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As filed with the Securities and Exchange Commission on July 30, 1997.
Registration No. 333-_____________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________________
MEDICAL GRAPHICS CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1316712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 OAK GROVE PARKWAY
SAINT PAUL, MINNESOTA 55127
(Address of Principal Executive Offices and zip code)
____________________________
MEDICAL GRAPHICS CORPORATION WARRANT AGREEMENT
MEDICAL GRAPHICS CORPORATION RESTRICTED STOCK GRANT AGREEMENT
(Full title of the Plans)
____________________________
Copy to:
Glenn D. Taylor, President Thomas G. Lovett, IV
Medical Graphics Corporation Lindquist & Vennum P.L.L.P.
350 Oak Grove Parkway 4200 IDS Center
Saint Paul, Minnesota 55127 Minneapolis, MN 55402
(612) 484-4874 (612) 371-3270
(Name, address and telephone
number, including area code,
of agent for service)
--------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Share Price Fee
- -------------------------------------------------------------------------------
Common Stock, 150,000 shares $3.875(1) $581,250(1) $176.14
$.05 par value,
to be issued
pursuant to the
Warrant Agreement
of Mark W. Sheffert
Common Stock, 30,000 $3.875(1) 116,250 $35.23
$.05 par value,
to be issued
pursuant to the
Restricted Stock
Grant Agreement of
Mark W. Sheffert
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) and (h) and based upon the average of the high and
low prices of the Company's Common Stock on the Nasdaq National Market on
July 23, 1997.
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PART I
Pursuant to Part I of Form S-8, the information required by Items 1 and 2
of Form S-8 is not filed as a part of this Registration Statement.
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange Commission
are hereby incorporated by reference:
(a) The Annual Report of the Company on Form 10-KSB for the fiscal year
ended December 31, 1996, as amended by Amendment No. 1 on
Form 10-KSB/A.
(b) The Quarterly Report of the Company on Form 10-QSB for the quarter
ended March 31, 1997.
(c) The Definitive Proxy Statement dated May 2, 1997 for the Annual
Meeting of Shareholders held on May 22, 1997.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the
completion or termination of this offering of shares of Common Stock shall be
deemed to be incorporated by reference in this Registration Statement and to be
a part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
The current description of the Company's Common Stock is as follows:
COMMON STOCK. The Company has one class of Capital Stock registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"), Common Stock, $.05 par value. The Company is authorized
to issue up to 10,000,000 shares of Common Stock. No share of Common Stock
is entitled to preference over any other share, and each share is equal to
any other share in all respects. Holders are entitled to one vote for each
share held of record at each meeting of shareholders. In any distribution
of capital assets, whether voluntary or involuntary, holders are entitled
to receive pro rata the assets remaining after creditors have been paid in
full. Holders of Common Stock have no preemptive rights. The outstanding
shares are, and the Common Stock offered hereby upon payment therefore will
be, fully paid and nonassessable.
CUMULATIVE VOTING. There is no cumulative voting for the election of
directors. Accordingly, the owners of a majority of shares of Common Stock
outstanding may elect all of the directors, if they choose to do so, and
the owners of the balance of such shares will not be able to elect any
directors.
DIVIDEND POLICY. The Company has adopted the policy of retaining all of
its earnings to finance the growth of its business and, accordingly, does
not anticipate payment of any dividends in the foreseeable future.
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CLASS A STOCK. In addition, in March 1997, the Company's Board of Directors
designated 500,000 shares of its Capital Stock as a new Class A Stock (the
"Class A Stock") and established certain rights and preferences with
respect to the Class A Stock. The Class A Stock has a liquidation
preference of $3.375 per share. Each Class A share is currently
convertible into one share of Capital Stock and has voting rights equal to
the Capital Stock into which it is convertible. The Company has a total of
444,445 shares of Class A Stock outstanding. The Class A Stock is not
registered pursuant to Section 12 of the Exchange Act.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that the personal liability
of a director for monetary damages for breach of fiduciary duty as a director is
limited to the fullest extent permitted by Minnesota law. Minnesota law provide
that a director is not liable to the Company or its shareholders for monetary
damages for a breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
shareholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law; (iii) under Sections
302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from
which the director derived an improper personal benefit; or (v) for any act or
omission occurring prior to the date such indemnification provision became
effective. Provisions regarding indemnification of officers and directors of
the Company are also contained in Section 45 of the Company's Bylaws.
Section 302A.521 of the Minnesota Business Corporation Act provides that a
corporation shall indemnify any person made or threatened to be made a party to
a proceeding by reason of acts or omissions performed in such person's official
capacity as an officer, director, employee or agent of the corporation against
judgments, penalties, fines, including without limitation, excise taxes assessed
against such person with respect to an employee benefit plan, settlements, and
reasonable expenses, including attorneys' fees and disbursements, incurred by
such person in connection with the proceeding if, with respect to the acts or
omissions of such person complained of in the proceeding, such person (i) has
not been indemnified by another organization or employee benefit plan for the
same expenses with respect to the same acts or omissions; (ii) acted in good
faith; (iii) received no improper personal benefit and Minnesota Statutes,
Section 302A.255 (regarding conflicts of interest), if applicable, has been
satisfied; (iv) in the case of a criminal proceeding, has no reasonable cause to
believe the conduct was unlawful; and (v) in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed that
the conduct was in the best interests of the corporation, or in the case of acts
or omissions by persons in their capacity for other organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation. In addition, Section 302A.521, subd. 3, of the Minnesota Statutes
requires payment or reimbursement by the corporation, upon written request, of
reasonable expenses (including attorneys' fees) incurred by a person in advance
of the final disposition of a proceeding in certain instances if a decision as
to required indemnification is made by a disinterested majority of the Board of
Directors present at a meeting at which a disinterested quorum is present, or by
a designated committee of the Board, by special legal counsel, by the
shareholders or by a court.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The issuance of the Warrant was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933.
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ITEM 8. EXHIBITS. (Filed electronically herewith)
Exhibit
-------
4.1 Warrant Agreement of Mark W. Sheffert
4.2 Restricted Stock Grant Agreement of Mark W. Sheffert
5.1 Opinion of Lindquist & Vennum P.L.L.P
23.1 Consent of Lindquist & Vennum P.L.L.P. (included in Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney (included on signature page)
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes to:
(1) File, during any period in which offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the small business issuer pursuant to the
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foregoing provisions, or otherwise, the small business issuer has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
5
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Saint Paul, State of Minnesota, on July 22, 1997.
MEDICAL GRAPHICS CORPORATION
By \s\ Glenn D. Taylor
---------------------------------------------------
Glenn D. Taylor, President and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned officers and directors of Medical Graphics Corporation
hereby constitute and appoint Glenn D. Taylor and Mark W. Sheffert, or either of
them, with power to act one without the other, our true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for us and
in our stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing necessary or advisable
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
the date and in the capacities indicated.
Signature
- ---------
\s\ Glenn D. Taylor Dated: July 22, 1997
- ------------------------------------------
Glenn D. Taylor, President,
Chief Executive Officer
(Principal Executive Officer) and Director
\s\ Dale H. Johnson Dated: July 22, 1997
- ------------------------------------------
Dale H. Johnson, Chief Financial
Officer (Principal Financial
Officer)
\s\ Mark W. Sheffert Dated: July 22, 1997
- ------------------------------------------
Mark W. Sheffert, Chairman
\s\ Anthony J. Adducci Dated: July 22, 1997
- ------------------------------------------
Anthony J. Adducci, Director
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\s\ Gerald T. Knight Dated: July 22, 1997
- ------------------------------------------
Gerald T. Knight, Director
\s\ W. Edward McConaghay Dated: July 22, 1997
- ------------------------------------------
W. Edward McConaghay, Director
\s\ Donald C. Wegmiller Dated: July 22, 1997
- ------------------------------------------
Donald C. Wegmiller, Director
\s\ John C. Penn Dated: July 22, 1997
- ------------------------------------------
John C. Penn, Director
\s\ John D. Wunsch Dated: July 22, 1997
- ------------------------------------------
John D. Wunsch, Director
7
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EXHIBIT 4.1
WARRANT
To Subscribe for and Purchase Common Stock of
MEDICAL GRAPHICS CORPORATION
THIS CERTIFIES THAT, for value received, MARK W. SHEFFERT or registered
assigns is entitled to subscribe for and purchase from MEDICAL GRAPHICS
CORPORATION (herein called the "Company"), a corporation organized and existing
under the laws of the State of Minnesota, at the price specified below (subject
to adjustment as noted below) at any time from and after the date hereof to and
including March 27, 2002, One Hundred Fifty Thousand (150,000) fully paid and
nonassessable shares of the Company's Common Stock (subject to adjustment as
noted below).
The warrant purchase price (subject to adjustment as noted below) shall be
$3.375 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, by written notice of exercise delivered to the
Company 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the shares of stock so purchased
shall be delivered to the holder hereof within a reasonable time, not exceeding
10 days, after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend under the heading
"Restriction on Transfer" below.
3. The Company covenants and agrees that all shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of issue or transfer upon exercise of
the subscription rights evidenced by this Warrant, a sufficient number of shares
of its Common Stock to provide for the exercise of the rights represented by
this Warrant.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of issuance
of this Warrant, be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the warrant purchase price, the holder of
this Warrant shall thereafter be entitled to purchase, at the warrant purchase
price resulting from
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such adjustment, the number of shares obtained by multiplying the warrant
purchase price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the warrant purchase price resulting from such
adjustment.
(b) In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares, the warrant purchase price in
effect immediately prior to such subdivision shall be proportionately reduced,
and conversely, in case the outstanding shares of Common Stock of the Company
shall be combined into a smaller number of shares, the warrant purchase price in
effect immediately prior to such combination shall be proportionately increased.
(c) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(e) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
(f) No fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, but, instead of any fraction of a share which would otherwise
be issuable, the Company shall pay a cash adjustment (which may be effected as a
reduction of the amount to be paid by the holder hereof upon such exercise) in
respect of such fraction in an amount equal to the same fraction of the market
price per share of Common Stock as of the close of business on the date of the
notice required by paragraph 1 above. "Market price" for purposes of this
paragraph 4(f) and for purposes of paragraph 11(d) hereof shall mean, if the
Common Stock is traded on a securities exchange or on the Nasdaq National Market
or Nasdaq Small Cap Market, the closing price of the Common Stock on such
exchange or the Nasdaq National Market or Nasdaq Small Cap Market, or, if the
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Common Stock is otherwise traded in the over-the-counter market, the last
reported sale price, in each case averaged over a period of 20 consecutive
business days prior to the date as of which "market price" is being determined.
If at any time the Common Stock is not traded on an exchange or the Nasdaq
National Market or Nasdaq Small Cap Market, or otherwise traded in the
over-the-counter market, the "market price" shall be deemed to be the higher of
(i) the book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company as of the last day of any month ending within 60 days preceding the date
as of which the determination is to be made, or (ii) the fair value thereof
determined in good faith by the Board of Directors of the Company as of a date
which is within l5 days of the date as of which the determination is to be made.
5. As used herein, the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock and shall also include any capital
stock of any class of the Company hereafter authorized which shall not be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company;
provided that the shares purchasable pursuant to this Warrant shall include
shares designated as Common Stock of the Company on the date of original issue
of this Warrant or, in the case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided for in paragraph 4(g)
above.
6. This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and
opinion by the Company, such holder shall be entitled to transfer this Warrant,
or to exercise this Warrant in accordance with its terms and dispose of the
shares received upon such exercise or to dispose of shares of Common Stock
received upon the previous exercise of this Warrant, all in accordance with the
terms of the notice delivered by such holder to the Company, provided that an
appropriate legend respecting the aforesaid restrictions on transfer and
disposition may be endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, at the principal office
of the Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that the bearer of
this Warrant, when endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares which may be subscribed for and purchased hereunder, each of such new
Warrants
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to represent the right to subscribe for and purchase such number of shares as
shall be designated by said holder hereof at the time of such surrender.
10. The Company will file a form S-8 Registration Statement covering the
shares of Common Stock issuable pursuant to exercise of this Warrant.
11. (a) In addition to and without limiting the rights of the holder of
this Warrant under the terms of this Warrant, the holder of this Warrant shall
have the right (the "Conversion Right") to convert this Warrant or any portion
thereof into shares of Common Stock as provided in this paragraph 11 at any time
or from time to time prior to its expiration, subject to the restrictions set
forth in paragraph (c) below. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the holder of this Warrant,
without payment by the holder of any exercise price or any cash or other
consideration, that number of shares of Common Stock equal to the quotient
obtained by dividing the Net Value (as hereinafter defined) of the Converted
Warrant Shares by the fair market value (as defined in paragraph (d) below) of a
single share of Common Stock, determined in each case as of the close of
business on the Conversion Date (as hereinafter defined). The "Net Value" of
the Converted Warrant Shares shall be determined by subtracting the aggregate
warrant purchase price of the Converted Warrant Shares from the aggregate fair
market value of the Converted Warrant Shares. Notwithstanding anything in this
paragraph 11 to the contrary, the Conversion Right cannot be exercised with
respect to a number of Converted Warrant Shares having a Net Value below $100.
No fractional shares shall be issuable upon exercise of the Conversion Right,
and if the number of shares to be issued in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the holder of
this Warrant an amount in cash equal to the fair market value of the resulting
fractional share.
(b) The Conversion Right may be exercised by the holder of this Warrant by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in paragraph (a) above as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), but not later than the expiration date of this Warrant.
Certificates for the shares of Common Stock issuable upon exercise of the
Conversion Right, together with a check in payment of any fractional share and,
in the case of a partial exercise, a new warrant evidencing the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder of this Warrant within 15 days following the Conversion
Date.
(c) In the event the Conversion Right would, at any time this Warrant
remains outstanding, be deemed by the Company's independent certified public
accountants to give rise to a charge to the Company's earnings for financial
reporting purposes, then the Conversion Right shall automatically terminate upon
the Company's written notice to the holder of this Warrant of such adverse
accounting treatment.
(d) For purposes of this paragraph 11, the "fair market value" of a share
of Common Stock as of a particular date shall be its "market price", calculated
as described in paragraph 4(k) hereof.
12. All questions concerning this Warrant will be governed and interpreted
and enforced in accordance with the internal law of the State of Minnesota.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of March 27, 1997.
MEDICAL GRAPHICS CORPORATION
By . . . . . . . . . . . . . . . . . . . . . . .
Its . . . . . . . . . . . . . . . . . . . . .
RESTRICTION ON TRANSFER
The securities evidenced hereby may not be transferred without (i) the
opinion of counsel satisfactory to the Company that such transfer may be
lawfully made without registration under the Federal Securities Act of 1933 and
all applicable state securities laws or (ii) such registration.
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FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto this Warrant, and appoints ______________________________________________
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated:
In the presence of:
______________________________________________
(Signature must conform in all respects to
the name of the holder as specified on the face of
this Warrant without alteration, enlargement or
any change whatsoever, and the signature must be
guaranteed in the usual manner)
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SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: MEDICAL GRAPHICS CORPORATION (the "Company")
The undersigned _________________________
Please insert Social Security or other
identifying number of Subscriber:
_________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $_______, such payment being made as provided on the face of this
Warrant.
The undersigned requests that certificates for such shares of Common Stock
be issued as follows:
Name: ________________________________________________________________
Address: ________________________________________________________________
Deliver to: ________________________________________________________________
Address: ________________________________________________________________
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated:
Signature ____________________________________
Note: The signature on this
Subscription Form must correspond with the
name as written upon the face of this Warrant
in every particular, without alteration or
enlargement or any change whatever.
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EXHIBIT 4.2
MANCHESTER COMPANIES, INC.
AMENDED AND RESTATED
RETAINER AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of January 12, 1997 confirms that
MEDICAL GRAPHICS CORPORATION ("MGC") has engaged, as of the date hereof,
Manchester Companies, Inc. ("MCI") to perform certain Organization
Reengineering/Renewal Services (the "Services") for MGC. In connection with the
foregoing, MGC and MCI agree that:
1. RETENTION. MGC hereby retains MCI on an exclusive basis in connection
with providing Organization Reengineering/Renewal Services for MGC as
described herein.
2. TERMINATION. The initial terms of this Agreement shall be for twelve
(12) months commencing on the date hereof. During the initial twelve
(12) month term, this Agreement may not be terminated by either MGC or
MCI except for failure to provide, using reasonably business
practices, the Services described herein. Following expiration of the
initial twelve (12) month term of this Agreement, either MCI or MGC
may terminate this Agreement at any time upon 30 days written notice,
delivered to the other, and without liability or continuing obligation
on the part of MCI. However, MGC's obligations to MCI shall continue
after the termination of this Agreement.
3. SERVICES TO BE PERFORMED:
A. Evaluate and analyze the business operations, financing and
capitalization of the Company and its Divisions and make
recommendations for improvement to MGC management and the Board.
MCI's activities will include, but not be limited to, control of
cash accounts, review of cash flow projections, review of cost
accounting systems, review of inventory controls, review of
overall accounting/control environment, recommendations for
expediting collection of accounts receivable, negotiations with
trade creditors, negotiations with banks regarding credit
agreements, negotiations with major suppliers/customers regarding
outstanding issues, review of sales/pricing mechanisms, and
assistance with decision/management oversight and processes.
B. Develop a short-term crisis management plan to assure MGC's
positive cash flow/profitability.
C. Develop and communicate proposals for refinancing/renewing MGC to
existing secured and unsecured creditors.
D. Make recommendations regarding refinancing through new sources as
appropriate.
E. Develop/implement strategy for communications to shareholders,
employees, creditors and capital markets.
F. Reengineer operations to assure acceptable gross margins.
G. Refocus/restructure the organization in accordance with the
crisis management plan.
<PAGE>
H. Assure organizational effectiveness through appropriate policies,
procedures, HR management and system controls.
I. Develop reliable financial reporting systems/procedures including
the timely preparation and review of Bank reporting/compliance
documents.
J. Provide the Board with timely updates on progress. Seek audit
committee approval for any significant changes in the Company's
current financial reporting policies and procedures.
K. Assist the Company in developing a definitive business plan
including, but not limited to, business/industry description,
management team resumes, products/services features and
functions, market research/analysis, estimated market
share/sales, design/development plans, operations plan, overall
schedule and critical risks/problems.
L. Assist the Company in obtaining replacement
financing.
M. Assist the Company in obtaining equity
investments.
MCI will be vested by the Board with the appropriate authority to effectively
execute the crisis management plan and the Services described herein. MCI will
report only to the Board.
4. FEES AND EXPENSES.
A. A monthly fee of $20,000 beginning with the effective date of
MCI's engagement and on the first of each month thereafter for a
period of eleven (11) months.
B. One hundred fifty thousand (150,000) Warrants for MGC's common
stock will be issued to MCI, said Warrants to be exercisable for
five (5) years from the effective date of this Agreement with an
exercise price of $3.375 per share, in the form of the Warrant
attached hereto as Exhibit A.
C. Thirty thousand (30,000) shares of MGC stock.
D. Fifty thousand (50,000) options to acquire MGC
stock at an exercise price of $3.375, which
options shall vest ratably over the term of this
Agreement and shall become fully vested upon a
change in control. The options granted hereunder
shall be in the form of Exhibit B attached hereto
and incorporated herein.
E. MGC agrees to, on an as-incurred basis, as documented by MCI, to
reimburse MCI for all reasonable out-of-pocket expenses incurred
in connection with the rendering of the Financing Services. MCI
will submit expense reimbursement bills on a monthly basis, and
MGC agrees that they will be paid within 10 days. Any individual
expense in excess of $200 will be subject to MGC's prior written
approval. MCI's fees do not include any fees charged by other
related entities involved in pursuit of the execution of the
Financing Services outlined herein. Such other fees include, but
are not limited to, those charged by legal counsel, auditors and
tax advisors, appraisal companies,
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<PAGE>
environment testing concerns, lenders, industry consultants and
other consultants or professionals as may be mutually determined
to be necessary.
F. Failure by MGC to perform in accordance with any of the terms and
conditions under this Paragraph 4 will result in all fees
described therein to become due and payable immediately. MGC
further agrees to reimburse MCI for any and all expenses,
including legal fees, incurred by MCI to collect such fees.
5. COOPERATION. MGC will cooperate with MCI and provide, where possible,
information reasonably required by MCI in connection with fulfilling
service obligations under this Agreement. In addition, MCI will
require the involvement of, and MGC agrees to provide reasonable
access to, the officers and directors of MGC.
6. CONFIDENTIALITY.
A. This Agreement and its contents, including any proprietary
company information, will be treated by MGC and MCI as
confidential except as required by law. MCI will also treat as
confidential the contemplated plans and strategies of MGC.
Neither MGC nor MCI will, unless required by a statute, rule,
regulation, agency or court, make any public or private
statements about MGC, their financing or structure, without the
prior consent of the other parties to this Agreement.
B. Without limiting the generality of Section 6(a), any advice
rendered by MCI pursuant to this Agreement may not, unless
required by an statute, rule, regulation, agency or court, be
disclosed publicly or privately in any manner without MCI's prior
written approval and will be treated as confidential.
C. MGC will provide MCI with all reasonable financial and other
information requested by MCI for the purpose of rendering its
Services pursuant to this Agreement. All non-public information
given to MCI by MGC will be treated by MCI as confidential by it
and will not be used by MCI for any purposes other than the
performance of the Services rendered to MGC under this Agreement.
D. With respect to information about their businesses provided by
MGC, MCI agrees that, for a period of one (1) year, the
information will be kept confidential by it and that access to
the information will be limited to those persons under its
supervision who may have a need to know the information. MCI
further agrees that such information shall be deemed to be the
property of MGC and, when in tangible form, shall be returned to
MGC upon request. MGC's information shall be used only for
Purposes expressed herein and may be used for other purposes only
with the prior written approval of MGC. MCI also agrees to keep
confidential in accordance herewith any analysis, compilation,
study, or other documents prepared by MCI for use in connection
with the above-mentioned Services.
E. In the event that any party hereto, or either of its
representatives, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena,
Civil Investigative Demand, similar process or otherwise), to
disclose any information of the other party, it is agreed that
the requested or required party will
3
<PAGE>
provide the other with prompt notice of such request so that the
other may seek an appropriate protective order and/or waive
compliance with the provisions of this Agreement. It is further
agreed that, if in the absence of a protective order or the
receipt of a waiver hereunder, any party or its representatives
is nonetheless, in the opinion of its respective counsel,
compelled to disclose information or else stand liable for
contempt or suffer other censure or penalty or other adverse
consequences, the requested party or its representative may
disclose such information without liability hereunder.
F. The phrase "information" does not include information which (i)
is or becomes available to the public other than as a result of a
disclosure in violation of the terms hereof; (ii) was in the
possession of a respective party on a non-confidential basis
prior to its disclosure under this Agreement; or (iii) becomes
available on a non-confidential basis from a source other than a
party hereto or its respective representative.
G. Because damages at law would be difficult to ascertain in the
event of the failure or refusal of either party hereto to comply
with the Provisions of this paragraph 6, each party, in addition
to, and not in limitation of, any of the rights, remedies or
damages available at law or in equity, shall (a) be entitled to
seek or restrain any such breach and (b) be entitled to seek the
recovery from the breaching party of all costs and expenses,
including reasonable attorneys' fees in connection therewith,
incurred by the party seeking to enforce or prevent any breach or
threatened breach of this paragraph 6.
7. INDEMNIFICATION. If, in connection with any Services or matters that
are the subject of this Agreement, MCI becomes involved in any
capacity in any action or legal proceeding, pending or threatened, MGC
agrees (i) to reimburse MCI for the reasonable legal fees,
disbursements of counsel and other expenses (including the cost of
investigation and preparation) incurred by MCI as such fees,
disbursements and other expenses are incurred; and (ii) to indemnify,
defend, and hold MCI harmless against any losses, claims, damages, or
liabilities, joint or several, to which MCI may become subject arising
out of any such action or legal proceeding.
8. The provisions of this Agreement shall, where applicable, survive the
expiration of the period of this Agreement, including any extensions
thereof.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof
and supersedes and cancels as of the date hereof all prior
understandings, written or oral, with respect to the subject matter
hereof.
10. GOVERNING LAW. This Agreement and the agreements contained herein
shall be governed by, and construed in accordance with, the laws of
the State of Minnesota, without giving effect to the principles of
conflicts of laws thereof,
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MANCHESTER COMPANIES, INC.
By_________________________________
Its________________________________
MEDICAL GRAPHICS CORPORATION
By_________________________________
Its________________________________
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<PAGE>
EXHIBIT 5.1
July 25, 1997
Medical Graphics Corporation
350 Oak Grove Parkway
Saint Paul, MN 55127
RE: OPINION OF COUNSEL AS TO LEGALITY OF 180,000 SHARES OF COMMON STOCK TO
BE REGISTERED UNDER THE SECURITIES ACT OF 1933
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933 on Form S-8 of 180,000 shares of Common Stock, $.05 par
value per share, of Medical Graphics Corporation (the "Company") offered to Mark
W. Sheffert pursuant to the Warrant Agreement dated March 27, 1997 (the
"Warrant") and the Restricted Stock Grant Agreement dated January 12, 1997 (the
"Stock Grant").
As general counsel for the Company, we advise you that it is our opinion,
based on our familiarity with the affairs of the Company and upon our
examination of pertinent documents, that the 180,000 shares of Common Stock to
be offered to Mark W. Sheffert by the Company under the Warrant and Stock Grant
will, when paid for and issued, be validly issued and lawfully outstanding,
fully paid and nonassessable shares of Common Stock of the Company.
The undersigned hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an Exhibit to the Registration Statement
with respect to said shares of Common Stock under the Securities Act of 1933.
Very truly yours,
LINDQUIST & VENNUM P.L.L.P.
\s\ Lindquist & Vennum P.L.L.P.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Medical Graphics Corporation on Form S-8 relating to the Warrant and Stock Grant
Agreements of Mark W. Sheffert of our report dated April 4, 1997 (April 15, 1997
as to the third paragraph of Note 11) on the 1996 financial statements
appearing in the Annual Report on Form 10-KSB of Medical Graphics Corporation
for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
July 28, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement of
Medical Graphics Corporation on Form S-8 pertaining to the Medical Graphics
Corporation Warrant Agreement and Medical Graphics Corporation Restricted Stock
Grant Agreement of our report dated February 16, 1996 with respect to the
consolidated financial statements of Medical Graphics Corporation included in
its Annual Report (Form 10-KSB) for the year ended December 31, 1996 filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
July 25, 1997
