EXHIBIT 4.2
MANCHESTER COMPANIES, INC.
AMENDED AND RESTATED
RETAINER AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of January 12, 1997 confirms that
MEDICAL GRAPHICS CORPORATION ("MGC") has engaged, as of the date hereof,
Manchester Companies, Inc. ("MCI") to perform certain Organization
Reengineering/Renewal Services (the "Services") for MGC. In connection with the
foregoing, MGC and MCI agree that:
1. RETENTION. MGC hereby retains MCI on an exclusive basis in connection
with providing Organization Reengineering/Renewal Services for MGC as
described herein.
2. TERMINATION. The initial terms of this Agreement shall be for twelve
(12) months commencing on the date hereof. During the initial twelve
(12) month term, this Agreement may not be terminated by either MGC or
MCI except for failure to provide, using reasonably business
practices, the Services described herein. Following expiration of the
initial twelve (12) month term of this Agreement, either MCI or MGC
may terminate this Agreement at any time upon 30 days written notice,
delivered to the other, and without liability or continuing obligation
on the part of MCI. However, MGC's obligations to MCI shall continue
after the termination of this Agreement.
3. SERVICES TO BE PERFORMED:
A. Evaluate and analyze the business operations, financing and
capitalization of the Company and its Divisions and make
recommendations for improvement to MGC management and the Board.
MCI's activities will include, but not be limited to, control of
cash accounts, review of cash flow projections, review of cost
accounting systems, review of inventory controls, review of
overall accounting/control environment, recommendations for
expediting collection of accounts receivable, negotiations with
trade creditors, negotiations with banks regarding credit
agreements, negotiations with major suppliers/customers regarding
outstanding issues, review of sales/pricing mechanisms, and
assistance with decision/management oversight and processes.
B. Develop a short-term crisis management plan to assure MGC's
positive cash flow/profitability.
C. Develop and communicate proposals for refinancing/renewing MGC to
existing secured and unsecured creditors.
D. Make recommendations regarding refinancing through new sources as
appropriate.
E. Develop/implement strategy for communications to shareholders,
employees, creditors and capital markets.
F. Reengineer operations to assure acceptable gross margins.
G. Refocus/restructure the organization in accordance with the
crisis management plan.
H. Assure organizational effectiveness through appropriate policies,
procedures, HR management and system controls.
I. Develop reliable financial reporting systems/procedures including
the timely preparation and review of Bank reporting/compliance
documents.
J. Provide the Board with timely updates on progress. Seek audit
committee approval for any significant changes in the Company's
current financial reporting policies and procedures.
K. Assist the Company in developing a definitive business plan
including, but not limited to, business/industry description,
management team resumes, products/services features and
functions, market research/analysis, estimated market
share/sales, design/development plans, operations plan, overall
schedule and critical risks/problems.
L. Assist the Company in obtaining replacement
financing.
M. Assist the Company in obtaining equity
investments.
MCI will be vested by the Board with the appropriate authority to effectively
execute the crisis management plan and the Services described herein. MCI will
report only to the Board.
4. FEES AND EXPENSES.
A. A monthly fee of $20,000 beginning with the effective date of
MCI's engagement and on the first of each month thereafter for a
period of eleven (11) months.
B. One hundred fifty thousand (150,000) Warrants for MGC's common
stock will be issued to MCI, said Warrants to be exercisable for
five (5) years from the effective date of this Agreement with an
exercise price of $3.375 per share, in the form of the Warrant
attached hereto as Exhibit A.
C. Thirty thousand (30,000) shares of MGC stock.
D. Fifty thousand (50,000) options to acquire MGC
stock at an exercise price of $3.375, which
options shall vest ratably over the term of this
Agreement and shall become fully vested upon a
change in control. The options granted hereunder
shall be in the form of Exhibit B attached hereto
and incorporated herein.
E. MGC agrees to, on an as-incurred basis, as documented by MCI, to
reimburse MCI for all reasonable out-of-pocket expenses incurred
in connection with the rendering of the Financing Services. MCI
will submit expense reimbursement bills on a monthly basis, and
MGC agrees that they will be paid within 10 days. Any individual
expense in excess of $200 will be subject to MGC's prior written
approval. MCI's fees do not include any fees charged by other
related entities involved in pursuit of the execution of the
Financing Services outlined herein. Such other fees include, but
are not limited to, those charged by legal counsel, auditors and
tax advisors, appraisal companies,
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environment testing concerns, lenders, industry consultants and
other consultants or professionals as may be mutually determined
to be necessary.
F. Failure by MGC to perform in accordance with any of the terms and
conditions under this Paragraph 4 will result in all fees
described therein to become due and payable immediately. MGC
further agrees to reimburse MCI for any and all expenses,
including legal fees, incurred by MCI to collect such fees.
5. COOPERATION. MGC will cooperate with MCI and provide, where possible,
information reasonably required by MCI in connection with fulfilling
service obligations under this Agreement. In addition, MCI will
require the involvement of, and MGC agrees to provide reasonable
access to, the officers and directors of MGC.
6. CONFIDENTIALITY.
A. This Agreement and its contents, including any proprietary
company information, will be treated by MGC and MCI as
confidential except as required by law. MCI will also treat as
confidential the contemplated plans and strategies of MGC.
Neither MGC nor MCI will, unless required by a statute, rule,
regulation, agency or court, make any public or private
statements about MGC, their financing or structure, without the
prior consent of the other parties to this Agreement.
B. Without limiting the generality of Section 6(a), any advice
rendered by MCI pursuant to this Agreement may not, unless
required by an statute, rule, regulation, agency or court, be
disclosed publicly or privately in any manner without MCI's prior
written approval and will be treated as confidential.
C. MGC will provide MCI with all reasonable financial and other
information requested by MCI for the purpose of rendering its
Services pursuant to this Agreement. All non-public information
given to MCI by MGC will be treated by MCI as confidential by it
and will not be used by MCI for any purposes other than the
performance of the Services rendered to MGC under this Agreement.
D. With respect to information about their businesses provided by
MGC, MCI agrees that, for a period of one (1) year, the
information will be kept confidential by it and that access to
the information will be limited to those persons under its
supervision who may have a need to know the information. MCI
further agrees that such information shall be deemed to be the
property of MGC and, when in tangible form, shall be returned to
MGC upon request. MGC's information shall be used only for
Purposes expressed herein and may be used for other purposes only
with the prior written approval of MGC. MCI also agrees to keep
confidential in accordance herewith any analysis, compilation,
study, or other documents prepared by MCI for use in connection
with the above-mentioned Services.
E. In the event that any party hereto, or either of its
representatives, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena,
Civil Investigative Demand, similar process or otherwise), to
disclose any information of the other party, it is agreed that
the requested or required party will
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provide the other with prompt notice of such request so that the
other may seek an appropriate protective order and/or waive
compliance with the provisions of this Agreement. It is further
agreed that, if in the absence of a protective order or the
receipt of a waiver hereunder, any party or its representatives
is nonetheless, in the opinion of its respective counsel,
compelled to disclose information or else stand liable for
contempt or suffer other censure or penalty or other adverse
consequences, the requested party or its representative may
disclose such information without liability hereunder.
F. The phrase "information" does not include information which (i)
is or becomes available to the public other than as a result of a
disclosure in violation of the terms hereof; (ii) was in the
possession of a respective party on a non-confidential basis
prior to its disclosure under this Agreement; or (iii) becomes
available on a non-confidential basis from a source other than a
party hereto or its respective representative.
G. Because damages at law would be difficult to ascertain in the
event of the failure or refusal of either party hereto to comply
with the Provisions of this paragraph 6, each party, in addition
to, and not in limitation of, any of the rights, remedies or
damages available at law or in equity, shall (a) be entitled to
seek or restrain any such breach and (b) be entitled to seek the
recovery from the breaching party of all costs and expenses,
including reasonable attorneys' fees in connection therewith,
incurred by the party seeking to enforce or prevent any breach or
threatened breach of this paragraph 6.
7. INDEMNIFICATION. If, in connection with any Services or matters that
are the subject of this Agreement, MCI becomes involved in any
capacity in any action or legal proceeding, pending or threatened, MGC
agrees (i) to reimburse MCI for the reasonable legal fees,
disbursements of counsel and other expenses (including the cost of
investigation and preparation) incurred by MCI as such fees,
disbursements and other expenses are incurred; and (ii) to indemnify,
defend, and hold MCI harmless against any losses, claims, damages, or
liabilities, joint or several, to which MCI may become subject arising
out of any such action or legal proceeding.
8. The provisions of this Agreement shall, where applicable, survive the
expiration of the period of this Agreement, including any extensions
thereof.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof
and supersedes and cancels as of the date hereof all prior
understandings, written or oral, with respect to the subject matter
hereof.
10. GOVERNING LAW. This Agreement and the agreements contained herein
shall be governed by, and construed in accordance with, the laws of
the State of Minnesota, without giving effect to the principles of
conflicts of laws thereof,
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MANCHESTER COMPANIES, INC.
By_________________________________
Its________________________________
MEDICAL GRAPHICS CORPORATION
By_________________________________
Its________________________________
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