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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___ )*
Medical Graphics Corporation
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(Name of Issuer)
Common Stock, $0.05 par value
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(Title of Class of Securities)
584907109
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(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)
March 31, 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
Page 1 of 4 Pages
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SCHEDULE 13D
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CUSIP NO. 584907109 PAGE 1 OF 4 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, I.R.S. ID # 41-1870858
FAMILY FINANCIAL STRATEGIES, INC., AS ITS MANAGER, I.R.S. ID # 41-1835679
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(See Instructions)
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions) 00 (exchange of stock in a merger)
WC, BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO / /
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION (UNITED STATES)
FAMCO II LIMITED LIABILITY COMPANY - DELAWARE
FAMILY FINANCIAL STRATEGIES, INC. - MINNESOTA
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NUMBER OF 7 SOLE VOTING POWER
SHARES 444,445
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 444,445
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PERSON 10 SHARED DISPOSITIVE POWER
WITH -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
444,445
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES / /
CERTAIN SHARES
(See instructions)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6
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14 TYPE OF REPORTING PERSON (See instructions)
OO, IA, CO
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Page 1 of 4 Pages
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Item 1. SECURITY AND ISSUER
(a) NAME OF ISSUER
Medical Graphics Corporation
Class A Stock
(b) ADDRESS OF ISSUER'S PRINCIPAL EXECUTIVE OFFICES
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. 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 were borrowed from a
bank in the ordinary course of business on behalf of Famco II and certain of
its members.
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Item 4. PURPOSE OF TRANSACTION.
Famco II holds the securities for investment purposes. Famco II
may, from time to time, (1) acquire additional shares of 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 stock in the open market, in privately negotiated transactions or
otherwise. FFS holds no securities in its own right but is solely the
Manager of Famco II.
Mr. John Wunsch, President of FFS, was elected as a director but
such election was neither required by the investment in the securities nor a
purpose of making such investment.
Except as set forth above, Famco II has 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.
FAMCO II
(a) Amount Beneficially Owned: 444,445 Shares of Class A Stock.
Each share of Class A Stock is convertible into one share of
Common Stock, $.05 par value.
(b) Of the shares owned by Famco II, Famco II has the power to vote
as follows:
(i) Sole power to vote or direct the vote - 444,445
(ii) Shared power to vote or direct the vote - 0
(iii) Sole power to dispose or direct the disposition
of - 444,445
(iv) Shared power to dispose or direct the disposition of - 0
FFS. FFS is a beneficial owner solely by virtue of being the Manager
of Famco II.
(c) RECENT TRANSACTIONS. On March 31, 1997, Famco II acquired
148,148 of the shares referred to above. The balance of the
shares are to be purchased by April 15, 1997 subject to the
terms of the Stock Purchase Agreement.
(d) Not applicable.
(e) Not applicable.
<PAGE>
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
FFS is the Manager named in the limited liability company agreement
of Famco II.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Joint Filing Agreement
Exhibit 2 Promissory Note
Exhibit 3 Stock Purchase Agreement
Exhibit 4 Certificate of Rights and Preferences of the Class A Stock
Exhibit 5 Registration Rights Agreement
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
APRIL 8, 1997 FAMCO II LIMITED LIABILITY COMPANY
By its Manager
Family Financial Strategies, Inc.
By: /s/John D. Wunsch
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Its: Chief Financial Officer
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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.
April 8, 1997
FAMCO II LIMITED LIABILITY COMPANY
By its Manager
Family Financial Strategies, Inc.
By: /s/ John D. Wunsch
---------------------------------
Its: Chief Executive Officer
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FAMILY FINANCIAL STRATEGIES, INC.
By: /s/ John D. Wunsch
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Its: Chief Executive Officer
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<PAGE>
PROMISSORY NOTE
Chicago, Illinois
$1,200,000.00 March __, 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 One
Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00) on March 31,
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 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 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.
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(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 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 (ii) 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 Period applicable to a LIBOR Portion whether such LIBOR Portion is
to continue as a LIBOR Portion and the new Interest Period selected therefor,
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
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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 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:
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(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 say 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
or other funds or amounts 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
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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 amount
of this Note together with accrued 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 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 stock.
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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 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 entirety by insurance and which is in an aggregate amount in excess of
$10,000,000.00 shall be 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;
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(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 other than an 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 my Event of Default
described in subsection (g) or (h) of Section 6.1 hereof has occurred and is
continuing, this Note shall 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 by applicable law.
SECTION 7. DEFINITIONS.
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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 services as 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).
"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.
-8-
<PAGE>
"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 condition 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
any 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.
"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
-9-
<PAGE>
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 my 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 be 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.
SECTION 8.5. NOTICES. All communications provided for herein shall be in
writing or by telecopy addressed to the Bank at
___________________________________________ 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
-10-
<PAGE>
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.
FAMCO II LIMITED LIABILITY COMPANY,
a Delaware limited liability company
By: Family Financial Strategies, Inc.
Its: Manager
By: /s/ Greg Nelson
----------------------------------------
Its: Chief Financial Officer
---------------------------------
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<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (including the Exhibits hereto, this
"Agreement"), dated as of March 31, 1997 is entered into by and among FAMCO II
LIMITED LIABILITY COMPANY, a Minnesota limited liability company (the
"Subscriber"), 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, the Company agrees to issue and
sell to Investor 444,445 shares of Class A Stock at a purchase price of $3.375
per share for a total price of $1,500,001.87 (the "Purchase Price"). The shares
of stock purchased by Investor hereunder are hereinafter referred to as the
"Shares."
1.2 PAYMENT OF PURCHASE PRICE
Five Hundred Thousand Dollars ($500,000.00) of the Purchase Price shall be
payable on March 31, 1997 whereupon the number of Shares purchased thereby shall
be issued. Provided there has been no occurrence of an Adverse Event (as
hereinafter defined), the balance of the Purchase Price shall be payable April
15, 1997 (the "Second Payment"). An "Adverse Event" shall mean: (i) the Company
has not received the proposed financing in the amount of $4.1 million from
Norwest Bank Minnesota N.A. and Norwest Business Credit by April 14, 1997; or
(ii) Marquette Bank terminates its forbearance agreement and proceeds to
exercise its remedies against the Company; or (iii) the Company's auditors issue
a qualified opinion; or (iv) any action is brought or threatened against the
Company by Catherine A. Anderson or ErgometR. If an Adverse Event occurs,
Subscriber shall have the option to cancel the Second Payment by sending written
notice thereof to the Company whereupon Subscriber shall have no further
obligation to the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Subscriber as follows:
<PAGE>
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 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, if any, 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. The requisite number of shares of common stock of
the Company have been reserved for issuance upon conversion of the Shares.
Except as set forth on Schedule 2.3, no shareholder of the Company has any
rights or preferences not afforded all shareholders of the Company, including
without limitation, any pre-emptive or approval right pertaining to the sale and
purchase of the Shares.
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, sales
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 Subscriber shall constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their 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
<PAGE>
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 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
3
<PAGE>
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 Subscriber are true and correct
and accurate in all material respects as of the date hereof except for financial
data which is accurate as of the 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 SUBSCRIBER
Subscriber hereby represents and warrants, severally and not jointly, to
the Company as follows:
3.1 AUTHORIZATION
This Agreement, when executed and delivered by Subscriber and the Company,
will constitute a valid and legally binding obligation of Subscriber,
enforceable against Subscriber 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
Subscriber has such knowledge and experience in financial and business
matter 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. Subscriber
acknowledges that the Shares are a speculative risk. Subscriber 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
Subscriber 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.
4
<PAGE>
Subscriber 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 Subscriber's
representations as expressed herein. The Subscriber 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.
3.4 ACCESS TO DATA
Subscriber 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. Subscriber 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, Subscriber
represents that it is a resident of Minnesota
4. RIGHTS AND PREFERENCES
4.1 RIGHTS AND PREFERENCES
The Shares shall have the rights and preferences set forth on the
Certificate of Rights and Preferences attached hereto as Exhibit A.
4.2 REGISTRATION RIGHTS
The Shares shall have the registration rights set forth in the Registration
Rights Agreement attached hereto as Exhibit B.
5
<PAGE>
5. MISCELLANEOUS
5.1 GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of Minnesota as applied to agreements among Minnesota residents made and
to be performed entirely within the State of Minnesota.
5.2 SURVIVAL
The representations, warranties, covenants, and agreements made herein
shall survive any investigation made by Subscriber 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.
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 Subscriber.
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
6
<PAGE>
Subscriber, at Subscriber's address set forth or at such other addresses as
Subscriber 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 Subscriber 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.
MEDICAL GRAPHICS CORPORATION
By: /s/Dale H. Johnson
------------------------------------------
Its: Chief Financial Officer
--------------------------------------
FAMCO II LIMITED LIABILITY COMPANY
By its Manager
Family Financial Strategies, Inc.
By: /s/John D. Wunsch
-----------------------------------------
Its: Chief Executive Officer
--------------------------------------
7
<PAGE>
CERTIFICATE
OF
RIGHTS AND PREFERENCES
OF
CLASS A STOCK
OF
MEDICAL GRAPHICS CORPORATION
The undersigned, being the Chairman of Medical Graphics Corporation,
hereby certifies that (a) the following resolution was duly adopted on March
25, 1997 by the Board of Directors of such Corporation, acting pursuant to
the provision of section 302A.401, subdivision 3 of the Minnesota Business
Corporation Act, for the purpose of designating a separate class of the
Corporation's authorized stock as "Class A Stock" and fixing the relative
rights and preferences of such class, and (b) such resolution has not been
subsequently modified or rescinded:
"RESOLVED, that 500,000 shares of this Corporation's authorized stock
shall be designated as "Class A Stock," and the rights, preferences,
privileges and restrictions granted to or imposed upon the Class A Stock are
as follows:
(A) VOTING RIGHTS.
Each holder of Class A Stock shall have one vote on all matters
submitted to the shareholders of this Corporation for each share of Common
Stock $.05 par value ("Common Share") which such holder of Class A Stock
would be entitled to receive upon the conversion such holder's Class A Stock
pursuant to the provisions of subsection (C)(3) of this Certificate. In
addition, each holder of Class A Stock shall have the special voting rights
which are described in subsection (C)(4) of this Certificate. No holder of
any Class A Stock shall have any cumulative voting rights.
(B) PREEMPTIVE RIGHTS.
No holder of Class A Stock shall be entitled as such, as a matter of
right, to subscribe for, purchase or receive any part of any class of stock
whatsoever, or of securities convertible into or exchangeable for any stock
of any class whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.
<PAGE>
(C) CLASS A STOCK.
(1) DIVIDENDS. In the event that this Corporation declares and
pays any cash dividends with respect to its Common Shares, the holders of
Class A Stock shall be entitled to receive a cash dividend per share equal to
the cash dividend that would otherwise be payable with respect to each such
share if it had been converted into Common Shares pursuant to the provisions
of subsection (C)(3) of this Certificate.
(2) LIQUIDATION PREFERENCE. In the event of the liquidation,
dissolution or winding up of this Corporation, whether voluntary or
involuntary, the holders of the Class A Stock shall be entitled to receive in
cash, out of the assets of this Corporation, an amount equal to $3.375 per
share for each outstanding share of Class A Stock before any payment shall be
made or any assets distributed to the holders of this Corporation's Common
Shares or any other class of shares of this Corporation; and the holders of
the Class A Stock shall not be entitled to share in any other assets of this
Corporation thereafter remaining. If, upon any liquidation or dissolution of
this Corporation, the assets of the Corporation are insufficient to pay such
$3.375 per share for each outstanding share of Class A Stock, the holders of
such shares shall share pro rata in any such distribution in proportion to
the full amounts to which they would otherwise be respectively entitled.
(3) CONVERSION RIGHTS. (a) Each share of Class A Stock shall be
convertible at the option of the holder thereof into one Common Share of this
Corporation, subject to adjustment as provided below. In order to exercise
the conversion privilege, a holder of the Class A Stock shall surrender the
certificate to the Corporation at its principal office, accompanied by
written notice to the Corporation that the holder elects to convert a
specified portion or all of such shares. Class A Stock shall be deemed to
have been converted on the day of surrender of the certificate representing
such shares for conversion in accordance with the foregoing provisions, and
at such time the rights of the holder of such Class A Stock, as such holder,
shall cease and such holder shall be treated for all purposes as the record
holder of Common Shares issuable upon conversion. As promptly as practicable
on or after the conversion date, this Corporation shall issue and mail or
deliver to such holder a certificate or certificates for the number of Common
Shares issuable upon conversion, computed to the nearest one hundredth of a
full share, and a certificate or certificates for the balance of the Class A
Stock surrendered, if any, not so converted into Common Shares.
(b) The number of Common Shares issuable upon the conversion of
any share of Series A Stock shall be adjusted from time to time to reflect
changes in the capital structure of this Corporation, and shall be determined
by dividing $3.375 by the conversion price (the "Conversion Price") then in
effect. The Conversion Price shall initially be $3.375 and shall be subject
to adjustment from time to time as hereinafter provided:
2
<PAGE>
(i) In case this Corporation shall declare a dividend upon
its Common Shares payable otherwise than in cash out of earnings or surplus
(including a dividend payable in Common Shares), then thereafter each holder
of Class A Stock upon the conversion thereof will be entitled to receive the
number of Common Shares into which such Class A Stock shall be converted,
and, in addition and without payment therefor, the stock or other securities
and other property (including Common Shares) which such holder would have
received by way of dividends or distributions (otherwise than out of earnings
or surplus) if continuously since the record date for any such dividend or
distribution such holder (aa) has been the record holder of the number of
Common Shares then received, and (bb) had retained all dividends or
distributions in stock or securities payable in respect of such Common Shares
or in respect of any stock or securities paid as dividends or distributions
and originating directly or indirectly from such Common Shares.
(ii) In case this Corporation shall at any time subdivide or
split its outstanding Common Shares into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision or split
shall be proportionately reduced, and conversely, in case the outstanding
Common Shares of this Corporation shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be appropriately increased.
(iii) If and whenever this Corporation shall (a) issue or sell
any of its Common Shares for a consideration per share less than the
Conversion Price then in effect, (b) issue or sell warrants, options or other
rights to acquire its Common Shares at a price less than the Conversion Price
then in effect, or (c) issue or sell any other securities that are
convertible into its Common Shares for a purchase or exchange price less than
the Conversion Price then in effect, other than (i) shares subject to options
and warrants outstanding as of the date hereof, and (ii) shares issued
pursuant to the Corporation's Employee Stock Purchase Plan or any subsequent
employee stock purchase plan adopted pursuant to Section 423 of the Internal
Revenue Code of 1986, as amended, at prices lower than the Conversion Price,
then, forthwith upon such issuance or sale, the Conversion Price in effect
immediately prior to such issuance or sale shall be reduced to the purchase
price or conversion or exchange price at which such issuance or sale is
effected.
(iv) Upon any adjustment of the Conversion Price, then and in
each such case this Corporation shall give written notice thereof, by
first-class mail, postage prepaid, addressed to the registered holders of the
Class A Stock at the addresses of such holders as shown on the books of this
Corporation, which notice shall state the Conversion Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
receivable at such price upon the conversion of the Class A Stock, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
(c) In case any time:
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<PAGE>
(i) this Corporation shall pay any dividend payable in stock
upon its Common Shares or make any distribution (other than regular cash
dividends) to the holders of its Common Shares; or
(ii) this Corporation shall offer by subscription pro rata to
the holders of its Common Shares any additional shares of stock of any class
or other rights; or
(iii) there shall be any capital reorganization,
reclassification of the capital stock of this Corporation, or consolidation
or merger of this Corporation with, or sale of all or substantially all of
its assets to another Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of this Corporation;
Then, in any one or more of said cases, this Corporation shall give
written notice, by first-class mail, postage prepaid, addressed to the
holders of the Class A Stock at the addresses of such holders as shown on the
books of this Corporation, of the date on which (aa) the books of this
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (bb) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Shares of record shall
participate in such dividend, distribution or subscription rights, or shall
be entitled to exchange their Common Shares for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Such written notice shall be given at least 20 days prior to the action in
question and not less than 20 days prior to the record date or the date on
which this Corporation's transfer books are closed in respect thereto.
(4) VOTING RIGHTS. Except as otherwise required by law, so long as any
shares of the Class A Stock remain outstanding, this Corporation shall not,
without the vote or written consent by the holders of at least one half of
the Class A Stock, voting together as a single class (a) participate in any
reorganization, transfer of a substantial portion of its assets,
consolidation, plan of exchange, or merger or acquisition (except for a mere
reincorporation); or (b) authorize or issue any (i) preferred shares or (ii)
shares of stock having priority over the Class A Stock or ranking on a parity
therewith as to the payment of distribution of assets upon the liquidation or
dissolution, voluntary or involuntary, of this Corporation; or (c) amend the
Articles of Incorporation of this Corporation or this Certificate so as to
alter any existing provision of this Certificate relating to the Class A
Stock.
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RESOLVED, FURTHER, that the appropriate officers of this Corporation are
authorized and directed to file a Certificate containing the foregoing
resolution with the Secretary of State of Minnesota in accordance with the
applicable provisions of the Minnesota Business Corporation Act."
IN WITNESS WHEREOF, the undersigned have executed this certificate as of
the 31st day of March 1997.
MEDICAL GRAPHICS CORPORATION
By: /s/ Mark W. Sheffert, Chairman
--------------------------------
MARK W. SHEFFERT, CHAIRMAN
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Exhibit B
Registration Rights Agreement
1. SHELF REGISTRATION
(a) SHELF REGISTRATION. The Company shall, as promptly as practicable,
after April 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
April 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 From S-1 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 to any Shelf
Registration. 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 previously continuously effective. As used
herein, the term "Shelf Registration" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
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(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 registered 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 a majority of the holders 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 the Purchased
Stock to be so registered; provided, however, that nothing herein shall
prevent the Company from, at any time, abandoning or
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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
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proceeding for the 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.
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:
(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
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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 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
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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 Class A
Stock purchased pursuant to the Stock Purchase Agreement dated March 31,
1997, all Common Stock issued in exchange or substitution thereof, whether
or not such securities have in fact been issued, 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. Nothing in this paragraph
shall, however, be deemed to require the Company to register the Class A
Stock, it being understood that the securities actually being registered
are shares of Common Stock of the Company into which the Purchased Stock is
convertible.
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