Exhibit 99.3
C R E D I T F A C I L I T Y A G R E E M E N T
THIS is a CREDIT FACILITY AGREEMENT (this "Agreement"), dated as of
September 25, 2001 among MICROLOG CORPORATION, a Virginia corporation
("Parent"), MICROLOG CORPORATION OF MARYLAND, a Maryland corporation
("Subsidiary") and TFX EQUITIES INCORPORATED, a Delaware corporation ("Lender").
(Parent and Subsidiary are sometimes referred to herein collectively as
"Borrowers" and individually as a "Borrower.")
B A C K G R O U N D
A. Subsidiary is a wholly owned subsidiary of Parent.
B. Parent and Subsidiary together conduct a business of professional
services, system integration, and software development for corporate contact
centers. Each has a need for the financing provided for in this Agreement, which
Lender is willing to supply to them jointly on the terms hereof, for allocation
to the financial needs of each of them as Parent and Subsidiary mutually
determine.
A G R E E M E N T
NOW THEREFORE, the mutual covenants and agreements contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS. The following terms used in this Agreement have the meanings
indicated therefor:
"Agreement" has the meaning set forth therefor in the opening paragraph
of this Agreement.
"Borrowers" has the meaning set forth therefor in the opening paragraph
of this Agreement.
"Business Day" means any day, other than Saturday or Sunday, when
commercial banks are open for business in Pennsylvania.
"Closing" has the meaning set forth therefor in Section 2.4.
"Closing Date" has the meaning set forth therefor in Section 2.2.
"Event of Default" has the meaning set forth therefor in Section 2.6.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Exempted Securities" means all securities issued pursuant to either
(i) the Parent's Incentive Stock Option Plan, as in effect on the date hereof or
(ii) the Parent's Non-Employee Director Stock Option Plan, as in effect on the
date hereof.
"Holder" means Lender, its successors and Persons who are assignees
from Lender, mediately or immediately, of Holder's interest in any Note or
Warrant.
"Indemnified Party" has the meaning set forth therefor in Section 6.6.
"Indemnifying Party has the meaning set forth therefor in Section 6.6.
"Lender" has the meaning set forth therefor in the opening paragraph of
this Agreement.
"New Issue Securities" has the meaning set forth therefor in Article 7.
"Notes" has the meaning set forth therefor in Section 2.1.
"Parent" has the meaning set forth therefor in the opening paragraph of
this Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization or a government or
governmental instrumentality or agency.
"Piggy-Back Registration" means a registration of Restricted Shares of
Lender made at its request pursuant to Section 6.2.
"Registrant" means a Holder who elects to register Restricted Shares
pursuant to this Agreement.
"Registration" means a registration effected by preparing and filing a
registration statement under and in compliance with the Securities Act and the
registration provided for therein becoming effective thereunder.
"Registration Expenses" means all expenses, other than Selling
Expenses, incurred by Parent in effecting a Registration requested by any Holder
pursuant to this Agreement and otherwise complying with Parent's obligations
under Article 6, including without limitation all registration and filing fees,
printing expenses, fees and disbursements of counsel for Parent and the expense
of any special audits incident to or required by any such registration.
"Restricted Shares" means shares of common stock of Parent acquired
upon conversion of any Note or the exercise of any Warrant and the conversion of
shares of capital stock of Parent acquired by such exercise.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Selling Expenses" means all stock transfer taxes and underwriters
discounts and commissions applicable solely to the sale of Restricted Shares by
any Registrant, the registration fees incurred in connection with the
registration or qualification of Registrants' Restricted Shares under, and the
expense of complying with, the securities or blue sky laws of the states or
other jurisdictions in which Registrants desire to offer such Restricted Shares
for sale incurred exclusively because of such proposed sale by Registrants,
including legal fees applicable thereto, and all fees and disbursements of
counsel for Registrants.
"Series A Stock" means the Parent's Series A Convertible Preferred
Stock, par value $0.01 per share.
"Subsidiary" has the meaning set forth therefor in the opening
paragraph of this Agreement.
"Warrants" has the meaning set forth therefor in Section 2.1.
2. THE CREDIT FACILITY.
2.1 Amount. Subject to and upon the terms and conditions of this
Agreement, Lender will make available to the Borrowers financing in the
aggregate amount of $750,000 by the purchase at par from the Borrowers, within
three (3) Business Days after the Borrowers shall have made a request therefor
pursuant to Section 2.2, of up to ten (10) Convertible Subordinated Notes of the
Borrowers, each in substantially the form of Exhibit A (the "Notes"), each such
Note being accompanied by a detachable Warrant of Parent in substantially the
form of Exhibit B (the "Warrants").
2.2 Requests for Financing. Borrowers may request financing pursuant to
this Agreement at any time, and from time to time, within twenty-four (24)
months after the date of this Agreement. Each such request will specify the
number of Notes with Warrants attached to be purchased by Lender and the date
when such purchase is requested to be made (the "Closing Date" for such
financing).
2.3 Purpose. Borrowers will use the proceeds of financing provided
pursuant hereto solely for working capital of each of Parent and Subsidiary as
they shall deem appropriate.
2.4 Closing. The closing of each financing requested pursuant to this
Agreement (each a "Closing") will be held at the offices of Lender, 000 X.
Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx, XX 00000. At each Closing:
(a) The Borrowers will deliver to Lender the number of Notes
requested to be purchased at such Closing, each duly authorized, executed and
issued by each of the Borrowers in substantially the form of Exhibit A, bearing
as the issue date thereof the Closing Date, with a Warrant, duly authorized,
executed and issued by Parent in substantially the form of Exhibit B, dated the
Closing Date, attached to each such Note.
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(b) Lender will deliver to the Borrowers the purchase price for
such Notes and Warrants, being the aggregate principal amount of the Notes
purchased at such Closing by payment thereof to Subsidiary, which Subsidiary
shall receive on its own behalf and on behalf of Parent.
2.5 Certain Action by Subsidiary Authorized. Parent acknowledges that
it has appointed Subsidiary the attorney-in-fact of Parent with full power and
authority, for and on behalf of Parent and in its name, to make requests for
financing pursuant to Section 2.2, to deliver Notes and Warrants executed and
issued by Parent pursuant to Section 2.4 and to receive and receipt for the
proceeds of financings made pursuant hereto. Parent will give Lender at least
three (3) days prior notice before terminating or otherwise modifying the
foregoing authority of Subsidiary.
2.6 Conditions of Closings. The obligations of Lender to complete the
purchase of Notes and Warrants provided herein to be completed at any Closing
are subject to the fulfillment prior to or at such Closing of the following
conditions (any of which may, at its option, be waived by Lender):
(a) The representations and warranties of the Borrowers set forth
herein shall be true at and as of the date and time of such Closing.
(b) No event or condition shall have occurred and remain uncured
which constitutes an Event of Default (as defined in the Notes) under any
outstanding Note or a breach of, or a failure to perform, any obligation of
Parent under any outstanding Warrant or which would (i) but for the passage of
time or the giving of notice or both constitute such an Event of Default or such
a breach or failure to perform an obligation or (ii) constitute an Event of
Default under any Note requested to be purchased at such Closing or a breach of,
or a failure to perform, any obligation of Parent under any Warrant to be issued
at such Closing, if such Note or Warrant were outstanding immediately before
such Closing.
(c) The Borrowers shall have delivered to Lender such evidence of
the matters referred to in clauses (a) and (b) of this Section as Lender may
request, which may include certificates of officers of each of the Borrowers to
the effect stated in such clauses.
(d) In the case of the first such Closing only, the Borrowers shall
have requested the purchase of Notes (with Warrants attached) in an aggregate
principal amount not less than the amount then payable to Lender under any notes
of the Borrowers then held by the Lender, and at such Closing the Borrowers
shall have paid such notes in full, whether or not such payment thereof is then
due.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. The Borrowers jointly and
severally represent and warrant as follows:
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3.1 Organization and Qualification. Each of the Borrowers (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation (Virginia in the case of Parent, and Maryland
in the case of Subsidiary), (ii) is duly qualified as a foreign corporation and
is in good standing in each jurisdiction where the character of the properties
owned or leased by such Borrower or the nature of its business makes such
qualification necessary (except for such jurisdictions where the failure to be
so qualified would not have a material adverse effect, determined in accordance
with generally accepted accounting principles, on the business, financial
condition or results of operations of the Borrowers taken as a whole) and (iii)
has the corporate power, holds all necessary licenses and permits and is in all
respects entitled to carry on its business as now being conducted.
3.2 Capitalization of Parent. The authorized, issued and outstanding
shares of capital stock of Parent, the number of such shares issued, reacquired
and held by Parent in its treasury, and the number of shares of capital stock of
Parent reserved for issuance and the purpose for such reservation is as set
forth in the Schedule of Capitalization. All such outstanding shares of capital
stock have been duly authorized, are duly and validly issued and outstanding,
and are fully paid and non-assessable. Except (i) for the rights provided for in
this Agreement and in the Notes and Warrants which may be issued pursuant hereto
and (ii) as set forth on the Schedule of Capitalization, there are not
outstanding any options or other rights to purchase or otherwise acquire from
Parent, or any commitment of any character by Parent to issue, any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for, or otherwise entitling any Person to acquire from Parent, any shares of its
capital stock.
3.3 Capital Stock of Subsidiary. All outstanding shares of capital
stock of Subsidiary are held beneficially and of record by Parent. There are not
outstanding any options or other rights to purchase or otherwise acquire from
Subsidiary, or any commitment of any character by Subsidiary to issue, any
shares of capital stock or any securities or obligations convertible into or
exchangeable for, or otherwise entitling any Person to acquire from Subsidiary,
any shares of its capital stock.
3.4 No Material Adverse Changes. Since June 30, 2001 there has not
occurred any material adverse change in the financial or other condition,
business, properties, results of operations or prospects of either Borrower or
any other event or condition which, under applicable rules and regulations of
the SEC is required to be reported on a Form 10-Q, whether or not the filing of
such form is then due.
3.5 No Violation of Law by Execution and Performance of this Agreement,
the Notes and the Warrants. The execution and delivery by the Borrowers of this
Agreement and the offer, sale and issuance of the Notes by the Borrowers and the
Warrants by Parent, and the performance by the Borrowers of their respective
obligations hereunder or thereunder do not and will not violate any applicable
law or constitute a default or result in a right of acceleration, termination or
other similar right (or would, but for the passage of time or the giving of
notice, constitute a default or result in such a right of acceleration,
termination or other similar right) under any contract, agreement or instrument
to which either Borrower is a party or by which it may be bound other than
agreements or instruments executed by the Borrowers in connection with
indebtedness of the Borrowers to Silicon Valley Bank (the "Senior Indebtedness
Documents").
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3.6 Corporate Proceedings and Authorization. All corporate proceedings
required by law or by the provisions of this Agreement, any Notes or Warrants or
otherwise required to be taken by the Borrowers in connection with the due
consummation of the transactions contemplated by this Agreement and the Notes
and Warrants have been duly and validly taken.
3.7 No Required Approvals or Consents. No approval, consent or
authorization of, or declaration or filing with, any governmental or judicial
authority or any other Person is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby other than approvals or consents required pursuant to the Senior
Indebtedness Documents.
3.8 SEC Filings. Parent has filed all Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q required by the Exchange Act to have been filed.
As of their respective dates all such reports complied in all material respects
with the requirements of the Exchange Act applicable thereto. None of such
reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender represents and warrants to
the Borrowers as follows:
4.1 Purchase for Own Account, Etc. Lender will purchase the Notes and
the Warrants, for Lender's own account for investment without any view to the
distribution thereof. Lender will purchase all securities of Parent which are
acquired by Lender pursuant to the exercise of rights of conversion or purchase
provided for in the Notes, the Warrants or the Series A Stock for Lender's own
account for investment without any view to the distribution thereof unless such
distribution shall have been registered under the Securities Act pursuant to an
effective registration statement.
4.2 Accredited Investor Status. Lender is an "Accredited Investor" as
that term is defined in Rule 501(a) promulgated under the Securities Act.
5. COVENANTS OF THE BORROWERS. The Borrowers jointly and severally
covenant that so long as the commitment of Lender to purchase Notes and Warrants
of the Borrowers shall not have terminated or expired and thereafter so long as
any Note shall be outstanding the Borrowers each will perform and observe the
following:
5.1 Board Appointments. will use its reasonable best efforts to, within
thirty (30) days after the first Closing appoint a new Director to the Board of
Directors, acceptable to Lender, with relevant significant industry experience.
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5.2 Expense Reduction Plan. Parent will adopt an expense reduction plan
satisfactory to Lender for the elimination of $1,300,000 of operating expenses
for the six month period ending October 31, 2001 compared to the prior six month
period.
5.3 Mergers and Other Business Combinations. Without first offering to
(i) pay in full all outstanding principal of, interest on and other amounts
payable under all outstanding Notes and (ii) terminate Lender's commitments
under this Agreement to purchase Notes and Warrants and, if such offer is
accepted by Lender, without first satisfying all such Notes in full and
terminating Lender's such commitments, neither Borrower will merge into or
consolidate with any Person or acquire any of the voting stock or any
substantial part of the assets and business of any Person, or permit any Person
to merge into such Borrower or to acquire any substantial part of its business
or assets.
5.4 Borrowing. Without the prior consent of Lender, neither Borrower
will incur any indebtedness to any Person for money borrowed (other than the
indebtedness evidenced by the Notes), including any indebtedness to Silicon
Valley Bank.
5.5 Distributions to Shareholders. Parent will not, directly or
indirectly, pay any dividend or make any other distribution to any shareholder
of Parent in respect of Parent's capital stock or redeem or otherwise acquire
any shares of Parent's capital stock (except that Parent may make and pay pro
rata distributions to its shareholder which are made or paid solely in shares of
Parent's common stock).
5.6 Guarantees. Neither Borrower will directly or indirectly guarantee
endorse (other than for collection or deposit in the ordinary course of
business), discount, sell with recourse for less than the face value or agree
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
agree (contingently or otherwise) to supply or advance funds (whether by way of
loan, stock purchase, capital contribution or otherwise) in respect of, or
otherwise become directly or indirectly liable for, indebtedness or liabilities
of any other Person (other than the other Borrower).
5.7 No Liens. Neither Borrower will permit any mortgage, pledge,
charge, lien, security interest or other encumbrance to exist involving any of
its properties, assets, or operations, except:
(a) Security interests heretofore granted to Silicon Valley Bank,
including security interests in property which may be acquired hereafter;
(b) Liens for taxes, assessments or similar charges not yet due and
payable or still subject to payment without interest or penalty; and
(c) Pledges or deposits made in the ordinary course of business
consistent with past practices.
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6. REGISTRATION RIGHTS RESPECTING SHARES OF COMMON STOCK ACQUIRED PURSUANT
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TO CONVERSION OF NOTES OR EXERCISE AND CONVERSION OF WARRANTS.
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6.1 Demand Registration.
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(a) Demand for Registration. At any time one or more Holders
holding in the aggregate at least 51% of the Restricted Shares outstanding may
request that Parent effect the Registration of all or a portion of the
Restricted Shares held by such Holders. Such Registration may be effected on any
registration statement form for which Parent is then eligible. Such request
shall specify the aggregate number of Restricted Shares intended to be offered
and sold and shall describe the nature and method of the proposed offer and sale
thereof. The Holders collectively will be entitled to request two Demand
Registrations. A Registration will not count as one of such two permitted Demand
Registrations if such Registration shall not become effective unless such
failure to become effective results solely from (i) the demand for such
Registration having been withdrawn upon the instructions (made not more than 15
days after submission of the request for such Registration) of the Holders who
made such request or (ii) the fault of a Holder (other than by the giving of
instructions by a Holder for withdrawal of such request for Registration made
not more than 15 days after the submission of the request therefor).
(b) Limitations on Obligation to Effect Demand Registrations.
Parent will not be obligated to effect any Demand Registration (i) requested
within one year after the effective date of a previous Demand Registration or a
Piggy-Back Registration pursuant to which one or more Holders sold at least 75%
of the aggregate number of Restricted Shares originally requested to be included
in such Piggy-Back Registration or (ii) pursuant to which the amount of
Restricted Shares to be offered for sale, determined after giving effect to any
withdrawals by Holders, is less than 20% of the number of Restricted Shares
issued by Parent.
(c) Parent's Right to Postpone Registration. Parent may
postpone for up to 180 days the commencement of the preparation of such
registration statement for a Demand Registration if the Board of Directors of
Parent determines in good faith that such Demand Registration (a) might have a
material adverse effect on (i) any proposal or plan to engage in any acquisition
of assets (other than in the ordinary course of business) or any merger, tender
offer or similar transaction or (ii) any proposed or pending public offering of
securities by Parent or any of its subsidiaries or (b) might result in
disclosure of non-public information that would not be in the best interests of
Parent or its shareholders to disclose; provided that if the Demand Registration
is so postponed, it will not be counted as one of the two Demand Registrations
permitted by Section 6.1(a) if all of the Holders requesting such Registration
withdraw their requests within 10 days after notice that such a determination to
postpone has been made.
6.2 Piggy-Back Registration. So long as any Holder holds any Restricted
Shares, each time that Parent proposes to effect a Registration of any of its
equity securities (as that term is defined in Rule 405 of the Rules and
Regulations of the SEC promulgated under the Securities Act) other than a
registration on Form S-8 or S-4 or similar registration form hereafter
authorized or prescribed by the SEC, including a Registration pursuant to
Section 6.1, it will give written notice at least thirty days before the
proposed filing date therefor to each Person who is at such time a Holder and,
upon the written request of any such Holder given within 20 days after the date
of such notice, Parent will include in such Registration the Restricted Shares
which any such Holder has so requested be registered for disposition in
accordance with the intended method of disposition described in such Holder's
request.
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6.3 Registration Procedure. Subject to the limitations provided in this
Article 6, if Parent receives a request to register any Restricted Shares of a
Holder pursuant to Section 6.1 or 6.2 which complies with the terms thereof,
Parent will use its best efforts to:
(a) as promptly as possible, and in any event within 90 days after
receipt of such request, prepare and file with the SEC on an appropriate form a
registration statement or an amendment to a previously filed registration
statement providing for the registration of the Restricted Shares which are the
subject of such request;
(b) keep such registration statement effective and current until
the earlier of (i) the completion of the distribution of the Restricted Shares
so registered or (ii) the expiration of 90 days after the date of effectiveness
of such Registration of Restricted Shares, and otherwise comply with the
applicable provisions of the Securities Act in connection therewith;
(c) furnish to the Registrants thereunder such number of copies of
a summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as the Registrants may reasonably request in order to facilitate the public sale
or other disposition of Restricted Shares owned by the Registrants;
(d) register or qualify the Restricted Shares covered by such
Registration under the securities or blue sky laws of such states of the United
States as the Registrants shall request, and take all other action which may be
necessary to enable the Registrants to consummate the public sale or other
disposition in such jurisdictions of such Restricted Shares owned by the
Registrants; provided that Parent shall not be obliged to qualify to do business
in any jurisdiction where it is not then so qualified or take any action which
would subject it to service of process in suits, other than suits arising out of
the offering or sale of such securities, in any jurisdiction where it is not
then so subject; and
(e) promptly advise each such Registrant as to the following: (i)
the time at which the registration statement or any post-effective amendment
thereto shall have become effective, the time at which any amendment or
supplement to the prospectus is filed with the SEC and the time at which the
offering and sale may commence, (ii) any request or suggestion by the SEC for
any amendment to such registration statement or the prospectus or for additional
information and the nature and substance thereof and (iii) the issue by the SEC
or any other federal or state governmental authority or court of any order or
similar process suspending the effectiveness of such registration statement or
the suspension of the qualification of the Restricted Shares for sale in any
jurisdiction, or of the initiation (or threat thereof) of any proceedings for
that purpose; Parent will use its best efforts to prevent the issue of any such
order or process and, if any such order or process shall be issued, to obtain
the withdrawal thereof at the earliest possible time.
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6.4 Underwriting.
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(a) Underwritten Distribution May be Required. If Parent
proposes to include in a Registration referred to in Section 6.1 or 6.2
securities of the same class as the Restricted Shares for sale in an
underwritten distribution, the right of any Holder to Registration of such
Holder's Restricted Shares pursuant to this Article 6 shall be conditioned on
the inclusion in such underwriting of the Restricted Shares of such Holder
requested to be so registered (unless Parent, and in the case of a Demand
Registration the Holders of a majority of the Restricted Shares included in such
Registration, otherwise agree).
(b) Selection of Underwriters. Parent shall have the right to
select the managing underwriter or underwriters to effect (i) any distribution
referred to in Section 6.4(a) or (ii) any other distribution by underwriters of
Restricted Shares proposed to be subject to a Registration pursuant hereto;
provided that in the case of a Demand Registration, if the Holders who shall
have requested such Registration owning at least a majority of the Restricted
Shares requested to be registered in such Registration shall object to the
managing underwriter or underwriters proposed by Parent (which objection shall
not be unreasonably made) within 10 days after notice shall have been given to
such Holders of such underwriter or underwriters, Parent shall propose another
managing underwriter or underwriters, which shall also be subject to such
disapproval rights. The foregoing procedure shall be followed until the proposed
managing underwriter or underwriters is not disapproved.
(c) Underwriting Agreement. All Holders proposing to
distribute securities through such an underwriting referred to in Section 6.4(b)
shall enter into an underwriting agreement in form approved by Parent with the
underwriter or underwriters selected therefor in accordance with this Section
6.4 and shall agree not to effect any public sale or distribution of securities
of the same class as the securities included in the Registration within 90 days
after the effective date of such registration statement, other than as part of
such underwriting.
(d) Limitation on Restricted Shares to be Included in an
Underwritten Registration. If the managing underwriter advises Parent in writing
that marketing factors require the underwriters to limit the number of
Restricted Shares to be underwritten, then Parent will so advise all Holders who
have requested that Restricted Shares owned by them be included in such
Registration, and the available underwriting shall be allocated among all
Holders of such Restricted Shares as they may agree or, in the absence of such
agreement, in proportion, as nearly as practicable, to the respective numbers of
Restricted Shares requested to be included in such Registration and not
withdrawn. If any Holder then participating in the Registration disapproves of
the terms of the underwriting, such Holder may elect to withdraw therefrom by
written notice to Parent. If by any such withdrawal of Restricted Shares from
the underwriting, a greater number of Restricted Shares may be included in the
underwriting, then Parent will offer to all Holders remaining in the
underwriting the right to include additional Restricted Shares owned by them in
proportion to the number of Restricted Shares of each such Holder theretofore
included in the Registration. If the number of Restricted Shares to be
underwritten in a Demand Registration is limited by the managing underwriter and
within 10 days thereafter all of the Holders who have requested that their
Shares be included in the Registration withdraw such request, the Demand
Registration will not be counted as one of the two Demand Registrations
permitted by Section 6.1(a).
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6.5 Expenses.
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(a) Registration Expenses. Except as otherwise expressly
provided below in this Section 6.5, Parent will bear all Registration Expenses
incurred in connection with any Demand Registration or Piggy-Back Registration
commenced or completed pursuant to this Article 6.
(b) Selling Expenses. All Selling Expenses in connection with
any Registration commenced or completed pursuant to this Article 6 will be borne
by the Registrants in proportion to the number of shares registered (or
requested be registered in the case of a Registration which does not become
effective) by each.
6.6 Indemnification.
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(a) Indemnification by Parent. In each case of a Registration
of Restricted Shares pursuant to this Article 6, Parent will indemnify and hold
harmless each Holder whose Restricted Shares are included in the Registration,
each underwriter (as defined in the Securities Act) thereof, each officer and
director of such Holder and any such underwriter and each other Person, who
controls (within the meaning of such term as used in the Securities Act) such
Holder or any such underwriter from and against any claim, damage, loss,
liability or action, arising out of or based on any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
under which such Restricted Shares were registered under the Securities Act, any
prospectus or preliminary prospectus contained therein or any amendment or
supplement thereto (including, in each case, documents incorporated therein by
reference) or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made, and will reimburse each such Person for any legal or other
expenses reasonably incurred in connection with the investigation or defense of
any such claim, damage, loss, liability or action; provided that Parent will not
be liable in any such case to the extent that such claim, damage, loss,
liability or action arises out of or is based upon any untrue statement, alleged
untrue statement, omission or alleged omission, made in or omitted from such
materials in reliance upon and in conformity with written information relating
to such Holder which was furnished by or at the direction of such Holder to
Parent specifically for use in the preparation of such registration statement,
prospectus or preliminary prospectus (or amendment or supplement thereto); and
provided further that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter (or to
the benefit of any Person controlling such underwriter) from whom the Person
asserting any such claim, damage, loss, liability or action purchased any of
such Restricted Shares if a copy of the final prospectus had not been sent or
given to such Person at or prior to written confirmation of the sale of such
Restricted Shares to such Person and the untrue statement or omission of a
material fact contained in such preliminary prospectus was corrected in the
final prospectus.
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(b) Indemnification by Holders. In the event that any
Restricted Shares of a Holder are included in a Registration pursuant to this
Article 6, such Holder will indemnify and hold harmless Parent, its directors,
its officers who sign the registration statement and each Person, who controls
(within the meaning of such term as used in the Securities Act) Parent to the
same extent (and subject to the same limitations) as the foregoing indemnity
from Parent to such Holder, but only with respect to information relating to
such Holder which was furnished to Parent in writing by or at the direction of
such Holder expressly for use in the registration statement, any prospectus or
preliminary prospectus contained therein or any amendment or supplement thereto.
(c) Counsel Fees and Expenses; Settlements. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnification may be sought pursuant
to this Article 6 (the "Indemnified Party"), such Indemnified Party shall
promptly notify the Person from whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent in such proceeding the Indemnified Party and (to
the extent appropriate) any other Person whom the Indemnifying Party may
designate and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, the Indemnified Party shall have the
right to retain counsel in addition to counsel provided pursuant to the
preceding sentence, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the Indemnifying Party has agreed
to the retention of such counsel at its expense or (ii) the Indemnifying Party
proposes that the same counsel represent both the Indemnified Party and another
Person who is a party to such proceeding and representation of both such Persons
by the same counsel would be inappropriate due to actual or potential differing
interests between them. Except as provided in the preceding sentence, the
Indemnifying Party will not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm qualified in such jurisdiction to act as counsel for
all such Indemnified Parties. Such firm shall be approved as satisfactory in
writing by the Holders in the case of Indemnified Parties indemnified pursuant
to Section 6.6(a) and by Parent in the case of Indemnified Parties indemnified
pursuant to Section 6.6(b). The Indemnifying Party shall not be liable for any
settlement of any litigation or proceeding effected without the Indemnifying
Party's written consent. The Indemnifying Party will not, without the
Indemnified Party's written consent, settle or compromise any proceeding or
consent to entry of any judgment which would impose an injunction or other
equitable relief upon such Indemnified Party or which does not include as an
unconditional term thereof the release of such Indemnified Party from all
liability in respect of such proceeding. In the event that the Indemnifying
Party, within a reasonable time after notice of any such proceeding, fails to
provide counsel, such Indemnified Party shall have the right (upon further
notice to the Indemnifying Party) to retain counsel and undertake the defense,
compromise or settlement of such proceeding for the account of the Indemnifying
Party, subject to the right of the Indemnifying Party to assume the defense of
such proceeding at any time prior to settlement, compromise or final
determination thereof. The cost and expense of counsel so retained by the
Indemnified Party shall be borne by the Indemnifying Party, and the Indemnifying
Party shall be bound by, and shall pay the amount of, any settlement,
compromise, final determination or judgment reached while the Indemnified Party
was represented by counsel retained by the Indemnified Party pursuant to this
Article 6.
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(d) Other Terms Required by Underwriters. The indemnification
pursuant to the foregoing provisions of this Article 6 shall be on such other
terms and conditions as are at the time customary and reasonably required by
underwriters in public offerings, including providing for contribution in the
event indemnification provided for in this Section 6.6 is unavailable or
insufficient.
6.7 Provision of Information by Holders. In connection with any
Registration to be effected pursuant to this Article 6, each Holder of
Restricted Shares to be included in such Registration shall furnish to Parent
such written information regarding such Holder and the Restricted Shares held by
such Holder as Parent may request in writing, which information shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement for inclusion in the registration statement (and
the prospectus included therein).
6.8 Agreements of Each Holder. If requested by Parent, each Holder
whose Restricted Shares are to be included in a Registration will execute and
deliver to Parent an agreement, in form reasonably satisfactory to Parent, that
such Holder will comply with all applicable prospectus delivery requirements of
the Securities Act and all anti-stabilization, manipulation and similar
provisions of Section 10 of the Exchange Act, and will furnish to Parent
information about sales made in such public offering. Parent's obligations to
effect the Registration of Restricted Shares of any Holder under this Agreement
shall be conditioned upon such Holder's complying with the foregoing sentence.
6.9 No Obligation to Register Shares Under Certain Circumstances. If in
the reasonable opinion of Parent the number of shares for which Registration
shall have been requested by a Holder may be sold lawfully by such Holder
without Registration (pursuant to an exemption from registration under the
Securities Act, including Rule 144 or Rule 145 or otherwise), for net proceeds
and on terms substantially the same as the net proceeds and terms which such
Holder would reasonably expect to enjoy by the disposition of such shares for
which such Registration was requested, after notice by Parent to such Holder
specifying the manner in which such disposition may be effected without
Registration, such Holder will withdraw such Holder's request for Registration.
7. PREEMPTIVE RIGHTS.
------------------
So long any Notes are issued and outstanding, if Parent shall at any
time after the date of this Agreement issue or sell any shares of Common Stock
or any securities convertible into or exchangeable for Common Stock
(collectively the "New Issue Securities") for cash consideration, other than the
issue or sale of Exempted Securities, Parent shall thereupon offer, upon the
same terms and for the same consideration, such number of the New Issue
Securities to the Lender as will result in Lender immediately after acquiring
such New Issue Securities holding the same percentage of Parent's securities as
Lender held before the issuance of any New Issue Securities. For purposes of the
forgoing, in addition to shares of Common Stock actually held by Lender, Lender
shall be deemed to hold all shares of Common Stock issuable upon conversion in
full of (i) outstanding Notes and (ii) the Series A Stock issuable upon exercise
in full of outstanding Warrants.
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8. NOTICES.
--------
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered (by physical delivery or by
telefax or any other electronic means) to a party at the following address or to
such other address as such party may hereafter specify by notice to the others:
If to Lender, to:
TFX Equities Incorporated
000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
If to the Borrowers (or either Borrower), to:
Microlog Corporation
00000 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President
Fax: (000) 000-0000
9. CERTAIN PRINCIPLES OF CONSTRUCTION.
-----------------------------------
The following principles of construction will apply to this Agreement:
(a) Unless otherwise expressly stated in connection therewith, a
reference in this Agreement to an "Article," "Section," "Schedule" or "Exhibit"
refers to an Article, Section of, or a Schedule or Exhibit attached, to this
Agreement.
(b) The word "including" means "including without limitation."
10. GENERAL.
--------
10.1 Parties in Interest. This Agreement will be binding on and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10.2 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes any prior agreements or understandings between or among any of the
parties hereto relating to the subject matter hereof.
10.3 Governing Law. This Agreement will be governed by the substantive
laws of the Commonwealth of Pennsylvania without regard to the choice of law
provisions of such laws.
-14-
10.4 Amendment and Modification. No amendment or modification of or
supplement to this Agreement will be effective unless it is in writing and duly
executed by the party or parties to be charged thereunder.
10.5 Headings and Titles. The headings and titles of Articles, Sections
and the like in this Agreement are inserted for convenience of reference only,
form no part of this Agreement and shall not be considered for purposes of
interpreting or construing the text hereof.
10.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
PARENT:
MICROLOG CORPORATION
By:
------------------------------------
Name: Xxxx X. Xxxxx
------------------------------------
Title: President & Chief Executive Officer
------------------------------------
SUBSIDIARY:
MICROLOG CORPORATION OF MARYLAND
By:
------------------------------------
Name: Xxxx X. Xxxxx
------------------------------------
Title: President & Chief Executive Officer
------------------------------------
LENDER:
TFX EQUITIES INCORPORATED
By:
------------------------------------
Name: Xxxx X. Xxxxxxx
------------------------------------
Title: President
------------------------------------
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SCHEDULE OF CAPITALIZATION
OF
PARENT
================================================================================
Authorized Capital Stock............................. 14,000,000
Authorized Common Stock......................... 13,000,000
Authorized Preferred Stock...................... 1,000,000
Issued and Outstanding Common Stock.................. 7,106,938
Issued and Outstanding Preferred Stock............... 0
Treasury Shares of Capital Stock..................... 601,870
RESERVATION OF SHARES
Number of Shares
Purpose of Reservation Reserved For Issuance
-----------------------------------------------------------------------
Incentive Stock Option Plan..................... 1,701,817
Non-Employee Director Stock Option Plan......... 237,000
