<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1998
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to
-------------- -------------
Commission file number: 0-5958
------
MERIDIAN MEDICAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-0898764
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10240 Old Columbia Road, Columbia, Maryland 21046
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-309-6830
------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of June 3, 1998
---------------------------- ------------------------------
Common Stock, $.10 par value 2,980,395 Shares
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
Page No.
--------
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements (Unaudited except July 31, 1997 balance sheet)
Consolidated Balance Sheets as of
April 30, 1998 and July 31, 1997 ........................ 4
Consolidated Statements of Operations for
the Three and Nine Months Ended April 30, 1998 and 1997 . .5
Consolidated Statements of Cash Flows for
the Nine Months Ended April 30, 1998 and 1997 ............. 6
Notes to Consolidated Financial Statements .................. 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 10
ITEM 3 Quantitative and Qualitative Disclosure about Market Risk ....14
PART II. OTHER INFORMATION
--------------------------
ITEM 2 Changes in Securities and Use of Proceeds ...................14
ITEM 6. Exhibits and Reports on Form 8-K ........................... 14
SIGNATURES........................................................... 15
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
Meridian Medical Technologies, Inc. (hereinafter referred to as the _Company_
or _MMT_ or _Meridian_) was formed in November 1996 through the merger of
Survival Technology, Inc. (_STI_) and Brunswick Biomedical Corporation
(_Brunswick_). At the time of the merger, Brunswick held approximately 61%
of STI's outstanding common stock, which Brunswick purchased from the estate
of STI's late founder on April 15, 1996. As a result, STI had been treated
for financial accounting purposes as a consolidated, majority-owed subsidiary
of Brunswick from that date.
Although STI was the surviving corporation of the merger as a legal matter,
the merger was treated as a purchase of STI by Brunswick for financial
accounting purposes. As a result, Brunswick's historical financial
statements became the Company's financial statements, STI's assets and
liabilities were revalued to their respective fair values and the Company's
historical financial statements reflect the combined operations of STI and
Brunswick after April 15, 1996 (subject to minority interests). The minority
interests was eliminated upon completion of the merger on November 20, 1996.
MMT's business plan is to operate as a medical device company focusing on
Home Healthcare and Emergency Medical Technologies. The Company has three
areas of business. The Drug Delivery Systems business capitalizes on
injectable drug delivery devices with an emphasis on commercial auto-
injectors. This group also supplies customized drug delivery system design,
pharmaceutical research and development, and sterile product manufacturing to
pharmaceutical and biotechnology companies. The Cardiopulmonary Systems
business focuses on non-invasive cardiac diagnostics and telemedicine. It is
proceeding with the research and development of the PRIME ECG-TM- program, an
80-lead cardiac mapping system for rapid and improved diagnostic accuracy of
cardiac ischemia. The STI Military Systems business focuses on the worldwide
market for auto-injectors used by military personnel for self-administration
of a family of nerve gas antidotes, morphine and diazepam, and civil defense
applications.
Certain statements in the Quarterly Report on Form 10-Q are forward-looking
and are identified by the use of forward-looking words or phrases, such as,
"believes," "expects," is or are "expected," "anticipates," "anticipated,"
and words of similar import. These forward-looking statements are based on
the Company's current expectations. Because forward-looking statements
involve risk and uncertainties, the Company's actual results could differ
materially. In addition to the factors discussed generally herein, among the
factors that could cause results to differ materially from current
expectations are: (i) the general economic and competitive conditions in
markets and countries where the Company and its subsidiaries offer products
and services; (ii) changes in capital availability or costs; (iii)
fluctuations in demand for certain of the Company's products, including
changes in government procurement policy; (iv) technological challenges
associated with the development and manufacture of current and anticipated
products; (v) commercial acceptance of auto-injectors and competitive
pressure from traditional and new drug delivery methods; and (vi) delays,
costs and uncertainties associated with government approvals required to
market new drugs and medical devices.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
(in thousands of dollars)
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30,
1998 July 31,
(Unaudited) 1997
----------- --------
<C> <C>
<S>
ASSETS
Current assets:
Cash $ 279 $ 23
Restricted cash 264 264
Receivables 8,485 7,507
Inventories 8,440 6,047
Prepaid expenses and other assets 1,031 531
Deferred income taxes 1,659 1,659
-------- -------
Total current assets 20,158 16,031
-------- -------
Fixed assets 19,322 17,246
Less accumulated depreciation 2,959 1,468
-------- -------
16,363 15,778
-------- -------
Deferred financing fees 729 --
Excess of cost over net assets acquired 8,370 9,168
Other intangible assets 2,809 3,105
-------- -------
Total assets $ 48,429 $44,082
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 7,604 $ 6,194
Lines of credit 2,057 4,113
Current portion of long-term debt 536 2,299
Product exchange reserves 2,882 1,539
Customer deposits 221 918
Restructuring reserve 123 124
-------- -------
Total current liabilities 13,423 15,187
Long-term notes payable 18,608 13,062
Other long-term debt 535 859
Deferred revenue -- 315
Other noncurrent liabilities 553 625
-------- -------
Deferred income taxes 1,741 1,741
-------- -------
34,860 31,789
-------- -------
Shareholders' equity:
Common stock $.10 par, 18,000,000 authorized,
2,980,395 and 2,912,502 issued and outstanding 298 292
Paid-in capital 28,851 28,660
Warrants 3,003 2,073
Accumulated deficit (18,269) (18,312)
Unearned stock option compensation (139) (140)
Foreign currency translation adjustment 38 (67)
Treasury stock, at cost (213) (213)
-------- -------
Total shareholders' equity 13,569 12,293
-------- -------
Total liabilities and shareholders' equity $ 48,429 $44,082
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Three-Months Ended Nine-Months Ended
April 30, April 30,
1998 1997 1998 1997
-------- -------- -------- --------
<C> <C> <C> <C>
<S>
Net sales $ 13,430 $ 10,680 $ 34,796 $ 29,663
Cost of sales 8,324 6,875 21,220 18,843
--------- ---------- --------- ---------
Gross profit 5,106 3,805 13,576 10,820
---------- ---------- ---------- ---------
Selling, general & administrative expense 1,735 1,450 4,676 4,325
Research & development expense 491 655 1,266 2,311
Depreciation and amortization expense 870 738 2,635 2,185
Write-off in-process R&D -- -- -- 2,702
Write-off merger transaction costs -- -- -- 1,246
Product exchange 2,244 -- 2,244 --
---------- ---------- ---------- ---------
5,340 2,843 10,821 12,769
---------- ---------- ---------- ---------
Operating income (loss) (234) 962 2,755 (1,949)
---------- ---------- ---------- ---------
Other expense (income):
Interest expense 694 323 2,083 1,929
Other expense (income) 13 50 (181) (74)
---------- ---------- ---------- ---------
707 373 1,902 1,855
Income (loss) before income taxes and
extraordinary loss (941) 589 853 (3,804)
Provision (benefit) for income taxes (223) -- 317 367
Minority interest in consolidated subsidiary -- -- -- 265
---------- ---------- ---------- ---------
Income (loss) before extraordinary loss (718) 589 536 (4,436)
Extraordinary loss due to extinguishment of
debt, net of income taxes of $317 494 -- 494 --
---------- ---------- ---------- ---------
Net income (loss) (1,212) $ 589 42 $ (4,436)
========== ========== ========== =========
Earnings per common share:
Income (loss) before extraordinary item (.24) 0.20 .18 (2.69)
Extraordinary charge (.17) -- (.17) --
---------- ---------- ---------- ---------
Net income per common share $ (.41) $ 0.20 $ .01 $ (2.69)
========== ========== ========== =========
Earnings per common share assuming dilution:
Income (loss) before extraordinary item (.24) 0.18 .16 (2.69)
Extraordinary charge (.17) -- (.15) --
---------- ---------- ---------- ---------
Net income per common share assuming
dilution $ (.41) $ 0.18 $ .01 $ (2.69)
========== ========== ========== ==========
Weighted average shares:
Basic 2,972,968 2,912,502 2,965,904 1,648,464
Diluted 2,972,968 3,220,996 3,322,374 1,648,464
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1998 1997
---- ----
<C> <C>
<S>
Cash flows from operating activities:
Net income (loss) $ 42 $ (4,436)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 2,635 2,247
Amortization of deferred compensation 56 54
Amortization of notes payable discount 876 398
Loss (gain) on fixed asset disposals 22 (7)
Write off in-process R&D -- 2,702
Provision for income taxes 317 367
Deferred interest to note principal -- 757
Extraordinary loss due to extinguishment of debt 494 --
Changes in assets and liabilities
Receivables (978) 567
Inventories (2,393) (947)
Prepaid expenses and other assets (500) 141
Accounts payable and accrued liabilities 2,752 1,542
Restructuring reserve -- (378)
Other liabilities and accrued expenses (631) (748)
Deferred revenue (315) 285
Other noncurrent assets -- (354)
Other noncurrent liabilities (72) 78
---------- ----------
Net cash provided by operating activities 2,305 2,268
---------- ----------
Cash flows from investing activities:
Purchases of fixed assets (2,165) (2,505)
Purchases of patents and licenses -- (55)
Increase in short-term investments -- 257
Proceeds from sale of fixed assets -- 3
---------- ----------
Net cash (used for) investing activities (2,165) (2,300)
========== ==========
Cash flows from financing activities:
Net (payment) proceeds on line of credit (2,056) 716
Proceed from refinanced notes payable long-term 14,070 --
Payment on notes payable long-term (11,973) (138)
(Net payment) on other long-term debt (324) (1,400)
Proceeds from issuance of warrants 930 --
Payment of financing fees (729) --
Proceeds from issuance of common stock 198 --
---------- ----------
Net cash provided by (used for)
financing activities 116 (822)
---------- ---------
Net increase (decrease) in cash 256 (854)
Cash at beginning of period 23 1,489
---------- ----------
Cash at end of period $ 279 $ 635
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals other than accruals for the product recall) necessary
to present fairly the Company's financial position as of April 30, 1998
and July 31, 1997, the results of its operations for the three-month and
nine-month periods ended April 30, 1998 and 1997, and its cash flows for
the nine-month periods ended April, 1998 and 1997. The results of
operations for the three-month and nine-month periods ended April 30,
1998 are not necessarily indicative of the results that may be expected
for the fiscal year ending July 31, 1998.
2. On November 20, 1996, Brunswick Biomedical Corporation ("Brunswick") was
merged into Survival Technology, Inc. ("STI") to form Meridian Medical
Technologies, Inc. ("MMT" or the "Company"). At the time of the merger,
Brunswick held approximately 61% of STI's outstanding common stock, which
it had purchased from the estate of STI's late founder on April 15, 1996.
As a result, STI had been treated for financial accounting purposes as a
consolidated, majority-owned subsidiary of Brunswick from that date and
Brunswick's historical financial statements became the Company's
financial statements, STI's assets and liabilities have been revalued to
their respective fair values and Brunswick's historical financial
statements reflect the combined operations of STI and Brunswick after
April 15, 1996 (subject to minority interests). The minority interests
were eliminated upon completion of the merger on November 20, 1996. (See
Meridian's Annual Report on Form 10-K for fiscal year ended July 31, 1997
for a more complete discussion of the merger accounting.)
3. Inventories consisted of the following (in thousands of dollars):
April 30, July 31,
1998 1997
--------------------------
Components and subassemblies $ 6,283 $ 4,788
Material, labor and overhead
costs in process 2,502 1,460
Finished goods 224 345
--------- ---------
$ 9,009 $ 6,593
Inventory reserve (569) (547)
--------- ---------
Total $ 8,440 $ 6,046
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. On April 30, 1998, the Company sold $15.0 million aggregate principal
amount of senior subordinated notes maturing on April 30, 2005 to Nomura
Holding America Inc. The notes bear 12% interest payable quarterly in
arrears with principal payments deferred until maturity. The Company
issued warrants to Nomura Holding America Inc. to purchase 204,770 shares
of MMT common stock until maturity of the notes at an exercise price of
$11.988 per share (subject to an anti-dilution provision).
The note proceeds were used to (1) retire $6.0 million of senior
subordinated notes issued to the Sarnoff Estate which bore 13% interest
and would have matured on April 15, 2001, (2) retire $1.2 million of
subordinated notes issued to EM Industries which bore 13% interest and
would have matured on April 15, 2001, and (3) reduce the existing senior
term loan due ING CAPITAL by $3.5 million. The senior term loan also was
amended to extend its maturity to April 30, 2003, defer quarterly
principal amortization payments until March 31, 1999 at which time
quarterly amortizations will be $250,000 through March 31, 2002 with
quarterly payments of $500,000 required thereafter. Net of financing
related costs of $700,000, the Company gained working capital borrowing
availability of $3.5 million on its existing working capital line of
credit with ING CAPITAL. Associated with the refinancing transactions,
the Company recorded an extraordinary charge on extinguishment of debt
amounting to $494,000, net of an income tax benefit of $317,000.
5. On October 8, 1997, the Company announced a product exchange program for
all of its EpiEZPen-Registered Trademark- product sold since March 1996
(approximately 500,000 units). This exchange program was initiated after
a minimal amount of units (less than 10 units) were returned for premature
activation in the package. The estimated cost of the exchange program is
$1.5 million and was included in fiscal 1997 results of operations as
reported in the Company's Annual Report on Form 10-K. Actual costs could
differ materially from management's estimates; however, it now appears
that the reserve will be adequate. The Company has not included any cost
sharing of this exchange with potentially responsible parties as the
benefit and probability of such an arrangement are not determinable at
this time. Actual costs incurred through April 30, 1998 were approximately
$901,000. The Company believes the exchange will be substantially complete
by the end of fiscal 1998.
6. On May 8, 1998, the Company announced a Class 1 product recall for 47
lots of EpiPen-Registered Trademark- auto-injectors manufactured between June
1997 and February 1998 (approximately 1.0 million units). This recall was
initiated after detecting a loss of active drug (epinephrine) in retained
samples from production lots. The loss of epinephrine resulted from a
chemical complex formed from exposure of the active drug to the needle
caused by puncture of the drug cartridge diaphragm by the needle during an
automated production step. Upon detection of the puncture, the Company
immediately terminated the automated production process and reverted back
to the previous production process. The estimated cost of the recall is
$2.2 million and is included in the fiscal third quarter. While the
Company believes the estimated costs are reasonable to cover the cost of
the recall, actual costs could differ materially from management's
estimates.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which was required to be adopted by
the Company in its January 1998 financial statements. The Company has
adopted this methodology and used it to compute current earnings per share
and to restate all prior periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock
options, warrants and other potentially dilutive common shares are
excluded. Fully diluted EPS has not changed significantly but has been
renamed diluted EPS. The extraordinary loss due to extinguishment of debt
was ($0.17) per basic and diluted share for the quarter and ($0.17) per
basic and ($0.15) per diluted share for nine months ended April 30, 1998.
8. There is no current or deferred tax expense for the nine months ended
April 30, 1998 due to the quarterly loss. When applied to the estimated
income tax for the fiscal year, the carryforwards are expected to reduce
the effective rate to zero.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Quarter and Nine Months in Review
MMT earned $651,000 or $0.22 basic and diluted earnings per share excluding a
reserve provision for EpiPen-Registered Trademark- recall and an
extraordinary loss on extinguishment of debt during the three months ended
April 30, 1998. MMT incurred a net loss of $1.2 million, ($0.41) basic and
diluted earnings per share (see Note 7 to the consolidated financial
statements) on sales of $13.4 million for the third quarter of fiscal 1998
ended April 30, 1998 compared with net income of $589,000 or $0.20 per basic
and $0.18 per diluted earnings per share, on sales of $10.7 million in the
same period of fiscal 1997. (The fiscal 1997 nine month shares shown in the
Consolidated Statement of Operations are not comparable to fiscal 1998 due to
the low common share base of Brunswick prior to the merger.) The fiscal 1998
third quarter net loss includes a $2.2 million ($1.4 million after tax)
provision for a product recall and a $494,000 net of tax, extraordinary
charge on extinguishment of debt. Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the third quarter of fiscal 1998
was $2.9 million (excluding the product recall provision and the
extraordinary charge for extinguishment of debt) compared to $1.6 million for
the same period in fiscal 1997.
For the nine months ended April 30, 1998, MMT earned net income of $42,000 or
$0.01 basic and diluted earnings per share on revenues of $34.8 million.
These results compare to a net loss of ($4.4 million) or ($2.69) per basic
and diluted share for the fiscal 1997 nine month comparable period. The
fiscal 1998 nine month net income includes a $2.2 million ($1.4 million after
tax) provision for a product recall, and an extraordinary charge on
extinguishment of debt amounting to $494,000 net of tax, while the nine month
fiscal 1997 net loss includes $3.9 million of non-recurring, one-time merger
related costs. EBITDA for the first nine months of fiscal 1998 excluding the
recall provision and the extraordinary loss on refinancing of debt was $7.8
million compared to $4.2 million in the first nine months of fiscal 1997
excluding merger related costs.
Revenues of MMT's three areas of business and gross profit for the quarter
and nine months ended April 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
($thousands) Quarter ended Quarter ended Nine Months ended Nine Months ended
April 30, 1998 April 30, 1997 April 30, 1998 April 30, 1997
<C> <C> <C> <C>
<S>
Drug Delivery $ 4,493 $ 4,831 $ 15,869 $ 13,904
Cardiopulmonary 314 822 844 2,370
STI Military Systems 8,623 5,027 18,083 13,389
----------- ----------- ---------- -----------
Total Revenues $ 13,430 $ 10,680 $ 34,796 $ 29,663
=========== =========== ========== ===========
Gross Profit $ 5,106 $ 3,805 $ 13,576 $ 10,820
=========== =========== ========== ===========
Gross Profit % 38.0% 35.6% 39.0% 36.5%
</TABLE>
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(continued)
Drug Delivery business revenue in the fiscal third quarter ended April 30,
1998 was $4.5 million compared to $4.8 million in the comparable prior year
period. The 6% lower revenue reflects primarily the absence of development
revenue amounting to $900,000 from Mylan Laboratories for filing aNDA's,
partially offset by EpiPen-Registered Trademark- shipments, which were 32%
above prior year levels. The growth in EpiPen-Registered Trademark-
shipments was partially due to an adjustment in inventory levels from
increased sales and marketing emphasis.
Drug Delivery revenues for the first nine-months of fiscal 1998 were $15.9
million, 14% higher than the comparable prior year period. The increase is
attributable to a 47% increase in EpiPen-Registered Trademark- revenues
partially offset by the absence of Mylan aNDA development revenues.
Impacting the Drug Delivery business is the May 8, 1998 Class 1 recall
announced for the EpiPen-Registered Trademark-. As explained in Note 6 to
the consolidated financial statements, the recall involves 1.0 million units
covering production from June 1997 through February 1998. The Company is
working closely with Dey Laboratories, the product distributor, to provide
replacement products as well as satisfy growth in core product demand. The
Company's production facilities are operating at maximum capacity limited by
component vendor delivery capabilities. The reserve provision of $2.2
million was estimated and is considered adequate to cover the full costs of
the replacements. However, no assurances can be given that this estimate is
accurate.
The Drug Delivery new product pipeline continued to expand during the third
quarter. On February 10, 1998 MMT entered into an alliance with DuoJect
Medical Systems to provide diluent solution and assemble DuoJect's Inter-Vial
drug delivery system. The DuoJect system provides separate storage chambers
for powdered medication and diluent that can then be combined within a single
syringe system for application. MMT will provide sterile filling of the
diluent and assembly of the DuoJect system. On March 10, 1998, MMT obtained
North American rights to manufacture and co-market IntraJect-Registered
Trademark-, a pre-filled, disposable, needle-less auto-injector developed by
UK-based Weston Medical Ltd. This patented technology provides MMT a
strategic opportunity to further compliment its auto-injector portfolio and,
if successful, to offer a significantly lower cost drug delivery device. On
April 28, 1998, MMT announced an agreement with Human Genome Sciences, Inc.
(HGS) to supply product filled vials for use in HGS's Phase I and Phase II
clinical trials for human protein Myeloid Progenitor Inhibitory Factor-1 for
cancer therapy. Revenues are anticipated this fiscal year. Over the near
term, the Company should realize increasing development revenues with a
potential for product revenues in later years.
Cardiopulmonary revenues were lower in the third quarter and nine months
ended April 30, 1998 compared to the same periods of fiscal 1997 primarily
due to the sale of a non-core emergency care product line previously included
as part of the cardiopulmonary business and the absence of a CardioBeeper-
Registered Trademark- promotion held in fiscal 1997.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(continued)
The Cardiopulmonary systems group PRIME ECG-TM- Electrocardiac Imaging System
product development is proceeding towards a fiscal year 1999 European launch
and a fiscal year 2000 U.S. launch. Several potential U.S. partners have
been identified and discussions are proceeding, but no assurances can be
given that agreements will be reached or timetables achieved. Contracts were
let to facilitate the PRIME ECG-TM- FDA regulatory filing and to initiate
clinical trials in the US. Three scientific papers were presented and
submitted in a recent American College of Cardiology annual convention.
STI Military Systems revenues in the third quarter of fiscal 1998 were $8.4
million, 67% higher than the same period last year. The increased revenues
were primarily from the U.S. DoD for pre-stocking components and shipments of
auto-injectors to replenish supplies. Partially offsetting these gains was
the absence of a large auto-injector shipment to a NATO allied country in the
third quarter of last year.
Nine month revenues of the STI Military Systems group were $17.9 million, 33%
higher than in the comparable prior year period. The growth results from
higher shipments to the U.S. DoD for pre-stocking of components and shipment
of auto-injectors.
Third quarter STI Military business activities included the approval for
storage of morphine enabling the first shipments of morphine auto-injectors
in the fiscal fourth quarter 1998. The unit also completed the bio-
availability clinical trial for the multi-chambered auto-injector with
results expected by mid-summer.Additionally, orders were received from the
City of New York for delivery of auto-injectors for civil defense, and an
order was received from the Government of Israel for delivery of auto-
injectors starting in the fiscal fourth quarter of this year and continuing
into 1999.
Gross margins were 38.0% and 39.0% of revenues in the third quarter and nine
months ended April 30, 1998 respectively compared to 35.6% and 36.5% in the
same periods of fiscal 1997. The margin improvement is due to the increased
revenues coupled with overhead cost control and continuing cost reduction
programs. The lower gross margins in the third quarter compared to the
previous six months reflect mix changes, particularly high military pre-
stocking shipments in the third quarter.
Operating costs were $5.3 million in the third quarter of fiscal 1998, $2.5
million higher than in the comparable period of fiscal 1997. The higher
costs primarily reflect the EpiPen-Registered Trademark- product recall
provision of $2.2 million. Operating costs were $10.8 million during the
first nine months of fiscal 1998, $2.0 million less than in the comparable
prior year period, which is mostly the result of higher contract R&D incurred
by Brunswick prior to the merger. Excluding the $2.2 million EpiPen-
Registered Trademark- reserve provision in fiscal 1998 and the $3.9 million
merger costs in fiscal 1997, operating costs were lower than prior year by
$297,000.
Operating income, excluding the EpiPen-Registered Trademark- product recall,
was $2.0 million for the quarter ended April 30, 1998, $1.0 million higher
than the comparable period in the prior year. Operating income for the first
nine months of fiscal 1998 was $5.0 million compared to $2.0 million in the
prior year comparable period, excluding the recall provision in 1998 and the
merger costs in 1997.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(continued)
Interest expenses were $694,000 in the third quarter of fiscal 1998, an
increase of $371,000 over the prior year third quarter which was low due to
an adjustment of interest cost, which was over accrued in the prior year
second quarter.
The income tax provision for the third quarter of fiscal 1998 was a credit of
$540,000 consisting of a benefit of $223,000 from losses before extraordinary
item, and a benefit of $317,000 for the extraordinary loss from the
extinguishment of debt. The nine month tax provision of $317,000 is
completely offset by the tax benefit from the extraordinary loss. The
utilization of available net operating loss carryforwards of Brunswick
will likely offset any tax provision required for the year. A tax provision
for the first nine months of fiscal 1997 was made because the Company needed
to provide for taxes on STI earnings prior to the merger.
Liquidity and Capital Resources
Total cash as of April 30, 1998 was $543,000, an increase of $256,000 from
July 31, 1997. The Company generated $2.3 million of cash from operations in
the first nine months of fiscal 1998, despite net income of $42,000,
attributable mostly to non-cash depreciation and amortization partially
offset by cash used to fund working capital changes, primarily inventory and
receivables. Investing activities in the first nine months of fiscal 1998
used $2.2 million of cash for capital additions mostly for molds, automation
equipment associated with cost reduction projects and for a new autoclave.
Net proceeds from the debt refinancing used to reduce the working capital
line with ING CAPITAL was $3.5 million.
During the nine months ended April 30, 1998, the Company increased its asset
based working capital credit line with ING CAPITAL to a maximum of $6.5
million from $5.0 million. The amount outstanding under this working capital
line at April 30, 1998 was $1.8 million. On April 30, 1998, the Company
completed its planned long-term debt refinancing. The Company issued $15.0
million of senior subordinated notes to Nomura Holding America Inc. (Nomura)
and used the proceeds to retire and pay-down term notes issued to finance the
merger which were currently requiring amortization principal payments.
The senior subordinated notes to Nomura mature on April 30, 2005 and bear
interest at 12% payable quarterly in arrears with principal payment deferred
until maturity. The Company issued warrants to Nomura to purchase 204,770
shares of MMT common stock until maturity of the Notes at an exercise price
of $11.988 per share. The Company retired senior subordinated debt held by
the Sarnoff Estate for $6.0 million, retired subordinated debt held by EM
Industries for $1.2 million and paid down $3.5 million on the senior term
loan with ING CAPITAL. After these transactions, the Company eliminated
quarterly principal amortization payments until March 31, 1999 and increased
its cash borrowing availability through the working capital line by $3.5
million. (See Note 4 to the consolidated financial statements for discussion
about the debt refinancing.)
An initial grant award of $508,000 was received from the Industrial
Development Board of Northern Ireland to assist MMT in its facility
consolidation in Northern Ireland. While no assurances can be given that all
anticipated grants will be received, total expected grants for both capital
and expense items associated with the facility consolidation in Northern
Ireland will approach $1.3 million over three years.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(continued)
Working capital at April 30, 1998 was $7.8 million, up from $0.8 million at
July 31, 1997. The increase is primarily attributable to higher inventories
($2.4 million), higher receivables ($978,000), higher prepaid expenses
($500,000) and lower current liabilities ($1.8 million) mostly from reduced
borrowings on the credit line. At April 30, 1998, accounts receivable were
$8.5 million, representing 66 days-sales-outstanding, and inventories were
$8.4 million representing a turn-over rate of 3.4 times per year.
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
Financial covenants under the 4th Amendment to the Term Loan and revolving
credit loan with ING CAPITAL and the senior subordinated notes with Nomura
Holding America Inc. described herein require the Company to maintain certain
levels of net worth and debt to EBITDA ratios and limit the Company's capital
expenditures in any one fiscal year to amounts varying from $3.8 million to
$5.0 million under the ING agreement and $4.2 million to $6.6 million under
the Nomura agreement. In addition, covenants under such indebtedness
restrict the ability of the Company to pay any dividends on its common stock.
On April 30, 1998, for $930,000, the Company issued warrants to Nomura
Holding America Inc to purchase 204,770 shares (subject to anti-dilution
provision) of MMT common stock until April 30, 2005 at an exercise price of
$11.988 per share (subject to dilution adjustment). On April 30, 1998, for
$14,070,000, the Company isued, to Nomura Holding America Inc.,12% Senior
Subordinated Notes, with interest payable quarterly in arrears and principal
due April 30, 2005. The Company issued the Notes and the warrants in
reliance on the exemption from registration under section 4(2) of The
Securities Act of 1933, as amended.
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 10.1 - Note and Warrant Purchase Agreement dated as of April 30,
1998.
Exhibit 10.2 - Registration Rights Agreement dated as of April 30, 1998.
Exhibit 10.3 - Warrant Agreement dated as of April 30, 1998.
Exhibit 27.1 - Financial Data Schedule.
Exhibit 27.2 - Restated Financial Data Schedule for the quarter ended
April 30, 1997
(b) Reports on Form 8-K
Press releases dated May 8, 1998 issued by the Company were filed as
exhibits 99.1 and 99.2 to Form 8-K filed and dated May 8, 1998.
<PAGE>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
` -----------------------------------
Registrant
June 3, 1998 By: /S/James H. Miller
------------ -----------------------
Date James H. Miller
President and
Chief Executive Officer
(Principal Executive Officer)
June 3, 1998 By: /S/G. Troy Braswell
------------ ------------------------
Date G. Troy Braswell
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
MERIDIAN MEDICAL TECHNOLOGIES, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
with
NOMURA HOLDING AMERICA INC.
12.0% Senior Subordinated Notes Due 2005.
Warrants to purchase 204,770 Shares of Common Stock.
Dated as of April 30, 1998
658180v11
TABLE OF CONTENTS
(Not Part of Agreement)
Page
Section 1. Definitions .......................................1
Section 1.1. Defined Terms...............................1
Section 1.2. Accounting Terms...........................19
Section 1.3. Rules of Construction......................19
Section 2. Sale and Purchase of Notes and Warrants ..........19
Section 2.1. Authorization of Notes and Warrants........19
Section 2.2. Issuance and Sale of Notes and Warrants....20
Section 2.3. Closing....................................20
Section 2.4. Fees.......................................21
Section 2.5 Interest Rate Limitation...................21
Section 2.6. Allocation of Purchase Price...............21
Section 2.7. Reduced Return.............................22
Section 3. Payments and Prepayments of Notes ................22
Section 3.1. Optional Prepayments of the Notes..........22
Section 3.2. Notice of Prepayment of the Notes..........23
Section 3.3. Allocation of Payments.....................23
Section 3.4. Payments...................................23
Section 3.5. Taxes......................................24
Section 3.6. Surrender of Notes; Notation Thereon.......25
Section 3.7. Purchase of Notes..........................25
Section 4. Representations and Warranties of the Company ....26
Section 4.1. Corporate Existence and Power..............26
Section 4.2. Corporate Authority........................26
Section 4.3. Binding Effect.............................26
Section 4.4. Capital Stock..............................26
Section 4.5. Business Operations and Other
Information; Financial Condition...........27
Section 4.6. Subsidiaries...............................28
Section 4.7. Litigation; No Violation of Governmental
Orders or Laws.............................28
Section 4.8. No Conflicts with Agreements, Statutes,
Orders, Etc................................29
Section 4.9. Consent, Etc...............................29
Section 4.10. Outstanding Indebtedness; Investments.....30
Section 4.11. Assets and Properties......................30
Section 4.12. Taxes......................................31
Section 4.13. Disclosure.................................31
Section 4.14. Offering of Securities.....................32
Section 4.15. Broker's or Finder's Commissions...........32
Section 4.16. Labor Matters..............................32
Section 4.17. Environmental Matters......................33
Section 4.18. Margin Regulations; Use of Proceeds........34
-i-
658180v11
Section 4.19. Compliance with ERISA......................34
Section 4.20. Material Contracts.........................36
Section 4.21. Insurance..................................38
Section 4.22. Possession of Franchises, Licenses, Etc....38
Section 4.23. Intellectual Property......................38
Section 4.24. Customers and Suppliers....................39
Section 4.25. Status under Certain Laws..................39
Section 4.26. Certain Transactions.......................40
Section 4.27. Solvency...................................40
Section 4.28. Use of Proceeds............................40
Section 4.29. Ranking of Notes...........................40
Section 5. Representations of the Purchaser .................40
Section 6. Closing Conditions ...............................41
Section 6.1. Proceedings Satisfactory...................41
Section 6.2. Opinion of Purchaser's Special Counsel.....41
Section 6.3. Opinions of Counsel to the Company.........42
Section 6.4. Representations and Warranties True,
Etc.; Certificates.........................42
Section 6.5. Absence of Material Adverse Change, Etc....42
Section 6.6. Consents and Approvals.....................42
Section 6.7. Absence of Litigation, Orders, Etc.........42
Section 6.8. Subordination Agreement....................43
Section 6.9. Total Indebtedness under Credit
Agreement..................................43
Section 6.10. Fees.......................................43
Section 6.11. Wire Instructions..........................43
Section 6.12. Put Subordination Agreement................43
Section 7. Financial Statements and Information .............44
Section 8. Inspection of Properties and Books ...............48
Section 9. Affirmative Covenants ............................49
Section 9.1. Payment of Principal and Interest..........49
Section 9.2. Payment of Taxes and Claims................49
Section 9.3. Maintenance of Properties, Records and
Corporate Existence........................50
Section 9.4. Insurance..................................51
Section 9.5. Subsidiary Guarantors......................52
Section 9.6. Pension and Benefit Plan Covenants.........53
Section 9.7. Notice of Default..........................54
Section 10. Negative and Maintenance Covenants ...............54
Section 10.1. Restrictions on Indebtedness...............54
Section 10.2. Restrictions on Liens......................55
Section 10.3. Limitation on Sale and Leasebacks..........57
-ii-
658180v11<PAGE>
Section 10.4. Consolidation. Merger or Disposition of
Assets; Acquisitions.......................57
Section 10.5. Sale or Discount of Receivables............58
Section 10.6. Conduct of Business........................58
Section 10.7. Restricted Payments and Restricted
Investments................................59
Section 10.8. Issuance of Capital Stock..................59
Section 10.9. Transactions with Affiliates...............59
Section 10.10. Termination of Pension Plans...............59
Section 10.11. Maintenance of Capital Expenditures........59
Section 10.12. Certain Contracts..........................60
Section 10.13. Limitation on Dividend Restrictions
Affecting Subsidiaries.....................61
Section 10.14. No Amendment of Charter, By-Laws...........61
Section 10.15. Acquisition of Margin Securities...........61
Section 10.16. Financial Covenants........................62
Section 10.17 Certificate Regarding Additional
Permitted Indebtedness.....................64
Section 11. Events of Default ................................64
Section 11.1. Events of Default; Remedies................64
Section 11.2. Suits for Enforcement......................68
Section 11.3. Remedies Cumulative........................68
Section 11.4. Remedies Not Waived........................69
Section 12. Registration, Exchange, and Transfer of Notes ....69
Section 13. Lost, Stolen, Damaged and Destroyed Notes ........69
Section 14. Miscellaneous ....................................70
Section 14.1. Amendment and Waiver.......................70
Section 14.2. Expenses...................................71
Section 14.3. Survival of Representations and
Warranties.................................72
Section 14.4. Successors and Assigns; Limitation on
Transfer...................................72
Section 14.5. Notices....................................73
Section 14.6. Indemnification............................74
Section 14.7. Public Announcements.......................75
Section 14.8. No Fiduciary Relationship..................75
Section 14.9. Confidentiality............................75
Section 14.10. Integration and Severability...............76
Section 14.11. Counterparts...............................76
Section 14.12. Governing Law..............................76
Section 14.13. Submission to Jurisdiction: Waiver of
Service and Venue..........................76
Section 14.14. Waiver of Right to Trial by Jury...........77
SCHEDULES
-iii-
658180v11<PAGE>
Schedule 4.4 Capital Stock
Schedule 4.5 Financial Statements
Schedule 4.6 Subsidiaries
Schedule 4.7 Litigation
Schedule 4.9 Consents
Schedule 4.10A Existing Indebtedness
Schedule 4.10B Existing Investments
Schedule 4.11 Real Property Leases
Schedule 4.16 Labor Matters
Schedule 4.17 Environmental Matters
Schedule 4.19 Pension and Benefit Plans
Schedule 4.20A Material Contracts
Schedule 4.20B Contracting Suspensions
Schedule 4.21 Insurance
Schedule 4.23 Intellectual Property
Schedule 4.24 Customers; Suppliers
Schedule 4.26 Related Party Transactions
EXHIBITS
Exhibit A Form of Senior Subordinated Note
Exhibit B Form of Subsidiary Guarantee
Exhibit C Form of Subordination Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Warrant
Exhibit F Form of Opinion of Counsel to the Company
-iv-
658180v11<PAGE>
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement")
is made and entered into as of April 30, 1998, by and between
MERIDIAN MEDICAL TECHNOLOGIES, INC., a Delaware corporation
(together with its successors, the "Company"), and NOMURA HOLDING
AMERICA INC., a Delaware corporation (together with its
successors, assigns and transferees, the "Purchaser").
RECITALS
WHEREAS, the Company has proposed to issue and sell to the
Purchaser (i) its 12.0% Senior Subordinated Notes Due 2005 in the
aggregate original principal amount of $15,000,000, and (ii) its
Warrants to purchase an aggregate of 204,770 shares (subject to
adjustment as therein provided) of the Company's Common Stock,
all for the consideration and upon the terms and conditions
hereinafter provided; and
WHEREAS, the proceeds of the issuance and sale of the Notes
are to be used to repay certain existing Indebtedness of the
Company and its Subsidiaries and for general corporate purposes
of the Company and its Subsidiaries;
NOW, THEREFORE, the Company and the Purchaser agree as
follows:
Section 1. Definitions{tc "Section 1. Definitions" \f
C \l 1}.
Section 1.1. Defined Terms{tc "Section 1.1. Defined
Terms" \f C \l 2}. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"Accountants" has the meaning specified in Section 7.
"Additional Debt" means:
(i) the portion, if any, of the aggregate
outstanding principal amount of Senior Indebtedness
(including the maximum aggregate amount of all commitments
to extend any revolving credit, working capital, letter of
credit or similar credit facility in connection therewith,
and including the face amount of all letters of credit and
other contingent obligations (whether issued or guaranteed
by the holders of such Indebtedness) from time to time
outstanding in connection therewith) that exceeds the
Maximum Commitment, as the same may be from time to time
reduced ("Excess Principal") and all interest accrued
thereon (including, without limitation, interest accruing
after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Company and its Subsidiaries,
658180v11<PAGE>
whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), prepayment charges,
if any, payable with respect thereto, and all other sums
payable under or in connection with such Senior Loan
Documents, including, without limitation, all indebtedness
and obligations incurred or to be incurred pursuant to
letters of credit (whether issued or guaranteed by the
holders of such Indebtedness) or other commitments by the
holders of such Indebtedness extended for the benefit of the
Company and its Subsidiaries pursuant to the Credit
Agreement or any other such Senior Loan Document, in each
case to the extent the foregoing relate to Excess Principal,
and
(ii) any aggregate outstanding principal amount of
Indebtedness (other than Senior Indebtedness) incurred by
the Company and its Subsidiaries (including the maximum
aggregate amount of all commitments to extend any revolving
credit, working capital, letter of credit or similar credit
facility in connection therewith, and including the face
amount of all letters of credit and other contingent
obligations (whether issued or guaranteed by the holders of
such Indebtedness) from time to time outstanding in
connection therewith) and all interest accrued thereon
(including, without limitation, interest accruing after the
filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating
to the Company and its Subsidiaries, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding), prepayment charges, if any, payable in
connection therewith, and all other sums payable under or in
connection therewith, including, without limitation, all
indebtedness and obligations incurred or to be incurred
pursuant to letters of credit (whether issued or guaranteed
by the holders of such Indebtedness).
"Additional Permitted Indebtedness" means any Additional
Debt incurred by the Company or any of its Subsidiaries after the
date hereof, provided that:
(i) the Pro Forma Interest Coverage Ratio at the
time of such incurrence of Additional Debt is not less than
the Interest Coverage Ratio in effect at such time pursuant
to Section 10.16(d); and
(ii) the Pro Forma Leverage Ratio at the time of
such incurrence of Additional Debt is not more than
4.25:1.00 for any incurrence of Additional Debt on or before
April 30, 1999 and 4.00:1.00 for any incurrence of
Additional Debt thereafter; and provided further that:
(x) if any Additional Debt incurred by the Company
or any of its Subsidiaries by its terms ranks senior in
liquidation (without regard to any security interest) to the
- 2 -
658180v11<PAGE>
Indebtedness evidenced hereby, such Additional Debt shall
not constitute Additional Permitted Indebtedness unless the
lenders of such Additional Debt, pursuant to a written
instrument satisfactory to the Purchaser, become parties to
and "Senior Lenders" under the Subordination Agreement and
such Additional Debt is included thereunder as Designated
Senior Indebtedness.
(y) any extension, renewal, refunding or
refinancing of any Additional Debt shall be treated as the
incurrence of Indebtedness for the purposes of this
definition.
For such purposes, the "Pro Forma Interest Coverage Ratio"
for any incurrence of Additional Debt means the ratio of (A)
EBITDA to (B) Interest Expense, calculated in the case of each of
such amounts for the period of 12 consecutive full calendar
months most recently ended prior to the incurrence of such
Additional Debt on a pro forma basis, assuming that (x) such
Additional Debt was incurred by the Company or its Subsidiaries
immediately prior to the commencement of such 12-month period,
and (y) the net proceeds of such Additional Debt were applied,
and any related transaction (including, without limitation, any
acquisition of Capital Stock or assets of any Person financed in
whole or in part by means of such Additional Debt and any
concurrent repayment of outstanding Indebtedness) occurred,
immediately prior to the commencement of such 12-month period;
and the "Pro Forma Leverage Ratio" for any incurrence of
Additional Debt means the ratio of (C) Consolidated Total
Indebtedness, calculated as of the date of incurrence of such
Additional Debt immediately after giving effect thereto and to
any concurrent repayment of outstanding Indebtedness, to (D)
EBITDA, calculated for the period of 12 consecutive full calendar
months most recently ended prior to the incurrence of such
Additional Debt on a pro forma basis assuming that the net
proceeds of such Additional Debt were applied, and any related
transaction (including, without limitation, any acquisition of
Capital Stock or assets of any Person financed in whole or in
part by means of such Additional Debt and any concurrent
repayment of outstanding Indebtedness) occurred, immediately
prior to the commencement of such 12-month period. For the
purposes of this definition, Indebtedness of the Company or its
Subsidiaries provided for under a revolving credit or similar
arrangement (including, without limitation, the Indebtedness
provided for under the Senior Loan Documents as in effect on the
date hereof) shall be deemed to be incurred at the time of any
increase in the maximum commitment amount relating thereto
(whether or not such increase is accompanied by an increase in
the principal amount thereof at the time outstanding), but not at
the time of any increase in the outstanding principal amount of
such Indebtedness to an amount which is less than or equal to the
maximum commitment amount thereof at the time in effect.
- 3 -
658180v11<PAGE>
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under
common control with such Person, except ING shall not be deemed
to constitute an Affiliate of the Company. For purposes of this
definition, "control" of a Person shall mean the power, direct or
indirect, (i) to vote or direct the voting of 10% or more of the
outstanding shares of Voting Stock of such Person, or (ii) to
direct or cause the direction of the management and policies of
such Person whether by ownership of Capital Stock, by contract or
otherwise.
"Audited Financial Statements" has the meaning specified in
Section 4.5(b).
"Authorized Officer" with respect to any Person means the
Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer or the Treasurer of such Person, or any
further or different officer of such Person so designated by any
Authorized Officer in a written notice to the holders of Notes.
"Bankruptcy Code" means 11 U.S. C. Sec. 101 et seq., as from
time to time hereafter amended, and any successor or similar
statute.
"Business Day" means any day except a Saturday, a Sunday or
a legal holiday in New York City.
"Capitalized Lease Obligation" means, as to any Person, all
monetary obligations of such Person under any leasing or similar
arrangement which, in accordance with GAAP, are or would be
classified as capitalized leases.
"Capital Stock" means and includes any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without
limitation, shares of preferred or preference stock.
"Cash Equivalents" means:
(i) marketable obligations maturing within one year
after acquisition thereof issued or fully guaranteed by the
United States of America or an instrumentality or agency
thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof),
(ii) open market commercial paper, maturing within 180
days after acquisition thereof, which has the highest credit
rating of either Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies or Moody's Investor
Services, Inc., or an equivalent rating by any other
nationally recognized credit rating agency of similar
standing, issued by a corporation organized under the laws
of any State of the United States of America or of the
District of Columbia,
- 4 -
658180v11<PAGE>
(iii) certificates of deposit or bankers
acceptances or other obligations maturing within one year
after acquisition thereof issued by a domestic commercial
bank which is a member of the Federal Reserve System and has
capital and surplus and undivided profits in excess of
$500,000,000, and
(iv) other certificates of deposit maturing within one
year after acquisition thereof in respect of deposits fully
insured by the Federal Deposit Insurance Corporation.
"Certified" when used with respect to any financial
information of any Person to be certified by any of its officers,
indicates that such information is to be accompanied by a
certificate to the effect that such financial information has
been prepared in accordance with GAAP consistently applied (other
than with respect to budgets and projections), subject in the
case of interim financial information to normal year-end audit
adjustments and absence of the footnotes required by GAAP, and
presents fairly, in all material respects, the information
contained therein as at the dates and for the periods covered
thereby.
"Change of Control" means any transaction or event as a
direct or indirect result of which:
(i) any Person is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of more than 25% of the outstanding
shares of Voting Stock of the Company; or
(ii) during any period of 12 consecutive months
(whether commencing before or after the Closing Date),
individuals who on the first day of such period constituted
the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company
was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of
the Company then in office.
"Closing Date" has the meaning specified in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $0.10 per
share, of the Company.
"Company" means Meridian Medical Technologies, Inc., a
Delaware corporation, and any successor thereto.
- 5 -
658180v11<PAGE>
"Company Reports" has the meaning specified in Section
4.5(a).
"Consolidated Capital Expenditure" means, for any period,
without duplication, the sum of (a) the gross dollar amount of
additions during such period to property, plant, equipment and
other fixed assets of the Company and its Subsidiaries, including
those additions made in the ordinary course of business, but
excluding routine maintenance and repairs, plus (b) the aggregate
amount of Capitalized Lease Obligations incurred during such
period by the Company and its Subsidiaries.
"Consolidated Total Indebtedness" means, as of any date of
determination, the aggregate amount of outstanding Indebtedness
of the Company and its Subsidiaries as of such date, determined
on a consolidated basis in accordance with GAAP.
"Control Affiliate" means, as to any Person, any other
Person which directly or indirectly controls, is controlled by,
or is under common control with such Person. For purposes of this
definition, "control" of a Person shall mean the power, direct or
indirect, (i) to vote or direct the voting of a majority of the
Voting Stock of such Person, or (ii) to direct or cause the
direction of the management and policies of such Person whether
by ownership of Voting Stock, by contract or otherwise.
"Contracts" mean all contracts, agreements, mortgages,
indentures, licenses, leases, commitments, plans, arrangements,
sales orders and purchase orders of every kind.
"Credit Agreement" means the Credit Agreement dated as of
April 15, 1996 among Brunswick Biomedical Corporation, a
Massachusetts corporation, various lenders as are, or may become
parties thereto and ING, individually and as Agent, assumed by
the Company by an agreement dated November 20, 1996, as such
Credit Agreement may from time to time be amended, modified or
supplemented in accordance with its terms.
"Default" means any event or condition which, with due
notice or lapse of time or both, would become an Event of
Default.
"Designated Senior Indebtedness" has the meaning specified
in the Subordination Agreement.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"EBITDA" means, for any period, an amount equal to Net
Income plus (to the extent deducted in determining Net Income)
interest expense, provisions for income taxes, depreciation,
amortization of intangible assets and the write-off of in-process
research and development expense, in each case for the Company
- 6 -
658180v11<PAGE>
and its Subsidiaries on a consolidated basis; provided, that (a)
any calculation of EBITDA that takes into account the fourth
quarter of the Company's 1997 Fiscal Year shall exclude from such
calculation the $1,539,400 pre-tax charge incurred during the
fourth quarter of the Company's 1997 Fiscal Year, which charge is
related to the voluntary product exchange program, and (b) any
calculation of EBITDA shall exclude any extraordinary item
associated with the extinguishment of Indebtedness as a result of
any refinancing of all or any part of the Indebtedness evidenced
by the Estate Subordinated Note or the Junior Subordinated Note
or the obligations under the Senior Loan Documents.
"Environmental Laws" means any and all Federal, state,
local, and foreign Statutes, Orders, permits, regulations,
concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution, the protection
of the environment or the generation, treatment, storage, use,
maintenance, recycling, transportation, release or disposal of
Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery Act, the Emergency
Planning and Community Right to Know Act, the Safe Drinking Water
Act, the Hazardous Materials Transportation Act, the Clean Air
Act, the Clean Water Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Noise Control Act, the Occupational Safety
and Health Act, the Toxic Substances Control Act, any so-called
"Superfund" or "Superlien" law, and any regulation promulgated
under any of the foregoing, all as now or at any time hereafter
may be in effect.
"Environmental Matter" means any claim, investigation,
litigation, administrative proceeding or Order asserted, arising
or entered under or pursuant to any Environmental Law, or
relating to any Hazardous Materials, in each case against or
affecting the Company, any of its Subsidiaries, their respective
operations, or any Properties owned or operated by any of them.
"ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
"ERISA Affiliate" means any corporation or other Person
(including, without limitation, any Subsidiary of the Company)
which is a member of the same controlled group (within the
meaning of Section 414(b) of the Code) of corporations or other
Persons as the Company, or which is under common control (within
the meaning of Section 414(c) of the Code) with the Company, or
any corporation or other Person which is a member of an
affiliated service group (within the meaning of Section 414(m) of
the Code) with the Company, or any corporation or other Person
which is required to be aggregated with the Company pursuant to
Section 414(o) of the Code or the regulations promulgated
thereunder.
- 7 -
658180v11<PAGE>
"Estate Subordinated Note" has the meaning specified in the
Credit Agreement.
"Event of Default" has the meaning specified in Section
11.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a
reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar
federal statute.
"Existing Senior Debt" has the meaning specified in the
Subordination Agreement.
"Fair Market Value" means what a willing buyer would pay to
a willing seller in an arm's-length transaction.
"Financial Statements" has the meaning specified in Section
4.5(b).
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America, applied
on a consistent basis both as to classification of items and
amounts.
"Governmental Body" means any federal, state, provincial,
county, city, town, village, municipal or other government or
governmental department, commission, council, board, bureau,
agency, authority or instrumentality, of or within the United
States of America or its territories or possessions, or of or
within any other country, or of any international community
established by treaty.
"Government Contract" means any contract or agreement with
or for any Governmental Body (including, without limitation, any
such contract or agreement with respect to which the Company or
any of its Subsidiaries is a subcontractor at any level), other
than any purchase order issued in the ordinary course of business
and having a face amount (including all addenda, modifications
and supplements thereto) of less than $500,000.
"Guarantee" means any guarantee or other contingent
liability (other than any endorsement for collection or deposit
in the ordinary course of business), direct or indirect, with
respect to any obligations of another Person, through an
agreement or otherwise, including, without limitation, (i) any
other endorsement or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to
a guarantee in respect of any such obligations, and (ii) any
agreement (A) to purchase, or to advance or supply funds for the
payment or purchase of, any such obligations, (B) to purchase,
sell or lease Property, products, materials or supplies, or
transportation or services, in respect of enabling such other
- 8 -
658180v11<PAGE>
Person to pay any such obligation or to assure the owner thereof
against loss regardless of the delivery or nondelivery of the
Property, products, materials or supplies or transportation or
services or (C) to make any loan, advance or capital contribution
to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to
satisfy any obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum
equity, working capital or other balance sheet condition in
respect of any such obligation. The amount of any Guarantee shall
be equal to the outstanding amount of the obligations directly or
indirectly guaranteed.
"Hazardous Material" means the following:
(i) any "hazardous substance" as defined in, or for
purposes of, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.A. SS 9601 & 9602,
as may be amended from time to time, or any other so-called
"superfund" or "superlien" law and any judicial
interpretation of any of the foregoing;
(ii) any "regulated substance" as defined pursuant to
40 C.F.R. Part 280;
(iii) any "pollutant or contaminant" as defined in
42 U.S.C.A. S 9601 (33);
(iv) any "hazardous waste" as defined in, or for
purposes of, the Resource Conservation and Recovery Act;
(v) any "hazardous chemical" as defined in 29 C.F.R.
Part 1910;
(vi) any "hazardous material" as defined in, or for
purposes of, the Hazardous Materials Transportation Act; and
(vii) any other substance, regardless of physical
form, or form of energy or pathogenic agent that is subject
to any other past, present or future law or requirement of
any Governmental Body regulating, relating to, or imposing
obligations, liability, or standards of conduct concerning
the protection of human health, plant life, animal life,
natural resources, Property or the reasonable enjoyment of
life or Property from the presence in the environment of any
solid, liquid, gas, odor, pathogen or form of energy, from
whatever source.
Without limiting the generality of the foregoing, the term
"Hazardous Material" thus includes, but is not limited to, any
material, waste or substance that contains petroleum or any
fraction thereof, asbestos, or polychlorinated biphenyls, or that
is flammable, explosive or radioactive.
- 9 -
658180v11<PAGE>
"Indebtedness" with respect to any Person means, without
duplication:
(i) all indebtedness of such Person for borrowed
money,
(ii) any obligation incurred for all or any part of the
purchase price of Property or services, other than accounts
payable and accrued expenses included in current liabilities
in accordance with GAAP and incurred in respect of Property
or services purchased in the ordinary course of business,
(iii) indebtedness or obligations evidenced by
bonds, notes or similar written instruments,
(iv) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of
credit, bankers' acceptances, surety or other bonds and
similar instruments,
(v) any obligation (whether or not such Person has
assumed or become liable for the payment of such obligation)
secured by a Lien on any Property of such Person,
(vi) Capitalized Lease Obligations of such Person,
(vii) all obligations, contingent or otherwise, of
such Person with respect to any Interest Rate Protection
Agreement,
(viii) all obligations, contingent or otherwise, of
such Person under any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in
currency values,
(ix) all obligations of such Person to redeem, purchase
or otherwise retire or extinguish any of its Capital Stock
at a fixed or determinable date (whether by operation of a
sinking fund or otherwise), at another's option or upon the
occurrence of a condition not solely within the control of
such Person (e.g., redemption from future earnings);
provided, that (a) for purposes of determining the amount of
Indebtedness outstanding at any time, the entire amount
required to effect a redemption, repurchase, retirement or
extinguishment of any Capital Stock shall be deemed to be
outstanding Indebtedness and (b) for purposes of determining
whether the tests under the definition of Additional
Permitted Indebtedness have been satisfied, the entire
amount required to effect a redemption, repurchase,
retirement or extinguishment of any Capital Stock shall be
deemed to be incurred at the time of issuance thereof, and
- 10 -
658180v11<PAGE>
(x) all Guarantees by such Person of obligations of
any other Person of the types described in clauses (i)
through (viii) of this definition, inclusive;
provided, however, Indebtedness shall not include, in
respect of the put right granted to ING under the Warrant
Purchase Agreement dated April 15, 1996 by and between ING
and the Company, any claim or right that would otherwise
constitute a claim if not otherwise subject to the Put
Subordination Agreement.
"ING" means ING (U.S.) Capital Corporation, a Delaware
corporation.
"Intellectual Property" means patents, patent applications,
patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); all registered and
unregistered statutory and common law copyrights; all registered
and unregistered trademarks, service marks, licenses, logos,
sales materials and trade names; all registrations, applications
and renewals for any of the foregoing; all trade secrets,
confidential information, know-how, customer lists, formulae,
manufacturing and production processes and techniques, research
and development information, product designations, quality
standards, investigations, drawings, specifications, designs,
plans, improvements, proposals, technical and computer data; all
license agreements and sublicense agreements to and from third
parties relating to any of the foregoing; all other confidential
information and proprietary rights (including, without
limitation, all computer software and documentation); and all
copies and tangible embodiments of the foregoing (in whatever
form or medium).
"Interest Coverage Ratio" means, for any period, the ratio
of (a) EBITDA for such period to (b) Interest Expense during such
period.
"Interest Expense" means, for any period, the sum of (a) the
Company's consolidated interest expense accrued during such
period in respect of all Indebtedness of the Company and its
Subsidiaries, minus (b) the Company's consolidated interest
expense accrued during such period in respect of the Estate
Subordinated Note and the Junior Subordinated Note to the extent
that, in accordance with the terms of the Estate Subordinated
Note and the Junior Subordinated Note, such interest expense is
added to the respective principal amounts thereof and is not paid
by the Company in cash, minus (c) to the extent included in the
Company's consolidated interest expense accrued during such
period, the amount of any original issued discount that is
amortized during such period in respect of the Notes or the
obligations under the Senior Loan Documents.
"Interest Rate Protection Agreement" shall mean an interest
rate swap, cap or collar agreement or similar arrangement between
- 11 -
658180v11<PAGE>
any Person or Persons and one or more financial institutions
providing for the transfer or mitigation of interest rate or
expense risks either generally or under specific contingencies.
"Internal Revenue Service" means the United States Internal
Revenue Service and any successor or similar agency performing
similar functions.
"Inventory" means all goods, merchandise and other personal
Property which are held for sale or lease or consignment or to be
furnished under a contract of service, or are raw materials, work
in process or material used or consumed, or to be used or
consumed, in the business of the Company and its Subsidiaries.
"Investment" when used with reference to any investment of
the Company or any of its Subsidiaries means any investment so
classified under GAAP, and, whether or not so classified,
includes (i) any Indebtedness owed by any Person to the Company
or to any such Subsidiary, (ii) any Guarantee or contingent
obligation of the Company or any such Subsidiary of Indebtedness
or other obligations of any Person, and (iii) any Capital Stock
of, partnership interest in, or other ownership or similar
interest in any Person held by the Company or any such
Subsidiary; and the amount of any Investment shall be the
original principal or capital amount thereof less all cash
returns of principal or equity thereof (and without adjustment by
reason of the financial condition of such other Person).
"Junior Subordinated Note" has the meaning specified in the
Credit Agreement.
"Lien" means any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, conditional sale or title retention
agreement, lessor's interest under a capitalized lease or
analogous instrument, in, of or on any of a Person's Property
(whether held on the date hereof or hereafter acquired), or any
signed or filed financing statement which names such Person as
the debtor, or the execution of any security agreement or the
like authorizing any other Person as the secured party thereunder
to file such a financing statement.
"Majority Holders" means the holders of at least a majority
in principal amount of the Notes at the applicable time
outstanding.
"Material Adverse Effect" means any change or changes or
effect or effects that individually or in the aggregate are
materially adverse to (i) the condition (financial or otherwise),
operations, performance, business, properties or prospects of the
Company and its Subsidiaries taken as a whole, (ii) the rights
and remedies of the Purchaser under this Agreement, the Notes,
the Warrants or the Registration Rights Agreement, (iii) the
ability of the Company to fulfill its obligations under this
Agreement, the Notes, the Warrants or the Registration Rights
- 12 -
658180v11<PAGE>
Agreement or (iv) the legality, validity or enforceability of
this Agreement, the Notes, the Warrants or the Registration
Rights Agreement.
"Material Contracts" means all oral or written supply
agreements, requirements contracts, customer agreements,
franchise agreements, license agreements, distribution
agreements, joint venture agreements, asset purchase agreements,
stock purchase agreements, merger agreements, agency or
advertising agreements, leases of real or personal property,
credit agreements, loan agreements, security agreements, pledge
agreements, mortgages, trust deeds, trust indentures, stockholder
agreements, consulting agreements, management agreements,
employment agreements, severance agreements, collective
bargaining agreements, employee benefit plans or arrangements,
tax sharing agreements, and other contracts, agreements and
commitments to which the Company or any of its Subsidiaries are
parties, in each case which have a face amount or value
(including all addenda, modifications and supplements thereto) of
$500,000 or more. The term "Material Contract" shall include, in
any event, without limitation, (i) any Government Contract to
which the Company or any of its Subsidiaries is a party, (ii) the
Specified IP Contracts and (iii) any "material" contract
required to be filed with the Company's periodic reports pursuant
to Item 601(b)(10) of Regulation S-K promulgated by the
Securities and Exchange Commission.
"Maximum Commitment" means, at any time, the lesser of (i)
$13,500,000 and (ii) the aggregate commitment at such time under
the Senior Loan Documents.
"Multiemployer Plan" means a multiemployer plan as defined
in Section 3(37) or Section 4001(a)(3) of ERISA or Section 414(f)
of the Code contributed to by the Company or any of its
Subsidiaries or ERISA Affiliates.
"Net Income" means, as to any Person, for any period, the
net income (or loss) of such Person for such period, determined
in accordance with GAAP, but excluding extraordinary gains or
losses for such period.
"Note" and "Notes" have the meanings specified in Section
2.1 (a).
"Officer's Certificate" means, with respect to any
corporation, a certificate signed by the Chief Executive Officer,
the President, one of the Vice Presidents, or the Chief Financial
Officer of the specified corporation.
"Order" means any order, writ, injunction, decree, judgment,
award, determination or written direction or demand of any court,
arbitrator or Governmental Body.
"Other Taxes" has the meaning specified in Section 3.5(c).
- 13 -
658180v11<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation, and
any successor agency or Governmental Body performing similar
functions.
"Pension Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, excluding any Multiemployer
Plans, maintained by or contributed to by the Company or any of
its Subsidiaries or ERISA Affiliates.
"Permitted Lien" means any of the Liens permitted to be
incurred under Section 10.2.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a trust, an
unincorporated organization and a government or any department or
agency thereof.
"Plan" and "Plans" means any employee benefit plan as
defined in Section 3(3) of ERISA, excluding a Multiemployer
Plan, established or maintained for the benefit of employees of
the Company or any of its Subsidiaries or ERISA Affiliates.
"Prepayment Premium" means at any time with respect to any
Notes being prepaid in whole or in part pursuant to Section 3.1
during any of the periods set forth below, an amount equal to the
percentage set forth opposite such period of the aggregate
principal amount of the Notes being prepaid at such time:
Percentage of Principal
Amount Being Prepaid
Period
April 30, 1998 to and including 3%
April 30, 2001
May 1, 2001 to and including April 2%
30, 2002
May 1, 2002 to and including April 1%
30, 2003
May 1, 2003 and thereafter 0%
"Property" with respect to any Person, means any interest in
any kind of property or asset, whether real, personal or mixed,
tangible or intangible, of such Person.
"Put Subordination Agreement" means that certain Put
Subordination Agreement by and among the Company, ING and the
Purchaser dated as of the date hereof.
"Registration Rights Agreement" means that certain
Registration Rights Agreement, in the form attached as Exhibit D
hereto, to be dated as of and entered into on the Closing Date,
among the Company and each of the Persons who will be holders of
- 14 -
658180v11<PAGE>
the Warrants, as from time to time amended, modified or
supplemented in accordance with its terms.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder for which
the 30-day notice requirement applies.
"Restricted Investment" means any Investment other than
(i) any Investment in Cash Equivalents,
(ii) any Investment existing on the Closing Date and
set forth in Schedule 4.10B,
(iii) any loan or advance to or Guarantee of the
obligations of any Subsidiary of the Company by the Company
or any of its Subsidiaries; provided that the aggregate
amount of such loans, investments or Guarantees in all
Subsidiaries of the Company that are not Wholly-owned
Subsidiaries shall not at any time exceed $500,000;
(iv) any Investment by the Company in the Capital Stock
of any Subsidiary of the Company, and any Investment by any
Subsidiary of the Company in the Capital Stock of any other
Subsidiary of the Company; provided that (a) the aggregate
amount of the Investments of the Company and its
Subsidiaries in all Subsidiaries of the Company shall not at
any time exceed 20% of the Company's consolidated assets and
(b) the aggregate amount of such Investments of the Company
and its Subsidiaries in all Subsidiaries of the Company that
are not Wholly-owned Subsidiaries shall not at any time
exceed the lesser of (x) $1,500,000 or (y) 10% of the
consolidated net worth of the Company as determined in
accordance with GAAP;
(v) any Investment by the Company or any of its
Subsidiaries in any Person which is a joint venture of the
Company or any such Subsidiary with a Person that is not the
Company or a Subsidiary of the Company, provided that (x)
such joint venture is not a Subsidiary of the Company or any
of its Subsidiaries and (y) the aggregate amount of all
Investments of the Company and its Subsidiaries referred to
in this subparagraph (iv) (excluding amounts referred to in
subparagraph (v) of this definition) shall not at any time
exceed $500,000, and
(vi) Guarantees by the Company or any of its
Subsidiaries of the obligations of joint ventures referred
to in the foregoing subparagraph (iv) with respect to
accounts payable of such joint ventures included in current
liabilities in accordance with GAAP and incurred in respect
of Property or services purchased in the ordinary course of
business, provided that the aggregate amount of such
Guarantees shall at no time exceed $500,000.
- 15 -
658180v11<PAGE>
"Restricted Payment" means, with respect to any Person,
(i) the declaration or payment of any dividend or
other distribution on, or the incidence of any liability to
make any other payment in respect of, Capital Stock of such
Person (other than one payable solely in Capital Stock of
such Person),
(ii) any payment or distribution by such Person on
account of the purchase, redemption, defeasance (including
in-substance or legal defeasance) or other retirement of any
Capital Stock of such Person, or of any warrant, option or
other right to acquire such Capital Stock (whether directly
or indirectly, and including, without limitation, any
purchase or other acquisition of such Capital Stock, or of
any warrant, option or other right to acquire such Capital
Stock, by any Subsidiary of such Person),
(iii) any other payment or distribution by such
Person in respect of its Capital Stock, whether directly or
indirectly or through any Subsidiary of such Person, and
(iv) any payment or distribution by such Person on
account of the principal of or prepayment charges, if any,
or interest or other amounts, with respect to any
Indebtedness of the Company or any of its Subsidiaries which
is subordinated in right of payment to the prior payment of
the Notes.
The amount of any Restricted Payment made in the form of
Property shall be deemed to be the greater of the Fair Market
Value or the net book value of such Property. Notwithstanding
anything to the contrary set forth in this definition, the term
"Restricted Payment" shall not include (A) the declaration or
payment of any dividend by, or any other payment or distribution
in respect of the Capital Stock of, any Wholly-owned Subsidiary
of the Company which is payable and paid solely to the Company
and/or one or more other Wholly-owned Subsidiaries of the Company
or (B) any payment or distribution permitted to be made by the
Company pursuant to the terms and conditions of the Put
Subordination Agreement.
"SEC" means the United States Securities and Exchange
Commission and any successor agency, authority, commission or
Governmental Body.
"Securities Act" means as of any date the Securities Act of
1933, as amended, or any similar federal statute then in effect,
and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar
federal statute.
- 16 -
658180v11<PAGE>
"Senior Indebtedness" means (i) the Existing Senior Debt and
(ii) the principal amount of any and all extensions, renewals,
refundings or refinancings, in whole or in part, of the Existing
Senior Debt, interest accrued thereon (including, without
limitation, interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Company or any of its
Subsidiaries, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding), prepayment
premiums payable with respect thereto, and fees, costs, expenses,
indemnities and other amounts payable with respect thereto.
"Senior Loan Documents" has the meaning specified in the
Subordination Agreement.
"Solvent" means when used with respect to any Person, that
(i) the fair value of the property of such Person is greater than
the total amount of liabilities (including, without limitation,
contingent liabilities) of such Person, (ii) the present fair
salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liabilities of
such Person on its debts as they become absolute and matured,
(iii) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person's ability
to pay as such debts and liabilities mature, and (iv) such Person
is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's
assets would constitute unreasonably small capital. For such
limitation, pending litigation, Guarantees and pension plan
taxes, if any, are valued at the amount that, in light of all the
facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or
matured liability.
"Specified IP Contracts" means (i) the License Agreement
between University of Ulster and Nirad Limited dated December 11,
1992 and (ii) the License Agreement between Survival Technology,
Inc. and Becton, Dickinson and Company dated October 31, 1996.
"Statute" means any statute, ordinance, code, treaty,
directive, law, rule or regulation of any Governmental Body.
"Subordinated Indebtedness" has the meaning specified in the
Subordination Agreement.
"Subordination Agreement" has the meaning specified in
Section 6.8.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity of which at least a majority of the
outstanding Voting Stock is at the time directly or indirectly
owned or controlled by such Person or by one or more of any
entities directly or indirectly owned or controlled by such
Person.
- 17 -
658180v11<PAGE>
"Subsidiary Guarantee" means a Guarantee in the form of
Exhibit B, to be executed and delivered pursuant to Section 9.5
by any Person which thereafter becomes a Subsidiary of the
Company organized under the laws of the United States of America.
"Taxes" has the meaning specified in Section 3.5(a).
"Total Debt Leverage Ratio" means, for any period, the ratio
of (a) the aggregate outstanding principal amount of all
Indebtedness of the Company and its Subsidiaries as of the last
day of such period to (b) EBITDA for such period.
"Total Debt Service" means, for any period, the sum of (a)
Interest Expense with respect to all Indebtedness of the Company
and its Subsidiaries during such period, plus (b) principal
repayments, if any, of the Loans (as such term is defined in the
Credit Agreement) during such period required to be made pursuant
to clause (e) of Section 3.3.1 of the Credit Agreement, plus (c)
principal repayments, if any, of all other Indebtedness of the
Company and its Subsidiaries required to be made during such
period.
"Total Debt Service Ratio" means, for any period, the ratio
of (a) EBITDA to (b) Total Debt Service.
"Unaudited Financial Statements" has the meaning specified
in Section 4.5(b).
"Unfunded Current Liability" of any Pension Plan shall mean
the amount, if any, by which the actuarial present value of the
accumulated plan benefits under the Pension Plan as of the close
of its most recent plan year, determined in accordance with
Statement of Financial Accounting Standards No. 35, based upon
the actuarial assumptions used by the Pension Plan's actuary in
the most recent annual valuation of the Pension Plan, exceeds the
fair market value of the assets allocable thereto, determined in
accordance with Treasury Regulations Sections 1.412(c)(2)-
1(c)(l).
"U.S. Person" means a citizen or resident of the United
States of America, a corporation, partnership or other entity
created or organized in or under any laws of the United States of
America or of any State thereof, or any estate or trust that is
subject to federal income taxation regardless of the source of
its income.
"U.S. Taxes" has the meaning specified in Section 3.5(b).
"Voting Stock" with respect to any Person shall mean Capital
Stock of such Person of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled
to vote for the election of members of the Board of Directors (or
Persons performing similar functions) of such Person.
- 18 -
658180v11<PAGE>
"Warrant" and "Warrants" have the meanings specified in
Section 2.1(b).
"Wholly-owned Subsidiary" shall mean, with respect to any
Person, any Subsidiary of such Person all of the shares of
Capital Stock (and all rights and options to purchase such
shares) of which, other than directors' qualifying shares, are
owned, beneficially and of record, by such Person and/or one or
more Wholly-owned Subsidiaries of such Person.
Section 1.2. Accounting Terms{tc "Section 1.2.
Accounting Terms" \f C \l 2}. All accounting terms used in
this Agreement shall be applied on a consolidated basis for the
Company and its Subsidiaries, unless otherwise specifically
indicated herein. Any accounting terms not specifically defined
herein shall have the meanings customarily given them in
accordance with GAAP.
Section 1.3. Rules of Construction{tc "Section 1.3.
Rules of Construction" \f C \l 2}. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Section or
subsection. Reference herein to any Section or subsection refers
to such Section or subsection (as the case may be) hereof. Words
in the singular include the plural, and words in the plural
include the singular. Each covenant or agreement contained
herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant or
agreement contained herein, so that compliance with any one
covenant or agreement shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant
or agreement. Where any provision herein refers to action to be
taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is
taken directly or indirectly by such Person.
Section 2. Sale and Purchase of Notes and
Warrants{tc "Section 2.Sale and Purchase of Notes and Warrants"
\f C \l 1}.
Section 2.1. Authorization of Notes and Warrants{tc
"Section 2.1. Authorization of Notes and Warrants" \f C \l 2}.
The Company has duly authorized the issue, sale and delivery of:
(a) its 12.0% Senior Subordinated Notes Due 2005 in
the aggregate principal amount of $15,000,000, to be dated the
date of issue thereof, (i) to bear interest (computed on the
basis of a 360-day year and actual days elapsed) from such date
at the rate of 12.0% per annum payable in cash quarterly in
arrears on the first day of July, October, January and April in
each year (commencing July 1, 1998) and at maturity, and to bear
interest (so computed) payable in cash on demand at the rate of
14.0% per annum (x) on any overdue principal and Prepayment
- 19 -
658180v11<PAGE>
Premium, if any, and, to the extent permitted by applicable law,
on any overdue interest, until the same shall be paid and (y)
during the continuance of any Event of Default, (ii) to mature on
April 30, 2005, and (iii) to be substantially in the form of
Exhibit A hereto attached (all such Notes originally issued
pursuant to this Agreement, or delivered in substitution or
exchange for any thereof, being collectively called the "Notes"
and individually a "Note").
(b) its Warrants, initially exercisable to purchase an
aggregate of 204,770 shares (subject to adjustment as therein
provided) of its authorized but unissued Common Stock, at an
initial exercise price of $11.988 per share (subject to
adjustment as therein provided), to be exercisable during the
period commencing on the Closing Date and ending on April 30,
2005, and to be substantially in the form of Exhibit E hereto
attached (all such Warrants originally issued pursuant to this
Agreement, or delivered in substitution or exchange for any
thereof, being collectively called the "Warrants" and
individually a "Warrant").
Section 2.2. Issuance and Sale of Notes and
Warrants.{tc "Section 2.2. Issuance and Sale of Notes and
Warrants" \f C \l 2}
(a) Subject to the terms and conditions herein set
forth, the Company hereby agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Company, Notes in the
aggregate principal amount of $15,000,000, at a purchase price of
100% of the principal amount thereof.
(b) Subject to the terms and conditions herein set
forth, the Company hereby agrees to issue to the Purchaser, in
consideration of its purchase of Notes hereunder and as
additional interest on such Notes, Warrants initially exercisable
to purchase an aggregate of 204,770 shares of Common Stock.
Section 2.3. Closing{tc "Section 2.3. Closing" \f C
\l 2}. (a) The initial closing of the sale and delivery of
Notes and Warrants shall take place at the offices of Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 at
10:00 a.m., New York time on May 1, 1998 or such other date as
the parties shall agree (herein called the "Closing Date").
(b) On the Closing Date, the Company will deliver to
the Purchaser:
(i) Notes registered in the name of the Purchaser
or its nominee, duly executed and dated the Closing
Date, in the aggregate principal amount of U.S.
$15,000,000, in such denominations as the Purchaser
shall specify, against the Purchaser's delivery to the
- 20 -
658180v11<PAGE>
Company of immediately available funds in the amount of
the aggregate purchase price of such Notes, and
(ii) Warrants initially exercisable to purchase an
aggregate of 204,770 shares of Common Stock, registered
in the name of the purchaser or its nominee, duly
executed and dated the Closing Date, in such
denominations as the Purchaser shall specify (or, in
the absence of such notice, one Warrant registered in
the Purchaser's name initially exercisable for such
aggregate number of shares of Common Stock).
Section 2.4. Fees{tc "Section 2.4. Fees" \f C \l
2}. (a) On the Closing Date, the Company will pay to the
Purchaser a non-refundable funding fee in an amount equal to
$37,500.
(b) On the Closing Date, the Company will pay to
Nomura Securities International, Inc. a non-refundable
structuring fee in an amount equal to $37,500.
Section 2.5. Interest Rate Limitation{tc "Section 2.5
Interest Rate Limitation" \f C \l 2}. Notwithstanding any
provisions of this Agreement or the Notes, in no event shall the
amount of interest paid or agreed to be paid by the Company
exceed an amount computed at the highest rate of interest
permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement or the
Notes at the time performance of such provision shall be due,
shall involve exceeding the interest rate limitation validly
prescribed by law which a court of competent jurisdiction may
deem applicable hereto, then, ipso facto, the obligations to be
fulfilled shall be reduced to an amount computed at the highest
rate of interest permissible under applicable law, and if for any
reason whatsoever any Purchaser shall ever receive as interest an
amount which would be deemed unlawful under such applicable law
such interest shall be automatically applied to the payment of
principal of the Notes outstanding hereunder (whether or not then
due and payable), without prepayment charge, premium or penalty,
and not to the payment of interest, or shall be refunded to the
Company if such principal and all other obligations of the
Company to such Purchaser have been paid in full.
Section 2.6. Allocation of Purchase Price{tc "Section
2.6. Allocation of Purchase Price" \f C \l 2}. It is hereby
agreed that, for purposes of Treasury Regulations S 1.1273-2(h),
(i) the aggregate "issue price" of the investment unit consisting
of the Notes and Warrants to be issued pursuant to this Agreement
is $15,000,000, (ii) the aggregate fair market value and
aggregate purchase price of the Notes is $14,070,344, and (iii)
the aggregate fair market value and aggregate purchase price of
the Warrants is $929,656. The Company and the Purchaser agree to
use the foregoing issue price, purchase prices and fair market
values for U.S. federal income tax purposes with respect to this
- 21 -
658180v11<PAGE>
transaction (unless otherwise required by a final determination
by the Internal Revenue Service or a court of competent
jurisdiction).
Section 2.7. Reduced Return{tc "Section 2.7.
Reduced Return" \f C \l 2}. If the Purchaser shall have
determined that the applicability of any law, rule, regulation or
guideline adopted after the date hereof pursuant to or arising
out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards," or the
adoption after the date hereof of any other law, rule, regulation
or guideline regarding capital adequacy, or any change after the
date hereof in any of the foregoing or in the enforcement or
interpretation or administration of any of the foregoing by any
court or any central bank or other Governmental Body, charged
with the enforcement or interpretation or administration thereof,
or compliance by the Purchaser (or any lending office of the
Purchaser) or the Purchaser's holding company with any request or
directive regarding capital adequacy (whether or not having the
force of law) of any such Governmental Body, has or would have
the effect of reducing the rate of return on the Purchaser's
capital or on the capital of the Purchaser's holding company, if
any, as a consequence of its purchasing any Notes or its
obligations under this Agreement to a level below that which the
Purchaser or the Purchaser's holding company could have achieved
but for such applicability, adoption, change or compliance
(taking into consideration the Purchaser's policies and the
policies of the Purchaser's holding company with respect to
capital adequacy) by an amount deemed by the Purchaser acting
reasonably to be material, then, upon demand by the Purchaser,
the Company shall pay to the Purchaser from time to time such
additional amount or amounts as will compensate the Purchaser or
the Purchaser's holding company for any such reduction suffered.
The certificate of the Purchaser with respect to such additional
amount or amounts shall be conclusive absent manifest error.
Section 3. Payments and Prepayments of Notes{tc
"Section 3. Payments and Prepayments of Notes" \f C \l 1}.
Section 3.1. Optional Prepayments of the Notes{tc
"Section 3.1. Optional Prepayments of the Notes" \f C \l 2}.
(a) Upon notice given as provided in Section 3.2, the Company, at
its option, may prepay at any time all or from time to time any
part (in an aggregate amount of $1,000,000 or any greater amount
which is an even multiple of $100,000, or, if the aggregate
principal balance of the Notes shall be less than $1,000,000,
then in an amount equal to such aggregate principal balance) of
the principal amount of the Notes, together with accrued but
unpaid interest on the principal amount being prepaid to the date
of such prepayment, plus payment of the applicable Prepayment
Premium.
- 22 -
658180v11<PAGE>
(b) If, on or prior to the third Business Day after
the date of the receipt by the Company of proceeds from a public
offering of any of the Company's Capital Stock (other than
issuances of Capital Stock to employees, officers and directors
of the Company pursuant to stock option plans of the Company),
the Company applies all or a portion of such proceeds from the
offering of its Capital Stock as a prepayment pursuant to Section
3.2(a) above, then the amount of the Prepayment Premium due in
respect of such prepayment (to the extent attributable to such
proceeds) shall be one-half of the amount specified in the
definition thereof.
Each prepayment made pursuant to this Section 3.1 shall be
allocated as provided in Section 3.3.
Section 3.2. Notice of Prepayment of the Notes{tc
"Section 3.2. Notice of Prepayment of the Notes" \f C \l 2}.
The Company shall call Notes for prepayment pursuant to Section
3.1 by giving written notice thereof to each holder of Notes not
less than 15 nor more than 60 days prior to the date fixed for
such prepayment. Such notice shall specify (a) the date fixed
for such prepayment, (b) the principal amount to be prepaid on
such date, (c) the amount of accrued interest to be paid on such
date and (d) the amount of the Prepayment Premium, if any, to be
paid in connection therewith. Notice of prepayment having been
so given, the aggregate principal amount of the Notes so to be
prepaid as specified in such notice, together with interest
accrued thereon to such date fixed for prepayment, plus the
applicable Prepayment Premium, if any, shall become due and
payable on the specified prepayment date.
Section 3.3. Allocation of Payments{tc "Section 3.3.
Allocation of Payments" \f C \l 2}. In the event of any
payment or prepayment of less than the entire outstanding
principal balance of the Notes pursuant to Section 3.1, the
Company shall allocate the principal amount so to be paid or
prepaid by it and the interest and Prepayment Premium, if any,
among the Notes in proportion, as nearly as may be, to the
respective unpaid principal amounts thereof.
Section 3.4. Payments{tc "Section 3.4. Payments"
\f C \l 2}. Each payment by the Company hereunder of the
principal amount of the Notes, interest thereon, Prepayment
Premium fees, costs, expenses, indemnities and other amounts due
hereunder shall be made in Dollars by wire transfer of
immediately available funds, without deduction (except as
provided in Section 3.5), set-off or counterclaim, to each holder
of Notes entitled to receive such payment at such office or bank
account as shall be specified by such holder from time to time by
written notice to the Company, not later than 1:00 p.m. (New York
City time) on the date on which such payment shall become due
(each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day).
Whenever any payment hereunder or under the Notes shall be stated
- 23 -
658180v11<PAGE>
to be due on a day other than a Business Day, that payment shall
be made on the next succeeding Business Day and the extension of
time shall be included in the computation of interest due
thereon.
Section 3.5. Taxes{tc "Section 3.5. Taxes" \f C \l
2}. (a) All payments by the Company or other payor under this
Agreement or with respect to the Notes shall be made free and
clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings
imposed on or with respect to such payments, and all interest,
penalties and other liabilities with respect thereto (all such
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"), excluding
(i) taxes on Purchaser's net income or capital or (ii) franchise
taxes, in each case imposed on Purchaser by the jurisdiction
under the laws of which it is organized or any subdivision
thereof (all such nonexcluded Taxes being hereinafter referred to
as "Covered Taxes").
(b) If the Company shall be required by law to deduct
any Covered Taxes imposed by the United States of America or any
taxing authority thereof ("U.S. Taxes") from or in respect of any
sum payable hereunder to any holder which is not a U.S. Person,
(i) except as provided in subsection (f) below, the sum payable
shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section 3.5), such holder
receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Company shall make such
deductions and (iii) the Company shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law. Upon the occurrence of any event
giving rise to the operation of this Section 3.5(b) with respect
to any holder, such holder shall, if requested by the Company,
use reasonable efforts to designate another office of such holder
through which its Notes are held, with the object of preventing
the consequence of the event giving rise to the operation of this
Section 3.5(b); provided that such designation would not result
in the imposition of any U.S. Taxes or other taxes, levies,
imposts, deductions, charges or withholdings by any jurisdiction
on such holder or with respect to any amounts payable to such
holder hereunder, or other material cost or expense to such
holder, or violate any Statute or Order to which such holder or
the Company is then subject.
(c) In addition, the Company agrees to pay any present
or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any
payment made under this Agreement or the Notes or from the
execution, delivery, enforcement or registration of, or otherwise
with respect to, this Agreement or the Notes, other than any
transfer taxes payable in connection with a change in the
- 24 -
658180v11<PAGE>
registered holder of any Notes (hereinafter referred to as "Other
Taxes").
(d) The Company will indemnify each holder of Notes
for the full amount of Covered Taxes, U.S. Taxes or Other Taxes
imposed by any jurisdiction and paid by such holder with respect
to any amounts payable pursuant to this Section 3.5, and any
liability (including penalties, additions to tax, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Covered Taxes, U.S. Taxes or Other Taxes were correctly
asserted. This indemnification shall be made within 30 days from
the date such holder makes written demand therefor (which demand
shall identify the nature and amount of Covered Taxes, U.S. Taxes
or Other Taxes for which indemnification is being sought and
shall include a copy of the relevant portion of any written
assessment from the relevant taxing authority demanding payment
of such Covered Taxes, U.S. Taxes or Other Taxes).
(e) Within 30 days after the date of any payment of
Covered Taxes, U.S. Taxes or Other Taxes, the Company will
furnish to the holders of Notes the original or a certified copy
of any receipt furnished by the relevant taxing authority
evidencing payment thereof.
(f) The Company shall have no obligation to pay
additional amounts in respect of U.S. Taxes to any holder of
Notes which is not a U.S. Person pursuant to subsection (b) of
this Section 3.5, or to indemnify such holder in respect of such
U.S. Taxes pursuant to subsection (d) of this Section 3.5, if
such U.S. Taxes are imposed solely by reason of such holder's
failure to comply with applicable certification, information,
documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United
States of America of such holder.
(g) Without prejudice to the survival of any other
agreement contained herein, the agreements and obligations
contained in this Section 3.5 shall survive the payment in
full of principal, interest, fees and any other amounts
payable hereunder (other than amounts payable pursuant to this
Section 3.5).
Section 3.6. Surrender of Notes; Notation Thereon{tc
"Section 3.6. Surrender of Notes; Notation Thereon " \f C \l 2}.
The Company may, as a condition of payment of all or any part of
the principal of, Prepayment Premium (if any) and interest on,
any Note, require the holder of such Note to present such Note
for notation of such payment and, if such Note be paid in full,
require the surrender thereof.
Section 3.7. Purchase of Notes{tc "Section 3.7.
Purchase of Notes" \f C \l 2}. The Company will not, nor
will it permit any of its Subsidiaries or Affiliates to, acquire
directly or indirectly by purchase or prepayment or otherwise any
- 25 -
658180v11<PAGE>
of the outstanding Notes except by way of payment or prepayment
in accordance with the provisions of such Notes and of this
Agreement. If the Company or any of its Subsidiaries or
Affiliates acquires any Notes in violation of this Section 3.4 or
in any other manner, such Notes shall thereafter be canceled and
shall not be reissued, no Note shall be issued in substitution
therefor, and such Notes shall not be deemed to be outstanding
for any purpose under this Agreement.
Section 4. Representations and Warranties of the
Company{tc "Section 4. Representations and Warranties of the
Company" \f C \l 1}. The Company represents and warrants to the
Purchaser that:
Section 4.1. Corporate Existence and Power{tc
"Section 4.1. Corporate Existence and Power" \f C \l 2}. Each
of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation and are duly
qualified to do business in each additional jurisdiction where
the failure to so qualify would have a Material Adverse Effect.
The Company and each of its Subsidiaries have all requisite
corporate power to own their respective Properties and to carry
on their respective businesses as now being conducted and as
proposed to be conducted, and in the case of the Company to
execute, deliver and perform its obligations under this
Agreement, the Notes, the Warrants and the Registration Rights
Agreement.
Section 4.2. Corporate Authority{tc "Section 4.2.
Corporate Authority" \f C \l 2}. The execution, delivery and
performance by the Company of this Agreement, the Notes, the
Warrants and the Registration Rights Agreement are within the
corporate powers of the Company and have been duly authorized by
all necessary corporate action on the part of the Board of
Directors of the Company and no action on the part of the
stockholders of the Company is required in connection therewith.
Section 4.3. Binding Effect{tc "Section 4.3.
Binding Effect" \f C \l 2}. This Agreement and the
Registration Rights Agreement have been duly executed and
delivered by the Company and are, and the Notes and Warrants when
issued, executed and delivered as contemplated herein will be,
the legal, valid and binding obligations of the Company, in each
case enforceable against the Company in accordance with their
respective terms, except, in each of the foregoing cases, as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relative to
or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of equity.
Section 4.4. Capital Stock{tc "Section 4.4.
Capital Stock" \f C \l 2}. (a) Except as set forth on
Schedule 4.4, there are no securities outstanding that are
- 26 -
658180v11<PAGE>
convertible into or exchangeable for any shares of Capital Stock
of the Company, nor, except as set forth on Schedule 4.4, are
there outstanding any rights to subscribe for or purchase, or any
options or warrants for the purchase of, or any agreements
(contingent or otherwise) providing for the issuance of, or any
calls, commitments or claims of any character relating to, any
shares of Capital Stock of the Company, or any securities
convertible into or exchangeable for any such shares.
(b) The shares of Common Stock issuable upon exercise
of the Warrants have been duly and validly reserved for issuance
upon such exercise and, when issued and delivered against payment
therefor as provided therein, will be duly authorized, validly
issued, fully paid and non-assessable and subject to no Liens in
respect of the issuance thereof.
Section 4.5. Business Operations and Other
Information; Financial Condition{tc "Section 4.5. Business
Operations and Other Information; Financial Condition" \f C \l
2}. (a) The Company has delivered to the Purchaser copies of (i)
the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1997, (ii) the Company's Annual Report to
Stockholders for the fiscal year ended July 31, 1997, (iii) the
Company's Quarterly Reports on Form 10-Q, as amended, for the
fiscal quarters ended October 31, 1997 and January 31, 1998, and
(iv) the Company's definitive Proxy Statement distributed to its
stockholders in connection with its 1997 annual meeting of
stockholders, each as filed with the SEC (collectively, the
"Company Reports"). The Company Reports do not contain any
misstatement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
The Company Reports, taken together, contain a true and correct
description of the businesses, operations and principal
Properties of the Company and its Subsidiaries as of the
respective dates thereof.
(b) Set forth in the Company Reports are (i) the
audited consolidated balance sheets of the Company and its
Subsidiaries as of July 31, 1997 and June 30, 1996, and the
audited consolidated statements of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries for the
fiscal years ended July 31, 1997, June 30, 1996 and June 30,
1995, together with the notes thereto and the reports thereon of
Ernst & Young LLP, Price Waterhouse LLP and Arthur Andersen LLP
(the "Audited Financial Statements") and (ii) the unaudited
consolidated balance sheets of the Company and its Subsidiaries
as of October 31, 1997 and January 31, 1998, and the related
unaudited consolidated statements of operations and cash flows
for each of the three-month and six-month periods then ended,
together with the notes thereto (the financial statements
referred to in clause (ii) are herein collectively called the
"Unaudited Financial Statements"; the Audited Financial
Statements and the Unaudited Financial Statements are sometimes
- 27 -
658180v11<PAGE>
hereinafter collectively referred to as the "Financial
Statements"). The Audited Financial Statements have been
prepared in accordance with GAAP consistently applied throughout
the periods involved, and present fairly, in all material
respects, the consolidated financial position and related
consolidated results of operations, stockholders' equity and cash
flows of the Company and its Subsidiaries as at each of the dates
and for each of the periods covered thereby, subject, in the case
of the Unaudited Financial Statements, to non-material year-end
audit adjustments, absence of certain of the notes required by
GAAP and absence of statements of stockholders' equity.
(c) As of the date of each of the balance sheets
included in the Audited Financial Statements and the Unaudited
Financial Statements, neither the Company nor any of its
Subsidiaries had any material Indebtedness or material liability,
absolute or contingent, liquidated or unliquidated, except
Indebtedness and liabilities reflected or reserved against on
such respective balance sheets or described in the notes thereto.
Since July 31, 1997, no Material Adverse Effect has occurred.
Section 4.6. Subsidiaries{tc "Section 4.6.
Subsidiaries" \f C \l 2}. Set forth in Schedule 4.6 attached
hereto is a true and complete list of all Subsidiaries of the
Company, setting forth as to each such Subsidiary its
jurisdiction of incorporation and the percentage of each class of
Capital Stock of such Subsidiary owned by the Company or a
Subsidiary of the Company. Except as set forth in Schedule 4.6,
the Company does not own any shares of Capital Stock of, and has
no direct or indirect equity interest in, any Person other than
the Subsidiaries listed in Schedule 4.6. Except as set forth in
Schedule 4.6, the Company has good title to all of the shares of
Capital Stock it owns of each of its Subsidiaries, free and clear
in each case of any Lien. All such shares of Capital Stock of
each Subsidiary have been duly and validly issued, and are fully
paid and non-assessable and owned of record and beneficially by
the Company and/or one or more of its Subsidiaries. There are no
securities outstanding that are convertible into or exchangeable
for any shares of Capital Stock of the Company's Subsidiaries,
nor are there outstanding any rights to subscribe for or
purchase, or any options or warrants for the purchase of, or any
agreements (contingent or otherwise) providing for the issuance
of, or any calls, commitments or claims of any character relating
to, any shares of Capital Stock of the Company's Subsidiaries or
any securities convertible into or exchangeable for any such
shares.
Section 4.7. Litigation; No Violation of Governmental
Orders or Laws{tc "Section 4.7. Litigation; No Violation of
Governmental Orders or Laws" \f C \l 2}. (a) Except as set
forth on Schedule 4.7, there are no judicial, administrative,
arbitral or other actions, suits or proceedings pending or, to
the knowledge of the Company after due inquiry, threatened
against or affecting the Company or any of its Subsidiaries, or
- 28 -
658180v11<PAGE>
any Properties or rights of any of them which, if adversely
determined, individually or in the aggregate, would have a
Material Adverse Effect.
(b) There are no judicial, administrative, arbitral or
other actions, suits or proceedings pending or, to the knowledge
of the Company after due inquiry, threatened against or affecting
the Company or any of its Subsidiaries which seek to enjoin, or
otherwise prevent the consummation of, the transactions
contemplated herein or to recover any damages or obtain any
relief as a result of any of the transactions contemplated herein
in any court or before any arbitrator of any kind or before or by
any Governmental Body.
(c) Neither the Company nor any of its Subsidiaries is
subject to any Order of any Court, arbitrator or Governmental
Body which individually or in the aggregate, would have a
Material Adverse Effect.
(d) Neither of the Company nor any of its Subsidiaries
is, or will be after giving effect to the consummation of the
transactions contemplated hereby, in default under or in
violation of any federal, state, local and foreign Statute or
Order, which default or violation, individually or in the
aggregate together with all other such defaults and violations,
has had or is reasonably likely to have a Material Adverse
Effect.
Section 4.8. No Conflicts with Agreements, Statutes,
Orders, Etc{tc "Section 4.8. No Conflicts with Agreements,
Statutes, Orders, Etc" \f C \l 2}. Neither the execution and
delivery by the Company of this Agreement, the Notes, the
Warrants and the Registration Rights Agreement, nor the offering,
issuance or sale of the Notes or the Warrants, nor the
fulfillment of or compliance with the terms and provisions hereof
or thereof, will conflict with, or result in a breach or
violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of, any
Lien (other than Permitted Liens) on any Properties or assets of
the Company or its Subsidiaries pursuant to, the charter or by-
laws of the Company or its Subsidiaries, or any contract,
agreement, mortgage, indenture, lease or instrument to which any
of them is a party or by which any of them is bound or to which
or any of their respective assets are subject, or any Order or
Statute to which any of them or any of their respective assets
are subject.
Section 4.9. Consents, Etc.{tc "Section 4.9.
Consent, Etc." \f C \l 2} Except as set forth in Schedule
4.9, no consent, approval or authorization of or declaration,
registration or filing with any Governmental Body or any
nongovernmental Person, including, without limitation, any
creditor or stockholder of the Company or any of its
Subsidiaries, is required in connection with the execution or
- 29 -
658180v11<PAGE>
delivery by the Company of this Agreement, the Notes, the
Warrants or the Registration Rights Agreement, or the performance
by the Company of its obligations hereunder or thereunder, or as
a condition to the legality, validity or enforceability of this
Agreement, the Notes, the Warrants or the Registration Rights
Agreement, except for such consents, approvals, authorizations,
declarations, registrations or filings as are listed in Schedule
4.9, all of which have been obtained or will be obtained on or
prior to the Closing Date and are or will then be in full force
and effect.
Section 4.10. Outstanding Indebtedness;
Investments{tc "Section 4.10. Outstanding Indebtedness;
Investments" \f C \l 2}.
(a) Schedule 4.10A sets forth a correct and complete
list and brief description of all Indebtedness for borrowed money
of the Company and all Liens securing such Indebtedness
(excluding any Indebtedness evidenced by the Notes), indicating
which such Indebtedness will be discharged and paid in full on
the Closing Date (the "Non-Continuing Indebtedness") and which
such Indebtedness will be continuing after giving effect to the
transactions contemplated herein (the "Continuing Indebtedness").
There exists no breach or default under the terms and provisions
of any instrument, agreement or contract pertaining to any such
Indebtedness and no event or condition which, with due notice or
lapse of time or both, would constitute such a breach or default.
(b) Schedule 4.10B sets forth a correct and complete
list and brief description of all Investments of the Company and
its Subsidiaries.
Section 4.11. Assets and Properties{tc "Section 4.11.
Assets and Properties" \f C \l 2}. (a) Schedule 4.11 sets
forth a true and complete list of all fee interests in real
Property and leases of real Property of the Company or its
Subsidiaries.
(b) Each of the Company and its Subsidiaries has good
and marketable title to all of its respective Properties (other
than Properties leased from others), subject to no Lien of any
kind except Permitted Liens.
(c) The Properties owned by, leased to or used by the
Company and its Subsidiaries, taken as a whole, are in good
operating condition and repair, ordinary wear and tear excepted,
are free and clear of any known defects except such defects as do
not materially interfere with the continued use thereof in the
conduct of normal operations of the Company and its Subsidiaries
and are able to serve the function for which they are currently
being used in all material respects, in each case except as
disclosed in Schedule 4.11.
- 30 -
658180v11<PAGE>
(d) The Company has furnished or made available to the
Purchaser or its representatives true and complete copies of all
leases of real Property leased by the Company or any of its
Subsidiaries from others, together with all amendments,
modifications and supplements thereto to the date hereof. Each
of the Company and its Subsidiaries enjoys peaceful and
undisturbed possession under all leases, whether of realty or
personalty, to which it respectively is a party, and all such
leases are valid and subsisting and in full force and effect.
None of the Company or any of its Subsidiaries is in breach or
violation of the terms of any such lease, and the Company does
not know of any breach or violation of any of such leases by any
third party, except, in each case, for such breaches and
institutions thereof as in the aggregate do not and will not have
a Material Adverse Effect.
Section 4.12. Taxes{tc "Section 4.12. Taxes" \f C \l
2}. Each of the Company and its Subsidiaries has filed, or on
behalf of each of them there have been filed, all federal, state,
local and foreign tax returns, informational returns and excise
tax returns which are required to have been filed by or on behalf
of such Persons, and there have been paid all taxes shown to be
due and payable on such returns and all other material taxes and
assessments payable by any of them, unless any tax liability is
being diligently contested in good faith and the Company or any
of its Subsidiaries, as the case may be, has adequately reserved
against such tax liability on its books and financial statements
in accordance with GAAP. No tax liens have been filed and no
claims are being asserted with respect to any such taxes as of
the date hereof. No tax assessment against the Company or any of
its Subsidiaries has been proposed and all of their respective
tax liabilities are adequately provided for on their respective
books and financial statements in accordance with GAAP. The
federal income tax returns of the Company and its Subsidiaries
have been audited by the Internal Revenue Service, and such
audits have been completed, or the statute of limitations has
run, for all tax years of the Company through and including the
year ended July 31, 1992, and all deficiencies, assessments,
interest and penalties proposed as a result of any such audit
have been paid in full. No issue has been raised in any such
examination that, by application of similar principles, may
reasonably be expected to result in the assertion of a material
deficiency for any other taxable year not so examined.
Section 4.13. Disclosure{tc "Section 4.13.
Disclosure" \f C \l 2}. This Agreement and the documents,
certificates or other writings delivered to the Purchaser by or
on behalf of the Company in connection with the transactions
contemplated hereby, taken as a whole, do not contain any untrue
statement of material fact or omit to state a material fact
necessary to make the statements therein not misleading in light
of the circumstances under which they were made. There is no
fact known to the Company that could reasonably be expected to
have a Material Adverse Effect that has not been set forth herein
- 31 -
658180v11<PAGE>
or in the other documents, certificates or other writings
delivered to the Purchaser by or on behalf of the Company
specifically for use in connection with the transactions
contemplated hereby.
Section 4.14. Offering of Securities{tc "Section 4.14.
Offering of Securities" \f C \l 2}. None of the Company,
any of its Subsidiaries or their respective representatives has,
directly or indirectly, offered any of the Notes or the Warrants
or any security similar to any of them for sale to, or solicited
any offers to buy any of the Notes or the Warrants or any
security similar to any of them from, or otherwise approached or
negotiated with respect thereto with, more than 60 Persons
excluding the Purchaser, and none of the Company, any of its
Subsidiaries or their respective representatives has taken or
will take any action which would subject the issuance or sale of
any of the Notes or Warrants to the provisions of Section 5 of
the Securities Act or violate the provisions of any securities or
Blue Sky laws of any applicable jurisdiction.
Section 4.15. Broker's or Finder's Commissions{tc
"Section 4.15. Broker's or Finder's Commissions" \f C \l 2}.
Except for the structuring fee of Nomura Securities
International, Inc. and fees of ING Baring (U.S.) Securities,
Inc., no broker's or finder's fee or commission will be payable
by the Company with respect to the issuance and sale of the Notes
or the Warrants. The Company agrees to indemnify the Purchaser
and hold it harmless against any loss, cost, claim or liability
(including, without limitation, reasonable attorneys' fees and
disbursements for the investigation and defense of claims)
asserted against Purchaser arising out of or relating to any such
actual or alleged fee or commission.
Section 4.16. Labor Matters{tc "Section 4.16. Labor
Matters" \f C \l 2}. Except as set forth in Schedule 4.16,
during the three years preceding the Closing Date, there has been
no strike, work stoppage, slowdown or other labor dispute or
grievance involving the Company or any of its Subsidiaries, or
employees of any such Person, nor is any such action, dispute or
grievance pending or, to the knowledge of the Company, after due
inquiry, threatened against the Company or any of its
Subsidiaries that could have a Material Adverse Effect. Except
as set forth in Schedule 4.16, none of the Company or any of its
Subsidiaries is a party to any collective bargaining agreement
and none of them has any knowledge after due inquiry of any
pending or threatened effort to organize any of its employees.
Except as set forth in Schedule 4.16, there are no pending
retaliatory or wrongful discharge claims or employment
discrimination charges or complaints or administrative or
judicial complaints arising therefrom pending against the Company
or any of its Subsidiaries or against any of their respective
employees before any Governmental Body, which have had or could
reasonably be expected to have a Material Adverse Effect, nor to
the knowledge of the Company after due inquiry are any such
- 32 -
658180v11<PAGE>
charges or complaints threatened against the Company or any of
its Subsidiaries. The Company and its Subsidiaries are in
compliance with all applicable Statutes and Orders relating to
the employment of labor, including, without limitation, any
provisions thereof relating to wages, bonuses, collective
bargaining agreements, equal pay, occupational safety and health,
equal employment opportunity and wrongful or retaliatory
termination of employment, except for such noncompliance as in
the aggregate would not result in a Material Adverse Effect.
Section 4.17. Environmental Matters{tc "Section 4.17.
Environmental Matters" \f C \l 2}. Except as set forth in
Schedule 4.17:
(a) there is no pending or, to the knowledge of the
Company, threatened Environmental Matter relating to the Company
or any of its Subsidiaries, any of their respective Properties or
the use thereof, and the Company is aware of no facts that could
result in any such Environmental Matter. Neither the Company nor
any of its Subsidiaries has agreed to assume by contract or
otherwise any liability of any other Person for cleanup,
compliance, or required Consolidated Capital Expenditures in
connection with any Environmental Matter arising prior to the
date hereof;
(b) To the knowledge of the Company, the Properties
used, owned, leased, operated, managed or controlled at any time
by the Company or any of its Subsidiaries are and were free of
air, soil, groundwater, or surface water contamination resulting
from the spill, discharge, or release of Hazardous Materials by
the Company or any of its Subsidiaries (other than any such
spill, release, or discharge that is permitted under any
Environmental Law or that would not require investigation,
reporting, or remediation under any Environmental Law). To the
knowledge of the Company, the Properties used, owned, leased,
operated, managed, or controlled at any time by the Company or
any of its Subsidiaries are and were free of any other harmful
chemical or physical conditions;
(c) the Company and its Subsidiaries are currently in
compliance with all applicable Environmental Laws, except for
such non-compliance as in the aggregate would not have a Material
Adverse Effect, are not currently in receipt of any notice of
violation of any Environmental Law or of any potential liability
for cleanup of Hazardous Materials, have cured any past
violations or alleged violations of Environmental Laws asserted
against the Company or any of the Subsidiaries to the
satisfaction of all Governmental Bodies having jurisdiction
thereof and are not now subject to any investigation by a
Governmental Body concerning Hazardous Materials or any
Environmental Laws. The Company and its Subsidiaries hold and
are in compliance with all governmental permits, licenses, and
authorizations necessary under Environmental Laws to operate
their businesses including those that relate to siting, air
- 33 -
658180v11<PAGE>
emissions, discharges to surface or ground water, discharges to
any sewer or septic system, noise emissions, solid waste disposal
or the generation, use, transportation or other management of
Hazardous Materials, except for such permits, licenses and
authorizations, the absence of which or non-compliance with which
in the aggregate would not have a Material Adverse Effect. To
the Company's knowledge, the Company and its Subsidiaries have
not at any time generated, manufactured, refined, recycled,
discharged, emitted, released, buried, processed, produced,
reclaimed, stored, treated, transported, or disposed of any
Hazardous Materials except in compliance with all applicable
Statutes and Orders, including permit requirements;
(d) no Properties of the Company or its Subsidiaries
are subject to any Lien or claim that might lead to a Lien in
favor of any Person as a result of any Environmental Matter or
response thereto;
(e) neither the Company nor any of its Subsidiaries
has any material liabilities, absolute or contingent, on the date
hereof with respect to Hazardous Materials, except for such
liabilities as are not in the aggregate reasonably likely to have
a Material Adverse Effect; and
Section 4.18. Margin Regulations; Use of Proceeds{tc
"Section 4.18. Margin Regulations; Use of Proceeds" \f C \l 2}.
None of the Company or any of its Subsidiaries owns or intends to
acquire any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System of the United
States (12 CFR S 221). No part of the proceeds from the sale of
the Notes will be used, and no part of the proceeds of any loans
repaid with the proceeds from the sale of the Notes was used,
directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System of the United States (12
CFR S 221), or for the purpose of buying or carrying or trading
in any securities under such circumstances as to involve the
Company or of its Subsidiaries in a violation of Regulation X of
said Board (12 CFR S 224) or to involve any broker or dealer in a
violation of Regulation of said Board (12 CFR S 220). Neither
the Company nor any of its Subsidiaries, or any agent acting on
behalf of the Company or its Subsidiaries, has taken or will take
any action which might cause this Agreement or the Notes to
violate Regulation U, Regulation X, Regulation T or any other
regulation of the Board of Governors of the Federal Reserve
System or to violate the Exchange Act, in each case as in effect
now or as the same may hereafter be in effect. As used in this
Section, the term "purpose of buying or carrying" has the meaning
assigned thereto in the aforesaid Regulation U.
Section 4.19. Compliance with ERISA{tc "Section 4.19.
Compliance with ERISA" \f C \l 2}. The Company has
furnished or made available to the Purchaser copies of each
material bonus, deferred compensation, incentive compensation,
- 34 -
658180v11<PAGE>
stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, or
retirement plan, program, agreement or arrangement or other Plan
maintained as of the Closing Date by the Company or any of its
Subsidiaries or ERISA Affiliates with respect to employees of the
Company or any of its Subsidiaries or ERISA Affiliates, and each
material employment, consulting, severance or similar agreement
between the Company or any of its Subsidiaries and their
respective officers and managerial employees. Except as set
forth on Schedule 4.19:
(a) no Pension Plan which is subject to Part 3 of
Subtitle B of Title 1 of ERISA or Section 412 of the Code had an
accumulated funding deficiency (as such term is defined in
Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of such
Pension Plan heretofore ended;
(b) no liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been
incurred and is outstanding with respect to any Pension Plan, and
there has not been any Reportable Event, or any other event or
condition, which presents a material risk of involuntary
termination of any Pension Plan by the PBGC;
(c) neither any Plan nor any trust created thereunder,
nor, to the Company's knowledge, any trustee or administrator
thereof, has engaged in a prohibited transaction (as such term is
defined in Section 4975 of the Code or Section 406 of ERISA) that
could reasonably be expected to subject the Company or any of its
Subsidiaries or ERISA Affiliates to any tax or penalty imposed
under Section 4975 of the Code or Section 502(i) of ERISA which
would have a Material Adverse Effect; and neither the Company nor
any of its Subsidiaries or ERISA Affiliates has received a notice
that a Multiemployer Plan or trust created thereunder, or any
trustee or administrator thereof, has engaged in any such
prohibited transaction under circumstances which would have a
Material Adverse Effect;
(d) no liability under Title IV of ERISA which would
have a Material Adverse Effect has been incurred and is
outstanding with respect to any Multiemployer Plan as a result of
the complete or partial withdrawal by the Company or any of its
Subsidiaries or ERISA Affiliates from such Multiemployer Plan,
nor has the Company or any of its Subsidiaries or ERISA
Affiliates been notified by any Multiemployer Plan that such
Multiemployer Plan is currently in reorganization or insolvency
under and within the meaning of Section 4241 or 4245 of ERISA or
that such Multiemployer Plan intends to terminate or has been
terminated under Section 4041A of ERISA;
(e) the Company and its Subsidiaries and ERISA
Affiliates are in compliance in all respects with all applicable
provisions of ERISA and the Code and the regulations and
- 35 -
658180v11<PAGE>
published interpretations thereunder with respect to all Plans
and Multiemployer Plans, except where non-compliance would not
have a Material Adverse Effect;
(f) no Pension Plan has an Unfunded Current Liability
in excess of $750,000 and presents a material risk of termination
by the PBGC or by the Company or any of its Subsidiaries or ERISA
Affiliates;
(g) as of the Closing Date, neither the Company nor
any of its Subsidiaries or ERISA Affiliates has received a notice
within the past two years to the effect that a Multiemployer Plan
has any unfunded vested benefits within the meaning of Section
4213(c) of ERISA;
(h) no event has occurred with respect to any Plan
subject to Title IV of ERISA or with respect to any other
employee benefit pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA established or maintained at
any time during the five-year period immediately preceding the
Closing Date for the benefit of employees of the Company or any
of its Subsidiaries or ERISA Affiliates which presents a risk of
material liability of the Company or any of its Subsidiaries or
ERISA Affiliates under Section 4069 of ERISA;
(i) any Plan which provides for continued medical,
health, life or other welfare benefits for employees after they
leave the employment of the Company or any of its Subsidiaries or
ERISA Affiliates (other than any such welfare benefits required
to be provided under the Consolidated Omnibus Budget
Reconciliation Act or other similar law) may be terminated at any
time without the incurrence of any liability which would have a
Material Adverse Effect; and
(j) neither the Company nor any of its Subsidiaries or
ERISA Affiliates is a party in interest (as defined in Section
3(14) of ERISA) with respect to any employee benefit plan (as
defined in Section 3(3) of ERISA), other than the Plans and any
Multiemployer Plans or any other employee benefit plan that would
not cause the purchase or holding of the Notes and Warrants by
the Purchaser or any other holder thereof to be a prohibited
transaction under Section 406(a) of ERISA and Section 4975(c) of
the Code.
Section 4.20. Material Contracts{tc "Section 4.20.
Material Contracts" \f C \l 2}. (a) Schedule 4.20A
contains a list of all Material Contracts to which the Company
and its Subsidiaries are a party. True and complete copies of
each of the Material Contracts to which the Company and its
Subsidiaries are a party, with all amendments, modifications and
supplements thereto to the date hereof, have previously been
furnished or made available to Purchaser or its representatives
by the Company. Each of such Material Contracts is valid,
subsisting and in full force and effect. Neither the Company nor
- 36 -
658180v11<PAGE>
any of its Subsidiaries is in breach or violation of any of the
terms, conditions or provisions of any of the Material Contracts
and, to the best knowledge of the Company, no other party to any
of the Material Contracts is in breach or violation of any of the
terms, conditions or provisions thereof, except for such breaches
and violations as in the aggregate do not and would not result in
a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has transferred or subordinated any of its rights or
interests in any of the Material Contracts, and such rights and
interests are subject to no Liens except Permitted Liens.
Neither the Company nor any of its Subsidiaries is a party to any
Material Contract or is subject to any restriction contained in
its charter or by-laws which individually or in the aggregate has
had or is reasonably likely to have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.20B, neither the
Company nor any of its Subsidiaries has during the past 10 years
been debarred or suspended from contracting (as a first tier
contractor or any level of subcontractor) for or bidding on any
Government Contract. Neither the Company nor any of its
Subsidiaries is currently debarred or suspended from (or has
received written notice that it is under investigation with
respect to a possible debarment or suspension from) bidding on or
entering into any Government Contract. Except as set forth in
Schedule 4.20b, neither the Company nor any of its Subsidiaries
has received written notice (i) that any Government Contract may
be or will be terminated for the convenience of a Governmental
Body or by reason of a default or alleged default by the Company
or any of its Subsidiaries, (ii) that a Government Contract or
governmental program involving the Company or any of its
Subsidiaries will be eliminated or substantially reduced or
suspended or (iii) requiring or resulting in loss of use or
substantial impairment or interference of use by the Company or
any of its Subsidiaries of any facilities owned by a Governmental
Body.
(c) Final audits of all of the Government Contracts of
the Company and its Subsidiaries with the United States of
America and its departments, commissions, agencies and
instrumentalities have been completed by the Defense Contract
Audit Agency for all fiscal years of the Company through and
including its fiscal year ended July 31, 1993. No issue has been
raised in any such audit or in any pending audit covering
subsequent years that could reasonably be expected to result in
the suspension or debarment of the Company or any of its
Subsidiaries from bidding on or entering into any Government
Contract.
(d) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to the Company or any of its Subsidiaries
under, or any other material term of, any Material Contract with
any Person and, to the knowledge of the Company, no such Person
has made written demand for such renegotiation.
- 37 -
658180v11<PAGE>
Section 4.21. Insurance{tc "Section 4.21. Insurance"
\f C \l 2}. Schedule 4.21 sets forth a true and complete list
and brief descriptions of all policies of workers compensation,
general liability, fire, property, casualty, marine, business
interruption, errors and omissions, flood, earthquake and other
insurance carried by the Company as of the Closing Date, true and
complete copies of which policies have previously been delivered
to the Purchaser. Such policies are in full force and effect,
and neither the Company nor any of its Subsidiaries has received
notice of cancellation with respect to any such policy. All
premiums payable with respect to such policies have been or will
then have been paid in respect of the coverage periods specified
in Schedule 4.21 and all premiums payable with respect to such
policies on or before the Closing Date will have been paid as and
when due on or before the Closing Date.
Section 4.22. Possession of Franchises, Licenses,
Etc{tc "Section 4.22. Possession of Franchises, Licenses, Etc"
\f C \l 2}. Each of the Company and its Subsidiaries possesses
all franchises, certificates, licenses (including FDA licenses),
permits, registrations, security clearances and other
authorizations from Governmental Bodies that are necessary for
the ownership, maintenance and operation of its Properties and
assets, and for the conduct of their respective businesses as now
conducted, and none of the Company or any of its Subsidiaries is
in violation of any thereof, except, in each case, for such
matters as in the aggregate do not and will not result in a
Material Adverse Effect.
Section 4.23. Intellectual Property{tc "Section 4.23.
Intellectual Property" \f C \l 2}. (a) Set forth in
Schedule 4.23 is an accurate and complete list of all patents,
trademarks, trade names, service marks and copyrights owned by
the Company and its Subsidiaries and all applications therefor,
and all license agreements with respect to Intellectual Property
used in the business of the Company, specifying with respect to
each such item the owner thereof, the registration or application
number thereof, the jurisdiction by or in which such item has
been issued or registered or in which an application therefor has
been filed, if any, the date of such issuance, registration or
application, and the expiration date thereof.
(b) The Company and its Subsidiaries own and have good
title to, or possess the right to use pursuant to binding and
enforceable agreements, all items of Intellectual Property, free
from Liens, except Permitted Liens, which are necessary for the
present and planned future conduct of their respective
businesses. Except as set forth in Schedule 4.23, (i) to the
best knowledge of the Company, none of the present or
contemplated products or operations of the Company or any of its
Subsidiaries, infringes or otherwise violates, or will then
infringe or otherwise violate, any Intellectual Property owned by
any other Person, and (ii) there is no pending or, to the best
- 38 -
658180v11<PAGE>
knowledge of the Company, threatened claim, demand, litigation,
investigation, arbitration or other proceeding against or
affecting the Company or any of its Subsidiaries contesting the
right of any of them to manufacture, distribute or sell any such
product or to engage in any such operation, or to use any of such
Intellectual Property.
(c) Set forth in Schedule 4.23 is an accurate and
complete list and summary description, including any royalties
paid or received by the Company and its Subsidiaries, of all
Contracts relating to any Intellectual Property to which the
Company or any Subsidiary is a party or by which the Company or
any Subsidiary is bound (the "IP Contracts"), except for any
license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of
less than $1,000 under which the Company or any Subsidiary is a
licensee. There are no outstanding and, to the Company's
knowledge, no threatened disputes or disagreements with respect
to any such agreement.
Section 4.24. Customers and Suppliers{tc "Section
4.24. Customers and Suppliers" \f C \l 2}. Schedule 4.24
sets forth the principal suppliers and the principal customers of
the Company and its Subsidiaries (being the 10 largest suppliers
and the 10 largest customers of the Company and its Subsidiaries
and any predecessor corporations for the period from August 1,
1997 to March 31, 1998) and since March 31, 1998 there has been
no termination or cancellation of, and no modification or change
in, the Company's and its Subsidiaries' business relationships
with any principal supplier, principal customer or group of
principal customers or suppliers. Except as described in
Schedule 4.24, the Company has no reason to believe that the
benefits of any relationship with any of the principal customers
or suppliers of the Company or any of its Subsidiaries will not
continue after the Closing Date in substantially the same manner
as prior to the date of this Agreement.
Section 4.25. Status under Certain Laws{tc "Section
4.25. Status under Certain Laws" \f C \l 2}. Neither the
Company nor any of its Subsidiaries is an "investment company" or
a "person directly or indirectly controlled by or acting on
behalf of an investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding
company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended. Neither the Company nor
any of its Subsidiaries is subject to regulation as a "common
carrier" or "contract carrier" or any similar classification by
the Interstate Commerce Commission or under the laws of any
state, or is subject to regulation under any other Statute which
limits its ability to incur indebtedness.
- 39 -
658180v11<PAGE>
Section 4.26. Certain Transactions{tc "Section 4.26.
Certain Transactions" \f C \l 2}. Except as set forth on
Schedule 4.26 hereto, neither the Company nor any of its
Subsidiaries is indebted, directly or indirectly, to any of their
respective officers, directors or stockholders or to any of the
respective spouses or children of any of such Persons, except
with respect to salaries and related employee compensation and
expense reimbursement, and except as set forth on Schedule 4.26,
none of such officers, directors or stockholders, or any member
of their immediate families, is indebted to the Company or any of
its Subsidiaries in any amount whatsoever. Except as set forth
on Schedule 4.26 hereto, no officer, director or shareholder of
the Company or any of its Subsidiaries, or any member of their
immediate families, is, directly or indirectly, interested in any
Material Contract with the Company or nor any of its
Subsidiaries.
Section 4.27. Solvency{tc "Section 4.27. Solvency"
\f C \l 2}. The Company and its Subsidiaries are Solvent on the
Closing Date both before and after giving effect to the
application of the net proceeds of the issuance and sale of the
Notes and the Warrants to be issued on the Closing Date.
Section 4.28. Use of Proceeds{tc "Section 4.28. Use
of Proceeds" \f C \l 2}. The proceeds from the sale and issuance
of the Notes will be used to repay existing Indebtedness of the
Company and its Subsidiaries.
Section 4.29. Ranking of Notes{tc "Section 4.29.
Ranking of Notes" \f C \l 2}. The Indebtedness represented
by the Notes is intended to constitute senior subordinated
Indebtedness, and accordingly is, and shall be at all times while
the Notes remain outstanding, senior in right of payment to, or
pari passu with, all other Indebtedness (except for Designated
Senior Indebtedness) of the Company and its Subsidiaries;
provided, however, if any of such other Indebtedness is
subordinate to Designated Senior Indebtedness such subordination
shall be on terms substantially similar to the terms of the
Subordination Agreement attached hereto as Exhibit C.
Section 5. Representations of the Purchaser{tc
"Section 5. Representations of the Purchaser" \f C \l 1}. The
Purchaser represents to the Company that (a) it is an "accredited
investor," within the meaning of Rule 501 promulgated by the SEC
under the Securities Act, and (b) it is acquiring the Notes and
the Warrants to be purchased by it hereunder for its own account,
for investment, and not with a view to or for sale in connection
with any distribution thereof in violation of the registration
provisions of the Securities Act or the rules and regulations
promulgated thereunder, and (c) its purchase of the Notes and the
Warrants will not constitute a "prohibited transaction" under
Section 406 of ERISA and Section 4975 of the Code. The Purchaser
acknowledges that the Notes and the Warrants have not been
registered under the Securities Act and may not be sold except
- 40 -
658180v11<PAGE>
pursuant to an effective registration statement thereunder or an
exemption from registration under the Securities Act and
applicable state securities laws.
Section 6. Closing Conditions{tc "Section 6.
Closing Conditions" \f C \l 1}. The Purchaser's obligation
to purchase and pay for the Notes to be purchased by it hereunder
on the Closing Date shall be subject to the satisfaction, on or
before the Closing Date, of the following conditions:
Section 6.1. Proceedings Satisfactory{tc "Section 6.1.
Proceedings Satisfactory" \f C \l 2}. All corporate and
other proceedings taken or to be taken in connection with the
transactions contemplated to occur on the Closing Date and all
documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchaser and its special counsel, and
the Purchaser and its special counsel shall have received all
such counterpart originals or certified or other copies of such
documents as they may reasonably request, including, without
limitation:
(i) certificates dated as of a recent date
prior to the Closing Date as to the corporate status of
each of the Company and each of its Subsidiaries in
each jurisdiction where each of the Company and each of
its Subsidiaries is organized or is authorized to do
business as a foreign corporation;
(ii) certified copies of the certificate or
articles of incorporation (or other comparable
constituting document) of each of the Company and each
of its Subsidiaries with all amendments thereto to the
Closing Date;
(iii) certified copies of the by-laws (or
other comparable constituting document) of each of the
Company and each of its Subsidiaries with all
amendments thereto to the Closing Date;
(iv) certified copies of resolutions of the
Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement,
the Notes, the Warrants and the Registration Rights
Agreement; and
(v) certificates as to the incumbency and
signatures of each of the officers of the Company who
shall execute this Agreement or any Note, Warrant or
Registration Rights Agreement on behalf the Company.
Section 6.2. Opinion of Purchaser's Special Counsel{tc
"Section 6.2. Opinion of Purchaser's Special Counsel" \f C \l
2}. The Purchaser shall have received from Stroock & Stroock &
Lavan LLP, who are acting as special counsel for the Purchaser in
- 41 -
658180v11<PAGE>
connection with this transaction, a favorable legal opinion dated
the Closing Date and addressed to the Purchaser, covering such
matters as the Purchaser may reasonably request.
Section 6.3. Opinions of Counsel to the Company{tc
"Section 6.3. Opinions of Counsel to the Company" \f C \l 2}.
The Purchaser shall have received from Arnold & Porter, counsel
to the Company in connection with the transactions contemplated
by this Agreement, favorable legal opinions (which may include
opinions of local counsel), dated the Closing Date and addressed
to the Purchaser covering the matters specified in Exhibit F.
Section 6.4. Representations and Warranties True,
Etc.; Certificates{tc "Section 6.4. Representations and
Warranties True, Etc.; Certificates" \f C \l 2}. The
representations and warranties of the Company contained in
Section 4 and elsewhere in this Agreement shall be true on and as
of the Closing Date with the same effect as if such
representations and warranties had been made on and as of the
Closing Date. The Company shall have performed all agreements on
its part required to be performed under this Agreement on or
prior to the Closing Date, and there shall exist no Default or
Event of Default on the Closing Date. The Company shall have
delivered to the Purchaser an Officer's Certificate, dated the
Closing Date, to the effect of the matters stated in the
foregoing sentences of this Section 6.4 and in Sections 6.5, 6.6,
6.7 and 6.9.
Section 6.5. Absence of Material Adverse Change,
Etc{tc "Section 6.5. Absence of Material Adverse Change, Etc"
\f C \l 2}. Since July 31, 1997, no Material Adverse Effect
shall have occurred.
Section 6.6. Consents and Approvals{tc "Section 6.6.
Consents and Approvals" \f C \l 2}. All necessary consents,
waivers, approvals and authorizations of, and declarations,
registrations and filings with, Governmental Bodies and
nongovernmental Persons required in order to issue and sell the
Notes and the Warrants as contemplated hereby and to consummate
the other transactions contemplated hereby shall have been
obtained or made and shall be in full force and effect,
including, without limitation, all required consents and waivers
of the holders of Senior Indebtedness and of any agent or
representative thereof.
Section 6.7. Absence of Litigation, Orders, Etc{tc
"Section 6.7. Absence of Litigation, Orders, Etc" \f C \l 2}.
There shall not be pending or, to the knowledge of the Company
after due inquiry, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or affecting
either of the Company or its Subsidiaries or their respective
Property and assets (and, as to any action, suit, proceeding,
governmental investigation or arbitration so disclosed, there
shall not have occurred since the date of this Agreement any
- 42 -
658180v11<PAGE>
development) which seeks to enjoin or restrain any of the
transactions contemplated herein or which has had or is
reasonably likely to have a Material Adverse Effect. No Order of
any court, arbitrator or Governmental Body shall be in effect
which purports to enjoin or restrain any of the transactions
contemplated herein or which has had or will have a Material
Adverse Effect.
Section 6.8. Subordination Agreement{tc "Section 6.8.
Subordination Agreement" \f C \l 2}. The Company, each
Subsidiary of the Company and ING, as lender and agent under the
Credit Agreement, shall have executed and delivered a
Subordination Agreement in the form of Exhibit C hereto (as from
time to time amended, modified or supplemented in accordance with
its terms, the "Subordination Agreement").
Section 6.9. Total Indebtedness under Credit
Agreement{tc "Section 6.9. Total Indebtedness under Credit
Agreement" \f C \l 2}. The aggregate Indebtedness of the Company
under the Credit Agreement on the Closing Date (after giving
effect to the transactions contemplated hereby) shall not exceed
$23,000,000 and the excess availability under the Credit
Agreement on the Closing Date (after giving effect to the
transactions contemplated hereby) shall be at least $1,000,000.
Section 6.10. Fees.{tc "Section 6.10. Fees." \f C \l
2} The fees required to be paid on the Closing Date pursuant to
Section 2.4 shall be paid concurrently with the issuance and sale
of Notes to be sold on the Closing Date. The fees and expenses
incurred by Stroock & Stroock & Lavan LLP and any local or
special counsel to the Purchaser in connection with the
preparation of this Agreement, the Notes, the Warrants and the
Registration Rights Agreement and the transactions contemplated
hereby shall be paid by the Company on the Closing Date.
Section 6.11. Wire Instructions.{tc "Section 6.11.
Wire Instructions." \f C \l 2} The Purchaser shall have
received not less than two Business Days prior to the Closing
Date wire instructions prepared by the Company as to all wire
transfers or other payments to be effected on the Closing Date in
connection with the transactions to be consummated on the Closing
Date pursuant to this Agreement or the other Transaction
Documents, which wire instructions shall identify the payor and
payee of each such wire transfer or payment, shall describe the
manner of transfer or payment, shall direct that all funds be
transferred to a bank chartered under the laws of the United
States of America or any state thereof located within the United
States of America, and shall otherwise be satisfactory in form
and substance to the Purchaser.
Section 6.12. Put Subordination Agreement{tc "Section
6.12. Put Subordination Agreement" \f C \l 2}. The Company,
ING and the Purchaser shall have executed and delivered the Put
Subordination Agreement.
- 43 -
658180v11<PAGE>
Section 7. Financial Statements and Information{tc
"Section 7. Financial Statements and Information" \f C \l 1}.
The Company will furnish to the Purchaser and any other holder of
Notes, so long as any Notes shall be outstanding:
(a) Monthly Financial Statements. As soon as
available and in any event within 45 days after the end of each
month, copies of the consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of such
month and the related consolidated and consolidating statements
of operations and cash flows for such month and for the portion
of the fiscal year ended with the last day of such month, and
stating in comparative form the corresponding figures from the
consolidated budget of the Company and its Subsidiaries for such
period and for the portion of the previous fiscal year ended with
the last day of such period, all Certified by the Chief Financial
Officer of the Company;
(b) Quarterly Financial Statements; Compliance
Certificates. As soon as available and in any event within 45
days after the end of each quarterly accounting period (other
than the fourth quarterly accounting period) in each fiscal year
of the Company,
(i) copies of the Company's Quarterly Report on
Form 10-Q promulgated by the SEC, or any successor form
thereto, and
(ii) an Officer's Certificate of the Chief
Financial Officer of the Company setting forth
computations in reasonable detail showing whether or
not as at the end of such fiscal quarter there existed
any breach or violation of the provisions of Section
10.1, 10.7, 10.11, 10.12 or 10.16 hereof;
(c) Annual Financial Statements; Compliance
Certificates. As soon as available and in any event within 90
days after the end of each fiscal year of the Company,
(i) copies of the audited consolidated and
unaudited consolidating balance sheets of the Company
and its Subsidiaries, in each case as of the end of
such fiscal year, together with, in each case, the
related audited consolidated and unaudited
consolidating statements of operations, stockholders'
equity and cash flows for such fiscal year, and the
notes thereto, all in reasonable detail and stating in
comparative form (A) the respective audited
consolidated and unaudited consolidating figures as of
the end of and for the previous fiscal year and (B) the
corresponding figures from the consolidated budget of
the Company and its Subsidiaries for such fiscal year,
(x) in the case of each of such audited consolidated
- 44 -
658180v11<PAGE>
financial statements, accompanied by a report thereon
of Ernst & Young LLP, or other independent public
accountants of recognized national standing selected by
the Company and reasonably acceptable to the Majority
Holders (the "Accountants"), which report shall be
unqualified as to going concern and scope of audit and
shall state that such consolidated financial statements
present fairly, in all material respects, the
consolidated financial position of the Company and its
Subsidiaries as at the end of such fiscal year and
their consolidated results of operations, stockholders'
equity and cash flows for such fiscal year in
conformity with GAAP and that the examination by the
Accountants in connection with such consolidated
financial statements has been made in accordance with
generally accepted auditing standards, and (y) in the
case of such unaudited consolidating financial
statements, Certified by the Chief Financial Officer
of the Company; and
(ii) a written statement of the Accountants (x)
setting forth computations in reasonable detail showing
whether or not as at the end of such fiscal year there
existed any breach or violation of the provisions of
Section 10.1, 10.7, 10.10, 10.11 or 10.16 hereof, and
(y) stating that in making the examination necessary
for their report on such financial statements they
obtained no knowledge of any event or condition
constituting a Default or Event of Default, or if such
Accountants shall have obtained such knowledge,
specifying the nature and status thereof;
(d) Officer's Compliance Certificates. Concurrently
with the reports or financial statements furnished pursuant to
subsections (b) and (c) of this Section 7 an Officer's
Certificate of the Chief Financial Officer of the Company stating
that, based upon such examination or investigation and review of
this Agreement as in the opinion of the signer is necessary to
enable the signer to express an informed opinion with respect
thereto, no Default or Event of Default exists or has existed
during such period or, if such a Default or Event of Default
shall exist or have existed, the nature and period of existence
thereof and what action the Company has taken, is taking or
proposes to take with respect thereto;
(e) Stockholder Reports; SEC Filings. Promptly after
the same are available and in any event within 10 days thereof,
copies of all such proxy statements, financial statements,
notices and other reports as the Company shall send or make
available generally to its stockholders, and copies of all
regular and periodic reports, registration statements and other
documents which the Company shall file with the SEC;
- 45 -
658180v11<PAGE>
(f) Management Letters. Promptly after the receipt
thereof by the Company, and in any event within 10 days thereof,
copies of any management letters and any reports as to material
inadequacies in accounting controls (including reports as to the
absence of any such inadequacies) submitted to the Company by the
Accountants in connection with any audit of the Company and its
Subsidiaries made by the Accountants;
(g) Events of Default. Promptly (and in any event
within 5 days) after becoming aware of (i) the existence of any
Default or Event of Default on the part of the Company, an
Officer's Certificate of the Company specifying the nature and
period of existence thereof and what action the Company is
taking or proposes to take with respect thereto; or (ii) any
Indebtedness of the Company or any of its Subsidiaries being
declared due and payable before its expressed maturity, or any
holder of such Indebtedness having the right to declare such
Indebtedness due and payable before its expressed maturity,
because of the occurrence of any default (or any event which,
with notice and/or the lapse of time, shall constitute any such
default) under such Indebtedness, an Officer's Certificate of the
Company describing the nature and status of such matters and what
action the Company or such Subsidiary is taking or proposes to
take with respect thereto;
(h) ERISA Matters. Promptly and in any event within
15 days after the Company knows or, in the case of a Pension Plan
has reason to know, that a Reportable Event with respect to any
Pension Plan has occurred, that any Pension Plan or that any
Multiemployer Plan is or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA or has
any unfunded vested benefits within the meaning of Section
4213(c) of ERISA, or that the Company or any of its Subsidiaries
or ERISA Affiliates will or may incur any material liability to
or on account of a Pension Plan or Multiemployer Plan under Title
IV of ERISA or any other material liability under ERISA has been
asserted against the Company or any of its Subsidiaries or ERISA
Affiliates, or that any Pension Plan has an Unfunded Current
Liability in excess of $500,000, an Officer's Certificate of the
Company setting forth information as to such occurrence and what
action, if any, the Company or such Subsidiary or ERISA Affiliate
is required or proposes to take with respect thereto, together
with any notices concerning such occurrences which are (a)
required to be filed by the Company or such Subsidiary or ERISA
Affiliate with the Internal Revenue Service or the PBGC, or (b)
received by the Company or such Subsidiary or ERISA Affiliate
from any Multiemployer Plan;
(i) Material Adverse Effect. Promptly after becoming
aware of any Material Adverse Effect with respect to which notice
is not otherwise required to be given pursuant to this Section 7,
an Officer's Certificate of the Company setting forth the details
of such Material Adverse Effect and stating what action the
- 46 -
658180v11<PAGE>
Company or any of its Subsidiaries has taken or proposes to take
with respect thereto;
(j) Litigation and Proceedings. Promptly (and in any
event within 15 days) after the Company knows of (i) the
institution of, or threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting
the Company or any of its Subsidiaries or any Property of any of
them, or (ii) any material development in any such action, suit,
proceeding, governmental investigation or arbitration, which, in
either case, if adversely determined, is likely to have a
Material Adverse Effect, an Officer's Certificate of the Company
describing the nature and status of such matter in reasonable
detail;
(k) Annual Budget. Not later than 30 days prior to
the beginning of each fiscal year of the Company, a copy of a
consolidated and consolidating budget of the Company and its
Subsidiaries prepared by the Company for such fiscal year, which
shall include at minimum a projected balance sheet and a
projected statement of operations for each month in such fiscal
year;
(l) Notices to Senior Lenders. Copies of all notices,
reports, certificates and other information furnished to the
holders of Senior Indebtedness or to any agent or representative
of such holders, in each case promptly after the same are so
furnished; and
(m) Other Information. Any other information,
including financial statements and computations, relating to the
performance of obligations arising under this Agreement and/or
the affairs of the Company or any of its Subsidiaries that the
Purchaser or any other holder of Notes may from time to time
reasonably request and which is capable of being obtained,
produced or generated by the Company or such Subsidiary; provided
that nothing in this subsection (m) shall be construed to require
the Company or its Subsidiaries to disclose any documents or
information in violation of any Statute or Government Contract
restricting such disclosure for reasons of national security.
It is further understood and agreed that, for the
purpose of effecting compliance with Rule 144A promulgated by the
SEC in connection with any resales of Notes or Warrants that may
hereafter be effected pursuant to the provisions of such Rule, at
any time when the Company shall not be subject to the
requirements of Section 13 or 15(d) of the Exchange Act, (i) each
prospective purchaser of Notes or Warrants designated by a holder
thereof shall have the right to obtain from the Company, upon the
written request of such holder, copies of (A) the consolidated
balance sheet of the Company and its Subsidiaries as of the end
of then most recently completed fiscal year of the Company (or,
if such fiscal year shall have ended within the preceding 90
days, as of the end of the next preceding fiscal year), together
- 47 -
658180v11<PAGE>
with the related consolidated statements of operations,
stockholders' equity and cash flows for the fiscal year then
ended, (B) similar financial statements for the two preceding
fiscal years (which financial statements, and the financial
statements referred to in clause (A) of this paragraph, shall be
audited if audited financial statements are available at such
time), (C) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of then most recently completed fiscal
quarter of the Company (or, if such fiscal quarter shall have
ended within the preceding 60 days, as of the end of the next
preceding fiscal quarter), together with the related consolidated
statements of operations, stockholders' equity and cash flows for
the portion of the current fiscal year then ended, and (D) any
other information that is necessary to comply with such Rule, and
(ii) each such holder and each such prospective purchaser shall
have the right to obtain from the Company, upon the written
request of such holder, a very brief statement of the nature of
the business of the Company and the products and services it
offers, dated as of a date within 12 months prior to the date of
such request.
The Company will keep at its principal executive office
a true copy of this Agreement, and cause the same to be available
for inspection at said office during normal business hours by any
holder of Notes or by any prospective purchaser of Notes
designated in writing by the holder thereof.
Section 8. Inspection of Properties and Books{tc
"Section 8. Inspection of Properties and Books" \f C \l 1}.
The Purchaser and each other holder of Notes, so long as any
Notes shall be outstanding, shall have the right to visit and
inspect any of the Properties of the Company and its
Subsidiaries, to examine their books of account and records, to
make copies and extracts therefrom at the expense of the Company
or a Subsidiary, as the case may be, and to discuss their
affairs, finances and accounts with, and to be advised as to the
same by, their officers and management and their independent
public accountants (and by this provision the Company authorizes
the Accountants to discuss their affairs, finances and accounts
and those of its Subsidiaries and agrees to make such Accountants
available to the Purchaser and such other holders for such
discussions together with such officers of the Company and the
Subsidiaries as the Purchaser or any such other holders may
desire to be present), all at such reasonable time and intervals
during normal business hours as the Purchaser and such other
holders may desire and upon reasonable prior notice. The Company
agrees to pay all reasonable out-of-pocket expenses incurred by
the Purchaser and such other holders in connection with the
exercise of their rights under this Section 8 at any time when a
Default or Event of Default shall have occurred and be
continuing. The Purchaser and such holders, through their
representatives, shall be entitled to meet with the senior
management of the Company at least once during each fiscal
quarter of the Company to discuss the Company's and its
- 48 -
658180v11<PAGE>
Subsidiaries' financial statements, business, assets, operations
and prospects.
Section 9. Affirmative Covenants{tc "Section 9.
Affirmative Covenants" \f C \l 1}. The Company covenants
and agrees that, so long as any of the Notes shall be
outstanding:
Section 9.1. Payment of Principal and Interest{tc
"Section 9.1. Payment of Principal and Interest" \f C \l 2}.
The Company will duly and punctually pay the principal of and
interest on the Notes, and will timely pay and perform all of its
other Obligations in accordance with the terms of such Notes and
this Agreement. The Company will comply with all of the
covenants, agreements and conditions contained in this Agreement.
Section 9.2. Payment of Taxes and Claims{tc "Section
9.2. Payment of Taxes and Claims" \f C \l 2}. The Company will,
and will cause each of its Subsidiaries to, pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or
levies imposed upon the Company or any of its Subsidiaries (or
any other Subsidiaries of the Company which are part of any
affiliated group, within the meaning of Section 1504(a)(1) of the
Code, with the Company or any of its Subsidiaries) or their
income or profits or upon their Property, real, personal or
mixed, or upon any part thereof;
(b) all claims for labor, materials and supplies
which, if unpaid, would result in the creation of a Lien upon
Property of the Company or any of its Subsidiaries; and
(c) all claims, contributions, assessments or levies
required to be paid by the Company or any of its Subsidiaries
pursuant to any Plan or any agreement, contract, Statute or Order
governing or relating to any Plan;
provided, that the taxes, assessments, claims, charges and levies
described in Section 9.2(a), (b) and (c) need not be paid while
being diligently contested in good faith and by appropriate
proceedings so long as (i) adequate book reserves have been
established with respect thereto in accordance with GAAP and (ii)
neither the Company's nor any such Subsidiary's title to and
right to use its Property is materially adversely affected by
such non-payment. The Company will timely file, and will cause
its Subsidiaries to file, all tax returns required to be filed in
connection with the payment of taxes required by this Section
9.2. If an Event of Default shall have occurred and be
continuing and any such contested items shall have resulted in a
Lien or claim upon any of the Company's or any of its
Subsidiaries' Property, the Majority Holders may, at their
election (but shall not be obligated to), (a) procure the release
and discharge of any such Lien or claim and any judgment or
- 49 -
658180v11<PAGE>
decree thereon, without inquiring into or investigating the
amount, validity or enforceability of such Lien or claim and (b)
effect any settlement or compromise of the same, and any amounts
expended by the Majority Holders in connection therewith
including premiums paid or security furnished in connection with
the issuance of any surety company bonds, shall be reimbursed by
the Company within five Business Days of demand therefor by the
Purchaser.
Section 9.3. Maintenance of Properties, Records and
Corporate Existence{tc "Section 9.3. Maintenance of
Properties, Records and Corporate Existence" \f C \l 2}. The
Company will, and will cause each of its Subsidiaries to:
(a) maintain their respective Properties in good
condition, reasonable wear and tear excepted, and make all
renewals, repairs, replacements, additions, betterments, and
improvements, except where the failure to do so would not have a
Material Adverse Effect;
(b) keep books of records and accounts in which full
and correct entries will be made of all their respective business
transactions and will reflect in their financial statements
adequate accruals and appropriations to reserves, all in
accordance with GAAP at the time in effect and consistently
applied;
(c) maintain the same fiscal year during and after the
current fiscal year ending July 31, 1998, provided, however, that
the Company shall be able to change its fiscal year with the
written consent of the Purchaser, which consent shall not be
unreasonably withheld;
(d) except as permitted by Section 10.4(a), do or
cause to be done all things necessary to preserve and keep in
full force and effect their respective corporate existence,
rights, powers and franchises including, without limitation, any
necessary qualification or licensing in any foreign jurisdiction,
except where the failure to do so would not have a Material
Adverse Effect;
(e) comply with all applicable Statutes, Orders,
franchises, authorizations, licenses and permits of, and all
applicable restrictions imposed by, any Governmental Body, in
respect of the conduct of its business and the ownership of its
Properties (including, without limitation, all Environmental Laws
and all applicable Statutes, Orders, franchises, authorizations,
licenses and permits relating to fair labor standards, equal
employment opportunities and occupational health and safety),
except for such matters as in the aggregate would not have a
Material Adverse Effect; and
(f) keep any Property owned or operated by it free of
Hazardous Materials and any other potentially materially harmful
- 50 -
658180v11<PAGE>
chemical or physical conditions. If the Company or any of its
Subsidiaries receives notice or becomes aware of any
Environmental Matter or contamination with Hazardous Materials
that relates to any of them or their respective Properties, then
the Company shall promptly provide written notice thereof to the
Purchaser and, upon written request from the Majority Holders,
shall provide the Purchaser with such reports, certificates,
engineering studies or other written material or data as the
Majority Holders may request so as to satisfy the Purchaser that
the Company and its Subsidiaries are in compliance with their
obligations under this subsection (f) and subsection (e) of this
Section 9.3. The Majority Holders shall also have the right, at
any time and from time to time after receipt of notice or
knowledge of any such Environmental Matter or contamination, to
require the Company at its expense to employ a qualified
environmental consultant acceptable to the Majority Holders to
conduct an environmental review, audit, assessment or report with
respect thereto concerning the Company's and its Subsidiaries'
operations and Property unless the Company has theretofore
employed a qualified environmental consultant acceptable to the
Majority Holders to conduct such an environmental review, audit,
assessment or report in scope and methodology satisfactory to the
Majority Holders. The Company agrees to cooperate fully with
such consultant in connection with any such review, audit,
assessment or report, including, without limitation, by providing
such access to the Company's and its Subsidiaries' books,
records, Properties, employees and agents and by furnishing such
written and oral information as such consultant may reasonably
request in connection with any such review, audit, assessment or
report.
Section 9.4. Insurance{tc "Section 9.4. Insurance"
\f C \l 2}. (a) Subject to the last sentence of this Section
9.4(a), the Company will, and will cause each of its Subsidiaries
to, carry and maintain in full force and effect at all times,
with financially sound and reputable insurance companies or
associations rated A- (Class 12) or better by A.M. Best & Co.
(or, as to workers' compensation or similar insurance, in an
insurance fund or by self-insurance authorized by the
jurisdiction in which its operations are carried on): (i)
insurance against loss or damage to the tangible real and
personal Property of the Company and its Subsidiaries by fire,
theft, explosion, spoilage and all other hazards and risks
ordinarily insured against by other owners or users of such
Property in similar businesses, (ii) all workers' compensation or
similar insurance as may be required under the laws of any
jurisdiction, (iii) public liability insurance against claims for
personal injury, property damage suffered upon, in or about any
premises occupied by them or occurring as a result of the
ownership, maintenance or operation by them of any automobile,
truck or other vehicle or as a result of the use of products
manufactured, constructed or sold by them, or services rendered
by them, (iv) business interruption insurance covering risk of
loss as a result of the cessation of any substantial part of the
- 51 -
658180v11<PAGE>
business conducted by them, consistent with past practice, (v)
product liability insurance with coverage and (vi) insurance
against such other risks as are usually insured against by
corporations of established reputation engaged in the same or
similar businesses and similarly situated. If the Company
maintains after the Closing Date any insurance policies with
insurance companies or associations that do not meet the
foregoing standards, the Company shall within 60 days of the
Closing Date obtain replacement policies with insurance companies
or associations that meet the foregoing standards.
(b) Insurance specified in clause (a) of this Section
9.4, shall be maintained in such types, with such coverage and in
such amounts (and with co-insurance, deductibles and self-insured
retention, if any) as are from time to time hereafter customary
for corporations of established reputation engaged in the same or
similar businesses and similarly situated; provided, that in no
event shall the insurance specified in clause (a) be for amounts
lower than, or coverage less than, that currently provided
without the prior written consent of the Majority Holders.
(c) If the Company or any of its Subsidiaries shall
fail to obtain, maintain or renew any insurance required pursuant
to this Section 9.4, or to pay the premiums therefor, or to
deliver to the Purchaser proper evidence thereof beyond any
applicable notice and cure period, if any, for the performance of
such actions, the Majority Holders, at their sole option and
without any obligation to do so, may procure and pay for such
insurance, and any sums expended by it to procure any such
insurance shall be repaid by the Company, together with any late
charge imposed by any such insurer, if applicable, within five
Business Days after receipt of bills therefor from the Majority
Holders.
Section 9.5. Subsidiary Guarantors{tc "Section 9.5.
Subsidiary Guarantors" \f C \l 2}.
(a) (i) STI International Limited, a United Kingdom
corporation ("STI"), a Subsidiary of the Company, shall not be
required to execute a Subsidiary Guarantee if the following
conditions are complied with: STI is (A) dissolved no later than
June 30, 1999 and (B) from the date of this Agreement until June
30, 1999 there is no material change in the assets held by STI.
(ii) MTEC, Inc., (formerly known as Brunswick
Biomedical Technologies, Inc.) a Massachusetts corporation
("MTEC"), a Subsidiary of the Company, shall not be required to
execute a Subsidiary Guarantee if the total fair market value of
the assets of MTEC do not, at any time, exceed $1,000,000 in the
aggregate.
In the event that any of the foregoing conditions is not
satisfied, the appropriate Subsidiary shall execute a Subsidiary
Guarantee in the form attached as Exhibit B hereto.
- 52 -
658180v11<PAGE>
(b) Promptly upon any Person becoming a Subsidiary of
the Company organized under the laws of the United States of
America or any State thereof, the Company shall provide written
notice thereof to each holder of Notes, and at any time the total
fair market value of the assets of such Subsidiary exceed
$1,000,000, the Company shall cause such Subsidiary to execute
and deliver a Subsidiary Guarantee (in the form attached as
Exhibit B hereto) to the holders of Notes, together with
certified resolutions and other customary documentation relating
to the execution of such a guaranty as Purchaser may reasonably
request.
(c) Promptly upon any Person becoming a Subsidiary of
the Company (other than a Subsidiary referred to in clause (b)
above), the Company shall provide written notice thereof to each
holder of Notes, and at any time the total fair market value of
the assets of such Subsidiary exceed $1,000,000, the Company
shall (i) cause each such Subsidiary to enter into a pledge
agreement reasonably satisfactory to ING and the Majority Holders
providing for a pledge in favor of ING and the Purchaser of two-
thirds of the outstanding Capital Stock of each such Subsidiary
with the Lien to secure the Company's obligations under the
Senior Loan Documents granted to ING being prior to the Lien
granted to the Purchaser hereunder; provided that the Purchaser
shall execute and deliver to ING, any other Senior Lender (as
defined in the Subordination Agreement) and any holder of
Designated Senior Indebtedness who has a security interest in
such pledged Capital Stock an intercreditor agreement
satisfactory to ING and (ii) provide in favor of ING and the
Purchaser, in such form as ING and the Majority Holders shall
reasonably request, a negative pledge with respect to the portion
of outstanding Capital Stock of such Subsidiary not pledged
pursuant to clause (i) above; provided that with respect to
Meridian Medical Technologies Limited, there shall be no default
under this Section 9.5(c) so long as the Company complies with
the terms of this provision within 180 days after the Closing
Date.
Section 9.6. Pension and Benefit Plan Covenants{tc
"Section 9.6. Pension and Benefit Plan Covenants" \f C \l 2}.
The Company will:
(a) take or cause to be taken all necessary steps to
ensure that the representations and warranties set forth under
Section 4.19 of this Agreement continue to be true and correct in
all material respects, as if the same were made on a continuing
basis, on and with effect as of each date while any of the Notes
are outstanding, except to the extent permitted in writing by the
Majority Holders, and
(b) not, and will ensure that its Subsidiaries will
not, amend any Plan or establish or adopt any Plan that would
have the effect of materially adversely affecting the financial
- 53 -
658180v11<PAGE>
condition of such Plan or of causing a Material Adverse Effect,
without the written consent of the Purchaser, except for such
amendments as may be required by applicable law or any
Governmental Authority.
Section 9.7. Notice of Default{tc "Section 9.7.
Notice of Default" \f C \l 2}. Upon the chief executive officer,
the chief operating officer or the chief financial officer of the
Company learning thereof, the Company will give prompt written
notice (with a description in reasonable detail) to the Purchaser
of the occurrence of any Default or Event of Default.
Section 10. Negative and Maintenance Covenants{tc
"Section 10. Negative and Maintenance Covenants" \f C \l 1}.
The Company covenants and agrees that so long as any of the Notes
shall be outstanding, the Company shall comply with the
provisions set forth in Sections 10.1 through 10.17 hereof,
inclusive.
Section 10.1. Restrictions on Indebtedness{tc "Section
10.1. Restrictions on Indebtedness" \f C \l 2}. The Company
will not, and will not permit any of its Subsidiaries to, incur,
create, assume, guarantee or in any way become liable for, or
permit to exist, Indebtedness other than:
(a) Indebtedness incurred pursuant to this Agreement
and the Notes;
(b) Senior Indebtedness, provided that the aggregate
outstanding principal amount of such Indebtedness (including the
maximum aggregate amount of all commitments to extend any
revolving credit, working capital, letter of credit or similar
credit facility in connection therewith, and including the face
amount of all letters of credit and other contingent obligations
(whether issued or guaranteed by the holders of such
Indebtedness) from time to time outstanding in connection
therewith) shall not at any time exceed the Maximum Commitment;
(c) Indebtedness of the Company and its Subsidiaries
existing on the Closing Date and described on Schedule 4.10A
hereto;
(d) Additional Permitted Indebtedness;
(e) Indebtedness of any Wholly-owned Subsidiary of the
Company to the Company or to another Wholly-owned Subsidiary of
the Company;
(f) Indebtedness secured by Liens permitted by
subsections (a) through (h), inclusive, of Section 10.2;
(g) Guarantees by the Company or any of its
Subsidiaries of other Indebtedness permitted by this Section
10.1; and
- 54 -
658180v11<PAGE>
(h) Indebtedness secured by Liens permitted by Section
10.2(m) hereof, provided that the aggregate outstanding principal
amount of Indebtedness incurred pursuant to this subsection (h)
shall not at any time exceed the equivalent of U.S. $500,000.
Notwithstanding the foregoing, the Company and its
Subsidiaries will not at any time create or incur any
Indebtedness other than Designated Senior Indebtedness which,
under the terms of the documentation pursuant to which such
Indebtedness is created or incurred, is subordinated in right of
payment to any other Indebtedness of the Company or any of its
Subsidiaries, unless such Indebtedness is also subordinated in
right of payment, in the same manner and to the same extent, to
the Indebtedness represented by the Notes.
Section 10.2. Restrictions on Liens{tc "Section 10.2.
Restrictions on Liens" \f C \l 2}. The Company will not, and
will not permit any of its Subsidiaries directly or indirectly,
to create, assume or suffer to exist any Lien upon any of their
respective Properties whether now owned or hereafter acquired,
except for:
(a) Liens for taxes, assessments or governmental
charges or claims the payment of which is not at the time
required by Section 9.2;
(b) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law incurred in the ordinary course of business, in
each case for sums the payment of which is not at the time
required by Section 9.2;
(c) Liens (other than any Lien imposed by ERISA and
other than any Lien securing an obligation for the payment of
borrowed money) incurred or deposits made in the ordinary course
of business in connection with obligations not due or delinquent
with respect to workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money
bonds and other similar obligations; provided, that no such Lien
shall be permitted to the extent it encumbers any real Property
of the Company or its Subsidiaries;
(d) any attachment or judgment Lien (including
judgment or appeal bonds) which shall, within 30 days after the
entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 30 days
after the expiration of any such stay; provided that such Liens
shall not in any event exceed the equivalent of U.S. $750,000 in
the aggregate at any time outstanding;
- 55 -
658180v11<PAGE>
(e) normal and customary rights of set-off upon
deposits of cash in favor of banks or other depositary
institutions;
(f) zoning restrictions, easements, rights-of-way,
servitudes or other similar rights in land (including, without
restriction, rights-of-way and servitudes for railways, sewers,
drains, gas and oil pipelines, gas and water mains, electric
light and power and telephone or telegraph or cable television
conduits, poles, wires and cables) granted to or reserved by
other Persons, and the defects or irregularities of which are of
a minor nature, none of which individually or in the aggregate
materially and adversely impair the usefulness in the operation
of the business of the Company or any of its Subsidiaries or the
value of the property subject to such restrictions, easements,
rights-of-way, servitudes or other similar rights in land granted
to or reserved by other Persons, or title defect;
(g) the right reserved to or vested in any
municipality or governmental or other public authority by the
terms of any lease, license, franchise, grant or permit acquired
by the Company or any of its Subsidiaries or by any statutory
provision, to terminate any such lease, license, franchise, grant
or permit, or to require annual or other payments as a condition
to the continuance thereof;
(h) Liens given to a public utility or any
municipality or governmental or other public authority when
required by such utility, municipality or other authority in
connection with the operations of the Company all in the ordinary
course of its business;
(i) Liens securing Indebtedness of a Wholly-owned
Subsidiary of the Company to the Company or to another Wholly-
owned Subsidiary of the Company;
(j) Liens (including Liens created pursuant to
capitalized leases) existing on the date hereof and described in
Schedule 4.10A hereto;
(k) Liens securing Designated Senior Indebtedness and
incurred pursuant to the Credit Agreement or the other Senior
Loan Documents;
(l) Liens securing Additional Permitted Indebtedness
that is not Designated Senior Indebtedness; provided that the
aggregate principal amount of such Indebtedness secured by such
Liens shall not exceed $5,000,000 in the aggregate.
(m) Liens (including Liens created pursuant to
capitalized leases) in respect of Property acquired, constructed
or improved by the Company or any of its Subsidiaries after the
Closing Date, which Liens exist or are created at the time of
acquisition or completion of construction or improvement of such
- 56 -
658180v11<PAGE>
Property or within six months thereafter, to secure Indebtedness
which is assumed or incurred to finance all or any part of the
purchase price or cost of acquisition or construction or
improvement of such Property, but any such Lien shall cover only
the Property so acquired or constructed and any improvements
thereto (and any real Property on which such Property is located,
if such Property is a building, improvement or fixture), and may
not exceed the lesser of (x) the Fair Market Value of such
Property or (y) the purchase price or cost of such acquisition,
construction or improvement;
(n) the extension, renewal or replacement of any Lien
permitted by this Section 10.2, but only if the extension,
renewal or replacement of the Indebtedness secured thereby is not
prohibited under Section 10.1 hereof and the principal amount of
the Indebtedness secured by such Lien immediately prior to such
extension, renewal or replacement is not increased and the Lien
is not extended to other Property.
(o) Liens which arise by operation of law under
Article 2 of the Uniform Commercial Code in favor of unpaid
sellers of goods, or liens in any items or any accompanying
documents or proceeds of either arising by operation of law under
Article 4 of the Uniform Commercial Code in favor of a collecting
bank.
(p) Liens consisting of precautionary UCC-1 filings in
respect of operating leases.
Section 10.3. Limitation on Sale and Leasebacks{tc
"Section 10.3. Limitation on Sale and Leasebacks" \f C \l 2}.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any arrangement whereby the Company or any such
Subsidiary shall sell or transfer any Property owned by the
Company or any of its Subsidiaries to any Person other than the
Company or a Subsidiary of the Company and thereupon the Company
or such Subsidiary shall lease or intend to lease, as lessee, the
same Property.
Section 10.4. Consolidation, Merger or Disposition of
Assets; Acquisitions{tc "Section 10.4. Consolidation. Merger or
Disposition of Assets; Acquisitions" \f C \l 2}. The Company
will not, and will not permit any of its Subsidiaries to,
(i) consolidate or amalgamate with or be a party to a merger with
any other Person, (ii) liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), (iii) convey, sell,
lease, license, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of the
business or Property (tangible or intangible) of the Company or
any such Subsidiary, whether now owned or hereafter acquired, or
(iv) acquire by purchase or otherwise any of the outstanding
Capital Stock of, or all or substantially all of the business,
operating assets and Property of, any Person or of any operating
division or unit of any Person, provided, however, that:
- 57 -
658180v11<PAGE>
(a) any Wholly-owned Subsidiary of the Company may
merge or consolidate with or into, or be dissolved or liquidated
into, the Company or any other Wholly-owned Subsidiary of the
Company so long as (x) in any merger or consolidation involving
the Company, the Company shall be the surviving or continuing
corporation, and (y) in any merger or consolidation involving one
or more Wholly-owned Subsidiaries of the Company and one or more
Subsidiaries of the Company that are not Wholly-owned
Subsidiaries, the surviving or continuing corporation shall be
one of such Wholly-owned Subsidiaries;
(b) any Wholly-owned Subsidiary of the Company may
sell, lease or otherwise dispose of all or any part of its assets
to the Company or to any other Wholly-owned Subsidiary of the
Company;
(c) the Company and any of its Subsidiaries may in the
ordinary course of its business sell or otherwise dispose of
Inventory owned by the Company or such Subsidiary;
(d) the Company and any of its Subsidiaries may in the
ordinary course of its business sell or otherwise dispose of
equipment and other Property which is obsolete or no longer used
in the business of the Company and its Subsidiaries;
(e) to the extent such transfers are in the aggregate
permitted under clause (iv) of the definition of Restricted
Investment, the Company and its Subsidiaries may transfer assets
to any Subsidiary of the Company; and
(f) the Company and its Subsidiaries may sell, lease
or otherwise dispose of assets other than in the ordinary course
of business to any Person other than a Subsidiary of the Company,
provided that (i) the Fair Market Value of the assets sold,
leased or otherwise disposed of with respect to each such
transaction shall not exceed $250,000 and (ii) the aggregate Fair
Market Value of all assets sold, leased or otherwise disposed of
pursuant to this subsection (e) in each fiscal year of the
Company shall not exceed $750,000.
Section 10.5. Sale or Discount of Receivables{tc
"Section 10.5. Sale or Discount of Receivables" \f C \l 2}. The
Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, any of its
respective Accounts or notes receivable.
Section 10.6. Conduct of Permitted Business{tc
"Section 10.6. Conduct of Business" \f C \l 2}. The Company will
not, and will not permit any of its Subsidiaries to, engage in
any business other than the business of the general character
engaged in by each of them on the date hereof as described in the
- 58 -
658180v11<PAGE>
Company Reports and any businesses or activities reasonably
related thereto.
Section 10.7. Restricted Payments and Restricted
Investments{tc "Section 10.7. Restricted Payments and Restricted
Investments" \f C \l 2}. (a) The Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make
any Restricted Payment, except the declaration and payment of
dividends and distributions by a Wholly-owned Subsidiary of the
Company on its Capital Stock to the Company or to another Wholly-
owned Subsidiary of the Company.
(b) The Company will not, and will not permit any of
its Subsidiaries to, make any Restricted Investment.
Section 10.8. Issuance of Capital Stock{tc "Section
10.8. Issuance of Capital Stock" \f C \l 2}. The Company
will not permit any Subsidiary of the Company to issue, sell or
otherwise dispose of any shares of its Capital Stock, or any
warrants, options, conversion rights, exchange rights or other
rights to subscribe for, purchase or acquire such Capital Stock,
except to the Company or to a Wholly-owned Subsidiary of the
Company (except for directors' qualifying shares).
Section 10.9. Transactions with Affiliates{tc "Section
10.9. Transactions with Affiliates" \f C \l 2}. Except in
the case of transactions between or among the Company and its
Wholly-owned Subsidiaries, the Company will not, and will not
permit any of their Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any Property
or the rendering of any service), with any Affiliate of the
Company or such Subsidiary unless such transaction is otherwise
not prohibited under this Agreement, is in the ordinary course of
the Company's or such Subsidiary's business and is on fair and
reasonable terms that are not less favorable to the Company or
such Subsidiary, as the case may be, than those that would
obtainable at the time in any arm's length transaction with a
Person who is not such an Affiliate.
Section 10.10. Termination of Pension Plans{tc
"Section 10.10. Termination of Pension Plans" \f C \l 2}.
The Company will not, and will not permit any of its Subsidiaries
or ERISA Affiliates to, permit any Plan maintained by the Company
or any such Subsidiary or ERISA Affiliate to be terminated in a
manner which could reasonably be expected to result in the
imposition of a Lien on any Property of the Company or any
Subsidiary of the Company pursuant to Section 4068 of ERISA.
Section 10.11. Maintenance of Capital Expenditures{tc
"Section 10.11. Maintenance of Capital Expenditures" \f C \l
2}. The Company will not, and will not permit any of its
Subsidiaries to make or commit to make any Consolidated Capital
Expenditures, except the Company and its Subsidiaries may make
- 59 -
658180v11<PAGE>
Consolidated Capital Expenditures during any fiscal year provided
(a) no Default or Event of Default has occurred and is
continuing, and (b) the aggregate amount of Consolidated Capital
Expenditures made during such fiscal year (including the amount
of Capital Lease Liabilities incurred during such fiscal year
that in accordance to GAAP is attributable to principal) does not
exceed the amount set forth below opposite such fiscal year:
Fiscal Year Ended Permitted Amount
1998 4,200,000
1999 6,800,000
2000 6,600,000
2001 6,600,000
2002 6,600,000
2003 6,600,000
2004 6,600,000
2005 6,600,000
; provided that to the extent in any fiscal year the Permitted
Amount for such year exceeds the Company's Capital Expenditures
for such year, the Permitted Amount for the following fiscal year
shall be increased by the lesser of such excess or $500,000.
Section 10.12. Certain Contracts{tc "Section 10.12.
Certain Contracts" \f C \l 2}. The Company will not, and
will not permit any of its Subsidiaries to, enter into or be a
party to:
(a) any contract providing for the making of loans
(other than Cash Equivalents), advances or capital contributions
to any Person other than the Company or a Wholly-owned Subsidiary
of the Company, or for the purchase of any Property from any
Person, in each case primarily in order to enable such Person to
maintain working capital, net worth or any other balance sheet
condition or to pay debts, dividends or expenses, or
(b) any contract for the purchase of materials,
supplies or other Property or services if such contract (or any
related document) requires that payment for such materials,
supplies or other Property or services shall be made regardless
of whether or not delivery of such materials, supplies or other
Property or services is ever made or tendered, or
(c) any contract to rent or lease (as lessee) any real
or personal Property if such contract (or any related document)
provides that the obligation to make payments thereunder is
absolute and unconditional under conditions not customarily found
in commercial leases then in general use or requires that the
lessee purchase or otherwise acquire securities or obligations of
the lessor (provided, that this subsection (c) shall not be
construed to prevent the Company or any of its Subsidiaries from
- 60 -
658180v11<PAGE>
being a party to or complying with any provision of any lease to
which any of them is a party on the date hereof), or
(d) any contract for the sale or use of materials,
supplies or other Property, or the rendering of services, if such
contract (or any related document) requires that payment for such
materials, supplies or other Property, or the use thereof, or
payment for such services, shall be subordinated to any
Indebtedness (of the purchaser or user of such materials,
supplies or other Property or the Person entitled to the benefit
of such services) owed or to be owed to any Person, or
(e) except as permitted by Section 10.1, and except
for Investments which are not Restricted Investments, any other
contract which, in economic effect, is substantially equivalent
to a Guarantee.
Section 10.13. Limitation on Dividend Restrictions
Affecting Subsidiaries{tc "Section 10.13. Limitation on
Dividend Restrictions Affecting Subsidiaries" \f C \l 2}. Except
pursuant to this Agreement, the Company will not permit any of
its Subsidiaries directly or indirectly to create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or restriction which by its terms restricts the
ability of any such Subsidiary to (a) pay dividends or make any
other distributions on such Subsidiary's Capital Stock, (b) pay
any Indebtedness owed to the Company or any other Subsidiary of
the Company, (c) make any loans or advances to the Company or any
other Subsidiary of the Company or (d) transfer any of its
Property or assets to the Company or any other Subsidiary of the
Company.
Section 10.14. No Amendment of Charter, By-Laws{tc
"Section 10.14. No Amendment of Charter, By-Laws" \f C \l 2}.
The Company will not effect any amendment to or modification of
its charter documents or by-laws, and will not permit any of its
Subsidiaries to effect any amendment to or modification of their
charter documents or by-laws, if any such amendment or
modification would adversely affect the rights or remedies of the
Purchaser under this Agreement and the Notes.
Section 10.15. Acquisition of Margin Securities{tc
"Section 10.15. Acquisition of Margin Securities" \f C \l 2}.
The Company will not, and will not permit any of its Subsidiaries
to, own, purchase or acquire (or enter into any contract to
purchase or acquire) any "margin security" as defined by any
regulation of the Board of Governors of the United States Federal
Reserve System as now in effect or as the same may hereafter be
in effect unless, prior to any such purchase or acquisition or
entering into any such contract, the Purchaser shall have
received an opinion of counsel satisfactory to the Purchaser to
the effect that such purchase or acquisition will not cause this
Agreement or the Notes to be in violation of Regulation U or any
other regulation of such Board then in effect.
- 61 -
658180v11<PAGE>
Section 10.16. Financial Covenants.{tc "Section 10.16.
Financial Covenants" \f C \l 2} (a) Minimum Net Worth.
The Company shall not permit its net worth determined in
accordance with GAAP as of the last day of any fiscal quarter,
(i) commencing with the fiscal quarter ending on July 31, 1997
and continuing thereafter through and including July 31, 1998 to
be less than $12,000,000 and (ii) commencing with the fiscal
quarter ending on October 31, 1998 and continuing thereafter, to
be less than (A) $12,000,000 plus (B) 50% of Net Income (but not
loss) of the Company for each fiscal quarter of the Company
ending after July 31, 1997 through and including the last day of
the fiscal quarter in which this covenant is being tested;
provided, however, that any calculation of net worth and Net
Income (and loss) shall exclude the after-tax effect of any
extraordinary item associated with the extinguishment of
Indebtedness as a result of any partial refinancing of the Senior
Indebtedness and shall also exclude any increase in net worth
resulting from the issuance of the Warrants.
(b) Total Debt Leverage Ratio. The Company shall not
permit its Total Debt Leverage Ratio with respect to the 12-month
period ending on the last day of any fiscal quarter of the
Company to be greater than the ratio set forth opposite such
fiscal quarter:
Fiscal Quarter Ended Ratio
April 30, 1998 4.25:1.00
July 31, 1998 4.25:1.00
October 31, 1998 4.25:1.00
January 31, 1999 4.25:1.00
April 30, 1999 4.25:1.00
July 31, 1999 and the last
day of any subsequent
fiscal quarter of the 4.00:1.00
Company
(c) Total Debt Service Ratio. The Company will not
permit its Total Debt Service Ratio with respect to the 12-month
period ending on the last day of any fiscal quarter of the
Company to be less than the ratio set forth below opposite such
fiscal quarter:
Fiscal Quarter Ending Ratio
April 30, 1998 1.60:1.0
0
July 31, 1998 1.60:1.0
0
October 31, 1998 1.70:1.0
0
January 31, 1999 1.80:1.0
0
- 62 -
658180v11<PAGE>
April 30, 1999 1.90:1.0
0
July 31, 1999 2.00:1.0
0
October 31, 1999 2.05:1.0
0
January 31, 2000 2.10:1.0
0
April 30, 2000 2.15:1.0
0
July 31, 2000 2.20:1.0
October 31, 2000 and the 0
last day of any subsequent
fiscal quarter of the
Company 2.25:1.0
0
(d) Interest Coverage Ratio. The Company will not
permit its Interest Coverage Ratio with respect to the 12-month
period ending on the last day of any fiscal quarter to be less
than the ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending Ratio
April 30, 1998 2.50:1.0
0
July 31, 1998 2.50:1.0
0
October 31, 1998 2.50:1.0
0
January 31, 1999 2.50:1.0
0
April 30, 1999 2:50:1.0
0
July 31, 1999 2.60:1.0
0
October 31, 1999 2.60:1.0
0
January 31, 2000 2.70:1.0
0
April 30, 2000 2.70:1.0
0
July 31, 2000 2.75:1.0
0
and the last day of any
subsequent fiscal quarter
of the Company
(e) EBITDA. The Company will not permit EBITDA for
the 12-month period ending on the last day of any fiscal quarter
of the Company to be less than the amount set forth opposite such
date:
- 63 -
658180v11<PAGE>
Fiscal Quarter Ended Amount
April 30, 1998 $7,000,000
July 31, 1998 $7,000,000
October 31, 1998 $7,360,000
January 31, 1999 $7,625,000
April 30, 1999 $8,000,000
July 31, 1999 $8,250,000
October 31, 1999 $8,500,000
January 31, 2000 $9,000,000
April 30, 2000 $9,500,000
July 31, 2000 and the
last day of any
subsequent fiscal quarter $10,000,000
of the Company
Section 10.17. Certificate Regarding Additional Permitted
Indebtedness{tc "Section 10.17 Certificate Regarding
Additional Permitted Indebtedness" \f C \l 2}. In connection
with the incurrence of any indebtedness that constitutes
Designated Senior Indebtedness or has an aggregate principal
amount (including the maximum amount of all commitments to extend
any revolving credit, working capital, letter of credit or
similar credit facility in connection therewith and including the
face amount of all letters of credit and other contingent
obligations (whether issued or guaranteed by the holders of such
indebtedness) from time to time outstanding in connection
therewith) of at least $1,000,000 ("Threshold Debt"), the Company
shall provide to the Purchaser, at least three Business Days
prior to the incurrence of such indebtedness, with respect to
Designated Senior Indebtedness, a copy of any certificate to be
provided pursuant to the terms of the Subordination Agreement, or
with respect to Threshold Debt, a certificate, signed by the
chief executive officer or chief financial officer of the
Company, to the effect that such indebtedness constitutes
Additional Permitted Indebtedness under the Note Purchase
Agreement as in effect on the date hereof, such certificate to
set forth, in reasonable detail, the calculations used for the
calculation of the Pro Forma Interest Coverage Ratio and the Pro
Forma Leverage Ratio.
Section 11. Events of Default{tc "Section 11.
Events of Default" \f C \l 1}.
Section 11.1. Events of Default; Remedies{tc "Section
11.1. Events of Default; Remedies" \f C \l 2}. If any of the
following events (herein called "Events of Default") shall have
occurred and be continuing (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or by
operation of law or otherwise):
(a) the Company shall default in the due and punctual
payment or prepayment of all or any part of the principal of, or
Prepayment Premium (if any) on, any Note when and as the same
- 64 -
658180v11<PAGE>
shall become due and payable, whether at stated maturity, by
acceleration, by notice of prepayment or otherwise;
(b) the Company shall default in the due and punctual
payment or prepayment of any interest on any Note when and as
such interest shall become due and payable, and such default
shall continue for a period of five days;
(c) the Company shall default in the performance or
observance of any of the covenants, agreements or conditions
contained in Sections 10.1 through 10.17, inclusive, of this
Agreement;
(d) the Company shall default in the performance or
observance of any of the covenants, agreements or conditions
contained in this Agreement (other than those referred to in any
subsection of this Section 11.1 other than this subsection (d)),
and such default shall continue for a period of 10 days after a
notice thereof shall have been given to the Company by the
Purchaser (or if such default is not reasonably susceptible to
cure within 10 days, such longer period as is reasonably needed
to effect such cure, but in no event longer than 30 days from the
date notice is given, so long as the Company promptly commences
and diligently pursues such cure);
(e) (i) any of the Designated Senior Indebtedness
shall be declared to be due and payable or required to be
prepaid, redeemed, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Indebtedness shall be required
to be made, in each case prior to the stated maturity thereof, or
the maturity of any or all of such Designated Senior Indebtedness
is otherwise accelerated, or (ii) the Company or any of its
Subsidiaries shall fail to pay all or any portion of the
Designated Senior Indebtedness in full upon the final stated
maturity of such respective Indebtedness (including any extension
thereof);
(f) (i) the Company or any of its Subsidiaries shall
fail to pay any principal of, premium or interest on or any other
amount payable in respect of Indebtedness of such Person that is
outstanding in a principal amount of at least $250,000 in the
aggregate (excluding Designated Senior Indebtedness and excluding
Indebtedness represented by the Notes) when the same becomes due
and payable (whether at scheduled maturity, or by required
prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such
Indebtedness; or (ii) any other event shall occur or condition
shall exist under any agreement or instrument relating to any
such Indebtedness (excluding Designated Senior Indebtedness and
excluding Indebtedness represented by the Notes) that is
outstanding in the principal amount of at least $500,000 and
shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such
- 65 -
658180v11<PAGE>
event or condition is to permit the acceleration of the maturity
of such Indebtedness (whether or not such acceleration occurs);
provided that if any event specified in clause (i) or (ii) above
occurs as a result of a default under an agreement or instrument
that exclusively provides for or evidences purchase money
indebtedness or Capitalized Lease Obligations (or, if such
agreement or instrument is part of a facility, such facility
exclusively provides for purchase money indebtedness or
Capitalized Lease Obligations) and the maximum principal amount
of indebtedness (including any unused commitments) under such
agreement or instrument (or, if such agreement or instrument is
part of a facility, then the maximum principal amount of
indebtedness (including unused commitments) under such facility)
does not exceed $5,000,000, then no Event of Default shall be
deemed to have occurred as a result of such default unless such
default has resulted in Indebtedness under such agreement or
instrument being declared to be due and payable or required to be
prepaid, redeemed, purchased or defeased, or an offer to prepay,
redeem, purchase or defease such Indebtedness shall be required
to be made, in each case prior to the stated maturity thereof, or
the maturity of any or all of such Indebtedness is otherwise
accelerated.
(g) (i) a notice of debarment or notice of suspension
shall have been issued under any United States Government
Contract, (ii) the Company or any Subsidiary of the Company shall
be barred or suspended from contracting with any United States
Governmental Body or (iii) any United States Government Contract
shall be terminated due to alleged fraud, willful misconduct,
gross negligence or any intentional wrongdoing by the Company or
any of its Subsidiaries;
(h) the Company or any of its Subsidiaries shall (i)
apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its Property, (ii) be
generally unable to pay its debts as such debts become due, (iii)
make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Bankruptcy Code or the
foreign equivalent thereof, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors,
(vi) fail to controvert in a timely or appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or the foreign
equivalent thereof, (vii) admit in writing its inability to pay
its debts generally as such debts become due, (viii) take any
action under the laws of its jurisdiction of organization
analogous to any of the foregoing, or (ix) take any requisite
action for the purpose of effecting any of the foregoing;
(i) a proceeding or case shall be commenced, without
the application or consent of the Company or its Subsidiaries in
any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution, winding up of the Company or any of
- 66 -
658180v11<PAGE>
its Subsidiaries or composition or readjustment of the
Indebtedness of any of them, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of the Company or any
of its Subsidiaries or of all or any substantial part of the
assets of any of them, or (iii) similar relief in respect of the
Company or any of its Subsidiaries under any law providing for
the relief of debtors, and such proceeding or case shall continue
undismissed, or unstayed and in effect, for a period of 60 days;
or an order for relief shall be entered in an involuntary case
under the Bankruptcy Code, against the Company or any of its
Subsidiaries; or action under the laws of the jurisdiction of
organization of any of the Company or any of its Subsidiaries
analogous to any of the foregoing shall be taken with respect to
any of the Company or any of its Subsidiaries and shall continue
undismissed, or unstayed and in effect, for a period of 60 days;
(j) final judgment for the payment of money shall be
rendered by a court of competent jurisdiction against the Company
or any of its Subsidiaries, and the Company or such Subsidiary,
as the case may be, shall not discharge or bond the same or
provide for its discharge or bonding in accordance with its
terms, or procure a stay of execution thereof, within 45 days
from the date of entry thereof and within said period of 45 days,
or such longer period during which execution of such judgment
shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal, and such judgment
together with all other such judgments shall exceed in the
aggregate $750,000;
(k) any representation or warranty made by or on
behalf of the Company in this Agreement or any Officer's
Certificate or other certificate or notice now or hereafter
delivered pursuant to or in connection with any provision of this
Agreement (including, without limitation, any Officer's
Certificate or other certification delivered pursuant to Section
7 hereof), shall prove to be false, incorrect or breached in any
material respect on the date as of which made;
(l) there shall be a Change of Control of the Company;
or
(m) the Company, any Subsidiary Guarantor or ING shall
default in the performance or observance of any of the covenants,
agreements or conditions contained in the Put Subordination
Agreement; provided, however, that failure of a Put Holder (as
defined in the Put Subordination Agreement) to provide notice
pursuant to Section 6 of the Put Subordination Agreement shall
not be deemed to be an Event of Default under this Agreement;
then (i) upon the occurrence of any Event of Default described in
subsection (h) or (i), the unpaid principal amount of all Notes,
together with all interest accrued thereon and all fees, costs,
expenses, indemnities and other amounts payable under this
Agreement or the Notes, shall automatically become immediately
- 67 -
658180v11<PAGE>
due and payable, without presentment, demand, notice,
declaration, protest or other requirements of any kind, all of
which are hereby expressly waived, or (ii) upon the occurrence of
any other Event of Default, the Majority Holders may, by written
notice to the Company, declare the unpaid principal amount of all
Notes to be, and the same shall forthwith become, immediately due
and payable, together with the interest accrued thereon, and all
fees, costs, expenses, indemnities and other amounts payable
under this Agreement or the Notes, all without presentment,
demand, notice, protest or other requirements of any kind, all of
which are hereby expressly waived. The provisions of this
Section 11.1 are subject, however, to the condition that if, at
any time after any Note shall have so become due and payable, the
Company shall pay all arrears of interest on the Notes and all
payments on account of the principal of and, to the extent
permitted by law, prepayment charge (if any) on the Notes which
shall have become due otherwise than by acceleration (with
interest on all such overdue principal and prepayment charge, if
any, and, to the extent permitted by law, on overdue payments of
interest, at the applicable rate per annum provided for in the
Notes or this Agreement in respect of overdue amounts of
principal, prepayment charge and interest), and all Events of
Default (other than nonpayment of principal of, Prepayment
Premium (if any) and accrued interest on the Notes, due and
payable solely by virtue of acceleration) shall be remedied or
waived pursuant to Section 14.1, then, and in every such case,
the Majority Holders, by written notice to the Company, may
rescind and annul any such acceleration and its consequences with
respect to the Notes; but no such action shall affect any
subsequent Default or Event of Default or impair any right
consequent thereon.
Section 11.2. Suits for Enforcement {tc "Section 11.2.
Suits for Enforcement" \f C \l 2}. If any Event of Default
shall have occurred and be continuing, the Purchaser may, with
respect to the Notes, proceed to protect and enforce the
respective rights of the holders of such Notes, either by suit in
equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this
Agreement or in aid of the exercise of any power granted in this
Agreement, and may proceed to enforce the payment of all sums due
upon such Notes, and such further amounts as shall be sufficient
to cover the costs and expenses of collection (including, without
limitation, reasonable counsel fees and disbursements), or to
enforce any other legal or equitable right of the holder of such
Notes.
Section 11.3. Remedies Cumulative{tc "Section 11.3.
Remedies Cumulative" \f C \l 2}. No remedy conferred in
this Agreement or the Notes upon the Purchaser, is intended to be
exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in
equity or otherwise.
- 68 -
658180v11<PAGE>
Section 11.4. Remedies Not Waived{tc "Section 11.4.
Remedies Not Waived" \f C \l 2}. No course of dealing
between the Company and no delay or failure in exercising any
rights hereunder or under such Note, shall operate as a waiver of
any of the rights of the Purchaser or of the holder of any Note.
Section 12. Registration, Exchange, and Transfer of
Notes{tc "Section 12. Registration, Exchange, and Transfer of
Notes" \f C \l 1}. The Company will keep at its principal
executive office a register, in which, subject to such reasonable
regulations as it may prescribe, but at its expense (other than
transfer taxes, if any), the Company will provide for the
registration and transfer of Notes. Whenever any Note or Notes
shall be surrendered either at the principal executive office of
the Company, or at the place of payment named in the Note, for
transfer or exchange, accompanied (if so required by the Company)
by a written instrument of transfer in form reasonably
satisfactory to the Company duly executed by the holder thereof
or by such holder's attorney duly authorized in writing, and such
other documentation and information as the Company shall
reasonably request as necessary in connection with such transfer
or exchange, the Company will execute and deliver in exchange
therefor a new Note or Notes in such denominations as may be
requested by such holder, of like tenor and in the same aggregate
unpaid principal amount as the aggregate unpaid principal amount
of the Note or Notes so surrendered. Any Note issued in exchange
for any other Note or upon transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were
carried by the Note so exchanged or transferred, and neither gain
nor loss of interest shall result from any such transfer or
exchange. Any transfer tax or governmental charge relating to
such transaction shall be paid by the holder requesting the
exchange. The Company and any of its agents may treat the Person
in whose name any Note is registered as the sole and exclusive
record and beneficial holder and owner of such Note for the
purpose of receiving payment of the principal of, prepayment
charge (if any) and interest and other amounts on such Note and
for all other purposes whatsoever, whether or not such Note be
overdue.
Section 13. Lost, Stolen, Damaged and Destroyed
Notes{tc "Section 13. Lost, Stolen, Damaged and Destroyed
Notes" \f C \l 1}. At the request of any holder of any Note, the
Company will issue and deliver at its expense, in replacement of
any Note or Notes lost, stolen, damaged or destroyed, upon
surrender thereof, if mutilated, a new Note or Notes in the same
aggregate unpaid principal amount, and otherwise of the same
tenor, as the Note or Notes so lost, stolen, damaged or
destroyed, duly executed by the Company. The Company may
condition the replacement of a Note or Notes reported by the
holder thereof as lost, stolen, damaged or destroyed, upon the
receipt from such holder of an indemnity and/or security
reasonably satisfactory to the Company; provided that if such
- 69 -
658180v11<PAGE>
holder shall be the Purchaser or its nominee, the Purchaser's
unsecured agreement of indemnity shall be sufficient for purposes
of this Section.
Section 14. Miscellaneous{tc "Section 14.
Miscellaneous" \f C \l 1}.
Section 14.1. Amendment and Waiver{tc "Section 14.1.
Amendment and Waiver" \f C \l 2}. (a) Any term, covenant,
agreement or condition of this Agreement or of the Notes may,
with the written consent of the Company, be amended, or
compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively),
by one or more substantially concurrent written instruments
signed by the Majority Holders, except that
(i) without the specific prior written consent of
the holders of all of the Notes at the time
outstanding, no such amendment or waiver shall (A)
reduce the principal of, or the rate of interest on, or
the amount of any applicable Prepayment Premium with
respect to, any of the Notes, (B) subject to the
provisions of the last paragraph of Section 11.1,
extend the time of payment of all or any portion of the
principal of or interest on or any Prepayment Premium
payable with respect to any of the Notes, (C) modify
any of the provisions of this Agreement or of the Notes
with respect to the payment or prepayment (whether
mandatory or optional) of the principal thereof,
interest thereon, or Prepayment Premium with respect
thereto, (D) reduce the percentage of Notes required
with respect to any such amendment or to effectuate any
such waiver, (E) alter the definition of the term
"Majority Holders" or (F) modify any provision of this
Section; and
(ii) no such waiver shall extend to or affect any
obligation not expressly waived or impair any right
consequent thereon.
(b) Any amendment or waiver pursuant to subsection (a)
of this Section 14.1 shall apply equally to all holders of the
Notes at the time outstanding and shall be binding upon them,
upon each future holder of any Note, and upon the Company, in
each case whether or not a notation thereof shall have been
placed on any Note.
(c) Notwithstanding any other provision contained in
this Section 14.1 or elsewhere in this Agreement to the contrary,
Notes which at any time are held by the Company or by any
Subsidiary or Affiliate of the Company shall not be deemed
outstanding for purposes of any vote, consent, approval, waiver
or other action required or permitted to be taken by the holders
of Notes, or by any of them, under the provisions of this Section
- 70 -
658180v11<PAGE>
14.1 or Section 11 of this Agreement, and neither the Company nor
any such Subsidiary or Affiliate shall be entitled to exercise
any right as a holder of Notes with respect to any such vote,
consent, approval or waiver or to take or participate in taking
any such action at any time.
(d) So long as any Notes remain outstanding, the
Company will not solicit, request or negotiate for or with
respect to any proposed consent with respect to, or waiver or
amendment of, any of the provisions of this Agreement or the
Notes unless each holder of Notes (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Company
and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to
enable it to make an informed decision with respect thereto. The
Company will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as
consideration for or as an inducement to the entering into by any
holder of Notes of any amendment, waiver or consent with respect
to any of the terms and provisions of this Agreement or the Notes
unless such remuneration is currently paid, on the same terms,
ratably to the holders of all Notes then outstanding.
Section 14.2. Expenses{tc "Section 14.2. Expenses"
\f C \l 2}. The Company agrees, whether or not the transactions
hereby contemplated shall be consummated, to pay and save the
Purchaser and any other holder of Notes harmless against any and
all liability for the payment of all reasonable out-of-pocket
expenses arising in connection with this Agreement, the Notes,
the Warrants, the Registration Rights Agreement, any other
agreements, instruments or documents executed pursuant thereto or
in connection therewith, and the transactions hereby
contemplated, including without limitation all such expenses
incurred with respect to the enforcement of any provision of any
such agreement, instrument or document, all expenses incurred in
connection with the reproduction of such agreements, instruments
and documents and all stamp and other similar taxes (together in
each case with interest and penalties, if any) which may be
payable in respect of the execution and delivery of such
agreements, instruments and documents, or the issuance, delivery
or acquisition by the Purchaser of any Note or Warrant or
otherwise pursuant to this Agreement, the fees and disbursements
of Stroock & Stroock & Lavan LLP and of any special or local
counsel in connection with the preparation of such agreements and
instruments and the transactions hereby and thereby contemplated,
and the fees and disbursements of the Accountants. The Company
also agrees to pay all expenses incurred by the Purchaser or any
other holder of Notes or Warrants (including reasonable counsel
fees and disbursements) in connection with any amendment or
requested amendment of, or waiver or consent or requested waiver
or consent under or with respect to, this Agreement, the Notes,
the Warrants, the Registration Rights Agreement, or any of such
other agreements, instruments or documents, whether or not the
- 71 -
658180v11<PAGE>
same shall become effective, and all expenses incurred by the
Purchaser or any other holder of Notes or Warrants (including
reasonable counsel fees and disbursements and the reasonable
fees, expenses and disbursements of an investment bank or other
firm acting as financial advisor to the holders of Notes or
Warrants) following the occurrence and during the continuance of
any Default or Event of Default or incident to the negotiation of
any workout, restructuring or similar arrangement relating to the
Company or its Subsidiaries. The obligations of the Company
under this Section 14.2 shall survive the payment or transfer of
any Note or Warrant (including, without limitation, the payment
or prepayment of the Notes in full and the exercise of the
Warrants), the enforcement of any provision hereof or thereof,
any such amendments, waivers or consents, any such Default or
Event of Default, and any such workout, restructuring or similar
arrangement.
Section 14.3. Survival of Representations and
Warranties{tc "Section 14.3. Survival of Representations and
Warranties" \f C \l 2}. All representations and warranties
contained herein or made in writing by or on behalf of any party
to this Agreement or otherwise in connection herewith, shall (i)
survive the execution and delivery of this Agreement and the
Registration Rights Agreement and the delivery of the Notes and
Warrants to the Purchaser and shall continue in effect as long as
any of the Notes or Warrants is outstanding, and thereafter as
provided in Sections 14.2 and 14.6 with respect to the
obligations imposed thereunder, and (ii) be deemed to be material
and to have been relied upon by the Purchaser, regardless of any
investigation made by the Purchaser or on its behalf.
Section 14.4. Successors and Assigns; Limitation on
Transfer{tc "Section 14.4. Successors and Assigns; Limitation
on Transfer" \f C \l 2}. (a) All representations, warranties,
covenants and agreements in this Agreement made by or on behalf
of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto
whether so expressed or not, except that the Purchaser shall not
be obligated to purchase any Note or Warrant from any issuer
other than the Company. The provisions of this Agreement are
intended to be for the benefit of all holders, from time to time,
of any Notes or Warrants purchased pursuant hereto, and shall be
enforceable by any such holder, whether or not an express
assignment to such holder of rights under this Agreement has been
made by the Purchaser or any of its successors or assigns.
(b) Notwithstanding any other provision of this
Agreement to the contrary, without the prior written consent of
the Company, neither the Purchaser nor any other holder of Notes
shall transfer any Notes to any Person unless the aggregate
principal amount of Notes concurrently transferred to such Person
(taken together with any concurrent transfers of Notes by the
transferor or its Control Affiliates to the transferee or its
Control Affiliates) shall be not less than the lesser of (i)
- 72 -
658180v11<PAGE>
$1,000,000, or (ii) the entire remaining principal balance of the
Notes held by such transferor; provided that nothing in this
subsection (b) shall be deemed to prohibit any transfer of Notes
by any Person to (x) any Control Affiliate of such Person or (y)
any Person who immediately prior to such transfer is a holder of
Notes or a Control Affiliate of a holder of Notes; provided,
further, that no transfer of Notes shall be permitted if,
immediately after giving effect to such transfer, there would be
more than five holders of Notes (provided that, solely for the
purposes hereof, a Person and all of such Person's Control
Affiliates shall be counted as a single holder of Notes).
Section 14.5. Notices{tc "Section 14.5. Notices"
\f C \l 2}. All notices hereunder shall be in writing and shall
be conclusively deemed to have been received and shall be
effective (a) on the day on which delivered if delivered
personally or transmitted by telecopier, (b) one Business Day
after the date on which the same is delivered to a nationally
recognized overnight courier service, or (c) three Business Days
after being sent by registered or certified United States mail,
return receipt requested, and shall be addressed:
(i) in the case of the Company, to:
Meridian Medical Technologies, Inc.
10240 Old Columbia Road
Columbia, MD 21046
Attention: James H. Miller
Telecopy No.: (410) 309-1691;
with a copy (which shall not constitute
notice) to:
Arnold & Porter
555 Twelfth Street N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esq.
Telecopy No.: (202) 942-5999;
(ii) in the case of the Purchaser, to:
Nomura Holding America Inc.
2 World Financial Center, Building B
New York, NY 10281-1198
Attention: Howard Gellis, or his authorized
representative
Telecopy No.: (212) 667-1029
with a copy to:
Nomura Holding America Inc.
2 World Financial Center, Bldg. B
New York, NY 10281-1198
- 73 -
658180v11<PAGE>
Attention: Michael Goldberg, Esq.
Telecopy No.: (212) 667-1024;
or at such other address and/or telecopy number and/or to the
attention of such other Person as any of such Persons shall have
advised the others by notice in the manner herein specified.
Section 14.6. Indemnification{tc "Section 14.6.
Indemnification" \f C \l 2}. In consideration of the
execution and delivery of this Agreement by the Purchaser, the
Company hereby agrees to defend, indemnify, exonerate and hold
harmless the Purchaser, each holder of Notes, and each of their
respective officers, directors, stockholders, affiliates,
trustees, employees and agents, and each other Person, if any,
controlling such Purchaser or holder of Notes or any of its
respective Affiliates (herein collectively called the
"Indemnitees") from and against any and all liabilities,
obligations, losses, damages, claims, actions, suits,
proceedings, judgments, costs and expenses, including, without
limitation, legal fees and other expenses incurred in the
investigation, defense, appeal and settlement of claims, actions,
suits and proceedings (herein collectively called the
"Indemnified Liabilities"), incurred by the Indemnitees or any of
them as a result of, or arising out of or relating to:
(i) the execution, delivery, performance or
enforcement of this Agreement, the Notes, the Warrants,
the Registration Rights Agreement or any other
instrument or document contemplated hereby or thereby
by any of the Indemnitees, or any act, event or
transaction related or attendant thereto or
contemplated hereby or thereby, or any action or
inaction by any Indemnitee under or in connection
therewith, or
(ii) any Environmental Matter, any violation or
alleged violation by the Company or any of its
Subsidiaries of any Environmental Law or the actual or
alleged existence, or release by the Company or any of
its Subsidiaries, of any Hazardous Material that
affects the Company, any of its Subsidiaries, or their
respective operations or Properties,
except for any such Indemnified Liabilities that are finally
judicially determined (or acknowledged by the respective
Indemnitee in writing) to have resulted from the respective
Indemnitee's gross negligence or willful misconduct, and if and
to the extent that the foregoing undertaking may be unenforceable
for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable
law. The obligations of the Company under this Section 14.6
shall be in addition to any liability that the Company may
otherwise have and shall survive the payment or prepayment in
- 74 -
658180v11<PAGE>
full or transfer of any Note or Warrant and the enforcement of
any provision hereof or thereof.
Section 14.7. Public Announcements{tc "Section 14.7.
Public Announcements" \f C \l 2}. The Company agrees that
it will not issue any press release or make any other public
announcement, statement or filing with regard to this Agreement,
the Notes, the Warrants, the Registration Rights Agreement or the
transactions hereby or thereby contemplated without the prior
approval of the Majority Holders, which approval shall not be
unreasonably withheld and shall in no event be withheld in any
case where such press release, public announcement, statement or
filing is required by applicable law (including applicable rules
and regulations of the SEC).
Section 14.8. No Fiduciary Relationship{tc "Section
14.8. No Fiduciary Relationship" \f C \l 2}. The Purchaser
shall not, by reason of its purchase or holding of Notes or
Warrants pursuant to this Agreement, be deemed to have any
fiduciary or other special relationship with the Company or any
of its Subsidiaries. No provision of this Agreement, the Notes,
the Warrants, the Registration Rights Agreement or any of the
other documents executed and delivered in connection herewith
shall be construed to create a fiduciary duty on the part of the
Purchaser, any holder of Notes or any trustee or agent therefor
in favor of the Company, any of its Subsidiaries or Affiliates,
or their respective directors, officers, employees, agents,
stockholders or creditors.
Section 14.9. Confidentiality{tc "Section 14.9.
Confidentiality" \f C \l 2}. Each holder of Notes agrees to
use reasonable efforts (in accordance with its customary
procedures with respect to the treatment of confidential
information) not to disclose, or use for any purpose other than
in connection with its investment in the Notes or the Warrants,
without the prior written consent of the Company, any information
with respect to the Company or any of its Subsidiaries which is
furnished by the Company pursuant to or in connection with the
transactions contemplated by this Agreement, provided that such
holder may disclose any such information (a) as has become
generally available to the public (other than through disclosure
by such holder in contravention of this Agreement), (b) to such
holder's directors, trustees, partners, officers, employees,
agents and professional consultants, (c) to any other holder of
Notes, (d) to any Person to which such holder offers to sell or
transfer any Note or any part thereof or participation therein,
provided that the prospective transferee shall agree to be bound
by the provisions of this Section 14.9, (e) in any report,
statement, testimony or other submission to any Governmental Body
having or claiming to have jurisdiction over such holder, and (f)
in order to comply with any Statute or Order applicable to such
holder, or in response to any summons, subpoena or other legal
process or formal or informal investigative demand issued to such
- 75 -
658180v11<PAGE>
holder in the course of any litigation, investigation or
administrative proceeding.
Section 14.10. Integration and Severability{tc
"Section 14.10. Integration and Severability" \f C \l 2}.
This Agreement (including the schedules and exhibits thereto),
the Notes, the Warrants, the Registration Rights Agreement and
the other documents executed pursuant to this Agreement embody
the entire agreement and understanding between the Purchaser and
the Company, and supersede all prior agreements and
understandings relating to the subject matter hereof. In case
any one or more of the provisions contained in this Agreement,
the Notes, the Warrants, the Registration Rights Agreement or any
other agreement, instrument or document executed in connection
therewith, or any application thereof, shall be invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
therein, and any other application thereof, shall not in any way
be affected or impaired thereby.
Section 14.11. Counterparts{tc "Section 14.11.
Counterparts" \f C \l 2}. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original but all of which shall together constitute one and the
same instrument.
Section 14.12. Governing Law{tc "Section 14.12.
Governing Law" \f C \l 2}. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
Section 14.13. Submission to Jurisdiction; Waiver of
Service and Venue{tc "Section 14.13. Submission to
Jurisdiction: Waiver of Service and Venue" \f C \l 2}. (a) EACH
OF THE COMPANY, THE PURCHASER AND EACH OTHER HOLDER OF NOTES
CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK,
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO
ANY ACTION INSTITUTED THEREIN, AND AGREES THAT, EXCEPT UPON THE
WRITTEN CONSENT OF THE MAJORITY HOLDERS, ANY DISPUTE CONCERNING
THE RELATIONSHIP BETWEEN THE PURCHASER OR ANY OTHER HOLDER OF
NOTES, ON THE ONE HAND, AND THE COMPANY, ON THE OTHER HAND, OR
THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS AGREEMENT OR
OTHERWISE, SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
(b) THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY HAND DELIVERY TO THE COMPANY AT ITS
ADDRESS SET FORTH ABOVE IN SECTION 14.5, OR, AT THE OPTION OF THE
MAJORITY HOLDERS, BY SERVICE UPON CT CORPORATION, WHICH THE
COMPANY IRREVOCABLY APPOINTS AS ITS AGENT FOR THE PURPOSE OF
ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF NEW YORK. IN
ADDITION, THE PURCHASER AND EACH OTHER HOLDER OF NOTES AGREES TO
- 76 -
658180v11<PAGE>
PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO THE COMPANY AT ITS ADDRESS SET FORTH ABOVE IN
SECTION 14.5. THE COMPANY HEREBY CONSENTS TO SERVICE OF PROCESS
AS AFORESAID.
(c) NOTHING IN THIS SECTION 14.13 SHALL AFFECT THE
RIGHT OF THE PURCHASER OR ANY OTHER HOLDER OF NOTES TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE PURCHASER OR ANY OTHER HOLDER OF NOTES (UPON THE
CONSENT OF THE MAJORITY HOLDERS AS PROVIDED IN SECTION 14.13(a))
TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
Section 14.14. Waiver of Right to Trial by Jury{tc
"Section 14.14. Waiver of Right to Trial by Jury" \f C \l 2}.
EACH OF THE COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (I)
ARISING UNDER THIS AGREEMENT, ANY NOTE OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. THE COMPANY AND THE PURCHASER HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 77 -
658180v11<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have
executed this Agreement by their duly authorized officers as of
the date first written above.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By:
Its:
NOMURA HOLDING AMERICA INC.
By:
Its:
- 78 -
658180v11<PAGE>
FORM OF
REGISTRATION RIGHTS AGREEMENT
between
MERIDIAN MEDICAL TECHNOLOGIES, INC.
and
NOMURA HOLDING AMERICA INC.
Dated as of April 30, 1998
687583v1<PAGE>
TABLE OF CONTENTS
Page
1. Definitions...........................................1
2. Demand Registration...................................3
3. Piggyback Registration................................6
4. Registration Procedures...............................8
5. Registration Expenses................................15
6. Preparation; Reasonable Investigation................16
7. Sale of Warrants to Underwriters.....................17
8. Indemnification......................................17
9. Contribution.........................................20
10. Current Public Information...........................21
11. Registration Rights to Others........................22
12. Adjustments Affecting Registrable Securities.........22
13. Rule 144 and Rule 144A...............................23
14. Amendments and Waivers...............................23
15. Nominees for Beneficial Owners.......................23
16. Assignment...........................................24
17. Miscellaneous........................................24
(a) Further Assurances..............................24
(b) Headings........................................25
(c) No Inconsistent Agreements......................25
(d) Remedies........................................25
(e) Entire Agreement................................25
(f) Notices.........................................25
(g) Governing Law...................................26
(h) Severability....................................26
(i) Counterparts....................................26
- i -
687583v1<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 30,
1998 (this "Agreement"), by and between MERIDIAN MEDICAL
TECHNOLOGIES, INC., a Delaware corporation (the "Company") and
NOMURA HOLDING AMERICA INC., a Delaware corporation (the
"Holder").
The Company desires to grant to the Holder certain
registration rights with respect to certain warrants to purchase
204,770 shares (subject to adjustment) of Common Stock, $0.10 par
value per share, of the Company which the Holder is purchasing
from the Company on the date hereof pursuant to the Note and
Warrant Purchase Agreement (as defined below).
In consideration of the premises and the mutual
agreements set forth herein, the parties hereto hereby agree as
follows:
1. Definitions{ TC "1. Definitions" \f C \l "1" }.
Unless otherwise defined herein, capitalized terms used herein
and in the recitals above shall have the following meanings:
"Business Day" means any day except a Saturday, Sunday
or a legal holiday in New York City.
"Commission" means the United States Securities and
Exchange Commission and any successor agency, authority,
commission or government body.
"Common Stock" means the shares of common stock, par
value $0.10 per share, of the Company.
"Exchange" means the principal stock exchange or market
on which the Common Stock is traded, which is presently NASDAQ.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute then in effect,
and a reference to a particular section thereof shall include a
reference to a comparable section, if any, of any such similar
statute.
"ING" means ING (U.S.) Capital Corporation, a Delaware
corporation.
"ING Securities" means those Securities with respect to
which ING has been granted registration rights pursuant to the
Registration Rights Agreement dated as of April 15, 1996 by and
between the Company and ING, as the same has been or may be
amended (the "ING Registration Rights Agreement").
687583v1<PAGE>
"Majority Holders" means at any time the holders of
Warrants exercisable for a majority of the shares of Warrant
Stock issuable under the Warrants at the time outstanding.
"NASD" means the National Association of Securities
Dealers, Inc. and any successor organization or entity.
"NASDAQ" means the Nasdaq Stock Market and includes The
Nasdaq National Market and The Nasdaq SmallCap Market.
"Note and Warrant Purchase Agreement" means the Note
and Warrant Purchase Agreement dated as of April 30, 1998, by and
between the Company and the Holder.
"Person" means and includes an individual, a
partnership, a joint venture, a corporation, a company, a trust,
an unincorporated organization and a government or any department
or agency thereof.
"Registrable Securities" shall mean (a) all shares of
Common Stock issued or issuable upon the exercise of any Warrant,
and (b) any Securities issued or issuable by the Company with
respect to shares of Common Stock referred to in the foregoing
clause (a) by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares,
reclassification, merger, consolidation or other reorganization
of the Company; provided, however, that as to any particular
Registrable Securities that have been issued, such Securities
shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such Securities shall have
become effective under the Securities Act and such Securities
shall have been disposed of under such registration statement,
(ii) they shall have been distributed to the public pursuant to
Rule 144, (iii) they shall have been otherwise transferred or
disposed of, and new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the
Company, and subsequent transfer or disposition of them shall not
require their registration or qualification under the Securities
Act or any similar state law then in force, or (iv) they shall
have ceased to be outstanding. For the purposes of Sections 2, 3
and 4 of this Agreement, the holder of any Warrant shall be
deemed to be a holder of the Registrable Securities issuable upon
exercise of such Warrant, and such Registrable Securities shall
be deemed to be issued and outstanding.
- 2 -
660958v6<PAGE>
"Registration Expenses" shall have the meaning set
forth in Section 5 hereof.
"Securities" means any debt or equity Securities of the
Company, whether now or hereafter authorized, any instrument
convertible into or exchangeable for Securities or a Security,
and any option, warrant or other right to purchase or acquire any
Security. "Security" shall mean one of the Securities.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a
reference to a particular section thereof shall include a
reference to a comparable section, if any, of any such similar
statute.
"Transfer" means any transfer, sale, assignment,
pledge, hypothecation or other disposition of any interest.
"Transferor" and "Transferee" have correlative meanings.
"Underwritten Offering" means a public offering of
Securities distributed by means of a firm commitment
underwriting.
"Warrant" means the Warrants issued and sold pursuant
to the Note and Warrant Purchase Agreement, including, without
limitation, any other warrants of like tenor issued in
substitution or exchange for any thereof pursuant to the
provisions of Section 2(c) or 2(d) thereof or Section 2(c) or
2(d) of any of such other Warrants.
"Warrant Stock" means Common Stock issuable upon
exercise of any Warrants or Warrants.
2. Demand Registration{ TC "2. Demand Registration"
\f C \l "1" }
(a) Subject to the terms and conditions set forth herein,
at any time hereafter, the Majority Holders may request (such
requesting holders being herein called in each case the
"Requesting Holders") that the Company effect the registration
under the Securities Act of all or part of such holders'
Registrable Securities on Form S-1 or any similar long-form
registration or, if available, on Form S-2 or S-3 or any similar
short-form registration (all registrations requested pursuant to
- 3 -
660958v6<PAGE>
this Section 2(a) are referred to herein as "Demand
Registrations"). Each such request for registration shall
specify the approximate number of Registrable Securities
requested to be registered, and may at the election of the
Requesting Holders specify the intended method or methods of
disposition thereof (which may include, without limitation, a
"shelf" offering pursuant to Rule 415 under the Securities Act,
or an Underwritten Offering). Within 10 days after receipt of
such request, the Company will promptly give written notice of
such requested registration to all other holders of Registrable
Securities, and, subject to the provisions of Section 2(f)
hereof, will include in such registration all Registrable
Securities with respect to which the Company has received written
requests for inclusion therein within 20 days after the receipt
of the Company's notice; provided, however, that the Company
shall not be obligated to file a registration statement relating
to any Demand Registration under this Section 2(a):
(i) unless the Company shall have received requests
for such registration with respect to at least 50% of the
Registrable Securities then outstanding; or
(ii) within a period of six months after the effective
date of any registration statement filed by the Company with
respect to which the holder of any Warrant or of any shares
of Warrant Stock issued upon exercise hereof shall have been
afforded the opportunity to register shares of Warrant Stock
in accordance with the provisions of Section 3 hereof.
(b) The holders of Registrable Securities will be entitled
to request one Demand Registration. The Company will pay all
Registration Expenses incurred in connection with such Demand
Registration. A registration will not count as the permitted
Demand Registration (i) unless and until it has become effective,
(ii) unless at least 90% of the Registrable Securities initially
requested to be registered by the holders of Registrable
Securities requesting such registration shall be covered by the
Demand Registration at the time it becomes effective and (iii)
unless the Demand Registration remains effective for the minimum
period required under Section 4(a)(i) below; provided that in any
event, except as provided in Section 2(d), the Company will pay
all Registration Expenses in connection with any registration
initiated as a Demand Registration whether or not it has become
effective.
- 4 -
660958v6<PAGE>
(c) The Company may postpone for not more than 90 days
within or during any period of 365 consecutive days with respect
to any request for a Demand Registration hereunder, the filing or
effectiveness of a registration statement under Section 2(a) if
the Board of Directors of the Company determines in good faith
that such registration might reasonably be expected to have an
adverse effect on any proposal or plan by the Company to engage
in any sale or acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or
similar transaction; provided that in such event, the Requesting
Holders will be entitled to withdraw such request, and if such
request is withdrawn, such registration will not count as the
permitted Demand Registration under this Section 2 and the
Company will pay all Registration Expenses in connection with
such withdrawn registration request.
(d) A registration requested pursuant to this Section 2
will not be deemed to have been effected unless it has become
effective under the Securities Act; provided that (i) if after a
registration has become so effective, the offering of Registrable
Securities pursuant to such registration is terminated, suspended
or interfered with by any stop order, injunction or other order
or requirement of the Commission or other governmental agency or
court, such registration will be deemed not to have been
effected; and (ii) if before a registration becomes effective,
the offering of Registrable Securities pursuant to such
registration is terminated at the request of all of the
Requesting Holders, such registration will be deemed to have been
effected unless such Requesting Holders reimburse the Company for
all reasonable expenses incurred by the Company in connection
with such registration prior to its termination or which the
Company shall have been thereafter required to incur as a result
of actions on the part of the Requesting Holders.
(e) In the case of any Demand Registration which involves
an Underwritten Offering, the Company shall have the right to
select the investment banker (or investment bankers) that shall
manage the offering (collectively, the "managing underwriter"),
subject to the approval of the holders of a majority of the
Registrable Securities being so registered which approval shall
not be unreasonably withheld.
- 5 -
660958v6<PAGE>
(f) Except with the prior written consent of the Majority
Holders, the Company will include in a Demand Registration only
(i) Registrable Securities, (ii) ING Securities to the extent ING
requests that such ING Securities be included pursuant to ING's
"piggyback" registration rights granted under the ING
Registration Rights Agreement, (iii) authorized but unissued or
treasury shares of Common Stock which the Company desires to
issue and sell ("Company Securities"), and (iv) other outstanding
shares of Common Stock which the Company shall have been
requested to register ("Other Securities"); provided that if a
Demand Registration involves an Underwritten Offering and the
managing underwriter advises the Company that, in its opinion,
the number of Securities proposed to be included in such offering
exceeds the number of Securities which can be sold therein
without adversely affecting the marketability of the offering,
then the Company will promptly so advise each holder of
Registrable Securities that has requested registration, and,
[subject to Section 2(a)] of the ING Registration Rights
Agreement and subject to Section 10(e) of the Estate Warrant (as
defined in the ING Registration Rights), will include in such
registration first, Registrable Securities and ING Securities
requested to be so included by the respective holders thereof,
allocated pro rata among such holders based on the number of
Registrable Securities or ING Securities, as the case may be,
with respect to which each such holder has requested
registration, second, Company Securities which the Company
desires to include in such registration, and, third, Other
Securities requested to be included in such registration,
allocated pro rata among the holders thereof based on the number
of such Other Securities with respect to which each such holder
has requested registration, until the aggregate number of
Securities included in such Demand Registration is equal to the
number thereof that, in the opinion of such managing underwriter,
can be sold without adversely affecting the marketability
thereof.
(g) The Company agrees to include in any such registration
statement filed pursuant to Section 2(a) hereof all information
which any Requesting Holder, upon advice of counsel, shall
reasonably request.
3. Piggyback Registration{ TC "3. Piggyback
Registration" \f C \l "1" }. (a) If the Company at any time
proposes to register under the Securities Act any shares of its
- 6 -
660958v6<PAGE>
Common Stock now or hereafter authorized (other than a
registration on Form S-4 or S-8 or any successor or similar forms
thereto and other than pursuant to a registration under Section 2
hereof), whether for sale for its own account or for the account
of any selling stockholder, on a form and in a manner that would
permit registration of Registrable Securities for sale to the
public under the Securities Act, it will give written notice to
all the holders of Registrable Securities promptly, and in any
event no later than 30 days before the initial filing with the
Commission of a registration statement, of its intention to do
so, describing such Securities and specifying the form and manner
and the other relevant facts involved in such proposed
registration (including, without limitation, (i) whether or not
such registration will be in connection with an underwritten
offering of Securities and, if so, the identity of the managing
underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting, (ii) the price at
which such Securities are reasonably expected to be sold to the
public, and (iii) the amount of the underwriting discount
reasonably expected to be incurred in connection therewith).
Upon the written request of any such holder delivered to the
Company within 20 calendar days after the receipt of any such
notice (which request shall specify the Registrable Securities
intended to be disposed of by such holder and the intended method
of disposition thereof), the Company will (subject to the
provisions of Section 3(d) hereof), include in such registration
all of the Registrable Securities that the Company has been so
requested to register; provided, however, that if, at any time
after giving such written notice of its intention to register any
Securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company
shall determine for any reason not to register such Securities,
the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities who made a
request as hereinabove provided and thereupon the Company shall
be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of the
holders of Registrable Securities under Section 2 hereof. No
registration effected under this Section 3 shall relieve the
Company of its obligation to effect a Demand Registration under
Section 2 hereof.
- 7 -
660958v6<PAGE>
(b) The Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3
incidental to the registration of any of its Securities in
connection with mergers, acquisitions, exchange offers, dividend
reinvestment plans or stock option or other employee benefit
plans.
(c) The Registration Expenses incurred in connection with
each registration of Registrable Securities requested pursuant to
this Section 3 shall be paid by the Company.
(d) If a registration pursuant to this Section 3 involves
an Underwritten Offering and the managing underwriter advises the
Company that, in its opinion, the number of Securities proposed
to be included in such offering exceeds the number of Securities
which can be sold therein without adversely affecting the
marketability of the offering, then the Company will promptly so
advise each holder of Registrable Securities that has requested
registration, and, subject to Sections 2(a) and 2(b) of the ING
Registration Rights Agreement and Sections 10(c) and 10(e) of the
Estate Warrant, will include in such registration first, Company
Securities which the Company desires to include in such
registration, second, Registrable Securities and ING Securities
requested to be included therein, allocated pro rata among the
holders of Registrable Securities or ING Securities, as the case
may be, based on the number of Registrable Securities with
respect to which each such holder has requested registration,
and, third, Other Securities requested to be included in such
registration, allocated pro rata among the holders thereof based
on the number of such Other Securities with respect to which each
such holder has requested registration, in each case until the
aggregate number of Securities included in such registration is
equal to the number thereof that, in the opinion of such managing
underwriter, can be sold without adversely affecting the
marketability thereof.
(e) In connection with any registration pursuant to this
Section 3 which involves an Underwritten Offering, the Company
shall have the right in its sole discretion to select the
managing underwriter with respect to the offering.
4. Registration Procedures{ TC "4. Registration
Procedures" \f C \l "1" }. (a) Whenever any holders of
Registrable Securities have requested that any Registrable
- 8 -
660958v6<PAGE>
Securities be registered pursuant to Section 2 or 3 hereof,
subject to the applicable terms and conditions of Sections 2 and
3 hereof, the Company will use its best efforts to effect the
registration of such Securities under the Securities Act and the
sale thereof in accordance with the intended method of
disposition thereof, and in connection therewith the Company
will, as expeditiously as reasonably possible:
(i) prepare and, in any event within 90 calendar days
after the end of the period within which requests for
registration may be given to the Company, file with the
Commission a registration statement with respect to such
Registrable Securities and within 60 days of such filing (or
within such shorter period as may be reasonably practicable)
use its best efforts cause such registration statement to
become and remain effective until the earlier of (A) six
months or, if such registration statement relates to an
Underwritten Offering, such longer period as in the opinion
of counsel for the underwriters a prospectus is required by
law to be delivered in connection with sales of Registrable
Securities by an underwriter or dealer, or (B) such shorter
period as will terminate when all of the Securities covered
by such registration statement have been disposed of in
accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration
statement (but in any event not before the expiration of any
longer period required under the Securities Act);
(ii) prepare and file with the Commission such
amendments (including post-effective amendments) and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to
the disposition of all Securities covered by such
registration statement during such period in accordance with
the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(iii) prior to filing with the Commission any such
registration statement, prospectus, or amendment or
supplement thereto, furnish copies thereof to counsel for
the sellers of Registrable Securities under such
- 9 -
660958v6<PAGE>
registration statement, which documents will be subject to
review by such counsel;
(iv) furnish to each seller of Registrable Securities
covered by the registration statement and to each
underwriter, if any, of such Registrable Securities, such
number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary
prospectus) and such other documents as such seller may
reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by
such seller;
(v) use its best efforts to register or qualify such
Registrable Securities covered by such registration
statement under such other securities or Blue Sky laws of
such jurisdictions as each seller shall reasonably request,
and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Securities
owned by such seller, in such jurisdictions, except that the
Company shall not for any such purpose be required (A) to
qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section
4(a), it is not then so qualified, or (B) to subject itself
to taxation in any such jurisdiction, or (C) to take any
action which would subject it to general or unlimited
service of process in any such jurisdiction where it is not
then so subject;
(vi) use its best efforts to cause such Registrable
Securities covered by such registration statement to be
registered or qualified with or approved by such other
governmental agencies or authorities (including, without
limitation, state securities commissions) as may be
necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(vii) immediately notify each seller of Registrable
Securities covered by such registration statement, at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act within the appropriate
period mentioned in Section 4(a)(i) hereof, if the Company
- 10 -
660958v6<PAGE>
becomes aware that 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 the light of
the circumstances then existing, and, at the request of any
such seller, deliver a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of
the circumstances then existing;
(viii) cause all Registrable Securities covered by
the registration statement to be listed on each securities
exchange on which similar securities issued by the Company
are then listed or, if not so listed, to be listed on NASDAQ
or such national securities exchange as the managing
underwriter of such offering, if any, may designate;
(ix) provide a transfer agent and registrar for all
such Registrable Securities not later than the effective
date of such registration statement;
(x) enter into such customary agreements (including
underwriting agreements in customary form) and take all such
other actions as the holders of a majority of the
Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(xi) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration
statement;
- 11 -
660958v6<PAGE>
(xii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission and
make generally available to its Security holders, in each
case as soon as practicable, but not later than 45 calendar
days after the close of the period covered thereby (90
calendar days in case the period covered corresponds to a
fiscal year of the Company), an earnings statement of the
Company which will satisfy the provisions of Section 11(a)
of the Securities Act;
(xiii) in the event of the issuance of any stop
order suspending the effectiveness of a registration
statement, or of any order suspending or preventing the use
of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration
statement for sale in any jurisdiction, the Company will use
its reasonable efforts promptly to obtain the withdrawal of
such order;
(xiv) obtain a "cold comfort" letter, dated the
effective date of such registration statement (and, if such
registration involves an Underwritten Offering, dated the
date of the closing under the underwriting agreement),
signed by the Company's independent public accountants, in
customary form and covering such matters as are customarily
covered by comfort letters by independent public accountants
in such public offerings and such other financial matters as
the holders of a majority of the Registrable Securities
being sold may reasonably request; and
(xv) furnish a legal opinion of the Company's counsel,
dated the effective date of such registration statement
(and, if such registration involves an Underwritten
Offering, dated the date of the closing under the
underwriting agreement), with respect to the registration
statement, each amendment and supplement thereto, the
prospectus included therein (including the preliminary
prospectus) and other documents relating thereto, in
customary form and covering such matters as are customarily
covered by legal opinions of Company's counsel in such
public offerings and such other legal matters as the holders
of a majority of the Registrable Securities being sold may
reasonably request.
- 12 -
660958v6<PAGE>
(b) It shall be a condition precedent to the obligation of
the Company to take any action pursuant to this Section 4 in
respect of Registrable Securities that the holders requesting
registration thereof shall furnish to the Company such
information regarding the Registrable Securities held by such
holder and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in
connection with the action taken by the Company; provided,
however, that the failure of any holder of Registrable Securities
to furnish such information shall not affect the obligations of
the Company pursuant to this Section 4 with respect to any holder
of Registrable Securities who furnishes such information to the
Company. Notwithstanding any provision to the contrary contained
herein, no holder of Registrable Securities shall be required to
furnish any information or make any representations or warranties
to the Company or the underwriters other than representations and
warranties contained in a writing furnished by such holder
expressly for use in the registration statement to be filed in
connection with such registration solely with regard to such
holder's identity, its ownership of Securities of the Company,
the class and number of such Securities it intends to include in
such offering, its intended method of distribution, other
information pertinent to such holder in its capacity as a selling
stockholder, and any other information with respect to such
holder required by law to be disclosed in such registration
statement.
(c) If a registration pursuant to Section 2 or 3 involves
an Underwritten Offering, the holders of Registrable Securities
to be distributed by the underwriters thereof shall be parties to
the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of
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 Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. No such
holder of Registrable Securities shall be required to make any
representations or warranties to, or agree to any indemnities or
contribution provisions with, the Company or the underwriters
other than representations, warranties, indemnities and
- 13 -
660958v6<PAGE>
contribution provisions with respect to information required to
be furnished by such holder in writing pursuant to subsection (b)
of this Section 4.
(d) If a registration pursuant to Section 2 or 3 involves
an Underwritten Offering, each holder of Registrable Securities
agrees, whether or not such holder's Registrable Securities are
included in such registration, not to effect any sale or
distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Registrable Securities, or of any Security
convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten
Offering), without the consent of the managing underwriter,
during a period commencing 10 calendar days before and ending 180
calendar days (or such lesser number as the managing underwriter
shall designate) after the effective date of such registration.
(e) If a registration pursuant to Section 2 or 3 involves
an Underwritten Offering, any holder of Registrable Securities
requesting to be included in such registration may elect, in
writing, prior to the effective date of the registration
statement filed in connection with such registration, not to
register such securities in connection with such registration,
unless such holder has agreed with the Company or the managing
underwriter not to exercise its rights under this Section 4(e),
subject, however, to the obligations of such holder under Section
2(d) hereof, if applicable.
(f) It is understood that in any Underwritten Offering in
addition to any shares of Common Stock (the "initial shares") the
underwriters have committed to purchase, the underwriting
agreement may grant the underwriters an option to purchase up to
a number of additional shares of authorized but unissued shares
of Common Stock (the "option shares") equal to 15% of the initial
shares (or such other maximum amount as the NASD may then
permit), solely to cover over-allotments. Shares of Common Stock
proposed to be sold by the Company and the other sellers shall be
allocated between initial shares and option securities as agreed
or, in the absence of agreement, pursuant to Section 2(f) or
3(d), as the case may be. The number of initial shares and
option shares to be sold by requesting holders shall be allocated
pro rata among all such holders on the basis of the relative
number of shares of Registrable Securities each such holder has
requested to be included in such registration.
- 14 -
660958v6<PAGE>
5. Registration Expenses{ TC "5. Registration Expenses" \f
C \l "1" }.
(a) All costs and expenses incurred or sustained in
connection with or arising out of each registration pursuant to
Section 2 or 3 (as the case may be), including, without
limitation, all registration and filing fees, fees and expenses
of compliance with securities or Blue Sky laws (including
reasonable fees and disbursements of counsel for the underwriters
in connection with the Blue Sky qualification of Registrable
Securities), printing expenses, messenger, telephone and delivery
expenses, fees and disbursements of counsel for the Company and
for the sellers of Registrable Securities (subject to the
limitations contained in paragraph (b) of this Section 5), fees
and disbursements of all independent certified public accountants
(including the expenses relating to the preparation and delivery
of any special audit or "cold comfort" letters required by or
incident to such registration), and fees and disbursements of
underwriters (excluding discounts and commissions, but including
underwriters' liability insurance if the Company or if the
underwriters so require), the reasonable fees and expenses of any
special experts retained by the Company of its own initiative or
at the request of the managing underwriters in connection with
such registration, and fees and expenses of all (if any) other
persons retained by the Company (all such costs and expenses
being herein called, collectively, the "Registration Expenses"),
will be borne and paid by the Company as provided by the
provisions contained in this Agreement. The Company will, in any
case, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual
audit, the expense of liability insurance referred to above, and
the fees and expenses incurred in connection with the listing of
the Securities to be registered on each securities exchange on
which similar Securities of the Company are then listed.
(b)In connection with each registration of Registrable
Securities pursuant to this Agreement, the Company will reimburse
the holders of Registrable Securities being registered in such
registration for the reasonable fees and disbursements of any one
counsel chosen by the holders of a majority in interest of such
Registrable Securities. The Company will not bear the cost of
nor pay for any stock transfer taxes imposed in respect of the
- 15 -
660958v6<PAGE>
transfer of any Registrable Securities to any purchaser thereof
by any Holder in connection with any registration of Registrable
Securities pursuant to this Agreement.
(c)To the extent that Registration Expenses incident
to any registration are, under the terms of this Agreement, not
required to be paid by the Company, each holder of Registrable
Securities included in such registration will pay all
Registration Expenses which are clearly solely attributable to
the registration of such Holder's Registrable Securities so
included in such registration, and all other Registration
Expenses not so attributable to one holder will be borne and paid
by all sellers of Securities included in such registration in
proportion to the number of Securities so included by each such
seller.
6. Preparation; Reasonable Investigation{ TC "6.
Preparation; Reasonable Investigation" \f C \l "1"
}.
(a)In connection with the preparation and filing of
each registration statement under the Securities Act pursuant to
this Agreement, the Company shall give each Holder of Registrable
Securities registered under such registration statement, the
underwriter, if any, and its respective counsel and accountants
the reasonable opportunity to participate in the preparation of
such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or
supplement thereto, and shall give each of them such reasonable
access to its books and records and such reasonable opportunities
to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of
any such Holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the
Securities Act.
(b)Each Holder of Registrable Securities shall
maintain the confidentiality of any confidential information
received from or otherwise made available by the Company to such
Holder of Registrable Securities and identified in writing by the
Company as confidential. Information that (i) is or becomes
available to a Holder of Registrable Securities from a public
source, (ii) is disclosed to a Holder of Registrable Securities
- 16 -
660958v6<PAGE>
by a third-party source who the Holder of Registrable Securities
reasonably believes has the right to disclose such information or
(iii) is or becomes required to be disclosed by a Holder of
Registrable Securities by law, including by court order, shall
not be deemed to be confidential information for purposes of this
Agreement.
7. Sale of Warrants to Underwriters{ TC "7. Sale of
Warrants to Underwriters" \f C \l "1" }. Notwithstanding
anything in this Section 7 to the contrary, in the case of any
offering subject to the provisions of Section 2 or 3 hereof which
is an Underwritten Offering, in lieu of exercising any Warrant
prior to or simultaneously with the filing or the effectiveness
of any registration statement filed in connection therewith, the
holder of such Warrant may sell such Warrant to the underwriter
or underwriters of the offering being registered upon the
undertaking of such underwriter or underwriters to exercise such
Warrant before making any distribution pursuant to such
registration statement and to include the Warrant Stock issued
upon such exercise among the Securities being offered pursuant to
such registration statement. The Company agrees to cause such
Warrant Stock to be included among the Securities being offered
pursuant to such registration statement to be issued within such
time as will permit such underwriter or underwriters to make and
complete the distribution contemplated by the underwriting.
8. Indemnification{ TC "8. Indemnification" \f C \l
"1" }. (a) In the event of any registration of any Securities
under the Securities Act pursuant to Section 2 or 3 hereof, the
Company will, and it hereby agrees to, indemnify and hold
harmless, to the extent permitted by law, each seller of any
Registrable Securities covered by such registration statement,
its directors and officers or general and limited partners (and
directors and officers thereof and, if such seller is a portfolio
or investment fund, its investment advisors or agents), each
other Person who participates as an underwriter in the offering
or sale of such Securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning
of Section 15 of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage
or expense whatsoever arising out of or based upon an untrue
statement or alleged untrue statement of a material fact
contained in any registration statement (or any amendment or
- 17 -
660958v6<PAGE>
supplement thereto), including all documents incorporated
therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading,
or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever to the extent of the aggregate amount
paid in settlement (a "Settlement Payment") of any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense (other than any
Settlement Payment) reasonably incurred by them in
connection with investigating, preparing or defending
against any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under
clauses (i) or (ii) above;
provided, however, that this indemnity does not apply to any
loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by
or on behalf of any such seller or underwriter expressly for use
in the preparation of any registration statement (or any
amendment thereto) or any preliminary prospectus or prospectus
(or any amendment or supplement thereto); and provided, further,
that the Company will not be liable to any Person who
participates as an underwriter in the offering or sale of
Registrable Securities (or, if such offering and sale are not
effected by or through an underwriter, then such seller) or any
- 18 -
660958v6<PAGE>
other Person, if any, who controls such underwriter (or seller,
as the case may be) within the meaning of Section 15 of the
Securities Act, under the indemnity agreement in this Section
8(a) with respect to any preliminary prospectus or final
prospectus or final prospectus as amended or supplemented, as the
case may be, to the extent that any such loss, claim, damage or
liability of such underwriter or controlling Person results from
the fact that such underwriter (or seller, as the case may be)
sold Registrable Securities to a Person to whom there was not
sent or given, at or prior to the written confirmation of such
sale, a copy of the final prospectus or of the final prospectus
as then amended or supplemented, whichever is most recent, if the
Company has previously furnished copies thereof to such
underwriter (or seller, as the case may be). Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such
director, officer, general or limited partner, investment advisor
or agent, underwriter or controlling Person and shall survive the
transfer of such Securities by such seller.
(b) The Company may require, as a condition to including
any Registrable Securities in any registration statement filed in
accordance with Section 2 or 3 hereof, that the Company shall
have received an undertaking reasonably satisfactory to it from
the prospective seller of such Registrable Securities, to
indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 8(a) hereof) the Company, the
underwriters, if any, each Person who controls the Company or any
such underwriter (within the meaning of Section 15 of the
Securities Act) and their respective officers, directors,
partners, employees, agents and representatives, with respect to
any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary, final
or summary prospectus contained therein, or any amendment or
supplement, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of
such seller specifically for use in the preparation of such
registration statement, preliminary, final or summary prospectus
or amendment or supplement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of the Company, the underwriters, or any such director,
officer, partner, employee, agent, representative or controlling
Person and shall survive the transfer of such Securities by such
- 19 -
660958v6<PAGE>
seller. In that event, the obligations of the Company and such
seller pursuant to this Section 8 are to be several and not
joint; provided, however, that, with respect to each claim
pursuant to this Section 8, the Company shall be liable for the
full amount of such claim, and each such seller's liability under
this Section 8 shall be limited to an amount equal to the net
proceeds (after deducting the underwriters' discount and
expenses) received by such seller from the sale of Registrable
Securities by it pursuant to such registration statement.
(c) 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 this Section 8, such
indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to such
indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of
its obligations under this Section 8, except to the extent (not
including any such notice of an underwriter) that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying
party similar 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 or other expenses subsequently incurred by such
indemnifying party in connection with the defense thereof.
(d) The Company and each seller of Registrable Securities
shall provide for the foregoing indemnities (with appropriate
modifications) in any underwriting agreement with respect to any
required registration or other qualification of Securities under
any federal or state law or regulation of any governmental
authority.
9. Contribution{ TC "9. Contribution" \f C \l "1" }.
In order to provide for just and equitable contribution in
- 20 -
660958v6<PAGE>
circumstances under which the indemnity contemplated by Section 8
hereof is for any reason not available, the parties required to
indemnify by the terms thereof shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company,
any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In
determining the amounts which the respective parties shall
contribute, there shall be considered the relative benefits
received by each party from the offering of the Registrable
Securities (taking into account the portion of the proceeds of
the offering realized by each), the parties' relative knowledge
and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable
considerations appropriate under the circumstances. The Company
and each such seller agree with each other and the underwriters
of the Registrable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or for
the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the initial
public offering price of the Registrable Securities. For
purposes of this Section 9, each Person, if any, who controls an
underwriter within the meaning of Section 15 of the Securities
Act shall have the same rights to contribution as such
underwriter, and each director and each officer of the Company
who signed the registration statement, and each Person, if any,
who controls the Company or a seller of Registrable Securities
shall have the same rights to contribution as the Company or a
seller of Registrable Securities, as the case may be.
Notwithstanding the foregoing, no seller of Registrable
Securities shall be required to contribute any amount in excess
of the amount such seller would have been required to pay to an
indemnified party if the indemnity under Section 8 hereof were
available.
10. Current Public Information{ TC "10. Current Public
Information" \f C \l "1" }. At all times after the Company has
filed a registration statement with the Commission pursuant to
the requirements of either the Securities Act or the Exchange
Act, and as long as any Warrant shall remain outstanding or the
- 21 -
660958v6<PAGE>
holder hereof shall hold any Registrable Securities, the Company
will file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder, and will take such further
action as any holder or holders of Registrable Securities may
reasonably request, all to the extent required to enable such
holders to sell Registrable Securities pursuant to Rule 144
adopted by the Commission under the Securities Act (as such rule
may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Commission.
11. Registration Rights to Others{ TC "11. Registration
Rights to Others" \f C \l "1" }. (a) The Company represents
and warrants to the Holder that there are no agreements,
understandings or commitments, oral or written, between the
Company and the holders of its Securities pursuant to which such
holders have a right to require the Company to register or
qualify any of its Securities under the Securities Act or any
applicable state securities laws, except for the rights granted
in the ING Registration Rights Agreement and registration rights
granted to the Estate of Dr. Stanley Sarnoff or transferee
thereof.
(b) Except for the rights granted in this Agreement, the
ING Registration Rights Agreement and registration rights granted
to the Estate of Dr. Stanley Sarnoff or transferee thereof,
without the prior written consent of the Majority Holders, the
Company will not grant to any Person the right to require the
Company to register any equity Securities of the Company, or any
Securities convertible into or exchangeable or exercisable for
such equity Securities, under the Securities Act or any
applicable state securities laws.
12. Adjustments Affecting Registrable Securities{ TC "12.
Adjustments Affecting Registrable Securities" \f C \l "1" }.
The Company shall not effect or permit to occur any combination,
subdivision or reclassification of Registrable Securities that
would adversely affect the ability of the Holders to include such
Registrable Securities in any registration of its Securities
under the Securities Act contemplated by this Agreement or the
marketability of such Registrable Securities under any such
registration or other offering.
- 22 -
660958v6<PAGE>
13. Rule 144 and Rule 144A{ TC "13. Rule 144 and Rule
144A" \f C \l "1" }. The Company shall take all actions required
to be taken on the part of the Company in order to enable the
Holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, (b) Rule 144A under the
Securities Act, as such Rule may be amended from time to time, or
(c) any similar rules or regulations hereafter adopted by the
Commission, including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be
filed under the Exchange Act. Upon the request of any Holder,
the Company shall deliver to such Holder a written statement as
to whether it has complied with such requirements. The Company
will, at the request of any holder of Registrable Securities,
upon receipt from such holder of a certificate certifying (i)
that such holder currently intends to transfer such Registrable
Securities, (ii) that such holder has held such Registrable
Securities for a period of not less than two consecutive years
within the meaning of Rule 144(d) or any successor rule, and
(iii) that such holder has not been an affiliate (as defined in
Rule 144) of the Company for more than 90 preceding days, remove
from the stock certificates representing such Registrable
Securities that portion of any restrictive legend which relates
to the registration provisions of the Securities Act.
14. Amendments and Waivers{ TC "14. Amendments and
Waivers" \f C \l "1" }. Any provision of this Agreement may be
amended, modified or waived if, but only if, the written consent
to such amendment, modification or waiver has been obtained from
(i) except as provided in clause (ii) below, the Holder or
Holders of at least a majority of the shares of Registrable
Securities affected by such amendment, modification or waiver and
(ii) in the case of any amendment, modification or waiver of any
provision of Section 5 or Section 8 hereof or this Section 14, or
as to the percentages of Holders required for any amendment,
modification or waiver, or any amendment, modification or waiver
which adversely affects any right and/or obligation under this
Agreement of any Holder, the written consent of each Holder so
affected.
15. Nominees for Beneficial Owners{ TC "15. Nominees for
Beneficial Owners" \f C \l "1" }. In the event that any
Registrable Securities is held by a nominee for the beneficial
- 23 -
660958v6<PAGE>
owner thereof, the beneficial owner thereof may, at its election
in writing delivered to the Company, be treated as the Holder of
such Registrable Securities for purposes of any request or other
action by any Holder or Holders pursuant to this Agreement or any
determination of the number or percentage of shares of
Registrable Securities held by any Holder or Holders contemplated
by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial
ownership of such Registrable Securities.
16 Assignment{ TC "16. Assignment" \f C \l "1" }. The
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
successors and permitted assigns. Any Holder may assign to any
Transferee of its Registrable Securities its rights and
obligations under this Agreement (except with respect to shares
of Registrable Securities sold pursuant to Rule 144 under the
Securities Act, under any registration statement or otherwise in
a manner such that the shares are no longer subject to
restrictions from further public resale under the Securities Act
without regard to volume limitations), provided that the Company
shall receive written notice of such transfer and that such
Transferee shall agree in writing with the parties hereto prior
to the assignment to be bound by this Agreement as if it were an
original party hereto, whereupon such Transferee shall for all
purposes be deemed to be a Holder under this Agreement. Except
as provided above or otherwise permitted by this Agreement,
neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be
assignable by any Holder without the prior written consent of the
other parties hereto. The Company may not assign this Agreement
or any right, remedy, obligation or liability arising hereunder
or by reason hereof.
17. Miscellaneous{ TC "17. Miscellaneous" \f C \l "1" }.
(a) Further Assurances{ TC "(a) Further Assurances" \f C
\l "2" }. Each of the parties hereto shall execute such
documents and other papers and perform such further acts as may
be reasonably required or desirable to carry out the provisions
of this Agreement and the transactions contemplated hereby.
- 24 -
660958v6<PAGE>
(b) Headings{ TC "(b) Headings" \f C \l "2" }. The
headings in this Agreement are for convenience of reference only
and shall not control or affect the meaning or construction of
any provisions hereof.
(c) No Inconsistent Agreements{ TC "(c) No Inconsistent
Agreements" \f C \l "2" }. The Company will not hereafter enter
into any agreement which is inconsistent with the rights granted
to the Holders in this Agreement.
(d) Remedies{ TC "(d) Remedies" \f C \l "2" }. Each
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and the Company hereby agrees to
waive the defense in any action for specific performance that a
remedy at law would be adequate.
(e) Entire Agreement{ TC "(e) Entire Agreement" \f C \l
"2" }. This Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of the subject
matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with
respect to the subject matter hereof, other than those expressly
set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties hereto
with respect to the subject matter hereof.
(f) Notices{ TC "(f) Notices" \f C \l "2" }. Any
notices or other communications to be given hereunder by any
party to another party shall be in writing, shall be delivered
personally, by telecopy, by certified or registered mail, postage
prepaid, return receipt requested, or by Federal Express or other
comparable delivery service, in the case of a Holder, to the
address of such Holder as shown on the Company's shareholder
records, and in the case of the Company, as follows:
- 25 -
660958v6<PAGE>
Meridian Medical Technologies, Inc.
10240 Old Columbia Road
Columbia, Maryland 21046
Attention: Chief Executive Officer
Tel: (410) 309-6830
Fax: (410) 309-1691
with a copy to:
Arnold & Porter
555 12th Street N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esq.
Tel: (202) 942-5998
Fax: (202) 942-5999
Notice shall be effective when delivered if given personally,
when receipt is acknowledged if telecopied, three Business Days
after mailing if given by registered or certified mail as
described above, and one Business Day after deposit if given by
Federal Express or comparable delivery service.
(g) GOVERNING LAW{ TC "(g) Governing Law" \f C \l "2" }.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE TO BE PERFORMED ENTIRELY IN SUCH STATE. ANY ACTION AGAINST
THE COMPANY MAY BE BROUGHT SOLELY IN THE FEDERAL OR STATE COURTS
LOCATED IN NEW YORK COUNTY, NEW YORK.
(h) Severability{ TC "(h) Severability" \f C \l "2" }.
Notwithstanding any provision of this Agreement, neither the
Company nor any other party hereto shall be required to take any
action which would be in violation of any applicable Federal or
state securities law. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of any other provision
of this Agreement in such jurisdiction or the validity, legality
or enforceability of this Agreement, including any such
provision, in any other jurisdiction, it being intended that all
rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
(i) Counterparts{ TC "(i) Counterparts" \f C \l "2" }.
This Agreement may be executed in two or more counterparts, each
- 26 -
660958v6<PAGE>
of which shall be deemed an original but all of which shall
constitute one and the same Agreement.
- 27 -
660958v6<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By:
Name:
Title:
NOMURA HOLDING AMERICA INC.
By:
Name:
Title:
- 28 -
660958v6<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
MERIDIAN MEDICAL TECHNOLOGIES, INC.
Expires May 1, 2005
No. W-1 New York, New York
204,770 Shares May 1, 1998
FOR VALUE RECEIVED, subject to the provisions hereinafter
set forth, the undersigned, MERIDIAN MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation (together with its successors and assigns,
the "Issuer"), hereby certifies that
NOMURA HOLDING AMERICA INC.
or its registered assigns is entitled to subscribe for and
purchase, during the period specified in this Warrant, 204,770
shares (subject to adjustment as hereinafter provided) of the
duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an initial exercise price per
share equal to $11.988 per share, subject, however, to the
provisions and upon the terms and conditions hereinafter set
forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in
Section 7 hereof. This Warrant is one of the Warrants issued
pursuant to the Note and Warrant Purchase Agreement, initially
exercisable to purchase 204,770 shares of Warrant Stock in the
aggregate.
1. Duration. The right to subscribe for and purchase
shares of Warrant Stock represented hereby shall commence on the
date hereof and shall expire at 5:00 P.M., New York time, on May
1, 2005; provided, however, that if, on such expiration date, the
Issuer is then required, pursuant to an effective request
therefor, to effect, or is in the process of effecting, a
registration under the Securities Act for an Underwritten
Offering in which shares of Warrant Stock are, pursuant to the
Registration Rights Agreement dated as of May 1, 1998 by and
between the Issuer and Nomura Holding America Inc., entitled to
be included, or if the Issuer is in default of any obligations
created by such provisions, said right to subscribe for and
659294v9<PAGE>
purchase shares of Warrant Stock shall expire at 5:00 P.M., New
York time, on the 30th day following the date on which such
registration shall have become effective or on the 30th day
following the date all of such defaults have been cured, as the
case may be.
2. Method of Exercise; Payment; Issuance of New Warrant;
Transfer and Exchange.
(a) Time of Exercise. The purchase right represented by
this Warrant may be exercised in whole or in part at any time and
from time to time prior to expiration.
(b) Method of Exercise. The holder hereof may exercise
this Warrant, in whole or in part, by the surrender of this
Warrant (with the subscription form attached hereto duly
executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise
multiplied by the number of shares of Warrant Stock with respect
to which this Warrant is then being exercised (after giving
effect to any reduction required by Section 6 hereof), payable at
such holder's election (i) by certified or official bank check,
(ii) by surrendering and canceling an amount of the principal of
and accrued interest on the Notes held by such holder equal in
the aggregate to the aggregate amount of the consideration
payable upon such exercise (and, for such purposes, all interest
accrued on such Notes to the date of such exercise shall first be
applied to such payment before any of the principal amount
thereof shall be so surrendered and applied), (iii) by
surrendering to the Issuer the right to receive a portion of the
number of shares of Warrant Stock with respect to which this
Warrant is then being exercised equal to the product obtained by
multiplying such number of shares of Warrant Stock by a fraction,
the numerator of which is the Warrant Price in effect on the date
of such exercise and the denominator of which is the Current
Market Price in effect on such date, or (iv) by a combination of
the foregoing methods of payment selected by the holder of this
Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the
provisions of clause (ii) or clause (iii) of this Section 2(b),
such exercise shall be accompanied by written notice from the
holder of this Warrant specifying the manner of payment thereof,
and in the case of an application of clause (ii), stating the
respective amounts of principal and interest of the Notes to be
applied to such payment, and in the case of an application of
clause (iii), containing a calculation showing the number of
shares of Warrant Stock with respect to which rights are being
surrendered thereunder and the net number of shares to be issued
after giving effect to such surrender. If, pursuant to clause
(ii) above, less than the entire unpaid principal amount of any
Note shall be applied toward payment of the consideration payable
upon any exercise of this Warrant, the holder thereof shall
2
659294v9<PAGE>
surrender the Note and the Issuer shall issue a new Note (dated
the date of the Note being surrendered) representing the balance
of the unpaid principal amount of the Note so surrendered,
payable to such holder or as such holder may otherwise direct.
(c) Issuance of Stock Certificates. In the event of any
exercise of the rights represented by this Warrant in accordance
with and subject to the terms and conditions hereof, (i)
certificates for the shares of Warrant Stock so purchased shall
be dated the date of such exercise and delivered to the holder
hereof within a reasonable time, not exceeding fifteen days after
such exercise, and the holder hereof shall be deemed for all
purposes to be the holder of the shares of Warrant Stock so
purchased as of the date of such exercise, and (ii) unless this
Warrant has expired, a new Warrant representing the number of
shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount
thereof which shall have been canceled in payment or partial
payment of the Warrant Price as hereinabove provided) shall also
be issued to the holder hereof within such time.
(d) Transferability and Nonnegotiability of Warrant. This
Warrant may not be transferred or assigned in whole or in part
without compliance with all applicable federal and state
securities laws by the transferor and the transferee (including,
to the extent required by law or reasonably requested by the
Issuer, the delivery of appropriate investment representations in
customary form). Subject to the provisions of this Warrant with
respect to compliance with the Securities Act, title to this
Warrant may be transferred by endorsement (by the holder
executing the form of assignment attached hereto) and delivery in
the same manner as a negotiable instrument transferable by
endorsement and delivery. This Warrant is exchangeable at the
principal office of the Issuer for Warrants for the purchase of
the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares
of Warrant Stock as the holder hereof shall designate at the time
of such exchange. All Warrants issued on transfers or exchanges
shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Warrant Stock
issuable pursuant hereto.
(e) Exchange of Warrant Upon a Transfer. On surrender of
this Warrant for exchange, properly endorsed on the form of
assignment attached hereto, and subject to the provisions of this
Warrant with respect to compliance with the Securities Act and
the limitations on assignments and transfers contained herein,
the Issuer at its expense shall issue to or on the order of the
holder a new Warrant or Warrants of like tenor, in the name of
the holder or as the holder (on payment by the holder of any
applicable transfer taxes) may direct, exercisable in the
aggregate for the number of shares of Warrant Stock issuable upon
exercise hereof; provided, that nothing in this subsection (e)
3
659294v9<PAGE>
shall be deemed to prohibit any transfer of Warrants by any
Person to (i) any Affiliate of such Person or (ii) any Person who
immediately prior to such transfer is a holder of Warrants.
(f) Compliance with Securities Laws.
(i) The holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Warrant Stock to
be issued upon exercise hereof are being acquired solely for the
holder's own account and not as a nominee for any other party,
and for investment, and that the holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock
to be issued upon exercise hereof except under circumstances that
will not result in a violation of the Securities Act or any state
securities laws. In the event that, upon exercise of this
Warrant, the shares of Warrant Stock to be issued hereunder shall
constitute "restricted securities" (as defined in Regulation D
promulgated under the Securities Act), then the holder shall, if
requested by the Issuer, confirm in writing to the Issuer that
the shares of Warrant Stock so purchased are being acquired
solely for the holder's own account and not as a nominee for any
other party, for investment, and not with a view toward any
distribution or resale that would violate the registration or
qualification provisions of the Securities Act or any state
securities laws.
(ii) Except as provided in paragraph (iii) below, this
Warrant and all certificates representing shares of Warrant Stock
issued upon exercise hereof shall be stamped or imprinted with a
legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT.
(iii) The restrictions imposed by this Section 2(f)
upon the transfer of this Warrant and the shares of Warrant Stock
to be purchased upon exercise hereof shall terminate (A) when
such securities shall have been effectively registered under the
Securities Act, or (B) upon the Issuer's receipt of an opinion of
counsel, in form and substance reasonably satisfactory to the
Issuer (it being understood that in-house counsel to the holder
shall be deemed to be acceptable counsel), addressed to the
Issuer to the effect that such restrictions are no longer
required to ensure compliance with the Securities Act. Whenever
such restrictions shall cease and terminate as to any such
securities, the holder thereof shall be entitled to receive from
the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or,
in the case of shares of Warrant Stock, new stock certificates)
of like tenor not bearing the applicable legends required by
paragraph (ii) above relating to the Securities Act and state
4
659294v9<PAGE>
securities laws.
(g) Continuing Rights of Holder. The Issuer 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 of Warrant
Stock issued upon such exercise, acknowledge in writing the
extent, if any, of its continuing obligation to afford to such
holder all rights to which such holder shall continue to be
entitled after such exercise in accordance with the terms of this
Warrant, provided that if any such holder shall fail to make any
such request, the failure shall not affect the continuing
obligation of the Issuer to afford such rights to such holder.
(h) No Rights or Liabilities as Stockholders. This Warrant
shall not entitle the holder hereof to any of the rights of a
stockholder of the Issuer, except as expressly contemplated by
this Warrant. No provision of this Warrant, in the absence of
the actual exercise of this Warrant or any part hereof by the
holder hereof into shares of Warrant Stock issuable upon such
exercise, shall give rise to any liability on the part of such
holder as a stockholder of the Issuer, whether such liability
shall be asserted by the Issuer or by creditors of the Issuer or
otherwise.
3. Stock Fully Paid; Reservation of Shares. (a) The
Issuer covenants and agrees that all shares of Warrant Stock
which may be issued upon the exercise of this Warrant will, upon
issuance, be fully paid and non-assessable and free from all
taxes, liens and charges with respect to issuance (other than
taxes in respect of any transfer occurring contemporaneously with
such issuance, or as otherwise specified herein or in the Note
and Warrant Purchase Agreement). The Issuer further covenants
and agrees that during the period within which this Warrant may
be exercised, the Issuer will at all times have authorized and
reserved for the purpose of the issue upon exercise of the
subscription rights evidenced by this Warrant a sufficient number
of shares of Common Stock to provide for the exercise of this
Warrant.
(b) If any shares of the Common Stock required to be
reserved for issuance upon exercise of this Warrant require
registration or qualification with any governmental authority
under any federal or state law before such shares may be so
issued, the Issuer will in good faith use its reasonable efforts
at its expense to cause such shares to be duly registered or
qualified.
(c) The Issuer shall not by any voluntary action including,
without limitation, amending the Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation,
merger, 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, but will at all
5
659294v9<PAGE>
times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the holder hereof against
impairment. Without limiting the generality of the foregoing,
the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any provision of the Certificate of Incorporation
or by-laws of the Issuer in any manner that would adversely
affect in any way the powers, preferences or relative
participating, optional or other special rights of the Common
Stock, (iii) take all such action as may be reasonably necessary
in order that the Issuer may validly and legally issue fully paid
and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use
its reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having
jurisdiction thereof as may be reasonably necessary to enable the
Issuer to perform its obligations under this Warrant.
4. Adjustment of Purchase Price and Number of Shares. The
number and kind of securities purchasable upon the exercise of
this Warrant and the payment of the Warrant Price shall be
subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale. (i) In case of any
recapitalization or reorganization of the Issuer or any
reclassification or change of outstanding Securities issuable
upon exercise of this Warrant (other than a change in par value,
or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination), or in case
of any consolidation or merger of the Issuer with or into another
corporation (other than a merger with another corporation in
which the Issuer is the surviving corporation and which does not
result in any reclassification or change -- other than a change
in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or
combination -- of outstanding Securities issuable upon exercise
of this Warrant), or in case of any sale or transfer to another
corporation of the property of the Issuer as an entirety or
substantially as an entirety, the Issuer or such successor or
purchasing corporation, as the case may be, shall, without
payment of any additional consideration therefor, issue a new
Warrant, providing that the holder of this Warrant shall have the
right to exercise such new Warrant and procure upon such exercise
in lieu of each share of Warrant Stock theretofore issuable upon
exercise of this Warrant the kind and the highest amount of
shares of Capital Stock, other securities, money and property
receivable upon such recapitalization, reorganization,
reclassification, change, consolidation, merger, sale or transfer
by a holder of one share of Common Stock issuable upon exercise
6
659294v9<PAGE>
of this Warrant had it been exercised immediately prior to such
recapitalization, reorganization, reclassification, change,
consolidation, merger, sale or transfer. Such new Warrant shall
provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
Section 4. The provisions of this subsection (a) shall similarly
apply to successive recapitalizations, reorganizations,
reclassifications, changes, consolidations, mergers, sales and
transfers.
(ii) Notwithstanding anything contained in this Warrant
to the contrary, the Issuer will not effect any of the
transactions described in the above subparagraph (i) unless prior
to the consummation thereof, each person (other than the Issuer)
which may be required to deliver any Capital Stock, securities,
money or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and
reasonably satisfactory to the Majority Holders, (A) the
obligations of the Issuer under this Warrant (and if the Issuer
shall survive the consummation of such transaction, such
assumption shall be in addition to (but without duplication), and
shall not release the Issuer from, any continuing obligations of
the Issuer under this Warrant) and (B) the obligation to deliver
to the holder of this Warrant such shares of Capital Stock, other
securities, money or property as, in accordance with the
foregoing provisions of this paragraph (a), such holder shall be
entitled to receive, and such person shall have similarly
delivered to such holder an opinion of counsel for such person,
which counsel shall be reasonably satisfactory to such holder,
stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation,
all of the provisions of this paragraph (a)) shall be applicable
to the Capital Stock, other securities, money or property which
such person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
(b) Subdivision or Combination of Shares. If the Issuer,
at any time while this Warrant is outstanding, shall subdivide or
combine any class or classes of its Common Stock, (i) in case of
subdivision of shares, the Warrant Price shall be proportionately
reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of holders of its Common Stock for the
purpose of so subdividing, as at the applicable record date,
whichever is earlier) to reflect the increase in the total number
of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares,
shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of holders
of its Common Stock for the purpose of so combining, as at the
applicable record date, whichever is earlier) to reflect the
reduction in the total number of shares of Common Stock
outstanding as a result of such combination.
7
659294v9<PAGE>
(c) Certain Dividends and Distributions. If the Issuer, at
any time while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution of, shares of any class or classes of Common Stock,
the Warrant Price shall be adjusted, as at the date the Issuer
shall take a record of the holders of such class or classes of
Common Stock, for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of
such payment or other distribution), to that price determined by
multiplying the Warrant Price in effect immediately prior to such
record date (or if no such record is taken, then immediately
prior to such payment or other distribution), by a fraction (A)
the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution, and (B) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after
such dividend or distribution (plus in the event that the Issuer
paid cash for fractional shares, the number of additional shares
which would have been outstanding had the Issuer issued
fractional shares in connection with said dividends); or
(ii) Liquidating Dividends, etc. Make a distribution of its
property to the holders of its Common Stock as a dividend in
liquidation or partial liquidation or by way of return of capital
other than as a dividend payable out of funds legally available
for dividends under the laws of the State of Delaware, the holder
of this Warrant shall, upon exercise, be entitled to receive, in
addition to the number of shares of Warrant Stock receivable
thereupon, and without payment of any consideration therefor, a
sum equal to the amount of such property as would have been
payable to such holder as owner of that number of shares of
Warrant Stock of the Issuer receivable by exercise of this
Warrant, had such holder been the holder of record of such
Warrant Stock on the record date for such distribution; and an
appropriate provision therefor shall be made a part of any such
distribution.
(d) Issuance of Additional Shares of Common Stock. If the
Issuer, at any time while this Warrant is outstanding, shall
issue any Additional Shares of Common Stock (other than as
provided in the foregoing subsections (a) through (c) of this
Section 4), at a price per share less than 90% of the Warrant
Price then in effect or less than the Current Market Price then
in effect or without consideration, then the Warrant Price upon
each such issuance shall be adjusted to that price determined by
multiplying the Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock
plus (B) the number of shares of Common Stock which the aggregate
consideration for the total number of such Additional Shares of
8
659294v9<PAGE>
Common Stock so issued would purchase at a price per share equal
to the Current Market Price then in effect or 90% of the Warrant
Price then in effect (whichever is greater), and
(ii) the denominator of which shall be equal to the number
of shares of Common Stock outstanding immediately after the
issuance of such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any
of the circumstances for which an adjustment is provided in
subsections (a), (b) or (c) of this Section 4. No adjustment of
the Warrant Price shall be made under this subsection (d) upon
the issuance of any Additional Shares of Common Stock which are
issued pursuant to any Common Stock Equivalent if upon the
issuance of such Common Stock Equivalent (1) any adjustment shall
have been made pursuant to subsection (e) of this Section 4 or
(2) no adjustment was required pursuant to subsection (e) of this
Section 4.
(e) Issuance of Common Stock Equivalents. If the Issuer,
at any time while this Warrant is outstanding, shall issue any
Common Stock Equivalent and the price per share for which
Additional Shares of Common Stock may be issuable thereafter
pursuant to such Common Stock Equivalent shall be less than 90%
of the Warrant Price then in effect or less than the Current
Market Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which
Additional Shares of Common Stock may be issuable thereafter is
amended, and such price as so amended shall be less than the 90%
of the Warrant Price or less than the Current Market Price in
effect at the time of such amendment, then the Warrant Price upon
each such issuance or amendment shall be adjusted as provided in
the first sentence of subsection (d) of this Section 4 on the
basis that (i) the maximum number of Additional Shares of Common
Stock issuable pursuant to all such Common Stock Equivalents
shall be deemed to have been issued (whether or not such Common
Stock Equivalents are actually then exercisable, convertible or
exchangeable in whole or in part) as of the earlier of (A) the
date on which the Issuer shall enter into a firm contract for the
issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (ii) the
aggregate consideration for such maximum number of Additional
Shares of Common Stock shall be deemed to be the minimum
consideration received or receivable by the Issuer for the
issuance of such Additional Shares of Common Stock pursuant to
such Common Stock Equivalent. No adjustment of the Warrant Price
shall be made under this subsection (e) upon the issuance of any
Convertible Security which is issued pursuant to the exercise of
any warrants or other subscription or purchase rights therefor,
if any adjustment shall previously have been made in the Warrant
Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e).
9
659294v9<PAGE>
(f) Purchase of Common Stock by the Issuer. If the Issuer
at any time while this Warrant is outstanding shall, directly or
indirectly through a Subsidiary or otherwise, purchase, redeem or
otherwise acquire any of its Common Stock at a price per share
greater than the Current Market Price then in effect, then the
Warrant Price upon each such purchase, redemption or acquisition
shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately
prior to such purchase, redemption or acquisition minus the
number of shares of Common Stock which the aggregate
consideration for the total number of such shares of Common Stock
so purchased, redeemed or acquired would purchase at the Current
Market Price; and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after
such purchase, redemption or acquisition. For the purposes of
this subsection (f), the date as of which the Current Market
Price shall be computed shall be the earlier of (x) the date on
which the Issuer shall enter into a firm contract for the
purchase, redemption or acquisition of such Common Stock, or (y)
the date of actual purchase, redemption or acquisition of such
Common Stock. For the purposes of this subsection (f), a
purchase, redemption or acquisition of a Common Stock Equivalent
shall be deemed to be a purchase of the underlying Common Stock,
and the computation herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock
Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is
actually exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this
Section 4. The following provisions shall be applicable to the
making of adjustments in the Warrant Price hereinbefore provided
in Section 4(d), (e) and (f):
(i) Computation of Consideration. The consideration
received by the Issuer shall be deemed to be the following: to
the extent that any Additional Shares of Common Stock or any
Common Stock Equivalents shall be issued for a cash
consideration, the consideration received by the Issuer therefor,
or, if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the
subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers
for public offering without a subscription offering, the public
offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts, commissions, or
expenses paid or incurred by the Issuer for or in connection with
the underwriting thereof or otherwise in connection with the
issue thereof; to the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the fair market value of such consideration
10
659294v9<PAGE>
at the time of such issuance as determined in good faith by the
Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be
the consideration received by the Issuer for issuing such Common
Stock Equivalents, plus the additional consideration payable to
the Issuer upon the exercise, conversion or exchange of such
Common Stock Equivalents. In case of the issuance at any time of
any Additional Shares of Common Stock or Common Stock Equivalents
in payment or satisfaction of any dividend upon any class of
Capital Stock other than Common Stock, the Issuer shall be deemed
to have received for such Additional Shares of Common Stock or
Common Stock Equivalents a consideration equal to the amount of
such dividend so paid or satisfied. In any case in which the
consideration to be received or paid shall be other than cash,
the Board shall notify the holder of this Warrant of its
determination of the fair market value of such consideration
prior to payment or accepting receipt thereof. If, within thirty
days after receipt of said notice, the Majority Holders shall
notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be made by an Independent Appraiser selected
by the Majority Holders with the approval of the Board (which
approval shall not be unreasonably withheld), whose fees and
expenses shall be paid by the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any
Common Stock Equivalent the issuance of which effected an
adjustment in the Warrant Price, if such Common Stock Equivalent
shall not have been converted, exercised or exchanged in its
entirety, the number of shares of Common Stock deemed to be
issued and outstanding by reason of the fact that they were
issuable upon conversion, exchange or exercise of any such Common
Stock Equivalent shall no longer be computed as set forth above,
and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting
any other adjustments in the Warrant Price made pursuant to the
provisions of this Section 4 after the issuance of such Common
Stock Equivalent) had the adjustment of the Warrant Price been
made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon
conversion, exchange or issuance of such Common Stock Equivalent
and thereupon only the number of Additional Shares of Common
Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed
as in clause (i) of this subsection (g)) shall be deemed to have
been received by the Issuer.
(iii) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for the
account of the Issuer or any of its Subsidiaries.
11
659294v9<PAGE>
(h) Other Action Affecting Common Stock. In case after the
date hereof the Issuer shall take any action affecting its Common
Stock, other than an action described in any of the foregoing
subsections (a) through (g) of this Section 4, inclusive, and the
failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with
the essential intent and principle of this Section 4, then the
Warrant Price shall be adjusted in such manner and at such time
as the Board may in good faith determine to be equitable in the
circumstances.
(i) Adjustment of Number of Shares. Upon each adjustment
in the Warrant Price pursuant to any of the foregoing provisions
of this Section 4, the number of shares of Warrant Stock
purchasable hereunder shall be adjusted, to the nearest one
hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior
to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before
giving effect to such adjustment and the denominator of which
shall be the Warrant Price immediately after giving effect to
such adjustment. If the Issuer shall be in default under any
provision contained in Section 3 of this Warrant so that shares
issued at the Warrant Price adjusted in accordance with this
Section 4 would not be validly issued, the adjustment of number
of shares provided for in the foregoing sentence shall
nonetheless be made and the holder of this Warrant shall be
entitled to purchase such greater number of shares at the lowest
price at which such shares may then be validly issued under
applicable law. Such exercise shall not constitute a waiver of
any claim arising against the Issuer by reason of its default
under Section 3 of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or
number of shares of Warrant Stock purchasable upon exercise of
this Warrant shall be adjusted pursuant to Section 4 hereof, the
Issuer shall cause its Chief Financial Officer to prepare and
execute a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a
description of the basis on which the Board made any
determination hereunder), and the Warrant Price and number of
shares of Warrant Stock purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to
be delivered to the holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the holder of
this Warrant with respect to the matters set forth in such
certificate may at the option of the holder of this Warrant be
submitted to a nationally recognized accounting firm selected by
it, which firm shall be instructed to deliver a written opinion
as to such matters to the Issuer and such holder within thirty
days after submission to it of such dispute. Such opinion shall
be final and binding on the parties hereto. The fees and
12
659294v9<PAGE>
expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant
Stock will be issued in connection with any exercise hereof, but
in lieu of such fractional shares, the Issuer shall make a cash
payment therefor equal in amount to the product of the applicable
fraction multiplied by the Current Market Price then in effect.
7. Definitions. For the purposes of this Warrant, the
following terms have the following meanings:
"Additional Shares of Common Stock" means all shares of
Common Stock issued by the Issuer after the date of this Warrant,
and all shares of Other Common Stock, if any, issued by the
Issuer after the date of this Warrant, except (i) Warrant Stock,
(ii) shares of Common Stock issuable upon exercise of the
warrants issued by the Company to ING (U.S.) Capital Corporation
("ING") pursuant to the Warrant Purchase Agreement dated as of
April 15, 1996 by and between ING and the Issuer, (iii) shares of
Common Stock issuable upon exercise of the warrants issued by the
Company to the Estate of Dr. Stanley Sarnoff, (iv) shares of
voting Common Stock issued upon conversion of any shares of the
Company's Class A Common Stock (as such term is defined in the
Warrant Purchase Agreement dated as of April 15, 1996 between
Brunswick Biomedical Corporation and ING), (v) shares of Common
Stock issuable upon exercise of the warrants issued in connection
with the merger of Brunswick Biomedical Corporation with and into
Survival Technology, Inc. and options assumed in such merger and
(vi) shares of Common Stock issued after May 1, 1998 pursuant to
stock options granted prior to, on or after that date under the
Issuer's current or future employee stock option and director
stock option plans, and shares of Common Stock issued after that
date pursuant to the Issuer's current or future employee stock
purchase, stock bonus and similar employee benefit plans.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without
limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person
which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and
(iv) all equity or ownership interests in any Person of any other
type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the date of this
Warrant, and as hereafter from time to time amended, modified,
supplemented or restated in accordance with its terms and
pursuant to applicable law.
13
659294v9<PAGE>
"Common Stock" means the Common Stock, $0.10 par value per
share, of the Issuer and any other Capital Stock into which such
stock may hereafter be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be
at any time convertible into or exchangeable for Additional
Shares of Common Stock. The term "Convertible Security" shall
mean one of the Convertible Securities.
"Current Market Price" as of any day means (i) the average
of the last sale prices of the Common Stock on the 10 most recent
Trading Days preceding such day, as quoted in the National Market
System ("NMS/NASDAQ") of the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"), as
published in The Wall Street Journal (or, if for any reason such
information for such Trading Day is not available in The Wall
Street Journal, then as published in any other newspaper of
general circulation which regularly publishes such information);
or (ii) if such Common Stock is not then quoted in NMS/NASDAQ,
but is listed on the New York Stock Exchange and reported on the
New York Stock Exchange Consolidated Tape, such Current Market
Price shall be the average of the last sale prices (regular way)
of the Common Stock on the 10 most recent Trading Days preceding
such day, as reported on such Consolidated Tape (as published in
The Wall Street Journal or, if for any reason such information
for such Trading Day is not available in The Wall Street Journal,
then as published in any other newspaper of general circulation
which regularly publishes such information); or (iii) if such
Common Stock is not then listed on the New York Stock Exchange,
Inc. or reported on such Consolidated Tape, but is listed or
admitted to trading on any other domestic securities exchange,
then such Current Market Price shall be the average of the last
sale prices on the 10 most recent Trading Days preceding such day
on the principal domestic stock exchange on which such stock is
then listed or admitted to trading, or, if no sale takes place on
such day on such exchange, the average of the closing bid and
asked prices on such day as officially quoted on such exchange;
or (iv) if such Common Stock is not then listed or admitted to
trading on any domestic securities exchange nor quoted in
NMS/NASDAQ, then the Current Market Price for such Trading Day
shall be the average of the respective averages of the reported
closing bid and asked price quotations on the 10 most recent
Trading Days preceding such day in the over-the-counter market,
as reported by NASDAQ, or, if not so reported, as furnished by
the National Quotation Bureau, Inc., or, if such firm at the time
is not engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business as
selected by the Issuer, or if there is no such firm, as furnished
14
659294v9<PAGE>
by any member of the National Association of Securities Dealers,
Inc. selected by the Issuer with the written approval of the
Majority Holders; or (v) if such Common Stock is not listed or
admitted to trading on any domestic securities exchange or quoted
in the domestic over-the-counter market, the Current Market Price
shall be deemed to be an amount mutually agreed upon in writing
between the Issuer and the Majority Holders within fifteen days
immediately following the date on which the Current Market Price
is to be determined. If no such agreement as to Current Market
Price is so reached, the Current Market Price shall be the fair
market value per share of Common Stock as of the applicable date
hereunder, as determined by an Independent Appraiser selected by
the Majority Holders and consented to by the Issuer (such consent
not to be unreasonably withheld), whose fees and expenses shall
be paid by the Issuer. The determination of fair market value by
such Independent Appraiser shall be based upon the fair market
value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into
account all relevant factors determinative of value, and shall be
final and binding on all parties. In determining the fair market
value of any shares of Common Stock, no consideration shall be
given to any restrictions on transfer of the Common Stock imposed
by any stockholders' agreement or similar agreement or by federal
or state securities laws.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute at the time in effect,
and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar
federal statute.
"Independent Appraiser" means a nationally recognized
investment banking firm or other nationally recognized firm that
is regularly engaged in the business of appraising the Capital
Stock or assets of corporations or other entities as going
concerns, and which is not affiliated with either the Issuer or
the holder of any Warrant.
"Issuer" means Meridian Medical Technologies, Inc., a
Delaware corporation, and its successors.
"Majority Holders" means at any time the holders of Warrants
exercisable for a majority of the shares of Warrant Stock
issuable under the Warrants at the time outstanding.
"NASD" means the National Association of Securities Dealers,
Inc., and any successor organization or entity.
"Note and Warrant Purchase Agreement" means the Note and
Warrant Purchase Agreement, dated as of May 1, 1998, between the
Issuer and Nomura Holding America Inc., as such agreement may
from time to time be amended, modified or supplemented in
accordance with its terms.
15
659294v9<PAGE>
"Notes" means the 12.0% Senior Subordinated Notes Due 2005
of the Issuer in the aggregate original principal amount of
$15,000,000 issued pursuant to the Note and Warrant Purchase
Agreement.
"Other Common Stock" means any Capital Stock of the Issuer
of any class which shall be authorized at any time after the date
of this Warrant (other than Common Stock) and which shall have
the right to participate in the distribution of earnings and
assets of the Issuer without limitation as to amount.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a trust, an
unincorporated organization and a government or any department or
agency thereof.
"SEC" means the United States Securities and Exchange
Commission and any successor agency, authority, commission or
governmental body.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument
convertible into or exchangeable for Securities or a Security,
and any option, warrant or other right to purchase or acquire any
Security. "Security" shall mean one of the Securities.
"Securities Act" means as of any date the Securities Act of
1933, as amended, or any similar federal statute then in effect,
and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar
federal statute.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which at least a majority of the
outstanding Voting Stock is at the time directly or indirectly
owned or controlled by such Person or by one or more of any
entities directly or indirectly owned or controlled by such
Person.
"Trading Day" shall mean any day on which equity securities
are traded and quoted on NASDAQ, or, if at any time of
determination the Common Stock shall no longer be quoted on
NASDAQ, then such term shall mean any day on which equity
securities are traded on the principal domestic securities
exchange on which the Common Stock shall then be listed.
"Underwritten Offering" means any public offering of
Securities distributed by means of a firm commitment
underwriting.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
16
659294v9<PAGE>
designated) having ordinary voting power for the election of a
majority of the members of the Board of Directors (or other
governing body) of such corporation, other than Capital Stock
having such power only by reason of the happening of a
contingency.
"Warrants" means the Warrants issued and sold pursuant to
the Note and Warrant Purchase Agreement, including, without
limitation, this Warrant, and any other warrants of like tenor
issued in substitution or exchange for any thereof pursuant to
the provisions of Section 2(c) or 2(d) hereof or Section 2(c) or
2(d) of any of such other Warrants.
"Warrant Price" shall mean the price specified in the first
paragraph of this Warrant and such other prices as shall result
from the adjustments specified in Section 4 hereof.
"Warrant Stock" shall mean Common Stock issuable upon
exercise of any Warrants or Warrants.
8. Amendment and Waiver. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith
may be waived (either generally or in a particular instance and
either retroactively or prospectively), by a written instrument
or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such amendment or waiver
shall reduce the number of shares of Warrant Stock issuable under
the Warrants, increase the Warrant Price, shorten the period
during which the Warrants may be exercised or modify any
provision of this Section 8 without the consent of the holders of
all Warrants then outstanding.
9. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Notices. All notices and other communications provided
for hereunder shall be in writing and delivered by hand or sent
by first class mail or sent by telecopy (with such telecopy to be
confirmed promptly in writing sent by first class mail), and if
to the holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such holder at its last known address or
telecopy number appearing on the books of the Issuer maintained
for such purposes, and if to the Issuer, addressed to:
Meridian Medical Technologies, Inc.
10240 Old Columbia Road
Columbia, Maryland 21046
Attention: Chief Executive Officer
Telecopy No.: (410) 309-1691;
with a copy to:
Arnold & Porter
17
659294v9<PAGE>
555 12th Street, N.W.
Washington, D.C. 20004-1202
Attention: Steven Kaplan, Esq.
Telecopy No.: (202) 942-5999;
or to such other address or addresses or telecopy number or
numbers as any such party may most recently have designated in
writing to the other parties hereto by such notice. All such
communications shall be deemed to have been given or made when so
delivered by hand or sent by telecopy, or three business days
after being so mailed.
11. Remedies. The Issuer stipulates that the remedies at
law of the holder of this Warrant in the event of any default or
threatened default by the Issuer 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.
12. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding
upon the successors and assigns of the Issuer, the holder hereof
and (to the extent provided herein) the holders of Warrant Stock
issued pursuant hereto, and shall be enforceable by any such
holder or holder of Warrant Stock.
13. Modification and Severability. If, in any action
before any court or agency legally empowered to enforce any
provision contained herein, any provision hereof is found to be
unenforceable, then such provision shall be deemed modified to
the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in
the preceding sentence, the unenforceability of such provision
shall not affect the other provisions of this Agreement, but this
Agreement shall be construed as if such unenforceable provision
had never been contained herein.
14. Integration. This Warrant and the other Warrants
issued pursuant to the Note and Warrant Purchase Agreement
replace all prior agreements, supersede all prior negotiations
and constitute the entire agreement of the parties with respect
to the transactions contemplated herein. References to the Note
and Warrant Purchase Agreement herein shall, to the extent that
the Notes and other obligations thereunder have been repaid and
such Note and Warrant Purchase Agreement have terminated, mean
the Note and Warrant Purchase Agreement as in effect immediately
prior to its termination.
18
659294v9<PAGE>
15. Headings. The headings of the Sections of this Warrant
are for convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By: _____________________________
Name:
Title:
19
659294v9<PAGE>
SUBSCRIPTION
MERIDIAN MEDICAL TECHNOLOGIES, INC.
The undersigned _______________, pursuant to the provisions
of the within Warrant, hereby elects to purchase _______________
shares of Common Stock of MERIDIAN MEDICAL TECHNOLOGIES, INC.
covered by the within Warrant.
Dated: _______________ Signature _______________
Address _______________
_______________
ASSIGNMENT
FOR VALUE RECEIVED, _______________ hereby sells, assigns
and transfers unto _______________ the within Warrant and all
rights evidenced thereby and does irrevocably constitute and
appoint _______________, attorney, to transfer the said Warrant
on the books of the within named corporation.
Dated: _______________ Signature _______________
Address _______________
_______________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _______________ hereby sells, assigns
and transfers unto _______________ the right to purchase _____
shares of Warrant Stock evidenced by the within Warrant together
with all rights therein, and does irrevocably constitute and
appoint __________, attorney, to transfer that part of the said
Warrant on the books of the within named corporation.
Dated: _______________ Signature _______________
Address _______________
_______________
FOR USE BY THE CORPORATION ONLY:
This Warrant No. W-___ canceled (or transferred or exchanged)
this ___ day of ____________ 19_, _______________ shares of
Common Stock issued therefor in the name of _______________,
Warrant No. W-__ issued for _____ shares of Common Stock in the
name of _______________.
20
659294v9<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
APRIL 30, 1998.
</LEGEND>
<CIK> 0000095676
<NAME> MERIDIAN MEDICAL TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 543
<SECURITIES> 0
<RECEIVABLES> 8,764
<ALLOWANCES> 279
<INVENTORY> 8,440
<CURRENT-ASSETS> 20,158
<PP&E> 19,322
<DEPRECIATION> 2,959
<TOTAL-ASSETS> 48,429
<CURRENT-LIABILITIES> 13,423
<BONDS> 18,608
0
0
<COMMON> 298
<OTHER-SE> 13,271
<TOTAL-LIABILITY-AND-EQUITY> 48,429
<SALES> 13,430
<TOTAL-REVENUES> 13,430
<CGS> 8,324
<TOTAL-COSTS> 8,324
<OTHER-EXPENSES> 5,340
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 694
<INCOME-PRETAX> (941)
<INCOME-TAX> (223)
<INCOME-CONTINUING> (718)
<DISCONTINUED> 0
<EXTRAORDINARY> (494)
<CHANGES> 0
<NET-INCOME> (1,212)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED APRIL 30, 1998. IT REPRESENTS A RESTATEMENT OF THE QUARTER ENDED
APRIL 30, 1997 DUE TO THE ADOPTION OF SFAS NO. 128.
</LEGEND>
<RESTATED>
<CIK> 0000095676
<NAME> MERIDIAN MEDICAL TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 287
<SECURITIES> 0
<RECEIVABLES> 7,786
<ALLOWANCES> 279
<INVENTORY> 6,047
<CURRENT-ASSETS> 16,031
<PP&E> 17,246
<DEPRECIATION> 1,468
<TOTAL-ASSETS> 44,082
<CURRENT-LIABILITIES> 15,187
<BONDS> 13,062
0
0
<COMMON> 292
<OTHER-SE> 12,001
<TOTAL-LIABILITY-AND-EQUITY> 44,082
<SALES> 10,680
<TOTAL-REVENUES> 10,680
<CGS> 6,875
<TOTAL-COSTS> 6,875
<OTHER-EXPENSES> 2,843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 323
<INCOME-PRETAX> 589
<INCOME-TAX> 0
<INCOME-CONTINUING> 589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 589
<EPS-PRIMARY> .20
<EPS-DILUTED> .18<F1>
<FN>
<F1>RESTATED DUE TO ADOPTION OF SFAS NO. 128
</FN>
</TABLE>
