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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 15, 1997
Medar, Inc.
(Exact name of registrant as specified in its charter)
Michigan 0-12728 38-2191935
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
38700 Grand River Avenue, Farmington Hills, Michigan 48335
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 471-2660
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
Effective July 15, 1997, Medar, Inc. closed the private placement of $7.0
million of subordinated debentures to seven purchasers, including Maxco, Inc.,
a current 21% shareholder of Medar. The notes have maturities of up to eight
years and bear interest at 12.95%. Additionally, the note holders received
warrants for the purchase of 1.4 million Medar common shares at $6.86. The
agreement provides for limitations on common shareholder dilution in the first
year in the event of significant market price increases in Medar stock.
As part of this transaction, Maxco, Inc. agreed to purchase 150,000 newly
issued, unregistered shares of Medar common stock at $5 per share. The
proceeds from the sale of the debentures and the common stock are expected to
be used to reduce certain bank borrowing and for working capital.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
4.1 Note and Warrant Purchase Agreement
4.2 Form of 12.95% Senior Subordinated Secured Note
4.3 Form of Medar, Inc. Common Stock Purchase Warrant Certificate
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Medar, Inc.
(Registrant)
Date July 29, 1997 By: /s/ Richard R. Current
--------------------------- --------------------------------
Richard R. Current,
Executive Vice President,
Finance and Operations
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Note and Warrant Purchase Agreement
4.2 Form of 12.95% Senior Subordinated Secured Note
4.3 Form of Medar, Inc. Common Stock Purchase Warrant
Certificate
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EXHIBIT 4.1
NOTE AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 15, 1997
REGARDING
12.95% SENIOR SUBORDINATED SECURED NOTES
DUE JUNE 30, 2005
OF
MEDAR, INC.
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TABLE OF CONTENTS
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SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2. Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7. Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8. Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.10. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.11. Compliance with Governmental Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.13. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.14. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.15. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.16. Stock Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.17. No Defaults or Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.18. Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.19. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.20. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.21. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.22. Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5. REPRESENTATIONS OF THE PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1. Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6. PREPAYMENTS AND REPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2. Prepayment at Holder's Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4. Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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SECTION 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1. Preservation of Corporate Existence; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2. Compliance with Laws; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3. Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.5. Accounting, Access to Records, Books, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.9. Office for Payment, Exchange and Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.11. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.12. Payment of Dividends by Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.13. Transfer of Assets of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.14. Communication with Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.15. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.16. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.17. Delivery of Information for Rule 144A Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2. Debt to Worth Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3. Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.5. Merger and Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6. Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.7. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8. Sale or Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.9. Amendment of Charter and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.10. Issuance of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.11. Subsidiaries, Joint Ventures, Management Contracts, Capital
Structure Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.12. Corporate Offices, Corporate Name, Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.13. Amendments to Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.14. Private Placement Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.15. Amendments to Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.16. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.17. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.18. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 9. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1. Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2. Compliance with Agreements; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.3. Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.4. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.5. Legality; Governmental and Other Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6. Time of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7. No Change in Law, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.8. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.9. Other Financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.10. Related Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.11. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.12. Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.13. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.14. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.15. Opinion of the Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.16. Other Documents and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2. Notice of Proposed Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.3. All Holders Bound by Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION
OF SURRENDERED NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.1. Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.2. Exchange of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.3. Payment of Interest on Surrendered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.4. Surrender of Note in Exercise of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.5. Cancellation of Surrendered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1. Registration of Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.2. Replacement of Notes and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 14. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.2. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 15. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.1. Enforcement of Rights; Exercise of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15.2. Payment of Expenses of Enforcement and Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.3. Delay Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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15.4. Specific Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.5. Certain Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 16. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 17. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.1. Registration at the Request of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
17.2. Piggyback Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.4. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
17.5. Provision of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
17.7. Periodic Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.8. Indemnification Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.9. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
17.10. Certain Limitations in Connection with Future Grants of Registration Rights . . . . . . . . . . . . . . . 54
SECTION 18. EXPENSES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
18.2. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.3. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
18.4. Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 19. DIRECT PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 20. SECURITY INTEREST AND MORTGAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 21. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.2. Application of Proceeds of the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.3. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.4. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
21.6. Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
21.7. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 22. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.1. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.3. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
23.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
23.5. Binding Effect and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23.9. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
<PAGE> 7
SCHEDULES
Schedule 4.5 - Litigation
Schedule 4.6 - Financial Statements
Schedule 4.18 - Directors and Officers
EXHIBITS
Exhibit A - Purchasers' Note and Warrant Amounts and Addresses
Exhibit B - Form of Note
Exhibit C - Form of Warrant
Exhibit D - Form of Guaranty Agreement
Exhibit E - Form of Legal Opinion of Counsel to the Company
<PAGE> 8
NOTE AND WARRANT PURCHASE AGREEMENT, dated as of July 15,
1997, by and among Medar, Inc., a Michigan corporation (the "Company"), and
State Street Bank and Trust Company as Trustee for The Textron Master Trust,
Ohio National Fund, Inc./Social Awareness Portfolio, Ohio National Fund,
Inc./Equity Portfolio, Ohio National Fund, Inc./Omni Portfolio, Maxco, Inc.,
Industrial Boxboard Corporation Profit-Sharing Plan and Trust (July 1, 1989
restatement), and Robert W. Fulk IRA Rollover (each individually a "Purchaser"
and collectively, the "Purchasers", which term shall also include successors
and assigns and any permitted transferees of the Notes or the Warrants) and
Dorrance Street Capital Advisors, L.L.C., as Agent.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS
(a) The Company agrees to sell to the Purchasers and,
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Company contained herein or made pursuant
hereto, the Purchasers agree to purchase from the Company on the Closing Date
specified in Section 2 hereof, (i) a Note or Notes in the aggregate principal
amount set forth opposite such Purchaser's name on Exhibit A hereto and (ii) a
Warrant or Warrants for the number of shares of the Company's Common Stock set
forth opposite such Purchaser's name on Exhibit A. The aggregate purchase
price to be paid to the Company by the Purchasers for such Notes and such
Warrants is 100% of the principal amount of the Notes to be purchased by the
Purchasers, which amount will be allocated in accordance with Section 2(c)
hereof.
(b) As used herein, "Notes" means the aggregate of
$7,000,000 principal amount of the Company's 12.95% Senior Subordinated Secured
Notes Due June 30, 2005, together with all Notes issued in exchange therefor or
replacement thereof. Each Note will be substantially in the form of the Note
set forth as Exhibit B hereto. Interest on the Notes shall accrue from the
Closing Date and shall be payable quarterly on the 30th day of March, June,
September and December of each year, commencing September 30, 1997 (which first
interest payment shall be for the period from and including the Closing Date
specified in Section 2 hereof through and including September 30, 1997) at the
interest rates and in the manner specified in the form of Note attached hereto
as Exhibit B.
(c) If all or a portion of (i) the principal amount of the
Notes, (ii) the interest payable thereon or (iii) any fee or other amount
payable hereunder or under any other Loan Document shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the Default Rate from
the date of such nonpayment until paid in full (both before and after
judgment).
<PAGE> 9
(d) As used herein, "Warrants" means the aggregate of
Common Stock Purchase Warrants evidenced by certificates substantially in the
form of Exhibit C hereto, together with all Warrants issued in exchange
therefor or replacement thereof. Such Warrants in the aggregate initially
entitle the holders thereof to purchase 1,400,000 shares of Common Stock of the
Company, no par value, at a purchase price of $6.86, as set forth therein, such
number and such price being subject to adjustment as provided in the form of
Warrant attached hereto as Exhibit C.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the
closing (the "Closing") of the purchase and sale of the Notes and Warrants will
take place at the offices of Morgan, Lewis & Bockius, LLP, located at 101 Park
Avenue, New York, New York, at such time and date as shall be mutually agreed
to by the Company and the Purchasers. Such time and date are herein referred
to as the "Closing Date".
(b) Subject to the terms and conditions hereof, on the
Closing Date (i) the Company will deliver to each Purchaser (A) a Note or
Notes, substantially in the form of Exhibit B hereto, payable to such Purchaser
(or its nominee as notified to the Company), and dated the Closing Date, in the
aggregate principal amount set forth opposite such Purchaser's name on Exhibit
A, and (B) a Warrant or Warrants evidenced by certificates substantially in the
form of Exhibit C hereto and dated the Closing Date, for the number of shares
of the Company's Common Stock set forth opposite such Purchaser's name on
Exhibit A, and (ii) upon such Purchaser's receipt thereof, such Purchaser will
deliver to the Company by wire transfer an amount equal to the purchase price
for such Notes and Warrants (as specified in Section 1(a) hereof) payable to
the order of the Company in federal or other immediately available funds.
(c) The Purchasers acknowledge that the Notes and the
Warrants constitute an "investment unit" within the meaning of Section
1273(c)(2) of the Code and that the Company will allocate the "issue price"
(within the meaning of Section 1273(b) of the Code) of such investment unit,
for all Income Tax purposes, between the Notes and Warrants as follows: (i) the
price at which all of the Warrants were sold by the Company is $602,000 and
(ii) the price at which all of the Notes were sold was $6,398,000. Each
Purchaser agrees to abide by Treasury Regulation Section 1.1273-2(h)(2) with
respect to such allocation of the issue price.
SECTION 3. DEFINITIONS
(a) For purposes of the Loan Documents, the following
definitions shall apply (such definitions to be equally applicable to both the
singular and plural forms of the terms defined):
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<PAGE> 10
"Accountants" means Ernst & Young, LLP or another independent
certified public accounting firm selected by the Company and
reasonably satisfactory to the Majority Noteholders.
"Affiliate", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof
(other than a director nominated by one of the Purchasers) and any
Person (other than one of the Purchasers) which is, directly or
indirectly, the beneficial owner of more than ten percent (10%) of the
Voting Stock thereof, and, if such beneficial owner is a partnership,
any partner thereof, or if such beneficial owner is a corporation, any
Person, directly or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such
beneficial owner, or any officer or director of such beneficial owner
or of any corporation occupying any such control relationship, (ii) if
such Person is a partnership, any partner thereof, (iii) in all cases,
any Person (other than one of the Purchasers) which, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with such Person, and (iv) in
all cases, any Person 10% or more of whose Voting Stock is
beneficially owned, directly or indirectly through one or more
intermediaries, by such Person. For purposes of this definition,
"control" (including the correlative terms "controlling", "controlled
by" and "under common control with"), with respect to any Person,
shall mean possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise.
"Agent" means Dorrance Street Capital Advisors, L.L.C. or any
successor agent appointed pursuant to Section 21.7 hereof.
"Aggregate Net Income" means the aggregate amount of positive
annual net income after taxes for each fiscal year of the Company and
its Subsidiaries on a consolidated basis, as determined in accordance
with GAAP, beginning with the fiscal year ending December 31, 1997
through the date of determination, without any offset for any negative
net income during such period. Aggregate Net Income will only be
adjusted as of the last day of each fiscal year.
"Agreement" means this Agreement (together with exhibits and
schedules) as from time to time assigned, supplemented or amended or
as the terms hereof may be waived.
"Bankruptcy Code" means the United States Bankruptcy Code and
any successor thereto, and the rules and regulations issued
thereunder.
"Board" or "Board of Directors" means, with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however designated, which is
charged with legal responsibility for the management of
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<PAGE> 11
such Person, or any committee of such board of directors or group,
however designated, which is authorized to exercise the power of such
board or group in respect of the matter in question.
"Business" the business conducted by the Company in the vision
and welding industries and all other activities ancillary or related
thereto.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in New York, New York or Detroit, Michigan
are required to close.
"Capital Expenditures" means for any period, the amount of all
payments made by the Company or a Subsidiary during such period for
the lease, purchase, improvement, construction or use of any Property,
the value or cost of which under GAAP is required to be capitalized
and appears on the Company's or any Subsidiary's balance sheet in the
category of property, plant or equipment, without regard to the manner
in which such payments or the instrument pursuant to which they are
made is characterized by the Company or any other Person, and shall
include, without limitation, the principal components of payments for
the installment purchase of Property and payments under Capitalized
Leases.
"Capitalized Leases" means any lease to which the Company or a
Subsidiary is party as lessee, or by which it is bound, under which it
leases any property (real, personal or mixed) from any lessor other
than the Company or a Subsidiary, and which is required to be
capitalized in accordance with GAAP, but also including any such
lease, whether or not so capitalized, where the Company or a
Subsidiary is treated as the owner of the leased property under the
Code.
"Change of Control Event" means the acquisition by any Person,
or group of Persons (other than the shareholders of the Company as of
the Closing Date) acting in concert, in one or more transactions, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act) of shares of capital stock of the
Company the ownership of which entitles the holder(s) to cast more
than 25% of the votes entitled to vote generally in the election of
the Board of Directors of the Company.
"Claims" has the meaning set forth in the definition of
"Environmental Claim."
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations and interpretations thereunder.
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<PAGE> 12
"Collateral" means the Property upon which the Agent is
granted the Security Interests, pursuant to the terms of the General
Security Agreement, the Collateral Assignment and the Mortgages.
"Collateral Assignment" means the Collateral Assignment of
Proprietary Rights and Security Agreement to be entered into at the
Closing by the Company and the Agent.
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"Common Stock" means that class of stock or other equivalent
evidences of ownership of a corporation, the holders of which are
entitled to vote generally to elect the Board of Directors of such
corporation.
"Company" means Medar, Inc., a Michigan corporation, its
successors and permitted assigns.
"Company's Obligations" means all loans, debts, principal,
interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums, liabilities,
obligations (including the performance of the covenants of the Company
contained herein or in the Loan Documents), fees, lease payments,
guaranties, covenants, and duties owing by the Company to the
Purchasers or the Agent of any kind and description (whether pursuant
to or evidenced by this Agreement, any of the other Loan Documents, or
any other note or other instrument, or by any other agreement between
the Purchasers or the Agent and the Company, and whether or not for
the payment of money), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from the
Company to others that the Purchasers or the Agent may have obtained
by assignment or otherwise, and further including all interest not
paid when due.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and its Subsidiaries of the amounts signified by such term for
all such Persons, with intercompany items eliminated, and, with
respect to earnings, after eliminating the portion of earnings
properly attributable to minority interests, if any, in the capital of
any such Person (other than in the capital of the Company) and
otherwise as determined in accordance with GAAP.
"Consolidated Cash Flow" means for any period, the
Consolidated Net Income plus each of the following items, to the
extent deducted from the revenues of the Company in the calculation of
net income for such period: (i) Depreciation; (ii) amortization and
other noncash charges; (iii) interest expense incurred and fees paid
to the Senior Lender pursuant to the Loan Agreement; and (iv) Income
Taxes determined as
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<PAGE> 13
the accrued liability of the Company and any Subsidiary in respect of
such period, regardless of what portion of such expense has actually
been paid by the Company and any Subsidiary during such period; and
after deduction for (A) Income Taxes, to the extent actually paid
during such period; (B) all noncash income items recognized; (C) gain
on the sale of property, plant or equipment; and (D) all Capital
Expenditures paid by the Company and any Subsidiary.
"Consolidated Coverage Ratio" means, as of any date of
determination, the ratio of Consolidated Cash Flow to Consolidated
Interest Expense.
"Consolidated Interest Expense" means, for any period, the
total interest payable during such period by the Company and its
Subsidiaries on account of Indebtedness.
"Consolidated Liabilities" means, at any time, the total
liabilities of the Company and its Subsidiaries, determined in
accordance with GAAP and after eliminating inter-company transactions
among the Company and its Subsidiaries.
"Consolidated Net Income" means, for any period for which the
amount thereof is to be determined, the net income (net of any losses
or expenses) or loss of the Company and its Subsidiaries on a
consolidated basis, during such period (such net income to be
determined in accordance with GAAP) after Income Taxes actually paid,
but excluding:
(a) the earnings during such period of any Person to
which the assets of the Company or any Subsidiary
shall have been sold, transferred or disposed of, or
into which the Company or such Subsidiary shall have
merged, prior to the date of such transaction;
(b) any extraordinary gain or loss during such period
arising from the sale, exchange or other disposition
of capital assets (such term to include all fixed
assets, whether tangible or intangible, and all
inventory sold in conjunction with the disposition of
fixed assets);
(c) any gain or loss during such period arising from the
write-up or write-down of any asset; and
(d) any earnings or gains during such period resulting
from the receipt of any proceeds of any life
insurance policy.
"Consolidated Tangible Assets" means, at any time, the total
assets of the Company and its Subsidiaries determined in accordance
with GAAP excluding deferred assets, patents, copyrights, trademarks,
goodwill, capitalized software development costs and other General
Intangibles, and Investments.
-6-
<PAGE> 14
"Consolidated Tangible Net Worth" means, at any time,
Consolidated Tangible Assets minus Consolidated Liabilities.
"Contingent Liabilities" of any person means, as of any date,
all obligations of such person or of others for which such person is
contingently liable, as obligor, guarantor, surety or in any other
capacity, or in respect of which obligations such person assures a
creditor against loss or agrees to take any action to prevent any such
loss (other than endorsements of negotiable instruments for collection
in the ordinary course of business), including all reimbursement
obligations of such person in respect of any letters of credit, surety
bonds or similar obligations and all obligations of such person to
advance funds to, or to purchase assets, property or services from,
any other person in order to maintain the financial condition of such
other person.
"Default Rate" means a per annum rate equal to the interest
rate on the Notes plus four percent (4%).
"Depreciation" means, in respect of any period, all
depreciation on Property taken during such period, as determined in
accordance with GAAP.
"Earnings Available for Dividends" means the excess of (A) the
sum of (x) 50% of aggregate Consolidated Net Income, if positive, for
each fiscal year commencing on or after January 1, 1997 less 100% of
aggregate Consolidated Net Income, if negative, for each fiscal year
commencing on or after January 1, 1997 plus (y) net proceeds from the
sale by the Company of Common Stock (other than pursuant to the
Warrants) minus (B) all Restricted Payments and Restricted Investments
made since the Closing Date.
"Environment" means all air, surface water, groundwater, or
land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources.
"Environmental Auditors" has the meaning set forth in Section
7.14 hereof.
"Environmental Claim" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of
violations, investigations, complaints, requests for information,
proceedings, or other communication (written or oral), whether
criminal or civil, (collectively, " Claims") pursuant to or relating
to any applicable Environmental Law by any person (including but not
limited to any Governmental or Regulatory Authority, private person
and citizens' group) based upon, alleging, asserting, or claiming any
actual or potential (i) violation of or liability under any
Environmental Law, (ii) violation of any Environmental Permit, or
(iii) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, or Release into the
Environment, of any Hazardous Materials at any location, including but
not limited to any off-site location to which Hazardous
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<PAGE> 15
Materials or materials containing Hazardous Materials were sent for
handling, storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is
listed or proposed for listing on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System, or on any similar state list of sites requiring
investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding, or investigation related to or
arising from any alleged violation of any Environmental Law or the
presence or Release of a Hazardous Material.
"Environmental Law" means any and all current and future,
federal, state, local, provincial and foreign, civil and criminal
laws, statutes, ordinances, orders, codes, rules, regulations,
Environmental Permits, policies, guidance documents, judgments,
decrees, injunctions, or agreements with any Governmental or
Regulatory Authority, relating to the protection of health and the
Environment, worker health and safety, and/or governing the handling,
use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or
Release of Hazardous Materials, whether now existing or subsequently
amended or enacted, including but not limited to: the Clean Air Act,
42 U.S.C. Section 7401 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Hazardous Material Transportation
Act 49 U.S.C. Section 1801 et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act 7 U.S.C. Section 136 et seq.; the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; the Occupational Safety & Health Act of 1970,
29 U.S.C. Section 651 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 et seq.; and the state analogies thereto, all as
amended or superseded from time to time; and any common law doctrine,
including but not limited to, negligence, nuisance, trespass, personal
injury, or property damage related to or arising out of the presence,
Release, or exposure to a Hazardous Material.
"Environmental Permit" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consents or
authorizations required by any Governmental or Regulatory Authority
under or in connection with any Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered
into by a Governmental or Regulatory Authority under any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor statute.
"ERISA Affiliate" means each "person" (as defined in Section
3(9) of ERISA) which is under "common control" with the Company or any
of its Subsidiaries (within the meaning of Section 414(b), (c), (m) or
(o) of the Code).
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<PAGE> 16
"Event of Default" has the meaning set forth in Section 14
hereof.
"Fair Market Value" of any property means the fair market sale
value which a willing buyer at retail would pay a willing seller, each
under no compulsion to buy or sell and in full possession of all
relevant facts.
"GAAP" means generally accepted accounting principles, as in
effect from time to time, which shall include the official
interpretations thereof by the Financial Accounting Standards Board or
any successor thereto, consistently applied.
"General Intangibles" means all of the Company's and any
Subsidiary's present and future general intangibles and other personal
Property (including without limitation, any and all rights of the
Company and any Subsidiary to all choses or things in action, tax
refund claims, credits, claims, demands, goodwill, licenses, franchise
agreements, subscription costs, patents, trade names, trademarks,
service marks, copyrights, rights to royalties, blueprints, drawings,
customer lists, purchase orders, computer programs, computer discs,
computer tapes, literature, reports, catalogs, methods, sales
literature, video tapes, confidential information and trade secrets,
consulting agreements, employment agreements, leasehold interests in
real and personal Property, insurance policies, deposits with insurers
relating to workers' compensation liabilities, deposit accounts, tax
refunds and proprietary rights in any equipment), other than
"Equipment," "Inventory," "Accounts" and "Negotiable Instruments," as
each such term is defined in the UCC, as well as the Company's and any
Subsidiary's books and records of any kind relating to any of the
foregoing, and all products and proceeds of the foregoing.
"General Security Agreement" means the General Security
Agreement to be entered into at the Closing by the Company and the
Agent.
"Governmental Regulations" means any and all laws, statutes,
ordinances, rules, regulations, judgments, writs, injunctions,
decrees, orders, awards and standards, or any similar requirement, of
the government of the United States or any foreign government or any
state, province, municipality or other political subdivision thereof
or therein or any court, agency, instrumentality, regulatory authority
or commission of any of the foregoing.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political
subdivision.
"Guaranty Agreement" means the Subordinated Subsidiary
Guaranty, in the form attached hereto as Exhibit D, to be executed and
delivered to the Purchasers at the Closing by each Subsidiary.
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<PAGE> 17
"Hazardous Materials" means petroleum, petroleum hydrocarbons
or petroleum products, petroleum by-products, radioactive materials,
underground storage tanks, asbestos or asbestos-containing materials,
gasoline, diesel fuel, pesticides, radon, urea formaldehyde, lead or
lead-containing materials, polychlorinated biphenyls, ionizing and
non-ionizing radiation including radon and electromagnetic frequency
radiation; and any other chemicals, materials, substances or wastes in
any amount or concentration which are now or hereafter become defined
as or included in the definition of "hazardous substances," "hazardous
materials," "hazardous wastes," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances," "solid wastes," or
"contaminants" or words of similar import, under any Environmental
Law.
"Income Taxes" means all federal, state, local or foreign
income, taxes, assessments, duties, fees, levies or other governmental
charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect
thereto.
"Indebtedness" means all liabilities, obligations and
reserves, contingent or otherwise, which in accordance with GAAP,
would be reflected as a liability on a balance sheet or would be
required to be disclosed in a financial statement, including, without
duplication: (i) all Indebtedness for Borrowed Money, (ii) all
obligations secured by any Lien upon Property owned by the Company,
irrespective of whether such obligation or liability is assumed; (iii)
any obligation of the Company guaranteeing or intended to guarantee
(whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to the Company, but exclusive of obligations arising as the
result of the endorsement by the Company of checks or other negotiable
instruments in the ordinary course of the Company's business for
purposes of depositing such items) any indebtedness, lease, dividend,
letter of credit, or other obligation of any other Person; and (iv)
liabilities in respect of unfunded vested benefits under any Single
Employer Plan or in respect of withdrawal liabilities incurred under
ERISA by the Company or any ERISA Affiliate to any Multiemployer Plan.
"Indebtedness for Borrowed Money" means without duplication,
all Indebtedness (i) in respect of money borrowed, (ii) evidenced by a
note, debenture or other like written obligation to pay money
(including, without limitation, all of the Company's Obligations and
the Permitted Senior Indebtedness, and all reimbursement or other
obligations of the Company in respect of letters of credit (except for
commercial letters of credit up to $500,000), letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled
disbursement accounts, or other financial products (except hedging
transactions); (iii) in respect of Capitalized Leases or for the
deferred purchase price of Property (other than trade payables arising
in the ordinary course of business that are not represented by
promissory notes or by other written evidence other than invoices); or
(iv) in respect of
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obligations under conditional sales or other title retention agreements, and
all guaranties of any or all of the foregoing.
"Indemnified Persons" has the meaning set forth in Section
18.2 hereof.
"Investment" means, with respect to any Person:
(i) the amount paid or committed to be paid, or the value
of property or services contributed or committed to
be contributed, by the Company for or in connection
with the acquisition by the Company of any stock,
bonds, notes, debentures, partnership or other
ownership interests or other securities of such
Person; and
(ii) the amount of any advance, loan or extension of
credit to, or guaranty or other similar obligation
with respect to any Indebtedness of such Person by
the Company and (without duplication) any amount
committed to be advanced, loaned, or extended to, or
the payment of which is committed to be assured by a
guaranty or similar obligation for the benefit of,
such Person by the Company.
"Joint Venture" means a corporation, limited partnership or
other limited liability business entity, formed in the ordinary course
of business by the Company or any Subsidiary with Persons other than
Affiliates.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security interest of any kind or nature
whatsoever (including, without limitation, any conditional sale or
other title retention agreement and any financing lease or Capitalized
Lease having substantially the same effect as any of the foregoing and
any assignment or other conveyance of any right to receive income).
"Loan Agreement" means the Revolving Credit and Loan
Agreement, dated as of August 10, 1995, as amended through the date
hereof, between the Company and the Senior Lender.
"Loan Documents" mean, collectively, the
(i) Agreement;
(ii) Notes;
(iii) Warrants;
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(iv) General Security Agreement;
(v) Collateral Assignment;
(vi) Mortgages;
(vii) Subordination Agreement;
(vii) UCC financing statements; and
(viii) such other instruments and documents as
Purchasers may require to evidence and perfect
the Security Interests and the Notes,
and individually, any one of them.
As to each of the foregoing, together with all alterations,
amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements or supplements
thereto.
"Losses" have the meaning set forth in Section 18.2 hereof.
"Majority Noteholders" means the holders of Notes evidencing
more than 50% of the principal amount of all Notes then outstanding.
"Material Adverse Effect" means (i) a material adverse effect
on the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries on a consolidated basis, (ii) an effect
which is prejudicial in any material respect to the holders of the
Notes or the Warrants or (iii) an effect on the ability of the Company
or any Subsidiary to perform its obligations under this Agreement, any
Loan Document, the Notes or the Warrants.
"Mortgage" means those certain two Mortgages pursuant to which
the Company shall grant to the Agent a second priority lien on and
Security Interest in the Real Estate and all improvements thereon.
"Multiemployer Plan" shall mean any multiemployer plan (within
the meaning of section 3(37) of ERISA) to which either the Company,
any Subsidiary, or any ERISA Affiliate has an obligation to
contribute.
"Note" or "Notes" has the meaning set forth in Section l(b)
hereof.
"Outstanding" or "outstanding" means, when used with reference
to the Notes or Warrants as of a particular time, all Notes or
Warrants, as the case may be, theretofore
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<PAGE> 20
duly issued except (i) Notes or Warrants theretofore reported as lost,
stolen, mutilated or destroyed or surrendered for transfer, exchange
or replacement, in respect of which new or replacement Notes or
Warrants have been issued by the Company, (ii) Notes theretofore paid
in full, (iii) Warrants theretofore fully exercised and (iv) Notes
theretofore canceled by the Company, whether upon exercise of a
Warrant in whole or in part or otherwise; except that for the purpose
of determining whether holders of the requisite principal amount of
Notes or Warrants have made or concurred in any declaration, waiver,
consent, approval, notice, annulment of acceleration or other
communication under this Agreement or under any Notes or Warrants,
Notes or Warrants registered in the name of, as well as Notes or
Warrants owned beneficially by, the Company, any Subsidiary or any of
their Affiliates (other than one of the Purchasers) shall not be
deemed to be outstanding.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning set forth in Section 4.11 hereof.
"Permitted Liens" means any of the following Liens:
(i) the Senior Security Interests;
(ii) the Security Interests;
(iii) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which
adequate financial reserves have been established on its books and
records;
(iv) Liens (other than any Lien imposed by ERISA)
created and maintained in the ordinary course of business which are
not material in the aggregate, and which would not constitute or
result in a Material Adverse Effect, and which constitute (A) pledges
or deposits under worker's compensation laws, unemployment insurance
laws or similar legislation, (B) good faith deposits in connection
with bids, tenders, contracts or leases to which the Company or a
Subsidiary is a party for a purpose other than borrowing money or
obtaining credit, including rent security deposits, (C) Liens imposed
by law, such as those of carriers, warehousemen and mechanics, if
payment of the obligation secured thereby is not yet due or if such
Liens are discharged within sixty (60) days of the date they are
imposed, (D) Liens securing taxes, assessments or other governmental
charges or levies not yet subject to penalties for nonpayment, and (E)
pledges or deposits to secure public or statutory obligations of a
Company or a Subsidiary, or surety, customs or appeal bonds to which
the Company or a Subsidiary is a party;
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<PAGE> 21
(v) Liens affecting real property which constitute
minor survey exceptions or defects or irregularities in title, minor
encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the
use of such real property; provided, however,
that all of the foregoing, in the aggregate, do not at any time
materially detract from the value of said properties or materially
impair their use in the operation of the businesses of the Company or
any Subsidiary, as the case may be; and
(vi) Purchase Money Liens securing purchase money
Indebtedness; provided, however, that the aggregate outstanding amount
of Indebtedness and secured by all such Purchase Money Liens for the
Company and all Subsidiaries shall not exceed, on an aggregate basis,
$500,000 at any time.
"Permitted Senior Indebtedness" means (i) Senior Indebtedness
in an amount up to $23 million and (ii) the interests of the lessor
under any Capitalized Leases permitted to exist hereunder.
"Person" or "person" means an individual, corporation,
partnership, firm, limited liability company, association, trust,
unincorporated organization, government, governmental body or
political subdivision thereof.
"Plan" shall mean any employee benefit plan (within the
meaning of section 3(3) of ERISA) maintained or contributed to by the
Company, any Subsidiary, or any ERISA Affiliate, other than a
Multiemployer Plan.
"Potential Default" means a condition or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"Prepayment Premium" means, in connection with any prepayment
of a Note on a date, the amount equal to the following percentage of
the principal amount being prepaid:
July 1, 1999 to June 30, 2002 5%
2002 2003 4%
2003 2004 3%
2004 2005 2%
"Prohibited Transaction" means any transaction involving any
Plan which is proscribed by Section 406 of ERISA or Section 4975 of
the Code.
"Property" means all types of real, personal or mixed property
and all types of tangible or intangible property.
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<PAGE> 22
"Purchase Money Liens" means Liens securing purchase money
Indebtedness incurred in connection with the acquisition of capital
assets by Company or any Subsidiary in the ordinary course of
business; provided that (a) such Liens do not extend to or cover
assets or properties other than those purchased in connection with the
purchase in which such Indebtedness was incurred and (b) the
obligation secured by any such Lien so created shall not exceed 100%
of the cost of the property including transportation and installation
costs, covered thereby.
"Purchaser(s)" has the meaning set forth in the first
paragraph hereof.
"Real Estate" means all real estate and improvements located
thereon owned by the Company, all of which shall constitute a portion
of the Collateral and which shall be encumbered by the Mortgage.
"Registration Demand" has the meaning set forth in Section
17.1(b) hereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Material into the Environment.
"Reportable Event" shall mean, with respect to any Single
Employer Plan, an event described in section 4043(b) of ERISA, other
than an event as to which the notice requirement is waived under
applicable PBGC regulations.
"Restricted Investment" means any Investment other than (1)
obligations of the United States government due within one year, (2)
certificates of deposit and bankers acceptances due within one year of
a United States domiciled commercial bank having capital funds of at
least $100 million and whose long-term unsecured debt obligations have
been given a rating of at least A by Standard & Poor's or A2 by
Moody's, (3) commercial paper rated P-1 by Moody's or A-1 by Standard
& Poor's and maturing not more than 270 days from the date of creation
thereof, (4) debt of any state or political subdivision that is rated
AA or better by Moody's or Aa2 or better by Standard and Poor's and
maturing in less than one year, (5) investments in, and loans and
advances to, Subsidiaries or entities that will, concurrently with
such investment become Subsidiaries, (6) trade credit extended in the
ordinary course of the Company's business, (7) loans and advances made
in the ordinary course of business to officers and employees of
Company for relocation expenses, travel advances and similar expenses
relating to their employment, (8) endorsements of instruments or items
of payment for deposit to the Company's bank accounts, (9) an
additional investment not in excess of $100,000 in the Company's
current Joint Venture in China and an additional investment not in
excess of $250,000 in the Company's planned Joint Venture in Brazil,
and (10) additional Investments not to exceed $100,000 in the
aggregate.
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"Restricted Payment" means (i) every direct or indirect
dividend or other distribution paid, made or declared by the Company
or any Subsidiary on or in respect of any class of its capital stock
or in respect of any partnership or Joint Venture, in all cases
whether now or hereafter outstanding, interests and any payment under
or with respect to anti-dilution provisions of any capital stock of
the Company or any Subsidiary, (ii) every payment in connection with
the redemption, purchase, retirement or other acquisition, direct or
indirect, by or on behalf of the Company or any Subsidiary of any
shares of the Company's or a Subsidiary's capital stock, whether or
not owned by the Company or any Subsidiary or any partnership or Joint
Venture interests of the Company or any Subsidiary, or any warrants,
rights or options to acquire such stock or partnership interests,
(iii) every payment to or on behalf of any Affiliate of the Company or
of any Subsidiary on account of or with respect to any lease
arrangements and (iv) every payment by or on behalf of the Company or
any Subsidiary (whether as repayment or prepayment of principal or as
interest or otherwise) on or with respect to (A) any obligation to
repay money borrowed (other than the Notes) owing to any Affiliate of
the Company or of any Subsidiary or to any other holder of shares of
the Company's Common Stock (other than such a holder which holds only
Shares) or (B) any obligation to any Person, of any Affiliate of the
Company or of any Subsidiary or of any other holder of shares of the
Company's Common Stock, which obligation is assumed or guaranteed by
the Company or a Subsidiary; provided, however, (a) that the
restrictions of the foregoing clauses (i) and (ii) shall not apply to
any dividend, distribution, or other payment to the extent payable in
shares of the Common Stock of the Company or in options, warrants or
other rights to purchase such Common Stock, (b) that none of the
foregoing clauses shall apply to any payments from a Subsidiary to the
Company, (c) that none of the foregoing clauses shall apply to any
purchases by the Company from a Wholly-Owned Subsidiary of additional
capital stock of such Subsidiary and (d) that none of the foregoing
clauses shall apply to any payments, distributions or other transfers
or actions on or with respect to the Notes or Warrants. For purposes
of this definition, "capital stock" shall also include warrants (other
than the Warrants) and other rights and options to acquire shares of
capital stock.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"Security Interest" means the Liens granted to the Agent for
the benefit of the Purchasers pursuant to this Agreement and the Loan
Documents.
"Senior Indebtedness" means Senior Debt as defined in the
Subordination Agreement.
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<PAGE> 24
"Senior Lender" means NBD Bank, a Michigan banking
corporation, and its successors and assigns.
"Senior Security Interests" means Liens granted to the Senior
Lenders pursuant to the Loan Agreement and certain "Loan Documents"
(as defined in the Loan Agreement), as in effect on the date hereof or
amended as permitted by the Subordination Agreement so that the
obligations thereunder constitute Senior Indebtedness.
"Share" or "Shares" means shares of the Company's Common
Stock, or other securities, which can be obtained or have been
obtained by an exercise in whole or in part of any Warrant or the
exchange of a Warrant for shares of the Company's Common Stock
pursuant to the terms of the Warrants. In the event that any Shares
are sold either in a public offering pursuant to an effective
registration statement under Section 6 of the Securities Act or
pursuant to Rule 144 (but if sold under Rule 144, only if sold in
"brokers' transactions" within the meaning of Rule 144), then the
transferees of such Shares shall not be entitled to any benefits under
this Agreement with respect to such Shares and such Shares shall no
longer be considered to be "Shares" for purposes of this Agreement.
"Single Employer Plan" shall mean any Plan that is subject to
Title IV of ERISA.
"Solvent" has the meaning set forth in Section 4.21 hereto.
"Subordination Agreement" means that certain Subordination
Agreement of even date herewith by and among the Senior Lender, the
Company, the Agent and the Purchasers, as amended or modified pursuant
to the terms thereof.
"Subsidiary" means any corporation in which at least a
majority of the shares (other than any directors' qualifying shares
required by law) of each class of the capital stock (other than
preferred stock), at the time as of which any determination is being
made, is owned, beneficially and of record, directly or indirectly, by
the Company or one or more of its Subsidiaries, or both.
"Title Policies" has the meaning set forth in Section 10.15
hereto.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York, as amended, or as in effect in
any jurisdiction in which Collateral is located.
"Voting Stock" means capital stock or a partnership or
membership of any class or classes of a corporation, partnership or
other limited liability entity, respectively, the holders of which are
ordinarily entitled to elect the directors, or persons performing
similar functions, of such corporation, partnership or entity.
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"Warrant" or "Warrants" has the meaning set forth in Section
1(d) hereof.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the
equity securities of which (other than directors' qualifying shares)
are owned by the Company or one or more other Wholly-Owned Subsidiary
of the Company.
(e) For all purposes of the Loan Documents, except as
otherwise expressly provided or unless the context otherwise requires:
(i) the words " herein", "hereof" and "hereunder"
and other words of similar import refer to the particular Loan
Document as a whole and not to any particular Section or other
subdivision thereof;
(ii) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP;
(iii) all computations provided for herein, if any,
shall be made in accordance with GAAP, unless another method of
computation is herein specified;
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate; and
(v) the exhibits and schedules to this Agreement
shall be deemed a part of this Agreement and any Exhibit, Annex or
Schedule to any other Loan Document shall be deemed a part of such
other Loan Document, as the case may be.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows as of the date
hereof and as of the Closing Date:
4.1. Corporate Existence and Power. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and is duly
qualified to do business, and is in good standing, in all additional
jurisdictions where such qualification is necessary under applicable law. Each
of the Company and each Subsidiary has all requisite corporate power to own or
lease the properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted, and to execute and deliver
this Agreement and the other Loan Documents to be executed by such Company and
Subsidiary and to engage in the transactions contemplated hereby and thereby.
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<PAGE> 26
4.2. Corporate Authority.
(a) The execution, delivery and performance by the
Company of this Agreement and the other Loan Documents have been duly
authorized by all necessary corporate action and are not in contravention of
any applicable Governmental Regulation, or of the terms of the Company's
charter or by-laws, or of any contract or undertaking to which the Company is a
party or by which the Company or its property may be bound or affected and do
not result in the imposition of any Lien, except for Permitted Liens.
(b) The execution, delivery and performance by each
Subsidiary of the Guaranty Agreement has been duly authorized by all necessary
corporate action and are not in contravention of any applicable Governmental
Regulation, or of the terms of such Subsidiary's charter or by-laws, or of any
contract or undertaking to which such Subsidiary is a party or by which such
Subsidiary or its property may be bound or affected and do not result in the
imposition of any Lien, except Permitted Liens.
4.3. Binding Effect. This Agreement is, and each of the Loan
Documents to which the Company is a party when delivered hereunder will be,
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms. Each of the Loan Documents
to which a Subsidiary is a party when delivered hereunder will be legal, valid
and binding obligations of such Subsidiary, enforceable against it in
accordance with their respective terms.
4.4. Subsidiaries. The only Subsidiaries of the Company are
Medar Canada Ltd, a corporation organized under the federal laws of Canada, and
Integral Visoin Ltd., a company organized under the laws of England and Wales.
The Company directly owns all of the issued and outstanding shares of each
Subsidiary.
4.5. Litigation. Except as set forth in Schedule 4.5, there
is no action, suit or proceeding pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or any Subsidiary before
or by any court, governmental authority or arbitrator, which if adversely
decided might result, either individually or collectively, in any Material
Adverse Effect or in any adverse effect on the legality, validity or
enforceability of this Agreement or any other Loan Document and, to the best of
the Company's knowledge, there is no basis for any such action, suit or
proceeding.
4.6. Financial Condition. The financial statements listed in
Schedule 4.6, copies of which have been furnished to the Purchasers, fairly
present, and the financial statements delivered pursuant to Section 7.4 will
fairly present, the financial position of the Company and each Subsidiary as at
the respective dates thereof, and the results of operations of the Company and
the Subsidiaries for the respective periods indicated, all on a consolidated
basis in accordance with GAAP (subject, in the case of interim statements, to
normal, immaterial year-end audit adjustments). There has been no Material
Adverse Effect since March 31, 1997. There
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<PAGE> 27
is no material Contingent Liability of the Company or any Subsidiary that is
not reflected in such consolidated statements or in the notes thereto.
4.7. Use of Loans. The Company will use the proceeds of the
sale of the Notes and the Warrants for repayment of the Senior Indebtedness in
the amount of $4.5 million and the balance for working capital and other
general corporate purposes. The Company does not extend or maintain, in the
ordinary course of business, credit for the purpose, whether immediate,
incidental, or ultimate, of buying or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System), and
no part of the proceeds of any Note will be used for the purpose, whether
immediate, incidental, or ultimate, of buying or carrying any such margin stock
or maintaining or extending credit to others for such purpose.
4.8. Consents, Etc. Except for such consents, approvals,
authorizations, declarations, registrations or filings delivered by the Company
at or prior to the Closing pursuant to Section 10.5, if any, each of which is
in full force and effect, no consent, approval or authorization of or
declaration, registration or filing with any governmental authority or any
nongovernmental person, including any creditor, lessor or shareholder of the
Company or any Subsidiary, is required on the part of the Company or any
Subsidiary in connection with the execution, delivery and performance of this
Agreement and the other Loan Documents or the transactions contemplated hereby
or thereby or as a condition to the legality, validity or enforceability of
this Agreement and the other Loan Documents.
4.9. Taxes. Each of the Company and the Subsidiaries has
filed all tax returns (federal, state and local) required to be filed and have
paid all taxes shown thereon to be due, including interest and penalties, or
has established adequate financial reserves on its books and records for
payment thereof. The Company does not know of any actual or proposed tax
assessment or any basis therefor, and no extension of time for the assessment
of deficiencies in any federal or state tax has been granted to the Company.
4.10. Title to Properties. Except as otherwise disclosed in
the latest consolidated balance sheet delivered pursuant to Section 4.6, the
Company and each Subsidiary have a valid and indefeasible ownership interest in
all of the properties and assets reflected in the consolidated balance sheet of
the Company and each Subsidiary or subsequently acquired by the Company or any
Subsidiary. All of such properties and assets are free and clear of any Lien,
except for Permitted Liens.
4.11. Compliance with Governmental Relations. To the best of
the Company's knowledge, the Company and each Subsidiary is in compliance in
all material respects with all Governmental Regulations (including
Environmental Laws) applicable to such person or its business or properties.
Without limiting the generality of the foregoing, all licenses, permits, orders
or approvals which are required under any Governmental Regulation in connection
with any of the businesses or properties of the Company or any Subsidiary
("Permits") are in full force and effect, no notice of any violation has been
received in respect of any such Permits and
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no proceeding is pending or, to the knowledge of the Company, threatened to
terminate, revoke or limit any such Permits.
4.12. ERISA. To the best of the Company's knowledge, the
Company, each Subsidiary, their ERISA Affiliates and their respective Plans are
in compliance in all material respects with those provisions of ERISA and of
the Code which are applicable with respect to any Plan. No Prohibited
Transaction and no Reportable Event has occurred with respect to any such Plan.
None of the Company, any Subsidiary or any of their ERISA Affiliates is an
employer with respect to any Multiemployer Plan. The Company, the Subsidiaries
and each of their ERISA Affiliates have met the minimum funding requirements
under ERISA and the Code with respect to each of their respective Plans, if
any, and have not incurred any liability to the PBGC or any Plan. There is no
material unfunded benefit liability, determined in accordance with Section
4001(a)(18) of ERISA, with respect to any Plan of the Company, any Subsidiary
or their ERISA Affiliates.
4.13. Environmental Matters. Without limiting the generality
of Section 4.11:
(a) No written demand, claim, notice, suit, suit in
equity, action, administrative action, investigation or inquiry whether brought
by any governmental authority, private person or otherwise, arising under,
relating to or in connection with any Environmental Laws is pending or, to the
best of the Company's knowledge, threatened against Company, any Subsidiary,
any Property or any past or present operation of the Company or any Subsidiary
which could result in a Material Adverse Effect.
(b) The Company does not have any knowledge that any
other person has ever received any notice, claim or allegation of any
violation, and the Company is not aware of any existing violation, of
Environmental Laws at or about any Property, and the Company does not have any
knowledge of any actions commenced or threatened by any party for or related to
or arising out of non-compliance with Environmental Laws which apply to any
Property, activities at any Property or Hazardous Materials at, from or
affecting any Property.
(c) None of the Property appears on the National Priority
List (as defined under federal law) or any state listing which identifies sites
for remedial clean-up or investigatory actions. To the best of the Company's
knowledge, none of the Property has been contaminated with substances which
give rise to a clean-up obligation under any Environmental Law or common law.
4.14. Investment Company Act. Neither Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
4.15. Disclosure. No report or other information furnished
in writing by or on behalf of the Company to any Purchaser in connection with
the negotiation or administration of
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this Agreement contains any material misstatement of fact or omits to state any
material fact or any fact necessary to make the statements contained therein
not misleading. Neither this Agreement, the other Loan Documents, nor any
other document, certificate, or report or statement or other information
furnished to any Purchaser by or on behalf of the Company in connection with
the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact in order to make the statements
contained herein and therein not misleading. There is no fact known to the
Company which materially and adversely affects, or which in the future may (so
far as the Company can now foresee) materially and adversely affect, the
business, properties, operations, condition, financial or otherwise, or
prospects of the Company or any Subsidiary, which has not been set forth in
this Agreement or in the other documents, certificates, statements, reports or
other information furnished in writing to any Purchaser by or on behalf of the
Company in connection with the transactions contemplated hereby.
4.16. Stock Ownership. The authorized capital stock of the
Company consists of (i) 15,000,000 shares of Common Stock, without par value,
of which 8,852,401 shares are outstanding, and (ii) 400,000 shares of Preferred
Stock, without par value, none of which are outstanding. Such outstanding
shares of Common Stock are duly authorized, validly issued and outstanding and
fully paid and nonassessable. Except for the Warrants, options to purchase
718,600 shares of Common Stock granted to employees of the Company pursuant to
the Company's stock option plans and the Company's agreement to sell 150,000
shares of Common Stock to Maxco, Inc., there are no outstanding options,
warrants, rights, convertible securities or other agreements or plans under
which the Company may become obligated to issue, sell or transfer shares of its
capital stock or other securities.
4.17. No Defaults or Conflicts.
(a) No Event of Default or Potential Default has occurred
and is continuing.
(b) Neither the Company nor any of the Subsidiaries is in
violation or default under any indenture, agreement or instrument to which it
is a party or by which it or its properties may be bound which could have a
material adverse effect on the financial condition, operations, business,
prospects, profits or Property of the Company or the validity or enforceability
of any of the Loan Documents or any of the transactions contemplated thereby or
the priority of the Security Interests.
(c) The execution, delivery and performance by the Company of
this Agreement and of the Loan Documents to which it is a party and any of the
transactions contemplated hereby or thereby (including, without limitation, the
issuance of the Notes, the Warrants and the Shares as contemplated herein or
therein) do not and will not (i) violate or conflict with, with or without the
giving of notice or the passage of time or both, any provision of (A) the
respective Certificates of Incorporation or By-Laws of the Company or any of
its Subsidiaries or (B) any law, rule, regulation, order, judgment, writ,
injunction, decree, agreement, indenture or other
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<PAGE> 30
instrument applicable to the Company or any of its Subsidiaries or any of their
respective properties (or to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound), (ii) other than pursuant to this Agreement or the Loan Documents,
result in the creation of any Lien upon any of the Company's or any
Subsidiary's Properties, (iii) require the consent, waiver, approval, order or
authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation any shareholder approval) other than (A) the consent of the Senior
Lender (B) any registration, qualification or filing with the Securities and
Exchange Commission or any state securities commission necessary in connection
with the Company's obligations under Section 17 hereof and (C) the Company's
routine filing obligations under the Securities Exchange Act or (iv) cause
anti-dilution clauses of any outstanding securities to become operative or give
rise to any preemptive rights. No such provision referred to in the preceding
clause (i) will have a Material Adverse Effect.
4.18. Officers and Directors. Schedule 4.18 sets forth a
correct and complete list of all of the directors and executive officers of the
Company.
4.19. Offering of Notes. Neither the Company nor any agent
nor any other Person acting on their behalf, directly or indirectly, (i)
offered any of the Notes, Warrants or any similar security of the Company (A)
by any form of general solicitation or general advertising (within the meaning
of Regulation D under the Securities Act) or (B) for sale to or solicited
offers to buy any thereof from, or otherwise approached or negotiated with
respect thereto with, any Person other than the Purchasers and not more than
seven other investors each of which the Company reasonably believed was an
"accredited investor" within the meaning of Regulation D under the Securities
Act or (ii) has done, or caused to be done (or has omitted to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Notes, Warrants or Shares within the provisions of
Section 5 of the Securities Act.
4.20. Outstanding Securities. All securities (as defined in
the Securities Act) of each of the Company and the Subsidiaries have been
offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities. The Company is not required to file
on the date hereof and it has not filed prior to the date hereof, pursuant to
Section 12 of the Securities Exchange Act, a registration statement relating to
any class of debt or equity securities. The Company has not registered on or
prior to the date hereof or agreed to register any securities under the
Securities Act.
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4.21. Solvency.
(a) The Company is and, immediately after giving effect to
the issue and sale of the Notes and Warrants and the consummation of the other
transactions contemplated hereby, will be Solvent.
(b) For purposes of this Section 4.21, the term "Solvent"
means, with respect to any Person, that:
(i) the assets of such Person, at a fair valuation,
exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person;
(ii) the cash flow of such Person is sufficient to
enable it to pay its debts as they mature; and
(iii) such Person does not have an unreasonably small
capital with which to engage in its anticipated business.
(c) For purposes of this Section 4.21, the "fair valuation"
of the assets of any Person shall be determined on the basis of the amount
which may be realized within a reasonable time, either through collection or
sale of such assets at their Fair Market Value.
4.22. Chief Executive Office. The chief executive office of
the Company and its records with respect to the Collateral are located at
Farmington Hills, Michigan.
SECTION 5. REPRESENTATIONS OF THE PURCHASERS
Each Purchaser severally represents and warrants, but only as
to itself, to the Company that:
5.1. Power and Authority. Such Purchaser has all requisite
power, authority and legal right to execute, deliver, enter into, consummate
and perform this Agreement and the Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and the Loan Documents to
which it is a party by such Purchaser have been duly authorized by all required
corporate and other actions. Such Purchaser has duly executed and delivered
this Agreement and the Loan Documents to which it is a party, and this
Agreement and the Loan Documents to which it is a party constitute the legal,
valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to the
rights of creditors generally and subject to the availability of equitable
remedies and the application of equitable principles.
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5.2. Purchase for Investment. Such Purchaser is capable of
evaluating the risk of its investment in the Notes and Warrants being purchased
by it and is able to bear the economic risk of such investment. Such Purchaser
is purchasing the Notes and Warrants to be purchased by it for its own account,
and the Notes and Warrants are being purchased by it for investment and not
with a present view to any distribution thereof. Such Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
It is understood that the disposition of such
Purchaser's property shall, subject to the terms of this Agreement, at all
times be within such Purchaser's control. If such Purchaser should in the
future decide to dispose of any of its Notes, Warrants or Shares, it is
understood that it may do so only in compliance with the Securities Act and
this Agreement.
SECTION 6. PREPAYMENTS AND REPAYMENTS
6.1. Mandatory Prepayments. The Company agrees that it shall
prepay, at a price equal to the principal amount thereof, without premium, on
June 30, 2000 and on each June 30 thereafter to and including June 30, 2004,
$700,000 aggregate principal amount of all Notes outstanding and shall pay in
full the remaining principal amount of all Notes then outstanding on the
maturity date of June 30, 2005. If, on any such prepayment date, the aggregate
principal amount of the Notes outstanding is less than the amount required to
be prepaid on such date, the Company shall prepay all Notes in full. If any
prepayment date is not a Business Day, such prepayment shall be made on the
next day which is a Business Day. The aggregate principal amount of each
prepayment of Notes pursuant to this Section 6.1 shall be allocated among all
Notes at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such Notes. The Company's obligation to
prepay the Notes under this Section 6.1 in the amounts required by this Section
6.1 shall be fixed until there is no longer any remaining aggregate principal
amount of outstanding Notes, and the Company shall not receive any credit or
off-set with respect to such obligation as a result of any prepayment under
Section 6.2 or 6.3 hereof (except that the Company's obligation to prepay the
Notes under this Section 6.1 shall terminate when there is no longer any
outstanding principal amount under any Notes).
6.2. Prepayment at Holder's Option.
(a) In the event of a Change of Control Event, each holder of
a Note or Notes shall have the right, at such holder's option, to require the
Company to prepay such holder's Note or Notes in whole at a price equal to (i)
100% of the aggregate principal amount of Notes to be prepaid plus (ii) all
accrued interest on the Notes to the date of prepayment. Such option shall be
exercised by written notice to the Company under Section 6.2(b) hereof given at
any time from and after the Change of Control Event. As soon as possible after
a Change of Control Event occurs, or the Company has knowledge that it is
likely to occur, the Company shall give written notice to each holder of a Note
or Notes notifying each such holder of the occurrence or likely occurrence of
such Change of Control Event and informing each such holder of its right to
exercise an option to require a prepayment under this Section 6.2(a).
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(b) In order to exercise its rights to require a prepayment
under this Section 6.2, a holder requiring such prepayment shall send to the
Company a written notice demanding prepayment under this Section 6.2 and
specifying the date of such prepayment (which must be a Business Day and which
shall not be less than thirty (30) days after receipt of such notice by the
Company, but in no event earlier than such Change of Control Event).
(c) In the event that on any date for prepayment pursuant to
this Section 6.2 the Company, for whatever reason, does not pay in full the
prepayment amount or amounts due to any holder or holders of Notes who have
requested prepayment, then the amount actually prepaid by the Company to all
holders of Notes pursuant to this Section 6.2 shall be allocated among all such
holders of Notes in proportion, as nearly as practicable, to the respective
unpaid principal amount of Notes then held by each such holder; provided,
however, such non-payment in full shall nonetheless constitute a Potential
Default.
6.3. Optional Prepayments.
(a) At any time after June 30, 1999 (but not before) the
Company may at its option (subject to the other provisions of this Section 6.3)
prepay all or part of the principal amount of outstanding Notes, at a price
equal to the aggregate principal amount of the outstanding Notes to be prepaid
plus accrued interest thereon to the date of prepayment, together with an
amount equal to the Prepayment Premium.
(b) The aggregate amount of each prepayment of the principal
amount of Notes pursuant to this Section 6.3 shall be allocated among all Notes
at the time outstanding, in proportion, as nearly as practicable, to the
respective unpaid principal amounts of such Notes.
(c) Notwithstanding anything herein to the contrary, with
respect to an optional prepayment pursuant to this Section 6.3, the holders of
the Notes shall not receive less than 100% of the principal amount of the Notes
being prepaid.
(d) The right of the Company to prepay Notes pursuant to this
Section 6.3 shall be conditioned upon its giving notice of prepayment, signed
by a principal financial officer, to the holders of Notes not less than thirty
(30) days and not more than sixty (60) days prior to the date upon which the
prepayment is to be made specifying (i) the registered holder of each Note to
be prepaid, (ii) the aggregate principal amount being prepaid, (iii) the date
of such prepayment (which must be a Business Day), (iv) the accrued and unpaid
interest (to but not including the date upon which the prepayment is to be
made) and (v) that the prepayment of Notes is being made pursuant to this
Section 6.3. Notice of prepayment having been so given, the aggregate
principal amount of the Notes so specified in such notice, and all accrued and
unpaid interest thereon and the applicable Prepayment Premium, shall become due
and payable on the specified prepayment date, but the right to apply any or all
of the Notes as payment to exercise any Warrant or Warrants shall continue to,
but not including, the date of such prepayment.
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6.4. Obligations Unconditional. The Company hereby agrees
and confirms that its obligations under the Notes shall be deemed to constitute
for all purposes obligations for the payment of indebtedness for borrowed money
and shall accordingly be absolute and unconditional in accordance with the
terms of the Notes and this Agreement and shall not be affected by (and the
Company agrees not to assert) any right the Company may now or at any time
hereafter have, including any right to terminate, cancel, quit or surrender
this Agreement or any Note except in accordance with the express terms thereof.
SECTION 7. AFFIRMATIVE COVENANTS
The Company covenants and agrees that, until payment in full
of the principal of and accrued interest on the Notes and the payment or
performance of all other obligations under the Loan Documents, the Company
shall, and shall cause each Subsidiary to:
7.1. Preservation of Corporate Existence; Etc. Do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except to the extent permitted by Section 8.4, and
its qualification as a foreign corporation in good standing in each
jurisdiction in which such qualification is necessary under applicable law, and
the rights, licenses, permits (including those required under Environmental
Laws), franchises, patents, copyrights, trademarks and trade names material to
the conduct of its businesses; and defend all of the foregoing against all
claims, actions, demands, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency or regulatory
authority.
7.2. Compliance with Laws; Etc. Comply with all Governmental
Regulations (including ERISA, the Code and Environmental Laws), in effect from
time to time; and pay and discharge promptly when due all taxes, assessments
and governmental charges or levies imposed upon it or upon its income, revenues
or property, before the same shall become delinquent or in default, as well as
all lawful claims for labor, materials and supplies or otherwise, which, if
unpaid, might give rise to any Lien upon such properties or any portion
thereof, except to the extent that payment of any of the foregoing is then
being contested in good faith by appropriate legal proceedings and with respect
to which adequate financial reserves have been established on the books and
records of the Company or such Subsidiary.
7.3. Maintenance of Properties; Insurance. Maintain,
preserve and protect all property that is material to the conduct of its
business and keep such property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times in accordance with customary and prudent business practices for
similar businesses; and maintain in full force and effect insurance with
responsible and reputable insurance companies or associations in such amounts,
on such terms and covering such risks, including fire and other risks insured
against by extended coverage, as is usually carried by companies engaged in
similar businesses and owning similar properties similarly situated and
maintain in full force and effect
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public liability insurance, business interruption insurance, insurance against
claims for personal injury or death or property damage occurring in connection
with any of its activities or any properties owned, occupied or controlled by
it, in such amounts as it shall reasonably deem necessary, and maintain such
other insurance as may be required by Governmental Regulations or as may be
reasonably requested by the Majority Noteholders. Upon request, the Company
shall deliver to each Purchaser copies of all or any of such insurance policies
or the related certificates of insurance.
7.4. Reporting Requirements. Furnish to each Purchaser the
following:
(i) promptly and in any event within five (5)
calendar days after becoming aware of the occurrence of (A) any
Potential Default or Event of Default, (B) the commencement of any
material litigation against, by or affecting the Company or any
Subsidiary, and any material developments therein, or (C) any
development in the business or affairs of the Company or any
Subsidiary which has resulted in or which is likely, in the reasonable
judgment of the Company, to result in a Material Adverse Effect, a
statement of the chief financial officer of the Company setting forth
details of such Potential Default or Event of Default or such
litigation or such event or condition and the action which the
affected person has taken and proposes to take with respect thereto;
(ii) as soon as available and in any event within
30 days after the end of each fiscal month of the Company, the
consolidated balance sheet of the Company and the Subsidiaries as of
the end of each such month and consolidated income statement of the
Company and the Subsidiaries for each such month and for the period
commencing at the end of the previous fiscal year and ending with the
end of such month, setting forth in each case in comparative form the
corresponding figures for the corresponding date or period of the
preceding fiscal year, all in reasonable detail and duly certified
(subject to normal, immaterial year-end audit adjustments) by the
chief financial officer or controller of the Company as having been
prepared in accordance with GAAP, together with a certificate of the
chief financial officer or controller of the Company (A) stating that
no Potential Default or Event of Default has occurred and is
continuing or, if any Potential Default or Event of Default has
occurred and is continuing a statement setting forth the details
thereof and the action which the applicable person has taken and
proposes to take with respect thereto, and (B) setting forth a
computation (which computation shall accompany such certificate and
shall be in reasonable detail) showing compliance with Sections 8.1,
8.2, 8.3 and 8.6, in conformity with the terms of this Agreement;
(iii) as soon as available and in any event within
90 days after the end of each fiscal year of the Company, a copy of
the annual audited consolidated financial statements of the Company
and each Subsidiary for such fiscal year, with a customary audit
report the Accountants, without qualifications unacceptable to the
Majority Noteholders, and a certificate of the chief financial officer
or controller of the Company (A) stating that no Potential Default or
Event of Default has occurred or is continuing or
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if any Potential Default or Event of Default has occurred and is
continuing, a statement setting forth the details thereof and the
action which the applicable person has taken and proposes to take with
respect thereto, and (B) setting forth a computation (which
computation shall accompany such certificate and shall be in
reasonable detail) showing compliance with Sections 8.1, 8.2, 8.3 and
8.6 in conformity with the terms of this Agreement;
(iv) as soon as available, and in any event no
later than 30 days prior to the beginning of each fiscal year of the
Company and prior to the final approval by its Board of Directors, a
budget for such fiscal year presented on a monthly basis regarding the
Company's operations and capital expenditures on a consolidated basis
and regarding the operations and capital expenditures of each of its
Subsidiaries, including a balance sheet and statements of income and
cash flow for each month, together with an analysis of such budget
prepared in reasonable detail by the chief financial officer or the
President of the Company, and, within fifteen (15) days following
their preparation, (1) any operating budget of the Company otherwise
prepared and submitted to its Board and (2) any revisions or
amendments made by the Company (and submitted to its Board) to any
budget delivered under this clause (iv);
(v) promptly after receipt thereof by the
Company, copies of any audit or management reports submitted to it by
independent accountants in connection with any audit, interim audit or
other report submitted to the board of directors (or other governing
body) of the Company or any Subsidiary;
(vi) promptly after the same are available, copies
of each annual report, proxy or financial statement or other
communication sent to the Company's or a Subsidiary's stockholders and
copies of all annual, regular, periodic and special reports and
registration statements which the Company may file or be required to
file with the Securities and Exchange Commission or with any
securities exchange or the National Association of Securities Dealers,
Inc.; and
(vii) promptly, such other information respecting
the business, properties, operations or condition, financial or
otherwise, of the Company or any Subsidiary as any Purchaser may from
time to time reasonably request upon reasonable notice.
Without limiting the foregoing provisions of this Section 7.4, the
Company agrees that, if expressly requested in writing by any holder of Notes
or Warrants, it will not deliver to such holder (until otherwise instructed by
such holder) (x) any information or materials regarding the Company or any
Subsidiary (whether described in this Section 7.4 or otherwise) that is
non-public and (y) any information (whether or not included in clause (x))
which such holder specifies it does not want to receive.
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Each holder of Notes and Warrants hereby acknowledges that it is aware
of the restrictions imposed by federal and state securities laws on a person
possessing material nonpublic information without a company. In this regard,
each such holder hereby agrees that (i) while it is in possession of material
nonpublic information with respect to the Company and its Subsidiaries, such
holder will not purchase or sell any securities of the Company, or communicate
such information to any third party, in violation of any such laws and (ii) it
will keep all such nonpublic information confidential.
7.5. Accounting, Access to Records, Books, Etc. Maintain a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in accordance
with GAAP and to comply with the requirements of this Agreement and, at any
reasonable time and from time to time, (i) permit any Purchaser or any agents
or representatives thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, such person and
to discuss the affairs, finances and accounts of such person with their
respective directors, officers, employees and independent auditors, and by this
provision the Company does hereby authorize the same, and (ii) permit any
Purchaser or any of its agents or representatives to conduct a comprehensive
field audit of its books, records, properties and assets.
7.6. Further Assurances. Execute and deliver promptly after
request therefor by any Purchaser, all further instruments and documents and
take all further action that may be necessary or desirable, or that any
Purchaser may request, in order to give effect to, and to aid in the exercise
and enforcement of the rights and remedies of any Purchaser under, this
Agreement and the other Loan Documents.
7.7. Use of Proceeds. The Company will use the net proceeds
realized from the sale of the Notes and Warrants to prepay the Senior
Indebtedness the amount of $4.5 million and for working capital and other
general corporate purposes. No portion of such proceeds will be used for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying,
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended from time to time, any "margin stock" as defined in
said Regulation U, or any "margin stock" as defined in Regulation G of the
Board of Governors of the Federal Reserve System, as amended from time to time,
or for the purpose of purchasing, carrying or trading in securities within the
meaning of Regulation T of the Board of Governors of the Federal Reserve
System, as amended from time to time, or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase any such
margin stock or other securities.
7.8. Inspection. The Company will permit each holder of a
Note or Warrant and any authorized representative of such holder to visit and
inspect any of the properties of the Company and its Subsidiaries, to examine
their respective books of account and to discuss their business, affairs,
finances and accounts with their officers, all at such reasonable times (during
normal business hours and after notice to the Company) and as often as may be
reasonably
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requested and, if there is no Event of Default or Potential Default continuing,
at such holder's expense, otherwise at the Company's expense.
7.9. Office for Payment, Exchange and Registration. So long
as any of the Notes or Warrants are outstanding, the Company will maintain an
office or agency where Notes or Warrants may be presented for payment,
exchange, exercise or registration of transfer as provided in this Agreement or
in the Warrants. Such office or agency initially shall be the office of the
Company set forth in Section 22 hereof, which place may from time to time be
changed by notice to the holders of all Notes and Warrants then outstanding.
7.10. Notices. The Company will give notice to each holder
of a Note or Warrant promptly after it learns (other than by notice from all of
such holders) of the existence of any default under any Senior Indebtedness or
any material default under any other evidence of Indebtedness or under any
indenture, mortgage or other agreement relating to any evidence of Indebtedness
in respect of which the Company or any Subsidiary is liable.
7.11. Fiscal Year. The fiscal year of the Company and its
Subsidiaries for tax, accounting and any other purposes shall end on December
31 of each calendar year.
7.12. Payment of Dividends by Subsidiaries. The Company will
cause its Subsidiaries to pay dividends or make other distributions or advances
to the Company, to the extent of funds legally available therefor, in
sufficient amounts and at sufficient times to enable the Company to have
sufficient earnings and funds to pay on a timely basis all amounts due with
respect to Senior Indebtedness and the Notes and any other amounts due under
this Agreement or the other Loan Documents.
7.13. Transfer of Assets of Subsidiaries. The Company will
cause its Subsidiaries to transfer to the Company on or prior to August 31,
1997, all of their assets except for assets necessary for such Subsidiaries to
carry on their business as sales representatives of the Company, provided that
the aggregate Fair Market Value of the assets retained by all of the
Subsidiaries does not exceed $1 million.
7.14. Communication with Accountants. The Company (on behalf
of itself and each of its Subsidiaries) hereby authorizes the Agent (on behalf
of the Purchasers) to communicate directly with the independent certified
public accountants for the Company or any Subsidiary and authorizes such
accountants to disclose to the Agent any and all financial statements and any
other information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary;
provided, that the Company be informed of any such disclosures and participate
in any conversations between such accountants and the Agent (and the Company
agrees that it will not fail to cooperate in arranging or unreasonably delay
any such conversations); and further provided that the Agent shall not incur
charges from such accountants in exercise of such rights for more than ten (10)
hours per calendar year without the
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Company's prior written consent. The Company shall deliver a letter addressed
to such accountants instructing them to comply with the provisions of this
Section 7.14.
7.15. Environmental Matters. The Company agrees to
indemnify, defend, protect and hold harmless Purchasers, their officers,
directors, shareholders, employees, and agents from and against any and all
liability, loss, damage, cost and expense, including, but not limited to,
attorneys' and consultants fees and disbursements arising from any breach of
representations and warranties set forth in Section 4.13 or covenants set forth
in Section 7.2 herein, the Release or presence of Hazardous Materials on,
under, about, adjacent to, from or at any properties or facilities currently or
previously owned, operated or leased by the Company or any Subsidiary, any
predecessors of the Company or any Subsidiary or any entities previously owned
by the Company or any Subsidiary, or at any off-site location to which
Hazardous Materials generated by the Company or any Subsidiary, any
predecessors of the Company or any Subsidiary or any entities previously owned
by the Company or any Subsidiary were sent for handling, treatment, storage, or
disposal or any violation of any Environmental Law or Environmental Permit by
the Company or any Subsidiary or any entity previously owned by the Company or
any Subsidiary. The obligations of the Company under this Section shall
survive the Closing indefinitely.
In the event the Company receives notice of violation of any
Environmental Claim and does not take prompt action to do so, the Agent (on
behalf of the Purchasers) shall have the right to designate such persons
("Environmental Auditors") as the Agent may select to visit, inspect and have
access to any of the properties, facilities, products or wastes owned, leased
or operated by the Company or any Subsidiary (including, without limitation,
any location where records and documents created or maintained in connection
with Environmental Laws may be located) for the purpose of investigating actual
or potential Environmental Claims or any condition which could result in any
liability, cost or expense to the Purchasers. Such investigation may include,
among other things, above and below ground testing of air, soil, groundwater
and surface water, for the presence of Hazardous Materials and such other tests
as may be necessary or advisable in the opinion of the Agent or the
Environmental Auditors. The Company and the Subsidiaries will supply to the
Environmental Auditors such historical and operational information, including
without limitation analytical records and results, correspondence with
governmental authorities and environmental audits or reviews regarding
properties, products and wastes of the Company and Subsidiaries (including such
information respecting Environmental Cleanup Sites) as are within its
possession, custody or control, or which are available to it, and will make
available for meetings with the Environmental Auditors, appropriate employees
of the Company or the Subsidiaries having knowledge of such matters.
7.16. Taxes. All payments to a holder of Notes or to a
partner of a holder (or to a partner of such a partner) (any of the foregoing
referred to herein as a "recipient") of principal of, and interest on, the
Notes and all other amounts payable under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction for, any
present or future income, stamp or other taxes, fees, duties, withholding or
other charges of any nature whatsoever imposed by any taxing authority, other
than taxes imposed on or measured by the net income of
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such recipient (such non-excluded items being herein called "Taxes"). In the
event that any withholding or deduction from any payment to be made hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company will:
(a) pay to the relevant authority the full amount required to
be so withheld or deducted; and
(b) promptly forward to such recipient an official receipt or
other documentation satisfactory to such recipient evidencing such payment to
such authority.
7.17. Delivery of Information for Rule 144A Transactions. If
a holder of Notes proposes to transfer any such Notes pursuant to Rule 144A
under the Securities Act (as in effect from time to time), the Company agrees
to provide (upon the request of such holder or the prospective transferee) to
such holder and (if requested) to the prospective transferee any financial or
other information concerning the Company and its Subsidiaries which is required
to be delivered by such holder to any transferee of such Notes pursuant to such
Rule 144A.
SECTION 8. NEGATIVE COVENANTS
The Company further covenants and agrees that it will not, and
will not permit any Subsidiary to:
8.1. Minimum Net Worth. Permit its Consolidated Tangible Net
Worth to be less than, on September 30, 1997, $9,500,000, and as of the end of
each fiscal quarter of the Company beginning December 31, 1997 and thereafter,
less than (i) $9,500,000, plus (ii) as of the date of determination, 50% of
Aggregate Net Income.
8.2. Debt to Worth Ratio. Permit its ratio of Consolidated
Liabilities to Consolidated Tangible Net Worth to exceed (i) 3.50 to 1.00 as of
the end of each fiscal quarter of the Company and its Subsidiaries to and
including June 30, 1998, and (ii) 3.25 to 1.00 on September 30, 1998, and as of
the end of each fiscal quarter of the Company and its Subsidiaries thereafter.
8.3. Borrowing. Create, incur, assume or suffer to exist any
liability for Indebtedness for Borrowed Money except (i) Indebtedness from a
Subsidiary to the Company, (ii) Indebtedness secured by Permitted Liens, (iii)
Permitted Senior Indebtedness, (iv) deposit account guaranties of its
Subsidiaries not in excess of $100,000 in the aggregate in Canada and L.100,000
in the aggregate in the United Kingdom, and (v) other Indebtedness if on the
date of incurrence thereof and after giving effect thereto the Consolidated
Coverage Ratio for the period of the most recent four consecutive fiscal
quarters ended at least 45 days before the date of incurrence of such other
Indebtedness, calculated as though such other Indebtedness had been incurred as
of the first day of such four consecutive fiscal quarters, equals or exceeds
1.5 to 1.0.
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8.4. Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except
Permitted Liens.
8.5. Merger and Acquisition. Consolidate with or merge with
or into any Person, or acquire directly or indirectly all or substantially all
of the capital stock of any Person; provided that, so long as no Event of
Default or Potential Default is continuing, a merger after which the Company is
the surviving corporation and which does not cause a Potential Default or Event
of Default shall be permitted if either the Company is the surviving
corporation or, if not, the surviving corporation assumes all of the Company's
obligations under the Loan Documents in a manner satisfactory to the
Purchasers.
8.6. Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase, become liable in respect of any letter of
credit, or otherwise become liable upon the obligation of any Person, except
(i) liabilities arising from the endorsement of letters of credit, notes,
drafts, instruments or documents for deposit or collection or similar
transactions in the ordinary course of business, (ii) deposit account
guaranties of the Subsidiaries not in excess of $100,000 in the aggregate in
Canada and L.100,000 in the aggregate in the United Kingdom, and (iii) other
Contingent Liabilities not in excess of $500,000 in the aggregate.
8.7. Restricted Payments. Make any Restricted Payment or
Restricted Investment, except from Earnings Available for Dividends.
8.8. Sale or Transfer of Assets. Sell, lease, assign,
transfer or otherwise dispose of any Property except for disposition of (i)
inventory in the ordinary course of business, (ii) unusable, obsolete or
uneconomic items or equipment the proceeds of which, in the ordinary course of
the Company's business, are used to purchase new items or equipment of like
function and comparable value to the replaced items or equipment when the same
were new; provided, however, that such replacement items and equipment shall
become subject to the Security Interests, or (iii) other Property disposed of
on an arm's length basis in any twelve month period which did not account for
more than 10% of the Company's Consolidated Net Income for the prior fiscal
year.
8.9. Amendment of Charter and By-Laws. Amend, modify or
waive any term or provision of its corporate charter or by-laws, unless
required by law.
8.10. Issuance of Stock. Except for the Company's agreement
to sell 150,000 shares of Common Stock to Maxco, Inc., issue or cause to be
issued or sell any shares of capital stock or, except for the Warrants, any
securities convertible into or exercisable for any shares of capital stock of
the Company which will result in the occurrence of a Change of Control Event.
8.11. Subsidiaries, Joint Ventures, Management Contracts,
Capital Structure Changes. (i) Create or invest in any direct or indirect
Subsidiary or Joint Venture other than an additional investment not in excess
of $100,000 in the Company's current Joint Venture in China
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and an additional investment not in excess of $250,000 in the Company's planned
Joint Venture in Brazil; (ii) divest itself of any material assets by
transferring them to any existing Affiliate or any future Subsidiary or
Affiliate or by entering into a partnership, joint venture, similar
arrangement; (iii) transfer any assets to the Subsidiaries; (iv) make any
material change in its capital structure; or (v) enter into any management
contract (not including an employment contract for the full-time employment of
an officer or employee entered into in the regular course of the Company's
business) granting or transferring to a third party management rights in the
nature of control over any material portion of the Company's business.
8.12. Corporate Offices, Corporate Name, Corporate Records.
Transfer its executive offices or change its corporate name or maintain records
(including computer printouts and programs) with respect to the Collateral at
any locations other than those at which the same are presently kept or
maintained, except upon the Majority Noteholders' prior written consent and
after the delivery to the Agent of financing statements in form satisfactory to
the Noteholders.
8.13. Amendments to Agreements. Consent to any amendment to
the Loan Agreement and any Loan Documents (as that term is defined in the Loan
Agreement), except to the extent provided in the Subordination Agreement.
8.14. Private Placement Status. Neither the Company nor any
agent nor any other Person acting on the Company's behalf will do or cause to
be done (or will omit to do or to cause to be done) any act which act (or which
omission) would result in bringing the issuance or sale of the Notes, Warrants
or Shares within the provisions of Section 5 of the Securities Act (other than
in accordance with a registration and qualification of Shares under Section 17
hereof).
8.15. Amendments to Other Agreements. Without the prior
written consent of the Majority Noteholders, consent to or request any
amendment, modification, supplement or waiver of any of the provisions of any
agreement or instrument evidencing (A) the rights of stockholders' of the
Company or (B) the terms of (including the purchase and sale of) any form of
capital stock of the Company.
8.16. Sale and Leaseback. Enter into any agreement, directly
or indirectly, to sell or transfer any Property used in its business and
thereafter to lease back the same or similar property.
8.17. Nature of Business. Make any substantial change in the
nature of its business from that engaged in on the Closing Date or engage in
any other businesses other than those in which it is engaged on the Closing
Date.
8.18. Transactions with Affiliates. Enter into, or permit or
suffer to exist, any transaction or arrangement with any Affiliate, except on
terms which are no less favorable to the Company or such Subsidiary than could
be obtained from persons who are not Affiliates.
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SECTION 9. SUBORDINATION
Each holder of a Note, whether upon original issue or upon
transfer or assignment thereof, by his acceptance thereof agrees that the Notes
shall be subject to the provisions contained in the Subordination Agreement.
The Subordination Agreement shall not apply to the right of a holder of
Warrants to exercise Warrants using the principal amount of or accrued and
unpaid interest on the Notes (or cash) in accordance with the terms of the
Warrants.
SECTION 10. CONDITIONS TO PURCHASERS' OBLIGATIONS
The Purchasers' obligations to purchase a Note or Notes and a
Warrant or Warrants hereunder is subject to satisfaction of the following
conditions at the Closing (any of which may be waived by the Purchasers):
10.1. Accuracy of Representations and Warranties. The
representations and warranties of the Company in this Agreement and in the Loan
Documents or in any certificate or document delivered pursuant hereto or
thereto shall be correct and complete on and as of the Closing Date with the
same effect as though made on and as of the Closing Date (after giving effect
to the transactions contemplated by this Agreement).
10.2. Compliance with Agreements; No Defaults. The Company
shall have performed and complied in all material respects with all agreements,
covenants and conditions contained in this Agreement or the Loan Documents and
any other document contemplated hereby or thereby which are required to be
performed or complied with by the Company on or before the Closing Date. On
the Closing Date (after giving effect to the transactions contemplated hereby),
there shall be no Event of Default or Potential Default.
10.3. Officers' Certificate. The Purchasers shall have
received a certificate dated the Closing Date and signed by the President or
any Vice President and by the Secretary or the Treasurer (or chief financial
officer) of the Company, to the effect that the conditions of Sections 10.1 and
10.2 have been satisfied.
10.4. Proceedings. All corporate and other proceedings in
connection with the transactions contemplated by the Loan Documents, and all
documents incident thereto, shall be in form and substance satisfactory to the
Purchasers and their counsel, and the Purchasers shall have received all such
originals or certified or other copies of such documents as the Purchasers or
their counsel may reasonably request.
10.5. Legality; Governmental and Other Authorization. The
purchase of and payment for the Notes and Warrants shall not be prohibited by
any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchasers and shall not subject
the Purchasers to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings,
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registrations or qualifications with, any governmental or administrative agency
or other Person, with respect to the transactions contemplated by the Loan
Documents shall have been obtained or made and shall be in full force and
effect. The Company shall have delivered to the Purchasers, upon their
reasonable request setting forth what is required, factual certificates or
other evidence, in form and substance satisfactory to the Purchasers and their
counsel, to enable the Purchasers to establish compliance with this condition.
10.6. Time of Purchase. The Closing shall not occur later
than July 31, 1997.
10.7. No Change in Law, etc. No legislation, order, rule,
ruling or regulation shall have been proposed, enacted or made by or on behalf
of any governmental body, department or agency, and no legislation shall have
been introduced in either House of Congress, and no investigation by any
governmental authority or administrative body shall have been commenced or
threatened, and no action, suit or proceeding shall have been commenced before,
and no decision shall have been rendered by, any court, other governmental body
or arbitrator, which, in any such case, in the Purchasers' reasonable judgment
could adversely affect, restrain, prevent or change the transactions
contemplated by this Agreement and the Loan Documents (including without
limitation the issuance of the Notes and the Warrants hereunder or the issuance
of Shares upon exercise of the Warrants) or materially and adversely affect the
business, affairs, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company on a
consolidated basis.
10.8. Fees. The Company shall have paid (i) to the Purchasers
a non-refundable fee in the amount of $70,000 and (ii) to Morgan, Lewis &
Bockius LLP, counsel to the Purchasers, its fees and expenses in connection
with this transaction.
10.9. Other Financings. The Purchasers shall have approved
the terms of, and received copies of all documents relating to, the Senior
Indebtedness.
10.10. Related Agreements. The Company shall have delivered
to the Purchasers executed original copies of: each of the following:
General Security Agreement
Collateral Assignment
Mortgage for Property at 24755 Crestview,
Farmington Hills, Michigan
Mortgage for property at 38700 Grand River Avenue,
Farmington Hills, Michigan
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Subordinated Subsidiary Guaranty of Medar Canada Ltd.
Subordinated Subsidiary Guaranty of Integral Vision Ltd.
10.11. Security Interests. All filings of UCC financing
statements, all recordings of the Mortgage and all other filings and actions
necessary to perfect the Security Interests as second, valid and perfected
Liens in the Property covered thereby, subject only to Permitted Liens in
effect on the date hereof, shall have been filed or taken and confirmation
thereof shall have been received by the Agent. The Senior Lender shall have
received the original of any certificates of title or other instruments
necessary to be delivered into the Senior Lender's possession in order to
perfect the Agent's security interest therein.
10.12. Searches. The results of tax lien, litigation, UCC,
bankruptcy, and judgment searches with respect to the Company and its
Subsidiaries shall be acceptable to the Purchasers.
10.13. Material Agreements. Review and approval by the
Purchasers of all material agreements to which the Company is a party,
including without limitation, all such documents in respect of the borrowing of
money, all joint venture agreements, supply agreements or requirements
contracts, royalty agreements, license agreements, employment/management
incentive agreements, and product warranties.
10.14. Insurance. The Purchasers shall have received
evidence satisfactory to it that the Company and the Subsidiaries have in
effect such casualty, hazard, public liability, product liability and other
insurance policies required by the Purchasers, written by insurers and in
amounts and forms satisfactory to the Purchasers.
10.15. Opinion of the Company Counsel. The Purchasers shall
have received an opinion of Warren Cameron Faust & Asciutto, P.C., counsel for
the Company, dated the Closing Date and addressed to the Purchasers, in form
and substance satisfactory to the Purchasers, to the effect set forth in
Exhibit E hereto.
10.16. Other Documents and Opinions. The Purchasers shall
have received such other certificates, documents and opinions, in form and
substance satisfactory to the Purchasers and their counsel, relating to matters
incident to the transactions contemplated hereby as the Purchasers may
reasonably request.
SECTION 11. AMENDMENT AND WAIVER
11.1. Amendments and Waivers. This Agreement and any Loan
Document may be amended (or any provision hereof or thereof waived) only with
the written consent of (i) the Majority Noteholders, and (ii) the holder or
holders of Warrants or Shares representing at least a
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majority of the sum of the Shares then outstanding and the Shares then
obtainable upon the exercise of all Warrants then outstanding, if any;
provided, however, that no such amendment or waiver shall (i) change the fixed
maturity of any Note, the rate or the time of payment of interest thereon, the
principal amount thereof, the premium thereon, the currency in which the Notes
are payable, the prepayment provisions of Section 6 hereof, the current
exercise price of a Warrant or the registration rights under Section 17 hereof,
without the consent of the holder of each Note, Warrant or Share so affected or
(ii) reduce the aforesaid percentage of Notes, or reduce the aforesaid
percentage of Warrants or Shares, the holders of which are required to consent
to any such amendment or waiver, without the consent of the holders of all the
Notes, or, as the case may be, the holders of all Warrants and Shares, then
outstanding or (iii) exchange the definition of "Majority Noteholders" without
the consent of the holders of all the Notes then outstanding or (iv) increase
the percentage of the amount of the Notes, the holders of which may declare the
Notes to be due and payable under Section 14 hereof, without the consent of the
holders of all the Notes then outstanding.
11.2. Notice of Proposed Amendments and Waivers. The Company
agrees that all holders of Notes, Warrants or Shares shall be notified by the
Company in advance of any proposed amendment or waiver of any Loan Document,
but failure to give such notice shall not in any way affect the validity of any
such amendment or waiver. In addition, promptly after obtaining the written
consent of the holders herein provided, the Company shall transmit a copy of
any amendment or waiver which has been adopted to all holders of Notes,
Warrants or Shares then outstanding, but failure to transmit copies shall not
in any way affect the validity of any such amendment or waiver.
11.3. All Holders Bound by Amendments and Waivers. The
Company and each holder of a Note, Warrant or Share then or thereafter
outstanding shall be bound by any amendment or waiver effected in accordance
with the provisions of this Section 11, whether or not such Note, Warrant or
Share shall have been marked to indicate such modification, but any Note,
Warrant or Share issued thereafter shall bear a notation as to any such
modification (but the failure to bear any such notation shall not affect the
validity of any such subsequently issued Note, Warrant or Share, which shall be
enforceable in accordance with its terms subject to any such modification).
SECTION 12. EXCHANGE OF NOTES AND WARRANTS; CANCELLATION OF
SURRENDERED NOTES
12.1. Exchange of Notes. Subject to Section 16 hereof, at
any time at the request of any holder of one or more of the Notes to the
Company at its office provided under Section 7.9 hereof, the Company at its
expense (except for any transfer tax or any other tax arising out of the
exchange) will issue and deliver to or upon the order of the holder in exchange
therefor new Notes, in such denomination or denominations as such holder may
request (which must be in denominations of no less than $100,000 plus one Note
in a lesser denomination, if required), in aggregate principal amount equal to
the unpaid principal amount of the Note or Notes
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surrendered and substantially in the form thereof, dated as of the date to
which interest has been paid on the Note or Notes surrendered (or, if no
interest has yet been so paid thereon, then dated the date of the Note or Notes
so surrendered) and payable to such Person or Persons or order as may be
designated by such holder. Any such new Note shall bear any notation required
by Section 11 hereof.
12.2. Exchange of Warrants. Subject to Section 16 hereof, at
any time at the request of any holder of one or more of the Warrants to the
Company at its office provided under Section 7.9 hereof, the Company at its
expense (except for any transfer tax or any other tax arising out of the
exchange) will issue and deliver to or upon the order of the holder in exchange
therefor a new Warrant certificate or certificates of like tenor, in such
amount or amounts as such holder may request and calling in the aggregate on
the face or faces thereof for the number of Shares which are called for on the
face or faces of the Warrant certificate or certificates so surrendered, and in
the name of such holder or as such holder may direct. Any such new Warrant
certificate shall bear any notation required by Section 11 hereof.
12.3. Payment of Interest on Surrendered Notes. In the event
that any Note is surrendered to the Company upon the exercise of all or a
portion of any Warrant using the principal amount of, or accrued and unpaid
interest on, the Notes in accordance with the terms of the Warrants, or upon a
prepayment under Section 6 hereof, the Company shall pay all accrued and unpaid
interest on such Note or such portion thereof and interest shall cease to
accrue upon that portion of the principal amount of such Note used for such
exercise or which was prepaid, and the right to receive, and any right or
obligation to make, any prepayment on such portion of the principal amount
pursuant to Section 6 hereof shall terminate all upon the date of such exercise
or prepayment and upon presentation and surrender of such Note to the Company.
12.4. Surrender of Note in Exercise of Warrants. Upon the
exercise in whole or in part of any Warrant using the principal amount of, or
accrued and unpaid interest on, the Notes in accordance with the terms of the
Warrants or upon any prepayment under Section 6 hereof, if only a portion of
the principal amount of a Note is used in such exercise or prepayment, then
such Note shall be surrendered to the Company and the Company shall
simultaneously execute and deliver to or on the order of the holder thereof, at
the expense of the Company, a new Note or Notes in principal amount equal to
the unused portion of such Note.
12.5. Cancellation of Surrendered Notes. All Notes or
portions thereof which have been used to exercise all or a portion of a
Warrant, or which have been prepaid under Section 6 hereof, shall be cancelled
by the Company and no Notes shall be issued in lieu of the principal amount so
used for such exercise or prepayment.
SECTION 13. REGISTRATION; REPLACEMENT OF NOTES AND WARRANTS
13.1. Registration of Transfers. The Company shall keep a
register in which provisions shall be made for the registration of the Notes
and Warrants and the registration of
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transfers of the Notes and Warrants. The register shall be kept at the office
of the Company provided under Section 7.9 hereof. Upon surrender for
registration of transfer of any Note or Warrant at the office of the Company,
the Company shall execute and deliver, in the name of the designated transferee
or transferees, one or more new Notes or Warrants, as the case may be, of a
like aggregate principal amount of Notes or number of Shares. Each new Note
issued upon transfer shall be in a principal amount of at least $100,000 and in
integral multiples of $100,000 and dated the date or dates to which interest on
the Notes or Warrants surrendered shall have been paid. Each new Warrant
issued upon transfer shall be for at least 5% of the total number of Shares and
dated the date of the original Warrant. All Notes or Warrants issued upon any
registration of transfer of Notes or Warrants, as the case may be, shall be the
valid obligations of the Company evidencing the same respective obligations,
and entitled to the same security and benefits under this Agreement and the
other Loan Documents, as the Notes or Warrants surrendered upon such
registration of transfer. The Company shall make a notation on each new Note
of the amount of all payments of principal previously made on the old Notes
with respect to which such new Note is issued and the date to which interest
accrued on such old Note has been paid.
13.2. Replacement of Notes and Warrants. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note or Warrant and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
to the Company, or in the case of any such mutilation, upon surrender of such
Note or Warrant (which surrendered Note or Warrant shall be cancelled by the
Company), the Company will, without charge, issue a new Note or Warrant, as the
case may be, of like tenor in lieu of such lost, stolen, destroyed or mutilated
Note or Warrant as if the lost, stolen, destroyed or mutilated Note or Warrant
were then surrendered for exchange.
SECTION 14. DEFAULTS
14.1. Events of Default. Any of the following shall
constitute an "Event of Default" (whether any such event shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(i) the Company defaults in the payment (whether or
not such payment is prohibited under Section 9 hereof or under the
Subordination Agreement) of (A) any part of the principal of, or
Prepayment Premium on, any Note, when the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise, or (B) the interest on any Note, when the
same shall become due and payable, and such default in the payment of
interest shall have continued for five (5) days or (C) the Company
fails to pay any other amount due hereunder or under any Loan Document
and such default shall have continued for five (5) Business Days after
notice thereof from the Agent; or
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(ii) Any representation or warranty made by
Borrower in this Agreement or in any Loan Document or in any
certificate, report, financial statement other document furnished by
or on behalf of the Company in connection with this Agreement, shall
prove to have been incorrect in any material respect when made or
deemed made.
(iii) Any term, covenant or agreement contained in
Section 8 shall be breached.
(iv) Any term, covenant or agreement contained in
this Agreement or any other Loan Document (other than in Section 8
hereof or with regard to payments) shall be breached, and such breach
shall remain unremedied for thirty (30) calendar days after receipt by
the Company of written notice thereof.
(v) The Company or any Subsidiary shall fail to pay
any part of the principal of, the premium, if any, or the interest on,
or any other payment of money due under, any of its Indebtedness
(other than Indebtedness under this Agreement), beyond any period of
grace provided with respect thereto, which individually or together
with other such Indebtedness as to which any such failure exists has
an aggregate outstanding principal amount in excess of $100,000; or
the Company or any Subsidiary shall fail to perform or observe any
other term, covenant or agreement contained in any agreement, document
or instrument evidencing or securing any Indebtedness in an aggregate
outstanding principal amount in excess of $100,000, or under which any
such Indebtedness was issued or created, beyond any period of grace,
if any, if the effect of such failure is to cause, or permit the
holders of such Indebtedness (or a trustee on behalf of such holders)
to cause, any payment in respect of such Indebtedness to become due
prior to its due date.
(vi) One or more judgments or orders for the
payment of money in an aggregate amount of $250,000 or more shall be
rendered against any of the Company or any Subsidiary, or any other
judgment or order (whether or not for the payment of money) shall be
rendered against or shall affect Company or any Subsidiary which
causes or could cause a Material Adverse Effect or which does or could
have an adverse effect on the legality, validity or enforceability of
this Agreement or any other Loan Document and either (i) such judgment
or order shall have remained unsatisfied and the Company or such
Subsidiary shall not have taken action necessary to stay enforcement
thereof by reason of pending appeal or otherwise, prior to the
expiration of the applicable period of limitations for taking such
action or, if such action shall have been taken, a final order denying
such stay shall have been rendered, or (ii) enforcement proceedings
shall have been commenced by any creditor upon any such judgment or
order; provided that no final judgment shall be included in the
calculation under this subsection to the extent that the claim
underlying such judgment is covered by insurance and defense of such
claim has been tendered to and accepted by the insurer without
reservation.
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(vii) The occurrence of a Reportable Event that
results in or could result in liability of the Company, any
Subsidiary, or their ERISA Affiliates to the PBGC or to any Plan in
excess of $50,000 and such Reportable Event is not corrected within
thirty (30) days after the occurrence thereof, or the occurrence of
any Reportable Event which could constitute grounds for termination of
any Plan of the Company or its ERISA Affiliates by the PBGC or for the
appointment by the appropriate United States District Court of a
trustee to administer any such Plan and such Reportable Event is not
corrected within thirty (30) days after the occurrence thereof; or the
filing by the Company, any Subsidiary, or any of their ERISA
Affiliates of a notice of intent to terminate a Plan or the
institution of other proceedings to terminate a Plan; or the Company,
any Subsidiary, or any of their ERISA Affiliates shall fail to pay
when due any liability to the PBGC or to a Plan in excess of $50,000;
or the PBGC shall have instituted proceedings to terminate, or to
cause a trustee to be appointed to administer, any Plan of the
Company, any Subsidiary, or their ERISA Affiliates; or any person
engages in a Prohibited Transaction with respect to any Plan which
results in or could result in liability of the Company, any
Subsidiary, any of their ERISA Affiliates, any Plan of the Company,
any Subsidiary, or their ERISA Affiliates or any fiduciary of any such
Plan in excess of $50,000; or failure by the Company, any Subsidiary,
or any of their ERISA Affiliates to make a required installment or
other payment to any Plan within the meaning of Section 302(f) of
ERISA or Section 412(n) of the Code that results in or could result in
liability of the Company, any Subsidiary, or any of their ERISA
Affiliates to the PBGC or any Plan in excess of $50,000; or the
withdrawal of the Company, any Subsidiary, or any of their ERISA
Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; or
the Company, any Subsidiary, or any of their ERISA Affiliates becomes
an employer with respect to any Multiemployer Plan without the prior
written consent of the Purchasers.
(viii) The Company or any Subsidiary shall be
dissolved or liquidated (or any judgment, order or decree therefor
shall be entered); or shall generally not pay its debts as they become
due; or shall admit in writing its inability to pay its debts
generally; or shall make a general assignment for the benefit of
creditors; or shall institute, or there shall be instituted against
the Company or any Subsidiary, any proceeding or case seeking to
adjudicate it a bankrupt or insolvent or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or
seeking the entry of an order for relief, or the appointment of a
receiver, trustee, custodian or other similar official for it or for
any substantial part of its assets, rights, revenues or property, and,
if such proceeding is instituted against the Company or any Subsidiary
and is being contested by the Company or such Subsidiary, in good
faith by appropriate proceedings, such proceeding shall remain
undismissed or unstayed for a period of 60 days; or shall take any
action (corporate or other) to authorize or further any of the actions
described above in this subsection.
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(ix) The Company shall cease to own 100% of each
class of the outstanding voting stock of each of the Subsidiaries.
(x) This Agreement or any of the other Loan
Documents shall, at any time after their respective execution and
delivery, and for any reason, cease to be in full force and effect or
shall be declared null and void, or be revoked or terminated, or the
validity or enforceability thereof or hereof shall be contested by the
Company, a Subsidiary, or any stockholder of the Company, or the
Company or any Subsidiary shall deny that it has any further liability
or obligation thereunder or hereunder, as the case may be.
14.2. Acceleration of Notes. If an Event of Default occurs,
then and in each such event the Majority Noteholders may at any time (unless
all such Events of Default shall theretofore have been waived or remedied) at
its or their option, by written notice or notices to the Company, declare all
the Notes to be due and payable in full. Upon any such declaration or upon the
occurrence of an Event of Default pursuant to clause (viii) of Section 14.1
hereof (in which case no declaration is required), all Notes shall forthwith
immediately mature and become due and payable, together with interest accrued
thereon, plus an amount equal to the Prepayment Premium, if any, without
presentment, demand, protest or notice, all of which are hereby waived.
However, if, at any time after the principal of the Notes shall so become due
and payable and prior to the date of maturity stated in the Notes, all arrears
(without giving effect to any such acceleration) of principal and interest on
the Notes (with interest at the rate specified in the Notes on any overdue
principal and, to the extent legally enforceable, on any overdue interest)
shall be paid by or for the account of the Company, then the Majority
Noteholders, by written notice or notices to the Company, may rescind or annul
such declaration. If any holder of a Note shall give any notice or take any
other action with respect to a claimed default, the Company, forthwith upon
receipt of such notice or obtaining knowledge of such other action, will give
written notice thereof to all other holders of the Notes then outstanding,
describing such notice or other action and the nature of the claimed default.
SECTION 15. REMEDIES
15.1. Enforcement of Rights; Exercise of Remedies. In case
any one or more Events of Default shall occur and be continuing, the holder of
a Note or Warrant then outstanding may proceed to protect and enforce the
rights of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Loan Document, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or for any other remedy (including, without
limitation, damages). In addition, the Agent may:
(i) without notice to or demand upon the Company,
make such payments and do such acts as the Agent considers necessary
or reasonable to protect its security
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interest in the Collateral. The Company agrees to assemble the
Collateral if the Agent so requires, and to make the Collateral
available to the Agent as the Agent may designate. The Company
authorizes the Agent to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that in the Agent's determination appears
to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith. With respect to any of the
Company's owned premises, the Company hereby grants the Agent a
license to enter into possession of such premises and to occupy the
same, without charge, for up to one hundred twenty (120) days in order
to exercise any of the Agent's rights or remedies provided herein, at
law, in equity, or otherwise;
(ii) ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Collateral. The Agent is hereby
granted a license or other right to use, without charge, the Company's
labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks, service marks, and advertising matter, and
the goodwill associated with any of the foregoing, or any property of
a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and
the Company's rights under all licenses and all franchise agreements
shall inure to the Agent's benefit;
(iii) assume any and all of the obligations of the
Company under any of the Contracts (as defined in the General Security
Agreement) and to perform any and all acts that the Company is
required or entitled to perform thereunder, including, without
limitation, enforcement of the Company's rights pursuant to the terms
thereof;
(iv) sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including the Company's premises) as the Agent determines is
commercially reasonable. It is not necessary that the Collateral be
present at any such sale;
(v) give notice of the disposition of the
Collateral as follows:
(A) the Agent shall give the Company and
each holder of a security interest in the Collateral
who has filed with the Agent a written request for
notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or
some other disposition other than a public sale is
to be made of the Collateral, then the time on or
after which the private sale or other disposition is
to be made;
(B) the notice shall be personally
delivered or mailed, postage prepaid, to the Company
as provided in Section 22, at least ten (10)
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calendar days before the date fixed for the sale, or
at least ten (10) calendar days before the date on
or after which the private sale or other disposition
is to be made, unless the Collateral is perishable
or threatens to decline speedily in value. Notice
to persons other than the Company claiming an
interest in the Collateral shall be sent to such
addresses as they have furnished to the Agent;
(C) if the sale is to be a public sale,
the Agent also shall give notice of the time and
place by publishing a notice one time at least ten
(10) calendar days before the date of the sale in a
newspaper of general circulation in the county in
which the sale is to be held;
(vi) the Agent or any Purchaser may bid and
purchase at any public or private sale and can offset the Company's
Obligations against the purchase price; and
(vii) any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by the
Company. Any excess will be returned, without interest and subject to
the rights of third parties, by the Agent to the Company.
15.2. Payment of Expenses of Enforcement and Collection. In
case of a default in the payment of any principal of or interest on any Note,
or default in the payment of amounts owing under this Agreement or any Loan
Document, or default in the observance of any other agreement or covenant of
the Company contained in this Agreement or any Loan Document, the Company will
pay to the holder thereof or party thereto, in addition to any interest or
premium otherwise required, such further amount as shall be sufficient to cover
any and all costs and expenses of enforcement and collection, including,
without limitation, reasonable attorneys' fees and expenses.
15.3. Delay Not a Waiver. No course of dealing and no delay
on the part of the Agent, any holder of any Note or Warrant or any party to
this Agreement or any Loan Document in exercising any rights or remedies shall
operate as a waiver thereof or otherwise prejudice such holder's or party's
rights. No right or remedy conferred hereby or by any Loan Document shall be
exclusive of any other right or remedy referred to herein or therein or
available at law, in equity, by statute or otherwise. To the extent permitted
under any applicable law, each of the Company and each Subsidiary hereby
irrevocably waives and relinquishes the benefit of any valuation, stay,
appraisal, extension or redemption laws, whether such laws presently exist or
may exist in the future, which laws might, but for this Section 15(c), be
applicable to any sale of any or all of the assets of the Company or any
Subsidiary (including without limitation the Collateral) made pursuant to any
judgment, order or decree of any court, or otherwise based on any claim
relating to or arising out of this Agreement or of any of the Loan Documents.
15.4. Specific Enforcement. The Purchasers shall, in
addition to other remedies provided by law, have the right and remedy to have
the provisions of this Agreement and any
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Loan Document specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any breach or threatened breach of the
provisions of this Agreement or any Loan Document will cause irreparable injury
to the Purchasers and that money damages will not provide an adequate remedy.
Nothing contained herein shall be construed as prohibiting the Purchasers from
pursuing any other remedies available to the Purchasers for such breach or
threatened breach, including, without limitation, the recovery of damages from
the Company.
15.5. Certain Waivers. Except as may be otherwise
specifically provided herein or in any other agreement between the Purchasers
and the Company which may be applicable, the Company waives any right, to the
extent applicable law permits, to receive prior notice of or a judicial or
other hearing with respect to (i) any action or prejudgment remedy or
proceeding by the Agent to take possession, exercise control over, or dispose
of any item of the Collateral in any instance (regardless of where the same may
be located) where such action is permitted under the terms of this Agreement,
any other Loan Document or by applicable law, and (ii) of the time, place or
terms of sale in connection with the exercise of the Agent's rights hereunder.
The Company also waives, to the extent permitted by law, any bonds, security or
sureties required by any statute, rule or otherwise by law as an incident to
any taking of possession by the Agent of Property subject to the Agent's Lien.
The Company also waives any damages (direct, indirect, consequential or
otherwise) occasioned by the enforcement of the Agent's rights under this
Agreement including the taking of possession of any Collateral or the giving of
notice to any account debtor, all to the extent that such waiver is permitted
by law. The Company also consents that the Agent may enter upon any premises
owned by or leased to the Company without obligation to pay rent or other
compensation or for use and occupancy, through self help, without judicial
process and without having first given notice to the Company or obtained an
order of any court. These waivers and all other waivers provided for in this
Agreement, the other Loan Documents and any other agreements or instruments
executed in connection herewith have been negotiated by the parties and the
Company acknowledges that it has been represented by counsel of its own choice
and has consulted such counsel with respect to its rights hereunder.
SECTION 16. RESTRICTIONS ON TRANSFER
Each holder of a Note or Warrant by acceptance thereof agrees
that it will not sell or otherwise dispose of any Notes, Warrants or Shares
unless such Notes, Warrants or Shares have been registered under, or have been
sold pursuant to an exemption from registration under, the Securities Act. As
a condition to the Company's obligation to issue a new Note or Warrant to a
transferee thereof which (x) is not a holder of a Note or Warrant, the
transferor must certify to the Company the facts on which the transferor is
relying for such exemption and (y) is a holder of a Note or Warrant, the
transferor must represent to the Company in writing that the transfer is so
exempt.
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SECTION 17. REGISTRATION RIGHTS
17.1. Registration at the Request of Holders.
(a) The Company agrees that upon receipt by the Company
of a Registration Demand satisfying the conditions under Section 17.1(b)
hereof, the Company will (i) promptly at least sixty (60) days prior to the
filing date) give written notice of the proposed registration to each holder of
Warrants or Shares, and (ii) with reasonable promptness, and in any case not
later than ninety (90) days after receipt by the Company of the Registration
Demand, file a registration statement with the Commission relating to the
Shares as to which registration is requested in the Registration Demand. The
Company shall use its best efforts to make such registration statement become
effective promptly and to qualify the same under the securities laws of such
states as may be requested; provided, however, that with respect to compliance
with state securities laws, the Company shall not be obligated to qualify as a
foreign corporation or to execute or file any general consent to service of
process under the laws of any such state where it is not so subject. The
Company shall also include under such registration statement (and in such state
qualifications) any Shares requested to be so included by any other holder of
Warrants or Shares by written notice delivered to the Company within thirty
(30) days of receipt of the notice provided for in clause (i) above. The
Company shall have the right to determine whether any such registration shall
be underwritten.
(b) A "Registration Demand" means a written notice from
one or more holders of Warrants or Shares stating that such holder or holders
desire to sell some or all of their Shares under circumstances requiring
registration under the Securities Act and requesting that the Company effect
registration with respect to some or all of the Shares held, or to be held
after exercise of the Warrants, by such holder or holders; provided that such
holder or holders giving such notice hold Shares, including any Shares then
outstanding and any Shares then obtainable upon exercise of Warrants then
outstanding, representing not less than a majority of the sum of (i) the number
of Shares then obtainable upon the exercise of all Warrants then outstanding
and (ii) the number of Shares then outstanding from previous exercises of
Warrants. The Company is obligated to effect registration and qualification
pursuant to this Section 17.1 no more than twice.
(c) Notwithstanding the provisions of Section 17.1(a),
the Company may delay filing a registration statement for a period of time not
to exceed sixty (60) days, and may withhold efforts to cause the registration
statement to become effective, if the Company determines in good faith that
such registration might (i) interfere with or affect the negotiation or
completion of any transaction that is being contemplated by the Company
(whether or not a final decision has been made to undertake such transaction)
at the time the right to delay is exercised, or (ii) involve initial or
continuing disclosure obligations that might not be in the best interest of the
Company's stockholders. The Company may exercise its rights under this Section
17.1(c) no more than twice per calendar year, and it may not exercise such
rights for successive sixty-day periods without the prior written consent of
the Agent.
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(d) If the holder or holders who gave the Registration
Demand under this Section 17.1 inform the Company by written notice that they
are withdrawing their Registration Demand and pay all of the Company's
out-of-pocket expenses with respect to such registration and qualification
incurred to the date of the notice under this Section 17.1(c), then the
registration statement need not be filed and the whole effort will not count as
a registration and qualification (or an exercise of rights) under this Section
17.1.
17.2. Piggyback Rights. If the Company shall at any time
propose to file a registration statement under the Securities Act for any sales
of shares of the Company's Common Stock (or any warrants, units, convertibles,
rights or other securities related or linked to any shares of the Company's
Common Stock) on behalf of the Company or otherwise, the Company shall give
written notice of such registration no later than 60 days before its filing
with the Commission to all holders of Warrants or Shares; provided that
registrations relating solely to securities to be issued by the Company in
connection with any employee stock option or employee stock purchase or savings
plan on Form S-8 (or successor forms) under the Securities Act shall not be
subject to this Section 17.2. If holders of Warrants or Shares so request
within thirty (30) days of receipt of such notice, the Company shall include in
any such registration the Shares held or to be held after exercise of Warrants
by such holders and requested to be included in such registration.
17.3. Expenses. Subject to the limitations contained in this
Section 17.3 and except as otherwise specifically provided in this Section 17,
the entire costs and expenses of any registration and qualification pursuant to
Section 17.1 or 17.2 hereof shall be borne by the Company. Such costs and
expenses shall include, without limitation, the fees and expenses of counsel
for the Company and of its accountants, all other costs, fees and expenses of
the Company incident to the preparation, printing and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto, the reasonable fees and expenses of one counsel to the holders of
Warrants or Shares relating to such registration and qualification, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and
each amendment or supplement thereto to underwriters (if any), dealers and
other purchasers of the Shares and the costs and expenses (including fees and
disbursements of counsel) incurred in connection with the qualification of the
Shares under the securities laws of various jurisdictions. The Company shall
not, however, pay underwriting fees or commissions to the extent related to the
sale of Shares sold in any registration and qualification.
17.4. Procedures.
(a) In the case of each registration or qualification
pursuant to Section 17.1 or 17.2, the Company will keep all holders of Warrants
or Shares advised in writing as to the initiation of proceedings for such
registration and qualification and as to the completion thereof, and will
advise any such holder, upon request, of the progress of such proceedings.
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(b) At the Company's expense, the Company will keep each
registration and qualification under this Section 17 effective (and in
compliance with the Securities Act) by such action as may be necessary or
appropriate for a period of one hundred twenty (120) days after the effective
date of such registration statement, including, without limitation, the filing
of post-effective amendments and supplements to any registration statement or
prospectus necessary to keep the registration statement current and the further
qualification under any applicable state securities laws to permit such sale or
distribution, all as requested by such holder or holders, provided, that such
120-day period shall be extended by the number of days (i) that a stop order or
similar proceeding is in effect which prohibits the distribution of the Shares
registered pursuant to this Section 17 and (ii) from and including the date
that each holder on whose behalf Shares have been registered pursuant to this
Section 17 shall have received a notice delivered pursuant to paragraph (c)
below until the date on which such holders shall have received a reasonable
number of copies of a supplement to or an amendment of the prospectus so that
the prospectus thereafter shall not include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; in light of the
circumstances then existing.
(c) The Company will immediately notify each holder on whose
behalf Shares have been registered pursuant to this Section 17 at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
(d) If any registration under this Section 17 is in
connection with an underwritten offering, the Company will furnish to each
holder on whose behalf Shares have been registered pursuant to this Section 17
a signed counterpart, addressed to such holder, of (i) an opinion of counsel
for the Company, dated the effective date of such registration statement, and
(ii) a so-called "cold comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included in
such registration statement, and such opinion of counsel and accountants'
letter shall cover substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case
of such accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in connection
with underwritten public offerings of securities.
(e) Without limiting any other provision hereof, in
connection with any registration of Shares under this Section 17, the Company
will comply with the Securities Act, the Securities Exchange Act and all
applicable rules and regulations of the Commission, and will make generally
available to its securities holders, as soon as reasonably practicable, an
earnings statement covering a period of at least twelve (12) months, beginning
with the first month of the
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first fiscal quarter after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(f) In connection with any registration of Shares under this
Section 17, the Company will provide a transfer agent and registrar for the
Shares not later than the effective date of such registration statement.
(g) In connection with any underwritten registration of
Shares under this Section 17, the Company will, if requested by the
underwriters for any Shares included in such registration, enter into an
underwriting agreement with such underwriters for such offering, such agreement
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
provisions relating to indemnification and contribution. The holders on whose
behalf Shares are to be distributed by such underwriters shall be parties to
any such underwriting agreement, and the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Warrants or Shares and the conditions precedent to the obligations of such
underwriters under such underwriting agreement shall be conditions precedent to
the obligations of such holders of Warrants or Shares. The Company shall
cooperate with such holders of Warrants or Shares in order to limit any
representations or warranties to, or agreements with, the Company or such
underwriters to be made by such holders only to those representations,
warranties or agreements regarding such holder, such holder's Shares and such
holder's intended method of distribution and any other representation required
by law. Such underwriting agreement shall comply with Section 17.5 hereof.
(h) If the Company at any time proposes to register any of
its securities under the Securities Act, other than pursuant to a request made
under Section 17.1 hereof, whether or not for sale for its own account, and
such securities are to be distributed by or through one or more underwriters,
then the Company will use its best efforts, if requested by any holder of
Warrants or Shares who requests registration of Shares in connection therewith
pursuant to Section 17.2 hereof, to arrange for such underwriters to include
such Shares among the securities to be distributed by or through such
underwriters.
(i) Upon request by any holder of Warrants or Shares who has
requested such registration, the Company will give such holder and their
underwriters, if any, and their respective counsel and accountants, (i) such
information regarding the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto, as such holder may specify, and (ii)
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements, as shall be necessary, in the opinion of such holders or such
underwriters or their respective counsel, in order to conduct a reasonable and
diligent investigation within the meaning of the Securities Act. Without
limiting the foregoing, each registration statement, prospectus, amendment,
supplement or any other
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document filed with respect to a registration under this Section 17 shall be
subject to review and reasonable approval by the holders registering Shares in
such registration and by their counsel.
(j) The Company will cause all of the Shares registered
pursuant to this Section 17 to be listed on each securities exchange on which
similar securities issued by the Company are then listed or, if there shall
then be no such listing, to be accepted for quotation as a National Market
Security on The NASDAQ Stock Market.
17.5. Provision of Documents. The Company will, at the
expense of the Company, furnish to each holder of Warrants or Shares with
respect to which registration has been effected, such number of registration
statements, prospectuses, offering circulars and other documents incident to
any registration or qualification referred to in Section 17.1 or 17.2 as such
holder from time to time may reasonably request.
17.6. Indemnification. The Company will indemnify and hold
harmless, to the extent permitted by law, each holder of Warrants or Shares and
any underwriter (as defined in the Securities Act) for such holder and each
person, if any, who controls the holder or underwriter within the meaning of
the Securities Act or the Exchange Act and each of their respective directors,
officers, general partners and members against any losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable attorneys'
fees and expenses and reasonable costs of investigation) to which the holder or
underwriter or such controlling person may be subject, under the Securities Act
or otherwise, insofar as any thereof arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in
(A) any registration statement under which such Shares were registered under
the Securities Act pursuant to Section 17.1 or 17.2 hereof (including all
documents incorporated therein by reference), any prospectus or preliminary
prospectus contained therein, or any amendment or supplement thereto, or (B)
any other document incident to the registration of the Shares under the
Securities Act or the qualification of the Shares under any state securities
laws, or (ii) the omission or alleged omission to state in any item referred to
in the preceding clause (i) a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Securities
Exchange Act or any other federal or state securities law, rule or regulation
applicable to the Company and relating to action or inaction by the Company in
connection with any such registration or qualification, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished to the Company in writing by such
holder or by any underwriter for such holder expressly for use therein (with
respect to which information such holder or underwriter shall so indemnify and
hold harmless the Company, any underwriter for the Company and each person, if
any, who controls the Company or such underwriter within the meaning of the
Securities Act or the Exchange Act and each of their respective directors,
officers, general partners and members). The Company will enter into an
underwriting agreement and other agreements with the underwriter or
underwriters for any offering registered under the Securities Act pursuant to
Section 17.1 or 17.2 hereof and with the
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holders of Securities selling Shares pursuant to such offering, and such
underwriting agreement and other agreements shall contain customary provisions
with respect to indemnification and contribution which shall, at a minimum,
provide the indemnification set forth above.
17.7. Periodic Payments.
The indemnification provided for in Section 17.6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, upon the presentation by the indemnified party
to the indemnifying party of a statement showing the amount of expense, loss,
damage or liability for which payment is then requested.
17.8. Indemnification Procedure.
Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in Section 17.6, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 17.6 except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and 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 for any legal
fees and expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's reasonable judgment an
actual or potential conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim. The indemnifying
party will not, without the prior written consent of each indemnified party,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such indemnified party
or any Person who controls such indemnified party is a party to such claim,
action, suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of such indemnified party from all liability
arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain,
at its own expense, counsel with respect to the defense of a claim.
17.9. Contribution.
If the indemnification provided for in Section 17.6 is
unavailable (for any reason other than a determination of its inapplicability
by a court of competent jurisdiction) to hold
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harmless an indemnified party under such Section, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
Section 17.6 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand, and the indemnified party on the
other, in connection with statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations, including without limitation the relative benefits
received by each party from the offering of the securities covered by such
registration statement, the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted
and the opportunity to correct and prevent any statement or omission. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statements or omission. The parties hereto agree that it would not
be just and equitable if contributions pursuant to this Section 17.9 were to be
determined by pro rata or per capita allocation (even if the underwriters, if
any, were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the first and second sentences of this Section 17.9. The Company and
each holder of Warrants or Shares agrees with each other and any underwriters
of the Shares, if requested by such underwriters, that (i) the underwriters'
portion of such contribution shall not exceed the underwriting discount and
(ii) that the amount of such contribution shall not exceed an amount equal to
the net proceeds actually received by such indemnifying party from the sale of
securities in the offering to which the losses, liabilities, claims, damages or
expenses of the indemnified parties relate. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
17.10. Certain Limitations in Connection with Future Grants
of Registration Rights.
(a) From and after the date of this Agreement, the
Company shall not enter into any agreement with any holder or prospective
holder of any of its Common Stock providing for the granting to such holder of
demand registration rights unless such agreement includes provisions to the
effect that (i) the Company will give the holders of Warrants and Shares notice
at least thirty (30) days prior to the filing of a registration statement
pursuant to the exercise of such rights and (ii) notwithstanding Section 17.2
hereof, if a holder of Warrants or Shares requests inclusion of Shares (whether
such Shares are held directly or through the right to obtain such Shares upon
the conversion of Warrants held by such holder) and requests priority for such
Shares in such registration statement within thirty (30) days after receipt of
such notice, then such holder's Shares requested to be so included will be
given priority over the securities sought to be registered by the holders of
such demand registration rights if marketing factors require a limitation on
the number of securities to be included in such registration statement (and
such registration shall be deemed a demand registration for such holder under
Section 17.1 hereof),
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provided that the holder or holders giving the notice referred to in clause
(ii) above are entitled to exercise a demand registration hereunder. If such
holder or holders elect to include their Shares in such registration statement
and request and are given such priority, then such election shall reduce by one
the number of demand registrations to which such holder or holders are entitled
under Section 17.1 hereof. If a holder of Warrants or Shares requests
inclusion of its Shares (whether such Shares are held directly or through the
right to obtain such Shares upon conversion of Warrants held by such holder),
but does not request such priority for such Shares in such registration, then
such Shares shall be included in such registration statement in the manner
described in Section 17.2 hereof.
(b) From and after the date of this Agreement, the
Company shall not enter into any agreement with any holder or prospective
holder of any of its Common Stock providing for the granting to such holder of
incidental or "piggyback" registration rights unless such agreement includes
provisions to the effect that, in the case of a registered underwritten public
offering of the Company's Common Stock to which Section 17.1 or Section 17.2
hereof applies, such agreement gives the following priority to holders of
Warrants or Shares if marketing factors require a limitation on the number of
shares of Common Stock to be included in such offering:
(i) holders of Warrants or Shares shall have the right to
include in each registration to which Section 17.1 hereof applies, all
Shares they desire to include whether or not the Company or any other
holder of the Company's securities has requested or is planning a
registration of securities; and
(ii) the holders of Warrants or Shares and other holders of
securities of the Company having piggyback registration rights shall
have an equal right to include further securities in such registration
(beyond the amount to be included on behalf of the Company) in
proportion to their relative holdings of shares of Common Stock of the
Company (whether held directly or obtainable upon conversion or the
exercise of warrants or other rights).
SECTION 18. EXPENSES; INDEMNIFICATION
18.1. Expenses. Whether or not the transactions herein
contemplated are consummated, the Company will pay (i) the costs and expenses
of the preparation of this Agreement and the Loan Documents, the issuance of
the Notes, Warrants and Shares and the furnishing of all opinions by counsel
for the Company, (ii) the reasonable fees and disbursements of Morgan, Lewis &
Bockius LLP in connection this Agreement and with the Loan Documents and the
transactions contemplated hereby and thereby (whether or not a Closing occurs
hereunder, and if a Closing occurs hereunder the Company will make such payment
on the Closing Date), (iii) the Purchasers' due diligence out-of-pocket
expenses and consultant fees and expenses, (iv) the fees and disbursements of
counsel to the holders of Notes and Warrants in connection with any amendments
to or modifications or waivers of any provisions of the Loan Documents or in
connection with any other agreements between such holders and the Company
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<PAGE> 63
and (v) the fees and expenses of any investment banker, broker or finder
involved with this Agreement and the Loan Documents or any of the transactions
contemplated hereby or thereby. The obligations of the Company under this
Section 18 shall survive the Closing, the payment or cancellation of the Notes
and the exercise of the Warrants and any termination of this Agreement or any
Loan Documents.
18.2. Taxes. The Company agrees to pay, or cause to be paid,
all documentary, stamp and other similar taxes levied under the laws of the
United States of America or any state or local taxing authority thereof or
therein in connection with the issuance and sale of the Notes and the Warrants,
the issuance of the Shares upon exercise of the Warrants, the execution and
delivery of this Agreement and any other Loan Document or other documents or
instruments contemplated hereby or thereby and any modification of any of the
Loan Documents or any such other documents or instruments and will hold the
Purchaser harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
18.3. Indemnification. Whether or not the transactions
contemplated by this Agreement are consummated, the Company hereby agrees to
indemnify and hold each Purchaser and each holder of a Note or Warrant or Share
harmless (including any of such Purchaser's or holder's affiliated companies)
and any of such Purchaser's or holder's directors, officers, employees, or
agents and any person controlling (within the meaning of Section 20(a) of the
Securities Exchange Act) such Purchaser or holder or any of its affiliated
companies (collectively, the "Indemnified Persons") from and against any and
all losses, claims, damages, liabilities, securities law penalties, and
expenses whatsoever (including, but not limited to, any and all reasonable fees
and expenses whatsoever incurred by an Indemnified Person and its attorneys in
investigating, preparing for, defending against, acting as a witness, providing
evidence, producing documents, or taking any other action in respect of any
litigation or proceeding, commenced or threatened, or any claim whatsoever),
(collectively, the "Losses") arising out of or in connection with this
Agreement or any Loan Document, other than to the extent Losses result from the
gross negligence or wilful misconduct of the Indemnified Person. The foregoing
indemnity shall be in addition to any other rights which the Indemnified
Persons may have against the Company otherwise than under this paragraph. If a
court shall hold for any reason that the preceding indemnification is
unavailable to any Indemnified Person as to any matter for which it would be
available if enforceable in accordance with its terms, the Company on the one
hand and the Indemnified Person on the other agree to contribute to such loss
in such proportion as is appropriate to reflect the relative benefits and the
relative fault of the Company on the one hand and of the Indemnified Person on
the other in connection with the statements, actions, or omissions which
results in such Loss, as well as any other relevant equitable considerations.
18.4. Indemnification Procedures. If any Indemnified Party
is entitled to indemnification hereunder, such Indemnified Party shall give
prompt notice to the Company of any claim or of the commencement of any
proceeding with respect to which such Indemnified Party seeks indemnification
pursuant hereto and of which such Indemnified Party knew or
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<PAGE> 64
reasonably should have known; provided, however, that the failure so to notify
the Company shall not relieve the Company from any obligation or liability
except to the extent that the amount owed by the Company has been increased by
such failure. The Company shall have the right, exercisable by giving written
notice to an Indemnified Person within 20 Business Days after receipt of
written notice from such Indemnified Person of such claim or proceeding, to
assume, at its expense, the defense of any such claim or proceeding; provided,
however, that an Indemnified Person shall have the right to employ separate
counsel in any such claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (1) the Company agrees to pay such fees and
expenses; or (2) the Company fails promptly to assume, or to diligently pursue,
the defense of such claim or proceeding; or (3) the named parties to any such
claim or proceeding (including any impleaded parties) include both such
Indemnified Person and one or more of the Company or an Affiliate of the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more material defenses available to such Indemnified Person
which are different from or additional to those available to the Company or
such Affiliate; or (4) an Event of Default is continuing; or (5) the claim or
proceeding seeks to impose criminal penalties against the Indemnified Person
(in which case if such Indemnified Person notifies the Company in writing that
it elects to employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense thereof, it being understood,
however, that the Company shall not, in connection with any one such claim or
proceeding or separate but substantially similar or related claims or
proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such Indemnified Person). Whether or not such defense is assumed by
the Company, such Indemnified Person will not be subject to any liability for
any settlement made without its consent (but such consent will not be
unreasonably withheld or delayed).
SECTION 19. DIRECT PAYMENTS
As long as the Purchaser or any payee named in the Notes
delivered to the Purchaser on the Closing Date, or any institutional holder
which is a direct or indirect transferee from the Purchaser or such payee,
shall be the holder of any Note, the Company will make payments (whether at
maturity, upon mandatory or optional prepayment, upon repurchase or otherwise)
of principal, interest and premium, if any, (i) by check payable to the order
of the holder of any such Note duly mailed or delivered to such address as the
Purchaser or such other holder may designate in writing or (ii) if requested by
the Purchaser or such other holder, by wire transfer to the Purchaser's or such
other holder's (or its nominee's) account at any bank or trust company in the
United States of America, notwithstanding any contrary provision herein or in
any Note with respect to the place of payment. IF THE PURCHASER HAS PROVIDED
AN ADDRESS ON EXHIBIT A HERETO FOR PAYMENTS BY WIRE TRANSFER, THEN THE
PURCHASER SHALL BE DEEMED TO HAVE REQUESTED WIRE TRANSFER PAYMENTS UNDER THE
PRECEDING CLAUSE (ii). All such payments shall be made in
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<PAGE> 65
federal or other immediately available funds and shall arrive by 2:00 p.m.
local time at the place of payment on the day when due.
SECTION 20. SECURITY INTEREST AND MORTGAGES
The Company shall grant to the Agent for the benefit of the Purchasers
a security interest in the Collateral pursuant to the General Security
Agreement, the Collateral Assignment and the Mortgage.
SECTION 21. THE AGENT
21.1. Appointment. Each Purchaser hereby irrevocably
designates and appoints the Agent as the agent of such Purchaser under this
Agreement and the Loan Documents, and each such Purchaser irrevocably
authorizes the Agent, as the agent for such Purchaser, to take such action on
its behalf under the provisions of this Agreement and the Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement and the Loan Documents, together with such
other powers as are reasonably incidental thereto.
21.2. Application of Proceeds of the Collateral. All
Collateral shall be held or administered by the Agent for the ratable benefit
of the Purchasers. Any proceeds received by the Agent from the foreclosure,
sale, lease or other disposition of any of the Collateral and any other
proceeds received pursuant to the terms of the Loan Documents shall be applied,
first, to the cost of any such foreclosure, sale, lease or other disposition
and, second, to the payment in full of the remaining Company's Obligations pro
rata in proportion to the amount of the Company's Obligations owed to each
Person.
21.3. Delegation of Duties. The Agent may execute any of its
duties under this Agreement by or through agents or attorneys- in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to
such duties.
21.4. Reliance by Agent. The Agent may deem and treat the
registered owner of any Note as the owner thereof for all purposes. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement unless it shall first receive such advice or concurrence of the
Majority Noteholders as it deems appropriate. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement,
the Notes or any Loan Document in accordance with a request of the Majority
Noteholders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Purchasers and all future holders of the
Notes.
21.5. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Potential Default or Event of
Default hereunder unless the Agent has received notice from the Company
referring to this Agreement, describing such Potential
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<PAGE> 66
Default or Event of Default and stating that such notice is a "notice of
default". The Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Potential Default or
Event of Default as it shall deem advisable and in the best interests of the
Purchasers.
21.6. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to and generally engage in any kind of business with
the Company as though the Agent were not the Agent hereunder. With respect to
any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Purchaser and may exercise the same as though it were not
the Agent, and the terms "Purchaser" and "Purchasers" shall include the Agent
in its individual capacity.
21.7. Successor Agent. The Agent may resign as Agent upon 20
days' notice to the Purchasers. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Purchasers on whose behalf
such Agent is acting shall appoint a successor agent for the Purchasers,
whereupon such successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement or any Loan Document
or any holders of the Notes. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Section 21 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents. The Agent shall use its best efforts
to notify the Company of any such resignation; provided, however, neither the
Agent nor the Purchasers shall be held liable in any respect for the failure to
provide such notice; and further provided, however, that until the Company
receives notice of the Agent's resignation and of the appointment of a
successor agent, the Company shall be entitled to rely upon the Agent as the
Agent hereunder.
SECTION 22. NOTICES
Unless otherwise expressly specified or permitted by the terms
hereof, all notices, requests, demands, consents and other communications
hereunder or under the Loan Documents shall be in writing and shall be
delivered by hand or shall be sent by telex or telecopy (confirmed by
registered, certified or overnight mail or courier, postage and delivery
charges prepaid or shall be sent by overnight mail or courier (postage and
delivery charges prepaid), to the following addresses:
(a) if to the Purchaser, at the Purchaser's address as set
forth in Exhibit A hereto, or at such other address as may have been furnished
to the Company by the Purchaser in writing; or
(b) if to any other holder of a Note or Warrant, at such
address as the payee or registered holder thereof shall have designated to the
Company in writing; or
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<PAGE> 67
(c) if to the Company, at 38700 Grand River Avenue,
Farmington Hills, MI 48335-1563, Attention: Richard Current, telephone:
248-471-2660, telecopy: 248-615-2971 or at such other address as may have been
furnished in writing by the Company to the Agent, the Purchasers and the other
holders of Notes or Warrants; or
(d) if to the Agent, at One Hospital Trust Tower, 15th Floor,
Suite 1515, Providence, RI 02903, Attention: John D. Lemery, telephone:
401-453-3706, telecopy: 401-453-3704 or at such other address as may have been
furnished in writing by the Agent to the Company, the Purchasers and the other
holders of Notes or Warrants.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered
or, if sent by telex or telecopier, when received, unless otherwise expressly
specified or permitted by the terms hereof.
SECTION 23. MISCELLANEOUS
23.1. Entire Agreement. This Agreement and the Loan
Documents, together with any further agreements entered into by the Purchaser
and the Company at the Closing, contain the entire agreement between the
Purchaser and the Company, and supersede any prior oral or written agreements,
commitments, terms or understandings, regarding the subject matter hereof.
23.2. Survival. All agreements, representations and
warranties contained herein in any Loan Document or any document or certificate
delivered pursuant hereto or thereto shall survive, and shall continue in
effect following, the execution and delivery of this Agreement and of such Loan
Documents, the closings hereunder and thereunder, any investigation at any time
made by the Purchasers or on their behalf or by any other Person, the issuance,
sale and delivery of the Notes and the Warrants, any disposition thereof, any
payment or cancellation of the Notes, and any exercise of the Warrants;
provided, that Sections 7 and 8 shall terminate upon the payment in full of all
outstanding Notes. All statements contained in any certificate or other
document delivered by or on behalf of the Company pursuant hereto shall
constitute representations and warranties by the Company hereunder.
23.3. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument, and all signatures need not appear on
any one counterpart.
23.4. Headings. The headings and captions in this Agreement
and the table of contents are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions hereof.
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<PAGE> 68
23.5. Binding Effect and Assignment.
(a) The terms of this Agreement shall be binding upon, and
inure to the benefit of, the parties and their respective successors and
permitted assigns whether so expressed or not.
(b) The Company may not assign any of its obligations, duties
or rights under any of the Loan Documents, except pursuant to Section 8.4
hereof or with the Majority Noteholders' consent.
(c) In addition to any assignment by operation of law, a
Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement and any of the Loan Documents to any
transferee of any or all of its Notes, Warrants or Shares, subject to the terms
of Section 16 hereof, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser would otherwise
have under this Agreement or with respect to any remaining Notes, Warrants or
Shares held by the Purchaser.
23.6. Severability. Any provision of this Agreement or of
any Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof or thereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
23.7. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York (other than
any conflict of laws rule which might result in the application of the laws of
any other jurisdiction).
23.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE
COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES
THAT, SUBJECT TO THE ELECTION OF THE PURCHASERS OR ANY OTHER HOLDER OF NOTES,
ALL ACTIONS OR PROCEEDINGS RELATING TO THE LOAN DOCUMENTS MAY BE LITIGATED IN
SUCH COURTS. THE COMPANY ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LOAN DOCUMENTS. THE COMPANY HEREBY
AGREES THAT SERVICE UPON IT BY MAIL AT THE ADDRESS OF THE COMPANY PROVIDED IN
SECTION 22 HEREOF SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS IN
ANY SUCH PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
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<PAGE> 69
RIGHT OF THE PURCHASER OR ANY OTHER HOLDER OF NOTES TO BRING PROCEEDINGS OR
OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION.
23.9. WAIVER OF JURY TRIAL. THE COMPANY AND THE PURCHASERS
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE COMPANY AND THE
PURCHASERS ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASERS. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE
PURCHASERS FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO (OR ASSIGNMENTS OF) ANY LOAN DOCUMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
(WITHOUT A JURY) BY THE COURT.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have caused this Note
and Warrant Purchase Agreement to be executed as of the date first above
written.
MEDAR, INC.
By:
---------------------------------
Name:
Title:
State Street Bank and Trust Company, as
Trustee for
THE TEXTRON MASTER TRUST
By:
---------------------------------
Name:
Title:
OHIO NATIONAL FUND, INC./SOCIAL
AWARENESS PORTFOLIO
By:
---------------------------------
Name:
Title:
OHIO NATIONAL FUND, INC./EQUITY
PORTFOLIO
By:
---------------------------------
Name:
Title:
<PAGE> 71
OHIO NATIONAL FUND, INC./OMNI
PORTFOLIO
By:
---------------------------------
Name:
Title:
MAXCO, INC.
By:
---------------------------------
Name:
Title:
INDUSTRIAL BOXBOARD CORPORATION
PROFIT-SHARING PLAN AND TRUST
(July 1, 1989 Restatement)
By:
---------------------------------
P. Robert Klonoff, as agent for
John N. Hunter and J.A. Hunter,
Trustees
ROBERT W. FULK IRA ROLLOVER,
LaSalle National Bank as custodian
By:
---------------------------------
Robert W. Fulk
<PAGE> 72
DORRANCE STREET CAPITAL
ADVISORS, L.L.C., as Agent
By:
---------------------------------
Name:
Title:
<PAGE> 73
SCHEDULE 4.5
LITIGATION
Although the Company has pending litigation, the Company is of the
opinion that in each case there is adequate insurance coverage such that none
of the pending litigation will have a Material Adverse Effect on the Company.
<PAGE> 74
SCHEDULE 4.6
FINANCIAL STATEMENTS
Financial statements and other financial information contained in Medar, Inc.'s
Form 10-K for its fiscal year ended December 31, 1995 and its annual report for
its fiscal year ended December 31, 1996.
Unaudited balance sheet of Medar, Inc. dated March 31, 1997 and its related
statements of income and cash flow for the three months ended March 31, 1997.
<PAGE> 75
SCHEDULE 4.18
DIRECTORS AND OFFICERS
Medar, Inc. Board Members as of: 7-15-97
Charles J. Drake
Max A. Coon
Richard R. Current
Stephan Sharf
Vincent Shunsky
William B. Wallace
Stephen R. Zynda
Medar, Inc. Executive Officers as of: 7-15-97
President: Charles J. Drake
Executive Vice President of Finance and Operations: Richard R. Current
Vice President and Chief Operating Officer of Welding Products
Division: Mark R. Doede
Vice President of Marketing, Welding Products: Lyle D. Harbin
Vice President of Marketing, Vision Products: Arthur D. Harmala
Secretary: Max A. Coon
Treasurer: Vincent Shunsky
<PAGE> 76
EXHIBIT A
PURCHASERS
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
1. State Street Bank and Trust Company as Trustee for $5,000,000 1,000,000
the Textron Master Trust
(a) address for communications:
State Street Bank and Trust Company as
Trustee for the Textron Master Trust
One Enterprise Drive
Master Trust -W6C
North Quincy, MA 02171
Attention: Thomas C. Poppey
With a copy to:
Dorrance Street Capital
Advisors, L.L.C.
Attn: John D. Lemery
One Hospital Trust Tower
Suite 1515
Providence, R.I. 02903
Telephone: (401) 453-3706
Facsimile: (401) 453-3704
(b) address for payments, by wire transfer:
State Street Bank and Trust Company
ABA No. 011000028
Account Name: Textron/TX8A
Account Number: 67613075
Attention: Thomas C. Poppey
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
04-3283284
</TABLE>
A-1
<PAGE> 77
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
2. Ohio National Fund, Inc. $25,000 5,000
Social Awareness Portfolio
(a) address for communications:
Ohio National Fund, Inc.
Social Awareness Portfolio
c/o Ohio National Financial Services
One Financial Way
Cincinnati, Ohio 45242
Attn: Stephen Williams
Telephone: (513) 794-6444
Facsimile: (513) 794-4506
(b) address for payments, by wire transfer
Star Bank, N.A., Cincinnati
ABA No. 0420-0001-3
Account Name: Ohio National Master Account
FFC: Ohio National Fund, Inc.
Social Awareness Portfolio
Account Number: 485812853
Attention: Angie Lewis
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax identification Number:
31-1480019
</TABLE>
A-2
<PAGE> 78
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
3. Ohio National Fund, Inc. $475,000 95,000
Equity Portfolio
(a) address for communications:
Ohio National Fund, Inc.
Equity Portfolio
c/o Ohio National Financial Services
One Financial Way
Cincinnati, Ohio 45242
Attn: Stephen Williams
Telephone: (513) 794-6444
Facsimile: (513) 794-4506
(b) address for payments, by wire transfer
Star Bank, N.A., Cincinnati
ABA No. 0420-0001-3
Account Name: Ohio National Master Account
FFC: Ohio National Fund, Inc.
Equity Portfolio
Account Number: 485812853
Attention: Angie Lewis
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
31-1248842
</TABLE>
A-3
<PAGE> 79
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
4. Ohio National Fund, Inc. $400,000 80,000
Omni Portfolio
(a) address for communications:
Ohio National Fund, Inc.
Omni Portfolio
c/o Ohio National Financial Services
One Financial Way
Cincinnati, Ohio 45242
Attn: Stephen Williams
Telephone: (513) 794-6444
Facsimile: (513) 794-4506
(b) address for payments, by wire transfer
Star Bank, N.A., Cincinnati
ABA No. 0420-0001-3
Account Name: Ohio National Master Account
FFC: Ohio National Fund, Inc.
Omni Portfolio
Account Number: 485812853
Attention: Angie Lewis
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
31-1248845
</TABLE>
A-4
<PAGE> 80
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
5. Maxco, Inc. $750,000 150,000
1118 Centennial Way
Lansing, Michigan 48917
(a) address for communications:
Maxco, Inc.
1118 Centennial Way
Lansing, Michigan 48917
Attn: Vincent Shunsky
Vice President-Finance And
Treasurer
Telephone: (517) 321-3130
Facsimile: (517) 321-1022
(b) address for payments, by wire transfer
Comerica Bank
ABA No. 0720-0009-6
Account Name: Maxco, Inc.
Account Number: 1840094641
Attention: David Grantham, Vice President
Corporate Banking
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
38-1792842
</TABLE>
A-5
<PAGE> 81
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
6. Industrial Boxboard Corporation $250,000 50,000
Profit-Sharing Plan and Trust
(July 1, 1989 restatement)
John N. Hunter and J. A. Hunter, Trustees
(a) address for communications:
Industrial Boxboard Corporation
Profit-Sharing Plan and Trust
(July 1, 1989 restatement)
John N. Hunter and J.A. Hunter, Trustees
2249 Davis Court
Hayward, CA 94545
With a copy to:
The Klonoff Company, Inc.
Attention: P. Robert Klonoff
9227 North Mountain View Lane
Spokane, Washington 99218
Telephone: (509) 467-5879
Facsimile: (509) 467-6546
(b) address for payments, by wire transfer
Citibank, New York
ABA No. 0210-0008-9
FBO: Dean Witter Reynolds, Inc.
Beneficiary Account: 40611172
Further Credit DWR account: 112-066703-004
FBO: Industrial Boxboard Corp. Profit
Sharing Plan
Attention:
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
94-3093644
</TABLE>
A-6
<PAGE> 82
<TABLE>
<CAPTION>
Number of
Shares, Subject
Principal to Adjustment,
Amount of Initially
Notes to Covered by
Name and Address of Purchaser be Purchased Warrants
----------------------------- ------------ --------
<S> <C> <C> <C>
7. Robert W. Fulk IRA Rollover $100,000 20,000
(a) address for communications:
Robert W. Fulk IRA Rollover
135 South LaSalle Street
Suite 2220
Chicago, Illinois 60603
Attn: Robert W. Fulk
Telephone: (312) 263-4595
Facsimile: (312) 263-4827
(b) address for payments, by wire transfer:
LaSalle National Bank, Chicago, Illinois
ABA No. 071-000-505
Account Name: Robert W. Fulk IRA Rollover
Account Number: 03 6895 90 2
Attention: Trust Department
(providing sufficient information with such
wire transfer to identify the source and
application of such funds)
(c) Tax Identification Number:
###-##-####
</TABLE>
A-7
<PAGE> 1
EXHIBIT 4.2
EXHIBIT B
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY APPLICABLE REGULATION OF ANY STATE AND IS NOT TRANSFERABLE EXCEPT
UPON THE CONDITIONS SPECIFIED IN SECTION 16 OF THE PURCHASE AGREEMENT REFERRED
TO HEREIN.
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT AND ITS LIENS AND MORTGAGES SECURING
SUCH PAYMENT ARE SUBJECT AND SUBORDINATE TO THE PRIOR PAYMENT OF ALL
OBLIGATIONS OF THE COMPANY TO NBD BANK AND TO THE LIENS AND MORTGAGES OF NBD
BANK PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF JULY __,
1997.
MEDAR, INC.
12.95% Senior Subordinated Secured Note
Due June 30, 2005
Dated July __, 1997
New York, New York
No. _
FOR VALUE RECEIVED, the undersigned MEDAR, INC., a Michigan corporation
(herein, together with any successor, referred to as the "Company"), hereby
promises to pay to ______________________ (the "Payee") or registered assigns,
the principal sum of _____ Million Dollars ($_,000,000) in annual installments
of $_________ beginning on June 30, 2000 and on each June 30 thereafter to and
including June 30, 2004, and shall pay in full the remaining principal amount
of all Notes then outstanding on the maturity date of June 30, 2005, plus
interest (computed on the basis of the actual number of days elapsed over a
360-day year) on the unpaid balance of such principal sum from the date hereof
at the interest rate of 12.95% per annum, payable quarterly on the 30th day of
March, June, September and December of each year, commencing September 30, 1997
(which first interest payment shall be for the period from and including the
date hereof through and including September 30, 1997) until the entire
principal amount hereof shall have become due and payable, whether at maturity
or at a date fixed for prepayment or by acceleration or declaration or
otherwise, and at the Default Rate on any overdue installment of principal
(including any overdue prepayment of principal) and on any overdue premium and
(to the extent permitted by law) on any overdue installment of interest until
paid. The Default Rate shall be equal to the per annum interest rate on this
Note, plus four percent (4%).
Capitalized terms not otherwise defined herein shall have the meaning
ascribed
<PAGE> 2
thereto in the Note and Warrant Purchase Agreement dated as of July
__, 1997 (the "Purchase Agreement"), by and among the Company, the Payee and
the other Purchasers named therein.
If any payment due hereunder becomes due and payable on a day which is not
a Business Day, the due date thereof shall be the next day which is a Business
Day, and the interest payable on such next Business Day shall be the interest
accruing through such actual date of payment.
Payments of principal and interest shall be made in lawful money of the
United States of America at the principal office of the Company at Farmington
Hills, Michigan, or at such other place as the Company shall have designated
for such purpose to the holder thereof in writing, and may be paid by check
mailed, or shall be made by wire transfer, all as provided in the Purchase
Agreement, to the address or account designated by the holder hereof for such
purpose.
This Note is one of a duly authorized issue of Notes issued to the
Purchasers pursuant to the Purchase Agreement. This Note is subject to the
provisions of and is entitled to the benefits of the Purchase Agreement. In
addition, the payment of the principal of, premium, if any, and interest on
this Note is subordinated in right of payment to the prior payment in full of
certain other obligations of the Company to the extent and in the manner set
forth in the Purchase Agreement and the Subordination Agreement, dated as of
July __, 1997 (the "Subordination Agreement"), among NBD Bank and the
Purchasers and acknowledged by the Company, Integral Vision Ltd. and Medar
Canada Ltd.. Each holder of this Note, by accepting the same, agrees to and
shall be bound by the provisions of the Purchase Agreement and the
Subordination Agreement.
The obligations of the Company under this Note (and under the Purchase
Agreement) are secured by the Collateral. The existence of such Collateral
does not in any way reduce or restrict the rights and remedies available to a
holder of this Note whether such rights and remedies arise under this Note, the
Purchase Agreement or otherwise.
This Note is transferable only upon the terms and conditions specified in
the Purchase Agreement.
In case an Event of Default shall occur and be continuing, all amounts
then remaining unpaid on this Note shall become or may be declared due and
payable in the manner and with the effect provided in the Purchase Agreement.
No reference herein to the Purchase Agreement and no provision hereof or
thereof shall alter or impair the obligations of the Company, which are
absolute and unconditional, to pay the principal hereof and interest hereon at
the respective times and places specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and enforced in
accordance with and governed by the laws of the State of New York (other than
any conflict of laws rules which might result in the application of laws of any
other jurisdiction).
- 2 -
<PAGE> 3
Subject to the provisions of Section 16 of the Purchase Agreement, the
Company may treat the person in whose name this Note is registered as the owner
and holder of this Note for the purpose of receiving payment of principal of,
premium, if any, and interest on this Note and for all other purposes
whatsoever, and the Company shall not be affected by any notice to the contrary
(except that the Company shall comply with the provisions of Section 12 of the
Purchase Agreement regarding the issuance of a new Note or Notes to permitted
transferees).
IN WITNESS WHEREOF, MEDAR, INC. has caused this Note to be dated and to be
executed and issued on its behalf by its officer thereto duly authorized.
MEDAR, INC.
By _____________________
Name:
Title:
- 3 -
<PAGE> 1
EXHIBIT 4.3
EXHIBIT C
No. _
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR UNDER ANY APPLICABLE REGULATION OF ANY STATE AND ARE NOT TRANSFERABLE EXCEPT
UPON THE CONDITIONS SPECIFIED IN SECTION 16 OF THE PURCHASE AGREEMENT REFERRED
TO HEREIN.
MEDAR, INC.
Common Stock Purchase Warrant Certificate
Dated July _, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned MEDAR, INC., a Michigan
corporation (herein referred to as the "Company"), hereby certifies and agrees
that _______________, or registered assigns, is entitled to purchase from the
Company up to an aggregate of ________________ (______) duly authorized, validly
issued, fully paid and nonassessable shares of the Company's Common Stock, no
par value, or any stock into which such Common Stock shall have been changed or
any stock or other securities resulting from a reclassification thereof (all
such shares, stock or other securities which may be purchased by this, and all
other, Warrants are herein known as the "Shares") at a purchase price per Share
of $6.86 at any time and from time to time from the date hereof until 5:00 p.m.
on June 30, 2005. The foregoing agreement and rights are all subject to the
terms, conditions and adjustments (in both the number of Shares and the purchase
price per Share) set forth below in this Warrant Certificate.
This Warrant Certificate is one of the Common Stock Purchase Warrant
Certificates (the "Warrants", which term includes all Warrants issued in
substitution therefor) originally issued in connection with the issue and sale
by the Company of $7,000,000 of its Senior Subordinated Secured Notes (the
"Notes"). The Warrants and the Notes have been issued pursuant to the Note and
Warrant Purchase Agreement dated as of July _, 1997 (the "Purchase Agreement")
among the Company, and the Purchasers named therein. The Warrants originally so
issued evidence rights to purchase an aggregate of 1,400,000 shares at an
exercise price of $6.86 per share, subject to adjustment as provided herein.
This Warrant is subject to the provisions, and is entitled to the benefits, of
the Purchase Agreement, including, without limitation, the registration rights
provisions contained therein.
The Company represents that all Shares to which the holders of the
Warrants shall
<PAGE> 2
be entitled upon the exercise thereof (i) are duly authorized by the Articles
of Incorporation of the Company in accordance with the laws of the State of
Delaware, (ii) have been duly authorized to be issued upon the exercise of the
Warrants from time to time in whole or in part, (iii) will be, when issued in
accordance with the terms of the Warrants, duly authorized and validly issued
and fully paid and nonassessable and free and clear of all Liens and rights of
others whatsoever (other than Liens and rights of others claiming by, through
or under the holder hereof) and (iv) will not be at the time of such exercise
subject to any restrictions on transfer or sale except as provided by
applicable laws.
Section 1. Exercise of Warrant.
1.1. Manner of Exercise.
(a) This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day by surrender
of this Warrant, together with the form of subscription attached as Annex A
hereto (or a reasonable facsimile thereof) duly executed by such holder in
substantially such form, to the Company at its office designated pursuant to
the Purchase Agreement (or, if such exercise is in connection with an
underwritten public offering of Shares subject to this Warrant, at the location
at which the underwriting agreement requires that such Shares be delivered);
provided, however, that notwithstanding anything herein to the contrary, in the
event the holder exercises this Warrant prior to July 15, 1998, the Company
shall be entitled to exercise its right of exchange in lieu of such exercise as
provided in Section 12(d) hereof.
(b) Payment of the exercise price for Shares shall be made,
at the option of the holder (i) as provided in Section 1.5 hereof, (ii) as
provided in Section 2 hereof, or (c) by check or wire transfer payable to the
order of the Company, in any case, in an amount equal to (A) the number of
Shares specified in such form of subscription, multiplied by (B) the then
current exercise price. Such holder shall thereupon be entitled to receive the
number of Shares specified in such form of subscription (plus cash in lieu of
any fractional share as provided in Section 1.3 hereof).
1.2. Effective Date. Each exercise of this Warrant pursuant
to Section 1.1(a) hereof shall be deemed to have been effected immediately
prior to the close of business on the Business Day on which this Warrant is
surrendered to the Company as provided in Section 1.1 hereof (except that if
such exercise is in connection with an underwritten public offering of Shares
subject to this Warrant, then such exercise shall be deemed to have been
effected upon such surrender of this Warrant), and such exercise shall be at
the current exercise price in effect at such time. On each such day that an
exercise of this Warrant is deemed effected, the Person or Persons in whose
name or names any certificate or certificates for Shares are issuable upon such
exercise (as provided in Section 1.3 hereof) shall be deemed to have become the
holder or holders of record thereof.
1.3. Share Certificates, Cash for Fractional Shares, and
Reissuance of Warrants. As promptly as practicable after the exercise of this
Warrant, in whole or in part, and in any event
-2-
<PAGE> 3
within five (5) Business Days thereafter (unless such exercise shall be in
connection with a public offering of Shares subject to this Warrant, in which
event concurrently with such exercise), the Company at its expense (including
the payment by it of any applicable issue, stamp or other taxes) will cause to
be issued in the name of and delivered to the holder hereof or such other
person as such holder may direct:
(a) a certificate or certificates for the number of Shares to which
such holder shall be entitled upon such exercise plus, in lieu of any fractional
share to which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per Share (determined in accordance
with Section 3.2(g) hereof) on the effective date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for the
number (which may be fractional) of Shares (without giving effect to any
adjustment therein) equal to the number of such Shares called for on the face of
this Warrant minus the number of Shares which could have been obtained upon such
exercise for the exercise price paid if the current exercise price had been
$6.86 per Share.
1.4. Acknowledgment of Obligation. The Company will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any Shares issued upon such exercise, acknowledge in writing
its continuing obligation to afford to such holder all rights (including,
without limitation, any rights to registration of any such Shares pursuant to
the Purchase Agreement) to which such holder shall continue to be entitled under
this Warrant and the Purchase Agreement; provided, that if any such holder shall
fail to make any such request, the failure shall not affect the continuing
obligation of the Company to afford such rights to such holder.
1.5. Notes. The holder shall have the option, but not the
obligation, upon any exercise of this Warrant, to apply to the payment required
by Section 1.1 hereof all or any part of the accrued and unpaid interest on, or
principal of, any Notes at the time held by the holder. The Company will accept
the amount of accrued and unpaid interest or principal, if such election is
selected, specified in the form of subscription in satisfaction of the exercise
price for such Shares to be purchased. The holder shall have the right to apply
all or any portion of such accrued and unpaid interest or principal to exercise
all or any portion of this Warrant whether or not payment on the Notes is
otherwise prohibited.
1.6. Restriction. The holder acknowledges that the Shares acquired
upon exercise of the Warrant will be "restricted securities" as that term is
defined under the regulations promulgated under the Securities Act, will not be
saleable in the absence of an effective registration statement under the
Securities Act or an exemption from registration, and accordingly may be
required to be held for an indefinite period of time. The holder agrees that
Shares issued pursuant hereto may contain the following legend on the face
thereof: "This security has not been registered pursuant to the Securities Act
of 1933, as amended, and each holder of this security by the acceptance hereof
agrees that this security shall not be transferred in violation of said Act."
The Company agrees that such legend shall be removed from any Shares which are
no longer
-3-
<PAGE> 4
subject to such restrictions.
Each holder of a Warrant by acceptance thereof agrees that it will not
sell or otherwise dispose of any Warrants or Shares unless such Warrants or
Shares have been registered under, or have been sold pursuant to an exemption
from registration under, the Securities Act. As a condition to the Company's
obligation to issue a new Warrant to a transferee thereof which (x) is not a
holder of a Warrant, the transferor must certify to the Company the facts on
which the transferor is relying for such exemption or (y) is a holder of a
Warrant, the transferor must represent to the Company in writing that the
transfer is so exempt.
Section 2. Conversion of Warrant.
(a) In addition to and without limiting the rights of the holder
under the terms of this Warrant, the holder shall have the option, but not the
obligation, to convert this Warrant, or any portion hereof (the "Conversion
Right") into Shares as provided in this Section 2 at any time when this Warrant
can be exercised pursuant to the first paragraph hereof. Upon exercise of the
Conversion Right with respect to a particular number of Shares (the "Converted
Warrant Shares"), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that number
of Shares equal to the quotient obtained by dividing (x) the value of this
Warrant (or the specified portion hereof) on the Conversion Date (as defined in
Section 2(b) hereof), which value shall be determined by subtracting (A) the
aggregate current exercise price of the Converted Warrant Shares immediately
prior to the exercise of the Conversion Right from (B) the aggregate Market
Price of such Converted Warrant Shares on the Conversion Date by (y) the Market
Price of one Share on the Conversion Date.
(b) The Conversion Right may be exercised by the holder by the
surrender of this Warrant at the designated office of the Company together with
a written statement (a "Conversion Notice") specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of Converted
Warrant Shares (i.e., the Shares subject to this Warrant which are being
surrendered in exercise of the Conversion Right). Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
Conversion Notice, or on such later date as is specified therein (the
"Conversion Date") and, at the election of the holder, may be made contingent
upon the occurrence of any event specified in the Conversion Notice.
Certificates for the Shares issuable upon exercise of the Conversion Right, cash
in lieu of any fractional share to which such holder would otherwise be entitled
in an amount equal to the same fraction of the Market Price per Share on the
Conversion Date and, if applicable, a new Warrant evidencing the balance of the
Shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder promptly following the Conversion
Date.
Section 3. Current Exercise Price and Adjustments.
3.1. Current Exercise Price. The term "current exercise price" shall
mean initially $6.86 per Share, subject to adjustment from time to time as
hereinafter provided, in effect at any given time. In determining the current
exercise price, the result shall be expressed to the nearest
-4-
<PAGE> 5
$.01, but any such lesser amount shall be carried forward and shall be
considered at the time of and together with the next subsequent adjustment
which, together with any adjustments being carried forward, shall amount to
$.01 per Share or more.
3.2. Adjustment of Current Exercise Price. The current
exercise price shall be subject to adjustment, from time to time (but not below
zero), as follows:
(a) Adjustments for Stock Dividends, Recapitalization, etc.
In the event the Company shall, after the Closing Date, issue any shares of
Common Stock (i) by stock dividend or any other distribution upon the stock of
the Company payable in Common Stock or in securities convertible into or
exercisable or exchangeable for shares of Common Stock or (ii) in subdivision
of its outstanding Common Stock, by reclassification or otherwise, the current
exercise price then in effect shall be reduced proportionately; and, in like
manner, in the event of any combination of shares of Common Stock, by
reclassification or otherwise, the current exercise price then in effect shall
be increased proportionately. An adjustment made pursuant to this Section
3.2(a) shall become effective retroactively immediately after the record date
in the case of a dividend or other distribution and shall become effective
immediately after the effective date in the case of a subdivision or
combination.
(b) Intentionally Omitted.
(c) Adjustments for Issuance of Additional Stock. Subject to
the exception referred to in Section 3.2(e) hereof and except as otherwise
provided for in Section 3.2(a) hereof, in case the Company shall at any time or
from time to time after the Closing Date issue any additional shares of its
Common Stock ("Additional Common Stock") either (I) for consideration per share
less than the then current Market Price per share of the Company's Common Stock
(determined as provided in Section 3.2(g) hereof) immediately prior to the
issuance of such Additional Common Stock, or (II) for a consideration per share
less than the then current exercise price immediately prior to the issuance of
such Additional Common Stock, or (III) without consideration, then (in the case
of either clause (I), (II) or (III)), and thereafter successively upon each
such issuance, the current exercise price shall forthwith be reduced to a price
determined by multiplying such current exercise price by a fraction, of which
(A) the numerator shall be (i) the number of shares of the
Company's Common Stock outstanding immediately prior to such
issuance of shares of Additional Common Stock plus (ii) the
number of shares of the Company's Common Stock which the
aggregate amount of consideration, if any, received by the
Company for the total number of shares of Additional Common
Stock so issued would purchase at the greater of (x) the
Market Price per share of the Company's Common Stock in effect
immediately prior to such issuance of shares of Additional
Common Stock or (y) the exercise price per Share in effect
immediately prior to such issuance of shares of Additional
Common Stock, and
(B) the denominator shall be the number of shares of the
Company's Common
-5-
<PAGE> 6
Stock outstanding immediately after such issuance of shares of
Additional Common Stock,
provided, however, that such adjustment shall be made only if the current
exercise price determined from the aforesaid fraction shall be less than the
current exercise price in effect immediately prior to the issuance of such
Additional Common Stock. The adjustment described in this Section 3.2(c) shall
be made whenever such Common Stock is issued, and shall become effective
retroactively immediately after the date on which the Company committed to make
such issuance.
(d) Certain Rules in Applying the Adjustment for Additional
Stock Issuances. For purposes of any adjustment as provided in Section 3.2(c),
the following provisions shall also be applicable:
(1) Cash Consideration. In case of the issuance of
Additional Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be the net cash proceeds received
by the Company for such Additional Common Stock after deducting any
commissions or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with the issuance of, such
Additional Common Stock.
(2) Non-Cash Consideration. In case of the issuance
(other than upon conversion or application of obligations or shares of
stock of the Company) of Additional Common Stock for a consideration
other than cash, or a consideration a part of which shall be other
than cash, the amount of the consideration other than cash so received
or to be received by the Company shall be deemed to be the value of
such consideration at the time of its receipt by the Company as
determined in good faith by the Board of Directors of the Company,
provided, that where the non-cash consideration consists of the
cancellation, surrender or exchange of outstanding obligations of the
Company (or where such obligations are otherwise converted into shares
of the Company's Common Stock), the value of the non-cash
consideration shall be deemed to be the amount, including principal
and any accrued interest, as of the time of the Company's receipt, of
the obligations cancelled, surrendered, satisfied, exchanged or
converted. If the Company receives consideration, part or all of
which consists of publicly traded securities, the value of such
non-cash consideration shall be the aggregate market value of such
securities (based on the latest reported trades) as of the close of
the day immediately preceding the date of their receipt by the
Company.
(3) Options, Warrants, Convertibles, etc. In case of
the issuance (other than by way of a Distribution on Common Stock
pursuant to Section 3.2(b) hereof), whether by distribution or sale to
holders of its Common Stock or to others, by the Company of (i) any
security that is convertible into the Company's Common Stock or (ii)
any rights, options or warrants to purchase the Company's Common Stock
(except for the
-6-
<PAGE> 7
Warrants), if inclusion thereof would result in a current exercise
price lower than if excluded, the Company shall be deemed to have
issued, for the consideration described below, the number of shares of
the Company's Common Stock into which such convertible security may be
converted when first convertible, or the number of shares of the
Company's Common Stock deliverable upon the exercise of such rights,
options or warrants when first exercisable, as the case may be (and
such shares shall be deemed to be Additional Common Stock for purposes
of Section 3.2(c) hereof). The consideration deemed to be received by
the Company at the time of the issuance of such convertible securities
or such rights, options or warrants shall be the consideration so
received determined as provided in Sections 3.2(d)(1) and (2) hereof
deducting any commissions or other expenses paid or incurred by the
Company for any underwriting of, or otherwise in connection with, the
issuance of such convertible securities or rights, options or
warrants, plus (x) any consideration or adjustment payment to be
received by the Company in connection with such conversion, or, as
applicable, (y) the aggregate price at which shares of the Company's
Common Stock are to be delivered upon the exercise of such rights,
options or warrants when first exercisable (or, if no price is
specified and such shares are to be delivered at an option price
related to the Market Price of the subject Common Stock, an aggregate
option price bearing the same relation to the Market Price of the
subject Common Stock at the time such rights, options or warrants were
granted). In case any such securities, rights, options or warrants
shall be issued in connection with the issue or sale of other
securities of the Company comprising one integral transaction in which
no specific consideration is allocated to such securities, rights,
options or warrants, such securities, rights, options or warrants
shall be deemed to have been issued without consideration. If,
subsequently, (1) such number of shares into which such convertible
security is convertible, or which are deliverable upon the exercise of
such right, options or warrants, is increased or (2) the conversion or
exercise price of such convertible security, rights, options or
warrants is decreased, then the calculations under the preceding two
sentences (and any resulting adjustment to the current exercise price
under 3.2(c) hereof) with respect to such convertible security,
rights, options or warrants, as the case may be, shall be recalculated
as of the time of such issuance but giving effect to such changes (but
any such recalculation shall not result in the current exercise price
being higher than that which would be calculated without regard to
such issuance). On the expiration or termination of such rights,
options or warrants, or rights to convert, the current exercise price
hereunder shall be readjusted (up or down as the case may be) to such
current exercise price as would have been obtained had the adjustments
made upon the issuance of such rights, options, warrants or
convertible securities been made upon the basis of the delivery of
only the number of shares of the Company's Common Stock actually
delivered upon the exercise of such rights, options or warrants or
upon the conversion of any such securities and at the actual exercise
or conversion prices (but any such recalculation shall not result in
the current exercise price being higher than that which would be
calculated without regard to such issuance).
(4) Number of Shares Outstanding. The number of
shares of the Company's Common Stock as at the time outstanding shall
exclude all shares of the
-7-
<PAGE> 8
Company's Common Stock then owned or held by or for the account of the
Company or any of its Subsidiaries but shall include the aggregate
number of shares of the Company's Common Stock at the time deliverable
in respect of the convertible securities, rights, options and warrants
referred to in Section 3.2(d)(3); provided, that to the extent that
such rights, options, warrants or conversion privileges are not
exercised, such shares of Common Stock shall be deemed to be
outstanding only until the expiration dates of the rights, warrants,
options or conversion privileges or the prior cancellation thereof.
(e) Exclusions from the Adjustment for Additional Stock
Issuances. No adjustment of the current exercise price under Section 3.2(c)
hereof shall be made as a result of or in connection with the issuance of
Shares upon exercise of the Warrants or the exercise of options to purchase
718,600 shares of the Company's Common Stock pursuant to options previously
granted to certain officers of the Company pursuant to the Company's stock
option plans. To the extent that the issuance (or deemed issuance) of the
Company's Common Stock shall not result in any adjustment of the current
exercise price pursuant to the provisions of this Section 3.2(e), then such
Common Stock shall not be taken into account for purposes of determining any
fraction referred to in Section 3.2(c) hereof.
(f) Accountants' Certification. Whenever the current
exercise price is adjusted as provided in this Section 3.2, the Company will
promptly obtain a certificate of a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Company
(who may be the regular auditors of the Company) setting forth the current
exercise price as so adjusted, the computation of such adjustment and a brief
statement of facts accounting for such adjustment, and will mail to the holders
of the Warrants a copy of such certificate from such firm of independent public
accountants.
(g) Determination of Market Price. The current "Market
Price" per share of the Company's Common Stock on any date shall be deemed to
be the average of the daily closing prices for the twenty (20) consecutive
trading dates ending on the trading day before such date. The closing price
for each day shall be the last reported sale price or, in case no such sale
takes place on such day, the average of the closing bid and asked prices, in
either case on the principal national United States securities exchange on
which the Company's Common Stock is listed or admitted to trading, or if the
Company's Common Stock is not listed or admitted to trading on any such
national securities exchange, the average of the highest reported bid and
lowest reported asked prices as furnished by the National Association of
Securities Dealers Inc., Automated Quotation System Level I, or comparable
system. If the closing price cannot be so determined, the Market Price shall
be determined:
(x) by the written agreement of the Company and the
holders of Warrants representing a majority of the Shares then
obtainable from the exercise of outstanding Warrants (the
"Majority Holders"); or
(y) in the event that no such agreement is reached
within fifteen (15) days after the event giving rise to the
need to determine the Market Price, by a
-8-
<PAGE> 9
nationally recognized U.S. investment banking firm, selected by the
Company ("Company Appraiser") not more than 5 Business Days after the
end of such 15 day period. Any appraiser appointed pursuant to this
paragraph shall be instructed to make its determination as promptly as
possible and in any event within 30 days of appointment. If no such
selection is made within such period, then the Majority Holders shall
as promptly as possible select such a firm whose determination shall
be final and binding. If such selection is timely made by the
Company, and the Majority Holders do not object to the Market Price as
determined by the Company Appraiser within 10 days of receipt of
notice thereof by all holders of Warrants, then the Market Price as
determined by the Company Appraiser shall be the Market Price. If the
Majority Holders do so object to the Company Appraiser's determination
of Market Price, then the Majority Holders can select a nationally
recognized U.S. investment banking firm ("Alternate Appraiser") to
review the Company Appraiser's report and other relevant information.
Within 10 days after receipt by the Alternate Appraiser of such report
and such other information as is reasonably requested by the Alternate
Appraiser, the Company Appraiser and Alternate Appraiser shall
communicate and/or meet to resolve any questions or differences with
respect to the Market Price. If such appraisers agree on a Market
Price, such Market Price shall be the Market Price. If no agreement
is reached then the Company Appraiser and Alternate Appraiser shall
select a third nationally recognized firm (" Third Appraiser"). If
the Company Appraiser and the Alternate Appraiser cannot agree on a
Third Appraiser within 20 days of the end of such 10 day period,
either may apply to the American Arbitration Association to appoint
the Third Appraiser. The Third Appraiser shall, within 30 days of its
hire, issue a report with its determination of Market Price which
shall be conclusive and binding. All expenses of the Company
Appraiser shall be borne by the Company. All expenses of the
Alternate Appraiser shall be borne by the holders of the Warrants.
All expenses of the Third Appraiser shall be borne equally by the
Company and the holders of the Warrants.
Market Price shall be determined on the basis of the fair market value of the
Company as if it were sold as a going concern on the date of valuation and
without regard to the lack of any trading market for, or the lack of liquidity
in, the Common Stock of the Company.
The Company shall cooperate, and shall provide all necessary information and
assistance, to permit any determination under the preceding clause (x) or (y).
Each Appraiser shall be instructed to use its best efforts to give the Company
and all holders reasonable advance notice of the Market Price and the contents
of its report (by delivering a draft report) before the report is delivered in
final form. Any communications or reports by an Appraiser to either the
Company or any of the holders regarding Market Price shall be given
simultaneously to both the Company and all of the holders.
(h) Antidilution Adjustments Under Other Securities. Without
limiting any other
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rights available hereunder to the holders of Warrants, if there is an
antidilution adjustment (x) under any security which is convertible into Common
Stock of the Company whether issued prior to or after the date hereof or (y)
under any rights, options or warrants to purchase Common Stock of the Company
whether issued prior to or after the date hereof (except for the Warrants and
except as stated in Section 3.2(e) hereof) which (in the case of the preceding
clause (x) or (y)) results in a reduction in the exercise or purchase price
with respect to such security or rights or results in an increase in the number
of shares obtainable under such security or rights, then an adjustment shall be
made under this Section 3.2(h) to the current exercise price hereunder. Any
such adjustment under this Section 3.2(h) shall be whichever of the following
results in a lower current exercise price: (A) a reduction in the current
exercise price equal to the percentage reduction in such exercise or purchase
price with respect to such security or rights or (B) a reduction in the current
exercise price which will result in the same percentage increase in the number
of Shares available hereunder as the percentage increase in the number of
Shares available under such security or rights. Any such adjustment under this
Section 3.2(h) shall only be made if it would result in a lower current
exercise price than that which would be determined pursuant to any other
antidilution adjustment otherwise required hereunder as a result of the event
or circumstance which triggered the adjustment to the security or rights
described in clause (x) or (y) above (and if any such adjustment is so made
under this Section 3.2(h), then such other antidilution adjustment otherwise
required hereunder shall not be made as a result of such event or
circumstance).
(i) Reorganization Adjustments. In case of any capital
reorganization or reclassification of the capital stock of the Company (other
than a change in par value or a stock split-up), the holder of this Warrant
shall thereafter be entitled to purchase for the current exercise price the
securities and property receivable upon such capital reorganization or
reclassification by a holder of the number of shares of Common Stock which this
Warrant entitled the holder hereof to purchase immediately prior to such
capital reorganization or reclassification. In the event that at any time, as
a result of an adjustment made pursuant to this Section 3.2(i), the holder of
this Warrant shall become entitled to purchase any other securities or property
other than Common Stock, thereafter the number of such other securities or
property so purchasable upon exercise of this Warrant and the current exercise
price shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in this Section 3.2.
(j) Other Adjustments. Without limiting any provisions
of this Section 3.2 or any other provisions of this Warrant, in case any event
shall occur as to which any of the provisions of this Section 3.2 are not
strictly applicable but the failure to make any adjustment would not fairly
protect the exercise rights represented by the Warrants in accordance with the
intent and principles of this Section 3.2, the Company shall at its expense
appoint a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company (who may be the
regular auditors of the Company), and reasonably satisfactory to the Majority
Holders, which shall give their opinion upon the adjustment, if any, on a basis
consistent with the intent and principles established in this Section 3.2,
necessary to preserve, without dilution, the economic and other rights
represented by the Warrants. Upon receipt of
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such opinion, the Company will promptly mail copies thereof to the holders of
the Warrants and shall make the adjustments described therein.
(k) Meaning of "Issuance". References in this Warrant to
"issuance" of stock by the Company include issuances by the Company of
previously unissued shares and issuances, sales or other transfers by the
Company of treasury stock.
Section 4. Company's Consolidation or Merger. If the Company
shall at any time consolidate with or merge into another corporation (where the
Company is not the continuing corporation after such merger or consolidation),
the holder of a Warrant shall thereafter be entitled to receive, upon the
exercise thereof in whole or in part, the securities or other property to which
(and upon the same terms and with the same rights as) a holder of the number of
Shares then deliverable upon the exercise thereof would have been entitled upon
such consolidation or merger (subject to adjustments under Section 3.2 hereof),
and the Company shall take such steps in connection with such consolidation or
merger as may be necessary to assure such holder that the provisions of the
Warrants and the Purchase Agreement shall thereafter be applicable in relation
to any securities or property thereafter deliverable upon the exercise of this
Warrant, including, but not limited to, obtaining a written acknowledgment from
the continuing corporation of its obligation to supply such securities or
property upon such exercise and to be so bound by the Warrant and the Purchase
Agreement. A sale, transfer or lease (in one, or a series of related,
transactions) of all or substantially all of the assets of the Company to
another person shall be deemed a consolidation or merger for the foregoing
purposes.
Section 5. Notice to Holders of Warrants.
In case at any time
(i) the Company shall take any action which would require
an adjustment in the current exercise price pursuant to Section
3.2(a), (c), (h), (i) or (j); or
(ii) there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a change in
par value or from par value to no par value or from no par value to
par value of the Common Stock), or any consolidation or merger to
which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale, transfer or
lease (in one, or a series of related, transactions) of all or
substantially all of the assets of the Company; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Warrants, not less than twenty (20) days before any
record date or other date set for definitive action, of the date on which such
action, reorganization, reclassification, sale, transfer, lease, consolidation,
merger, dissolution, liquidation or winding-up, as the case may be, and the
terms
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thereof.
If the Company shall propose to issue or sell Common Stock (other than pursuant
to the Warrants) or options, rights or warrants to purchase Common Stock, it
shall, at least 30 days prior to the date of such proposed sale, notify the
holder in writing of the name and address of the proposed purchaser, whether
such purchaser is an Affiliate of the Company, the price and terms of the
proposed sale and the type of securities to be sold. Such notice shall be
accompanied by an investment letter, in form satisfactory to the Majority
Holders, to be signed by the proposed purchaser and stating that such
securities are not being acquired for resale. If the Company determines that
the provisions of Section 3.2 do not result in any adjustment, such notice
shall be accompanied by a written certification signed by the Board of
Directors of the Company to that effect. If the Majority Holders object they
shall, within 15 days after receipt of such notice, notify the Company of the
name of a nationally recognized investment banking firm which has been selected
by the Majority Holders to determine whether any such adjustment is required.
The Company shall promptly make available to such firm all information and data
it may reasonably acquire to make such determination. The determination of
such investment banking firm shall be final. If the investment banker does not
give notice to the Company and the Holder of its decision prior to a date 45
days following the Company's initial notice to the Holder, then the proposed
sale shall be deemed not to require an adjustment. One-half of the costs and
expenses of the investment banker shall be paid by the Company and one-half of
such costs and expenses shall be paid by the holders of the Warrants.
Section 6. Number of Shares. Upon any adjustment of the
current exercise price, the holder of this Warrant shall thereafter (until
another such adjustment) be entitled to purchase at the current exercise price
the number of Shares, calculated to the nearest 1/100 of a Share, obtained by
multiplying the current exercise price in effect immediately prior to such
adjustment by the number of Shares purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the new current
exercise price resulting from such adjustment.
Section 7. Specific Performance. The Company stipulates that
the remedies at law of a holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8. No Rights or Liabilities as Stockholder. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof any rights as a stockholder of the Company (prior to exercise of all or
a portion of this Warrant) or as imposing any liabilities on such holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
Section 9. Ownership; Transfer. The Company may treat the
Person in whose name this Warrant is registered pursuant to Section 13(a) of
the Purchase Agreement as the
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owner and holder of this Warrant for all purposes, and the Company shall not be
affected by any notice to the contrary (except that the Company shall comply
with the provisions of Section 16 of the Purchase Agreement regarding the
issuance of a new Warrant or Warrants to transferees). This Warrant is
transferable upon the conditions specified in Section 16 of the Purchase
Agreement.
Section 10. Covenants
10.1. Information Requirements. The Company will provide to
each holder of Warrants or Shares, promptly after the same are available,
copies of each annual report, proxy or financial statement or other
communication sent to the Company's or a Subsidiary's stockholders and copies
of all annual, regular, periodic and special reports and registration
statements which the Company may file or be required to file with the
Securities and Exchange Commission or with any securities exchange or the
National Association of Securities Dealers, Inc.
10.2. Reservation of Shares. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized Common
Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the then outstanding
Warrants.
10.3. No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant. The Company will at all
times in good faith assist in the carrying out of all such terms, and in the
taking of all such action, as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a)
will not permit the par value of any shares of Common Stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of the Company's Common Stock, free from all taxes, Liens
and charges with respect to the issue thereof, upon the exercise of this
Warrant from time to time outstanding and (c) will not take any action which
results in any adjustment of this current exercise price under this Warrant if
the total number of shares of the Company's Common Stock (or other securities)
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock (or other securities) then
authorized by the Company's Certificate of Incorporation and available for the
purpose of issue upon such exercise.
10.4. Listing of Shares. If the Company shall list any
shares of its Common Stock on any national securities exchange, it will take
such action as may be necessary, from time to time, to list the Shares, subject
to issuance, on such exchange.
10.5. Securities Exchange Act Registration. At any time that
the Company either files and such filing becomes effective, or is required to
file, a registration statement with respect to Common Stock of the Company
under Section 5 of the Securities Act or Section 12(b) or
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Section 12(g) of the Securities Exchange Act, then thereafter:
(a) The Company will maintain effective a registration
statement (containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act) with respect
to the Common Stock of the Company under Section 12(b) or Section 12(g),
whichever is applicable, of the Securities Exchange Act and will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such
Section 12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of the holder hereof
or of any Shares, make whatever other filings with the Commission, or otherwise
make generally available to the public such financial and other information, as
any such holder may deem reasonably necessary or desirable in order to enable
such holder to be permitted to sell Shares pursuant to the provisions of Rule
144 under the Securities Act (or any successor statute, rule or regulation to
Rule 144).
10.6. Maintenance of Public Market. At any time that the
Company is required to comply with Section 10.5(a) or 10.5(b) hereof, the
Company will not proceed with a program of acquisition of its own Common Stock,
initiate a corporate reorganization or recapitalization or authorize or consent
to any action which would have the effect of:
(a) removing the Company from registration with the
Commission under the Securities Exchange Act,
(b) requiring the Company to make a filing under Section
13(e) of the Securities Exchange Act,
(c) reducing substantially or eliminating the public market
for shares of Common Stock of the Company,
(d) if any shares of the Company's Common Stock are at any
time listed on the National Association of Securities Dealers Inc. Automated
Quotation System, causing a delisting of the Company's Common Stock from such
System (unless such stock is delisted as a result of being listed on a national
securities exchange), or
(e) if any shares of the Company's Common Stock are at any
time listed on a national exchange, causing a delisting of such stock from such
exchange.
10.7. Delivery of Information for Rule 144A Transactions. If
a holder of Warrants or Shares proposes to transfer any such Warrants or Shares
pursuant to Rule 144A under the Securities Act (as in effect from time to
time), the Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the prospective
transferee any financial or other information concerning the Company and its
Subsidiaries which is required to be delivered by such holder to any transferee
of such Warrants
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or Shares pursuant to such Rule 144A.
Section 11. Redemption. At any time on or after July 1,
2000, the Company shall have the right to redeem the Warrants, in whole or in
part, at a redemption price equal to $0.50 per Warrant, provided that (i) the
Market Price (determined in accordance with the first two sentences of Section
3.2(g) hereof, except that the average shall be for the sixty (60) consecutive
trading days immediately prior to the date of the redemption notice) per share
of the Company's Common Stock shall be at least 250% of the current exercise
price on the date of the redemption notice, (ii) the average number of shares
traded for the same sixty (60) day period has been at least 20,000 shares per
day and (iii) the Warrant holders are provided an opportunity to sell all of
the Shares obtainable upon exercise of all of the then outstanding Warrants in
an underwritten public offering paid for by the Company at a price per share of
95% or more of the price specified in clause (i). The Company may exercise
such redemption right by written notice to the holders of the Warrants
specifying the date of such redemption (which date shall not be less than 20
days after delivery of such notice to the holders of the Warrants) and the
number of Warrants to be redeemed from each holder on such date. Any such
redemption of less than all of the then outstanding Warrants shall be allocated
among all holders of Warrants in proportion to the number of Warrants each then
holds. Warrants shall be exercisable until 5:00 p.m. on the date fixed in such
notice for redemption.
Section 12. Exchange. (a) At any time on or prior to July
15, 1998 that the Market Price per share of the Company's Common Stock equals
or exceeds $11.86, the Company shall have the right to exchange the Warrants,
in whole but not in part, for nonrestricted, freely tradeable shares of the
Company's Common Stock (the "Exchange Shares"). Each Warrant holder shall be
entitled to receive the number of Exchange Shares determined by the following
formula:
Number of Shares receivable
upon exercise of the
Warrants held by such holder x $7,000,000
---------------------------- ----------
1,400,000 CMP
where CMP equals the current Market Price per share of the Company's Common
Stock as of the date of such notice. The Company may exercise such exchange
right by written notice to the holders of the Warrants specifying the date of
such exchange (which date shall be five Business Days after delivery of such
notice to the holders of the Warrants). This Warrant may not be exercised
after the receipt by the holder hereof of such exchange notice.
(b) As of the close of business on the date fixed in such notice for
the exchange, the Person or Persons in whose name or names this Warrant is
registered shall be deemed to have become the holder or holders of record of
such Exchange Shares. As promptly as practicable after the exchange of this
Warrant pursuant to this Section 12, and in any event within five (5)
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Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue, stamp or other taxes) will cause to be issued in
the name of and delivered to the holder hereof or such other person as such
holder may direct a certificate or certificates for the number of shares of
Common Stock of the Company to which such holder shall be entitled upon such
exchange.
(c) The holder of this Warrant shall have the option, by written
notice to the Company given on or before the date of such exchange, to require
the Company to attempt to sell its Exchange Shares on its behalf within 90 days
following the date of the exchange for an aggregate net purchase price payable
to the holder, after all costs and expenses of such sale, in an amount equal to
the current Market Price per share of the Company's Common Stock as of the date
of such notice times its number of Exchange Shares. In the event the Company
has been unable to complete such sale on such terms by the 90th day following
the date of the exchange, the holder shall have the option of continuing to
hold the Exchange Shares or of canceling the exchange with respect to any of
its Exchange Shares that were not sold on such terms. The holder can elect to
cancel the exchange by written notice to the Company within five (5) Business
Days following the termination of such ninety-day period. If the holder elects
to cancel the exchange, the Company shall promptly, and in any event within
five (5) Business Days after receipt from the holder of its notice of election
to cancel the exchange, deliver to the holder hereof or such other person as
such holder may direct a new Warrant or Warrants of like tenor to this Warrant,
calling in the aggregate on the face or faces thereof for the number (which may
be fractional ) of Shares (without giving effect to any adjustment therein)
equal to (i) the number of Shares receivable upon exercise of the Warrants held
by such holder immediately prior to the exchange, multiplied by (ii) one minus
a fraction, the numerator of which is the number of such holder's Exchange
Shares which the Company or the holder sold and the denominator of which is the
number of Exchange Shares received by such holder in the exchange.
(d) Notwithstanding anything herein to the contrary, in the event the
holder hereof exercises this Warrant prior to July 15, 1998, the Company shall
be entitled to exercise its right of exchange as provided in this Section 12 by
giving written notice to the holder within 30 days of the date the Warrant is
exercised. Any such exchange shall be upon the same terms as provided in this
Section 12, except such 30 day period for the Company to exercise its right to
exchange may extend past July 15, 1998 and the Company may exercise such
exchange right only with respect to the portion of this Warrant then being
exercised. The right of the Company to elect to exchange shall be irrespective
of and superior to the exercise of this Warrant. It is the intent of the
parties that any gain the holders of the Warrants may realize upon the exercise
of the Warrants prior to July 15, 1998 shall be limited to an aggregate of $7
million (or a pro rata portion thereof if less than all of the Warrants are
exercised or exchanged).
Section 13. Headings. The headings and captions in this
Warrant are for convenience of reference only and shall not define, limit or
otherwise affect any of the terms or provisions hereof.
Section 14. Governing Law. This Warrant shall be governed
by, and construed in accordance with, the laws of the State of New York (other
than any conflict of laws rule which
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might result in the application of the laws of any other jurisdiction).
Section 15. Survival. The obligations of the Company under
this Warrant shall survive its full exercise.
Section 16. Definitions. Terms defined in the Purchase
Agreement are used herein with the same definition. The following terms are
defined in the following Sections of this Warrant:
Additional Common Stock 3.2(c)
Alternate Appraiser 3.2(g)
Company First Paragraph
Company Appraiser 3.2(g)
Conversion Date 2(b)
Conversion Notice 2(b)
Conversion Right 2(a)
Converted Warrant Shares 2(a)
current exercise price 3.1
Distributions on Common Stock 3.2(b)
Market Price 3.2(g)
Majority Holders 3.2(g)
Purchase Agreement Second Paragraph
Shares First Paragraph
Third Appraiser 3.2(g)
Warrants Second Paragraph
IN WITNESS WHEREOF, MEDAR, INC. has caused this Warrant to be
dated and to be executed and issued on its behalf by its officer thereunto duly
authorized.
MEDAR, INC.
By ________________________
Name:
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Title:
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<PAGE> 19
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise of the Warrant
in whole or in part)
To MEDAR, INC.
The undersigned registered holder of the accompanying Warrant
hereby irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder,___________(1)/ Shares (as defined in such Warrant) and herewith
[makes payment therefor by application pursuant to Section 1.5 of such Warrant
of ___________________] [or] [makes payment therefor by conversion of ____
Shares represented by such Warrant pursuant to Section 2 of such Warrant] [or]
[makes payment therefor of $_________]. The undersigned requests that the
certificates for such Shares be issued in the name of, and delivered to,
_____________________ whose address is _________________________________.
Dated: _______________________
___________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
__________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
____________________
(1)/ Insert the number of Shares as to which this Warrant is being exercised.
In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of this
Warrant, to the holder surrendering the same.
<PAGE> 20
FORM OF ASSIGNMENT
(To be signed only a transferor of Warrant)
For value received, the undersigned hereby sells,
assigns, and transfers unto __________________________ the right represented by
the within Warrant to purchase _________ shares of Common Stock of MEDAR, INC.
to which the within Warrant relates, and appoints ______________________
Attorney to transfer such right on the books of MEDAR, INC. with full power of
substitution in the premises.
Dated: _________________
_______________________________________
(Name must conform to name of holder as
specified on the face of the Warrant)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_____________________________
