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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3 )*
---------
AMERICAN PRECISION INDUSTRIES INC.
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(Name of Issuer)
SERIES B SEVEN PERCENT (7%) CUMULATIVE CONVERTIBLE PREFERRED STOCK
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(Title of Class of Securities)
#029069-10-1 for Common Stock
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(CUSIP Number)
STANLEY WEISS, ESQ., 80 MAIN STREET, WEST ORANGE, NJ 07052 (973) 736-1815
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
March 13, 1998
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(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 [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
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
disclosures provided in a prior cover page.
The information required on 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).
SEC 1746 (12-91)
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SCHEDULE 13D
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CUSIP No. 029069-10-1 for Common Stock Page 2 of 7 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
INTER SCAN HOLDING LTD.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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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
SWITZERLAND
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7 SOLE VOTING POWER 1,236,337 shares (100%) of Series B Seven Percent (7%)
Cumulative Convertible Preferred Stock convertible into 1,538,603 shares (17.2%)
NUMBER OF of Common Stock - as directed by Issuer's Board of Directors for three years.
SHARES
BENEFICIALLY -----------------------------------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING
PERSON
WITH -----------------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER 1,236,337 shares (100%) of Series B Seven Percent (7%)
Cumulative Convertible Preferred Stock convertible into 1,538,603 shares (17.2%)
of Common Stock, subject to the Issuer's right of first refusal for three
years.
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10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,236,337 shares of the above Series B Preferred Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
One hundred (100%) percent of the outstanding Series B Preferred Stock
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14 TYPE OF REPORTING PERSON*
CO
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 2 of 7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
</TABLE>
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<TABLE>
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CUSIP No. 029069-10-1 for Common Stock Page 3 of 7 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Holger Hjelm as ultimate beneficial owner of all shares of Inter Scan Holding Ltd.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
00
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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
Sweden
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7 SOLE VOTING POWER 1,236,337 shares (100%) of Series B Seven Percent (7%)
Cumulative Convertible Preferred Stock convertible into 1,538,603 shares (17.2%)
NUMBER OF of Common Stock - as directed by Issuer's Board of Directors for three years.
SHARES
BENEFICIALLY -----------------------------------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING
PERSON
WITH -----------------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER 1,236,337 shares (100%) of Series B Seven Percent (7%)
Cumulative Convertible Preferred Stock convertible into 1,538,603 shares (17.2%)
of Common Stock subject to the Issuer's right of first refusal for three years.
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10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,236,337 shares of the above Series B Preferred Stock
- --------------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
One hundred (100%) percent of the outstanding Series B Preferred Stock
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14 TYPE OF REPORTING PERSON*
IN
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 2 of 7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
</TABLE>
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SCHEDULE 13D-AMENDMENT NO. 3
---------------------------
CUSIP #029069-10-1 COMMON STOCK PAGE 4 OF 7 PAGES
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INTRODUCTION
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The ownership of 20,000 shares of Series A Seven Percent (7%)
Cumulative Convertible Preferred Stock of American Precision Industries Inc.
("API") and a $5,000,000 Exchangeable Promissory Note which were exchangeable
into 1,236,337 shares of Series B Seven Percent (7%) Cumulative Convertible
Preferred Stock ("Series B Preferred Stock") was reported by Inter Scan Holding
Ltd. and Holger Hjelm (collectively the "Reporting Persons") in a Schedule
13D filed with the Securities and Exchange Commission ("SEC") on July 16, 1997,
as amended by Schedule 13D Amendment No. 1 filed with the SEC on July 17, 1997
and Amendment No. 2 filed with the SEC on November 24, 1997. Since the filing
of Amendment No. 2, Inter Scan, a reporting person, entered into a line of
credit with Marine Midland Bank wherein Inter Scan pledged the Series B
Preferred Stock to secure the line of credit from the Bank.
The cover pages of the Reporting Persons are hereby amended to read as
set forth in this Schedule 13D Amendment No. 3. Items 6 and 7 are hereby amended
as set forth in this Schedule 13D Amendment No. 3. All other cover pages and
items remain unchanged, and are incorporated herein by reference.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER Item 6 is hereby amended to read as follows:
There are no contracts, arrangements, understandings or relationships
among the persons named in Item 2 with respect to any securities of the API. The
only contracts, arrangements, understandings or relationships between any such
persons and any other person with respect to any securities of API are as
follows:
(1) The Stock Purchase Agreement and Exhibits thereto which are filed
as Appendix A to Amendment No. 1. The Stock Purchase Agreement contains
provisions concerning the voting of the securities [Section 3 of the Shareholder
Agreement, Exhibit 5.1(d)(1)]; finder fees [Section 11.8 of the Stock Purchase
Agreement]; guarantee of profits [Section 6 of the Shareholder Agreement,
Exhibit 5.1(d)(1) and Pages 3 and 4 of the Note, Exhibit 2.1(a)(ii)]; right of
first refusal [Section 4 of the Shareholder Agreement, Exhibit 5.1(d)(1)]; and
the giving of proxies [Section 3 of the Shareholder Agreement, Exhibit
5.1(d)(1)], all of which are incorporated herein by reference.
(2) A line of credit was extended to Inter Scan by Marine Midland Bank
in an amount not to exceed the lesser of: (i) fifty (50%) percent of the market
value of the API common stock into which the Series B Preferred Stock is
convertible; and (ii) $15,000,000. The line of credit is for working capital and
is secured by a pledge of all of the Series B Preferred Stock owned by Inter
Scan. A copy of the Pledge and Assignment Agreement dated March 13, 1998 is
annexed as Appendix B to this Schedule.
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SCHEDULE 13D-AMENDMENT NO. 3
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CUSIP #029069-10-1 COMMON STOCK PAGE 5 OF 7 PAGES
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ITEM 7. MATERIALS TO BE FILED AS EXHIBITS Item 7 is hereby amended to include
the following exhibit:
Appendix B- Pledge and Assignment Agreement
SIGNATURE
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After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
March 18, 1998 /s/ Stanley Weiss
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Stanley Weiss, Esq.
Attorney at Law
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SCHEDULE 13D
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CUSIP# 029069-10-1 COMMON STOCK PAGE 6 OF 7 PAGES
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POWER OF ATTORNEY
FOR EXECUTING FORMS 3, 4 AND 5
AND
SCHEDULE 13D
Know all by these presents, that the undersigned hereby constitutes and
appoints each of Stanley Weiss, James J. Tanous and Deborah K. Pawlowski,
signing singly, its true and lawful attorney-in-fact, with respect to the
undersigned's status as a holder of more that 10% of the voting securities of
American Precision Industries Inc., to:
(1) execute for and on behalf of the undersigned Forms 3, 4 and 5 in
accordance with Section 16(a) of the Securities Exchange Act of 1934
and the rules thereunder, and Schedule 13D, and any amendments thereto,
in accordance with Section 13(d) of the Securities Exchange Act of 1934
and the rule thereunder;
(2) do and perform any and all acts for and on behalf of the undersigned
which may be necessary or desirable to complete the execution of any
such Forms 3, 4 or 5 and any such Schedule 13D and any amendments
thereto and the timely filing of such form and Schedule with the United
States Securities and Exchange Commission, the New York Stock Exchange
and any other authority, and
(3) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the
undersigned;
it being understood that the documents executed by such attorney-in-fact on
behalf of the undersigned pursuant to this Power of Attorney shall be in such
form and shall contain such terms and conditions as such attorney-in-fact may
approve in his discretion.
The undersigned hereby grants to each such attorney-in-fact full power and
authority to do and perform all and every act and thing whatsoever requisite,
necessary and proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as such attorney-in-fact
might or could do if personally present, with full power of substitution or
revocation, hereby ratifying and confirming all that such attorney-in-fact, or
his/her substitute or substitutes, shall lawfully do or cause to be done by
virtue of this power of attorney and the rights and powers herein granted. The
undersigned acknowledges that the foregoing attorneys-in-fact, in serving in
such capacity at the request of the undersigned, are not assuming any of the
undersigned's responsibilities to comply with Section 16 or Section 13(d) of
the Securities Exchange Act of 1934.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be
executed as of this 11th day of July 1997.
Inter Scan Holding Ltd.
By /s/ Dr. Rudolf Heiz
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Dr. Rudolf Heiz
By /s/ Max E. Huber
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Max E. Huber
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SCHEDULE 13D
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CUSIP#029069-10-1 COMMON STOCK PAGE 7 OF 7 PAGES
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POWER OF ATTORNEY
FOR EXECUTING FORMS 3,4 AND 5
AND
SCHEDULE 13D
Know all by these presents, that the undersigned hereby constitutes and
appoints each of Stanley Weiss, James J. Tanous and Deborah K. Pawlowski,
signing singly, its true and lawful attorney-in-fact, with respect to the
undersigned's status as a director of American Precision Industries Inc. and
potential beneficial owner of more than 10% of the voting securities of
American Precision Industries Inc., to:
(1) execute for and on behalf of the undersigned Forms 3,4 and 5 in accordance
with Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder, and Schedule 13D, and any amendments thereto, in accordance
with Section 13(d) of the Securities Exchange Act of 1934 and the rule
thereunder;
(2) do and perform any and all acts for and on behalf of the undersigned
which may be necessary or desirable to complete the execution of any
such Forms 3,4 or 5 and any such Schedule 13D and any amendments thereto
and timely filing of such form and Schedule with the United States
Securities and Exchange Commission, the New York Stock Exchange and any
other authority; and
(3) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the
undersigned;
it being understood that the documents executed by such attorney-in-fact on
behalf of the undersigned pursuant to this Power of Attorney shall be in such
form and shall contain such terms and conditions as such attorney-in-fact may
approve in his discretion.
The undersigned hereby grants to each such attorney-in-fact full power
and authority to do and perform all and every act and thing whatsoever
requisite, necessary and proper to be done in the exercise of any of the rights
and powers herein granted, as fully to all intents and purposes as such
attorney-in-fact might or could do if personally present, with full power of
substitution or revocation, hereby ratifying and confirming all that such
attorney-in-fact, or his/her substitute or substitutes, shall lawfully do or
cause to be done by virtue of this power of attorney and the rights and powers
herein granted. The undersigned acknowledges that the foregoing
attorneys-in-fact, in serving in such capacity at the request of the
undersigned, are not assuming any of the undersigned's responsibilities to
comply with Section 16 or Section 13(d) of the Securities Exchange Act of 1934.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 13th day of July 1997.
By /s/ Holger Hjelm
-----------------------
Holger Hjelm
<PAGE> 8
Appendix B
PLEDGE AND ASSIGNMENT AGREEMENT
This Pledge and Assignment Agreement ("Pledge Agreement") is made as of
March 13, 1998 by INTER SCAN HOLDING LTD., a Swiss Corporation ("Pledgor"), with
its chief executive office at Schifflande 5, CH 8001, Zurich Switzerland, and
Marine Midland Bank ("Bank"), having an address at 140 Broadway, 4th Floor, New
York, New York 10005.
Pledgor agrees as follows:
I. DEFINITIONS.
A. DEFINED TERMS. The following terms shall have the meanings set
forth below when used in this Pledge Agreement:
1. "API" means American Precision Industries Inc., a Delaware
corporation.
2. "COLLATERAL" means
(a) the Preferred Stock;
(b) all rights of Pledgor in the Registration Agreement;
and
(c) any Replacement Collateral which becomes Collateral
pursuant to the provisions of Section VIII hereof
whether now owned or hereafter acquired or arising, and all Proceeds thereof in
any form.
3. "COMMON STOCK" means any common stock of API.
4. "CONVERTIBLE SECURITIES" means any securities issued by API
which are convertible into Common Stock.
5. "CREDIT AGREEMENT" means the Credit Agreement between
Pledgor and Bank dated as of March 13, 1998, as the same may be amended,
extended, or amended and restated from time to time.
6. "EVENT OF DEFAULT" means Event of Default as defined in
Section IX hereof.
7. "LOAN DOCUMENTS" means the Credit Agreement, or other
document or instrument now or hereafter executed in connection with the Credit
Agreement, as any such
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document or instrument may be renewed, amended, extended or amended and restated
from time to time.
8. "OBLIGATIONS" means all indebtedness or other obligations of
Pledgor to Bank now or hereafter incurred under the Loan Documents or now or
hereafter arising under the Loan Documents, of every kind and character, direct
or indirect, and whether such indebtedness or other obligations are from time to
time reduced and thereafter increased, or entirely extinguished and thereafter
reincurred, including, without limitation: (a) indebtedness not yet outstanding,
but contracted for, or with respect to which any other commitment related to the
Credit Agreement or any of the other Loan Documents exists; (b) all interest
provided for in any of the Loan Documents which accrues on any indebtedness
until payment of such indebtedness in full; and (c) all obligations to pay fees,
costs, expenses and indemnities under any of the Loan Documents.
9. "OFFERING PERIOD" means a 120 day period commencing on the date
that Bank notifies the Pledgor of the intended method of disposition of the
Collateral in accordance with the provisions of Section IX(D) hereof.
10. "PREFERRED STOCK" means 1,236,337 shares of Series B Seven
Percent (7%) Convertible Preferred Stock of API and any other shares of such
Series B Seven Percent (7%) Convertible Preferred Stock held as Collateral
pursuant to the terms of this Agreement.
11. "REGISTRATION AGREEMENT" means the Registration Agreement
between API and Pledgor dated as of July 8, 1997, as amended from time to time.
12. "SECURITY INTEREST" means the security interest in the
Collateral granted by the Pledgor under this Pledge Agreement.
B. CREDIT AGREEMENT DEFINITIONS. All capitalized terms used but not
defined herein shall have the meanings attributed to them in the Credit
Agreement.
C. UCC TERMS. All capitalized terms, unless otherwise defined in this
Pledge Agreement or the Credit Agreement, shall have the definitions set forth
in the Uniform Commercial Code adopted in New York State, as the same may from
time to time be in effect.
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II. SECURITY INTEREST.
Pledgor hereby pledges, transfers and assigns to Bank and
grants to Bank a security interest in the Collateral to secure payment of the
Obligations.
III. REPRESENTATIONS AND WARRANTIES OF PLEDGOR.
The Pledgor represents and warrants, and, so long as this Pledge
Agreement is in effect, shall be deemed continuously to represent and warrant
that: (a) the Pledgor is the owner of the Collateral free of all security
interests or other encumbrances, except the Security Interest; (b) each Security
constituting Collateral is genuine and in all respects what it purports to be;
(c) Pledgor's records concerning the Collateral are kept at the address
specified above; and (d) Pledgor is authorized to enter into this Pledge
Agreement.
IV. COVENANTS OF PLEDGOR.
So long as this Pledge Agreement is in effect, the Pledgor:
(a) will defend the Collateral against the claims and demands
of all other parties; will keep the Collateral free from all security interests
or other encumbrances, except the Security Interest; and will not sell,
transfer, assign, deliver or otherwise dispose of any Collateral or any interest
therein without the prior written consent of Bank; (b) will notify Bank promptly
in writing of any change in Pledgor's address, specified above; (c) in
connection herewith, will execute and deliver to Bank such financing statements,
assignments and other documents and do such other things relating to the
Collateral and the Security Interest as Bank may reasonably request, and pay all
costs of title searches and filing financing statements, assignments and other
documents in all public offices requested by Bank; and (d) will pay all taxes,
assessments and other charges of every nature which may be imposed, levied or
assessed against the Pledgor or the Pledgor's assets, prior to the date of
attachment of any penalties or liens with respect thereto (other than liens
attaching prior to payment becoming due, if payment is made when due), provided,
however, the Pledgor shall not be required to pay any such tax, assessment or
other charge so long as its validity is being contested in good faith by
appropriate proceedings diligently conducted.
V. REGISTERED HOLDER OF COLLATERAL.
The Pledgor authorizes Bank to transfer, after the occurrence
of an Event of Default, the Collateral or any part thereof into its own name or
that of its nominee so that Bank or
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its nominee may appear on record as the sole owner thereof. Pledgor waives all
rights to be advised of, or to receive, any notices, statements or
communications received by Bank or its nominee as such record owner.
VI. DIVIDENDS ON COLLATERAL.
A. Before the occurrence of any Event of Default, Pledgor may
retain any dividends paid with respect to the Collateral.
B. After the occurrence of an Event of Default, any dividends
paid on the Collateral shall be retained by Bank as part of the Collateral and
shall not be released to Pledgor; and the Pledgor will not demand or receive any
dividends on the Collateral. If the Pledgor receives any such dividends without
any demand by it, same shall be held by Pledgor for the benefit of the Bank, in
the same medium in which received, shall not be commingled with any assets of
Pledgor and shall be delivered to the Bank, in the form received, properly
indorsed to permit collection, not later than the next business day following
the day of its receipt. After the occurrence of an Event of Default, Bank shall
apply the net cash receipts from such dividends to payment of any of the
Obligations, provided that Bank shall account for and pay over to Pledgor any
such dividends remaining after payment in full of the Obligations.
VII. CONVERSION, INCREASES, PAYMENTS OR DISTRIBUTIONS.
A. Whether or not an Event of Default has occurred, the
Pledgor authorizes Bank (i) to receive any stock received upon conversion of any
shares constituting the Collateral, any increases in the Collateral (including,
without limitation, any stock issued as a result of any stock split or dividend,
any capital distributions and the like), and to hold the same as part of the
Collateral; and (ii) to receive any payment or distribution on the Collateral
upon redemption by, or dissolution and liquidation of, the issuer; to surrender
the Collateral or any part thereof in exchange therefor; and to apply the net
cash receipts from any such payment or distribution to a payment of the
Obligations.
B. Whether or not an Event of Default has occurred, if the
Pledgor receives any such increases, payments or distributions, Pledgor will
receive and deliver same promptly to the Bank, and on the same terms and
conditions set forth in paragraph VI.B. hereof respecting cash dividends, to be
held by Bank as part of the Collateral.
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VIII. REPLACEMENT COLLATERAL.
Prior to the earlier of (i) the occurrence of an Event of
Default, or (ii) conversion of any of the Preferred Stock into Common Stock, the
Pledgor may propose by written notice to the Bank to pledge and grant to the
Bank a security interest in other securities issued by API and related rights to
secure payment of the Obligations (the "Replacement Collateral"). The Bank will
accept the Replacement Collateral in substitution for the Collateral upon
fulfillment of each of the following conditions:
(A) the Replacement Collateral shall consist solely of
Convertible Securities and rights related to such securities;
(B) the number of shares of Common Stock into which the
Replacement Collateral is convertible shall be equal to or greater than the
number of shares of Common Stock into which the Preferred Stock is then
convertible;
(C) the market value and liquidity of the Replacement
Collateral shall be no less than that of the Preferred Stock and rights related
thereto in which the Bank has a security interest;
(D) all other terms of the Replacement Collateral shall be no
less favorable than that of the Preferred Stock and rights related thereto in
which the Bank has a security interest; and
(E) the Bank shall have received a written opinion of an
independent nationally recognized investment banking firm selected by the Bank
specifying that each of the foregoing conditions has been fulfilled and the fees
and expenses of such investment banking firm shall have been paid by the
Pledgor.
Upon fulfillment of each of the foregoing conditions, (i) the Pledgor
will deliver to the Bank certificated securities constituting the Replacement
Collateral and execute and deliver to the Bank any documents reasonably
requested by the Bank to perfect or confirm the Bank's security interest in the
Replacement Collateral and, thereupon, the Replacement Collateral shall become
the "Collateral" for all purposes of this Agreement, and (ii) the Bank will
deliver to the Pledgor certificates representing the securities formerly
constituting the Collateral and take such other actions as may be reasonably
necessary to terminate the Bank's security interest in such securities and
rights related thereto.
<PAGE> 13
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Pledgor covenants it shall promptly pay all fees and expenses of the
investment banking firm described in clause (E) above whether or not the
foregoing conditions have been satisfied.
IX. EVENTS OF DEFAULT.
A. Any of the following events or conditions shall constitute
an "Event of Default" hereunder: (a) default by the Pledgor in the performance
of any obligation, term or condition of this Pledge Agreement; and (b) an Event
of Default under the Credit Agreement.
B. Bank's rights and remedies with respect to the Collateral
shall be those of a secured party under the Uniform Commercial Code and under
any other applicable law, including, without limitation securities laws, as the
same may from time to time be in effect, in addition to those rights granted
herein and in any other agreement now or hereafter in effect between the Pledgor
and Bank.
C. Without in any way requiring notice to be given in the
following time and manner, the Pledgor agrees that any notice by Bank of sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial Code or otherwise, shall constitute
reasonable notice to the Pledgor if such notice is sent by telecopy or by
reliable overnight courier at least ten days prior to such action, to Pledgor's
telecopy number or address specified in Section 8.6 of the Credit Agreement or
to any other telecopy number or address which Pledgor has specified in writing
to Bank as the telecopy number or address to which notices hereunder shall be
given to Pledgor.
D. On the occurrence of an Event of Default, Bank will notify
the Pledgor of any intended method of disposition of the Collateral, if and when
determined, but the foregoing shall in no way limit the Bank's rights and
remedies or any other provision of this Pledge Agreement.
E. The Pledgor agrees to pay on demand all reasonable costs
and expenses incurred by Bank in enforcing this Pledge Agreement, in realizing
upon or protecting any Collateral and in enforcing and collecting any
Obligations or any guaranty thereof, including, without limitation, if Bank
retains counsel for advice, suit, appeal, insolvency or other proceedings under
the Federal Bankruptcy Code or otherwise, or for any of the above purposes, the
reasonable attorneys' fees incurred by Bank. Payment of all sums hereunder is
secured by the Collateral.
<PAGE> 14
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F. After the payment in full of the Obligations and the
termination or expiration of Bank's commitment under the Credit Agreement, Bank
agrees to account to the Pledgor for any proceeds remaining from the disposition
of Collateral by Bank and to pay such remaining proceeds to the Pledgor unless
otherwise required by law.
X. MISCELLANEOUS.
A. The Pledgor hereby agrees to execute and deliver, or cause
to be executed and delivered, to Bank all further documents and perform all
other acts and things which Bank reasonably deems necessary or appropriate to
protect any security interests in any property directly or indirectly securing
payment of any indebtedness of Pledgor to Bank.
B. The Pledgor hereby authorizes Bank, at Pledgor's expense,
to file such financing statement or statements relating to the Collateral
without the Pledgor's signature thereon as Bank at its option may deem
appropriate, and appoints Bank as the Pledgor's attorney-in-fact (without
requiring Bank) to execute any such financing statement or statements in the
Pledgor's name and to perform all other legal acts which Bank reasonably deems
appropriate to perfect and continue the Security Interest and to protect,
preserve and realize upon the Collateral. This power of attorney is coupled with
an interest and is irrevocable until the Obligations have been irrevocably paid
in full and all commitments by Bank under the Credit Agreement have expired or
been terminated.
C. After the occurrence of an Event of Default, Bank may
demand, collect and sue on any of the Collateral (in Pledgor's or Bank's name at
the latter's option); may enforce, compromise, settle or discharge such
Collateral without discharging the Obligations or any part thereof.
D. Upon Pledgor's failure to perform any of its duties
hereunder, Bank may, but shall not be obligated to, perform any or all such
duties, including, without limitation, payment of taxes, assessments, insurance
and other charges and expenses as herein provided, and the Pledgor shall pay an
amount equal to the cost thereof to Bank on demand by Bank. Payment of all
moneys hereunder shall be secured by the Collateral.
E. No course of dealing between Pledgor and Bank and no delay
or omission by Bank in exercising any right or remedy hereunder or with respect
to any Obligations shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or remedy. Bank may
remedy any default by Pledgor hereunder or with
<PAGE> 15
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respect to any Obligations in any reasonable manner without waiving the default
remedied and without waiving any other prior or subsequent default by Pledgor.
All rights and remedies of Bank hereunder are cumulative.
F. The Pledgor authorizes Bank, without notice or demand and
without affecting Pledgor's obligations hereunder, from time to time: (i) to
exchange, enforce or release any collateral or any part thereof (other than the
Collateral) taken from any party for payment of the Obligations or any part
thereof; (ii) to release, substitute or modify any obligation of any indorser,
guarantor or other party in any way obligated to pay the Obligations or any part
thereof, or any party who has given any security, mortgage or other interest in
any other collateral as security for the payment of the Obligations or any part
thereof; (iii) upon the occurrence of any Event of Default, to direct the order
or manner of disposition of the Collateral and any and all other collateral and
the enforcement of any and all indorsements, guaranties and other obligations
relating to the Obligations or any part thereof, as Bank may determine; and (iv)
to determine how, when and what application of payments and credits, if any,
shall be made on the Obligations or any part thereof.
G. The rights and benefits of Bank hereunder shall, if Bank so
directs, inure to any party acquiring Bank's interest in the Obligations.
H. Bank and Pledgor as used herein shall include the
successors or assigns of those parties.
I. No modification, rescission, waiver, release or amendment
of any provision of this Pledge Agreement shall be made, except by a written
agreement subscribed by the Pledgor and by a duly authorized officer of Bank.
J. This Pledge Agreement and the transaction evidenced hereby
shall be governed by and construed under the laws of New York State, as the same
may from time to time be in effect, without regard to principles of conflicts of
laws.
K. The Pledgor hereby irrevocably appoints Bank the Pledgor's
agent with full power, in the same manner, to the same extent and with the same
effect as if the Pledgor was to do the same to perform all acts which Bank deems
appropriate to protect, preserve and realize upon the Collateral. The agency
hereby created may only be exercised by Bank after the occurrence of an Event of
Default, is otherwise unconditional and shall not terminate until all of the
Obligations are paid in full and until all commitments by Bank under the Credit
Agreement have expired or been terminated. This power of attorney is a power
coupled
<PAGE> 16
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with an interest and is irrevocable until the Obligations have been irrevocably
paid in full and all commitments by Bank under the Credit Agreement have expired
or been terminated. Notwithstanding anything in this Pledge Agreement to the
contrary, the Bank shall not convert any Convertible Securities into Common
Stock prior to the occurrence of an Event of Default.
L. Prior to the occurrence of an Event of Default, and after
the occurrence of an Event of Default with the prior written consent of Bank,
the Pledgor may exercise its right to convert the Convertible Securities into
Common Stock in accordance with the terms of the Convertible Securities, and
Bank will consent to a release of the Convertible Securities to allow such
conversion, provided that the certificates evidencing such Common Stock
accompanied by stock powers executed in blank by the Pledgor are delivered to
Bank contemporaneously with the release of the Convertible Securities. Any such
Common Stock shall constitute part of the Collateral in accordance with the
provisions of VII hereof.
M. Bank acknowledges that the Preferred Stock, and if
applicable the Common Stock into which such Preferred Stock is converted, are
subject to the terms of the Shareholder Agreement, and that Bank's rights in the
Preferred Stock, and if applicable such Common Stock, are therefore subject to
the terms of the Shareholder Agreement.
N. This Pledge Agreement is and is intended to be a continuing
Pledge Agreement and shall remain in full force and effect until the Obligations
outstanding, or contracted or committed for (whether or not outstanding), and
any extensions or renewals thereof, together with interest accruing thereon
shall be finally and irrevocably paid in full. If, after receipt of any payment
of all or any part of the Obligations, Bank is for any reason compelled to
surrender such payment to any person or entity, because such payment is
determined to be void or voidable as a preference, impermissible setoff, or a
diversion of trust funds, or for any other reason, this Pledge Agreement shall
continue in full force notwithstanding any contrary action which may have been
taken by Bank in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to Bank's rights under this Pledge Agreement
and shall be deemed to have been conditioned upon such payment having become
final and irrevocable. After the payment in full of the Obligations and the
expiration or termination of Bank's commitment under the Credit Agreement, Bank
shall return to the Pledgor any certificated securities constituting Collateral
which have not been liquidated by Bank, and deliver to the Pledgor UCC
termination statements to terminate any UCC financing statements filed with
respect to the Collateral.
<PAGE> 17
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O. Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the "Securities Act"), and
applicable state securities laws ("Blue Sky Laws"), the Bank may be compelled,
with respect to any sale of all or any part of the Collateral, to make sales of
such Collateral to purchasers who have agreed, among other things, to acquire
the Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges that such public or private
sales may be at prices and on terms less favorable to the Bank than those
obtainable through a public sale without such restrictions. Pledgor acknowledges
and agrees that this Pledge Agreement does not obligate the Bank under any
circumstance to register any of the shares constituting Collateral under the
Securities Act or any Blue Sky Laws for the benefit of the Pledgor.
Notwithstanding the foregoing provisions of this
Section X(O), if, after the occurrence of an Event of Default, (1) Bank has
determined that a disposition of the Collateral shall be required, and (2) the
Collateral has a market value exceeding 150% of the then outstanding balance of
the Obligations (plus estimated interest to the anticipated Collateral
disposition date), then the Bank shall, at the option of the Bank, either (a)
use reasonable efforts during the Offering Period to dispose of the Collateral
by selling the Collateral in a registered public offering pursuant to the
Registration Agreement, or (b) permit the Pledgor to proceed with the public
offering during the Offering Period pursuant to the Registration Agreement,
provided that each of the following conditions is and remains satisfied during
the Offering Period:
1. The Pledgor shall have taken any action reasonably requested by the
Bank from time to time to facilitate such public offering and the registration
of the Collateral under the Securities Act and applicable Blue Sky Laws pursuant
to the Registration Agreement, including, without limitation, the exercise by
the Pledgor of the Pledgor's demand registration rights under the Registration
Agreement.
2. The Collateral shall continue to have a market value as determined
by the Bank (in accordance with the terms of the definition of "Collateral Pool"
in the Credit Agreement) exceeding 150% of the outstanding balance of the
Obligations from time to time plus estimated interest to the anticipated
Collateral disposition date.
3. There shall be no legal or other reason why the registration of the
Collateral under the Securities Act and applicable Blue Sky Laws during the
Offering Period shall not then be permissible or reasonably feasible.
<PAGE> 18
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4. The Pledgor shall have provided from time to time to the Bank a cash
deposit or other security acceptable to the Bank to secure the Pledgor's
obligation under Section IX(E) to reimburse the Bank for any expenses
anticipated to be incurred by the Bank in connection with any such public
offering.
The proceeds of any such public offering shall be applied to the
Obligations.
If (x) at any time any one or more of the conditions set forth in (1)
to (4) above shall not continue to be satisfied as determined by the Bank (even
if any such condition is later satisfied), or (y) a public offering of the
Collateral shall not have been consummated during the Offering Period, the Bank
shall thereupon have no further obligation to exercise reasonable efforts to
proceed with such public offering of the Collateral or to permit the Pledgor to
proceed with such public offering.
P. THE PLEDGOR AGREES THAT ANY ACTION OR PROCEEDING TO
ENFORCE, OR ARISING OUT OF, THIS PLEDGE AGREEMENT SHALL BE SUBJECT TO THE
PROVISIONS OF SECTION 8.12 OF THE CREDIT AGREEMENT AND THE RIDER THERETO.
Q. THE PLEDGOR AND BANK HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY THEY MAY HAVE IN ANY ACTION OR
PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS PLEDGE AGREEMENT OR THE
TRANSACTIONS RELATED THERETO.
[SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 19
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INTER SCAN HOLDING LTD.
By: /s/ Holger Hjelm, Director
-----------------------------------
Name: Holger Hjelm
-----------------------------------
By: /s/ Max Huber, Director
-----------------------------------
Name: Max Huber
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MARINE MIDLAND BANK
By: /s/ Mark J. Rakov
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Name: Mark J. Rakov
-----------------------------------
Title: Vice President
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[SIGNATURE PAGE - PLEDGE AGREEMENT]
