Physician Manager; and that the nature of these responsibilities be
expended to include marketing activities;
d) that the ancillary clinical staff presently paid as a pass-through
in the contract be transferred to St. Luke's Health Services as of
8/31/96.
Hopefully this reflects the sense of our meeting. Please sign below and return
one copy of this letter for our files.
Sincerely,
/s/
Rose S. DiOttavio
President
CoreCare Systems, Inc.
/s/Mary Litvin 7/31/96
- ------------------------------- ---------------------
Agreed and Accepted by: Date:
