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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2 )*
Medical Graphics Corporation
-------------------------------
(Name of Issuer)
Common Stock, $0.05 par value
---------------------------------
(Title of Class of Securities)
584907109
-----------------------------------------
(CUSIP Number)
Thomas G. Lovett IV
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telephone: (612) 371-3270
--------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 12, 1997
------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 5 Pages
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- ------------------------------
CUSIP NO. 584907109 Page _____ of ____ Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
FAMCO II LIMITED LIABILITY COMPANY, IRS ID # 41-1870858
FAMILY FINANCIAL STRATEGIES, INC., AS ITS MANAGER,
IRS ID # 41-1835679
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See Instructions)
(a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See instructions)
WC, BK
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION (UNITED STATES)
FAMCO II LIMITED LIABILITY COMPANY - DELAWARE; FAMILY FINANCIAL
STRATEGIES, INC. - MINNESOTA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 686,869
SHARES ----------------------------------------------------------------
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 686,869
----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
686,869
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See instructions) / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See instructions)
OO, IA, CO
- --------------------------------------------------------------------------------
Page 2 of 5 Pages
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ITEM 1. SECURITY AND ISSUER.
(a) NAME OF ISSUER
Medical Graphics Corporation
Common Stock, $.05 par value
(b) ADDRESS OF ISSUER'S PRINCIPAL EXECUTIVE OFFICE
350 Oak Grove Parkway
St. Paul, MN 55127
ITEM 2. IDENTITY AND BACKGROUND.
(a) NAME. This statement is being jointly filed by FAMCO II Limited
Liability Company ("FAMCO II") and its Manager, Family Financial
Strategies, Inc. ("FFS"). FAMCO II is the record holder of the stock
and FFS is a registered investment adviser.
(b) ADDRESS OF PRINCIPAL BUSINESS OFFICE. The principal address of FAMCO
II and FFS is:
Interchange Tower
600 South Highway 169
Suite 850
St. Louis Park, MN 55426-1204
(c) PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT. N/A
(d) CRIMINAL PROCEEDINGS. None.
(e) LITIGATION. None.
(f) CITIZENSHIP. FAMCO II is a Delaware limited liability company. FFS
is a Minnesota corporation.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Certain funds used in making the investment by FAMCO were borrowed from a bank
in the ordinary course of business on behalf of FAMCO II and certain of its
members.
Page 3 of 5 Pages
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ITEM 4. PURPOSE OF TRANSACTION.
FAMCO II has acquired the securities described in Item 3 above for
investment purposes.
FAMCO II may, from time to time (1) acquire additional shares of Common
Stock (subject to availability at prices deemed favorable to FAMCO II) in the
open market, in privately negotiated transactions, or otherwise, or (2) attempt
to dispose of shares of Common Stock in the open market, in privately negotiated
transactions or otherwise.
FAMCO II and FFS have no present plans or intentions that would result in
or relate to any of the transactions described in subparagraphs (a) through (j)
of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
(a) FAMCO II acquired and FFS, as the Manager of FAMCO II, is deemed
to have acquired beneficial ownership of 121,212 shares of common stock, $.05
par value, of the Company (the "Common Stock") at a purchase price of $4.125 per
share pursuant to a Stock Purchase Agreement dated November 10, 1997 (the
"Agreement") by and among the Company and FAMCO II, Special Situations Fund III,
L.P., Special Situations Private Equity Fund L.P. and Special Situations Cayman
Fund L.P. (the "Investors"). In addition, FAMCO II and FFS are deemed to
beneficially own an additional 121,212 shares of Common Stock as described
below. Under the terms of the Agreement, (i) the Company may require the
Investors to purchase an additional 121,212, 375,000, 500,000 and 125,000
shares, respectively, or (ii) the Investors may at their options purchase such
additional shares. If neither the Company nor the Investors exercise their
respective options, such options expire without further effect.
Therefore, the total amount beneficially owned by FAMCO II and FFS is
686,869 shares of Common Stock consisting of (i) 121,212 shares pursuant to the
Agreement, (ii) 121,212 shares deemed beneficially owned by virtue of the right
to purchase said shares under the Agreement, and (iii) 444,445 shares issuable
upon conversion of Class A Stock, previously reported on a Schedule 13D.
(b) The responses of FAMCO II and FFS to Items (7) through (11) of the
portions of the cover page of this Schedule which relate to beneficial ownership
of shares of Common Stock are incorporated herein by reference.
(c) Other than the transactions described in Item 3 above, FAMCO II and
FFS have not effected any transactions in the Common Stock during the past sixty
days.
(d) Not applicable.
(e) Not applicable.
Page 4 of 5 Pages
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ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Other than the Agreement referred to in Item 5, there are no contracts,
arrangements, understandings or relationships between FAMCO II or FFS and any
person with respect to any securities of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Title
- ------- -----
1 Joint Filing Agreement
2 Promissory Note
3 Stock Purchase Agreement dated November 10, 1997
4 Registration Rights Agreement, applicable to shares purchased
pursuant to the November 10, 1997 Stock Purchase Agreement
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned hereby certifies that the information set forth in this statement
is true, complete and correct.
Dated: November 20, 1997 FAMCO II LIMITED LIABILITY COMPANY
By Its Manager
Family Financial Strategies, Inc.
By: /s/ John D. Wunsch
----------------------------------
Its: Chief Executive Officer
Page 5 of 5 Pages
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EXHIBIT 1
JOINT FILING AGREEMENT
The undersigned, FAMCO II Limited Liability Company and Family Financial
Strategies, Inc., hereby agree that this Schedule 13D relating to securities of
Medical Graphics Corporation shall be filed on behalf of each of them.
November 20, 1997 FAMCO II LIMITED LIABILITY COMPANY
By Its Manager
Family Financial Strategies, Inc.
By: /s/ John D. Wunsch
-----------------------------------------
Its: Chief Executive Officer
FAMILY FINANCIAL STRATEGIES, INC.
By: /s/ John D. Wunsch
-----------------------------------------
Its: Chief Executive Officer
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EXHIBIT 2
PROMISSORY NOTE
Chicago, Illinois
$2,000,000.00 _____________, 1997
FOR VALUE RECEIVED, the undersigned, FAMCO II LIMITED LIABILITY COMPANY, a
Delaware limited liability company (the "BORROWER"), promises to pay to the
order of ___________ ______ (the "BANK") at its office at ____________________
the principal sum of Two Million and no/100 Dollars ($2,000,000.00) on August
30, 1998. The Borrower further promises to pay interest at such office on the
balance of principal remaining from time to time unpaid hereon at the rates and
times set forth in this Note.
SECTION 1. APPOINTMENT OF FISCAL AGENT.
The Borrower hereby irrevocably appoints Family Financial Strategies, Inc.
("FFS") as his/her fiscal agent for the purpose of receiving all notices
hereunder and selecting interest rates and interest options available to the
Borrower hereunder. The Bank is hereby authorized and directed to follow all
instructions of FFS with respect to all matters concerning this Note and to give
to FFS all notices hereunder or with respect to the Collateral, all of which
shall be binding upon the Borrower. The Borrower hereby indemnifies the Bank
from any liability or loss ensuing from the Bank's reliance upon such
instructions and notices. The Borrower acknowledges that FFS serves in a
similar role of fiscal agent for other participating Bell family members under a
Bank mortgage loan program, and that the interest rate alternatives available
under this Note shall be exercised on behalf of the Borrower by FFS on a common
and uniform basis for all or substantially all borrowers participating under
this program.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
SECTION 2.1. INTEREST RATE OPTIONS. (a) Subject to all of the terms
and conditions of this Section 2, portions of the principal indebtedness
evidenced by this Note (all of the indebtedness evidenced by this Note
bearing interest at the same rate for the same period of time being
hereinafter referred to as a "PORTION") may, at the option of FFS acting on
behalf of the Borrower, bear interest with reference to the Domestic Rate
(the "DOMESTIC RATE PORTION") or with reference to the Adjusted LIBOR Rate
("LIBOR PORTIONS"), and Portions may be converted from time to time from one
basis to another. The interest rate applicable to this Note will never be
greater than 25% (the "MAXIMUM RATE"). All of the indebtedness evidenced by
this Note which is not part of a LIBOR Portion shall constitute a single
Domestic Rate Portion, and all of the indebtedness evidenced by the Note
which bears interest with reference to a particular Adjusted LIBOR Rate for a
particular Interest Period shall constitute a single LIBOR Portion. Anything
contained herein to the contrary notwithstanding, there shall not be more
than one
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LIBOR Portion applicable to this Note outstanding at any one time. The
Borrower promises to pay interest on each Portion at the rates and times
specified in this Section 2.
(b) DOMESTIC RATE PORTION. The Domestic Rate Portion shall bear interest
at the rate per annum determined by subtracting the rate of 1/2 of 1% per annum
from the Domestic Rate, provided that if the Domestic Rate Portion or any part
thereof is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full thereof at the rate per annum determined by adding 2% to
the Domestic Rate which would otherwise be applicable thereto from time to time.
Interest on the Domestic Rate Portion shall be payable monthly in arrears on the
last day of each month and at maturity of this Note and interest after maturity
shall be due and payable upon demand.
(c) LIBOR PORTIONS. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding .70%
to the Adjusted LIBOR Rate for such Interest Period, provided that if any LIBOR
Portion is not paid when due (whether by lapse of time, acceleration or
otherwise) such Portion shall bear interest, whether before or after judgment,
until payment in full thereof through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding 2% to the interest
rate which would otherwise be applicable thereto, and effective at the end of
such Interest Period such LIBOR Portion shall automatically be converted into
and added to the Domestic Rate Portion and shall thereafter bear interest at the
interest rate applicable to the Domestic Rate Portion after default. Interest
on each LIBOR Portion shall be due and payable on the last day of each month and
at maturity (whether by lapse of time, acceleration or otherwise) and interest
after maturity shall be due and payable upon demand. Anything contained herein
to the contrary notwithstanding, the obligation of the Bank to create, continue
or effect by conversion any LIBOR Portion shall be conditioned upon the fact
that at the time no Default or Event of Default shall have occurred and be
continuing, and that the interest rate under this subsection (c) does not exceed
the Maximum Rate. Each LIBOR Portion under this Note and other loans
outstanding under the Bell family program referred to in Section 1 shall be in a
minimum amount of $1,000,000 or such greater amount which is an integral
multiple of $100,000.
SECTION 2.2. COMPUTATION OF INTEREST. All interest on the LIBOR Portions
of this Note shall be computed on the basis of a year of 360 days for the actual
number of days elapsed, and all interest on the Domestic Rate Portion of this
Note shall be computed on the basis of a year of 360 days for the actual number
of days elapsed.
SECTION 2.3. MANNER OF RATE SELECTION. FFS acting on behalf of the
Borrower shall notify the Bank (I) by 10:00 a.m. (Chicago time) at least three
(3) Business Days prior to the date upon which it requests that any LIBOR
Portion be created or that any part of the Domestic Rate Portion be converted
into a LIBOR Portion, and (it) by 10:00 a.m. (Chicago time) on the date upon
which it requests that any Domestic Rate Portion be created or that any part of
a LIBOR Portion be converted into a Domestic Rate Portion (each such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor). If FFS fails to notify the Bank on or before 10:00 a.m. (Chicago
time) on the third Business Day preceding the end of an Interest
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Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue
as a LIBOR Portion and the new Interest Period selected therefore such LIBOR
Portion shall automatically be converted into and added to the Domestic Rate
Portion as of and on the last day of such Interest Period. If any request is
made to convert a LIBOR Portion into another type of Portion available
hereunder, such conversion shall only be made so as to become effective as of
the last day of the Interest Period applicable thereto. All requests for the
creation, continuance or conversion of Portions under this Note shall be
irrevocable. Such requests may be written or oral and the Bank is hereby
authorized to honor telephonic requests for creations, continuances and
conversions received by it from any person the Bank in good faith believes to be
a person authorized to act on behalf of the Borrower hereunder, the Borrower
hereby indemnifying the Bank from any liability or loss ensuing from so acting.
SECTION 2.4. CHANGE OF LAW. Notwithstanding any other provisions of this
Note, if at any time the Bank shall determine in good faith that any change in
applicable laws, treaties or regulations or in the interpretation thereof makes
it unlawful for the Bank to create or continue to maintain any LIBOR Portion, it
shall promptly so notify FFS on behalf of the Borrower and the obligation of the
Bank to create, continue or maintain such LIBOR Portion under this Note shall
terminate as of the date of such determination until it is no longer unlawful
for the Bank to create, continue or maintain such LIBOR Portion. Upon receipt
of such notice from the Bank the Borrower shall, if the continued maintenance of
any LIBOR Portion is unlawful, thereupon prepay the outstanding principal amount
of the affected LIBOR Portion, together with all interest accrued thereon and
all other amounts payable to the Bank with respect thereto under this Agreement;
provided, however, that FFS on behalf of the Borrower may elect to convert the
principal amount of the affected Portion into the Domestic Rate Portion
available hereunder, subject to the terms and conditions of this Note.
SECTION 2.5. UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN LIBOR
OR ADJUSTED LIBOR RATE. Notwithstanding any other provision of this Note, if
prior to the commencement of any Interest Period, the Bank shall determine that
deposits in the amount of any LIBOR Portion scheduled to be outstanding during
such Interest Period are not readily available to the Bank in the relevant
market or by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining LIBOR or the Adjusted LIBOR Rate,
then the Bank shall promptly give notice thereof to FFS on behalf of the
Borrower and the obligations of the Bank to create, continue or effect by
conversion any LIBOR Portion, as the case may be, in such amount and for such
Interest Period shall terminate until deposits in such amount and for the
Interest Period selected by FFS on behalf of the Borrower shall again be readily
available in the relevant market and adequate and reasonable means exist for
ascertaining LIBOR or Adjusted LIBOR Rate, as the case may be.
SECTION 2.6 TAXES AND INCREASED COSTS. With respect to any LIBOR
Portion, if the Bank shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any
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central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending branch or the LIBOR Portions contemplated by this
Note (whether or not having the force of law) shall:
(I) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or disbursements
by, the Bank which is not in any instance already accounted for in
computing the interest rate applicable to such LIBOR Portion;
(ii) subject the Bank, any LIBOR Portion or this Note to the extent it
evidences such Portion, to any tax (including, without limitation, any
United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge, stamp tax, fee,
deduction or withholding in respect of any LIBOR Portion or this Note to
the extent it evidences such Portion, except such taxes as may be measured
by the overall net income or gross receipts of the Bank or its lending
branches and imposed by the jurisdiction, or any political subdivision or
taxing authority thereof, in which the Bank's principal executive office or
its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from the Borrower to the Bank under this Note to the extent it
evidences any LIBOR Portion (other than by a change in taxation of the
overall net income or gross receipts of the Bank); or
(iv) impose on the Bank any penalty with respect to the foregoing or
any other condition regarding its disbursement, any LIBOR Portion or this
Note to the extent it evidences any LIBOR Portion;
and the Bank shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to the Bank
of creating or maintaining any LIBOR Portion hereunder or to reduce the amount
of principal or interest received or receivable by the Bank (without benefit of,
or credit for, any prorations, exemption, credits or other offsets available
under any such laws, treaties, regulations, guidelines or interpretations
thereof), then the Borrower shall pay on demand to the Bank from time to time as
specified by the Bank such additional amounts as the Bank shall reasonably
determine are sufficient to compensate and indemnify it for such increased cost
or reduced amount. If the Bank makes such a claim for compensation, it shall
provide to FFS on behalf of the Borrower a certificate setting forth the
computation of the increased cost or reduced amount as a result of any event
mentioned herein in reasonable detail and such certificate shall be conclusive
if reasonably determined.
SECTION 2.7. FUNDING INDEMNITY. In the event the Bank shall incur any
loss, cost or expense (including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired or contracted to be acquired by the Bank to fund or maintain any LIBOR
Portion or the relending or reinvesting of such deposits
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or other funds or mounts paid or prepaid to the Bank) as a result of any failure
by the Borrower to create, borrow, continue or effect by conversion a LIBOR
Portion on the date specified in a notice given pursuant to this Note, then upon
the demand of the Bank, the Borrower shall pay to the Bank such amount as will
reimburse the Bank for such loss, cost or expense. If the Bank requests such a
reimbursement it shall provide to FFS on behalf of the Borrower with a
certificate setting forth the computation of the loss, cost or expense giving
rise to the request for reimbursement in reasonable detail and such certificate
shall be conclusive if reasonably determined.
SECTION 2.8. LENDING BRANCH. The Bank may, at its option, elect to make,
fund or maintain Portions of the loan hereunder at such of its branches or
offices as the Bank may from time to time elect.
SECTION 2.9. DISCRETION OF BANK AS TO MANNER OF FUNDING. Notwithstanding
any provision of this Note to the contrary, the Bank shall be entitled to fund
and maintain its funding of all or any part of this Note in any manner it sees
fit, it being understood, however, that for the purposes of this Note all
determinations hereunder shall be made as if the Bank had actually funded and
maintained each LIBOR Portion during each Interest Period applicable thereto
through the purchase of deposits in the relevant market in the amount of such
LIBOR Portion, having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the interest rate applicable to such LIBOR
Portion for such Interest Period.
SECTION 3. NOTATIONS AND REQUESTS.
The loan made against this Note, the status of all amounts evidenced by
this Note as constituting part of the Domestic Rate Portion or a LIBOR Portion,
and the rates of interest and Interest Periods applicable to such Portions shall
be recorded by the Bank on its books and records or, at its option in any
instance, endorsed on a schedule to this Note and the unpaid principal balance
and status, rates and Interest Periods so recorded or endorsed by the Bank shall
be PRIMA FACIE evidence in any court or other proceeding brought to enforce this
Note of the principal amount remaining unpaid thereon, the status of the loan
evidenced thereby and the interest rates and Interest Periods applicable
thereto; provided, however, that the failure of the Bank to record any of the
foregoing shall not limit or otherwise affect the obligation of the Borrower to
repay the principal mount of this Note together with seemed interest thereon.
Prior to any negotiation of this Note, the Bank shall record on a schedule
thereto the status of all amounts evidenced thereby as constituting part of the
Domestic Rate Portion or LIBOR Portion and the rates of interest and the
Interest Periods applicable thereto.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Bank that this Note does not
nor will the performance or observance by the Borrower of any of the matters and
things herein provided contravene any provision of law or any instrument or
agreement which affects the Borrower or any of its assets. The Borrower is not
engaged in the business of extending credit for the purpose
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of purchasing or carrying margin stocks (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System) and no part of the
proceeds of the loan evidenced hereby will be used to purchase or carry any
margin stock or extend credit to others for the purpose of purchasing or
carrying any margin stock.
SECTION 5. THE COLLATERAL.
This Note shall at all times be secured by first liens on certain
residential real property of the Borrower and on readily marketable investment
securities acceptable to the Bank (the "COLLATERAL") which shall be pledged to
the Bank by either the Borrower or FFS on behalf of the Borrower pursuant to
documentation acceptable to the Bank in form and substance (the "SECURITY
DOCUMENTS"). The Bank shall have the right to call for additional security
satisfactory to it should the value of the marketable investment securities
portion of the Collateral decline or be deemed by the Bank inadequate or
unsatisfactory. The Borrower understands the Bank determined that the
securities to be deposited initially with it by the Borrower or FFS must consist
of readily marketable and freely tradeable securities acceptable to the Bank in
an amount such that the total principal amount outstanding hereunder shall at no
time exceed 50% of the fair market value thereof (as determined by the Bank) but
the Borrower acknowledges and agrees that the Bank may by notice to FFS on
behalf of the Borrower require a higher collateral coverage or require
substitute collateral in the event that any security deposited with the Bank is
no longer satisfactory to it.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES.
SECTION 6. 1. DEFINITION. Any one or more of the following shall
constitute an Event of Default:
(a) Default in the payment when due of any principal of or interest
on this Note, whether at the stated maturity thereof or at any other time
provided in this Note;
(b) Any representation or warranty made by or on behalf of the
Borrower or other pledgors herein, in the Security Documents or in
connection with the transactions evidenced hereby proves untrue in any
respect;
(c) Default in the observance or performance of any other covenant,
condition, agreement or provision hereof or of the Security Documents;
(d) Failure of the Borrower to provide additional or substitute
collateral within three Business Days of demand of the Bank;
(e) Any judgment or judgments, writ or writs, or warrant or warrants
of attachment, or any similar process or processes which is not covered in
its entirely by insurance and which is in an aggregate amount in excess of
$10,000,000.00 shall be
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entered or filed against the Borrower or against any of his/her property or
assets and remain unstayed and undischarged for a period of 30 days from
the date of its entry;
(f) Any warranty of attachment, garnishment or any lien, levy or
similar process is filed on or with respect to any of the Collateral;
(g) The Borrower shall (I) have entered involuntarily against him/her
an order for relief under the Bankruptcy Reform Act of 1978, as amended,
(ii) admit in writing his/her inability to pay, or not pay, his/her debts
generally as they become due or suspend payment of its obligations, (iii)
make an assignment for the benefit of creditors, (iv) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, conservator, liquidator or similar official for him/her or any
substantial part of his/her property, (v) file a petition seeking relief or
institute any proceeding seeking to have entered against him/her an order
for relief under the Bankruptcy Reform Act of 1978, as amended, to
adjudicate him/her insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, marshalling of assets, adjustment
or composition of debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against him/her, or (vi) fail to contest in good faith any appointment or
proceeding described in Section 6.1(h) hereof;
(h) A custodian, receiver, trustee, conservator, liquidator or
similar official shall be appointed for the Borrower or any substantial
part of his/her property, or a proceeding described in Section 6.1(g)(v)
shall be instituted against the Borrower and such appointment continues
undischarged or any such proceeding continues undismissed or unstayed for a
period of 30 days; or
(I) Any party providing Collateral for this Note shall die or become
incompetent or any event specified in clauses (g) or (h) of this Section
6.1 shall occur with respect to any such party providing Collateral and in
any such case another party reasonably acceptable to the Bank shall not
have pledged collateral security for this Note which is acceptable to the
Bank in substitution for the Collateral provided by the party as to which
such an event or circumstance has occurred.
SECTION 6.2. REMEDIES FOR NON-BANKRUPTCY DEFAULTS. When any Event of
Default described in subsection (g) or (h) of Section 6.1 has occurred and is
continuing, the Bank may, by written notice to the Borrower: (I) declare the
principal of and the accrued interest on this Note to be forthwith due and
payable and thereupon this Note, including both principal and interest, shall be
and become immediately due and payable without further demand, presentment,
protest or notice of any kind and (ii) proceed to foreclose against or otherwise
realize upon any Collateral.
SECTION 6.3. REMEDIES FOR BANKRUPTCY DEFAULTS. When any Event of Default
described in subsection (g) or (h) of Section 6.1 hereof has occurred and is
continuing, this Note shall
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immediately become due and payable without presentment, demand, protest or
notice of any kind and the Bank may proceed to foreclose against or otherwise
realize upon the Collateral and exercise any other action, right, power or
remedy permitted by applicable law.
SECTION 7. DEFINITIONS.
As used in this Note, the following terms shall have the following
meanings:
"ADJUSTED LIBOR RATE" shall mean a rate per annum determined pursuant to
the following formula:
Adjusted LIBOR Rate = LIBOR
-----------------
100%-Reserve Percentage
"RESERVE PERCENTAGE" shall mean, for the purpose of computing the Adjusted
LIBOR Rate, the maximum rate of all reserve requirements (including, without
limitation, any marginal emergency, supplemental or other special reserves)
imposed by the Board of Governors of the Federal Reserve System (or any
successor) under Regulation D on Eurocurrency liabilities (as such term is
defined in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject to any amendments to such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such Interest Period.
For purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for prorations, exemptions or offsets under Regulation D. "LIBOR" means, for an
Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such rate
is available, and (b) if the LIBOR Index Rate cannot be determined, the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in
immediately available funds are offered to the Agent at 11:00 a.m. London,
England time) two (2) Business Days before the beginning of such Interest Period
by three (3) or more major banks in the interbank eurodollar market selected by
the Bank for a period equal to such Interest Period and in an amount equal or
comparable to the principal amount of the LIBOR Portion scheduled to be made
available by the Bank.
"LIBOR INDEX RATE" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day two Business Days before the commencement of
such Interest Period.
"TELERATE PAGE 3750" means the display designated as "PAGE 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service or such other service m may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
14
<PAGE>
"BUSINESS DAY" means a day on which the Bank is open for business in
Chicago, Illinois other than a Saturday or Sunday and, when used with respect to
LIBOR Portions, a day on which the Bank is also dealing in United States dollar
deposits in London, England and Nassau, Bahamas.
"COLLATERAL" means all of the real and personal property security for this
Note provided to the Bank from time to time whether by the Borrower or others.
"DEFAULT" means an event which with the passage of time, giving of notice
or both would constitute an Event of Default under this Note.
"DOMESTIC RATE" shall mean a variable interest rate which may change
monthly, and for any calendar month shall be equal to the highest prime rate as
published in the Money Rates section of THE WALL STREET JOURNAL on the first
business day of that calendar month. In the event THE WALL STREET JOURNAL does
not publish a prime rate, the Bank may substitute a comparable, readily
ascertainable index.
"EVENT OF DEFAULT" means any of the events or conditions specified as such
in Section 6 hereof.
"INTEREST PERIOD" shall mean, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending one (1), three (3) or six (6)
months thereafter as selected by the Borrower in its notice as provided herein;
PROVIDED THAT, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(I) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period for a
LIBOR Portion the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
this Note; and
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof.
For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.
15
<PAGE>
"SECURITY DOCUMENTS" means collectively any agreements now or hereafter
executed and delivered to the Bank in respect of the Collateral.
SECTION 8. MISCELLANEOUS.
SECTION 8.1. NO WAIVER OF RIGHTS. No delay or failure on the part of the
Bank or on the part of the holder or holders of the Note in the exercise of any
power or right shall operate as a waiver thereof, nor as an acquiescence in any
Default or Event of Default, nor shall any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right, and the rights and remedies hereunder of the Bank
and of the holder or holders of the Note are cumulative to, and not exclusive
of, any rights or remedies which any of them would otherwise have.
SECTION 8.2. HOLIDAYS. (a) If any payment of principal or interest on
the Domestic Rate Portion shall fall due on a day which is not a Business Day,
the payment date thereof shall be extended to the next Business Day and interest
at the rate such Portion bears for the period prior to maturity shall continue
to accrue on such principal from the stated due date thereof to and including
the next succeeding Business Day on which the same is payable.
(b) If any payment of principal or interest on any LIBOR Portion shall
fall due on a day which is not a Business Day, the payment date thereof shall be
extended to the next date which is a Business Day and the Interest Period for
such Portion shall be accordingly extended, unless as a result thereof any
payment date would fall in the next calendar month, in which case such payment
date shall he the next preceding Business Day and the relevant Interest Period
shall be correspondingly abbreviated. In either case, the next Interest Period
shall be measured from the payment date so adjusted.
SECTION 8.3. COSTS AND EXPENSES. The Borrower agrees to pay on demand
all of the reasonable costs and expenses of the Bank in connection with the
negotiation, preparation, execution and delivery of this Note and the other
instruments and documents to be delivered hereunder or in connection with the
transactions contemplated hereby, including the fees and out-of-pocket expenses
of Messrs. Chapman and Cutler, special counsel to the Bank; all reasonable costs
and expenses of the Bank (including attorneys' fees) incurred in connection with
any consents or waivers hereunder or amendments hereto which requires any change
in the documentation relating to this Note or any Collateral; and all reasonable
costs and expenses (including attorneys' fees), if any, incurred by the Bank or
any other holders of the Note in connection with the enforcement of this Note
and the other instruments and documents to be delivered hereunder and in
connection with endeavoring to preserve, protect, perfect or realize upon the
Collateral.
SECTION 8.4. SURVIVAL OF INDEMNITIES. All indemnities and other
provisions relative to reimbursement to the Bank of amounts sufficient to
protect the yield of the Bank with respect to the indebtedness evidenced by this
Note, including, but not limited to, Sections 2.6 and 2.7 hereof, shall survive
the termination and the payment of this Note.
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<PAGE>
SECTION 8.5. NOTICES. All communications provided for herein shall be in
writing or by telecopy addressed to the Bank at P.O. Box 755, 111 West Monroe
Street, Chicago, Illinois 60690, Attention: Thomas Payne, telephone number
(312) 3479, facsimile number (312) 461-6188, and if to the Borrower, addressed
to the Borrower in care of Family Financial Strategies, Inc., Interchange Tower,
600 South Highway 169, Suite 850, St. Louis Park, Minnesota 55426-1204,
Telephone number (612) 540-0111, Facsimile number (612) 540-0444. Any notice
shall be in writing and shall be deemed to have been given or made when served
personally or when received if sent by United States mail and any notice given
by telecopy shall be deemed given when transmitted (receipt confirmed by the
sender's transmission equipment) except that rate setting notices to the Bank
shall only be deemed effective upon actual receipt by it.
SECTION 8.6 GOVERNING LAW; WAIVERS; MISCELLANEOUS. This Note shall be
governed and construed in accordance with federal law and the laws of the State
of Illinois without regard to principles of conflicts of laws. The Borrower
hereby waives presentment for payment and demand. This Note cannot be changed
or terminated orally. All of the rights given to the Bank hereunder shall inure
to the benefit of its successors and assigns. If more than one person signs
this Note as Borrower, then the term "Borrower" as used herein shall mean all of
such parties, jointly and severally.
This Note is issued in substitution and replacement for and evidences in
part the indebtedness formerly evidenced by that certain note of the undersigned
dated March 31, 1997, payable to the order of the Bank in its face principal
amount of $1,200,000.00.
FAMCO II LIMITED LIABILITY COMPANY,
a Delaware limited liability company
By: Family Financial Strategies, Inc.
Its: Manager
By:
------------------------------------------
Its:
-----------------------------------
17
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EXHIBIT 3
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (including the Exhibits hereto, this
"Agreement"), dated as of November 10, 1997 is entered into by and among the
Investors listed on Exhibit A hereto (each an "Investor" or jointly the
"Investors") and MEDICAL GRAPHICS CORPORATION, a Minnesota corporation (the
"Company").
AGREEMENTS
1. SUBSCRIPTION FOR SHARES
1.1 NUMBER OF SHARES AND PURCHASE PRICE
Subject to the terms and conditions hereof, each Investor agrees, severally
and not jointly, to purchase at each Closing and the Company agrees to issue and
sell to each Investor that number of shares of the Company's Common Stock set
forth opposite each Investor's name on Exhibit A hereto (the "Shares") at a
price of $4.125 per share, which was equal to the average closing price of the
Company's Common Stock as quoted on the Nasdaq SmallCap Market for the ten days
prior to October 30, 1997 (the "Purchase Price").
1.2 INITIAL CLOSING
The purchase and sale of the Shares at the Initial Closing (as defined
below) shall be deemed to take place at the offices of Lindquist & Vennum
P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402,
at 1:00 p.m., on November 12, 1997, or at such other time and place as the
Company and Investors mutually agree upon orally or in writing (which time and
place are designated as the "Initial Closing"). At the Initial Closing the
Company shall deliver to each Investor a certificate representing the Shares
which such Investor is purchasing at the Initial Closing (as set forth on
Exhibit A hereto) against delivery to the Company by such Investor of a check or
wire transfer in the amount of the purchase price therefor payable to the
Company's order.
1.3 SUBSEQUENT CLOSING
The purchase and sale of an aggregate of the remaining Shares shall take
place at a subsequent closing or closings to be held at the offices of Lindquist
& Vennum P.L.L.P., as set forth above on either of the following dates: (a)
five business days from the date that the Company receives notice from any
Investor that such Investor elects to purchase such number of Shares as is set
forth opposite such Investor's name on Exhibit A under the "Subsequent Closing"
provided that such closing occurs on or prior to February 23, 1998; or (b) five
business days from the date that the Investors receive notice from the Company
that the Board of Directors of the
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Company has voted to consummate the Subsequent Closing (as defined below),
provided, however, that such closing occurs on or prior to February 23, 1998; or
(c) such other time and place as the Company and Investors shall mutually agree
in writing (which time and place are designated as the "Subsequent Closing").
At the Subsequent Closing, the Company shall deliver to an Investor a
certificate representing the Shares which such Investor is purchasing at such
Subsequent Closing (as set forth on Exhibit A hereto) against delivery to the
Company by such Investor of a check or wire transfer in the amount of the
purchase price therefor payable to the Company's order. If, by the close of
business on February 23, 1998, an Investor has not provided notice to the
Company of its intent to purchase additional shares and the Company has not
given the Investors notice that the Board of Directors has voted to consummate
the transaction, then the obligation of the Company to sell shares to such
Investor and the obligation of such Investor to purchase the shares shall be
terminated.
1.4 CONDITIONS TO SUBSEQUENT CLOSING
Notwithstanding anything to the contrary in this Agreement, the obligation
of each Investor to purchase the Shares set forth on Exhibit A hereto at the
Subsequent Closing shall be subject to the fulfillment of the following
conditions:
(1) There shall not have occurred since the execution of this Agreement
any material adverse change in the business, assets, financial
condition, result of operations, affair, or prospects of the Company;
(2) The Representations and Warranties of the Company set forth in Section
2 shall be true and correct as of the date of such closing and the
Company shall have performed all obligations required to be performed
by it prior to such Subsequent Closing;
(3) There shall be no action or suit pending or to the knowledge of the
Company, threatened against the Company, that questions the validity
of this Agreement or the issuance of any security hereunder, or the
right of the Company to enter into this Agreement or to consummate the
transactions contemplated hereby.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Investor as follows:
2.1 ORGANIZATION AND STANDING
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Minnesota. The Company has all
requisite power and authority to own and operate its properties and assets and
to carry on its business as currently conducted and as proposed to be conducted.
The Company is duly qualified to do business as a foreign corporation
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in all jurisdictions in which the failure to be so qualified would have a
material adverse effect on the Company's properties or business as now conducted
or as proposed to be conducted.
2.2 CORPORATE POWER
The Company has all requisite legal and corporate power to execute and
deliver this Agreement and the other agreements contemplated hereby, to issue
the Shares hereunder, and to carry out and perform its obligations under the
terms of this Agreement.
2.3 CAPITALIZATION
The authorized capital stock of the Company, the designation(s) of classes
of stock and the rights and preferences of stock are set forth on Schedule 2.3.
All issued and outstanding shares of the Company's capital stock as of the date
hereof have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in compliance with applicable federal and state
securities laws. Except as otherwise provided in the Certificate of Rights and
Preferences of the Class A Stock, no shareholder of the Company has any rights
or preferences not afforded all shareholders of the Company. No shareholder has
any pre-emptive or approval right pertaining to the sale and purchase of the
Shares by statute, contractual obligation or otherwise.
2.4 AUTHORIZATION
All corporate action on the part of the Company, its officers, directors
and shareholders necessary for the authorization, execution, delivery and
performance by the Company of this Agreement; the authorization, issuance, sale
and delivery of the Shares, and the performance of all of the Company's
obligations hereunder has been taken. This Agreement, when executed and
delivered by the Company and Investor shall constitute a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency or creditors' rights and rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.5 VALID ISSUANCE
The Shares, when issued, sold and delivered in accordance with this
Agreement, will be duly authorized and validly issued, fully paid and
nonassessable, will be free and clear of any liens or encumbrances.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS
Except as set forth on Schedule 2.6, the Company is not in violation of any
term of the Articles or its Bylaws, any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree, order to which the
Company is subject or any statute, rule or regulation applicable to the Company.
The execution, delivery, and performance of and compliance with this
20
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Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation, or require consent under or be in conflict with or
constitute, with or without the passage of time or giving of notice or both, a
breach or default under any such term, or result in the creation of any lien,
mortgage, pledge, encumbrance or charge upon any of the properties or assets of
the Company.
2.7 LITIGATION
Except as set forth on Schedule 2.7 hereof, there are no actions, suits,
proceedings or investigations pending against the Company or any of its
properties before any court or governmental agency (nor, to the Company's
knowledge, is there any reasonable basis therefor or threat thereof). The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment, or decree of any court or governmental agency or
instrumentality. There is no action, suit, proceeding, or investigation by the
Company currently pending or that the Company intends to initiate.
2.8 TAX RETURNS
The Company has filed all federal, state and other tax returns required to
have been filed by it and has paid all taxes which have become due and payable.
The Company has not been advised that any of its returns, federal, state or
other, have been or are being audited as of the date thereof. There are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment of any tax or deficiency against the Company, nor
are there any actions, suits, proceedings or claims now pending against the
Company in respect of any tax or assessment. There is no pending or, to the
Company's knowledge, threatened investigation of the Company by any federal,
state, foreign or local authority relating to any taxes or assessments, or any
claims for additional taxes or assessments asserted by any such authority.
2.9 GOVERNMENTAL CONSENTS
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement or the offer, sale or issuance of the
Shares or the consummation of any other transaction contemplated hereby under
applicable state securities laws, which filings and qualifications, if required,
will be accomplished within the required statutory period, and the filing
pursuant to Regulation D promulgated under the Securities Act of 1933, as
amended (the "1933 Act"), which filing will be made within 15 days of the
execution hereof.
2.10 ACCURACY OF INFORMATION
The information which has been furnished to the Investors is true and
correct and accurate in all material respects as of the date hereof except for
financial data which is accurate as of the
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date shown therein. Other than those listed on Schedule 2.10, there are no
employment agreements, stock option plans or compensation plans of the Company.
2.11 USE OF PROCEEDS
The proceeds received from the sale of Shares shall be used for general
business purposes of the Company. No commissions are payable in connection with
the sale of the Shares.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor hereby represents and warrants, severally and not jointly, to
the Company as follows:
3.1 AUTHORIZATION
This Agreement, when executed and delivered by Investor and the Company,
will constitute a valid and legally binding obligation of Investor, enforceable
against Investor in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency or creditors' rights and rules of
law governing specific performance, injunctive relief or other equitable
remedies.
3.2 EXPERIENCE
Investor has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its investment
in the Company and has the capacity to protect its own interests. Investor
acknowledges that the Shares are a speculative risk. Investor is able to fend
for itself in the transactions contemplated by this Agreement, can bear the
economic risk of its investment in the Shares (including possible complete loss
of such investment) for an indefinite period of time and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Shares.
3.3 INVESTMENT PURPOSE
Investor is acquiring the Shares for investment for its own account, not as
a nominee or agent, and not with a view to, or for resale in connection with,
any distribution thereof. Investor understands that the Shares have not been
registered under the 1933 Act by reason of a specific exemption from the
registration provisions of the 1933 Act, the availability of which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein. The Investor
understands that the Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving any public offering and that under such laws and
applicable regulations the Shares may be resold without registration under the
1933 Act only in certain limited circumstances.
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3.4 ACCESS TO DATA
Investor and its representatives have been afforded access to corporate
books, financial statements, records, contracts, documents and other information
concerning the Company (to the extent such exists), and to its offices and
facilities, have been afforded an opportunity to ask such questions of the
Company's officers, employees, agents, accountants and representatives
concerning the Company's existing and proposed business, operations, financial
condition, assets, liabilities and other relevant matters as they have deemed
necessary or desirable, and have been given all such information as has been
requested, in order to evaluate the merits and risks of the prospective
investments contemplated herein. Investor further represents and acknowledges
that it has been solely responsible for its own "due diligence" investigation of
the Company and its management and business, for its own analysis of the merits
and risks of this investment, and for its own analysis of the fairness and
desirability of the terms of the investment. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 2
hereof.
3.5 RESIDENCY
For purposes of the application of state securities laws, Investor
represents that it is a resident of the state or country set forth opposite its
name on Exhibit A hereto.
4. REGISTRATION RIGHTS
The Shares shall have the registration rights set forth in Exhibit B
hereto.
5. MISCELLANEOUS
5.1 GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of Minnesota.
5.2 SURVIVAL
The representations, warranties, covenants, and agreements made herein
shall survive any investigation made by Investor and shall survive the Closing.
All statements as to factual matters contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto shall be
deemed to be representations and warranties by the Company hereunder as of the
date of such certificate or instrument.
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5.3 SUCCESSORS AND ASSIGNS
Except as otherwise expressly provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors, and administrators of the parties hereto.
5.4 ENTIRE AGREEMENT
This Agreement, including the Exhibits hereto, constitute the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and no party shall be liable or bound to any other party in any manner by
and representations, warranties, covenants, or agreements except as specifically
set forth herein or therein. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
5.5 AMENDMENT AND WAIVER
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
Company and Investor.
5.6 NOTICES
All notices and other communications required or permitted hereunder shall
be in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission or deposit with the United States Post Office, by first
class mail, postage prepaid, addressed: (a) if to Investor, at Investor's
address set forth or at such other addresses as Investor shall have furnished to
the Company in writing, or (b) if to the Company, at 350 Oak Grove Parkway, St.
Paul, MN 55127, or at such other address as the Company shall have furnished to
Investor in writing.
5.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.
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MEDICAL GRAPHICS CORPORATION
By:
----------------------------------
Its: Chief Financial Officer
-------------------------------
FAMCO II LIMITED LIABILITY COMPANY
By its Manager
Family Financial Strategies, Inc.
By:
-----------------------------------
Its: Chief Executive Officer
--------------------------------
SPECIAL SITUATIONS FUND III, L.P.
By:
-----------------------------------
Its: Individual General Partner
-------------------------------
SPECIAL SITUATIONS PRIVATE EQUITY
FUND, L.P.
By:
-----------------------------------
Its: Individual General Partner
-------------------------------
SPECIAL SITUATIONS CAYMAN FUND L.P.
By:
----------------------------------
Its: Individual General Partner
-------------------------------
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EXHIBIT 4
REGISTRATION RIGHTS
1. SHELF REGISTRATION
(a) SHELF REGISTRATION. The Company shall, as promptly as practicable,
after November 15, 1997 file with the SEC a Registration Statement for
an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Purchased Stock (as hereinafter defined) (the
"Initial Shelf Registration"). The Company shall use its best efforts
to file with the SEC the Initial Shelf Registration within 30 days of
November 15, 1997 and shall use its best efforts to cause such Shelf
Registration to be declared effective under the Securities Act as
promptly as practicable thereafter. The Initial Shelf Registration
shall be on Form S-3 or another appropriate form permitting
registration of such Purchased Stock for resales by holders in the
manner or manners designated by them (including, without limitation,
one or more underwritten offerings). The Company shall not permit any
securities other than the Purchased Stock to be included in any Shelf
Registration without the consent of the holders of Purchased Stock.
The Company shall use its best efforts to keep the Initial Shelf
Registration continuously effective under the Securities Act of 1933,
as amended (the "Securities Act") until the date which is 36 months
from the date of filing (the "Effectiveness Period") or such shorter
period ending when (i) all Purchased Stock covered by the Initial
Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Purchased Stock has been
declared effective under the Securities Act.
(b) SUBSEQUENT SHELF REGISTRATION. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any
reasons at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder),
the Company shall use its best efforts to obtain the prompt withdrawal
of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend the
Shelf Registration in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the
Purchased Stock (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to
cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Subsequent
Shelf Registration continuously effective for a period equal to the
number of days in the Effectiveness Period less the aggregate number
of days during which the Initial Shelf Registration or any Subsequent
Shelf Registration was
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previously continuously effective. As used herein, the term "Shelf
Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and
amend any Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration, if required by the Securities Act, or if reasonably
requested by the holders of a majority of the Purchased Stock covered
by such Shelf Registration or by any underwriter of such Purchased
Stock, in each case, with the Company's consent, which consent shall
not be unreasonably withheld or delayed.
2. REQUIRED REGISTRATION. Commencing upon the expiration of the 36 month
period specified in Section 1, if the Company shall receive a written
request therefor from any holder of the Purchased Stock not theretofore
registered under the Securities Act, and sold, the Company shall prepare
and file a registration statement under the Securities Act covering the
shares of Purchased Stock which are the subject of such request and shall
use its best efforts to cause such registration statement to become
effective. In addition, upon the receipt of such request, the Company
shall promptly give written notice to all other record holders (if any) of
shares of Purchased Stock not theretofore registered under the Securities
Act and sold that such registration is to be effected. The Company shall
include in such registration statement such shares of Purchased Stock for
which it has received written requests to register by such other record
holders within 30 days after the delivery of the Company's written notice
to such other record holders. The Company shall be obligated to prepare,
file and cause to become effective only three registration statements
pursuant to this Section 2.
Without the written consent of the holders of seventy-five percent (75%) of
the Purchased Stock for which registration has been requested pursuant to
this paragraph 2, neither the Company nor any other holder of securities of
the Company may include securities in such registration if in the good
faith judgment of the managing underwriter of such public offering the
inclusion of such securities would interfere with the successful marketing
of the Purchased Stock or require the exclusion of any portion of the
Purchased Stock to be registered.
3. INCIDENTAL REGISTRATION. Each time the Company shall determine to proceed
with the actual preparation and filing of a registration statement under
the Securities Act in connection with the proposed offer and sale for cash
of any of its securities by it or any of its security holders (other than a
registration statement on a form that does not permit the inclusion of
shares by its security holders), the Company will give written notice of
its determination to all record holders of Purchased Stock not theretofore
registered under the Securities Act and sold. Upon the written request of
a record holder of any shares of Purchased Stock given within 30 days after
receipt of any such notice from the Company, the Company will, except as
herein provided, cause all such shares of Purchased Stock, the record
holders of which have so requested registration thereof, to be included in
such registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of
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the Purchased Stock to be so registered; provided, however, that nothing
herein shall prevent the Company from, at any time, abandoning or delaying
any such registration initiated by it; provided further, however, that if
the Company determines not to proceed with a registration after the
registration statement has been filed with the Commission and the Company's
decision not to proceed is primarily based upon the anticipated public
offering price of the securities to be sold by the Company, the Company
shall promptly complete the registration for the benefit of those selling
security holders who wish to proceed with a public offering of their
securities. If any registration pursuant to this paragraph 3 shall be
underwritten in whole or in part, the Company may require that the
Purchased Stock requested for inclusion pursuant to this paragraph 3 be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. If in the good
faith judgment of the managing underwriter of a proposed underwritten
public offering the inclusion of all of the Purchased Stock originally
covered by a request for registration would reduce the number of shares to
be offered by the Company or interfere with the successful marketing of the
shares of stock offered by the Company, the number of shares of Purchased
Stock otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof requesting
such registration, provided, however, that after any such required
reduction the Purchased Stock to be included in such offering, together
with any shares to be included in such offering that are being offered by
other selling shareholders, shall constitute at least 25% of the total
number of shares to be included in such offering. Those shares of
Purchased Stock which are thus excluded from the underwritten public
offering shall be withheld from the market by the holders thereof for a
period, not to exceed 90 days, which the managing underwriter reasonably
determines if necessary in order to effect the underwritten public
offering.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of paragraph 1, 2 or 3 hereof to effect the registration of
shares of Purchased Stock under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement with
respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for such period
as may be reasonably necessary to effect the sale of such securities,
not to exceed (I) thirty-six months in the case of the Shelf
Registration specified in Section 1 and (ii) nine months with respect
to a registration statement not covered by Section 1;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed (I) thirty-six months in the
case of the Shelf Registration specified in Section 1 and (ii) nine
months with respect to a registration statement not covered by Section
1;
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(c) furnish to the security holders participating in such registration and
to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities covered by
such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating holders may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified.
(e) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been
filed;
(f) notify such holders promptly of any request by the Commission for the
amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the Commission, promptly upon the request of any
such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required
under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Purchased Stock by such
holder;
(h) prepare and promptly file with the Commission and promptly notify such
holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(I) advise such holders, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for the
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purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should
be issued;
(j) not file any amendment or supplement to such registration statement or
prospectus to which a majority in interest of such holders shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior
to the filing thereof, unless in the opinion of counsel for the
Company the filing of such amendment or supplement is reasonably
necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate
applicable law; and
(k) at the request of any such holder, furnish: (I) an opinion, dated as
of the closing date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any,
and to the holder or holders making such request, covering such
matters as such underwriters and holder or holders may reasonably
request; and (ii) letters dated as of the effective date of the
registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
(l) use its best efforts to have the Purchased Stock listed on the Nasdaq
Small Cap Market or such other of the principal market or principal
exchange on which the Company's stock is then listed or quoted.
5. EXPENSES. With respect to each registration, the Company shall bear all
fees, costs and expenses including, without limitation,: all registration,
filing and NASD fees, printing expenses, fees and disbursements of counsel
and accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company and/or
selling security holders are required to bear such fees and disbursements),
all internal Company expenses, all legal fees and disbursements and other
expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance
against liability (if any) arising out of such public offering and
underwriting discounts and commissions and transfer taxes relating to the
shares included in the offering by the selling security holders.
6. INDEMNIFICATION. In the event that any Purchased Stock is included in a
registration statement under paragraph 1, 2 or 3 hereof:
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(a) The Company will indemnify and hold harmless each holder of shares of
Purchased Stock which are included in a registration statement
pursuant to the provisions of paragraph 1, 2 or 3 hereof, its
directors and officers, and any underwriter (as defined in the
Securities Act) for such holder and each person, if any, who controls
such holder or such underwriter within the meaning of the Securities
Act, from and against, and will reimburse such holder and each such
underwriter and controlling person with respect to, any and all loss,
damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) Each holder of shares of Purchased Stock which are included in a
registration pursuant to the provisions of this paragraph 1, 2 or 3
hereof will indemnify and hold harmless the Company, its directors and
officers, any controlling person or any underwriter from and against,
and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written
information furnished by such holder specifically for use in the
preparation thereof. Notwithstanding the foregoing, each holder's
liability for indemnification shall be limited to the amount of the
holder's original purchase price of the Purchased Stock.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) and (b) of this paragraph 6 of notice of
the commencement of any action involving
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the subject matter of the foregoing indemnity provisions such
indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said paragraph (a) or
(b), promptly notify the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified
party otherwise than hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party shall have the
right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, or if
there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select separate
counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (I) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
7. SPECIAL DEFINITION. "Purchased Stock" shall mean the Company's Common
Stock purchased pursuant to the Stock Purchase Agreement dated November 7,
1997 and the stock or other securities of the Company issued in a stock
split or reclassification of, or a stock dividend or other distribution on
or in substitution or exchange for, or otherwise in connection with, any of
the foregoing securities, or in a merger or consolidation involving the
Company or a sale of all or substantially all of the Company's assets.
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