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Exhibit 10.56
THIRD AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT
AND CERTAIN LOAN DOCUMENTS
This THIRD AMENDMENT TO SENIOR SECURED CREDIT AGREEMENT AND
CERTAIN LOAN DOCUMENTS (this "Third Amendment") is entered into as of October
30, 1998 by and among ADFlex Solutions, Inc., a Delaware corporation (the
"Borrower"), and the banks and other financial institutions that either now or
in the future are parties thereto as lenders (collectively the "Lenders" and
each individually a "Lender"), BankBoston, N.A. in its capacity as the L/C
Issuer (in such capacity, together with any successors thereto in such capacity,
the "L/C Issuer"), and BankBoston N.A., as agent and representative for the
Lenders (in such capacity BankBoston N.A. or any successor in such capacity is
referred to herein as the "Agent"). The Lenders, the L/C Issuer, and the Agent
are collectively referred to herein as the "Lender Parties" and each
individually as a "Lender Party".
RECITALS
A. Borrower and Lender Parties are parties to that certain
Senior Secured Credit Agreement dated as of June 5, 1997, as amended by that
certain First Amendment to Senior Secured Credit Agreement and Certain Loan
Documents (the "First Amendment") dated February 9, 1998 and that certain Second
Amendment to Senior Secured Credit Agreement and Certain Loan Documents; Waiver
of Existing Default (the "Second Amendment") dated May 11, 1998 (as so amended,
the "Credit Agreement"), pursuant to which the Lenders agreed to make available
to Borrower certain credit facilities, and certain related loan documents (the
"Loan Documents").
B. By a letter of notification dated October 1, 1998, Borrower
has notified Agent that it is in default with respect to (i) the interest
coverage ratio covenant contained in Section 6.5.3 of the Credit Agreement, and
(ii) the minimum net income covenant contained in Section 6.5.5 of the Credit
Agreement. Borrower has requested, and the Lender Parties have agreed, that the
resulting Defaults shall be waived for the Fiscal Quarter ending in September
1998.
C. Borrower and the Lender Parties have agreed to make certain
amendments to the Credit Agreement and to certain of the Loan Documents, subject
to the conditions and in reliance on the representations and warranties set
forth below.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, each Lender Party and
Borrower hereby agree as follows:
AGREEMENT
1. DEFINED TERMS; SECTION REFERENCES. Initially capitalized
terms used but not defined in this Third Amendment shall have the meanings
assigned to such terms in the
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Credit Agreement. All "Section" references herein are to sections of the Credit
Agreement unless otherwise specified.
2. AMENDMENTS TO SECTION 1.1 OF THE CREDIT AGREEMENT.
(a) The definition of "Base Rate" is hereby amended to provide
in its entirety as follows:
""BASE RATE" means, for the purposes of this Credit Agreement,
the greater of (i) the rate of interest announced from time to time by
BankBoston, N.A. as its head office as its "Base Rate," and (ii) the Federal
Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary, to
the next 1/8 of 1%), provided that if either the Senior Debt Leverage Ratio
shall exceed 0.50 to 1.00 or the Interest Coverage Ratio is equal to or less
than 2.00 to 1.00, "Base Rate" means the greater of (a) the rate of interest
announced from time to time by BankBoston, N.A. as its head office as its "Base
Rate" plus 1/2 of 1% per annum, and (ii) the Federal Funds Effective Rate plus
1% per annum (rounded upwards, if necessary, to the next 1/8 of 1%)."
(b) A new definition of "Chandler Mortgage" is hereby added to
Section 1.1 of the Credit Agreement, and shall provide in its entirety as
follows:
""CHANDLER MORTGAGE" means the Mortgage in favor of a lender
reasonably acceptable to Agent which is secured by the Chandler Property,
provided that such Debt secured by the Chandler Mortgage shall not exceed 80% of
the appraised value of the Chandler Property."
(c) A new definition of "Chandler Property" is hereby added to
Section 1.1 of the Credit Agreement, and shall provide in its entirety as
follows:
""CHANDLER PROPERTY" means the headquarters building, the
manufacturing facility, the underlying land and all other buildings located at
0000 Xxxx Xxxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxx."
(d) The definition of "Debt Service Coverage Ratio" is hereby
amended to provide in its entirety as follows:
""DEBT SERVICE COVERAGE RATIO" means, at the end of any Fiscal
Quarter, the ratio of (i) (a) EBITDA for the two consecutive Fiscal Quarters
then ended minus (b) Capital Expenditures for such period (provided that, upon
the closing of a Junior Capital Transaction, Borrower shall be entitled to
offset such Capital Expenditures with the proceeds from such Junior Capital
Transaction up to an aggregate amount equal to $15,000,000 over the term of this
Credit Agreement), plus (c) if Capital Expenditures includes the acquisition of
the Chandler Property, the cash proceeds received by Borrower from the Chandler
Mortgage upon the closing of such mortgage, to (ii) (a) Interest Expense for
such period, plus (b) scheduled payments of principal in respect of Debt of the
Borrower or any Consolidated Subsidiary for such period, excluding payments by
the Borrower pursuant to Section 2.8.1.1(i) of this Credit Agreement."
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(e) A new definition of "Subsidiary Accounts Receivable" is
hereby added to Section 1.1 of the Credit Agreement, and shall provide in its
entirety as follows:
""SUBSIDIARY ACCOUNTS RECEIVABLE" means all accounts
receivable now owned by or belonging or owing to each Subsidiary (including,
without limitation, under any trade name, style or division thereof) arising out
of goods sold or services rendered by each Subsidiary, and all monies due or to
become due to each Subsidiary under all purchase orders and contracts for the
sale of goods or the performance of services or both by each Subsidiary."
(f) The definition of "Investment" is hereby amended to
provide in its entirety as follows:
""INVESTMENT" means, with respect to any Person, (i) any
direct or indirect purchase or other acquisition by that Person of stock or
securities, or any beneficial interest in stock or other securities, of any
other Person, any partnership (whether general or limited) or limited liability
company interest in any other Person, or all or any substantial part of the
business or assets of any other Person, (ii) any direct or indirect loan,
advance or capital contribution by that Person to any other Person, including
all indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, but shall not include the amount of any loan or
other indebtedness to the extent such loan or indebtedness has been repaid."
(g) A new definition of "Junior Capital Transaction" is hereby
added to Section 1.1 of the Credit Agreement, and shall provide in its entirety
as follows:
""JUNIOR CAPITAL TRANSACTION" means one or more transactions
occurring after October 1, 1998 in which the Borrower receives gross proceeds of
at least $20,000,000 by issuing Capital Stock or Subordinated Debt, on terms and
conditions acceptable to, and approved by, the Required Lenders."
(h) A new definition of "Senior Debt Leverage Ratio" is hereby
added to Section 1.1 of the Credit Agreement, and shall provide in its entirety
as follows:
""SENIOR DEBT LEVERAGE RATIO" means the ratio of (a) Senior
Funded Debt minus Borrower's Cash, divided by (b) Borrower's Shareholder Equity
plus Subordinated Debt."
(i) A new definition of "Senior Funded Debt" is hereby added
to Section 1.1 of the Credit Agreement, and shall provide in its entirety as
follows:
""SENIOR FUNDED DEBT" means all of Borrower's Debt which is
not (i) Subordinated Debt, (ii) obligations in respect of any letters of credit
or bankers acceptances, or (iii) Contingent Obligations.
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(j) A new definition of "Shareholder Equity" is hereby added
to Section 1.1 of the Credit Agreement, and shall provide in its entirety as
follows:
""SHAREHOLDER EQUITY" means the sum of Capital Stock,
additional paid in capital and retained earnings less treasury stock, determined
in accordance with GAAP."
(k) A new definition of "Subordinated Debt" is hereby added to
Section 1.1 of the Credit Agreement, and shall provide in its entirety as
follows:
""SUBORDINATED DEBT" means all Debt of the Borrower which by
its terms is subordinate to Borrower's Senior Funded Debt and which was
authorized by the Required Lenders."
(l) The definition of "Term Loan Maturity Date" is hereby
amended to provide in its entirety as follows:
""TERM LOAN MATURITY DATE" means the last Business Day of the
Fiscal Year ending in December 2002."
(m) A new definition of "Warrants" is hereby added to Section
1.1 of the Credit Agreement, and shall provide in its entirety as follows:
""WARRANTS" means the Warrants, in the form of Exhibit W,
issued to each Lender (or its designee) in the amounts as provided in Schedule
1.1A."
3. AMENDMENTS TO SECTION 2.1.4.1 OF THE CREDIT AGREEMENT.
Section 2.1.4.1 of the Credit Agreement is hereby amended to
provide in its entirety as follows:
"2.1.4.1. When the Borrower desires to borrow Loans pursuant
to Section 2.1, it shall deliver to the Agent a Notice of Borrowing
substantially in the form of Exhibit E-1, duly completed and executed
by a Responsible Officer (a "Notice of Borrowing"), (a) no later than
12:00 noon (Boston time) on the proposed Funding Date, in the case of a
Borrowing of Base Rate Loans, or (b) no later than 2:00 p.m.(Boston
time) at least three LIBOR Business Days before the proposed Funding
Date, in the case of a Borrowing of LIBOR Rate Loans."
4. AMENDMENTS TO SECTION 2.1.4.5 OF THE CREDIT AGREEMENT.
Section 2.1.4.5 of the Credit Agreement is hereby amended to
provide in its entirety as follows:
"2.1.4.5. The Agent shall promptly notify each Lender of the
contents of any Notice of Borrowing (or telephonic notice in lieu
thereof) received by it and such Lender's pro rata portion of the
Borrowing requested. Not later than 1:00 p.m. (Boston time) on the date
specified in such notice as the Funding Date (or, in the case of Base
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Rate Loans, 5:00 p.m. (Boston time) on such date), each Lender, subject
to the terms and conditions hereof, shall make its pro rata portion of
the Borrowing available, in immediately available funds, to the Agent
at the Agent's Account."
5. AMENDMENTS TO SECTION 2.4.3.1 OF THE CREDIT AGREEMENT.
Section 2.4.3.1 of the Credit Agreement is hereby amended to
provide in its entirety as follows:
"2.4.3.1. Subject to this Section 2.4.3 and Sections 2.4.2 and
2.11, the Borrower shall have the option (a) at any time, to convert all or any
part of its outstanding Base Rate Loans to LIBOR Rate Loans, (b) on the last day
of the Interest Period applicable thereto, to (i) convert all or any part of its
outstanding LIBOR Rate Loans to Base Rate Loans, (ii) to continue all or any
part of its LIBOR Rate Loans as Loans of the same Type, or (iii) to convert all
or any part of its outstanding LIBOR Rate Loans to LIBOR Rate Loans of another
Type; provided that, in the case of clause (a), (b) (ii) or (b)(iii), there does
not exist a Default or an Event of Default at such time. If a Default or an
Event of Default shall exist upon the expiration of the Interest Period
applicable to any LIBOR Rate Loan or if the Senior Debt Leverage Ratio shall
exceed 0.50 to 1.00 upon the expiration of the Interest Period applicable to any
LIBOR Rate Loan or if the Interest Coverage Ratio is less than 2:00 to 1.00 upon
the expiration of the Interest Period applicable to any LIBOR Rate Loan, such
Loan automatically shall be converted into a Base Rate Loan."
6. AMENDMENTS TO SECTION 2.6.1 OF THE CREDIT AGREEMENT.
Section 2.6.1 of the Credit Agreement is hereby amended to
provide in its entirety as follows:
"2.6.1. COMMITMENT FEE. The Borrower shall pay to the Agent,
for the pro rata benefit of the Lenders, a commitment fee for each day from and
after the Closing Date until the Stated Termination Date, upon the excess, if
any, of (a) the aggregate Revolving Commitments of the Lenders over (b) the
Revolving Commitment Usage of all Lenders, in each case for such day. Such Fee
shall be payable in arrears on each Interest Payment Date and the Termination
Date. The commitment fee shall accrue at a rate of (i) at any time when the
Applicable Margin is less than 2.00, 0.20% per annum; (ii) at any time when the
Applicable Margin is 2.00 or 2.25, 0.25% per annum; and (iii) at any time when
either the Senior Debt Leverage Ratio is greater than 0.50 to 1.00 or the
Interest Coverage Ratio is equal to or less than 2.00 to 1.00, 0.50% per annum."
7. AMENDMENTS TO SECTION 2.7.1 OF THE CREDIT AGREEMENT.
Section 2.7.1. of the Credit Agreement is hereby amended to
provide in its entirety as follows:
"2.7.1. Each Lender's Revolving Commitment shall terminate
without further action on the part of such Lender on the earlier to occur of (a)
the last Business Day of the Fiscal
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Year ending in December 2000 (the "Stated Termination Date"), and (b) the date
of termination of the Revolving Commitment pursuant to Section 2.7.2 or 7.2
(such earlier date being referred to herein as the "Termination Date")."
8. AMENDMENTS TO SECTION 2.8.1.1 OF THE CREDIT AGREEMENT.
Section 2.8.1.1 is hereby amended to provide in its entirety
as follows:
"2.8.1.1. The Borrower shall make principal payments as
follows: (i) a principal payment in the amount of $5,000,000 will be paid on or
before January 20, 1999, (ii) a principal payment in the amount of $750,000 will
be paid on the last Business Day of each of the four fiscal quarters beginning
with the quarter that ends in December 1998, (iii) a principal payment in the
amount of $1,300,000 will be paid on the last Business Day of each of the twelve
fiscal quarters beginning with the quarter that ends in December 1999 and (iv) a
principal payment equal to the outstanding balance of the Term Loans will be
paid on the last Business Day of the fiscal quarter that ends in December 2002
(each such payment date being referred to hereinafter as a "Term Loan Payment
Date"). The Term Loans in any event shall be paid in full on the Term Loan
Maturity Date. The principal amount of the Term Loans prepaid or repaid by the
Borrower may not be reborrowed."
9. NEW SECTION 2.8.2.4 OF THE CREDIT AGREEMENT. A new Section
2.8.2.4 is hereby added, and provides in its entirety as follows:
"2.8.2.4 EXCESS TERM LOANS. If at any time the aggregate Term
Loans of all Lenders exceeds the aggregate amount of the Term Commitments then
in effect and if there is availability under the Borrowing Base then in effect,
the Borrower shall be deemed to have automatically requested a Revolving Loan
and the proceeds of such Revolving Loan shall be deemed to have been used to
repay Term Loans and each Lender shall be deemed to have made a Revolving Loan
in an amount as may be necessary so that, after giving effect to such Revolving
Loan, such excess amount of Term Loans is eliminated."
10. AMENDMENTS TO SECTION 5.1 OF THE CREDIT AGREEMENT. Section
5.1 of the Credit Agreement is hereby amended as follows:
(a) The introductory sentence of Section 5.1 of the
Credit Agreement is hereby amended to provide in its entirety as follows:
"The Borrower shall deliver to the Agent who shall in
turn deliver promptly to the Lender Parties:"
(b) Section 5.1.3 of the Credit Agreement is hereby
amended to provide in its entirety, as follows:
"as soon as practicable and in any event within
fifteen days after the end of each calendar month, (a) a Borrowing Base
Certificate, in substantially the form of Exhibit F-5 (a "Borrowing Base
Certificate", setting forth Borrower's calculation of the Borrowing Base as of
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the end of such calendar month, (b) a consolidated balance sheet of the Borrower
and the Consolidated Subsidiaries as of the end of such month and the related
consolidated statements of income and cash flow for such month and the portion
of the Fiscal Year ended at the end of such month, all in reasonable detail and
certified by the Borrower's chief financial officer as fairly presenting the
consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as of the dates indicated, and their consolidated results of
operations and cash flows for the periods indicated, in conformity with GAAP,
subject to normal year-end adjustments and the absence of footnotes, and (c)
together with each delivery of financial statements pursuant to subsection (b)
above, a certificate of the chief financial officer or the chief executive
officer of the Borrower, duly completed and setting forth the calculations
required to establish compliance with Section 6.5.6 on the date of such
financial statements;"
(c) Section 5.1.12 of the Credit Agreement is hereby
amended by deleting the "and" at the end thereof, by renumbering 5.1.13 to
5.1.14, and inserting the following new 5.1.13:
"5.1.13. on Monday of each week, a liquidity forecast
which shall be sent to the Agent via facsimile and shall set forth forecasted
receipts, disbursements, cash, borrowings and net position of the Borrower, for
such week and the succeeding eight weeks; and"
11. NEW SECTION 5.3.3 OF THE CREDIT AGREEMENT. A new Section
5.3.3 is hereby added, and provides in its entirety as follows:
"5.3.3 Without limiting the Borrower's obligations under
Section 5.3.1 and Section 5.3.2 hereof, on or before December 31, 1998 Borrower
shall deliver an appraisal of all Collateral consisting of Equipment, Fixtures
or other fixed assets which is located in the United States of America or Mexico
and all Collateral consisting of the raw material portion of inventory which is
located in the United States of America, provided that the Agent shall have
approved the appraiser selected by the Borrower."
12. NEW SECTION 5.10.2 OF THE CREDIT AGREEMENT. A new Section
5.10.2 is hereby added, and provides in its entirety as follows:
"5.10.2 Beginning as soon as possible, but in no event later
than December 1998 and subject to limitations imposed by local foreign laws, if
the Subsidiary Accounts Receivable of a Subsidiary exceed $750,000 for a
calendar month, Borrower shall cause such Subsidiary to transfer and assign all
of its Subsidiary Accounts Receivable generated during such month to Borrower."
13. NEW SECTION 5.13 OF THE CREDIT AGREEMENT. A new Section
5.13 is hereby added, and provides in its entirety as follows:
"5.13 WARRANTS VESTING. If the Warrants shall fail to vest in
accordance with their terms for any reason, Borrower shall pay Agent a fee of
$300,000 to be applied pro rata based upon each Lender's Commitment."
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14. AMENDMENTS TO SECTION 6.2.6 OF THE CREDIT AGREEMENT.
Section 6.2.6 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.2.6. Other Debt of the Borrower that is (i) unsecured, (ii)
secured by the Chandler Mortgage, or (iii) secured only by a valid and perfected
purchase money security interest, in an aggregate amount incurred during the
term of this Agreement not exceeding $10,000,000;"
15. AMENDMENTS TO SECTION 6.4.4 OF THE CREDIT AGREEMENT.
Section 6.4.4 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.4.4. the Borrower may make Investments in any Subsidiary
after the Closing Date if (i) in the case of any United States-based Subsidiary,
the Borrower has complied with Section 5.10 and (ii) in the case of any
Subsidiary, the aggregate amount of such Investments in all such Subsidiaries
does not exceed an amount equal to ten percent (10%) of Borrower's Tangible Net
Worth as at the time such Investment is made plus $25,000,000; and"
16. AMENDMENTS TO SECTION 6.5 OF THE CREDIT AGREEMENT.
(a) Section 6.5.1 of the Credit Agreement is hereby
amended to provide in its entirety as follows:
"6.5.1 LEVERAGE RATIO. The Leverage Ratio for any
Fiscal Quarter ending in December 1999 or any prior Fiscal Quarter shall not
exceed 2.00 to 1.00 at any time, and the Leverage Ratio for any Fiscal Quarter
ending subsequent to December 1999 shall not exceed 1.75 to 1.00 at any time."
(b) A new Section 6.5.6 is hereby added, and provides
in its entirety as follows:
"6.5.6 REVENUES. At the end of each period in the
table below, Borrower's gross revenues (determined in accordance with GAAP) to
date for the fiscal quarter in which such period falls, shall not be less than
the amount set forth opposite such period in the table below:
FOR DECEMBER 1998 QUARTER
by end of month 1: $ 7,200,000
by end of month 2: 18,000,000
by quarter end 36,000,000
FOR THE MARCH 1999 QUARTER
by end of Month 1: $ 7,600,000
by end of Month 2: 19,000,000
by quarter end: 38,000,000
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This covenant shall cease to apply if the Company closes a
Junior Capital Transaction."
17. AMENDMENTS TO SECTION 6.5.2 OF THE CREDIT AGREEMENT.
Section 6.5.2 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.5.2 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated
Tangible Net Worth shall not be less than the sum of (a) $42,000,000; plus (b)
commencing with the fiscal quarter ending in September 1998, seventy-five
percent (75%) of Borrower's Net Income for the applicable period on a cumulative
basis, provided that for the purposes of this Section 6.5.1 the cumulative
amount of Borrower's Net Income shall be calculated with out giving effect to
any quarters in which the Borrower's Net Income is less than zero; plus (c) one
hundred percent (100%) of the amount of any new equity investment in the
Borrower."
18. AMENDMENTS TO SECTION 6.5.3 OF THE CREDIT AGREEMENT.
Section 6.5.3 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.5.3 SENIOR DEBT LEVERAGE RATIO. The Senior Debt Leverage
Ratio at all times after March 31, 1999 shall not exceed 0.50 to 1.00."
19. AMENDMENTS TO SECTION 6.5.4 OF THE CREDIT AGREEMENT.
Section 6.5.4 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.5.4 DEBT SERVICE COVERAGE RATIO. As of the last day of the
Fiscal Quarter ending in June 1999, the Debt Service Coverage Ratio for the two
consecutive Fiscal Quarters then ended shall not be less than 1.00 to 1.00, and
as of the last day of the Fiscal Quarter ending in September 1999 and each
Fiscal Quarter thereafter, the Debt Service Coverage Ratio for the two
consecutive Fiscal Quarters then ended shall not be less than 2.00 to 1.00."
20. AMENDMENTS TO SECTION 6.5.5 OF THE CREDIT AGREEMENT.
Section 6.5.5 of the Credit Agreement is hereby amended to provide in its
entirety as follows:
"6.5.5 MINIMUM EBIT. As of the last day of each of the Fiscal
Quarters ending in September 1998, December 1998 and March 1999, Borrower's EBIT
shall not exceed a loss of greater than $3,300,000, shall not exceed a loss of
greater than $1,500,000, and shall be greater than or equal to zero,
respectively. As of the last day of each Fiscal Quarter ending in June 1999 and
each Fiscal Quarter thereafter: (i) Borrower's EBIT for the two consecutive
Fiscal Quarters then ended shall each be greater than zero, and (ii) if
Borrower's EBIT is a negative number as a result of losses, the absolute value
of such EBIT shall not exceed five percent (5%) of Consolidated Tangible Net
Worth."
21. AMENDMENTS TO SECTION 6.14 OF THE CREDIT AGREEMENT.
Section 6.14 of the Credit Agreement is hereby deleted in its entirety and a new
Section 6.14 is hereby added, and provides in its entirety as follows:
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"6.14 CHANDLER MORTGAGE. Neither Borrower nor any of
Borrower's Subsidiaries shall enter into the Xxxxxxxx Mortgage or otherwise
acquire the Chandler Property until after the consummation of a Junior Capital
Transaction, including the receipt by Borrower of the proceeds of such
transaction."
22. AMENDMENTS TO SCHEDULES AND EXHIBITS TO THE CREDIT
AGREEMENT.
(a) Schedule 1.1A to the Credit Agreement is hereby amended to
provide in its entirety as set forth on the Amended Schedule 1.1A attached
hereto.
(b) Schedule 1.1E to the Credit Agreement is hereby amended to
provide in its entirety as set forth on the Amended Schedule 1.1.E attached
hereto.
(b) Exhibit F-6 to the Credit Agreement is hereby amended to
provide in its entirety as set forth on the Exhibit F-6 attached hereto.
(c) Exhibit W to the Credit Agreement is hereby amended to
provide in its entirety as set forth on the Exhibit W attached hereto.
23. ACKNOWLEDGMENT OF SENIOR DEBT LEVERAGE RATIO AND INTEREST
RATE COVERAGE RATIO. Borrower and the Lender Parties hereby acknowledge that as
of the date hereof, (a) the Senior Debt Leverage Ratio exceeds 0.50 to 1.00, and
(b) the Interest Coverage Ratio is less than 2:00 to 1.00, and that pursuant to
Section 2.4.3.1 Borrower shall not have the option to borrow LIBOR Rate Loans or
to continue existing loans as LIBOR Rate Loans so long as its Senior Debt
Leverage Ratio exceeds 0.50 to 1.00 or its Interest Coverage Ratio is less than
2:00 to 1.00.
24. WAIVER OF EXISTING DEFAULTS. On a one-time-only basis, by
its signature below each Lender Party hereby waives the Defaults that exist as
of the end of the Fiscal Quarter that ended in September 1998 as a result of
Borrower's failure to comply with each of the Interest Coverage Ratio covenant
contained in Section 6.5.3 of the Credit Agreement and the minimum net income
covenant Section 6.5.5 of the Credit Agreement for such Fiscal Quarter;
provided, however, that Borrower agrees and acknowledges that Sections 6.5.3 and
6.5.5 shall be in full force and effect, subject to the amendments contained in
this Third Amendment, as if it had never been waived, with respect to the Fiscal
Quarter ending in December 1998, and for each relevant period thereafter.
25. WAIVER LIMITED. The waiver given herein is strictly
limited to its terms and shall not have any force and effect other than as
expressly set forth herein. No further waiver, either of additional terms or for
any additional period, shall be implied from the waiver provided herein. Without
limiting the foregoing, the waiver provided herein is subject to the limitations
set forth in Section 9.3.1.5 of the Credit Agreement.
26. AMENDMENT FEE. On the date hereof, Borrower shall pay to
Agent, for the ratable benefit of the Lenders, an amendment fee (the "Amendment
Fee") of Forty Thousand Dollars ($40,000).
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27. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS THIRD
AMENDMENT. Lender Parties' obligations under this Third Amendment are
conditioned upon, and this Third Amendment shall not be effective until,
satisfaction in full of each of the following:
(a) Agent shall have received this Third Amendment, duly
executed by each appropriate Person and in form and substance satisfactory to
Agent and its counsel;
(b) Lenders (or their designees) shall have received Warrants
in the amounts as set forth in Schedule 1.1A, duly executed by Borrower;
(c) Borrower shall have paid to Agent (i) the Amendment Fee;
and (ii) all amounts then due and payable pursuant to Section 9.1 of the Credit
Agreement which shall have been presented for payment;
(d) All of the representations and warranties of Borrower
contained herein, in the Credit Agreement and in each other Loan Document shall
be true and correct in all material respects on and as of the effective date of
this Third Amendment, as though made on and as of that date (except to the
extent that such representations and warranties expressly relate to an earlier
date or reflect changes brought about by this Third Amendment);
(e) Borrower shall have delivered to Agent certified copies of
resolutions of its Board of Directors authorizing Borrower to execute and
deliver this Third Amendment and the Warrants, in form and substance
satisfactory to Agent in its sole and absolute discretion;
(f) No Default or Event of Default shall have occurred and be
continuing or would result from the consummation of the transactions
contemplated in this Third Amendment; and
(g) All other documents, certificates, consents and opinions
required by Agent in connection with the transactions contemplated by this Third
Amendment shall have been executed and delivered in form and substance
satisfactory to Agent in its sole and absolute discretion.
28. REPRESENTATIONS AND WARRANTIES. In order to induce Lender
Parties to enter into this Third Amendment, Borrower makes the following
representations and warranties:
(a) The representations and warranties contained in the Credit
Agreement (and in the Schedules thereto) and each of the other Loan Documents
(and in the Schedules thereto) are true, correct and complete in all material
respects at and as of the effective date of this Third Amendment (except to the
extent that such representations and warranties expressly relate to an earlier
date or reflect changes brought about by this Third Amendment); and
(b) This Third Amendment and all other agreements and
documents executed by Borrower in connection herewith have been duly executed
and delivered by Borrower and constitute the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
terms, except as enforcement may be limited by bankruptcy, insolvency,
Third Amendment
11
12
reorganization, moratorium or similar laws relating to the enforcement of the
rights of creditors generally, or the exercise of judicial discretion with
respect to equitable remedies.
29. REFERENCES. All references in the Credit Agreement to
"this Agreement", "hereof", "herein", "hereto", or words of similar import, and
all references in all other Loan Documents to "the Credit Agreement" shall be,
and shall be deemed to be for all purposes, references to the Credit Agreement
as amended.
30. CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS OTHERWISE NOT
AFFECTED. Except as expressly amended pursuant to this Third Amendment, the
Credit Agreement and each of the other Loan Documents shall remain unchanged and
in full force and effect and are hereby ratified and confirmed in all respects.
Each Lender Party continues to reserve any and all rights and remedies under the
Credit Agreement and each of the other Loan Documents, and no failure, delay or
discontinuance on the part of any Lender Party in exercising any right, power or
remedy thereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
This Third Amendment and the Credit Agreement shall be read together, as one
document.
31. BINDING EFFECT. This Third Amendment shall be binding
upon, inure to the benefit of and be enforceable by Borrower and each Lender
Party and their respective successors and assigns, as permitted pursuant to the
Credit Agreement.
32. TIME OF THE ESSENCE. Time and exactitude of each of the
terms, obligations, covenants and conditions of this Third Amendment are hereby
declared to be of the essence.
33. GOVERNING LAW. THIS THIRD AMENDMENT IS A CONTRACT UNDER
THE LAWS OF THE STATE OF CALIFORNIA AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY SUCH LAWS (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW).
34. COUNTERPARTS. This Third Amendment may be executed in
several counterparts and by each party on a separate counterpart, each of which
when executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving any matter with respect to this
Third Amendment it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
Third Amendment
12
13
IN WITNESS WHEREOF, the parties hereto have duly executed this
Third Amendment, as of the date first above written.
AGENT:
BANKBOSTON, N.A.,
A NATIONAL BANKING ASSOCIATION,
as Agent, L/C Issuer and a Lender
By: \s\ Xxxx X. Xxxxxxx
---------------------------------------
Name: Xxxx X. Xxxxxxx
---------------------------------------
Title: Vice President
---------------------------------------
LENDERS:
BANK ONE, ARIZONA, N.A.,
A NATIONAL BANKING ASSOCIATION
By: \s\ Xxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxx Xxxxxxxx
---------------------------------------
Title: Vice President
---------------------------------------
IMPERIAL BANK,
A CALIFORNIA BANKING CORPORATION
By: \s\ Xxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------------------
Title: Senior Vice President
---------------------------------------
THE UNION BANK OF CALIFORNIA,
A NATIONAL BANKING ASSOCIATION
By: \s\ Xxxxx Xxxx
---------------------------------------
Name: Xxxxx Xxxx
---------------------------------------
Title: Vice President
---------------------------------------
Third Amendment
13
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BORROWER:
ADFLEX SOLUTIONS, INC.,
A DELAWARE CORPORATION
By: \s\ Xxxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
---------------------------------------
Title: Chief Financial Officer
---------------------------------------
Third Amendment
14
15
SCHEDULE 1.1A
COMMITMENTS
Lender Commitment Revolving Commitment Term Commitment Warrants
------ ----------- -------------------- --------------- --------
BankBoston, N.A $13,125,000 $ 5,833,333.333 $ 7,291,666.667 14,583
Bank One, Arizona, N.A 11,250,000 5,000,000.000 6,250,000.000 12,500
The Union Bank of California 11,250,000 5,000,000.000 6,250,000.000 12,500
Imperial Bank 9,375,000 4,166,666.667 5,208,333.333 10,417
----------- -------------------- --------------- ------
Total $45,000,000 $ 20,000,000.000 $25,000,000.000 50,000
=========== =================== =============== ======
Third Amendment
Schedule 1.1A
16
SCHEDULE 1.1E
APPLICABLE MARGIN & FEE RATE
The "APPLICABLE MARGIN" in respect of LIBOR Rate Loans and the "FEE
RATE" for any day are the respective rates per annum set forth below in the
applicable row under the column corresponding to the Pricing Level that applies
on such day:
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
PRICING LEVEL PRICING PRICING PRICING PRICING PRICING
------------- ------- -------- --------- -------- -------
Applicable Margin (LIBOR 1.50 1.75 2.00 2.25 LIBOR Rate Not
Rate Loans) Permitted
Fee Rate 0.20 0.20 0.25 0.25 0.50
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I PRICING" applies during any Pricing Period if, at the end of
the Fiscal Quarter most recently ended prior to the first day of such Pricing
Period, the Interest Coverage Ratio for the two consecutive Fiscal Quarters then
ended was greater than 5.00 to 1.00.
"LEVEL II PRICING" applies during any Pricing Period if no higher
Pricing Level applies and, at the end of the Fiscal Quarter most recently ended
prior to the first day of such Pricing Period, the Interest Coverage Ratio for
the two consecutive Fiscal Quarters then ended was less than or equal to 5.00 to
1.00, but greater than 4.00 to 1.00.
"LEVEL III PRICING" applies during any Pricing Period if no higher
Pricing Level applies and, at the end of the Fiscal Quarter most recently ended
prior to the first day of such Pricing Period, the Interest Coverage Ratio for
the two consecutive Fiscal Quarters then ended was less than or equal to 4.00 to
1.00, but greater than 3.00 to 1.00.
"LEVEL IV PRICING" applies during any Pricing Period if no higher
Pricing Level applies and, at the end of the Fiscal Quarter most recently ended
prior to the first day of such Pricing Period, the Interest Coverage Ratio for
the two consecutive Fiscal Quarters then ended was less than or equal to 3.00 to
1.00, but greater than 2.00 to 1.00.
"LEVEL V PRICING" applies (i) during any Pricing Period if no higher
Pricing Level applies and, at the end of the Fiscal Quarter most recently ended
prior to the first day of such Pricing Period, the Interest Coverage Ratio for
the two consecutive Fiscal Quarters then ended was less than or equal to 2.00 to
1.00, or (ii) on the first day of such Pricing Period the financial
Third Amendment
Schedule 1.1E
17
statements required by Section 5.1.2 of the Credit Agreement shall not have been
delivered with respect to such Fiscal Quarter.
"PRICING PERIOD" means a period beginning on (and including) the day on
which a Compliance Certificate required pursuant to Section 5.1.2 of the Credit
Agreement is delivered, and ending on (and excluding) the day on which the next
such Compliance Certificate is delivered. The first Pricing Period shall begin
on the day on which the Borrower delivers a Compliance Certificate or other
evidence establishing that the Senior Debt Leverage Ratio does not exceed 0.50
to 1.00.
"PRICING LEVEL" refers to such of Level I Pricing, Level II Pricing,
Level III Pricing, Level IV Pricing or Level V Pricing as applies during any
particular day. The numbering of Pricing Levels is in ascending order (e.g.,
Level II Pricing is referred to as a "higher" Pricing Level than Level I
Pricing).
Third Amendment
Schedule 1.1E
18
Exhibit W
WARRANT
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION
RULE 144.
WARRANT TO PURCHASE COMMON STOCK OF ADFLEX SOLUTIONS, INC.
(Subject to Adjustment)
NO. __ October 30, 1998
THIS CERTIFIES THAT, for value received, ________________________________, or
its permitted registered assigns ("Holder"), is entitled, subject to the terms
and conditions of this Warrant, at any time or from time to time after March 14,
1999 (the "Effective Date"), and before 5:00 p.m. California Time on the last
day of the Company's (as defined below) fiscal year in the year 2002 (the
"Expiration Date"), to purchase from ADFlex Solutions, Inc., a Delaware
corporation (the "Company"), [WARRANT SHARES (IN WORDS)] ([WARRANT SHARES (IN
NUMBERS]) shares of Common Stock of the Company at a price per share equal to
the Exercise Price. Both the number of shares of Common Stock purchasable upon
exercise of this Warrant and the Exercise Price are subject to adjustment and
change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
1.1. "Fair Market Value" of a share of Common Stock as of a
particular date shall mean:
(a) If traded on a securities exchange or the Nasdaq
National Market, the Fair Market Value shall be
deemed to be the average of the closing prices of the
Common Stock of the Company on such exchange or
market over the ten (10) trading days ending
immediately prior to the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market
Value shall be deemed to be the average of the
closing bid prices over the thirty (30)-day period
ending immediately prior to the applicable date of
valuation; and
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(c) If there is no active public market, the Fair Market
Value shall be the value thereof, as agreed upon by
the Company and the Holder; provided, however, that
if the Company and the Holder cannot agree on such
value, such value shall be determined by an
independent valuation firm experienced in valuing
businesses such as the Company and jointly selected
in good faith by the Company and the Holder. Fees and
expenses of the valuation firm shall be paid for by
the Company.
1.2. "Registered Holder" shall mean any Holder in whose name this
Warrant is registered upon the books and records maintained
by the Company.
1.3. "Warrant" as used herein, shall include this Warrant and any
warrant delivered in substitution or exchange therefor as
provided herein.
1.4. "Common Stock" shall mean the Common Stock of the Company and
any other securities at any time receivable or issuable upon
exercise of this Warrant.
1.5. "Exercise Price" shall mean $5.00.
1.6. "Concurrent Warrants" as used herein, shall include all other
warrants issued to the Lenders pursuant to the Third Amendment
and any warrants delivered in substitution or exchange
therefor as provided in such warrants.
1.7. "Third Amendment" shall mean that certain Third Amendment To
Senior Secured Credit Agreement and Certain Loan Documents,
dated as of October 30, 1998 among the Company, the banks and
other financial institutions that either now or in the future
are parties thereto as lenders (collectively the "Lenders" and
each individually a "Lender"), BankBoston, N.A. in its
capacity as the L/C Issuer (in such capacity, together with
any successors thereto in such capacity, the "L/C Issuer"),
and BankBoston N.A., as agent and representative for the
Lenders (in such capacity BankBoston N.A. or any successor in
such capacity is referred to herein as the "Agent").
2. EXERCISE OF WARRANT
2.1. Payment. Subject to compliance with the terms and conditions
of this Warrant and applicable securities laws, this Warrant
may be exercised, in whole or in part at any time or from time
to time, after the Effective Date and on or before the
Expiration Date by the delivery (including, without
limitation, delivery by facsimile) of the form of Notice of
Exercise attached hereto as Exhibit 1 (the "Notice of
Exercise"), duly executed by the Holder, at the principal
office of the Company referred to in Section 15, and as soon
as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company,
and
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(b) payment, (i) in cash (by check) or by wire transfer,
(ii) by cancellation by the Holder of indebtedness of
the Company to the Holder; or (iii) by a combination
of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of
Common Stock being purchased upon such exercise by
the then effective Exercise Price (the "Exercise
Amount").
2.2. Net Issue Exercise. In lieu of the payment methods set forth
in Section 2.1(b) above, the Holder may elect to exchange all
or some of this Warrant for shares of Common Stock equal to
the value of the amount of the Warrant being exchanged on the
date of exchange. If Holder elects to exchange this Warrant as
provided in this Section 2.2, Holder shall tender to the
Company the Warrant for the amount being exchanged, along with
written notice of Holder's election to exchange some or all of
the Warrant, and the Company shall issue to Holder the number
of shares of the Common Stock computed using the following
formula:
X = Y (A-B)
-------------
A
Where X = the number of shares of Common Stock to
be issued to Holder pursuant to this
Section 2.2.
Y = the number of shares of Common Stock
covered by this Warrant and in respect of
which the net issue exercise is made
pursuant to this Section 2.2 (as adjusted
to the date of such calculation).
A = the Fair Market Value of one share of the
Common Stock at the time the net issue
exercise is made.
B = Exercise Price (as adjusted to the date
of such calculation).
2.3. "Easy Sale" Exercise. In lieu of the payment methods set forth
in Section 2.1(b) above, when permitted by law and applicable
regulations (including Nasdaq and NASD rules), the Holder may
pay the Exercise Price through a "same day sale" commitment
from the Holder (and if applicable a broker-dealer that is a
member of the National Association of Securities Dealers (a
"NASD Dealer")), whereby the Holder irrevocably elects to
exercise this Warrant and to sell a portion of the shares so
purchased to pay the Exercise Price, and the Holder (or, if
applicable, the NASD Dealer) commits upon sale (or, in the
case of the NASD Dealer, upon receipt) of such shares to
forward the Exercise Price directly to the Company.
2.4. Stock Certificates; Fractional Shares. As soon as practicable
on or after the date of any exercise of this Warrant, the
Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for
the number
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of whole shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to
such fraction of the current Fair Market Value of one whole
share of Common Stock as of such date of exercise. No
fractional shares or scrip representing fractional shares
shall be issued upon an exercise of this Warrant.
2.5. Partial Exercise; Effective Date of Exercise. In case of any
partial exercise of this Warrant, the Company shall cancel
this Warrant upon surrender hereof and shall execute and
deliver a new Warrant of like tenor and date for the balance
of the shares of Common Stock purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender
for exercise as provided above, provided that if the Warrant
as provided in Section 2.1(a) and, if applicable, the payment
therefor as provided in Section 2.1(b), are not delivered
concurrently with the Notice of Exercise, this Warrant shall
be deemed to have been exercised at such later date as this
Warrant and, if applicable, the above-described payment are
delivered. The person entitled to receive the shares of Common
Stock issuable upon exercise of this Warrant shall be treated
for all purposes as the holder of record of such shares as of
the close of business on the date the Holder is deemed to have
exercised this Warrant.
2.6. Vesting. This Warrant will vest on December 15, 1998 if the
Company has not consummated a Junior Capital Transaction (as
such term is defined in the Third Amendment) and raised gross
proceeds of at least $20,000,000. If the Warrant shall fail to
vest because the Company shall have consummated a Junior
Capital Transaction and raised gross proceeds of at least
$20,000,000 this Warrant shall be void and shall be of no
further effect.
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and
non-assessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery thereof. The Company shall not be required to pay any tax or
other charge imposed in connection with any transfer involved in the
issuance of any certificate for shares of Common Stock in any name
other than that of the Registered Holder of this Warrant, and in such
case the Company shall not be required to issue or deliver any stock
certificate or security until such tax or other charge has been paid,
or it has been established to the Company's reasonable satisfaction
that no tax or other charge is due.
4. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of shares
of Common Stock issuable upon exercise of this Warrant (or any shares
of stock or other securities or property receivable or issuable upon
exercise of this Warrant) and the Exercise Price are subject to
adjustment upon occurrence of the following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or
Combinations of Shares. The Exercise Price of this Warrant
shall be proportionally decreased and the number of shares of
Common Stock issuable upon exercise of this Warrant (or any
shares
4
22
of stock or other securities at the time issuable upon
exercise of this Warrant) shall be proportionally increased to
reflect any stock split or subdivision of the Company's Common
Stock. The Exercise Price of this Warrant shall be
proportionally increased and the number of shares of Common
Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally decreased to reflect
any combination of the Company's Common Stock.
4.2. Adjustment for Dividends or Distributions of Stock or Other
Securities or Property. In case the Company shall make or
issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other
distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon
exercise of the Warrant) payable in (a) securities of the
Company or (b) assets (excluding cash dividends paid or
payable solely out of retained earnings), then, in each such
case, the Holder of this Warrant on exercise hereof at any
time after the consummation, effective date or record date of
such dividend or other distribution, shall receive, in
addition to the shares of Common Stock (or such other stock or
securities) issuable on such exercise prior to such date, and
without the payment of additional consideration therefor, the
securities or such other assets of the Company to which such
Holder would have been entitled upon such date if such Holder
had exercised this Warrant on the date hereof and had
thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and
all such additional securities or other assets distributed
with respect to such shares as aforesaid during such period
giving effect to all adjustments called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification of
securities or otherwise, shall change any of the securities as
to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or
classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this
Warrant immediately prior to such reclassification or other
change, and the Exercise Price therefor shall be appropriately
adjusted, all subject to further adjustment as provided in
this Section 4. No adjustment shall be made pursuant to this
Section 4.3 upon any conversion or redemption of the Common
Stock which is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or
Consolidation. In case of any capital reorganization of the
capital stock of the Company (other than a combination,
reclassification, exchange or subdivision of shares otherwise
provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all
or substantially all the assets of the Company then, and in
each such case, as a part of such reorganization, merger,
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23
consolidation, sale or transfer, lawful provision shall be
made so that the Holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price
then in effect, the number of shares of stock or other
securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or
transfer that a holder of the shares deliverable upon exercise
of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if
this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all
subject to further adjustment as provided in this Section 4.
The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, consolidations, mergers,
sales and transfers and to the stock or securities of any
other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration
payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable
securities, then the value of such consideration shall be
determined in good faith by the Company's Board of Directors.
In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect
to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably
may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.5. Conversion of Common Stock. In case all or any portion of the
authorized and outstanding shares of Common Stock of the
Company are redeemed or converted or reclassified into other
securities or property pursuant to the Company's Certificate
of Incorporation or otherwise, or the Common Stock otherwise
ceases to exist, then, in such case, the Holder of this
Warrant, upon exercise hereof at any time after the date on
which the Common Stock is so redeemed or converted,
reclassified or ceases to exist (the "Termination Date"),
shall receive, in lieu of the number of shares of Common Stock
that would have been issuable upon such exercise immediately
prior to the Termination Date, the securities or property that
would have been received if this Warrant had been exercised in
full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination
Date, all subject to further adjustment as provided in this
Warrant. Additionally, the Exercise Price shall be immediately
adjusted to equal the quotient obtained by dividing (x) the
aggregate Exercise Price of the maximum number of shares of
Common Stock for which this Warrant was exercisable
immediately prior to the Termination Date by (y) the number of
shares of Common Stock of the Company for which this Warrant
is exercisable immediately after the Termination Date, all
subject to further adjustment as provided herein.
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5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Exercise Price, or number or type of shares issuable upon exercise of
this Warrant, the Chief Financial Officer or Controller of the Company
shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Exercise Price. The Company shall
promptly send (by facsimile and by either first class mail, postage
prepaid or overnight delivery) a copy of each such certificate to the
Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of indemnity reasonably satisfactory to
it, and (in the case of mutilation) upon surrender and cancellation of
this Warrant, the Company will execute and deliver in lieu thereof a
new Warrant of like tenor as the lost, stolen, destroyed or mutilated
Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise
of this Warrant and the Concurrent Warrants such number of shares of
Common Stock or other shares of capital stock of the Company as are
from time to time issuable upon exercise of this Warrant and the
Concurrent Warrants and, from time to time, will take all steps
necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of
this Warrant and the Concurrent Warrants. All such shares shall be duly
authorized, and when issued upon exercise as provided herein, shall be
validly issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights,
except encumbrances or restrictions arising under federal or state
securities laws. Issuance of this Warrant and the Concurrent Warrants
shall constitute full authority to the Company's Officers who are
charged with the duty of executing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the
due exercise of this Warrant and the Concurrent Warrants.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this
Warrant and all rights hereunder may be transferred to any Registered
Holder's parent, subsidiary or affiliate, in whole or in part, on the
books of the Company maintained for such purpose at the principal
office of the Company referred to in Section 15, by the Registered
Holder hereof in person, or by duly authorized attorney, upon execution
of an assignment in the form of Exhibit 2 and surrender of this Warrant
properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. Upon any
permitted partial transfer, the Company will issue and deliver to the
Registered Holder a new Warrant or Warrants with respect to the shares
of Common Stock not so transferred. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that when
this Warrant shall have been so endorsed, the person in possession of
this Warrant may be treated by the Company, and all other persons
dealing with this Warrant,
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as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented hereby, any notice to the contrary
notwithstanding; provided, however that until a transfer of this
Warrant is duly registered on the books of the Company, the Company may
treat the Registered Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the
Securities and Exchange Commission (the "SEC") under the Securities Act
covering the disposition or sale of this Warrant or the Common Stock
issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws,
such Holder will not sell, transfer, pledge, or hypothecate (other than
to subsidiaries or affiliates) any or all of this Warrant or such
Common Stock, as the case may be, unless either (i) the Company has
received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is
not required in connection with such disposition or (ii) the sale of
such securities is made pursuant to SEC Rule 144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the
Holder hereby represents, warrants and covenants that this Warrant and
any shares of stock purchased upon exercise of this Warrant shall be
acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof; that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from
representatives of the Company such information as is necessary to
permit the Holder to evaluate the merits and risks of its investment in
the Company; that the Holder is able to bear the economic risk of
holding this Warrant and such shares as may be acquired pursuant to the
exercise of this Warrant for an indefinite period; that the Holder is
an "accredited investor" as defined in Rule 501(a) promulgated under
the Securities Act; that the Holder understands that this Warrant and
the shares of stock acquired pursuant to the exercise of this Warrant
will not be registered under the Securities Act (unless otherwise
required pursuant to exercise by the Holder of the registration rights,
if any, granted to the Registered Holder) and will be "restricted
securities" within the meaning of Rule 144 under the Securities Act and
that the exemption from registration under Rule 144 will not be
available for at least one (1) year from the date of exercise of this
Warrant, and even then will not be available unless a public market
then exists for the stock, adequate information concerning the Company
is then available to the public, and other terms and conditions of Rule
144 are complied with; and that all stock certificates representing
shares of stock issued to the Holder upon exercise of this Warrant or
upon conversion of such shares may have affixed thereto a legend
substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE
APPLICABLE STATE
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SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In the absence of affirmative action by
such Holder to purchase Common Stock by exercise of this Warrant or
Common Stock upon conversion thereof, no provisions of this Warrant,
and no enumeration herein of the rights or privileges of the Holder
hereof shall cause such Holder hereof to be a stockholder of the
Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable upon exercise
of this Warrant shall be "Registrable Securities" or such other
definition of securities entitled to registration rights pursuant to
Exhibit 3 to this Warrant.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Holder that:
13.1. Due Authorization; Consents. All corporate action on the part
of the Company, its officers, directors and shareholders
necessary for (a) the authorization, execution and delivery
of, and the performance of all obligations of the Company
under, this Warrant, and (b) the authorization, issuance,
reservation for issuance and delivery of all of the Common
Stock issuable upon exercise of this Warrant, has been duly
taken. This Warrant constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar
laws affecting creditors' rights generally and to general
equitable principles. All consents, approvals and
authorizations of, and registrations, qualifications and
filings with, any federal or state governmental agency,
authority or body, or any third party, required in connection
with the execution, delivery and performance of this Warrant
and the consummation of the transactions contemplated hereby
and thereby have been obtained.
13.2. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power to
own, lease and operate its property and to carry on its
business as now being conducted and as currently proposed to
be conducted.
13.3. SEC Reports; Financial Statements.
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(a) The Company has duly filed with the SEC the Company's
annual report on Form 10-K for the year ended
December 31, 1997 and its quarterly reports on Form
10-Q for the quarters ended March 31, 1998 and June
30, 1998 (collectively, the "ADFlex Solutions, Inc.
SEC Reports"). As of their respective filing dates,
the ADFlex Solutions, Inc. SEC Reports complied in
all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and none
of the ADFlex Solutions, Inc. SEC Reports contained
any untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary to make the statements made therein, in
light of the circumstances in which they were made,
not misleading, except to the extent corrected by a
subsequently filed document with the SEC.
(b) Each of the consolidated financial statements
(including, in each case, any related notes)
contained in the ADFlex Solutions, Inc. SEC Reports
complied as to form in all material respects with the
applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a
consistent basis throughout the periods involved
(except as may be indicated in the notes to such
financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q) and presented
fairly, in all material respects, the consolidated
financial position of the Company and its
subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited
interim financial statements are subject to normal
and recurring year-end adjustments which are not
expected to be material in amount.
13.4. Capitalization. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 par value
and 10,000,000 shares of preferred stock, $0.01 par value (the
"Preferred Stock"). As of September 30, 1998: (i) 8,928,249
shares of Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable; (ii)
1,107,430 shares of Common Stock were reserved for issuance
under the Company's stock option plans, 911,868 of which
shares were subject to options outstanding on such date; (iii)
173,423 shares of Common Stock were reserved for issuance
under the Company's employee stock purchase plan; (iv) no
shares of Common Stock were reserved for issuance upon
exercise of outstanding warrants; and (v) no shares of
Preferred Stock were issued and outstanding. No material
change in such capitalization has occurred between September
30, 1998 and the issuance date of this Warrant.
13.5. Valid Issuance of Stock. The outstanding shares of the capital
stock of the Company are duly and validly issued, fully paid
and non-assessable, and such shares, and all outstanding
options and other securities of the Company, have been issued
in full compliance with the registration and prospectus
delivery
10
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requirements of the Securities Act and the registration and
qualification requirements of all applicable state securities
laws, or in compliance with applicable exemptions therefrom,
and all other provisions of applicable federal and state
securities laws, including without limitation, anti-fraud
provisions.
13.6. Governmental Consents. All consents, approvals, orders,
authorizations or registrations, qualifications, declarations
or filings with any federal or state governmental authority on
the part of the Company required in connection with the
consummation of the transactions contemplated herein shall
have been obtained prior to and be effective as of the
Effective Date.
14. INFORMATION RIGHTS. The Company shall deliver to each holder of this
Warrant or any securities issued (directly or indirectly) upon exercise
hereof, upon request, copies of the Company's reports on Forms 10-K,
10-Q, and 8-K and Annual Reports to Shareholders promptly after such
documents are filed with the SEC.
15. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this
Agreement shall be in writing and shall be conclusively deemed to have
been duly given (a) when hand delivered to the other party; (b) when
received when sent by facsimile at the address and number set forth
below; (c) three business days after deposit in the U.S. mail with
first class or certified mail receipt requested postage prepaid and
addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party
receives a confirmation of delivery from the delivery service provider.
To Holder: To the Company:
ADFlex Solutions, Inc.
0000 X. Xxxxxxxx Xxxx.
Xxxxxxxx, XX 00000
Fax Number: (000) 000-0000
Fax Number:
Attention: Xxxxxxx X. Xxxxxxxxxx
President and Chief Executive Officer
With copies to: Xxxxxxxxx Xxxxx, P.C.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Fax Number: (000) 000-0000
Attention: Xxxxx X. XxXxxxxxx
11
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Fax Number:
Each person making a communication hereunder by facsimile shall
promptly confirm by telephone to the person to whom such communication
was addressed each communication made by it by facsimile pursuant
hereto but the absence of such confirmation shall not affect the
validity of any such communication. A party may change or supplement
the addresses given above, or designate additional addresses, for
purposes of this Section 15 by giving the other party written notice of
the new address in the manner set forth above.
16. HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
17. LAW GOVERNING. THIS WARRANT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (OTHER THAN CHOICE
OF LAW RULES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION).
18. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets 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 times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any shares of stock
issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of Common Stock upon
exercise of this Warrant.
19. NOTICES OF RECORD DATE. In case:
19.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable
upon the exercise of this Warrant), for the purpose of
entitling them to receive any dividend or other distribution,
or any right to subscribe for or purchase any shares of stock
of any class or any other securities or to receive any other
right; or
19.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization of the
Company, any reclassification of the Capital Stock of the
Company, or any conveyance of all or substantially all of the
assets of the Company to another corporation in which holders
of the Company's stock are to receive stock, securities or
property of another corporation; or
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19.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
19.4. of any redemption or conversion of all outstanding Common
Stock;
then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as
the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, or (ii) the date on
which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation, winding-up, redemption or
conversion is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock (or such stock or
securities as at the time are receivable upon the exercise of this
Warrant), shall be entitled to exchange their shares of Common Stock
(or such other stock or securities), for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice
shall be delivered at least thirty (30) days prior to the date therein
specified.
20. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Warrant shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
21. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and
each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
22. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Warrant enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of this
Warrant or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that
have been waived.
23. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall
automatically be extended until 5:00 p.m. the next business day.
24. DISPUTE RESOLUTION. The parties agree to negotiate in good faith to
resolve any dispute between them regarding this Warrant. If the
negotiations do not resolve the dispute to the reasonable satisfaction
of both parties, then each party shall nominate one senior officer of
the rank of Vice President or higher as its representative. These
representatives shall, within thirty (30) days of a written request by
either party to call such a meeting, meet in person and alone (except
for one assistant for each party) and shall attempt in good faith to
resolve the dispute. If the disputes cannot be resolved by such senior
managers in such meeting, the parties agree that they shall, if
requested in writing by either party, meet within thirty (30) days
after such written notification for one
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31
day with an impartial mediator and consider dispute resolution
alternatives other than litigation. If an alternative method of dispute
resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may begin litigation proceedings. This
procedure shall be a prerequisite before taking any additional action
hereunder.
25. CHOICE OF FORUM.
25.1. All actions or proceedings arising in connection with this
Agreement shall be tried and litigated in state or Federal
courts located in County of Suffolk, Commonwealth of
Massachusetts, unless such actions or proceedings are required
to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy. EACH OF THE
COMPANY AND THE HOLDER WAIVES ANY RIGHT IT MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS, TO ASSERT THAT IT IS NOT
SUBJECT TO THE JURISDICTION OF SUCH COURTS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE
WITH THIS SECTION.
25.2. IN ANY ACTION AGAINST THE COMPANY OR THE HOLDER, AS THE CASE
MAY BE, SERVICE OF PROCESS MAY BE MADE UPON THE COMPANY OR THE
HOLDER, AS THE CASE MAY BE, BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ITS ADDRESS INDICATED IN SECTION
15, WHICH SERVICE SHALL BE DEEMED SUFFICIENT FOR PERSONAL
JURISDICTION AND SHALL BE DEEMED EFFECTIVE 10 DAYS AFTER
MAILING.
25.3. Nothing contained in this Section shall preclude the Holder
from bringing any action or proceeding arising out of or
relating to this Warrant in the courts of any place where the
Company or any of its assets may be found or located. TO THE
EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING, THE JURISDICTION OF
ANY OTHER COURT OR COURTS THAT NOW OR HEREAFTER, BY REASON OF
SUCH PARTY'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE
AVAILABLE TO IT.
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the
Effective Date.
BANKBOSTON, N.A., A NATIONAL BANKING ASSOCIATION ADFLEX SOLUTIONS, INC.
By \s\ Xxxxxxx X. Xxxx By \s\ Xxxxxx X. Xxxxxxxxx
------------------------------------------------------- ------------------------------------------------------
Printed Name Xxxxxxx X. Xxxx Printed Name Xxxxxx X. Xxxxxxxxx
------------------------------------------------------- ------------------------------------------------------
Title Vice President Title Chief Financial Officer
-------------------------------------------------------
BANK ONE, ARIZONA, N.A., A NATIONAL BANKING
ASSOCIATION
By \s\ Xxxxxxx XxXxxx
-------------------------------------------------------
Printed Name Xxxxxxx XxXxxx
-------------------------------------------------------
Title Vice President
-------------------------------------------------------
IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
By \s\ Xxxxx X. Xxxxxxxx
-------------------------------------------------------
Printed Name Xxxxx X. Xxxxxxxx
-------------------------------------------------------
Title Senior Vice President
-------------------------------------------------------
THE UNION BANK OF CALIFORNIA, A NATIONAL BANKING
ASSOCIATION
By \s\ Xxxxxx X. Xxxxxx
-------------------------------------------------------
Printed Name Xxxxxx X. Xxxxxx
-------------------------------------------------------
Title President
15
33
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
ADFLEX SOLUTIONS, INC.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of ADFlex Solutions, Inc., as provided for therein, and (check
the applicable box):
/ / tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check in same-day funds in the
amount of $____________ for _________ such securities.
/ / Elects the Net Issue Exercise option pursuant to Section 2.2 of the
Warrant, and accordingly requests delivery of a net of ______________
of such securities.
/ / Elects the Easy Sale Exercise option pursuant to, and in accordance
with the requirements of, Section 2.3 of the Warrant.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
Signature:
-------------------------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
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EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, the undersigned hereby sells, assigns and transfers unto
____________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:
NAME(S) OF ASSIGNEE(S) ADDRESS # OF WARRANTS
---------------------- ---------------------------- ---------------
---------------------- ---------------------------- ---------------
---------------------- ---------------------------- ---------------
---------------------- ---------------------------- ---------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
-------------------------------------------------------------
Dated:
-------------------------------------------------------------
Signature:
-------------------------------------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
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EXHIBIT 3
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Section 1:
(a) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by
preparing and filing a registration statement in
compliance with the Securities Act of 1933, as
amended, (the "Securities Act"), and the declaration
or ordering of effectiveness of such registration
statement.
(b) Registrable Securities. The term "Registrable
Securities" means: (1) any Common Stock of the
Company issued or to be issued upon exercise of the
Warrant or Concurrent Warrants, and (2) any shares of
Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right
or other security which is issued as) a dividend or
other distribution with respect to, or in exchange
for or in replacement of, any shares of Common Stock
described in clause (1) of this subsection (b).
Notwithstanding the foregoing, "Registrable
Securities" shall exclude any Registrable Securities
sold by a person in a transaction in which rights
under this Section 1 are not assigned in accordance
with this Agreement or any Registrable Securities
sold in a public offering, whether sold pursuant to
Rule 144 promulgated under the Securities Act, or in
a registered offering, or otherwise.
(c) Registrable Securities Then Outstanding. The number
of shares of "Registrable Securities then
outstanding" shall mean the number of shares of
Common Stock of the Company that are Registrable
Securities and (l) are then issued and outstanding or
(2) are then issuable pursuant to an exercise of the
Warrant or the Concurrent Warrants or pursuant to
conversion of securities issuable pursuant to an
exercise of the Warrant or the Concurrent Warrants.
(d) Holder. For purposes of this Section 1, the term
"Holder" means any person owning of record
Registrable Securities that have not been sold to the
public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of
such Registrable Securities to whom rights under this
Section 1 have been duly assigned in accordance with
this Agreement.
(e) Form S-3. The term "Form S-3" means such form under
the Securities Act as is in effect on the date hereof
or any successor registration form under the
Securities Act subsequently adopted by the SEC which
permits
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inclusion or incorporation of substantial information
by reference to other documents filed by the Company
with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
1.2 [Intentionally Omitted].
1.3 Piggyback Registrations. The Company shall notify all Holders
of Registrable Securities in writing at least twenty-one (21)
days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
securities of the Company, but excluding registration
statements relating to any registration under Section 1.4 of
this Agreement or to any employee benefit plan or any
acquisition transaction or a corporate reorganization) and
will afford each such Holder an opportunity to include in such
registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of
the Registrable Securities held by such Holder shall within
fifteen (15) days after receipt of the above-described notice
from the Company, so notify the Company in writing, and in
such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all
of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the
Company with respect to offerings of its securities, all upon
the terms and conditions set forth herein.
(a) Underwriting. If a registration statement under which
the Company gives notice under this Section 1.3 is
for an underwritten offering, then the Company shall
so advise the Holders of Registrable Securities. In
such event, the right of any such Holder's
Registrable Securities to be included in a
registration pursuant to this Section 1.3 shall be
conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to
distribute their Registrable Securities through such
underwriting shall enter into an underwriting
agreement in customary form with the managing
underwriter or underwriters selected for such
underwriting (including a market stand-off agreement
of up to 180 days if required by such underwriters).
Notwithstanding any other provision of this
Agreement, if the managing underwriter(s)
determine(s) in good faith that marketing factors
require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may
exclude shares (including up to seventy-five percent
(75%) of the Registrable
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Securities) from the registration and the
underwriting, and the number of shares that may be
included in the registration and the underwriting
shall be allocated, first to the Company, and second,
to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement
on a pro rata basis based on the total number of
Registrable Securities then held by each such Holder;
provided, however, that the right of the underwriters
to exclude shares (including Registrable Securities)
from the registration and underwriting as described
above shall be restricted so that (i) the number of
Registrable Securities included in any such
registration is not reduced below twenty-five percent
(25%) of the aggregate number of Registrable
Securities for which inclusion has been requested;
and (ii) all shares that are not Registrable
Securities and are held by any other person,
including, without limitation, any person who is an
employee, officer or director of the Company (or any
subsidiary of the Company) shall first be excluded
from such registration and underwriting before any
Registrable Securities are so excluded, provided
however that Xyratex Limited shall have the right to
participate equally with the holders of Registrable
Securities included in any such registration. If any
Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the
underwriter(s), delivered at least ten (10) business
days prior to the effective date of the registration
statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded
and withdrawn from the registration. For any Holder
that is a partnership, the Holder and the partners
and retired partners of such Holder, or the estates
and family members of any such partners and retired
partners and any trusts for the benefit of any of the
foregoing persons, and for any Holder that is a
corporation, the Holder and all corporations that are
affiliates of such Holder, shall be deemed to be a
single "Holder," and any pro rata reduction with
respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration
rights owned by all entities and individuals included
in such "Holder," as defined in this sentence.
(b) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 1.3 (excluding
underwriters' and brokers' discounts and commissions
relating to shares sold by the Holders and legal fees
of counsel for the Holders), including, without
limitation all federal and "blue sky" registration,
filing and qualification fees, printers' and
accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the
Company.
(c) No Limit on Registrations. Except as otherwise
provided herein, there shall be no limit on the
number of times the Holders may request registration
of Registrable Securities under this Section 1.3.
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1.4 Form S-3 Registration. In case the Company shall at any time
after March 14, 1999, receive from any Holder or Holders of a
majority of all Registrable Securities then outstanding a
written request or requests that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, then the Company
will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request
therefor, and any related qualification or
compliance, to all other Holders of Registrable
Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and
compliances as may be so requested and as would
permit or facilitate the sale and distribution of all
or such portion of such Holders or Holders'
Registrable Securities as are specified in such
request, together with all or such portion of the
Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written
request given within twenty (20) days after the
Company provides the notice contemplated by Section
1.4(a); provided, however, that the Company shall not
be obligated to effect any such registration,
qualification or compliance pursuant to this Section
1.4:
(1) if Form S-3 is not available for such
offering by the Holders:
(2) if the Holders, together with the holders of
any other securities of the Company entitled
to inclusion in such registration, propose
to sell Registrable Securities and such
other securities (if any) at an aggregate
price to the public of less than $500,000;
(3) if the Company shall furnish to the Holders
a certificate signed by the President or
Chief Executive Officer of the Company
stating that in the good faith judgment of
the Board of Directors of the Company, it
would be materially detrimental to the
Company and its shareholders for such Form
S-3 Registration to be effected at such
time, in which event the Company shall have
the right to defer the filing of the Form
S-3 registration statement no more than once
during any twelve month period for a period
of not more than ninety (90) days after
receipt of the request of the Holder or
Holders under this Section 1.4;
(4) if the Company has, within the six (6) month
period preceding the date of such request,
already effected a registration under the
Securities Act other than a registration
from which the Registrable Securities of
Holders have been excluded (with respect to
all or any portion of the Registrable
Securities the Holders requested be
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39
included in such registration) pursuant to
the provisions of Section 1.3(a); or
(5) in any particular jurisdiction in which the
Company would be required to qualify to do
business or to execute a general consent to
service of process in effecting such
registration, qualification or compliance.
(c) Expenses. The Company shall pay all expenses incurred
in connection with each registration requested
pursuant to this Section 1.4, (excluding
underwriters' or brokers' discounts and commissions
relating to shares sold by the Holders and legal fees
of counsel for the Holders), including without
limitation federal and "blue sky" registration,
filing and qualification fees, printers' and
accounting fees, and fees and disbursements of
counsel.
(d) No Limit on Registrations. Except as otherwise
provided herein, there shall be no limit on the
number of times the Holders may request registration
of Registrable Securities under this Section 1.4.
1.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably
possible:
(a) Registration Statement. Prepare and file with the SEC
a registration statement with respect to such
Registrable Securities and use reasonable, good faith
efforts to cause such registration statement to
become effective, provided, however, that the Company
shall not be required to keep any such registration
statement effective for more than ninety (90) days.
(b) Amendments and Supplements. Prepare and file with the
SEC such amendments and supplements to such
registration statement and the prospectus used in
connection with such registration statement as may be
necessary to comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of
copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of
the Securities Act, and such other documents as they
may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by
them that are included in such registration.
(d) Blue Sky. Use reasonable, good faith efforts to
register and qualify the securities covered by such
registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that
the Company shall not be required
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in connection therewith or as a condition thereto to
qualify to do business or to file a general consent
to service of process in any such states or
jurisdictions.
(e) Underwriting. In the event of any underwritten public
offering, enter into and perform its obligations
under an underwriting agreement in usual and
customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such
underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notification. Notify each Holder 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 of
the happening of any event as a result of which the
prospectus included in such registration statement,
as then in effect, includes an untrue statement of a
material fact or omits to state 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.
(g) Opinion and Comfort Letter. Furnish, at the request
of any Holder requesting registration of Registrable
Securities, on the date that such Registrable
Securities are delivered to the underwriters for
sale, if such securities are being sold through
underwriters, or, if such securities are not being
sold through underwriters, on the date that the
registration statement with respect to such
securities becomes effective, (i) an opinion, dated
as of such date, of the counsel representing the
Company for the purposes of such registration, in
form and substance as is customarily given to
underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of
the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the
independent certified public accountants of the
Company, in form and substance as is customarily
given by independent certified public accountants to
underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of
the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to
Sections 1.3 or 1.4 that the selling Holders shall furnish to
the Company such information regarding themselves, the
Registrable Securities held by them, and the intended method
of disposition of such securities as shall be required to
timely effect the Registration of their Registrable
Securities.
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1.7 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 1.3 or
1.4:
(a) By the Company. To the extent permitted by law the
Company will indemnify and hold harmless each Holder,
the partners, officers and directors of each Holder,
any underwriter (as determined in the Securities Act)
for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the
Securities Act or the Securities Exchange Act of
1934, as amended, (the "1934 Act"), against any
losses, claims, damages, or Liabilities (joint or
several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following
statements, omissions or violations (collectively a
"Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in
such registration statement, including any
preliminary prospectus or final prospectus
contained therein or any amendments or
supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be
stated therein, or necessary to make the
statements therein not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act,
any federal or state securities law or any
rule or regulation promulgated under the
Securities Act, the 1934 Act or any federal
or state securities law in connection with
the offering covered by such registration
statement;
and the Company will reimburse each such Holder,
partner, officer or director, underwriter or
controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in
connection with investigating or defending any such
loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in
this subsection 1.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that
it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with
written information furnished expressly for use in
connection with such registration by such Holder,
partner, officer, director, underwriter or
controlling person of such Holder.
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(b) By Selling Holders. To the extent permitted by law,
each selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its
officers who have signed the registration statement,
each person, if any, who controls the Company within
the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such
registration statement or any of such other Holder's
partners, directors or officers or any person who
controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to
which the Company or any such director, officer,
controlling person, underwriter or other such Holder,
partner or director, officer or controlling person of
such other Holder may become subject under the
Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to
the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity
with written information furnished by such Holder
expressly for use in connection with such
registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling
person, underwriter or other Holder, partner,
officer, director or controlling person of such other
Holder in connection with investigating or defending
any such loss, claim, damage, liability or action:
provided, however, that the indemnity agreement
contained in this subsection 1.7(b) shall not apply
to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement
is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; and
provided, further, that the total amounts payable in
indemnity by a Holder under this Section 1.7(b) in
respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered
offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 1.7 of notice of the
commencement of any action (including any
governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any
indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that
an indemnified party shall have the right to retain
its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
actual or potential conflict of interests between
such indemnified party and any other party
represented by such counsel in such proceeding. The
failure to deliver
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written notice to the indemnifying party within a
reasonable time of the commencement of any such
action shall relieve such indemnifying party of
liability to the indemnified party under this Section
1.7 to the extent the indemnifying party is
prejudiced as a result thereof, but the omission so
to deliver written notice to the indemnified party
will not relieve it of any liability that it may have
to any indemnified party otherwise than under this
Section 1.7.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are
subject to the condition that, insofar as they relate
to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration
statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC
Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely
furnished to the indemnified party and was not
furnished to the person asserting the loss,
liability, claim or damage at or prior to the time
such action is required by the Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the
Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim
for indemnification pursuant to this Section 1.7 but
it is judicially determined (by the entry of a final
judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such
indemnification may not be enforced in such case
notwithstanding the fact that this Section 1.7
provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required
on the part of any such selling Holder or any such
controlling person in circumstances for which
indemnification is provided under this Section 1.7;
then, and in each such case, the Company and such
Holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be
subject (after contribution from others) in such
proportion so that such Holder is responsible for the
portion represented by the percentage that the public
offering price of its Registrable Securities offered
by and sold under the registration statement bears to
the public offering price of all securities offered
by and sold under such registration statement, and
the Company and other selling Holders are responsible
for the remaining portion; provided, however, that,
in any such case: (A) no such Holder will be required
to contribute any amount in excess of the public
offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity
guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the
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Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such
fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders
under this Section 1.7 shall survive until the fifth
anniversary of the completion of any offering of
Registrable Securities in a registration statement,
regardless of the expiration of any statutes of
limitation or extensions of such statutes.
1.8 Termination of the Company's Obligations. The Company shall
have no obligations pursuant to Sections 1.3 and 1.4 with
respect to any Registrable Securities proposed to be sold by a
Holder in a registration pursuant to Section 1.3 or 1.4 more
than seven (7) years after the date of this Agreement, or, if,
in the opinion of counsel to the Company, all such Registrable
Securities proposed to be sold by a Holder may then be sold
under Rule 144 in one transaction without exceeding the volume
limitations thereunder.
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