UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 27, 1999
SCHICK TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
State of Delaware 000-22673 11-3374812
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
31-00 47th Avenue
Long Island City, New York 11101
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (718) 937-5765
(Former Name or Former Address, if
Changed Since Last Report)
<PAGE>
ITEM 1. Changes in Control of Registrant.
(b) The arrangement described in Item 5 of this Form 8-K may result in a
change in control of the Registrant.
ITEM 2. Acquisition or Disposition of Assets.
The disposition by the Registrant of 468,000 shares of common stock of
Photobit Corp. is described in Item 5 of this Form 8-K.
ITEM 5. Other Events.
On December 27, 1999, the Registrant entered into a Loan Agreement (the
"Loan Agreement," filed as Exhibit 1 hereto) by and between the Registrant,
Schick Technologies, Inc. (a New York corporation), a wholly-owned subsidiary of
Registrant, and Greystone Funding Corporation (a Virginia Corporation)
("Greystone") . The Loan Agreement provides for the establishment of a credit
facility for the Registrant in the maximum amount of $7.5 million (the "Line of
Credit"), bearing an interest rate of ten percent (10%) per annum. The Line of
Credit must be repaid in full on the earlier of (a) the first date on which the
Registrant shall have received, in the aggregate, $12,500,000.00 or more from
equity and/or debt financings consummated subsequent to the date of the Loan
Agreement, or (b) December 27, 2004.
Greystone's obligation to make advances under the Line of Credit are
dependent upon certain conditions, including the written consent by Registrant's
senior lender to the creation of a second lien on certain of Registrant's assets
on or before February 15, 2000; the development and commencement by Registrant
of a restructuring plan; and, if deemed necessary by the Registrant's Board of
Directors, the receipt of an opinion from an investment banking firm on or
before February 15, 2000 to the effect that the transactions contemplated by the
Loan Agreement are fair to Registrant's stockholders from a financial point of
view, or a written waiver of such fairness opinion from the Registrant.
Additionally, the Loan Agreement requires the Registrant to present a
proposal at the next annual stockholders' meeting, for a vote by its
stockholders to increase the number of shares authorized under the Registrant's
1996 Employee Stock Option Plan or to establish a new stock option plan to
authorize options to purchase an additional 750,000 shares of Common Stock (the
"Stock Option Proposal").
In connection with the Loan Agreement, the Registrant increased the size of
its Board of Directors from three to five directors. Two individuals designated
by Greystone, Messrs. Jeffrey T. Slovin and Robert R. Barolak, were then
appointed by the Registrant's Board of Directors to fill the two vacant seats.
Mr. Slovin has also been appointed President of the Registrant. In addition,
Greystone will have the right to designate additional members of the
Registrant's Board of Directors based on the amount advanced to Registrant under
the Line of Credit. If Greystone advances more than $6,000,000 to Registrant
under the Line of Credit, Greystone will be entitled to appoint a majority of
the seats on the Board of Directors.
Pursuant to the Loan Agreement, and to induce Greystone to enter into said
Agreement, the Registrant agreed to issue to Greystone, or its designees,
warrants to purchase 3,000,000 shares of Registrant's Common Stock at an
exercise price of $0.75 per share. The Loan Agreement also provides for the
Registrant to issue to Greystone, or its designees, warrants to
2
<PAGE>
purchase two shares of Common Stock for each dollar advanced under the credit
facility once more than $1,000,000 has been advanced.
In connection with, and as a condition to, the Loan Agreement, on December
27, 1999 the Registrant, David B. Schick, Chief Executive Officer and a Director
of Registrant, Allen Schick, father of David B. Schick and a Director of
Registrant, and Greystone entered into a Stockholders' Agreement (the
"Stockholders Agreement") dated as of December 27, 1999 (which is filed as
Exhibit 2 hereto) (David B. Schick and Allen Schick are collectively referred to
herein as the "Stockholders") pursuant to which, among other things, (i) the
Stockholders agree to vote shares of the Registrant's Common Stock which they or
family members or certain affiliates own or which the Stockholders control (the
"Stockholder Shares") as necessary to cause the Registrant's Board of Directors
(the "Board") to consist of a minimum of six members or such other number as
required by the Loan Agreement; (ii) the Stockholders agree to vote the
Stockholder Shares in favor of the election or reelection of designees of
Greystone for the number of seats on the Board (initially two) as provided in
the Loan Agreement; (iii) the Stockholders agree to take action and vote to
appoint a Greystone designee to fill any vacancy on the Board by reason of the
death, resignation or removal of a Greystone designee; (iv) the Stockholders
agree not to vote Stockholder Shares to remove a Greystone designee from the
Board; (v) each Stockholder who is a director of the Registrant agrees, in his
capacity as director (and subject to his fiduciary duties), to cause Jeffrey
Slovin to hold the office of President of the Registrant and to vote as provided
in clauses (i) through (iv) above, as well as to vote to elect or reelect (and
not vote to remove) individuals appointed by Greystone to the audit committee
and compensation committee of the Board, as provided in the Loan Agreement. The
Stockholders have also agreed to vote all of their respective Stockholder Shares
in favor of the Stock Option Proposal and in favor of a proposal to increase the
number of Registrant's authorized shares.
In addition, the Registrant and Greystone entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement," filed as Exhibit 3 hereto), pursuant
to which Greystone purchased from the Registrant 468,000 shares of capital stock
of Photobit Corporation ("Photobit") which were owned by the Registrant, at a
price of $4.00 per share, for a total purchase price of one million eight
hundred seventy-two thousand dollars ($1,872,000.00), which price was negotiated
by the parties. The purchase price was payable as follows : (a) immediate
payment of the aggregate sum of one million dollars ($1,000,000.00); and (b)
immediate delivery of Greystone's fully-executed promissory note in the
aggregate principal amount of eight hundred seventy-two thousand dollars
($872,000.00). The sale of the Photobit stock is subject to a right of first
refusal held by Photobit and its founders. In the event that Photobit or its
founders choose to exercise their respective rights of first refusal, in whole
or in part, Greystone has agreed to sell the Photobit stock subject to such
exercise to the exercising parties.
Pursuant to the Stock Purchase Agreement, and to induce Greystone to enter
into said Agreement, the Registrant agreed to issue to Greystone, or its
designees, warrants to purchase 2,000,000 shares of Common Stock at an exercise
price of $0.75 per share.
On December 27, 1999, the Registrant issued a total of 5,000,000 warrants
in connection with the transactions described herein, as follows : (i) the
Registrant issued to Greystone warrants to purchase 2,850,000 shares of Common
Stock pursuant to the Loan Agreement and warrants to purchase 1,900,000 shares
of Common Stock pursuant to the Stock Purchase Agreement; and (ii) Greystone
directed the Registrant to issue to Greystone's designee, Jeffrey T. Slovin,
warrants to purchase 150,000 shares that Greystone was due to receive pursuant
to the
3
<PAGE>
Loan Agreement and warrants to purchase 100,000 shares that it was due to
receive pursuant to the Stock Purchase Agreement.
The number of shares of the Registrant's Common Stock deliverable upon
exercise of the warrants issued or to be issued to Greystone or its designees
under the Loan Agreement and/or Stock Purchase Agreement (collectively, the
"Warrants"), and the exercise price thereof, are subject to adjustment as
provided in the form of Warrant Certificate (filed as Exhibit 4 hereto). The
Warrants expire as of 5:00 p.m. on December 27, 2006.
The Warrants issued to Greystone pursuant to the Stock Purchase Agreement
will be returned to the Registrant in the event that its senior lender does not
consent to the creation of a second lien on certain of Registrant's assets on or
before February 15, 2000. In addition, under certain circumstances, Greystone
may be required to return certain of the warrants issued to it under the Loan
Agreement if it refuses to make advances under the Line of Credit.
ITEM 7. Financial Statements, Pro Forma Financial Information And Exhibits.
(c) Exhibits.
Exhibit 1 Loan Agreement, dated December 27, 1999, by and between Schick
Technologies, Inc., a Delaware corporation, Schick Technologies,
Inc., a New York corporation, and Greystone Funding Corporation
("Greystone"), a Virginia corporation.
Exhibit 2 Stockholders' Agreement, dated December 27, 1999, by and between
Schick Technologies, Inc., a Delaware corporation, David B.
Schick, Allen Schick and Greystone.
Exhibit 3 Stock Purchase Agreement, dated December 27, 1999, by and between
Schick Technologies, Inc., a Delaware corporation, and Greystone.
Exhibit 4 Form of Warrant Certificate Issued to Greystone to Purchase
Shares of Common Stock of Schick Technologies, Inc., a Delaware
corporation.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCHICK TECHNOLOGIES, INC.
-------------------------
(Registrant)
Date: January 11, 2000 By: /s/ David B. Schick
David B. Schick
Chief Executive Officer
LOAN AGREEMENT
LOAN AGREEMENT (this "Agreement"), is made and entered into the 27th day of
December 1999, by and between GREYSTONE FUNDING CORPORATION, a Virginia
corporation (the "Lender"), and SCHICK TECHNOLOGIES, INC., a Delaware
corporation (the "Company") and SCHICK TECHNOLOGIES, INC., a New York
corporation ("Schick New York"). The Company and Schick New York are hereinafter
individually referred to herein as a "Borrower" and collectively as the
"Borrowers."
W I T N E S S E T H :
WHEREAS, the Borrowers are engaged in the business of designing, developing
and manufacturing, marketing, selling and servicing digital radiographic imaging
systems and devices for the dental and medical markets and other related fields
(collectively, the "Business Operations"); and
WHEREAS, the Borrowers have requested the Lender to extend to the Borrowers
a loan and line of credit in the principal amount of up to $7,500,000, which the
Borrowers will utilize in connection with the Business Operations and as
contemplated by this Agreement; and
WHEREAS, the Lender is ready, willing and able to make such line of credit
available to the Borrowers upon the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Defined Terms. In addition to the other terms defined
elsewhere in this Agreement, as used herein, the following terms shall have the
following meanings:
"Additional Warrants" shall mean, in addition to the Initial Warrants,
those additional Warrants entitling the Lender to purchase up to 13,000,000
shares of Common Stock (subject to adjustment as provided therein), which shall
be issued to the Lender based upon the maximum level of Advances made by the
Lender to the Borrowers hereunder, all as described in Section 2.03 of this
Agreement.
"Advances" shall mean funds advanced under the Line of Credit from time to
time by the Lender to either or both of the Borrowers pursuant to this
Agreement; each of which Advances shall be subject at all times to the terms and
conditions set forth herein.
"Advance Period" shall mean the period from the Agreement Date to a date
which shall be two (2) years following the Agreement Date.
"Advance Requests" shall mean a Borrower's written request made during the
Advance Period to the Lender for any one or more Advances under the Line of
Credit provided for herein.
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person in
control of, controlled by, or under common control with the first Person, and
any other Person who has a substantial interest, direct or indirect, in the
first Person or any of its Affiliates, including, without limitation, any
officer or director of the first Person or any of its Affiliates; for the
purpose of this definition, a "substantial interest" shall mean the direct or
indirect legal or beneficial ownership of more than five (5%) percent of any
class of stock or similar interest.
"Agreement" shall mean this Loan Agreement as it may from time to time be
amended and/or supplemented.
"Agreement Date" shall mean the date this Agreement is executed by the
Lender, being the date set forth on the signature page hereof.
"Applicable Law" shall mean all applicable provisions of all (a)
constitutions, statutes, ordinances, rules, regulations and orders of all
governmental and/or quasi-governmental bodies, (b) Government Approvals, and (c)
orders, judgments and decrees of all courts and arbitrators.
"Business Day" shall mean a day other than (a) a Saturday, (b) a Sunday, or
(c) in the case of a day on which any payment hereunder is to be made in the
State of New York, a day on which commercial banks in the State of New York are
authorized or required by law to close.
"Capital Base" shall mean, for any fiscal period in question, the sum of
(a) the consolidated stockholders' equity of the Company and its consolidated
Subsidiaries, as calculated in accordance with GAAP, and (b) all Subordinated
Debt outstanding at the end of such fiscal period.
"Capital Expenditures" shall mean with respect to any Person, all
expenditures of such Person for tangible assets which are capitalized, and the
fair value of any tangible assets leased by such Person under any lease which
would be a Capitalized Lease, determined in accordance with GAAP, including all
amounts paid or accrued by such Person in connection with the purchase (whether
on a cash or deferred payment basis) or lease (including Capitalized Lease
Obligations) of any machinery, equipment, tooling, real property, improvements
to real property (including leasehold improvements), or any other tangible asset
of the Borrowers which is required, in accordance with GAAP, to be treated as a
fixed asset on the consolidated balance sheet of such Person.
"Capitalized Lease" shall mean any lease which is or should be capitalized
on the balance sheet of the lessee thereunder in accordance with GAAP.
"Capitalized Lease Obligation" shall mean with respect to any Person, the
amount of the liability which reflects the amount of future payments under all
Capitalized Leases of such Person as at any date, determined in accordance with
GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time.
2
<PAGE>
"Collateral" shall mean all now-owned and hereafter-acquired tangible and
intangible personal property of the Borrowers, including, without limitation,
all cash, marketable securities, accounts receivable, inventories, Contract
rights, patents, trademarks, copyrights and other general intangibles,
machinery, equipment and interests in real estate of the Borrowers, together
with all products and proceeds thereof.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Company; being the only issued class or series of voting securities of the
Company.
"Contract" shall mean any indenture, agreement (other than this Agreement),
other contractual restriction, lease in which either of the Borrowers is a
lessor or lessee, license, instrument, or certificates of incorporation of the
Borrowers.
"Current Assets" shall mean, at a particular date, all assets which would,
in conformity with GAAP, be properly classified as current assets on the
consolidated balance sheet of the Company and its Subsidiaries as at such date.
"Current Liabilities" shall mean, at a particular date, all liabilities
which would, in conformity with GAAP, be properly classified as current
liabilities on the consolidated balance sheet of the Company and its
Subsidiaries as at such date, including all Line of Credit Advances then
outstanding under the Line of Credit Note.
"Current Ratio" shall mean, on any given date, the ratio of Current Assets
to Current Liabilities.
"Default" shall mean any of the events specified in Article VII hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"ERISA Affiliate" shall mean, with respect to any Person, any other Person
which is under common control with the first Person within the meaning of
Section 414(b) or 414(c) of the Code.
"Event of Default" shall mean any of the events specified in Article VII
hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excess Available Cash" shall mean for any particular fiscal quarter in
question, 100% of the positive amount, if any, by which the Company's and
Subsidiaries cash and cash equivalents on the last Business Day of the quarter,
as set forth in its statement of cash flows for such quarter, collectively on
the final day of such fiscal quarter, exceed (i) the total of (x) Net Cash to be
Used in Operating Activities, (y) Net Cash to be Used in Investing Activities
and (z)
3
<PAGE>
any required principal payments to DVI, for the coming fiscal quarter as set
forth in the Company's budget or (ii) an amount equal to the Company's average
monthly cash expenditures during the fiscal quarter in question.
"Existing Indebtedness" shall mean any Indebtedness of the Borrowers
incurred prior to the Agreement Date. Existing Indebtedness shall include
obligations to DVI.
"Existing Liens" shall mean any Lien or other encumbrance that was incurred
as a result of any Existing Indebtedness.
"Fiscal Year" shall mean the fiscal year of the Borrowers which ends on
March 31 of each year. In the event that such Fiscal Year is so changed from
March 31 to another date with the consent of the Lender, then the quarterly
periods and annual periods referred to in Article V hereof shall also be amended
to coincide with such Fiscal Year, as so changed.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied, unless the context otherwise requires,
with respect to any financial terms, ratios or covenants contained herein, as
then in effect with respect to the preparation of financial statements;
provided, however, that if any change in GAAP enacted subsequent to the
Agreement Date shall affect the financial covenants referred to herein, the
parties shall, in good faith, appropriately amend such covenants to reflect such
changes in GAAP.
"Government Approval" shall mean an authorization, consent, non-action,
approval, license or exemption of, registration or filing with, or report to,
any governmental or quasi-governmental department, agency, body or other unit.
"Guaranty", "Guaranteed" or to "Guarantee", as applied to any Indebtedness
or Liability, shall mean and include the following, unless entered into in the
ordinary course of business: (a) a guaranty, directly or indirectly, in any
manner, including by way of endorsement (other than endorsements of negotiable
instruments for collection), of any part or all of such obligation, and (b) an
agreement, contingent or otherwise, and whether or not constituting a guaranty,
assuring, or intended or the practical effect of which is to assure, the payment
or performance (or payment of damages in the event of non-performance) of any
part or all of such obligation whether by (i) the purchase of securities or
obligations, (ii) the purchase, sale or lease (as lessee or lessor) of property,
or the purchase or sale of services, primarily for the purpose of enabling the
obligor with respect to such obligation to make any payment or performance (or
payment of damages in the event of non-performance) of or on account of any part
or all of such obligation, or to assure the owner of such obligation against
loss, (iii) the supplying of funds to or in any other manner investing in the
obligor with respect to such obligation, (iv) the repayment of amounts drawn
down by beneficiaries of letters of credit not arising out of the import of
goods, (v) the supplying of funds to or investing in a Person on account of all
or any part of such Person's obligation under a Guaranty of any such obligation
or indemnifying or holding harmless, in any way, such Person against any part or
all of such obligation, or (vi) otherwise.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii)
4
<PAGE>
all indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the outstanding undrawn amount of all letters of credit issued
for the account of such Person and, without duplication, all un-reimbursed
amounts drawn thereunder, (iv) all indebtedness of any other person or entity
secured by any Lien on any property owned by such Person, whether or not such
indebtedness has been assumed, (v) all contingent obligations of such Person,
(vi) all unfunded benefit liabilities of such Person, (vii) all payment
obligations of such Person under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar agreements, (viii) all
indebtedness and liabilities of such Person secured by any Lien or mortgage on
any property of such Person, whether or not the same would be classified as a
liability on a balance sheet, (ix) the liability of such Person in respect of
banker's acceptances and the estimated liability under any participating
mortgage, convertible mortgage or similar arrangement, (x) the aggregate
principal amount of rentals or other consideration payable by such Person in
accordance with GAAP over the remaining unexpired term of all Capitalized Leases
of such Person, (xi) all judgments or decrees by a court or courts or competent
jurisdiction entered against such Person, (xii) all indebtedness, payment
obligations, contingent obligations, etc. of any partnership in which such
Person holds a general partnership interest, provided that if such indebtedness
is non-recourse, only the portion of such indebtedness equal to such Person's
percentage ownership interest in such partnership shall be included in this
definition, (xiii) all convertible debt and subordinated debt owed by such
Person, (xiv) all preferred stock issued by such Person that, in either case,
are redeemable for cash on a mandatory basis, a cash equivalent, a note
receivable or similar instrument or are convertible on a mandatory basis to
Indebtedness as defined herein (other than Indebtedness described in clauses
(iii), (vi), (x), (xi) or (xiv) of this definition), and (xv) all obligations,
liabilities, reserves and any other items which are listed as a liability on a
balance sheet of such Person determined on a consolidated basis in accordance
with GAAP, but excluding (A) all general contingency reserves and reserves for
deferred income taxes and investment credit and (B) all customary trade payables
and accrued expenses not more than sixty (60) days past due and (C) any
indebtedness of such Person evidenced by a note or notes that is secured by a
pledge of cash or cash equivalents with a value equal to or greater than the
amount of the related indebtedness and which generates cash flow sufficient to
pay all sums due on such indebtedness when the same are due and payable.
"Initial Warrants" shall mean warrants to purchase 3,000,000 shares of
Common Stock of the Company in the form of Exhibit "B" annexed hereto.
"Interest Coverage Ratio" shall mean, as to the Company and its
Subsidiaries on a consolidated basis for any given fiscal period, the ratio of
EBITDA earned in such fiscal period to the total amount of Interest Expense
incurred in such fiscal period.
"Interest Expense" shall mean, with respect to any Person for any fiscal
period, all interest on, or the interest component of, all Indebtedness.
"Investment", as applied to any Borrower, shall mean: (a) any shares of
capital stock, assets, evidence of Indebtedness or other security issued by any
other Person to a Borrower or any Subsidiary, (b) any loan, advance or extension
of credit to, or contribution to the capital of, any other Person, other than
credit terms extended to customers in the ordinary course of business, (c) any
Guaranty of any indebtedness or liability of any other Person, (d) any
5
<PAGE>
obligation owed to a Borrower secured by a Lien on, or payable out of the
proceeds of production from, any property of any other Person, whether or not
such obligation shall have been assumed by such Person, (e) any other investment
by a Borrower or any Subsidiary thereof in any assets or securities of any other
Person, and (f) any commitment to make any Investment.
"Lien", as applied to the property or assets (or the income or profits
therefrom) of any Borrower, shall mean (in each case, whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise): (a) any mortgage, lien, pledge, attachment, assignment,
deposit arrangement, encumbrance, charge, lease constituting a Capitalized Lease
Obligation, conditional sale or other title retention agreement, or other
security interest or encumbrance of any kind in respect of any property
(including, without limitation, stock of any Subsidiary) of a Borrower, or upon
the income or profits therefrom, (b) any arrangement, express or implied, under
which any property of a Borrower is transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of indebtedness or the performance of any other liability in priority to
the payment of the general, unsecured creditors of a Borrower, (c) any
Indebtedness which remains unpaid more than five (5) calendar days after the
same shall have become due and payable and which, if unpaid, might by law
(including but not limited to bankruptcy or insolvency laws) or otherwise be
given any priority whatsoever over the general, unsecured creditors of a
Borrower, (d) any agreement (other than this Agreement) or other arrangement,
express or implied, which, directly or indirectly, prohibits a Borrower from
creating or incurring any Lien on any of its properties or assets or which
conditions the ability to do so on the security, on a pro rata or other basis,
of indebtedness other than indebtedness outstanding under this Agreement, and
(e) any arrangement, express or implied, under which any right or claim of a
Borrower is subject or subordinated in any way to any right or claim of any
other Person.
"Line of Credit" shall mean the line of credit in the maximum principal
amount outstanding at any one time of $7,500,000 to be made by the Lender to the
Borrowers pursuant to this Agreement.
"Maturity Date" shall mean the earlier of (a) the first date on which the
Company shall have received, in the aggregate, $12,500,000 or more from equity
and/or debt financings consummated subsequent to the Agreement Date, or (b)
December 27, 2004.
"Material Adverse Effect" shall mean any event or condition that has or
could reasonably be anticipated to have a material adverse effect on the Working
Capital, condition (financial or otherwise), assets, liabilities, reserves,
business, prospects, management or Business Operations of either of the
Borrowers, when taken individually or as a consolidated whole.
"Net Income", as applied to the Borrowers, shall mean the net income (or
loss) of the Company and its consolidated Subsidiaries for the period in
question, after giving effect to deduction of or provision for all operating
expenses, all taxes and reserves (including reserves for deferred taxes) and all
other proper deductions, all determined in accordance with GAAP; provided that,
for purposes of calculating Net Income, there shall be excluded and no effect
shall be given to:
6
<PAGE>
(a) any restoration of any contingency reserve, except to the extent
that provision for such reserve was made out of income for the subject
period;
(b) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of Investments and/or other capital
assets, provided that there shall also be excluded any related charges for
taxes thereon; and
(c) any net gain arising from the collection of the proceeds of any
insurance policy or policies.
"Note" shall mean the Line of Credit Promissory Note, dated the Agreement
Date in the maximum principal amount of $7,500,000 issued by the Borrowers and
payable to the order of the Lender, to represent the aggregate amounts
outstanding from time to time under the Line of Credit, all in the form of
Exhibit "A" annexed hereto and made a part hereof.
"Obligations" shall mean the collective reference to all Indebtedness and
other liabilities and obligations of every kind and description owed by the
Borrowers to the Lender from time to time, however evidenced, created or
incurred, whether direct or indirect, primary or secondary, fixed or contingent,
now or hereafter existing, due or to become due, including but not limited to
obligations represented by or arising under this Agreement, the Note and/or the
Security Documents.
"Permitted Liens" shall mean those Liens expressly permitted to Section
6.02 below.
"Person" shall mean any individual, partnership, corporation, limited
liability company, banking association, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature.
"Principal Payment Date" shall mean the date which is forty-five (45) days
after the last business day of each December, March, June and September
commencing on May 15, 2000.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement in the form of Exhibit "D" hereto, dated the Agreement Date by and
between the Lender and the Company pursuant to which the Company will register
the shares of the Company's Common Stock underlying the Warrants.
"SEC" shall mean the Securities and Exchange Commission, or any successor
to the functions of such agency.
"Security Agreement" shall mean the Security Agreement in the form of
Exhibit "C" hereto, dated the Agreement Date, by and between the Lender and the
Borrower, as same may be amended and/or supplemented from time to time in
accordance therewith, pursuant to which the Lender has received a continuing
priority lien and security interest in and to all of the Collateral,
subordinated only to the first priority Lien of the Senior Lender.
7
<PAGE>
"Security Documents" shall mean the collective reference to: (a) the
Security Agreement, (b) any specific assignments executed and delivered pursuant
to the Security Agreement, and (c) all UCC Financing Statements and other
documents filed or recorded to evidence and/or perfect the foregoing, or to
further or collaterally secure same, all as may be amended or supplemented from
time to time in accordance therewith.
"Senior Lender" shall mean DVI Financial Services, Inc. ("DVI") which has
provided the Borrower with loans and advances up to $6,222,415.63 in the
aggregate (the "Senior Indebtedness"); which is secured by first priority Liens
on the Collateral.
"Subordinated Debt" shall mean all indebtedness for money borrowed and
other liabilities of the Borrower, whether or not evidenced by promissory notes,
which is subordinated in right of payment, in a manner satisfactory to the
Lender (as evidenced by its prior written approval thereof), to all other
Obligations of the Borrowers to the Lender.
"Subsidiary" or "Subsidiaries" shall mean the individual or collective
reference to any corporation of which 50% or more of the outstanding shares of
stock of each class having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) is at the time owned by
the Company, directly or indirectly through one or more Subsidiaries of the
Company. Schick New York is a Subsidiary of the Company.
"UCC Financing Statements" shall mean the Uniform Commercial Code financing
statements on Form UCC-1 (or other applicable form) executed by the Borrowers,
in form for filing and recording in the appropriate state and county
jurisdictions in which any of the Borrower maintains any assets or conducts any
business.
"Warrants" shall mean the collective reference to the Initial Warrants and
the Additional Warrants.
"Working Capital" shall mean, on any given date, the amount by which the
Borrowers' consolidated Current Assets shall exceed their consolidated Current
Liabilities, as determined in accordance with GAAP.
Section 1.02. Use of Defined Terms. All terms defined in this Agreement
shall have their defined meanings when used in the Note, the Security Documents,
and all certificates, reports or other documents made or delivered pursuant to
this Agreement, unless otherwise defined therein or unless the specific context
shall otherwise require.
Section 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
ARTICLE II. GENERAL TERMS
Section 2.01. The Line of Credit.
(a) Advances; Periodic Repayments of Advances. Subject at all times to all
of the terms and conditions of this Agreement, including Section 2.02, Section
2.03 and Article IV hereof, during the Advance Period the Lender hereby agrees
to provide to the Borrowers a Line
8
<PAGE>
of Credit of up to a maximum of $7,500,000. The Lender shall have no obligation
to provide any Advances and the Borrowers shall not submit any Advance Request
to the Lender at any time (i) in which a Default or an Event of Default
hereunder shall have occurred and be continuing, or (ii) following the Advance
Period. Unless an Event of Default hereunder shall have occurred and be
continuing or this Agreement shall be sooner terminated pursuant to the terms
hereof, all outstanding Advances, together with all unpaid accrued interest
thereon, shall be due and payable in full by the Borrowers to the Lender on the
Maturity Date. Notwithstanding the foregoing, unless otherwise agreed to in
writing by the Lender in connection with the Restructuring Plan or otherwise, on
each Principal Payment Date, the Company shall reduce all Advances outstanding
on such Principal Payment Date by making a cash payment against such Advances to
the Lender in an amount which shall be equal to the Excess Available Cash, if
any, during the calendar quarter immediately preceding the Interest Payment Date
in question.
(b) Interest. The Borrowers shall pay the Lender interest on all
outstanding Advances under the Line of Credit at the rate of ten (10%) percent
per annum, all in accordance with the Note. Such interest shall be payable on a
quarterly basis on the last Business Day of each of December, March, June and
September, commencing December 30, 1999 (each an "Interest Payment Date"). The
amount of interest payable on each Interest Payment Date shall be based on the
average outstanding amount of the Advances in the calendar quarter immediately
preceding such Interest Payment Date (for the December 30, 1999 Interest Payment
Date, calculated from the Agreement Date to December 30, 1999). Interest shall
be based on a three hundred sixty (360) day year, counting the actual number of
days in each month. Unless a Default or Event of Default exists at the beginning
of any calendar quarter, the interest shall be calculated at the non-default
rate set forth in the Note; and in the event that a Default or Event of Default
shall occur during any calendar quarter, then the additional interest
attributable to the increase in interest rate resulting therefrom shall be
payable on demand (or, in the absence of demand, on the next scheduled Interest
Payment Date in conjunction with the quarterly interest payment).
(c) Prepayment. The Borrowers shall have the right to prepay outstanding
Advances in whole or in part, without premium or penalty, at any time and from
time to time.
(d) Maturity Date. Unless an Event of Default hereunder shall have occurred
and be continuing, hereof, the Borrowers shall pay in full all of the
Obligations in respect of the Line of Credit on the Maturity Date, subject to
prior mandatory prepayments or reductions of outstanding Advances out of Excess
Available Cash as provided in Section 2.01(a) hereof.
(e) The Note. The Loan shall be evidenced by the Note, the terms and
conditions of which are hereby incorporated herein by reference and made a part
hereof.
Section 2.02. Procedure for Making Advances. (a) Simultaneous with each
Advance Request, the Company will deliver to the Lender (i) a certificate
executed by the President, Chief Executive Officer or Chief Financial Officer of
Borrower attesting in their capacity as executive officers of such Borrower
that, as at the date of each Advance Request, no Default or Event of Default
hereunder shall have occurred and be continuing, and (ii) a reasonably detailed
statement of the intended use of the proceeds of such Advance, including if
applicable the item or items to be purchased and the Indebtedness or other
liabilities to be paid (the "Advance Analysis");
9
<PAGE>
(b) The Lender shall notify the Company, in writing, within five (5)
Business Days of receipt of the Advance Analysis whether or not the Lender will
make the Advance. The Lender may refuse to make the Advance if: (i) it does not
approve the use of the proceeds of such Advance Request for the uses set forth
in the Advance Analysis (the "Written Notification"), which approval shall not
be unreasonably withheld. Among other things, it shall not be unreasonable for
the Lender to disapprove the Advance Request because either of the Borrowers has
suffered a Material Adverse Effect and such Material Adverse Effect remains
uncured. In addition, the Lender may refuse to make an Advance if, in the
exercise of its sole discretion it determines that it would be imprudent to make
such Advance because of the status of any litigation or investigation respecting
either of the Borrowers or their officers or directors;
(c) If Lender does not approve the Advance Request for any reason other
than the status of any litigation or investigation, the Written Notification
shall provide a reasonably detailed explanation of the reason(s) therefor. Upon
approval of the Advance Request by the Lender it will authorize an immediate
drawing of such Advance under the Line of Credit and fund the Advance for the
purposes specified in the Advance Analysis for any reason other than the status
of any litigation or investigation. In the event that the Lender does not
approve the Advance Analysis, the parties shall promptly undertake in good faith
to expeditiously resolve the matter; if the parties do not resolve the matter to
their mutual satisfaction by the earlier of (a) five (5) business days after
Borrower's receipt of the Written Notification, or (b) ten (10) business days
after Lender's receipt of the Advance Analysis, the parties shall submit this
matter to arbitration administered by the American Arbitration Association under
its Commercial Arbitration Rules, and jointly request that said arbitration be
conducted in an expedited manner, and the parties shall abide by and perform any
decision and/or award rendered by the arbitrator(s) and agree that a judgment of
any court having jurisdiction may be entered upon the award, and that neither
party shall seek to challenge or overturn the decision and/or award rendered by
the arbitrator(s). Any arbitration proceedings conducted hereunder shall be held
in New York, New York; and
(d) If the actual use of proceeds differs materially from the purposes
specified in the Advance Analysis, the Company shall notify the Lender in a
writing which shall provide (i) a reasonably detailed explanation of the reasons
for the change; and (ii) an updated statement of the intended use of proceeds.
After receipt of such notice, the parties shall follow the procedures enumerated
in Sections 2.02(b) and 2.02(c) above.
Section 2.03. Issuance of Initial Warrants and Additional Warrants.
(a) On the Agreement Date, the Company shall issue to the Lender the
Initial Warrants.
(b) In addition to the Initial Warrants to be issued to the Lender on the
Agreement Date, it is the intention of the Company and the Lender that the
Lender shall be entitled to receive Additional Warrants based upon the maximum
level of Advances outstanding during the Advance Period. Accordingly, it is
hereby agreed that with respect to all Advances from $1,000,001 to $7,500,000 in
the aggregate, for each dollar Advanced by the Lender to the Borrowers
hereunder, the Lender shall be entitled to receive Warrants to purchase two (2)
shares
10
<PAGE>
of Company Common Stock at an exercise price of $0.75 per share (subject to
adjustment to protect the holder against dilution as provided in the Warrants);
(c) By way of example of the application of Section 2.03(a) and (b) above,
if the Borrowers have outstanding at any one time under this Agreement Advances
of $3,000,000, then the Lender shall be entitled to receive Warrants to purchase
an aggregate of 7,000,000 shares of Company Common Stock, as follows (i) the
Initial Warrants entitling the Lender to purchase 3,000,000 shares of Common
Stock at an exercise price of $0.75 per share; and (ii) Additional Warrants
entitling the Lender to purchase 4,000,000 shares of Common Stock at an exercise
price of $0.75 per share.
(d) By way of further example, based upon a maximum of $7,500,000 of
Advances which may be made by the Borrowers hereunder, if at any time or from
time to time prior to the Maturity Date there shall be outstanding at any time
the full $7,500,000 of Advances, the Lender shall be entitled to receive Initial
Warrants and Additional Warrants to purchase an aggregate of 16,000,000 shares
of Company Common Stock, at the exercise prices described herein and in the
Warrants.
(e) In all cases described in this Section 2.03, the number of shares of
Common Stock and exercise prices per share are subject to adjustment to protect
the holder against dilution, all as provided in the form of Warrants.
(f) On or before the date that the Lender shall make each and every Advance
under this Agreement pursuant to the procedures set forth in Section 2.02 above,
the Company shall issue to the Lender the appropriate number of Additional
Warrants contemplated by this Section 2.03.
(g) The form and content of all Additional Warrants, other than the number
of shares of Common Stock issuable upon full exercise thereof, shall be
identical in all material respects to the Initial Warrant.
Section 2.04. Security for the Obligations. The Note and all other
Obligations shall at all times be secured by a security interest in all of the
Collateral which shall be subordinated only to the first priority Lien of the
Senior Lender, all pursuant to the terms of the Security Agreement and any
specific assignments executed and delivered pursuant thereto; all as evidenced
by UCC Financing Statements which the Lender and its counsel may require to be
executed and filed.
Section 2.05. Further Obligations. With respect to all Obligations for
which the interest rate is not otherwise specified herein (whether such
Obligations arise hereunder, pursuant to the Note or any of the Security
Documents, or otherwise), such Obligations shall bear interest at the rate(s) in
effect from time to time pursuant to the Note.
Section 2.06. Obligations Unconditional. The payment and performance of all
Obligations shall constitute the absolute and unconditional obligations of the
Borrowers, and shall be independent of any defense or rights of set-off,
recoupment or counterclaim which the Borrower might otherwise have against the
Lender. All payments required by this Agreement
11
<PAGE>
and/or the Note or Security Documents shall be paid free of any deductions and
without abatement, diminution or set-off.
Section 2.07. Reversal of Payments. To the extent that any payment or
payments made to or received by the Lender pursuant to this Agreement, the Note
or any of the Security Documents are subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required to be repaid to any trustee,
receiver or other person under any state or federal bankruptcy or other such
law, then, to the extent thereof, such amounts shall be revived as Obligations
and continue in full force and effect hereunder and be secured pursuant to the
Security Documents, as if such payment or payments had not been received by the
Lender.
Section 2.08. Return of Warrants to the Company.
(a) In the event that the Lender refuses to make Advances duly requested by
the Borrowers in accordance with Section 2.02 hereof AND such refusal is:
(i) based on the Lender's concern over developments relating to the
pendency of any investigation or litigation respecting either of the
Borrowers or their officers or directors at the sole discretion of the
Lender, or
(ii) determined by arbitration to be an unreasonable refusal by the
Lender to make Advances as provided in Section 2.02(c) hereof,
the Company shall be entitled to receive from the Lender the number of Warrants
described in Section 2.08(b) hereof;
(b) If prior to date of such refusal to make Advances, the Lender has
Advanced to the Borrowers pursuant to this Agreement:
(i) up to a maximum level of Advances of $2,500,000, the Lender shall
return 2,000,000 Warrants to the Company;
(ii) between a maximum level of Advances of $2,500,000 and $5,000,000,
the Lender shall return 1,000,000 Warrants to the Company; and
(iii) more than a maximum level of Advances of $5,000,000, the Lender
shall not be required to return any Warrants to the Company;
(c) If the DVI Consent shall not have been received by February 15, 2000,
the Lender shall return 3,000,000 Warrants to the Company.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrowers hereby jointly and severally make the following
representations and warranties to the Lender, all of which representations and
warranties shall survive the Agreement Date, the delivery of the Notes and the
making of Advances, and are as follows:
Section 3.01. Financial Matters.
12
<PAGE>
(a) The Borrowers have heretofore furnished to the Lender (i) the audited
consolidated financial statements (including consolidated balance sheets,
consolidated statements of income and consolidated statements of cash flows) of
the Company and its consolidated Subsidiaries as at March 31, 1996, 1997, and
1998 and for each of the three (3) consecutive Fiscal Years ended on such dates,
and (ii) the unaudited consolidated financial statements (including consolidated
balance sheets, consolidated statements of income and consolidated statements of
cash flows) of the Company and its consolidated Subsidiaries as of the March 31,
1999 (collectively, the "Financial Statements").
(b) The Financial Statements have been prepared in accordance with GAAP on
a consistent basis for all periods, are complete and correct in all material
respects, and fairly present the consolidated financial condition of the Company
and its consolidated Subsidiaries as at said dates, and the results of
operations for the periods stated. The books of account and other financial
records of the Company and each of the Subsidiaries have been maintained in
accordance with GAAP, consistently applied. The Borrowers acknowledge that the
financial results set forth in its Financial Statements for the first, second
and third quarters of the Fiscal Year ended March 31,1999 will require
restatement and that the representations set forth in this Section 3.01(b) are
subject to, and qualified by, any such Restatement(s).
(c) Neither the Company nor any of the Subsidiaries has any liabilities,
Indebtedness, obligations or commitments of any kind or nature whatsoever,
whether absolute, accrued, contingent or otherwise above $100,000 in the
aggregate or $25,000 individually (collectively "Liabilities and
Contingencies"), including, without limitation, Liabilities and Contingencies
under employment agreements and with respect to any "earn-outs", stock
appreciation rights, or related compensation obligations, except: (i)
Liabilities and Contingencies disclosed in the Financial Statements or footnotes
thereto, or in the Pro Forma Balance Sheet, (ii) Liabilities and Contingencies
not incurred in the ordinary course of the Business Operations, all of which
(and the amounts thereof, to the extent determinable) are disclosed on Schedules
to this Agreement (to the extent required to be so disclosed hereunder) or in
public filings made with the SEC under the Securities Exchange Act of 1934, as
amended (true and complete copies of which filings have been furnished to the
Lender), (iii) Liabilities and Contingencies incurred in the ordinary course of
business and consistent with past practice since the date of the most recent
Financial Statements, which are not required to be disclosed on Schedules to
this Agreement, or (iv) those Liabilities which are not required to be disclosed
under GAAP. The reserves, if any, reflected on the consolidated balance sheet of
the Company and the Subsidiaries included in the most recent Financial
Statements are appropriate and reasonable. The Borrowers have not had and do not
presently have any contingent obligations, liabilities for taxes or unusual
forward or long-term commitments except as specifically set forth in the
Financial Statements or in Schedule "3.01" annexed hereto.
(d) Except as otherwise reflected on Schedule "3.01," Schedule "3.04" or
Schedule "3.05" to this Agreement, since the date of the most recent Financial
Statements, no Material Adverse Effect shall have occurred and shall be
continuing, including, without limitation, the following:
13
<PAGE>
(i) there has been no change in any assumptions underlying, or in any
methods of calculating, any bad debt, contingency or other reserve relating
to the Company or any of the Subsidiaries;
(ii) there have been no write-downs in the value of any inventory of,
and there have been no write-offs as uncollectible of any notes, accounts
receivable or other receivables of, the Company and the Subsidiaries,
except for write-downs and write-offs in the ordinary course of business
and consistent with past practice, none of which shall be material (and all
of which are described in the Schedules to this Agreement or in the
Financial Statements);
(iii) no material debts have been canceled, no claims or rights of
substantial value have been waived and no significant properties or assets
(real, personal or mixed, tangible or intangible) have been sold,
transferred, or otherwise disposed of by the Company or any Subsidiary,
except in the ordinary course of business and consistent with past
practice;
(iv) there has been no change in any method of accounting or
accounting practice utilized by the Company or any of the Subsidiaries;
(v) no material casualty, loss or damage has been suffered by the
Company or any of the Subsidiaries, regardless of whether such casualty,
loss or damage is or was covered by insurance; and
(vi) no action described in this Section 3.01(d) has been agreed to be
taken by the Company or any of the Subsidiaries.
Section 3.02. Organization; Corporate Existence. Each of the Borrowers: (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the States of Delaware or New York, (b) has all requisite corporate
power and authority to own its properties and to carry on its businesses as now
conducted and as proposed hereafter to be conducted, (c) is duly qualified to do
business as a foreign corporation in each and every jurisdiction where such
qualification is necessary and where the failure to so qualify would have a
material adverse effect on its financial condition, business, operations, assets
or properties, and (d) has all requisite corporate power and authority to
execute and deliver, and perform all of its obligations under this Agreement,
the Notes, the Warrants and the Security Documents. True and complete copies of
the: (i) Certificates of Incorporation of each of the Borrowers, as amended and
restated to date, and (ii) By-Laws of each of the Borrowers, together with all
amendments thereto, have been furnished to the Lender.
Section 3.03. Authorization. The execution, delivery and performance by
each of the Borrowers of their respective obligations under this Agreement, the
Notes, the Warrants, the Registration Rights Agreement and the Security
Documents have been duly authorized by all requisite corporate action and will
not, either prior to or as a result of the consummation of the Advances
contemplated by this Agreement: (a) violate any provision of Applicable Law, any
order of any court or other agency of government, any provision of the
Certificates of Incorporation or By-Laws of the Borrowers, or any Contract,
indenture, agreement or other instrument to which any of the Borrowers is a
party, or by which any of the Borrowers or any of
14
<PAGE>
their assets or properties are bound, other than in agreements between the
Company and DVI relating to the creating of Liens or (b) be in conflict with,
result in a breach of, or constitute (after the giving of notice of lapse of
time or both) a default under, or, except as may be provided in this Agreement,
result in the creation or imposition of any Lien of any nature whatsoever upon
any of the property or assets of any of the Borrowers pursuant to, any such
Contract, indenture, agreement or other instrument. Except in respect of the
filing of a Form 10-K (including amendments thereto) and/or a Form 8-K or Form
10-Q under the Securities Exchange Act of 1934, as amended, the Borrowers are
not required to obtain any Government Approval, consent or authorization from,
or to file any declaration or statement with, any governmental instrumentality
or agency in connection with or as a condition to the execution, delivery or
performance of any of this Agreement, the Notes, the Warrants or the Security
Documents.
Section 3.04. Litigation. Except as disclosed on Schedule "3.04" annexed
hereto, there is no action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending or, to the
knowledge of the Borrowers, threatened against or directly affecting the
Borrowers or any of their respective assets, which, if adversely determined,
would have a Material Adverse Effect on any of such assets or on the business,
operations, properties, assets or condition, financial or otherwise, of the
Borrowers.
Section 3.05. Material Contracts. Except as disclosed on Schedule "3.05"
annexed hereto, none of the Borrowers is a party to any Contract, agreement or
instrument or subject to any charter or other corporate restriction that could
have a Material Adverse Effect on the Business Operations, properties, assets or
operations of the Borrowers or is subject to any liability or obligation under
or relating to any collective bargaining agreement, or in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contract, agreement or instrument to which it is a
party or by which any of its assets or properties is bound, which default,
individually or in the aggregate, could have a Material Adverse Effect on
Borrower.
Section 3.06. Title to Properties. The Borrowers have good and marketable
title to all of their respective properties and assets, free and clear of all
mortgages, security interests, restrictions, encumbrances or other Liens of any
kind, except for restrictions on the nature of use thereof imposed by Applicable
Law, and except for Existing Liens, none of which materially interfere with the
use and enjoyment of such properties and assets in the normal course of the
Business Operations as presently conducted, or materially impair the value of
such properties and assets for the purpose of such business.
Section 3.07. Real Properties. Each of the Borrowers is the record fee
owner or lessee of all of the Real Properties owned or leased by such Borrower,
and:
(a) All of the owned and leased real properties (other than real properties
under Immaterial Leases) will be owned or leased free and clear of any and all
mortgages, liens, charges, easements and encumbrances binding upon any of the
Borrowers, except for the Mortgages and the Lease Assignments, and except for
encumbrances or imperfections of title listed in Schedule "3.07" annexed hereto
or other related immaterial zoning, easements or other restrictions of record,
none of which shall: (i) be material in amount; (ii) materially detract from the
value of any of the Real
15
<PAGE>
Properties; (iii) materially impair the use of any of the Real Properties in
connection with the Business Operations; or (iv) render title to any of the Real
Properties unmarketable or indefeasible;
(b) Except as set forth in Schedule "3.07" annexed hereto, the Real
Properties and all buildings and improvements located thereon have been
constructed to have access, ingress, egress, water supply, storm and sanitary
sewage facilities, telephone, gas, electricity, fire protection, and, without
limitation, other required public utilities, which are adequate for the uses
thereof in the Borrowers' business; and all access, ingress and egress to and
from the Real Properties, and all utility connections thereto, are by public
streets and roads;
(c) Except as set forth in Schedule "3.07" annexed hereto, all buildings
and improvements located on the Real Properties (including, without limitation,
the roofs, basements, appliances, the plumbing, heating and electric systems,
the cesspools and septic systems, if any, and the elevators, if any) are in good
working order, condition and repair (reasonable wear and tear excepted) for the
purposes currently used by the Borrowers, and, to the Borrowers' knowledge, are
maintained in accordance with Applicable Law in all material respects; and, to
the Borrowers' knowledge, no condition exists pursuant to which any adjoining or
other landowner may claim damage to such landowner's property by reason of
drainage from or any other condition existing upon the Real Properties; and
(d) Except as set forth in Schedule "3.07" annexed hereto, the use of the
Real Properties in and for the purposes of the Business Operations is in full
compliance with all building, zoning and other Applicable Law in all material
respects.
Section 3.08. Machinery and Equipment. The machinery and equipment owned,
leased and/or otherwise used by the Borrowers is covered under the Security
Agreement and is, as to each individual material item of machinery and
equipment, and in the aggregate as to all such machinery and equipment, in good
and usable condition and in a state of good maintenance and repair (reasonable
wear and tear excepted), and adequate for its use in the Business Operations.
Section 3.09. Capitalization. Except as set forth on Schedule "3.09"
annexed hereto, the Company has no Subsidiaries other than Schick New York.
Neither the Company nor Schick New York owns any capital stock, equity or assets
of any other corporation, form or entity, except for the Company's investment in
Photobit Corporation. Schedule "3.09" annexed hereto fully describes the
capitalization of Photobit Corporation and the nature of the Company's
investment therein.
Section 3.10. Solvency. The Advances made and to be made by the Borrowers
under this Agreement, do not and will not render the Borrowers insolvent or with
unreasonably small capital for their business; value of all of the assets and
properties of the Borrowers do now, and will, upon the funding of the Advances
contemplated hereby, exceed the aggregate Liabilities and Indebtedness of the
Borrowers (including contingent liabilities); none of the Borrowers is
contemplating either the filing of a petition under any state or federal
bankruptcy or insolvency law, or the liquidation of all or any substantial
portion of its assets or property and the Borrowers have no knowledge of any
Person contemplating the filing of any such petition against the Borrowers.
16
<PAGE>
Section 3.11. Patents, Trademarks and Other Intellectual Property. Schedule
"3.11" annexed hereto correctly sets forth a list and brief description of:
(a) all patents, patent applications, copyright registrations and
applications, registered trade names, and trademark registrations and
applications, both domestic and foreign, which are presently owned, filed or
held by any of the Company, any Subsidiaries or any of their Affiliates (or any
of them), and/or any of the directors or officers of the Company, and which are
used in the Business Operations;
(b) all material licenses, both domestic and foreign, which are owned or
controlled by any of the Company, any Subsidiaries or any of their Affiliates
(or any of them), and/or any of the directors or officers of the Company, and
which are used in the Business Operations; and
(c) all material written franchises, licenses and/or similar arrangements
granted to any of the Company, any Subsidiaries or any of their Affiliates (or
any of them), and/or any of the directors or officers of the Company for the
benefit of the Business Operations, or granted to others by the Company for the
benefit of the Business Operations. All letters patent, patent applications,
copyright registrations and applications, registered trade names, trademark
registrations and applications, franchises, licenses and other arrangements set
forth in Schedule "3.11" are, except as otherwise provided by their terms and
conditions, assignable to the Lender, subject to the rights of the Senior
Lender(s), and do not, to the knowledge of any Borrower, infringe upon the
rights of others, and are not subject to any pending challenge except as set
forth in Schedule "3.11". To the best of the Borrower's knowledge, no product,
system or apparatus sold by Borrower infringes on any patent owned by others.
Section 3.12. Full Disclosure. Except as set forth on Schedule "3.12"
annexed hereto, no statement of fact made by or on behalf of any of the
Borrowers in this Agreement, in any Security Document, or in any agreement,
certificate or schedule furnished to the Lender pursuant hereto (including,
without limitation, all registration statements, proxy materials and Forms 10-K,
10-Q, 8-K, and amendments thereto, for the fiscal period from July 1997 through
September 30, 1999, as filed with the SEC) contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary to make any statements contained herein or therein not misleading.
Except for matters of a general economic or political nature which do not affect
the Borrower uniquely, there is no fact presently known to the Borrower which
has not been disclosed to the Lender, which materially adversely affects, or so
far as the Borrower can foresee, will materially adversely affect, their
property, business, operations or condition (financial or otherwise).
Section 3.13. No Investment Company. None of the Borrowers is an
"investment company", or a company "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
Section 3.14. Margin Securities. None of the Borrowers owns or has any
present intention of acquiring any "margin security" within the meaning of
Regulation G (12 CFR Part 207), or any "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System (herein called "margin security" and "margin stock"). None of the
proceeds of the Line of Credit will be used, directly or indirectly, for the
purpose of purchasing or carrying, or for the purpose of reducing or retiring
any Indebtedness
17
<PAGE>
which was originally incurred to purchase or carry, any margin security or
margin stock or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934, as amended, or any rules or regulations promulgated under such
statutes.
Section 3.15. Tax Returns. Except as otherwise set forth in footnotes to
the consolidated balance sheet of Borrowers as at September 30, 1999, and except
for any non-material misstatement of income tax obligations and except for any
returns currently on extension pursuant to properly filed extension, the
Borrowers have filed all federal, state and local tax returns required to be
filed by any of them and have paid or made adequate provision (as reflected in
the balance sheets described in Section 3.01 hereof) for the payment of all
federal, state and local taxes, charges and assessments.
Section 3.16. ERISA. Except as set forth in Schedule "3.16" annexed hereto,
none of the Borrowers nor any ERISA Affiliate of any of the Borrowers maintains
or has any obligation to make any contributions to any pension, profit sharing
or other similar plan providing for deferred compensation to any employee. With
respect to any such plan(s) as may now exist or may hereafter be established by
the Borrowers or any ERISA Affiliate of any of the Borrowers, and which
constitutes an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA, except as set forth on Schedule "3.16": (a) the Borrowers or the
subject ERISA Affiliate have paid and shall cause to be paid when due all
amounts necessary to fund such plan(s) in accordance with its terms, (b) except
for normal premiums payable by the Borrowers to the Pension Benefit Guaranty
Corporation ("PBGC"), the Borrowers or the subject ERISA Affiliate have not
taken and shall not take any action which could result in any Liability to the
PBGC, or any of its successors or assigns, (c) the present value of all vested
accrued benefits thereunder shall not at any time exceed the value of the assets
of such plan(s) allocable to such vested accrued benefits, (d) there have not
been and there shall not be any transactions such as would cause the imposition
of any tax or penalty under Section 4975 of the Code or under Section 502 of
ERISA, which would adversely affect the funded benefits attributable to the
Borrowers or the subject ERISA Affiliate, (e) there has not been and there shall
not be any termination or partial termination thereof (other than a partial
termination resulting solely from a reduction in the number of employees of the
Borrowers or an ERISA Affiliate of the Borrowers, which reduction is not
anticipated by the Borrowers), and there has not been and there shall not be any
"reportable event" (as such term is defined in Section 4043(b) of ERISA) on or
after the effective date of Section 4043(b) of ERISA with respect to any such
plan(s) subject to Title IV of ERISA, (f) no "accumulated funding deficiency"
(as defined in Section 412 of the Code) has been or shall be incurred on or
after the effective date of Section 412 of the Code, (g) except as otherwise
reflected on Schedule "3.16" annexed hereto, such plan(s) have been and shall be
determined to be "qualified" within the meaning of Section 401(a) of the Code,
and have been and shall be duly administered in compliance with ERISA and the
Code, and (h) the Borrowers are not aware of any fact, event, condition or cause
which might adversely affect the qualified status thereof. As respects any
"multiemployer plan" (as such term is defined in Section 3(37) of ERISA) to
which any of the Borrowers or any ERISA Affiliate thereof has heretofore been,
is now, or may hereafter be required to make contributions, such Borrowers or
such ERISA Affiliate has made and shall make all required contributions thereto,
and there has not been and shall not be any
18
<PAGE>
"complete withdrawal" or "partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA) therefrom on the part of the
Borrowers or such ERISA Affiliate.
Section 3.17. Compliance with Laws. The Borrowers are in compliance in all
material respects with all occupational safety, health, wage and hour,
employment discrimination, environmental, flammability, labeling and other
Applicable Law which are material to their respective businesses and the
Business Operations, and the Borrowers are not aware of any state of facts,
events, conditions or occurrences which may now or hereafter constitute or
result in a violation of any of such Applicable Law, or which may give rise to
the assertion of any such violation, the effect of which could have a material
adverse effect on any Borrowers.
Section 3.18. Licenses and Permits. Each of the Borrowers have all federal,
state and local licenses and permits required to be maintained in connection
with and material to the Business Operations (including all Food and Drug
Administration ("FDA") permits and licenses), and all such licenses and permits
are valid and in full force and effect.
Section 3.19. Environmental Laws.
(a) Except as disclosed on Schedule "3.19" annexed hereto: (i) the
Borrowers have complied in all material respects with all Environmental Laws
relating to their respective businesses and properties, and (ii) there exists no
Hazardous Substances in or under any Existing Real Properties or storage tanks,
except those that are stored and used in compliance with Applicable Laws.
(b) Except as disclosed in Schedule "3.19" annexed hereto, to the best of
the Borrowers' knowledge, there exist no past or present violations of
Environmental Laws which will result in a material adverse effect on the
business, operations, prospects, assets, property or condition (financial or
otherwise) of the Borrowers.
(c) During the term of this Agreement, and for so long as any Loans remain
outstanding, the Borrower shall comply in all material respects with all
applicable Environmental Laws, and shall, in addition, promptly notify the
Lender of any and all claims, demands or Notices received under any
Environmental Laws and the Borrowers' response thereto.
(d) As used in this Agreement, the following terms have the following
meanings:
"Environmental Laws" include all federal, state, and local laws, rules,
regulations, ordinances, permits, orders, and consent decrees agreed to by the
Borrowers, relating to health, safety, and environmental matters applicable to
the business and property of the Borrowers. Such laws and regulations include
but are not limited to the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C.ss.6901 et seq., as amended; the New Jersey Environmental Cleanup and
Recovery Act ("ECRA"); the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. ss.9601 et seq., as amended; the Toxic
Substances Control Act ("TSCA"), 15 U.S.C.ss.2601 et seq., as amended; and the
Clean Water Act, 33 U.S.C.ss.1331 et seq., as amended.
19
<PAGE>
"Hazardous Substances", "Release", "Respond" and "Response" shall have the
meanings assigned to them in CERCLA, 42 U.S.C. ss.9601, as amended.
"Notice" means any summons, citation, directive, information request,
notice of potential responsibility, notice of violation or deficiency, order,
claim, complaint, investigation, proceeding, judgment, letter, or other
communication, written or oral, actual or threatened, from the United States
Environmental Protection Agency or other federal, state, or local agency or
authority, or any other entity or individual, public or private, concerning any
intentional or unintentional act or omission which involves management of
Hazardous Substances on or off any real properties; the imposition of any lien
on any real properties, including but not limited to liens asserted by
government entities in connection with any Borrower's response to the presence
or Release of Hazardous Substances; and any alleged violation of or
responsibility under any Environmental Laws.
Section 3.20. Reaffirmation. Each and every request by a Borrower for
Advances under Section 2.01 or Section 2.02 above shall constitute a
reaffirmation of the truth and accuracy in all material respects of the
Borrowers' representations and warranties hereunder and under the Security
Documents on and as of the date of such request.
Section 3.21. Labor Relations; Compliance. None of the Borrowers has been
or is a party to any collective bargaining or other labor Contract. Except as
disclosed in Schedule "3.21" annexed hereto, there has not been, there is not
presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting any Borrower relating to the alleged violation
of any Applicable Law pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Borrowers or their premises,
or (c) any application for certification of a collective bargaining agent. No
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lock-out of any employees by
any Borrower, and no such action is contemplated by any Borrower. Each Borrower
has complied in all respects with all Applicable Law relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. No Borrower is liable
for the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Applicable Law.
3.22. Insurance.
(a) All polices to which any Borrower is a party or that provide coverage
to any Borrower, or any director or officer of a Borrower:
(i) are valid, outstanding, and enforceable;
(ii) are issued by an insurer that is reasonably believed by Borrowers
to be financially sound and reputable;
20
<PAGE>
(iii) taken together, provide adequate insurance coverage for the
assets and the operations of the Borrowers for all risks to which the
Borrowers are normally exposed;
(iv) are sufficient for compliance with all Applicable Law and
Contracts to which any Borrower is a party or by which any of them is
bound;
(v) will continue in full force and effect following the consummation
of the execution, delivery of this Agreement, the warrants and the Security
Documents; and
(vi) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of any Borrower.
(b) Except as disclosed in Schedule "3.22" annexed hereto, no Borrower has
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(c) The Borrowers have paid all premiums due, and have otherwise performed
all of their respective obligations, under each policy to which any Borrower is
a party or that provides coverage to any Borrower or director thereof.
(d) The Borrowers have given notice to the insurer of all material claims
that may be insured thereby.
ARTICLE IV. CONDITIONS OF MAKING THE ADVANCES
The effectiveness of this Agreement, and the obligations of the Lender to
make any Advance hereunder, are subject to the following conditions precedent:
Section 4.01. Representations and Warranties. The representations and
warranties set forth in Article III hereof shall be true and correct in all
material respects on and as of the Agreement Date, and on each subsequent date
that an Advance is to be made, provided, however, that for the purpose of
determining whether the representations and warranties are true and correct as
of the date that an Advance may be made, the Company shall have the right to
amend its disclosure schedules attached to this Agreement, provided, that the
Lender receives such amended disclosure schedules at least five (5) business
days prior to such Advance Analysis and is provided with the necessary
documentation and access to the Company to determine the effect of such
amendment.
Section 4.02. Loan Documents. The Borrowers shall have duly executed and
delivered to the Lender upon the execution of this Agreement, all of the
following:
(a) All UCC Financing Statements, stock certificates and stock powers, and
other certificates and documents required thereunder;
(b) The Note;
21
<PAGE>
(c) A certificate of the Secretary or an Assistant Secretary of each of the
Borrowers certifying the votes of the Boards of Directors of the Borrowers, each
authorizing and directing the execution and delivery of this Agreement, the
Notes, the Warrants, the Security Agreement, and all further agreements,
instruments, certificates and other documents pursuant hereto and thereto;
(d) A certificate of the Secretary or an Assistant Secretary of each of the
Borrowers certifying the names of the officers of each of the Borrowers who are
authorized to execute and deliver this Agreement, the Notes, the Warrants, the
Security Agreement, and all other agreements, instruments, certificates and
other documents to be delivered pursuant hereto and thereto, together with the
true signatures of such officers. The Lender may conclusively rely on such
certificate until they shall receive any further such certificate canceling or
amending the prior certificate and submitting the signatures of the officers
named in such further certificate;
(e) Certificates of the Secretary of State of Delaware and New York, all
dated reasonably prior to the Agreement Date or the date of the Advance
Analysis, as applicable, stating that each Borrowers is duly incorporated and in
good standing in such jurisdiction and that Schick is qualified to do business
in New York;
(f) The Shareholders Agreement;
(g) The Security Agreement;
(h) The Registration Rights Agreement.
Section 4.03. Restructuring Plan. The Borrowers shall have developed,
completed and commenced to implement a written plan (the "Restructuring Plan"),
the content of which shall be satisfactory to and approved and authorized by
both the Board of Directors of the Company and the Lender (which shall not be
unreasonably withheld or delayed). The Restructuring Plan shall include, without
limitation, matters involving (a) the consent and renegotiating of the existing
loan with the Borrowers' Senior Lender, (b) the hiring and retaining of outside
consultants, (c) procedures for dealing with significant vendors and payment of
any significant outstanding payables, (d) procedures for dealing with the
collection of accounts receivable, (e) the hiring of any new executive level
employees and (f) a detailed annual operating and capital budget approved by
Lender (which approval shall not be unreasonably withheld).
Section 4.04. Board of Directors. The Greystone Designees shall (i) be
elected to the Boards of Directors of the Company and Schick New York and the
Company's Audit Committee and Compensation Committee, (ii) not have been removed
from such positions and (iii) if they resign from such positions shall promptly
be replaced by other individuals designated by the Lender as contemplated by
Section 5.14.
Section 4.05. RESERVED.
Section 4.06. The Initial Warrants. The Company shall have issued to the
Lender the Initial Warrants.
22
<PAGE>
Section 4.07. Fairness Opinion. If deemed necessary by the Board of
Directors to the Company, the Company and the Lender shall have received an
opinion from an investment banking firm acceptable to the Company to the effect
that the Line of Credit, the issuance of the Warrants and other transactions
contemplated by this Agreement and the Exhibits hereto hereby are fair to the
stockholders of the Company from a financial point of view (the "Fairness
Opinion").
Section 4.08. Further Matters. All legal matters, and the form and
substance of all documents, incident to the transactions contemplated hereby
shall be satisfactory to counsel for the Lender.
Section 4.09. No Default. No Default or Event of Default shall have
occurred and continues to occur without being remedied.
Section 4.10. Consent of Senior Lender. The written consent of DVI for the
creation of a security interest in the Collateral (the "DVI Consent") shall have
been received by the Borrowers and delivered to Lender.
Section 4.11. Six Month Financial Statements. The Company shall have
delivered the unaudited consolidated financial statements (including
consolidated balance sheets, consolidated statements of income and consolidated
statements of cash flows) of the Company and its consolidated subsidiaries for
the six month periods ended on September 30, 1998 and 1999.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrowers hereby jointly and severally covenant and agree that, from
the date hereof and until all Obligations (whether now existing or hereafter
arising) have been paid in full and the Borrowers have no further right to
extension or funding under this Agreement, each of the Borrowers shall:
Section 5.01. Corporate and Insurance. Do or cause to be done all things
necessary to at all times (a) other than mergers solely among Borrowers,
preserve, renew and keep in full force and effect its corporate existence,
rights, licenses, permits and franchises, (b) comply with this Agreement and
maintain and preserve the Lender's Liens and the priority thereof, (c) maintain,
preserve and protect all of its franchises and material trade names, and
preserve all of its material property used or useful in the conduct of its
business and keep the same in good repair, working order and condition
(reasonable wear and tear excepted), and from time to time make, or cause to be
made, all needed and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the Business Operations carried on in connection
therewith may be properly and advantageously conducted at all times, (d) keep,
under the coverage of an "umbrella" policy or other form of coverage reasonably
acceptable to the Lender, its insurable properties adequately insured at all
times, by financially sound and reputable insurers reasonably acceptable to the
Lender, to such extent and against such risks, including fire and other risks
and casualty insured against by extended coverage, and maintain, as part of such
coverage, liability and such other insurance, as is customarily maintained by
companies engaged in similar businesses (including, without limitation, products
liability insurance), in amounts reasonably satisfactory to the Lender and each
Lender, all of which insurance policies shall name the Lender and eac
23
<PAGE>
Lender as loss payee and an additional insured as its interests appear, and
shall provide for the Lender and each Lender to receive written notice thereof
at least twenty (20) days prior to any cancellation, modification or non-renewal
of the subject policy, and (e) comply with all Applicable Law material to its
Business Operations, whether now in effect or hereafter enacted, promulgated or
issued.
Section 5.02. Payment of Taxes. File, pay and discharge, or cause to be
paid and discharged, all taxes, assessments and governmental charges or levies
imposed upon the Borrowers or upon their income and profits or upon any of their
property (real, personal or mixed) or upon any part thereof, before the same
shall become in default, as well as all lawful claims for labor, materials,
supplies and otherwise, which, if unpaid when due, might become a Lien or charge
upon such property or any part thereof; provided, however, that the Borrowers
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim (other than taxes and/or
assessments relating to real property or the use thereof) so long as (a) the
validity thereof shall be contested in good faith by appropriate proceedings and
the Borrowers shall have set aside on their books adequate reserves with respect
to any such tax, assessment, charge, levy or claim so contested, and (b) payment
with respect to any such tax, assessment, charge, levy or claim shall be made
before any of the Borrowers' property shall be seized or sold in satisfaction
thereof.
Section 5.03. Notice of Proceedings. Give prompt written notice to the
Lender of:
(a) Any proceedings instituted against any of the Borrowers in any federal
or state court or before any commission or other regulatory body, whether
federal, state or local, which, if adversely determined, could have a material
adverse effect upon such Borrower's business, operations, properties, assets or
condition, financial or otherwise;
(b) Changes in location of material assets; and
(c) Material Adverse Effects or defaults to the Lender or the Senior
Lender.
Section 5.04. Periodic Reports. Furnish to the Lender:
(a) Within ninety (90) calendar days after the end of each Fiscal Year: (i)
consolidated balance sheets, statements of income, statements of stockholders'
equity, and statements of cash flows of the Borrowers, together with footnotes
and supporting schedules thereto, all certified by independent certified public
accountants selected by the Borrowers and reasonably acceptable to the Lender
(and commencing with Fiscal Year 2002 with the form of certification to be
without material qualification or otherwise satisfactory to the Lender), showing
the financial condition of the Borrowers at the close of such Fiscal Year and
the results of operations of the Borrowers during such Fiscal Year; (ii) an
unaudited consolidating balance sheet and statement of income of each of the
Borrowers, together with appropriate adjustments and eliminations; and (iii) a
schedule of all Contracts, capital contributions and loan transactions between
any Borrowers (on the one hand) and any other Borrowers or any Subsidiary (on
the other hand), including therein a schedule of all cash capital contributions
made by any Borrower and all Indebtedness (including Indebtedness for Money
borrowed) owed to any Borrower by any other Borrower or any Subsidiary
(hereinafter collectively referred to as "Intercompany Investment(s)"), as at
the end of such Fiscal Year;
24
<PAGE>
(b) Within forty-five (45) calendar days after the end of each fiscal
quarter: (i) unaudited consolidated and consolidating balance sheets and
statements of income of the Borrowers, together with supporting schedules
thereto, prepared by the Borrowers and certified by the Company's Chairman,
President or Chief Financial Officer, such balance sheets to be as of the close
of such fiscal quarter and such statements of income to be for the period from
the beginning of the then-current Fiscal Year to the end of such fiscal quarter,
together with comparative statements of income for the corresponding fiscal
quarter in the immediately preceding Fiscal Year, in each case subject to normal
audit and year-end adjustments which shall not be material; (ii) a schedule of
all Intercompany Investments (specifying therein, the respective obligors and
obligees) as at the end of such fiscal quarter; and (iii) a written calculation
of Excess Available Cash.
(c) Concurrently with the delivery of each of the financial statements
required by Sections 5.04(a) and 5.04(b) above, a certificate (the "Compliance
Certificate") on behalf of the Borrowers (signed by the Chairman, Chief
Executive Officer, Chief Financial Officer or President of the Company, in
substantially the form annexed as Exhibit "F" to this Agreement, (i)
calculating, setting forth, and certifying as to the accuracy of the
calculations required under Sections 5.08 through 5.11 hereof, and (ii)
certifying that he has examined the provisions of this Agreement and that no
Event of Default has occurred and/or is continuing;
(d) Such other supplemental financial information pertaining to the
Borrowers as the Lender may from time to time reasonably request (provided, that
as to items listed in clauses (iii) and (iv) below, not more frequently than
annually) including: (i) aging schedules of all accounts receivable and accounts
payable of the Borrowers as of the end of any one or more months, (ii) an
analysis of the Borrowers' inventory as at the end of any one or more months in
a form reasonably satisfactory to the requesting Lender, (iii) within thirty
(30) days after the commencement of each Fiscal Year, a consolidated Capital
Expenditure budget and a separate consolidated research and development
expenditure budget of the Borrowers for such Fiscal Year showing the nature and
amount of the proposed Capital Expenditures and proposed research and
development expenditures; and within ninety (90) days after the end of each
Fiscal Year, updated reports showing the actual Capital Expenditures and actual
research and development expenditures for such immediately preceding Fiscal
Year; and (iv) within thirty (30) days after the commencement of each Fiscal
Year, a consolidated cash flow and profit and loss projection of the Borrowers
for such Fiscal Year;
(e) Within ten (10) days after filing with the SEC, true and complete
copies of all registration statements, proxy materials and other periodic
reports (including Forms 10-K, 10-Q, 8-K and other related forms) filed on
behalf of any or all of the Borrowers or any Subsidiary with the SEC under the
Securities Act of 1933, as amended, and/or the Securities Exchange Act of 1934,
as amended; and
(f) Promptly, from time to time, such other information regarding the
Borrowers' operations, assets, business, affairs and financial condition, as the
Lender may reasonably request.
Section 5.05. Books and Records; Inspection. Maintain at its corporate
headquarters books and records respecting all of the Business Operations at the
Borrowers' principal places of
25
<PAGE>
business, and permit Lenders or representatives of the Lender to inspect, at any
time during normal business hours, upon reasonable notice, and without undue
disruption of the Business Operations, all of the Borrowers' various books and
records, and to make copies, abstracts and/or reproductions thereof.
Section 5.06. Notice of Default or Material Adverse Effect. Promptly advise
the Lender in writing of: (a) any Material Adverse Effect; or (b) the existence
or occurrence of any Default or Event of Default.
Section 5.07. Accounting. Maintain a standard system of accounting in order
to permit the preparation of consolidated financial statements in accordance
with GAAP.
Section 5.08. Current Ratio. Beginning in March 2001, as at the end of each
Fiscal Year, maintain a Current Ratio of not less than 1 to 1.
Section 5.09. Interest Coverage Ratio. Beginning in March 2002, as at the
end of each Fiscal Year, maintain an Interest Coverage Ratio of not less than
1.50 to 1.
Section 5.10. EBITDA. As at the end of each Fiscal Year, maintain an EBITDA
at not less than the minimum amount set forth below for such date:
Fiscal Year Ending Minimum EBITDA
------------------ --------------
March 31, 2001 0
March 31, 2002 $2,500,000
March 31, 2003 $5,000,000
March 31, 2004 $7,500,000
Section 5.11. RESERVED.
Section 5.12. Reports on Application of the Net Proceeds of Advances. The
Borrowers shall furnish to the Lender at (a) each regularly scheduled meeting of
the Board of Directors of the Company, and (b) on a quarterly basis on each
Interest Payment Date, a written report as to the application of the net
proceeds of all Advances, if any, made in the immediately preceding calendar
quarter.
Section 5.13. Further Deliveries. Exert its best efforts to obtain and
deliver to the Lender any and all further consents, including landlord's and/or
lessee's consents and estoppel certificates in respect of the Lease Assignments,
certificates of occupancy, and other relevant matters, to the extent that the
same have not previously been delivered, are not available for delivery, or are
not delivered to the Lender in accordance with this Agreement and the Security
Documents, and which subsequent deliveries are expressly consented to in writing
by Lender.
26
<PAGE>
Section 5.14. Board of Directors of the Company and Subsidiaries.
(a) Take all requisite corporate actions to cause the Boards of Directors
of each of the Borrowers to elect two additional persons designated by the
Lender (collectively, the "Initial Greystone Designees") to the Board of
Directors of the Company and each of its subsidiaries.
(b) Take all requisite corporate actions to cause an additional person
designated by the Lender ("Subsequent Greystone Designee" and together with the
Initial Greystone Designees the "Greystone Designees") to be elected to the
Boards of Directors of the Borrowers in accordance with the following formula:
Greystone Designees = Schick Seats / (1-Greystone %) - Schick Seats
provided, that, unless the Lender has Advanced to Borrowers pursuant to this
Agreement more than a maximum level of advances of $6,000,000, the number of
Greystone Designees shall not equal less than two directors or more than 50% of
each Board of Directors and provided that the number Greystone Designees shall
be rounded to the closest integer. If the Lender Advances more than a maximum
level of Advances of $6,000,000 to the Borrowers pursuant to this Agreement,
Greystone Designees shall equal the Schick Seats plus one. As used in this
Section, "Schick Seats" shall mean the total number of seats occupied on the
Board of Directors excluding those seats occupied by Greystone Designees; and
"Greystone %" shall mean the number of Warrants issued to Greystone, Jeffrey
Slovin or any other designee of Greystone under this Agreement, together with
the number of shares held by Greystone as the result of exercising its Warrants
hereunder divided by the number of Borrowers' shares which are issued and
outstanding, together with the number of Warrants issued to Greystone or any
other designee of Greystone under this Agreement. Schedule 5.14 annexed hereto
sets forth a tabular application of the formula contained in this Section.
(c) From and after the Agreement Date, fill vacancies created by death or
inability of any of the Greystone Designees to continue to serve on the Board of
Directors of the Company and its Subsidiaries, by another person designated by
the Lender.
(d) Take all requisite corporate actions to cause one person designated by
the Lender to serve on both the Company's Audit Committee and its Compensation
Committee.
Section 5.15. Environmental Response. In the event of any discharge, spill,
injection, escape, emission, disposal, leak or other Release of Hazardous
Substances on any Real Property owned or leased by any of the Borrowers, which
is not authorized by a permit or other approval issued by the appropriate
governmental agencies, and which requires notification to or the filing of any
report with any federal or state governmental agency, the Borrowers shall
promptly: (i) notify the Lender; and (ii) comply with the notice requirements of
the Environmental Protection Agency and applicable state agencies, and take all
steps necessary to promptly clean up such discharge, spill, injection, escape,
emission, disposal, leak or other Release in accordance with all applicable
Environmental Laws and the Federal National Contingency Plan, and, if required,
receive a certification from all applicable state agencies or the Environmental
Protection Agency, that such Real Property has been cleaned up to the
satisfaction of such agency(ies). In addition, if applicable, the Borrower shall
promptly register with the New Jersey Department of Environmental Protection any
underground storage tanks installed after the Agreement Date
27
<PAGE>
pursuant to the applicable regulations contained in the New Jersey Underground
Storage Tank Act, N.J.S.A. 58: 10A-21, et seq.
Section 5.16. Management. Cause David Schick, to continue to be employed as
Chief Executive Officer of the Company at the pleasure of the Board of Directors
pursuant to the terms of an employment agreement to be executed by and between
Borrowers and David Schick, as attached hereto as Exhibit "E" except in the
event of death or disability.
Section 5.17. Right of First Refusal. In the event and to the extent that
the Company shall elect to (i) raise any additional capital through any public
or private offer and sale of any of its equity securities (an "Equity
Offering"), or the Company hereby agrees to grant to the Lender the right and
option (the "Right of First Refusal"), but not the obligation, to purchase any
such equity securities of the Company (the "Equity Securities"). Such Right of
First Refusal shall be implemented in accordance with the following procedures:
(a) The Company shall give the Lender not less than twenty (20) Business
Days prior written notice of any intention by the Company to consummate any
Equity Offering. Within five (5) Business Days following receipt of such notice,
the Lender shall notify the Company, in writing, as to whether the Lender has an
interest in purchasing the Equity Securities being offered for sale. If the
Lender expresses an affirmative interest, the Company and the Lender shall
thereafter promptly meet and attempt to negotiate in good faith the terms and
conditions of the Lender's purchase of the Equity Securities. In the event that
the parties are unable to agree upon the terms and conditions of such
transaction by the earlier to occur of (i) fifteen (15) Business Days from the
Company's notice, or (ii) ten (10) Business Days from the initial meeting with
respect to such proposed transaction, then the Company shall be free to sell the
Equity Securities to any third party, subject, however, to the rights of the
Lender set forth in Section 5.17(b) below. Nothing herein shall prevent the
Company, at any time, from entering into negotiations with any third parties
concerning or relating to the sale of Equity Securities provided that a
Greystone representative shall be permitted to attend any such negotiations.
(b) In the event and to the extent that the Company shall receive a written
offer or proposal from any Person (whether or not Affiliated with the Company)
(a "Third Party") to purchase or sell any Equity Securities in a proposed Equity
Offering (the "Third Party Proposal"), the Company shall promptly furnish to the
Lender a true and complete copy of such Third Party Proposal. Such Third Party
Proposal for Equity Offerings must be in the form either (i) a letter of intent,
(ii) a Final Term Sheet or (iii) a Registration Statement filed with the
Securities and Exchange Commission. The Lender shall have a period of ten (10)
Business Days from receipt of such Third Party Proposal to notify the Company in
writing as to whether the Lender intends to match the terms of such Third Party
Proposal. If such Third Party Proposal is from a proposed underwriter or agent
seeking to sell the Equity Securities, the Lender may, at its sole option, elect
to match the Third Party Proposal by purchasing the Equity Securities, at a
price per share which shall be net of all selling commissions, discounts and
other offering expenses. To the extent that there shall be any material
amendments or modifications to such Third Party Proposal, the Company shall
promptly forward to the Lender a complete copy of each such amended Third Party
Proposal, and the twenty (20) Business Day period in which the
28
<PAGE>
Lender may match such amended Third Party Proposal shall again commence upon
delivery to the Lender of such amended Third Party Proposal(s).
(c) In the event that the Lender shall notify the Company of its
unwillingness to match the terms of any final Third Party Proposal, or shall
fail to timely notify the Company of its intention to so match such final Third
Party Proposal, the Lender's Right of First Refusal with respect to such Third
Party Proposal shall expire.
Section 5.18. Employee Options. Take all requisite corporate action
reasonably within its control to cause the shareholders to vote at the first
annual meeting of Shareholders of the Company that takes place after the
Agreement Date to either increase the number of shares available under the
Company's 1996 Employee Stock Option Plan or to establish a new stock option
plan to authorize the issuance of options to purchase an aggregate of 750,000
shares of Common Stock.
Section 5.19. Registration Rights. Shall register the shares of Schick
Common Stock underlying the Warrants as provided in the Registration Rights
Agreement and shall not be in breach of such Registration Rights Agreement.
Section 5.20. Intellectual Property.
(a) Borrower agrees to timely pay any and all maintenance, renewal, annuity
fees and the like to the appropriate governmental entity in order to keep all of
its intellectual property in full force and effect.
(b) Borrower agrees to bring any action or legal proceeding as may
reasonably be necessary in order to defend its intellectual property against
third party infringers thereof of which it has knowledge.
Section 5.21. Disclosure. The Company will promptly inform the Greystone
Designees of all developments with regard to the pendency of any investigation
or litigation respecting either the Borrowers or their officers or directors.
The Greystone Designees will determine in their own business judgment whether to
relay such information to other Greystone employees.
Section 5.22. Restructuring Plan. The Borrowers shall update and amend the
Restructuring Plan including the detailed budgets contained therein, once every
six months, provided that the content thereof shall be satisfactory to and
approved and authorized by both the Board of Directors of the Company and the
Lender (which shall not be unreasonably withheld). Upon such approval and
authorization the Borrowers shall diligently implement the Restructuring Plan.
ARTICLE VI. NEGATIVE COVENANTS
The Borrowers jointly and severally covenant and agree that, until all
Obligations (whether now existing or hereafter arising) have been paid in full
and the Borrowers have no further right to extension or funding under this
Agreement, unless the Lender shall otherwise consent in writing, none of the
Borrowers shall, directly or indirectly:
29
<PAGE>
Section 6.01. Indebtedness and Liabilities. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Indebtedness
or Liability, other than:
(a) Indebtedness to the Lender for Advances, or otherwise;
(b) Indebtedness and Liabilities with respect to trade obligations,
accounts payable and other normal accruals incurred in the ordinary course of
business, or with respect to which any of the Borrowers is contesting in good
faith the amount or validity thereof by appropriate proceedings, and then only
to the extent that the Borrowers have set aside on their books adequate reserves
therefor;
(c) Indebtedness under those Real Property Leases listed on Schedule "3.07"
annexed hereto;
(d) Indebtedness under Existing Operating Leases listed on Schedule "3.05"
annexed hereto;
(e) Existing Indebtedness, but only to the extent set forth on Schedule
"6.01(e)" annexed hereto;
(f) Purchase money Indebtedness or other Indebtedness incurred or assumed
in connection with Investments (including the acquisition of additional assets
or businesses) and Capital Expenditures made following the Agreement Date;
provided, however, that: (i) the Borrowers shall, in connection with the
incurrence of any and all such Indebtedness, be in compliance with the
provisions of Section 6.06(c) and Section 6.09 hereof; and (ii) to the extent
that the Borrowers shall elect to incur Indebtedness for money borrowed (other
than purchase money Indebtedness) from any financial institution in connection
with any permitted Investment contemplated by Section 6.06(c) hereof, they shall
afford the Lender a right of first refusal to provide the financing therefor;
provided, that the terms and conditions of any such financing which the Lender
may (at their sole discretion) elect to offer shall be on terms and conditions
which, in the aggregate, shall be no less favorable to the Borrowers than those
offered by any other financial institution;
(g) Intercompany Investments which are represented by instruments that are
promptly delivered (with all necessary endorsements thereon) to the Lender
pursuant to the Security Agreement; and
(h) Subordinated Debt in such amounts and upon such terms and conditions as
shall be reasonably acceptable to the Lender.
Section 6.02. Liens. Create, incur, assume or suffer to exist any Lien or
other encumbrance of any nature whatsoever on any of its assets, now or
hereafter owned, other than:
(a) Subject to Section 5.02 above, Liens securing the payment of taxes
which are either not yet due or the validity of which is being contested in good
faith by appropriate proceedings, and as to which the Borrowers shall have set
aside on their books adequate reserves;
30
<PAGE>
(b) Deposits under workers' compensation, unemployment insurance and social
security laws, or to secure the performance of bids, tenders, contracts (other
than for the repayment of Money Borrowed) or leases, or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity, performance or
other similar bonds in the ordinary course of business;
(c) Liens imposed by law, such as carriers', warehousemen's or mechanics'
liens, incurred by the Borrowers in good faith in the ordinary course of
business and discharged promptly after same are incurred, and fully bonded Liens
arising out of a judgment or award against the Borrowers with respect to which
the Borrowers shall currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(d) Liens in favor of the Lender;
(e) Existing Liens which are to survive the Agreement Date and which are
expressly reflected and described as such in Schedule "6.02(e)" annexed hereto;
(f) Other Liens incurred in connection with Indebtedness expressly
permitted pursuant to Section 6.01 above, but only to the extent that such Liens
secure Indebtedness in amounts not in excess of those permitted by such Section
6.01;
(g) Encumbrances consisting of easements, rights-of-way, survey exceptions
and other similar restrictions on the use of real property reflected on title
reports accepted by the Lender, or minor irregularities in title thereto which
do not materially impair the use of such property in the operation of the
business of the Borrowers; and
(h) Liens arising out of judgments or awards with respect to which the
Borrowers shall be prosecuting an appeal in good faith and in respect of which a
stay of execution shall have been or is being sought.
Section 6.03. Guarantees. Except for the Guarantee by any one of the
Borrowers of obligations of any of the other Borrower, Guarantee, endorse or
otherwise in any manner become or be responsible for obligations of any other
Person, except: Guarantees, not to exceed $100,000 outstanding at any point in
time in the aggregate, in respect of the financing of automobiles or other items
for use by employees, consultants or agents of the Borrowers.
Section 6.04. Sales of Assets and Management. (a) Sell, lease, transfer,
encumber or otherwise dispose of any of the Borrowers' properties, assets,
rights, licenses or franchises other than (i) sales of inventories in the
ordinary course of business, (ii) licenses, joint ventures and related
transactions entered into, modified or terminated in the ordinary course of
business, including but not limited to the licensing of Borrowers' intellectual
property; (iii) the disposition of obsolete personal properties in the ordinary
course of business, (iv) the termination of Excluded Contracts, or (v) the
subletting of any of the real property leased by Borrowers or (b) turn over the
management of, or enter into any management contract with respect to the
Business Operations or such properties, assets, rights, licenses or franchises.
Section 6.05. Sale-Leaseback. Enter into any arrangement, directly or
indirectly, with any Person whereby any of the Borrowers shall sell or transfer
any property (real, personal or
31
<PAGE>
mixed) used in the Business Operations, whether now owned or hereafter acquired,
and thereafter rent or lease such property.
Section 6.06. Investments; Acquisitions. Make any Investment in, or
otherwise acquire or hold securities (including, without limitation, capital
stock and evidences of indebtedness) of, or make loans or advances to, or enter
into any arrangement for the purpose of providing funds or credit to, any other
Person (including any Affiliate), except:
(a) advances to employees of any one or more of the Borrower: (i) for
business expenses not to exceed at any time $50,000 in the aggregate, and (ii)
for personal needs not to exceed at any time $100,000 in the aggregate as to all
employees of the Borrower;
(b) investments in obligations of the United States or certificates of
deposit of the Lender or other commercial banks, or other similar investments
reasonably satisfactory to the Lender;
(c) so long as no Default or Event of Default has occurred and is
continuing, an Investment in or acquisition of the securities, assets or
properties of any Person in which: (i) the aggregate consideration paid or
payable by any or all of the Borrowers (whether in the form of cash, notes
and/or any other securities obligating any of the Borrowers to mandatory
payments of dividends, Interest Expense or other redemption obligations) does
not exceed Three Hundred Thousand ($300,000) Dollars in any one Fiscal Year; and
(ii) the aggregate Indebtedness for money borrowed (including purchase money
Indebtedness incurred in connection with any such Investment) does not exceed
One Hundred Fifty Thousand ($150,000) Dollars in any one Fiscal Year; and
(d) intercompany investments, but only if and to the extent evidenced by
appropriate instruments (including, without limitation, in respect of
Indebtedness, negotiable promissory notes in principal amount equal to any and
all such Intercompany Investments so incurred), all of which shall be promptly
delivered (with all necessary endorsements thereon) to the Lender pursuant to
the Security Agreement.
Section 6.07. Corporate Form; Acquisitions. Dissolve or liquidate, or
consolidate or merge with or into, sell all or substantially all of the assets
of any of the Borrowers to, or otherwise acquire all or substantially all of the
securities, assets or properties of, any other Person; provided, that any such
transaction shall be permitted without the prior written consent of the Lender:
(a) if solely between or among Borrowers, or (b) if constituting an acquisition
or Investment otherwise permitted and within the dollar consideration and
Indebtedness limitations provided in Section 6.06(c) above.
Section 6.08. Dividends and Redemptions. Except for a transaction otherwise
permitted pursuant to Section 6.06(c) above, or (subject to the provisions of
Section 6.16 below) dividends paid or declared by any one or more Borrowers to
any other Borrower(s): (a) directly or indirectly declare or pay any dividends,
or make any distribution of cash or property, or both (other than dividends
solely in the form of Common Stock of the Company), to any Person in respect of
any of the shares of the capital stock of any of the Borrowers; or (b) directly
or
32
<PAGE>
indirectly redeem, purchase or otherwise acquire for consideration any
securities or shares of the capital stock of any of the Borrower or any other
Person.
Section 6.09. Indebtedness for Capital Expenditures. Other than
Indebtedness to the Lender, as contemplated by this Agreement: (a) incur
Indebtedness (including purchase money Indebtedness) in connection with Capital
Expenditures in any Fiscal Year, including direct purchases and/or Capitalized
Lease Obligations (other than Existing Capitalized Lease Obligations or
substitutes therefor at the same or lower annual rentals), for fixed assets or
personal property, where the aggregate Indebtedness (including purchase money
Indebtedness) so incurred shall exceed $250,000 in such Fiscal Year; or (b)
enter into any Operating Leases which obligates the Borrowers to rental payments
in any Fiscal Year which shall be $150,000, in the aggregate, in excess of the
Borrowers' aggregate rental payments under Operating Leases in the immediately
preceding Fiscal Year, provided, however, that the Borrower shall be permitted
to exercise its option to renew the Company's real property leases on its
facilities in Long Island City, New York.
Section 6.10. Change of Business. As to any of the Borrowers, directly or
indirectly: (a) engage in a business materially different from the general
nature of the Business Operations as now being conducted or as same may
hereafter be reasonably expanded from time to time in like areas of business, or
(b) wind up its Business Operations or cease substantially all of its normal
Business Operations for a period in excess of thirty (30) consecutive days, or
(c) suffer any material disruption, interruption or discontinuance of a material
portion of its normal Business Operations for a period in excess of ninety (90)
consecutive days, or (d) materially amend or terminate any material agreement.
Section 6.11. Receivables. Sell, assign, discount or dispose in any way of
any accounts receivable, promissory notes or trade acceptances held by any of
the Borrowers with or without recourse, except for any sale, assignment,
discounting or disposal of any such accounts receivable, promissory notes or
trade acceptances in connection with efforts to collect same (including
endorsements) in the ordinary course of business.
Section 6.12. Corporate Charter and By-Laws. Agree, consent, permit or
otherwise undertake to amend any of the terms or provisions of the Company's
Certificate of Incorporation or By-Laws.
Section 6.13. Affiliate Transactions. Enter into any Contract, agreement or
transaction with any Affiliate of any of the Borrowers (other than among
Borrowers) except after prior written notice to the Lender and then only upon
the prior written consent of the Lender.
Section 6.14. Fiscal Year. Amend its Fiscal Year.
Section 6.15. Debt. Issue, prepay, redeem or purchase any Senior Debt,
Subordinated Debt or redeemable preferred stock, except in accordance with the
terms of the Restructuring Plan. Furthermore, subject to the provisions of
Section 6.16 and Section 6.17 below, the Company or any Subsidiary may redeem or
purchase capital stock of any other Subsidiary which is a Borrower, if and to
the extent wholly-owned by the Company or another Subsidiary.
33
<PAGE>
Section 6.16. Sales of Capital Stock. Sell, lease, transfer, assign,
encumber or otherwise dispose of any shares of capital stock (collectively, a
"Stock Transfer") of the Company or any Subsidiary, except that stock options to
employees of the Company may be granted and exercised pursuant to existing stock
option plans of the Company.
Section 6.17. Compensation of Management. Increase compensation to
executive officers above the amount that has been agreed upon by Lender and the
Company's Compensation Committee.
Section 6.18. Litigation Settlements. Settle any material litigation which
involves the loss of any rights or payment of any moneys or royalties in excess
of $25,000 without the consent of Lender, which consent shall not be
unreasonably withheld or delayed.
Section 6.19. Use of Advances. Draw any Advances for any purpose not
otherwise approved by the Lender.
Section 6.20. Restructuring Plan. Fail to materially adhere to the
Restructuring Plan, as amended from time to time, pursuant to Section 5.22
hereof.
ARTICLE VII. DEFAULTS
Section 7.01. Events of Default. Each of the following events is herein,
and in the Note and the Security Documents, sometimes referred to as an Event of
Default:
(a) if any representation or warranty made in this Agreement, or in any of
the Security Documents, or in any report, certificate, financial statement or
other instrument furnished in connection with this Agreement or the borrowing
hereunder, shall be false, inaccurate or misleading in any material respect when
made or when deemed made hereunder;
(b) any failure to pay principal of or interest on the Note or any other
Obligations of the Borrowers to the Lender when the same shall be due and
payable, whether on a Principal Payment Date, an Interest Payment Date, at the
Maturity Date thereof or at a date required for prepayment or by acceleration or
otherwise;
(c) any default in the performance of any of the financial covenants
contained in Section 5.08 through Section 5.10, or any default in the due
observance or performance of any covenant, condition or agreement contained in
any Section of Article VI hereof;
(d) any default in the due observance or performance of any covenant,
condition or agreement (other than in Section 5.08 through Section 5.10) to be
observed or performed under Article V hereof, or otherwise pursuant to the terms
hereof, and the continuance of such default unremedied for a period of twenty
(20) days after written notice thereof to the Borrowers;
(e) if either of the Borrowers have suffered any Material Adverse Effect
which shall remain unremedied for a period of thirty (30) days after written
notice thereof to the Borrowers;
(f) any default with respect to any Indebtedness for money borrowed of the
Borrowers (other than to the Lender) in an amount in excess of $50,000, if the
effect of such
34
<PAGE>
default is to permit the holder to accelerate the maturity of any such
Indebtedness for money borrowed or to cause such Indebtedness for money borrowed
to become due prior to the stated maturity thereof;
(g) any material default in the due observance or performance of any
covenant, condition or agreement on the part of the Borrowers to be observed or
performed under the Note, the Warrants or any of the Security Documents,
including, without limitation, any event which subordinates or otherwise renders
invalid or unenforceable the Lender's first Liens, encumbrances and security
interests on the assets and properties of the Borrowers (subject only to the
Permitted Liens) and the continuation of such default beyond any applicable
grace period provided therein;
(h) if any Borrower shall: (i) apply for or consent to the appointment of a
receiver, trustee, custodian or liquidator of it or any of its properties, (ii)
admit in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code, or (v) file a voluntary petition in bankruptcy, or a
petition or an answer seeking reorganization or an arrangement with creditors or
to take advantage of any bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against him or it in any proceeding
under any such law, or (vi) take or permit to be taken any action in furtherance
of or for the purpose of effecting any of the foregoing;
(i) if any order, judgment or decree shall be entered, without the
application, approval or consent of the Borrowers, by any court of competent
jurisdiction, approving a petition seeking reorganization of any Borrowers, or
appointing a receiver, trustee, custodian or liquidator of any Borrowers, or of
all or any substantial part of its assets, and such order, judgment or decree
shall continue unstayed and in effect for any period of thirty (30) days;
(j) if final judgment(s) for the payment of money in excess of $25,000
individually or $100,000 in the aggregate shall be rendered against any
Borrowers, and the same shall remain undischarged, unsatisfied and unbonded for
a period of thirty (30) consecutive days following notice of said final
judgment(s) to such Borrowers, during which execution shall not be effectively
stayed;
(k) the occurrence of any levy upon or seizure or attachment of any
property of any Borrowers having an aggregate fair value in excess of $100,000
individually or $250,000 in the aggregate, which levy, seizure or attachment
shall not be set aside, bonded or discharged within thirty (30) days after the
date thereof;
(l) if the Greystone Designees are removed without good cause from or are
not elected or reelected to the Boards of Directors of the Borrowers or the
people designated by the Lender to serve on the Company's Audit Committee or
Compensation Committee have been removed without good cause from such committee
and no person designated by Greystone has been elected to replace such director
or committee member;
(m) if the Borrowers do not receive the DVI Consent by February 15, 2000;
or
35
<PAGE>
(n) if prior to February 15, 2000, the Lenders shall have not received
either (i) a Fairness Opinion pursuant to Section 4.07 or (ii) a written waiver
of such Fairness Opinion from the Company.
Section 7.02. Remedies. Upon the occurrence of any Event of Default, and at
all times thereafter during the continuance thereof: (a) the Note, and any and
all other Obligations of the Borrowers to the Lender, shall, at the Lender's
option (except in the case of Sections 7.01(g) and 7.01(h) hereof, the
occurrence of which shall automatically effect acceleration, regardless of any
action or forbearance in respect of any prior or ongoing Default or Event of
Default which may be inconsistent with such automatic acceleration), become
immediately due and payable, both as to principal, interest and other charges,
without presentment, demand, or notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Note or other evidence of
such Obligations to the contrary notwithstanding, (b) all outstanding
Obligations under the Note, and all other outstanding Obligations, shall bear
interest at the default rate of interest provided in the Note, (c) the Lender
may file suit against the Borrowers on the Note and/or seek specific performance
or injunctive relief thereunder (whether or not a remedy exists at law or is
adequate), (d) the Lender shall not be obligated to make any further Advances,
and (e) the Lender shall have the right, in accordance with the Note and the
Security Documents, to exercise any and all remedies in respect of such or all
of the collateral security for the Obligations as the Lender may determine in
its discretion (without any requirement of marshaling of assets, or other such
requirement).
ARTICLE VIII. PARTICIPATING LENDERS; ASSIGNMENT.
Section 8.01. Participations. Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without the
requirement of any consent of the Borrowers, and without in any manner affecting
or impairing the validity of any Obligations or any collateral security
therefor, transfer, assign or grant participating interests in the Loan as the
Lender shall in its sole discretion determine, to such other Persons (the
"Participants") as the Lender may determine. The Lender shall give written
notice to the Borrowers of such Participations. Notwithstanding the granting of
any such participating interests: (a) the Borrowers shall look solely to the
Lender for all purposes of this Agreement and the transactions contemplated
hereby, (b) the Borrowers shall at all times have the right to rely upon any
waivers or consents signed by the Lender as being binding upon all of the
Participants, and (c) all communications in respect of this Agreement and such
transactions shall remain solely between the Borrowers and the Lender hereunder.
Section 8.02. Transfer. Anything in this Agreement to the contrary
notwithstanding, the Lender may, at any time and from time to time, without the
requirement of any consent of the Borrowers, and without in any manner affecting
or impairing the validity of any Obligations or any collateral security
therefor, transfer and assign all or any portion of its right to receive payment
or foreclose on its security interest provided for in this Agreement, the Note
and the Security Documents to any Person (an "Assignee Lender"). The Lender
shall give written notice to the Borrowers prior to making any such transfer or
assignment.
ARTICLE IX. MISCELLANEOUS
36
<PAGE>
Section 9.01. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lender of the Advances, and the
execution and delivery to the Lender of the Note, and shall continue in full
force and effect for so long as the Note or any other Obligations of the
Borrowers to the Lender are outstanding and unpaid. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party; and all covenants,
promises and agreements in this Agreement contained, by or on behalf of the
Borrowers, shall inure to the benefit of the successors and assigns of the
Lender.
Section 9.02. Indemnification. The Borrowers shall indemnify the Lender and
its directors, officers, employees, attorneys and lenders against, and shall
hold the Lender and such Persons harmless from, any and all losses, claims,
damages and liabilities and related expenses, including reasonable counsel fees
and expenses, incurred by the Lender or any such Person arising out of, in any
way connected with, or as a result of: (a) the Borrowers' use of any of the
proceeds of the Loan made by the Lender to the Borrowers; (b) this Agreement,
the Borrowers' ownership and operation of the Borrowers' assets, including all
real properties and improvements or any Contract, the performance by the
Borrowers or any other Person of their respective obligations thereunder, and
the consummation of the transactions contemplated by this Agreement; and/or (c)
any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not the Lender or its directors, officers, employees,
attorneys or Lenders are a party thereto; provided that the indemnity provisions
set forth in this Section 9.02 shall not apply to any such losses, claims,
damages, liabilities or related expenses arising from (i) any unexcused breach
by the Lender of any of its obligations under this Agreement, (ii) the willful
misconduct or gross negligence of the Lender, provided that any such loss,
claim, damage, liability or expense has resulted from the willful misconduct or
gross negligence of the Lender and further provided, that such willful
misconduct or gross negligence was the primary cause thereof (i.e., more than
50% of the causation), or (iii) the breach of any commitment or legal obligation
of the Lender to any Person. The foregoing indemnity shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated by this Agreement,
the repayment of the Loan, the invalidity or unenforceability of any term or
provision of this Agreement, the Security Documents or the Note, any
investigation made by or on behalf of the Lender, and the content or accuracy of
any representation or warranty made by the Borrowers or their Affiliates under
this Agreement. All amounts due under this Section 9.02 shall be payable on
written demand therefor.
Section 9.03. Governing Law. This Agreement, the Note, the Warrants and the
Security Documents shall (irrespective of where same are executed and delivered)
be governed by and construed in accordance with the laws of the State of New
York (without giving effect to principles of conflicts of laws).
Section 9.04. Waiver and Amendment. Neither any modification or waiver of
any provision of this Agreement, the Note, the Warrants or the Security
Documents, nor any consent to any departure by the Borrowers therefrom, shall in
any event be effective unless the same shall be set forth in writing duly signed
or acknowledged by the Lender and the Borrowers, and then such waiver or consent
shall be effective only in the specific instance, and for the specific purpose,
for which given. No notice to or demand on the Borrowers in any instance shall
entitle
37
<PAGE>
the Borrowers to any other or future notice or demand in the same, similar or
other circumstances.
Section 9.05. Reservation of Remedies. Neither any failure nor any delay on
the part of any of the parties hereto in exercising any right, power or
privilege hereunder, or under the Note, any of the Security Documents, or any
other instrument given as security for any of the Obligations, shall operate as
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or future exercise, or the exercise of any other right, power or
privilege.
Section 9.06. Notices. All notices, requests, demands and other
communications under or in respect of this Agreement or any transactions
hereunder shall be in writing (which may include telegraphic or telecopied
communication) and shall be personally delivered or mailed (by prepaid
registered or certified mail, return receipt requested), sent by prepaid
recognized overnight courier service, or telegraphed or telecopied by facsimile
transmission to the applicable party at its address or telecopier number
indicated below.
If to the Lender:
c/o Greystone & Co., Inc.
152 West 57th Street, 60th Floor
New York, New York 10019
Attn: Stephen Rosenberg
Telecopier # (212) 649-9701
with a copy to:
Greenberg Traurig
2005 Market Street
Philadelphia, PA 19103
Attn: Michael Lehr
Telecopier # (215) 988-7801
If to the Borrowers:
Schick Technologies, Inc.
31-00 47th Avenue
Long Island City, New York 11101
Attn: David Schick
Telecopier # (718) 729-3469
with a copy to:
Schick Technologies, Inc.
31-00 47th Avenue
Long Island City, New York 11101
Attn: Zvi Raskin, Esq.
Telecopier # (718) 937-5962
or, as to each party, at such other address or telecopier number as shall be
designated by such party in a written notice to the other parties delivered as
aforesaid. All such notices, requests,
38
<PAGE>
demands and other communications shall be deemed given when personally delivered
or when deposited in the mails with postage prepaid (by registered or certified
mail, return receipt requested) or delivered to the telegraph company or
overnight courier service, addressed as aforesaid, or when submitted by
facsimile transmission to a telecopier number designated by such addressee.
Section 9.07. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Borrowers and the Lender and their respective
successors and permitted assigns, except that the Borrowers shall not assign any
of its rights or obligations hereunder without the prior written consent of the
Lender.
Section 9.08. Consent to Jurisdiction; Waiver of Jury Trial. The parties
hereto hereby consent to the jurisdiction of all courts of the State of New York
and the United States District Court for the Southern District of New York, as
well as to the jurisdiction of all courts from which an appeal may be properly
taken from such courts, for the purpose of any suit, action or other proceeding
arising out of or with respect to this Agreement, the Note, the Warrants, the
Security Documents, any other agreements, instruments, certificates or other
documents executed in connection herewith or therewith, or any of the
transactions contemplated hereby or thereby, or any of the parties' obligations
hereunder or thereunder. The parties hereto hereby expressly waive any and all
objections which they may have as to venue in any of such courts, and also waive
trial by jury in any such suit, action or proceeding. The Lender or Borrowers
may file a copy of this Agreement as evidence of the foregoing waiver of right
to jury trial.
Section 9.09. Severability. If any provision of this Agreement is held
invalid or unenforceable, either in its entirety or by virtue of its scope or
application to given circumstances, such provision shall thereupon be deemed
modified only to the extent necessary to render same valid, or not applicable to
given circumstances, or excised from this Agreement, as the situation may
require, and this Agreement shall be construed and enforced as if such provision
had been included herein as so modified in scope or application, or had not been
included herein, as the case may be.
Section 9.10. Captions. The Article and Section headings in this Agreement
are included herein for convenience of reference only, and shall not affect the
construction or interpretation of any provision of this Agreement.
Section 9.11. Sole and Entire Agreement. This Agreement, the Note, the
Security Documents, and the other agreements, instruments, certificates and
documents referred to or described herein and therein constitute the sole and
entire agreement and understanding between the parties hereto as to the subject
matter hereof, and supersede all prior discussions, agreements and
understandings of every kind and nature between the parties as to such subject
matter.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers on the date set forth below, but
all as of the day and year first above written.
Dated: As of December 27, 1999
GREYSTONE FUNDING CORPORATION
By: /s/ Robert Barolak
---------------------------------------------
Robert Barolak
SCHICK TECHNOLOGIES, INC., a Delaware corporation
By: /s/ David Schick
---------------------------------------------
David S. Schick
Chief Executive Officer
SCHICK TECHNOLOGIES, INC., a New York corporation
By: /s/ David Schick
---------------------------------------------
David S. Schick
Chief Executive Officer
40
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 23rd day of December 1999, personally appeared before me Robert R.
Barolak, of Greystone Funding Corporation who acknowledged that he is the Vice
President of Greystone Funding Corporation and that said instrument was signed
by him on behalf of said entity by due authority.
------------------------------------
Notary Public
My Commission Expires:
- ------------------------
41
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 23rd day of December 1999, personally appeared before me David
Schick, who acknowledged that he is the Chief Executive Officer of Schick
Technologies, Inc., a Delaware corporation, and that said instrument was signed
by him on behalf of said corporation by due authority.
------------------------------------
Notary Public
My Commission Expires:
- ------------------------
42
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the 23rd day of December 1999, personally appeared before me David
Schick, who acknowledged that he is the Chief Executive Officer of Schick
Technologies, Inc., a New York corporation, and that said instrument was signed
by him on behalf of said corporation by due authority.
------------------------------------
Notary Public
My Commission Expires:
- ------------------------
43
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement") entered into on this 27th day of
December 1999, among and Schick Technologies, Inc., a Delaware Corporation
("Schick"), David Schick and Allen Schick (the "Stockholders") and Greyston
Funding Corporation ("Greystone").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery hereof, Schick
Technologies, Inc., a New York Corporation ("Schick New York") and Schick
(collectively, the "Debtors"), and Greystone are entering into a Loan Agreement
of even date herewith (the "Loan Agreement"), pursuant to which the Greystone
has agreed, subject to the terms and conditions thereof, to extend a line of
credit to the Debtors not to exceed $7,500,000 in principal amount outstanding
at any time, with all loans and advances thereunder (the "Advances") and
interest thereon to be evidenced by that certain line of credit promissory note
of the Debtors of even date herewith in such maximum principal amount payable to
the order of Greystone (the "Note"); and
WHEREAS, in order to induce Greystone to make the Advances pursuant to the
Loan Agreement and to be evidenced by the Note, the Debtors have agreed to take
all requisite corporate action to cause (i) a certain number of individuals
designated by Greystone (the "Greystone Designees") to be elected or reelected
to the Board of Directors of both Schick and Schick New York (the "Boards")
pursuant to the terms and conditions of the Loan Agreement, (ii) that such
Greystone Designees shall not be removed from the Boards, (iii) an individual
appointed by Greystone to be appointed to serve on the Compensation Committee
and the Audit Committee and (iv) to cause Jeffrey Slovin to be appointed to the
office of President of Schick and shall not vote to remove him from such
position;
WHEREAS, David Schick and Allen Schick each individually own certain shares
of Comon Stock of Schick and Schick owns all of the shares of Common Stock of
Schick New York; and
WHEREAS, David Schick and Allen Schick are directors of Schick and Schick
New York.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION 1. Definitions. In addition to the terms defined elsewhere herein,
when used herein the following terms shall have the meanings indicated:
(a) "Affiliate" means with respect to the Stockholder, any Person who,
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, the Stockholder.
(b) "Beneficially Owned" means Stock owned by a Stockholder, or an
Affiliate or Family Member of that Stockholder.
<PAGE>
(c) "Family Member" means a parent, child, descendant or sibling of
the Stockholder, the spouse of any of the foregoing or the Stockholder, or
the estate, any guardian, custodian, conservator or committee of, or any
trust for the benefit of, the Stockholder or any of the foregoing.
(d) "Stock" means shares of Schick or Schick New York Common Stock.
(e) Unless otherwise separately defined in this Agreement, all
capitalized terms when used herein, shall have the same meaning and
definition as is set forth in the Loan Agreement.
SECTION 2. Termination.
(a) This Agreement may be terminated by written consent of Greystone.
(b) This agreement will automatically be terminated when all
Obligations of Schick (whether now existing or hereafter arising) under the
Loan Agreement have been paid in full and the Debtors shall have no further
right to extension or funding under the Loan Agreement.
SECTION 3. Election of Directors and Officers; Authority of Officers.
(a) Number of Directors. Each of the Stockholders agrees to take all
such lawful action, including affirmatively voting the shares of Stock
Beneficially Owned or controlled by such Stockholder, as necessary to cause
the Board of Directors of both Schick and Schick New York to consist of
such number of directors as required in order to elect the Greystone
Designees required by the provisions of Section 5.14 of the Loan Agreement.
(b) Covenant to Vote. Each of the Stockholders shall vote all of the
shares of the Stock Beneficially Owned or controlled by such Stockholder
(i) at each annual or special meeting of the Corporation's stockholders
called for the purpose of electing Directors or (ii) by written consent (in
lieu of an annual or special meeting) of the Corporation's stockholders for
the purpose of electing directors, in favor of the election or reelection
of the Greystone Designees as provided for in Section 5.14 of the Loan
Agreement.
(c) Filling Vacancies. If at any time there shall exist a vacancy on
the Corporation's Board of Directors by reason of the death, resignation or
removal of any Greystone Designee, unless the Board of Directors appoints a
Greystone designee to fill such vacancy, the Stockholders agree to promptly
take all such lawful action as reasonably within their power to duly call
and convene a special meeting (or by written consent in lieu of a special
meeting) of the Corporation's stockholders as soon as reasonably
practicable to appoint a Greystone Designee to fill such vacancy, and
thereafter each of the Stockholders shall affirmatively vote their Stock to
duly elect such director.
(d) Removal of Greystone Designees. Each of the Stockholders agrees
not to vote the Shares of Stock Beneficially Owned or controlled by such
Stockholder to remove a Greystone Designee.
2
<PAGE>
(e) Officers. Each Stockholder, who is a director of the Debtors,
shall in his capacity as director (subject to his fiduciary duties to
Schick) cause the following persons to hold such office with each of the
Debtors as hereafter designated:
Jeffrey Slovin - President
(f) Each Stockholder, who is a director of one of the Debtors, shall
in his capacity as director (subject to his fiduciary duties to Schick) (i)
cause the board of directors of the Debtors to be expanded as provided in
Section 5.14 of the Loan Agreement; (ii) vote to elect or reelect Greystone
Designees as provided in Section 5.14 of the Loan Agreement; (iii) not vote
to remove a Greystone Designee from the Board of Directors; (iv) vote to
elect or reelect individuals appointed by Greystone to the audit committee
and compensation committee as provided in Section 5.14 of the Loan
Agreement; and (v) not vote to remove an individual appointed by Greystone
to the audit committee and compensation committee.
(g) Each of the Stockholders shall vote all of the shares of the Stock
Beneficially Owned or controlled by such Stockholder (i) at the next annual
or special meeting of the Corporation's stockholders called for the purpose
of increasing the number of Schick's authorized shares and/or increasing
the number of stock options authorized under Schick's Employee Stock Option
Plan, or (ii) by written consent (in lieu of an annual or special meeting)
of the Corporation's stockholders for the purpose of increasing the number
of Schick's authorized shares and/or increasing the number of stock options
authorized under Schick's Employee Stock Option Plan, in favor of
increasing the number of Schick's authorized shares and/or increasing the
number of stock options authorized under Schick's Employee Stock Option
Plan.
SECTION 4. Severability: Governing Law. If any provision of this Agreement
shall be determined to be illegal and unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with their
terms. To the extent a provision in this Agreement is unenforceable as to time,
duration or geographic scope, the parties hereby stipulate that such court of
law is authorized to reduce such scope and enforce said provision to the fullest
extent permitted by law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, applicable to
instruments made and performed entirely in such state.
SECTION 5. Benefits of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, legal representatives and heirs and this Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
other Person.
SECTION 6. Notices. All notices and communications to be given or to
otherwise be made to any party to this Agreement shall be deemed to be
sufficient if contained in a written instrument delivered in person or duly sent
by first class registered or certified mail or by a recognized national courier
service, postage or charges prepaid, addressed to such party at such address as
appears above or on the stock books of the Corporation or such other address as
may be designated in writing by the addressee to the addressor. All such notices
and communications shall be deemed to have been received: (i) in the case of
personal delivery, on the date of such delivery, (ii) in the case of mailing, on
the fifth business day following such mailing, or (iii) in
3
<PAGE>
the case of delivery by a courier service, on the date of confirmation of
delivery of such notice, except notices of change of address which shall be
effective upon receipt.
SECTION 7. Modification. Except as otherwise provided herein, neither this
Agreement nor any provision hereof can be modified, changed, discharged or
terminated except by an instrument in writing signed by Greystone and each of
the Stockholders.
SECTION 8. Captions and References to Sections. The captions herein are
inserted for convenience only and shall not define, limit, extend or describe
the scope of this Agreement or affect the construction hereof. Sections
mentioned by number only are the respective sections of this Agreement.
SECTION 9. Availability of Equitable Remedies. Greystone and the
Stockholders acknowledge that a breach of the provisions of this Agreement will
not be adequately compensated by money damages. Accordingly, any party shall be
entitled, in addition to any other right or remedy available to it, to an
injunction restraining such breach or a threatened breach and to specific
performance of any such provision of this Agreement, and in either case no bond
or other security shall be required in connection therewith, and the parties
hereby consent to such injunction and to the ordering of specific performance.
SECTION 10. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all existing agreements among them concerning such subject matter.
SECTION 11. Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be evidenced by a
writing signed by the party against whom the waiver is sought to be enforced.
SECTION 12. Pronouns. Any masculine personal pronoun shall be considered to
mean the corresponding feminine or neuter personal pronoun, and vice versa, as
the context requires.
SECTION 13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument. This Agreement
shall become effective and binding upon each proposed party hereto upon the
execution and delivery of a counterpart hereof by such party.
SECTION 14. Sale of Stock. Nothing herein shall act to prohibit or prevent
the Stockholders from transferring, by sale, gift, bequest or in any other
manner, any or all of the Stock Beneficially Owned or controlled by such
Stockholder. Notwithstanding the foregoing, however, the Stockholder may not
transfer any of such Stock to a Director, Officer or 10% shareholder of Schick
or to an Affiliate or Family Member of such Stockholder unless said transferee
has agreed, in writing, to be bound by the applicable terms of this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
GREYSTONE FUNDING CORPORATION
By:
-------------------------------------------
Name:
Title:
SCHICK TECHNOLOGIES, INC., a Delaware Corporation
By:
-------------------------------------------
Name:
Title:
-------------------------------------------
David Schick
-------------------------------------------
Allen Schick
5
<PAGE>
Exhibit A
Stockholder Names Number of Shares, $.01 Par Value,
and Addresses Common Stock Owned of Schick
------------- ----------------------------
Technologies Inc., a Delaware
-----------------------------
Corporation
-----------
David Schick,
137-40 75th Road 2,183,300
Flushing, N.Y. 11367
Allen Schick, 1222 Woodside Parkway, 488,324
Silver Spring, MD 20910
Stockholder Names Number of Shares, $.01 Par Value,
and Addresses Common Stock Owned
------------- of Schick Technologies Inc.,
a New York Corporation
----------------------
Schick Technologies, Inc. 100
31-00 47th Avenue
Long Island City, N.Y. 11101
6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), entered into this 27th day
of December, 1999, by and between Greystone Funding Corporation, a Virginia
corporation (the "Buyer") and Schick Technologies, Inc., a Delaware corporation
(the "Stockholder" or "Schick").
W I T N E S S E T H:
--------------------
WHEREAS, the Stockholder is the record and beneficial owner of 468,000
shares, no par value per share of the outstanding capital stock (the "Stock"),
of Photobit Corporation (the "Company"); and
WHEREAS, the Buyer desires to purchase from the Stockholder and the
Stockholder desires to sell to the Buyer, all upon the terms and subject to the
conditions set forth in this Agreement, all (and not less than all) of the
Stock;
WHEREAS, in order to induce the Buyer to purchase the Stock, the
Stockholder has agreed to issue to the Buyer warrants to purchase 2,000,000
shares of common stock of Schick Technologies, Inc. ("Schick Common Stock") at
an exercise price of $0.75 per share;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE STOCK.
1.1 Stock Purchase. Subject to the terms and conditions of this
Agreement, on December 27, 1999 (the "Closing Date"), the Buyer shall
purchase and acquire from the Stockholder, and the Stockholder shall sell
and transfer to the Buyer, all (and not less than all) of the Stock, for
the Purchase Price provided for in Section 1.2 below. In furtherance
thereof, the Stockholder shall, on the Closing Date, deliver to the Buyer
the certificate(s) representing all of the Stock, duly endorsed for
transfer or accompanied by stock powers executed in blank for transfer.
1.2 Purchase Price. (a) The purchase price (the "Purchase Price") for
the Stock is $4.00 per share which equals One Million Eight Hundred
Seventy-two Thousand Dollars ($1,872,000), payable as follows: (a)
immediate payment of the aggregate sum of One Million ($1,000,000) Dollars
(the "Cash Portion") and (b) immediate delivery of the Buyer's
fully-executed promissory note in the aggregate principal amount of Eight
Hundred Seventy-two Thousand ($872,000) Dollars (the "Note"). On the
Closing date, the Buyer shall pay such Cash Portion (minus $60,000 of
expenses) by wire transfer of immediately available funds to the
Stockholder's designated account and shall deliver the duly executed Note
to the Stockholder.
1.3 Warrants. (a) Schick shall issue warrants to purchase Two Million
(2,000,000) shares of
<PAGE>
Schick Common Stock at an exercise price of $0.75 per share (subject to
adjustment to protect the holder against dilution as provided in the
Warrants) to the Buyer or its permitted designee. The Stockholder shall, on
the Closing Date, deliver such duly executed warrants to the Buyer.
(b) the Buyer shall return the Warrants to Schick if the DVI Consent
shall have not been received by February 15, 2000.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
In connection with the sale of the Stock to the Buyer, the Stockholder
hereby represents and warrants to the Buyer as follows:
2.1 Title to the Stock. The Stockholder is the valid and lawful record
and beneficial owner of all of the Stock, all of which Stock has been duly
authorized and validly issued and is fully paid and non-assessable, and is
free and clear of all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or federal
securities laws). On the Closing Date, the Buyer shall receive from the
Stockholder good, valid and marketable title to all of the Stock, free and
clear of all pledges, liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever.
2.2 Valid and Binding Agreement; No Breach.
Subject to the Shareholders Agreement,
(a) The Stockholder has full legal right, power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement, when executed and delivered by
the Stockholder, constitutes and will constitute the legal, valid and
binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally,
and except that the remedy of specific performance or similar
equitable relief is available only at the discretion of the court
before which enforcement is sought.
(b) Neither the execution and delivery of this Agreement or the
by the Stockholder, nor compliance with the terms and provisions of
this Agreement on the part of the Stockholder, will: (i) violate any
statute or regulation of any governmental authority, domestic or
foreign, affecting either Company or the Stockholder; (ii) require the
issuance of any authorization, license, consent or approval of any
federal or state governmental agency, or any other person; or (iii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree, agreement or
other agreement or instrument to which either Company or the
Stockholder is a party, or by which either Company or the Stockholder
is bound, or constitute a default thereunder.
(c) Consents. All necessary disclosures to and agreements and
consents of (a) any parties to any material contracts and/or any
licensing authorities which are
2
<PAGE>
material to either Company's business, and (b) any governmental
authorities or agencies to the extent required in connection with the
transactions contemplated by this Agreement, shall have been obtained
and true and complete copies thereof delivered to the Buyer.
(d) Settlement of Accounts. All debts, liabilities and other
monetary obligations owed to the Company by the Stockholder and/or any
of its Affiliates shall have been fully paid to the subject Company,
such that no such debts, liabilities or obligations shall be
outstanding on the Closing Date other than those incurred in the
regular course of business.
2.3 Capital Structure; Equity Ownership.
(a) Subject to the Shareholder Agreement, there are no
outstanding subscriptions, options, rights, warrants, convertible
securities or other agreements or calls, demands or commitments
obligating the Stockholder to transfer any shares of the Stock.
(b) The Stock represents all of the issued and outstanding shares
of the Company that are owned by the Stockholder.
(c) There are no actions, suits or proceedings pending or
threatened against or affecting the Stockholder that involve or relate
to the Stock.
2.4 Stockholder Board of Director Approval. This Agreement and the
sale of the Stock by the Stockholder has been approved by the Stockholder's
Board of Directors and duly executed resolutions of the Stockholder's Board
of Directors have been delivered to the Buyer.
2.5 Waiver of Right of First Refusal. (a) The Buyer shall have
attempted to obtain notice of the waiver of the Right of First Refusal
pursuant to the Shareholders Agreement, dated August 1, 1997, by and among
Photobit Corporation, its founders and certain of its shareholders (the
"Shareholder Agreement") from:
(i) the Company pursuant to Section 3.2 of the Shareholder
Agreement; and
(ii) from all of the founders pursuant to Section 3.3 of the
Shareholder Agreement.
(b) Notwithstanding the foregoing, however, in the event that the
Company or any of the founders exercise the Right of First Refusal
under the Shareholder Agreement, the Stock subject to such exercise
shall be sold by the Buyer to the exercising parties at a price of $4
per share.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
In connection with the Buyer's purchase of the Stock from the Stockholder,
the Buyer hereby represents and warrants to the Stockholder as follows:
3
<PAGE>
3.1 Organization, Good Standing and Qualification. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, with all necessary power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
3.2 Valid and Binding Agreement. Subject to the Shareholder Agreement,
this Agreement constitutes and will constitute the legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with
their respective terms, except to the extent that such enforceability may
be limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of
specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
3.3 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement by the Buyer, nor compliance with the terms and
provisions of this Agreement on the part of the Buyer, will: (a) violate
any statute or regulation of any governmental authority, domestic or
foreign, affecting the Buyer; or (b) require the issuance of any
authorization, license, consent or approval of any federal or state
governmental agency.
3.4 Investment. The Buyer is purchasing the Stock for its own account
for investment, and not with a view to the resale or distribution thereof
in violation of any applicable securities laws.
4. INDEMNIFICATION.
4.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates
delivered pursuant hereto, shall survive the execution and delivery to the
Buyer of this Agreement, and shall continue in full force and effect for so
long as the Stock is owned by the Buyer. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party; and all
covenants, promises and agreements in this Agreement contained, by or on
behalf of the Stockholder, shall inure to the benefit of the successors and
assigns of the Buyer.
4.2 General.
(a) The Stockholder shall defend, indemnify and hold harmless the
Buyer from, against and in respect of any and all claims, losses,
costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys'
fees, that the Buyer may incur, sustain or suffer ("Losses") as a
result of (i) any misrepresentation or breach of warranty by the
Stockholder under this Agreement, and/or (ii) any failure by the
Stockholder to perform any of the covenants or agreements of the
Stockholder contained in this Agreement.
4
<PAGE>
(b) The Buyer shall defend, indemnify and hold harmless the
Stockholder from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries
and deficiencies, including interest, penalties and reasonable
attorneys' fees, that the Stockholder may incur, sustain or suffer as
a result of any breach of, or failure by the Buyer to perform, any of
the representations, warranties, covenants or agreements of the Buyer
contained in this Agreement.
5. POST-CLOSING EVENTS.
5.1 Further Assurances. From time to time from and after the Closing
Date, the parties will execute and deliver to each other any and all
further agreements, instruments, certificates and other documents as may
reasonably be requested by the other party in order more fully to
consummate the transactions contemplated hereby, and to effect an orderly
transition of the business being acquired by the Buyer hereunder.
6. COSTS.
6.1 Finder's or Broker's Fees. Each of the Buyer and the Stockholder
represents and warrants that neither they nor any of their respective
Affiliates have dealt with any broker or finder in connection with the
transaction contemplated by this Agreement, and no broker or other person
is entitled to any commission or finder's fee in connection with this
transaction.
7. FORM OF AGREEMENT.
7.1 Effect of Headings. The Section headings used in this Agreement
are included for purposes of convenience only, and shall not affect the
construction or interpretation of any of the provisions hereof.
7.2 Entire Agreement; Waivers. This Agreement and the other agreements
and instruments referred to herein constitute the entire agreement between
the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party
hereto has made any representation or warranty or given any covenant to the
other except as set forth in this Agreement, and the other agreements and
instruments referred to herein. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
7.3 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
8. PARTIES.
5
<PAGE>
8.1 Parties in Interest. Nothing in this Agreement, whether expressed
or implied, is intended to confer any rights or remedies under or by reason
of this Agreement on any persons other than the parties to it and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligations or liability of any third
persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over or against any party
to this Agreement.
8.2 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to whom
notice is to be given, on the day after the delivery thereof to a
recognized overnight courier service for next-day delivery with all charges
prepaid or billed to the account of the sender, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, and properly
addressed as follows:
(a) If to the Stockholder:
Schick Technologies, Inc.
31-00 47th Avenue
Long Island City, NY 11101
Attn: David Schick
Telecopier # 718-729-3469
(b) If to the Buyer:
Greystone Funding Corporation
152 West 57th Street, 60th Floor
New York, New York 10019
Attn: Stephen Rosenberg
Telecopier # 212-649-9701
or to such other address as either party shall have specified by notice in
writing given to the other party.
9. MISCELLANEOUS.
9.1 Amendments and Modifications. No amendment or modification of this
Agreement shall be valid unless made in writing and signed by or on behalf
of the party to be charged therewith.
9.2 Non-Assignability; Binding Effect. Neither this Agreement, nor any
of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto, except that the Buyer may, without the consent of the Stockholder,
at any time and from time to time upon or after the Closing, assign as
collateral to the Buyer's lenders or other financing institutions any or
all of the Buyer's rights
6
<PAGE>
to indemnification under this Agreement. Otherwise, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and permitted assigns.
9.3 Governing Law; Jurisdiction. The parties hereto hereby consent to
the jurisdiction of all courts of the State of New York and the United
States District Court for the Southern District of New York, as well as to
the jurisdiction of all courts from which an appeal may be properly taken
from such courts, for the purpose of any suit, action or other proceeding
arising out of or with respect to this Agreement, the Note, the Warrants,
any other agreements, instruments, certificates or other documents executed
in connection herewith or therewith, or any of the transactions
contemplated hereby or thereby, or any of the parties' obligations
hereunder or thereunder. The parties hereto hereby expressly waive any and
all objections which they may have as to venue in any of such courts, and
also waive trial by jury in any such suit, action or proceeding. The Buyer
or Stockholder may file a copy of this Agreement as evidence of the
foregoing waiver of right to jury trial.
9.4 Schick and the Buyer hereby confirm their intent and agree that,
by the sale of the Stock hereunder, Schick is selling, assigning,
transferring and contributing the Stock absolutely and irrevocably and not
as collateral or security. If, notwithstanding the parties' intent to
effect an absolute sale, assignment, transfer and contribution, the
transactions contemplated hereby are characterized as a financing, Schick
hereby grants the Buyer a security interest in the Stock and this Agreement
shall be deemed a security agreement, within the meaning of the Uniform
Commercial Code, which (or a copy hereof) the Buyer may file in an
applicable filing office. Each of Schick and the Buyer hereby agrees to
treat the sale of the stock as a sale and contribution for tax, reporting
and accounting purposes (except to the extent that such assignment is not
recognized due to the reporting of taxes on a consolidated basis where
applicable and the application of consolidated financial reporting
principles under GAAP). Schick agrees to respond to any inquiries with
respect to the sale of the Stock hereunder by confirming the sale,
assignment, transfer and contribution of the stock to the Buyer, and to
note on its financial statements that the Stock has been sold to the Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
Buyer:
GREYSTONE FUNDING CORPORATION
By: /s/ Robert R. Barolak
Name: Robert R. Barolak
Title: Vice President
Stockholder:
SCHICK TECHNOLOGIES, INC.
By: _____________________
Name: David Schick
Title: CEO
7
WARRANT TO PURCHASE SHARES OF
COMMON STOCK OF SCHICK TECHNOLOGIES, INC.
December 27, 1999
Long Island City, New York
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") AND SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M., NEW YORK TIME
ON DECEMBER 27, 2006
THIS CERTIFIES THAT for value received, GREYSTONE FUNDING CORPORATION, a
Virginia corporation ("Greystone"), or their registered permitted assigns
(together with Greystone, hereinafter collectively referred to as the "Holder"),
may subscribe for and purchase, subject to the terms and conditions hereof, from
SCHICK TECHNOLOGIES, INC., a Delaware corporation (the "Company"), _____________
___________________________________ shares of Common Stock of the Company, par
value $0.01 per share (the "Common Stock"), at any time during the period (the
"Exercise Period") commencing at 9:00 a.m. New York Time on December 27, 1999
(the "Effective Date") and ending at 5:00 p.m. New York Time, on December 27,
2006, a date which is seven (7) years from the Effective Date (the "Expiration
Date"), at an exercise price which shall be equal to seventy-five ($0.75) cents
per share of Common Stock (the "Exercise Price"). The number of shares of Common
Stock issuable upon exercise of this Warrant, the Exercise Price, and the kind
of securities issuable upon exercise of this Warrant, shall be subject to
adjustment from time to time upon the occurrence of certain events as set forth
below. The shares of Common Stock issuable upon exercise of this Warrant, as
adjusted from time to time, is sometimes referred to hereinafter as "Warrant
Shares."
1. Exercise Price and Expiration. (a) This Warrant may be exercised in
whole or in part on any Business Day (as such term is hereinafter defined) at
any time during the Exercise Period upon surrender to the Company, at its
address for notices set forth in Section 8 of this Warrant (or at such other
office of the Company, if any, or such other office of the Company's duly
authorized agent for such purpose, as may be maintained by the Company for such
purpose and so designated by the Company by written notice to the Holder prior
to such exercise), together with the following: (i) a duly completed and
executed Notice of Warrant Exercise in the form annexed hereto, and (ii) payment
of the full Exercise Price for this Warrant or the portion thereof then being
exercised. This Warrant and all rights and options hereunder shall expire on,
and shall be immediately wholly null and void to the extent the Warrant is not
1
<PAGE>
properly exercised prior to the Expiration Date. As used in this Warrant the
term "Business Day" shall mean the time period between 9:00 a.m. New York, New
York Time and 5:00 p.m. New York, New York Time on any day other than any
Saturday, Sunday, or any other day on which commercial banks in New York, New
York are required or are authorized by law to close.
(b) Such Exercise Price shall be paid in lawful money of the United States
of America by bank cashier's check or by wire transfer of immediately available
funds to such account as shall have been designated in writing by the Company to
the Holder from time to time. In addition, Greystone may pay the Exercise Price
by forgiving all or a portion of the amount outstanding on the line of credit
extended by Greystone to the Company so that Greystone shall be deemed to have
paid the Company one dollar for every dollar of the amount outstanding on the
line of credit it has forgiven. In lieu of paying such Exercise Price in cash,
the Holder of this Warrant may elect to exercise certain "cashless" exercise
rights on each occasion he or it elects to exercise this Warrant. Such
"cashless" exercise shall be elected by the Holder's indicating on the Notice of
Exercise to the Company of his or its intention to exercise such cashless
exercise rights. The number of shares of Common Stock issuable to the Holder of
this Warrant upon any such "cashless" exercise shall be calculated as follows:
(i) The number of Warrant Shares issuable upon any full or partial
exercise of this Warrant (the "Subject Warrant Shares") shall be multiplied
by the Exercise Price then in effect. The product thereof shall be deemed
to be the "Exercise Cost."
(ii) The Subject Warrant Shares shall be multiplied by the closing
price of the Company's Common Stock, as traded on The Nasdaq Stock
Exchange, the OTC Bulletin Board or any other national securities exchange
and as reported by Bloomberg's, on the date that Notice of Exercise shall
be given by the Holder of the Warrant (the "Subject Closing Price"). The
product thereof shall be deemed to be the "Exercise Value."
(iii) The Exercise Value shall be subtracted from the Exercise Cost
and the positive result thereof, if any, shall be deemed the "Profit."
(iv) The Company shall issue that number of shares of Common Stock as
shall be determined by dividing the Profit by the Subject Closing Price.
(c) Upon the Holder's surrender of the Warrant and payment of the Exercise
Price or cashless exercise election, as set forth above, the Company shall
promptly issue and cause to be delivered to the Holder a certificate or
certificates for the total number of whole shares of Common Stock for which this
Warrant is then so exercised, as the case may be (adjusted to reflect the effect
of the anti-dilution provisions contained in Section 2 of this Warrant, if any)
in such denominations as are requested for delivery to the Holder, and the
Company shall thereupon deliver such certificates to the Holder. The Holder
shall be deemed to be the Holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder. If, at the
time this Warrant is exercised, a registration statement under the Securities
Act is not then in effect to register under said Securities Act the Warrant
Shares issuable upon
2
<PAGE>
exercise of this Warrant (together with any applicable state securities law
registrations), the Company may require the Holder to make such representations,
and may place such legends on certificates representing the Warrant Shares, as
may be reasonably required in the opinion of counsel to the Company to permit
the Warrant Shares to be issued without such registration, unless the Company
receives an opinion of counsel reasonably satisfactory to counsel to the Company
to the effect that said securities may be freely traded without registration
under the Securities Act.
(d) If the Holder shall exercise this Warrant with respect to less than all
of the Warrant Shares that may then be purchased under this Warrant, having
taken into account any prior exercise of the Warrant, the Company shall promptly
execute and deliver to the Holder a new warrant in the form of this Warrant for
the balance of such Warrant Shares.
2. Certain Anti-dilution Adjustments.
(a) If the Company shall (i) pay a dividend or make a distribution
generally to all or substantially all holder of shares of Company Common Stock
in the form of additional shares of Common Stock, (ii) subdivide or split or
reverse split or consolidate the outstanding shares of Common Stock into a
larger or smaller number of shares, (iii) effect an increase or decrease in the
number of issued and outstanding shares of Common Stock without consideration,
or (iv) effect a recapitalization which shall reclassify the outstanding shares
of Common Stock into one or more classes of Common Stock, then the number of
shares of Common Stock issuable upon exercise of this Warrant and the Exercise
Price shall be equitably and proportionately adjusted immediately following the
occurrence of any such event, and the Holder of record of this Warrant shall be
given notice of the same at such Holder's address in the Company's books and
records. An adjustment made pursuant to this Section shall become effective
immediately after the record date in the case of a dividend or distribution and
immediately after the effective date in the case of a subdivision, split,
combination or reclassification; provided, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the exercise price shall be recomputed
accordingly as of the close of business on such record date and thereafter such
exercise price in effect shall be as adjusted pursuant to this Section as of the
time of actual payment of such dividend or distribution.
(b) In case the Company shall issue shares of Common Stock ("Additional
Shares") or in case the Company shall issue rights, options or warrants to
purchase shares of Common Stock or securities convertible into or exchangeable
for Common Stock, in any case at a Price Per Share (as defined in paragraph (c)
below) or, where no cash payment is paid, for consideration having a reasonable
value which is lower than the Exercise Price then in effect (the "Trigger
Price"), the number of Warrant Shares hereafter purchasable upon the exercise of
this Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of this Warrant by the following fraction:
(A)(i) The number of shares of Common Stock outstanding immediately prior
to the issuance of such Additional Shares or rights, options, warrants or
convertible securities, plus (ii) the number of Additional Shares actually
subscribed for and purchased and
3
<PAGE>
shares of Common Stock issuable upon conversion or exercise of such rights,
options, warrants, or convertible securities, divided by
(B)(i) The number of shares of Common Stock outstanding immediately prior
to issuance of such Additional Shares or rights, options, warrants or
convertible securities plus (ii) the number of shares of Common Stock which
the aggregate Proceeds (as defined in paragraph (c) below) received by the
Company upon the sale of such Additional Shares or exercise or conversion
of such rights, options, warrants and convertible securities would purchase
at the Trigger Price.
Such adjustment shall be made whenever such Additional Shares or rights,
options, warrants or convertible securities are issued, and shall become
effective on the date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.
(a) For purposes of this Section 2, "Price Per Share" shall be defined
and determined according to the following formula:
R
P = ------
N
where
P = Price Per Share,
R = the "Proceeds" received or receivable by the Company which (i) in
the case of shares of Common Stock is the total amount received or
receivable by the Company in consideration for the sale and issuance
of such shares; (ii) in the case of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of securities
convertible into or exchangeable or exercisable for shares of Common
Stock, is the total amount received or receivable by the Company in
consideration for the sale and issuance of such rights, options,
warrants or convertible or exchangeable or exercisable securities,
plus the minimum aggregate amount of additional consideration, other
than the surrender of such convertible or exchangeable securities,
payable to the Company upon exercise, conversion or exchange thereof;
and (iii) in the case of rights, options or warrants to subscribe for
or purchase convertible or exchangeable or exercisable securities, is
the total amount received or receivable by the Company in
consideration for the sale and issuance of such rights, options or
warrants, plus the minimum aggregate amount of additional
consideration other than the surrender of such convertible or
exchangeable securities, payable upon the exercise, conversion or
exchange of such rights, options or warrants and upon the conversion
or exchange or exercise of the convertible or exchangeable or
exercisable securities; provided that in each case the proceeds
received or receivable by the Company shall be deemed to be the gross
cash proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof by
underwriters or
4
<PAGE>
dealers or other performing similar services or any expenses incurred
in connection therewith,
and
N = the "Number of Shares," which (i) in the case of Common Stock is
the number of shares issued; (ii) in the case of rights, options or
warrants to subscribe for or purchase shares of Common Stock or of
securities convertible into or exchangeable or exercisable for shares
of Common Stock, is the maximum number of shares of Common Stock
initially issuable upon exercise, conversion or exchange thereof; and
(iii) in the case of rights, options or warrants to subscribe for or
purchase convertible or exchangeable or exercisable securities, is the
maximum number of shares of Common Stock initially issuable upon
conversion, exchange or exercise of the convertible, exchangeable or
exercisable securities issuable upon the exercise of such rights,
options or warrants.
If the Company shall issue shares of Common Stock or rights, options,
warrants or convertible or exchangeable or exercisable securities for a
consideration consisting, in whole or in part, of property or other items other
than cash, the amount of such consideration shall be determined in good faith by
the majority vote of the Board of Directors of the Company whose determination
shall be conclusive and binding upon the Holder(s) of this Warrant.
(b) Whenever the number of Warrant Shares purchasable upon the exercise of
this Warrant is adjusted, as herein provided, the Exercise Price payable upon
exercise of this Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares purchasable immediately thereafter.
(c) No adjustment in the number of Warrant Shares purchasable hereunder
shall be required unless such adjustment would result in an increase or decrease
of at least one percent (1%) of the Exercise Price; provided that any
adjustments which by reason of this paragraph (c) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(d) No adjustment in the number of Warrant Shares purchasable upon the
exercise of this Warrant need be made under paragraph (b) or (c) if the Company
issues or distributes to the holder of this Warrant the shares, rights, options,
warrants or convertible or exchangeable securities, or evidences of indebtedness
or assets referred to in those paragraphs which the holder of this Warrant would
have been entitled to receive had this Warrant been exercised prior to the
happening of such event or the record date with respect thereto. In no event
shall the Company be required or obligated to make any such distribution
otherwise than in its sole discretion. No adjustment in the number of Warrant
shares purchasable upon the exercise of this Warrant need be made for sales of
Common Stock pursuant to a Subsidiary Company
5
<PAGE>
plan for reinvestment of dividends or interest. No adjustment need be made for a
change in the par value of the Common Stock.
(e) In the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the holder of this Warrant shall become
entitled to purchase any securities of the Company other than shares of Common
Stock, thereafter the number of such other shares so purchasable upon exercise
of this Warrant and the Exercise Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
paragraphs (a) through (d), inclusive, above.
3. Reorganization and Asset Sales.
If any capital reorganization or reclassification of the capital stock of
the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of the capital stock of the
Company to another corporation, or the sale of all or substantially all of the
assets or properties of the Company to another corporation, shall be effected in
such a manner so that Holder of Company Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Company
Common Stock, then, and in such event, the following provisions shall apply:
(a) Not more than 45 or less than 15 days prior to the consummation of any
such reorganization, reclassification, consolidation, merger or sale
(collectively, "Reorganization Transactions"), the Company shall notify the
Holder of the Reorganization Transaction (at the same time notice of same
shall be made generally available to the other Holders of Company Common
Stock), describing in such notice in reasonable detail the terms of the
Reorganization Transaction and the stock, securities or assets to be
received with respect to or in exchange for Common Stock of the Company. In
the event the Holder exercise this Warrant not more than 45 or less than 15
days prior to the consummation of the Reorganization Transaction, such
Holder shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock (collectively, "Reorganization
Consideration") on the same basis as the other Holder of Company Common
Stock participating in the Reorganization Transaction as if such Holder had
previously exercised this Warrant and held such number of Warrant Shares to
which they are entitled based on the Exercise Price.
(b) The Company shall not effect any such Reorganization Transaction unless
prior to or simultaneous with the consummation thereof, the successor
corporation (if other than the Company) resulting therefrom shall assume by
written instrument executed and made available to the Holder at the last
address of the Holder appearing on the books of the Company, the obligation
to deliver to the Holder such shares of stock, securities or assets, as, in
accordance with the foregoing provisions, the Holder may be entitled to
receive, any and all other liabilities and obligations of the Company
hereunder. In the event the Holder of this Warrant shall not exercise the
Warrant prior to or simultaneous with consummation of the Reorganization
Transaction, such Holder shall be entitled to receive a warrant to purchase
Common Stock in the successor corporation (if other than the Company) which
shall be appropriately adjusted as to exercise price, number of shares
6
<PAGE>
which may be purchased thereunder and other terms, so as to equitably
reflect the Reorganization Transaction and entitle the Holder to purchase
that number of shares of Common Stock of the successor corporation
equivalent in value to the consideration that such Holder would have
received had Holder exercised this Warrant immediately prior to or
simultaneously with such Reorganization Transaction. In the event the
successor corporation (if other than the Company) resulting from the
Reorganization Transaction shall be a privately-held company and the
Reorganization Consideration, in part or in whole, shall be in the form of
securities for which there is no readily ascertainable market value by
virtue of not being traded on any national market or exchange, the Company
shall not effect any such Reorganization Transaction unless prior to or
simultaneous with the consummation thereof, the successor corporation shall
agree by written instrument executed and made available to the Holder at
the last address of the Holder appearing on the books of the Company to pay
to the Holder a cash amount equivalent in value to the difference between
the Exercise Price and the Fair Market Value multiplied by the number of
Warrant Shares that such Holder would have received had the Holder
exercised this Warrant immediately prior to or simultaneously with such
Reorganization Transaction.
(c) If a purchase, tender or exchange offer is made to and accepted by a
holder of more than fifty (50%) percent of the outstanding shares of Common
Stock of the Company, the Company shall, prior to the consummation of any
consolidation, merger or sale to or with the person, firm or corporation
having made such offer or any affiliate of such person, firm or
corporation, give the Holder a reasonable opportunity of not less than 10
days to elect to receive upon the exercise of this Warrant, either the
stock, securities or assets then issuable with respect to the Common Stock
of the Company or the stock, securities or assets, or the equivalent,
issued to previous Holder of the Common Stock in accordance with such
purchase tender or exchange offer.
4. Notice of Adjustment.
Whenever the Exercise Price and the number of Warrant Shares issuable upon
the exercise of this Warrant shall be adjusted as herein provided, or the rights
of the Holder shall change by reason of other events specified herein, the
Company shall compute the adjusted Exercise Price and the number of adjusted
Warrant Shares in accordance with the provisions hereof and shall prepare a
certificate signed by its Chief Executive Officer, or its President, or its
Chief Financial Officer, setting forth the adjusted Exercise Price and the
adjusted number of Warrant Shares issuable upon the exercise of this Warrant or
specifying the other shares of stock, securities, or assets receivable as a
result of such changes in rights, and showing in reasonable detail the facts and
calculations upon which such adjustments or other changes are based. The Company
shall cause to be mailed to the Holder copies of such officer's certificate
together with a notice stating that the Exercise Price and the number of Warrant
Shares purchasable upon exercise of this Warrant have been adjusted and setting
forth the adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable upon the exercise of this Warrant.
5. Certain Representations of the Company.
7
<PAGE>
Throughout the Exercise Period, the Company has (i) all requisite power and
authority to issue this Warrant and the Warrant Shares, and (ii) sufficient
authorized and unissued shares of Common Stock to permit exercise of this
Warrant.
6. Certain Covenants of the Company.
(a) The Company shall take such steps as are necessary to cause the Company
to continue to have sufficient authorized and unissued shares of Common Stock
reserved in order to permit the exercise of the unexercised and unexpired
portion of this Warrant, if any.
(b) The Company covenants and agrees that all Warrant Shares issued upon
the due exercise of this Warrant will, upon issuance in accordance with the
terms hereof, be duly authorized, validly issued, fully paid and non-assessable
and free and clear of all taxes, liens, charges, and security interests created
by the Company with respect to the issuance thereof.
(c) The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Warrant Shares upon the exercise of this Warrant;
provided, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue of this Warrant or of
any certificates for Warrant Shares in a name other than that of the Holder upon
the exercise of this Warrant, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance 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.
(d) The Company covenants and agrees that if it fails (i) to register the
Warrant Shares as provided in the Registration Rights Agreement between the
Holder and the Company, dated of even date herewith, or (ii) to issue the shares
of Common Stock upon the proper exercise of the Warrant, then the Holder may
immediately commence an action for specific performance and/or damages.
7. No Shareholder Rights. No Holder of this Warrant shall, as such, be
entitled to vote or be deemed the holder of Common Stock or any other kind of
securities of the Company, nor shall anything contained herein be construed to
confer upon the Holder the rights of a shareholder of the Company or the right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or give or withhold consent to any
corporate action or to receive notice of meetings or other actions affecting
shareholders (except as otherwise expressly provided herein), or to receive
dividends or subscription rights or otherwise, until the date of Holder' proper
exercise of this Warrant as described herein.
8. Notices. Any notice, demand, request, waiver or other communication
under this Agreement must be in writing and will be deemed to have been duly
given (i) on the date of delivery if delivered by hand to the address of the
party specified below (including delivery by courier), or (ii) on the fifth day
after deposit in the U.S. Mail if mailed to the party to whom notice is to be
given to the address specified below, by first class mail, certified or
registered, return receipt requested, First Class postage prepaid:
8
<PAGE>
to the Company:
Schick Technologies, Inc.
31-00 47th Avenue
Long Island City, New York 11101
Attn: David Schick
the Holder: c/o Greystone & Co.
152 West 57th Street, 60th Floor
New York, New York 10019
Attn: Stephen Rosenberg
Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change will
be deemed to have been given until it is actually received by the party sought
to be charged with its contents.
9. General.
(a) This Warrant shall be governed by and construed in accordance with the
laws of the State of New York without regard to its conflict of laws provisions.
(b) Section and subsection headings used herein are included herein for
convenience of reference only and shall not affect the construction of this
Warrant or constitute a part of this Warrant for any other purpose.
(c) This Warrant may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument when instruments
originally executed by each party shall have been received by the Company.
(d) Greystone shall transfer a portion of this Warrant to Jeffrey Slovin
pursuant to the procedure in Section 9(e) below based on an agreement between
Greystone and Mr. Slovin.
(e) The Holder may surrender this Warrant to the Company in order to
receive a number of replacement warrants in various denominations to purchase in
the aggregate an equal number of Warrant Shares.
9
<PAGE>
IN WITNESS WHEREOF, the Company has duly executed this Warrant on and as of
the date first set forth above.
SCHICK TECHNOLOGIES, INC.
By:
---------------------------------
David Schick, CEO
10
<PAGE>
NOTICE
OF
WARRANT EXERCISE
TO SCHICK TECHNOLOGIES, INC.:
The undersigned hereby irrevocably elects to exercise the Warrant and to
purchase thereunder ____ full shares of Common Stock issuable upon the exercise
of such Warrant.
Please check the applicable method by which the undersigned elects to
exercise the Warrant:
____ The Exercise Price for this warrant shall be paid by delivery of
$___________ in cash as provided for in the Warrant.
____ The Exercise Price for this warrant shall be paid by Greystone's
forgiveness of $_______ of its line of credit.
____ The undersigned elects to exercise his or its "cashless" exercise rights in
the manner provided in Section 1(b) of the Warrant.
The undersigned requests that certificates for such Warrant Shares be
issued in the name of:
Name: ____________________________________
Address: _________________________________
Employer I.D. or S.S. #: _________________
<PAGE>
If such number of Warrants shall not be all the Warrants evidenced by the
Warrant document, the undersigned requests that a new document evidencing the
Warrants not so exercised issued and registered in the name of and delivered to:
_______________________________________
Name
_______________________________________
Address
_______________________________________
Employer I.D. or Social Security Number
Date: ________________ ----------------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
