Document:

Prepared by MERRILL CORPORATION

EXHIBIT 10.1

 

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

                THIS FIRST AMENDMENT TO CREDIT AGREEMENT

(this "Amendment") is entered into as of August 1, 2001, by and

between NATROL, INC., a Delaware corporation ("Borrower"), and WELLS

FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

 

                WHEREAS, Borrower is currently indebted to

Bank pursuant to the terms and conditions of that certain Credit Agreement

between Borrower and Bank dated as of March 1, 2001, as amended from time to

time ("Credit Agreement").

 

                WHEREAS, Bank and Borrower have agreed to

certain changes in the terms and conditions set forth in the Credit Agreement

and have agreed to amend the Credit Agreement to reflect said changes.

 

                NOW, THEREFORE, for valuable consideration,

the receipt and sufficiency of which are hereby acknowledged, the parties

hereto agree that the Credit Agreement shall be amended as follows:

 

                1.             Section

1.1(a) of the Credit Agreement is hereby amended (a) by deleting "March 1,

2002" as the last day on which Bank will make advances under the Line of

Credit, and by substituting for said date "July 15, 2002," and (b) by

deleting "Ten Million Dollars ($10,000,000.00)" as the maximum

principal amount available under the Line of Credit, and by substituting for said

amount "Five Million Dollars ($5,000,000.00)," with such changes to

be effective upon the execution and delivery to Bank of a promissory note

substantially in the form of Exhibit A attached hereto (which promissory

note shall replace and be deemed the Line of Credit Note defined in and made

pursuant to the Credit Agreement) and all other contracts, instruments and

documents required by Bank to evidence such change.

 

                2.             It

is acknowledged that under Section 1.1(b) of the Credit Agreement, Borrower has

been required to comply with the Borrowing Base as defined therein. Section

1.1(b) of the Credit Agreement is hereby amended by inserting the following at

the end thereof:

 

                "Notwithstanding the foregoing, Borrower

shall not be required to comply with the foregoing provisions of this Section

1.1(b) regarding the Borrowing Base until such time as Bank sends Borrower a

written notice that Bank is reinstating the Borrowing Base (the

"Reinstatement Notice"). Bank, in its sole discretion, may send the

Reinstatement Notice to Borrower at any time. Commencing on the earlier of (i)

the last day of the month following the month in which Borrower receives the

Reinstatement Notice, or (ii) the last day of the month in which Borrower

receives the Reinstatement Notice, if Borrower receives the Reinstatement

Notice prior to the 15th day of such month, the Borrowing Base shall be

reinstated and Borrower shall at all times thereafter comply with the foregoing

provisions of this Section 1.1(b) regarding the Borrowing Base."

 

                3.             Section

4.3(b) of the Credit Agreement is hereby deleted and replaced by the following:

 

                "(b)         Not

later than 25 days after and as of the end of each month, consolidated income

statements of Borrower and Subsidiaries, prepared by Borrower;"

 

                4.             Section

4.3(d) of the Credit Agreement is hereby amended by inserting the following at

the end thereof:

 

"provided,

however, that the foregoing certificates, reports and information described in

this paragraph (d) shall only be required after Bank has sent the Reinstatement

Notice to Borrower and the Borrowing Base has been reinstated in accordance

with Section 1.1(b);"

 

                5.             Sections

4.9(i), (j), and (k) are hereby deleted in their entirety, and the following

substituted therefor:

 

                "(i)          Net

profit after taxes not less than $400,000.00 on a fiscal year-to-date basis

determined as of June 30, 2001.

 

                (j)            Net

profit after taxes not less than $750,000.00 on a fiscal year-to-date basis

determined as of September 30, 2001.

 

                (k)           Net

profit after taxes not less than $1,000,000.00 for the fiscal year ending

December 31, 2001."

 

                6.             In

consideration of the changes set forth herein and as a condition to the

effectiveness hereof, immediately upon signing this Amendment Borrower shall

pay to Bank a non-refundable fee of $2,500.00.

 

                7.             Except

as specifically provided herein, all terms and conditions of the Credit

Agreement remain in full force and effect, without waiver or modification.

Except as otherwise defined herein, all terms defined in the Credit Agreement

shall have the same meaning when used in this Amendment. This Amendment and the

Credit Agreement shall be read together, as one document.

 

                8.             Borrower

hereby remakes all representations and warranties contained in the Credit

Agreement and reaffirms all covenants set forth therein, as same may be

modified hereby. Borrower further certifies that as of the date of this

Amendment there exists no Event of Default as defined in the Credit Agreement,

as same may be modified hereby, nor any condition, act or event which with the

giving of notice or the passage of time or both would constitute any such Event

of Default.

                IN WITNESS

WHEREOF, the parties hereto have caused this Amendment to be executed as of the

day and year first written above.

 

	

   

  NATROL, INC.

  	

   

  	

   

  	

   

  	

  WELLS FARGO

  BANK,

    NATIONAL ASSOCIATION

  
	

   

  	

   

  	

   

  	

   

  	 

	

  By:

  	

  /s/ Dennis

  Jolicoeur

  	

   

  	

   

  	

   

  	

  By:

  	

  /s/ Jan

  Macy-Buescher

  	 

	

   

  	

   

  	

   

  	

  Jan

  Macy-Buescher

  	

   

  	 

	

  Title: 

  	

  CFO

  	

   

  	

   

  	

  Vice

  President

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

																

 

 

EXHIBIT A

 

	

  WELLS FARGO BANK

  	

   

  	

  REVOLVING LINE OF

  CREDIT NOTE

  
	

   

  
	

  $5,000,000.00

  	

   

  	

  Los Angeles, CA

  
	

   

  	

   

  	

  August 1, 2001

  
	

   

  	

   

  	

   

  

 

        FOR VALUE RECEIVED,

the undersigned Natrol, Inc.

("Borrower") promises to pay to the order of WELLS FARGO BANK

NATIONAL ASSOCIATION ("Bank") at its office at Los Angeles RCBO, 333 South Grand Avenue 3rd Flr, Los Angeles, CA 90071, or at such other place as the

holder hereof may designate, in lawful money of the United States of America

and in immediately available funds, the principal sum of $5,000,000.00, or so much thereof as may be

advanced and be outstanding, with interest

thereon, to be computed on each advance from the date of its disbursement as

set forth herein.

 

DEFINITIONS:

 

        As

used herein, the following terms shall have the meanings set forth after each,

and any other term defined in this Note shall have the meaning set forth at the

place defined:

 

(a)           "Business Day" means any

day except a Saturday, Sunday or any other day on which commercial banks in

California are authorized or required by law to close.

 

(b)           "Fixed

Rate Term" means a period commencing on a Business Day and continuing for 1, 2 or 3 months, as designated by Borrower, during which all

or a portion of the outstanding principal balance of this Note bears interest

determined in relation to LIBOR; provided however, that no Fixed Rate Term may

be selected for a principal amount

less than $500,000.00; and provided

further, that no Fixed Rate Term shall extend beyond the scheduled maturity

date hereof. If any Fixed Rate Term would end on a day which is not a business

Day, then such Fixed Rate Term shall be extended to the next succeeding

Business Day.

 

(c)           " LIBOR" means the rate per

annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%)

determined by dividing Base LIBOR by a percentage equal to 100% less any LIBOR

Reserve Percentage.

 

(i)            "Base LIBOR" means the

rate per annum for United Sates dollar deposits quoted by Bank as the Inter–Bank

Market Offered Rate, with the understanding that such rate is quoted by Bank

for the purpose of calculating effective rates of interest for loans making

reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the

number of days in such Fixed Rate Term and in an amount approximately equal to

the principal amount to which such Fixed Rate Term applies. Borrower

understands and agrees that Bank may base its quotation of the Inter–Bank

Market Offered Rate upon such offers or other market indicators of the

Inter-Bank Market as Bank in its discretion deems appropriate including, but

not limited to, the rate offered for U.S. dollar deposits on the London Inter–Bank

Market.

 

(ii) "LIBOR Reserve Percentage" means the reserve percentage

prescribed by the Board of Governors of the Federal Reserve System (or any

successor) for "Eurocurrency Liabilities" (as defined in Regulation D

of the Federal Reserve Board, as amended), adjusted by Bank for expected

changes in such reserve percentage during the applicable Fixed Rate Term.

 

(d)           "Prime Rate" means at any

time the rate of interest most recently announced within Bank at its principal

office as its Prime Rate, with the understanding that the Prime Rate is one of

Bank's base rates and serves as the basis upon which effective rates of

interest are calculated for those loans making reference thereto, and is

evidenced by the recording thereof after its announcement in such internal

publication or publications as Bank may designate.

 

INTEREST:

 

(a)           Interest. The outstanding

principal balance of this Note shall bear interest (computed on the basis of a

350 day year, actual days elapsed) either (i) at a fluctuating rate per annum .50000% above the Prime Rate in effect from

time to time, or (ii) at a fixed rate per annum determined by Bank to be 3.00000% above LIBOR in effect on the first

day of the applicable Fixed Rate Term. When interest is determined in relation

to the Prime Rate, each change in the rate of interest hereunder shall become

effective on the date each Prime Rate change is announced within Bank. With

respect to each LIBOR selection option selected hereunder, Bank is hereby

authorized to note the date, principal amount, interest rate and Fixed Rate

Term applicable thereto and any payments made thereon on Bank's books and

records (either manually or by electronic entry) and/or on any, schedule

attached to this Note, which notations shall be prima facie evidence of the

accuracy of the information noted.

 

(b)           Selection

of Interest Rate Options. At any time any portion of this Note bears

interest determined in relation to LIBOR, it may be continued by Borrower at

the end of the Fixed Rate Term applicable thereto so that all or a portion

thereof bears interest determined in relation to the Prime Rate or to LIBOR for

a new Fixed Rate, Term designated by Borrower. At any time any portion of this

Note bears interest determined in relation to the Prime Rate, Borrower may

convert all or a portion thereof so that it bears interest determined in

relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance

hereunder or wishes to select a LIBOR option for all or a portion of the

outstanding principal balance hereof, and at the end of each Fixed Rate Term,

Borrower shall give Bank notice specifying: (i) the interest rate option

selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each

LIBOR selection the length of the applicable Fixed Race Term. Any such notice

may be given by telephone (or such other electronic method as Bank may permit)

so long as with respect to each LIBOR selection, (A) if requested by Bank,

Borrower provides to Bank written confirmation thereof not later than three (3)

Business Days after such notice is given, and (B) such notice is given to Bank

prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time

during any Business Day if Bank, at it's sole option but without obligation to

do so, accepts Borrower's notice and quotes a fixed rate to Borrower. If

Borrower does not immediately accept a fixed rate when quoted by Bank, the

quoted rate shall expire and any subsequent LIBOR request from Borrower shall

be subject to a redetermination by Bank of the applicable fixed rate. If no

specific designation of interest is made at the time any advance is requested

hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to

have made a Prime Rate interest selection for such advance or the principal

amount to which such Fixed Rate Term applied.

 

(c)           Taxes

and Regulatory Costs. Borrower shall pay to Bank immediately upon demand,

in addition to any other amounts due or to become due hereunder, any and all

(i) withholdings, interest equalization taxes, stamp taxes or other taxes

(except income and franchise taxes) imposed by any domestic or foreign

governmental authority and related in any manner to LIBOR, and (ii) future,

supplemental, emergency or other changes in the LIBOR Reserve Percentage,

assessment rates imposed by the Federal Deposit Insurance Corporation, or

similar requirements or costs imposed by any domestic or foreign governmental

authority or resulting from compliance by Bank with any request or directive

(whether or not having the force of law) from any central bank or other

governmental authority and related in any manner to LIBOR to the extent they

are not included in the calculation of LIBOR. In determining which of the foregoing

are attributable to any LIBOR option available to Borrower hereunder, any

reasonable allocation made by Bank among its operations shall be conclusive and

binding upon Borrower.

 

(d)           Payment

of Interest. Interest accrued on this Note shall be payable on the 1st day of each month, commencing September 1, 2001.

 

(e)           Default

Interest. From and after the maturity date of this Note, or such earlier

date as all principal owing hereunder becomes due and payable by acceleration

or otherwise, the outstanding principal balance of this Note shall bear

interest until paid in full at an increased rate per annum (computed on the

basis of a 360–day year, actual days elapsed) equal to 4% above the rate

of interest from time to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a)           Borrowing

and Repayment. Borrower may from time to time during the term of this Note

borrow, partially or wholly repay its outstanding borrowings, and reborrow,

subject to all of the limitations, terms and conditions of this Note and of the

Credit Agreement between Borrower and Bank defined below; provided however,

that the total outstanding borrowings under this Note shall not at any time

exceed the principal amount stated above. The unpaid principal balance of this

obligation at any time shall be the total amounts advanced hereunder by the

holder hereof less the amount of principal payments made hereon by or for any

Borrower, which balance may be endorsed hereon from time to time by the holder.

The outstanding principal balance of this Note shall be due and payable in full

on July 15, 2002.

 

(b)           Advances.

Advances hereunder, to the total amount of the principal sum available

hereunder, may be made by the holder at the oral or written request of (i) Elliott Balbert or Dennis Jolicoeur, any one acting

alone, who are authorized to request advances and direct the disposition of any

advances until written notice of the revocation of such authority is received

by the holder at the office designated above, or (ii) any person, with respect

to advances deposited to the credit of any deposit account of any Borrower,

which advances, when so deposited, shall be conclusively presumed to have been

made to or for the benefit of each Borrower regardless of the fact that persons

other than those authorized to request advances may have authority to draw

against such account. The holder shall have no obligation to determine whether

any person requesting an advance is or has been authorized by any Borrower.

 

(c)           Application

of Payments. Each payment made on this Note shall be credited first, to any

interest then due and second, to the outstanding principal balance hereof. All

payments credited to principal shall be applied first, to the outstanding

principal balance of this Note which bears interest determined in relation to

the Prime Rate, if any. and second, to the outstanding principal balance of

this Note which bears interest determined in relation to LIBOR, with such

payments applied to the oldest Fixed Rate Term first.

 

PREPAYMENT:

 

(a)           Prime

Rate. Borrower may prepay principal on any portion of this Note which bears

interest determined in relation to the Prime Rate at any time, in any amount

and without penalty.

 

(b)           LIBOR.

Borrower may prepay principal on any portion of this Note which bears interest

determined in relation to LIBOR at any time and in the minimum amount of $500,000.00; provided however, that if the outstanding

principal balance of such portion of this Note is less than said amount, the

minimum prepayment amount shall be the entire outstanding principal balance

thereof. In consideration of Bank providing this prepayment option to Borrower,

or if any such portion of this Note shall become due and payable at any time

prior to the last day of the Fixed Rate Term applicable thereto by acceleration

or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is

the sum of the discounted monthly differences for each month from the month of

prepayment through the month in which such Fixed Rate Term matures, calculated

as follows or each such month:

 

(i)            Determine

the amount of interest which would have accrued each month on the amount

prepaid at the interest rate applicable to such amount had it remained

outstanding until the last day of the Fixed Rate Term applicable thereto.

 

(ii)           Subtract

from the amount determined in (i) above the amount of interest which would have

accrued for the same month on the amount prepaid for the remaining term of such

Fixed Rate Term at LIBOR in effect or the date of prepayment for new loans made

for such term and in a principal amount equal to the amount prepaid.

 

(iii)          If the result obtained in (ii) for any

month is greater than zero, discount that difference by LIBOR used in (ii)

above.

 

Each Borrower acknowledges that prepayment of

such amount may result in Bank incurring additional costs, expenses and/or

liabilities, and that it is difficult to ascertain the full extent of such

costs, expenses and/or liabilities. Each Borrower, therefore, agrees to pay the

above–described prepayment fee and agrees that said amount represents a

reasonable estimate of the prepayment costs, expenses and/or liabilities of

Bank. If Borrower fails to pay any prepayment fee when due, the amount of such

prepayment fee shall thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from time to time

(computed on the basis of a 360–day year, actual days elapsed). Each

change in the rate of interest on any such past due prepayment fee shall become

effective on the date each Prime Rate change is announced within Bank.

 

EVENTS OF DEFAULT:

 

        This

Note is made pursuant to and is subject to the terms and conditions of that

certain Credit Agreement between Borrower and Bank dated as of March 1, 2001, as amended from time to time (the

"Credit Agreement"). Any default in the payment or performance of any

obligation under this Note, or any defined event of default under the Credit

Agreement, shall constitute an "Event of Default" under this Note.

 

MISCELLANEOUS:

 

(a)            Remedies.

Upon the occurrence of any Event of Default, the holder of this Note, at the

holder's option, may declare all sums of principal and interest outstanding

hereunder to be immediately due and payable without presentment, demand, notice

of nonperformance, notice of protest, protest or notice of dishonor, all of

which are expressly waived by each Borrower, and the obligation, if any, of the

holder to extend any further credit hereunder shall immediately cease and

terminate. Each Borrower shall pay to the holder immediately upon demand the full

amount of all payments, advances, charges, costs and expenses, including

reasonable attorneys' fees (to include outside counsel fees and all allocated

costs of the holder's in–house counsel), expended or incurred by the

holder in connection with the enforcement of the holder's rights and/or the

collection of any amounts which become due to the holder under this Note and

the prosecutor or defense of any action in any way related to this Note

including without limitation, any action for declaratory relief, whether

incurred at the trial or appellate level, in an arbitration proceeding or

otherwise, and including any of the foregoing incurred in connection with any

bankruptcy proceeding (including without limitation, any adversary proceeding

contested matter or motion brought by Bank or any other person) relating to any

Borrower or any other person or entity.

 

(b)           Obligations

Joint and Several. Should more than one person or entity sign this Note as

a Borrower, the obligations of each such Borrower shall be joint and several.

 

(c)           Governing

Law. This Note shall be governed by and construed in accordance with the

laws of the State of California.

 

 

        IN

WITNESS WHEREOF, the undersigned has executed this Note as of the date first

written above.

 

Natrol, Inc.

 

 

 

	

  WELLS FARGO BANK

  	

   

  	

  REVOLVING LINE OF

  CREDIT NOTE

  
	

   

  
	

  $5,000,000.00

  	

   

  	

  Los Angeles, CA

  
	

   

  	

   

  	

  August 1, 2001

  
	

   

  	

   

  	

   

  

 

        FOR VALUE RECEIVED,

the undersigned Natrol, Inc.

("Borrower") promises to pay to the order of WELLS FARGO BANK

NATIONAL ASSOCIATION ("Bank") at its office at Los Angeles RCBO, 333 South Grand Avenue 3rd Flr, Los

Angeles, CA 90071,or

at such other place as the holder hereof may designate, in lawful money of the

United States of America and in immediately available funds, the principal sum

of $5,000,000.00, or so much

thereof as may be advanced and be outstanding,

with interest thereon, to be computed on each advance from the date of

its disbursement as set forth herein.

 

DEFINITIONS:

 

        As

used herein, the following terms shall have the meanings set forth after each,

and any other term defined in this Note shall have the meaning set forth at the

place defined:

 

(a)           "Business Day" means any

day except a Saturday, Sunday or any other day on which commercial banks in

California are authorized or required by law to close.

 

(b)           "Fixed

Rate Term" means a period commencing on a Business Day and continuing for 1, 2 or 3 months, as designated by Borrower, during which all

or a portion of the outstanding principal balance of this Note bears interest

determined in relation to LIBOR; provided however, that no Fixed Rate Term may

be selected for a principal amount

less than $500,000.00; and provided

further, that no Fixed Rate Term shall extend beyond the scheduled maturity

date hereof. If any Fixed Rate Term would end on a day which is not a business

Day, then such Fixed Rate Term shall be extended to the next succeeding

Business Day.

 

(c)           " LIBOR" means the rate per

annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) determined

by dividing Base LIBOR by a percentage equal to 100% less any LIBOR Reserve

Percentage.

 

(i)            "Base

LIBOR" means the rate per annum for United Sates dollar deposits quoted by

Bank as the Inter–Bank Market Offered Rate, with the understanding that

such rate is quoted by Bank for the purpose of calculating effective rates of

interest for loans making reference thereto, on the first day of a Fixed Rate

Term for delivery of funds on

said date for a period of time

approximately equal to the number of days in such Fixed Rate Term and in an amount

approximately equal to the principal amount to which such Fixed Rate Term

applies. Borrower understands and agrees that Bank may base its quotation of

the Inter–Bank Market Offered Rate upon such offers or other market

indicators of the Inter-Bank Market as Bank in its discretion deems appropriate

including, but not limited to, the rate offered for U.S. dollar deposits on the

London Inter–Bank Market.

 

(ii)           "LIBOR

Reserve Percentage" means

the reserve percentage prescribed by the Board of Governors of the Federal

Reserve System (or any successor) for "Eurocurrency Liabilities" (as

defined in Regulation D of the Federal Reserve Board, as amended), adjusted by

Bank for expected changes in such reserve percentage during the applicable

Fixed Rate Term.

 

(d)           "Prime Rate" means at any

time the rate of interest most recently announced within Bank at its principal

office as its Prime Rate, with the understanding that the Prime Rate is one of

Bank's base rates and serves as the basis upon which effective rates of

interest are calculated for those loans making reference thereto, and is

evidenced by the recording thereof after its announcement in such internal

publication or publications as Bank may designate.

 

INTEREST:

 

(a)           Interest. The outstanding

principal balance of this Note shall bear interest (computed on the basis of a

350 day year, actual days elapsed) either (i) at a fluctuating rate per annum .50000% above the Prime Rate in effect from

time to time, or (ii) at a fixed rate per annum determined by Bank to be 3.00000% above LIBOR in effect on the first

day of the applicable Fixed Rate Term. When interest is determined in relation

to the Prime Rate, each change in the rate of interest hereunder shall become

effective on the date each Prime Rate change is announced within Bank. With

respect to each LIBOR selection option selected hereunder, Bank is hereby

authorized to note the date, principal amount, interest rate and Fixed Rate

Term applicable thereto and any payments made thereon on Bank's books and records

(either manually or by electronic entry) and/or on any, schedule attached to

this Note, which notations shall be prima facie evidence of the accuracy of the

information noted.

 

(b)           Selection

of Interest Rate Options. At any time any portion of this Note bears

interest determined in relation to LIBOR, it may be continued by Borrower at

the end of the Fixed Rate Term applicable thereto so that all or a portion

thereof bears interest determined in relation to the Prime Rate or to LIBOR for

a new Fixed Rate Term designated by Borrower. At any time any portion of this

Note bears interest determined in relation to the Prime Rate, Borrower may

convert all or a portion thereof so that it bears interest determined in

relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance

hereunder or wishes to select a LIBOR option for all or a portion of the

outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower

shall give Bank notice specifying: (i) the interest rate option selected by

Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR

selection the length of the applicable Fixed Race Term. Any such notice may be

given by telephone (or such other electronic method as Bank may permit) so long

as with respect to each LIBOR selection, (A) if requested by Bank, Borrower

provides to Bank written confirmation thereof not later than three (3) Business

Days after such notice is given, and (B) such notice is given to Bank prior to

10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during

any Business Day if Bank, at it's sole option but without obligation to do so,

accepts Borrower's notice and quotes a fixed rate to Borrower. If Borrower does

not immediately accept a fixed rate when quoted by Bank, the quoted rate shall

expire and any subsequent LIBOR request from Borrower shall be subject to a

redetermination by Bank of the applicable fixed rate. If no specific

designation of interest is made at the time any advance is requested hereunder

or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a

Prime Rate interest selection for such advance or the principal amount to which

such Fixed Rate Term applied.

 

(c)           Taxes

and Regulatory Costs. Borrower shall pay to Bank immediately upon demand,

in addition to any other amounts due or to become due hereunder, any and all

(i) withholdings, interest equalization taxes, stamp taxes or other taxes

(except income and franchise taxes) imposed by any domestic or foreign

governmental authority and related in any manner to LIBOR, and (ii) future,

supplemental, emergency or other changes in the LIBOR Reserve Percentage,

assessment rates imposed by the Federal Deposit Insurance Corporation, or

similar requirements or costs imposed by any domestic or foreign governmental

authority or resulting from compliance by Bank with any request or directive

(whether or not having the force of law) from any central bank or other

governmental authority and related in any manner to LIBOR to the extent they

are not included in the calculation of LIBOR. In determining which of the

foregoing are attributable to any LIBOR option available to Borrower hereunder,

any reasonable allocation made by Bank among its operations shall be conclusive

and binding upon Borrower.

 

(d)           Payment

of Interest. Interest accrued on this Note shall be payable on the 1st day of each month, commencing September 1, 2001.

 

(e)           Default

Interest. From and after the maturity date of this Note, or such earlier date

as all principal owing hereunder becomes due and payable by acceleration or

otherwise, the outstanding principal balance of this Note shall bear interest

until paid in full at an increased rate per annum (computed on the basis of a

360–day year, actual days elapsed) equal to 4% above the rate of interest

from time to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a)           Borrowing

and Repayment. Borrower may from time to time during the term of this Note

borrow, partially or wholly repay its outstanding borrowings, and reborrow,

subject to all of the limitations, terms and conditions of this Note and of the

Credit Agreement between Borrower and Bank defined below; provided however,

that the total outstanding borrowings under this Note shall not at any time

exceed the principal amount stated above. The unpaid principal balance of this

obligation at any time shall be the total amounts advanced hereunder by the

holder hereof less the amount of principal payments made hereon by or for any

Borrower, which balance may be endorsed hereon from time to time by the holder.

The outstanding principal balance of this Note shall be due and payable in full

on July 15, 2002.

 

(b)           Advances.

Advances hereunder, to the total amount of the principal sum available hereunder,

may be made by the holder at the oral or written request of (i) Elliott Balbert or Dennis Jolicoeur, any one acting

alone, who are authorized to request advances and direct the disposition of any

advances until written notice of the revocation of such authority is received

by the holder at the office designated above, or (ii) any person, with respect

to advances deposited to the credit of any deposit account of any Borrower,

which advances, when so deposited, shall be conclusively presumed to have been

made to or for the benefit of each Borrower regardless of the fact that persons

other than those authorized to request advances may have authority to draw

against such account. The holder shall have no obligation to determine whether

any person requesting an advance is or has been authorized by any Borrower.

 

(c)           Application

of Payments. Each payment made on this Note shall be credited first, to any

interest then due and second, to the outstanding principal balance hereof. All

payments credited to principal shall be applied first, to the outstanding

principal balance of this Note which bears interest determined in relation to

the Prime Rate, if any. and second, to the outstanding principal balance of

this Note which bears interest determined in relation to LIBOR, with such

payments applied to the oldest Fixed Rate Term first.

 

PREPAYMENT:

 

(a)           Prime

Rate. Borrower may prepay principal on any portion of this Note which bears

interest determined in relation to the Prime Rate at any time, in any amount

and without penalty.

 

(b)           LIBOR.

Borrower may prepay principal on any portion of this Note which bears interest

determined in relation to LIBOR at any time and in the minimum amount of $500,000.00; provided however, that if the outstanding

principal balance of such portion of this Note is less than said amount, the

minimum prepayment amount shall be the entire outstanding principal balance

thereof. In consideration of Bank providing this prepayment option to Borrower,

or if any such portion of this Note shall become due and payable at any time

prior to the last day of the Fixed Rate Term applicable thereto by acceleration

or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is

the sum of the discounted monthly differences for each month from the month of

prepayment through the month in which such Fixed Rate Term matures, calculated

as follows or each such month:

 

(i)            Determine

the amount of interest which would have accrued each month on the amount

prepaid at the interest rate applicable to such amount had it remained

outstanding until the last day of the Fixed Rate Term applicable thereto.

 

(ii)           Subtract

from the amount determined in (i) above the amount of interest which would have

accrued for the same month on the amount prepaid for the remaining term of such

Fixed Rate Term at LIBOR in effect or the date of prepayment for new loans made

for such term and in a principal amount equal to the amount prepaid.

 

(iii)          If the result obtained in (ii) for any

month is greater than zero, discount that difference by LIBOR used in (ii)

above.

 

Each Borrower acknowledges that prepayment of

such amount may result in Bank incurring additional costs, expenses and/or

liabilities, and that it is difficult to ascertain the full extent of such

costs, expenses and/or liabilities. Each Borrower. therefore, agrees to pay the

above–described prepayment fee and agrees that said amount represents a

reasonable estimate of the prepayment costs, expenses and/or liabilities of

Bank. If Borrower fails to pay any prepayment fee when due, the amount of such

prepayment fee shall thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from time to time

(computed on the basis of a 360–day year, actual days elapsed). Each

change in the rate of interest on any such past due prepayment fee shall become

effective on the date each Prime Rate change is announced within Bank.

 

EVENTS OF DEFAULT:

 

        This

Note is made pursuant to and is subject to the terms and conditions of that

certain Credit Agreement between Borrower and Bank dated as of March 1, 2001, as amended from time to time (the

"Credit Agreement"). Any default in the payment or performance of any

obligation under this Note, or any defined event of default under the Credit

Agreement, shall constitute an "Event of Default" under this Note.

 

MISCELLANEOUS:

 

(a)           Remedies. Upon the occurrence

of any Event of Default, the holder of this Note, at the holder's option, may

declare all sums of principal and interest outstanding hereunder to be immediately

due and payable without presentment, demand, notice of nonperformance, notice

of protest, protest or notice of dishonor, all of which are expressly waived by

each Borrower, and the obligation, if any, of the holder to extend any further

credit hereunder shall immediately cease and terminate. Each Borrower shall pay

to the holder immediately upon demand the full amount of all payments,

advances, charges, costs and expenses, including reasonable attorneys' fees (to

include outside counsel fees and all allocated costs of the holder's in–house

counsel), expended or incurred by the holder in connection with the enforcement

of the holder's rights and/or the collection of any amounts which become due to

the holder under this Note and the prosecutor or defense of any action in any

way related to this Note including without limitation, any action for

declaratory relief, whether incurred at the trial or appellate level, in an

arbitration proceeding or otherwise, and including any of the foregoing

incurred in connection with any bankruptcy proceeding (including without

limitation, any adversary proceeding contested matter or motion brought by Bank

or any other person) relating to any Borrower or any other person or entity.

 

(b)           Obligations

Joint and Several. Should more than one person or entity sign this Note as

a Borrower, the obligations of each such Borrower shall be joint and several.

 

(c)           Governing

Law. This Note shall be governed by and construed in accordance with the

laws of the State of California.

 

 

        IN

WITNESS WHEREOF, the undersigned has executed this Note as of the date first

written above.

 

Natrol, Inc.

 

 

 

	

  By: 

  	

  /s/  Dennis Jolicoeur

  
	

   

  	

   

  
	

  Title:  

  	

  CFOPrepared by MERRILL CORPORATION

EXHIBIT 4.6

WARRANT

 

To Purchase [______________] Shares of Common Stock

of

APPLIED EPI, INC.

 

February 15, 2001

 

This

Warrant and the Securities issuable upon exercise of this Warrant have not been

registered under the Securities Act of 1933 (the “1933 Act”), as amended, or

under any state securities laws (“Blue Sky Laws”) and may not be sold,

transferred, pledged, hypothecated or otherwise disposed of except pursuant to

(1) registration in compliance with such act and such state laws or (2) an

opinion of counsel reasonably satisfactory to the Company to the effect that

such registration is not required.

 

THIS CERTIFIES THAT, for good and valuable

consideration, ______________ (“Holder”), or his or her registered

assigns, is entitled to subscribe for and purchase from APPLIED EPI, INC., a

Minnesota corporation (the “Company”), at any time after February 15,

2001, to and including February 14, 2006, 

____________________ (______) fully paid and non-assessable shares of

the Common Stock of the Company at the price of $5.40 per share (the “Warrant

Exercise Price”), subject to the anti-dilution provisions of this

Warrant.  This Warrant is one of the

“Warrants” referred to in the Note and Warrant Purchase Agreement dated as of

February 15, 2001, between the Company and the several Note Purchasers listed

on Exhibit A thereof (the “Agreement”).

 

As used herein, the following terms shall have the

meanings set forth below: (i) “Warrant Shares” means the shares which may

be acquired upon exercise of this Warrant; and (ii) “Common Stock” means the

common stock, par value $.01 per share, of the Company, and shall also include

any capital stock of any class of the Company hereafter authorized which shall

not be limited to a fixed sum or percentage in respect of the rights of the

holders thereof to participate in dividends or in the distribution of assets

upon the voluntary or involuntary liquidation, dissolu­tion, or winding up of

the Company.  Capitalized terms used and

not otherwise defined herein shall have the meanings ascribed to such terms in

the Agreement.

 

This Warrant is subject to the following provisions,

terms and conditions:

 

1.             Exercise;

Transferability.

 

a.             The rights

represented by this Warrant may be exercised by the Holder hereof, in whole or

in part (but not as to a fractional share of Common Stock), by written notice

of exercise (in the form attached hereto) delivered to the Company at the

principal office of the Company prior to the expiration of this Warrant and

accompanied or preceded by the surrender of this Warrant along with (i) a check

in payment of the Warrant Exercise Price for such shares, (ii) surrender of

Notes (as issued under the Agreement) with an outstanding principal equal to or

greater than the Warrant Exercise Price multiplied by the number of Warrant

Shares to be acquired (in which case the Company will reissue a Note or Notes

representing the excess, if any, of such principal over the Warrant Exercise

Price multiplied by the number of Warrant Shares acquired upon exercise) or

(iii) such other consideration as shall be acceptable to the Board of Directors

(or an appropriate committee thereof) of the Company.

 

b.             This Warrant may be

sold, transferred, assigned, hypothecated or divided into two or more Warrants

of smaller denominations, and any Warrant Shares issued pursuant to exercise of

this Warrant may be trans­ferred as provided in Section 7 hereof.

 

2.             Exchange

and Replacement.  Subject to Sections 1 and 7 hereof,

this Warrant is exchangeable upon the surrender hereof by the Holder to the

Company at its office for new Warrants of like tenor and date representing in

the aggregate the right to purchase the number of Warrant Shares purchasable

hereunder, each of such new Warrants to represent the right to purchase such

number of Warrant Shares (not to exceed the aggregate total number purchasable

hereunder) as shall be designated by the Holder at the time of such

surrender.  Upon receipt by the Company

of evidence reasonably satisfactory to it of the loss, theft, destruction, or

mutilation of this Warrant, and, in case of loss, theft or destruction, of

indemnity or security reasonably satisfactory to it, and upon surrender and

cancellation of this Warrant, if mutilated, the Company will make and deliver a

new Warrant of like tenor, in lieu of this Warrant.  This Warrant shall be promptly canceled by the Company upon the

surrender hereof in connection with any exchange or replacement.  The Company shall pay all expenses, taxes

(other than stock transfer taxes), and other charges payable in connection with

the preparation, execution, and delivery of Warrants pursuant to this

Section 2.

 

3.             Issuance

of the Warrant Shares.

 

a.             The Company agrees

that the shares of Common Stock purchased upon exercise of this Warrant shall

be and are deemed to be issued to the Holder as of the close of business on the

date on which this Warrant shall have been surrendered and the payment made for

such Warrant Shares as aforesaid. 

Subject to the provisions of paragraph (b) of this Section 3,

certificates for the Warrant Shares so purchased shall be delivered to the

Holder within a reasonable time, not exceeding fifteen (15) days after the

rights represented by this Warrant shall have been so exercised, and, unless

this Warrant has expired, a new Warrant representing the right to purchase the

number of Warrant Shares, if any, with respect to which this Warrant shall not

then have been exercised shall also be delivered to the Holder within such

time.

 

b.             Notwithstanding the

foregoing, however, the Company shall not be required to deliver any

certificate for Warrant Shares upon exercise of this Warrant except in

accordance with exemptions from the applicable securities registration

requirements or registrations under applicable securities laws.  Nothing herein, however, shall obligate the

Company to effect registrations under federal or state securities laws, except

as provided in Section 9.  If

registrations are not in effect and if exemptions are not available when the

Holder seeks to exercise the Warrant, the Warrant exercise period will be

extended, if need be, to prevent the Warrant from expiring, until such time as

either registrations become effective or exemptions are availa­ble, and the

Warrant shall then remain exercisable for a period of at least 30 calendar days

from the date the Company delivers to the Holder written notice of the

availability of such registrations or exemptions.  The Holder agrees to execute such documents and make such

representations, warranties, and agreements as may be required solely to comply

with the exemptions relied upon by the Company, or the registrations made, for

the issuance of the Warrant Shares.

 

4.             Covenants

of the Company.  The Company covenants and agrees that all

Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,

non-assessable and free from all taxes, liens and charges with respect to the

issue thereof.  The Company further

covenants and agrees that during the period within which the rights represented

by this Warrant may be exercised, the Company will at all times have authorized

and reserved for the purpose of issue or transfer upon exercise of the

subscription rights evidenced by this Warrant a sufficient number of shares of

Common Stock to provide for the exercise of the rights represented by this

Warrant.

 

5.             Anti-dilution Adjustments. 

The provisions of this Warrant are subject to adjustment as provided in

this Section 5.

 

a.             The Warrant Exercise Price shall be

adjusted from time to time such that in case the Company shall hereafter:

 

i.              pay any dividends on any class of

stock of the Company payable in Common Stock or securities convertible into

Common Stock;

 

ii.             subdivide its then outstanding

shares of Common Stock into a greater number of shares; or

 

iii.            combine outstanding shares of Common

Stock, by reclassification or otherwise;

 

then, in any such event,

the Warrant Exercise Price in effect immediately prior to such event shall

(until adjusted again pursuant hereto) be adjusted immediately after such event

to a price (calculated to the nearest full cent) determined by dividing

(A) the number of shares of Common Stock outstanding immediately prior to

such event, multiplied by the then existing Warrant Exercise Price, by

(B) the total number of shares of Common Stock outstanding immediately after

such event (including in each case the maximum number of shares of Common Stock

issuable in respect of any securities convertible into Common Stock), and the

resulting quotient shall be the adjusted Warrant Exercise Price per share.  An adjustment made pursuant to this

Subsection shall become effective immediately after the record date in the case

of a dividend or distribution and shall become effective immediately after the

effective date in the case of a subdivision, combination or reclassification.  If, as a result of an adjustment made

pursuant to this Subsection, the Holder of any Warrant thereafter surrendered

for exercise shall become entitled to receive shares of two or more classes of

capital stock or shares of Common Stock and other capital stock of the Company,

the Board of Directors (whose determination shall be conclusive) shall

determine the allocation of the adjusted Warrant Exercise Price between or

among shares of such classes of capital stock or shares of Common Stock and

other capital stock.  All calculations

under this Subsection shall be made to the nearest cent or to the nearest 1/100

of a share, as the case may be.  In the

event that at any time as a result of an adjustment made pursuant to this Sub­section,

the Holder of any Warrant thereafter surrendered for exercise shall become

entitled to receive any shares of the Company other than shares of Common

Stock, thereafter the Warrant Exercise Price of such other shares so receivable

upon exercise of any Warrant shall be subject to adjustment from time to time

in a manner and on terms as nearly equivalent as practicable to the provisions

with respect to Common Stock contained in this Section.

 

b.             Upon each adjustment of the Warrant

Exercise Price pursuant to Section 5(a) above, the Holder of each Warrant

shall thereafter (until another such adjustment) be entitled to purchase at the

adjusted Warrant Exercise Price the number of shares, calculated to the nearest

full share, obtained by multiplying the number of shares specified in such Warrant

(as adjusted as a result of all adjustments in the Warrant Exercise Price in

effect prior to such adjustment) by the Warrant Exercise Price in effect prior

to such adjustment and dividing the product so obtained by the adjusted Warrant

Exercise Price.

 

c.             In

case of any consolidation or merger to which the Company is a party other than

a merger or consolidation in which the Company is the continuing or surviving

corporation, or in case of any sale or conveyance to another corporation of the

property of the Company as an entirety or substantially as an entirety, or in

the case of any statutory exchange of securities with another corporation

(including any exchange effected in connection with a merger of a third

corporation into the Company), there shall be no adjustment under

Section 5(a) above but the Holder of each Warrant then outstanding shall

have the right thereafter to convert such Warrant into the kind and amount of

shares of stock and other securities and property which he would have owned or

have been entitled to receive immediately after such consolidation, merger,

statutory exchange, sale, or conveyance had such Warrant been converted

immediately prior to the effective date of such consolidation, merger,

statutory exchange, sale, or conveyance and in any such case, if necessary,

appropriate adjustment shall be made in the application of the provisions set

forth in this Section with respect to the rights and interests thereafter of

any Holders of the Warrant, to the end that the provisions set forth in this

Section shall thereafter correspondingly be made applicable, as nearly as may

reasonably be, in relation to any shares of stock and other securities and

property thereafter deliverable on the exercise of the Warrant.  The provisions of this Subsection shall

similarly apply to successive consolidations, mergers, statutory exchanges,

sales or conveyances.

 

d.             Upon

any adjustment of the Warrant Exercise Price, then and in each such case, the

Company shall give written notice thereof, by first-class mail, postage

prepaid, addressed to the Holder as shown on the books of the Company, which

notice shall state the Warrant Exercise Price resulting from such adjustment

and the increase or decrease, if any, in the number of shares of Common Stock

purchasable at such price upon the exercise of this Warrant, setting forth in

reasonable detail the method of calculation and the facts upon which such

calculation is based.

 

6.             No Voting Rights. 

This Warrant shall not entitle the Holder to any voting rights or other

rights as a shareholder of the Company.

 

7.             Notice

of Transfer of Warrant or Resale of the Warrant Shares.

 

a.             Subject

to the sale, assignment, hypothecation, or other transfer restrictions set

forth in Section 1 hereof, the Holder, by acceptance hereof, agrees to

give written notice to the Company, before transferring this Warrant or

transferring any Warrant Shares, of such Holder’s intention to do so,

describing briefly the manner of any proposed transfer.  Promptly upon receiving such written notice,

the Company shall present copies thereof to the Company’s counsel.  If in the opinion of such counsel the

proposed transfer may be effected without registra­tion or qualification (under

any federal or state securities laws), the Company, as promptly as practicable,

shall notify the Holder of such opinion, whereupon the Holder shall be entitled

to transfer this Warrant or to dispose of Warrant Shares received upon the

previous exercise of this Warrant, all in accordance with the terms of the

notice delivered by the Holder to the Company; provided that an appropriate

legend may be endorsed on this Warrant or the certificates for such Warrant

Shares respecting restrictions upon transfer thereof necessary or advisable in

the opinion of counsel and satisfactory to the Company to prevent further

transfers which would be in violation of Section 5 of the Securities Act

of 1933, as amended (the “1933 Act”) and applicable state securities

laws; and provided further that the prospective transferee or purchaser shall

execute such documents and make such representations, warranties, and agree­ments

as may be required solely to comply with the exemptions relied upon by the

Company for the transfer or disposition of the Warrant or Warrant Shares.

 

b.             If

in the opinion of counsel referred to in this Section 7, the proposed

transfer or disposition of this Warrant or such Warrant Shares described in the

written notice given pursuant to this Section 7 may not be effected

without registration or qualification of this Warrant or such Warrant Shares,

the Company shall promptly give written notice thereof to the Holder, and the

Holder will limit its activities in respect to such transfer or disposition as,

in the opinion of such counsel, are permitted by law.

 

8.             Fractional

Shares.

 

a.             Fractional

shares shall not be issued upon the exercise of this Warrant, but in any case

where the Holder would, except for the provisions of this Section, be entitled

under the terms hereof to receive a fractional share, the Company shall, upon

the exercise of this Warrant for the largest number of whole shares then called

for, pay a sum in cash equal to the sum of (i) the excess, if any, of the

Fair Market Value of such fractional share over the proportional part of the

Warrant Exercise Price represented by such fractional share, plus (ii) the

proportional part of the Warrant Exercise Price represented by such fractional

share.

 

b.             For

purposes of this Section, the term “Fair Market Value” with respect to shares

of Common Stock as of a particular date (the “Determination Date”) shall

mean:

 

i.              If

the Company’s Common Stock is traded on an exchange or is quoted on The Nasdaq

National Market, then the average closing or last sale prices, respectively,

reported for the ten (10) business days immediately preceding the Determination

Date;

 

ii.             If

the Company’s Common Stock is not traded on an exchange or on The Nasdaq

National Market but is traded on The Nasdaq SmallCap Market or the local

over-the-counter market, then the average closing bid and asked prices reported

for the ten (10) business days immediately preceding the Determination Date;

and

 

iii.            If

the Company’s Common Stock is not traded on an exchange, on The Nasdaq National

Market, The Nasdaq SmallCap Market or on the local over-the-counter market,

then the fair market value of Common Stock as determined in good faith by the

Board of Directors of the Company.

 

9.             Registration

Rights.

 

a.             Piggyback

Registration.  If the Company at any

time within the later of (i) two (2) years after complete exercise of this

Warrant or (ii) seven (7) years from the date of this Warrant, proposes to

register under the 1933 Act (except by a Form S-4 or Form S-8

Registration Statement or any successor forms thereto) or qualify for a public

distribution under Section 3(b) of the 1933 Act, any of its securities, it

will give written notice to all Holders of this Warrant, of any Warrants issued

pursuant to Section 2 and/or Section 3(a) hereof, and of any Warrant

Shares, of its intention to do so and, on the written request of any such

Holder given within twenty (20) days after receipt of any such notice (which

request shall specify the Warrant Shares intended to be sold or disposed of by

such Holder and describe the nature of any proposed sale or other disposition

thereof), the Company will use its best efforts to cause all such Warrant

Shares, the Holders of which shall have requested the registration or

qualification thereof, to be included in such registration statement proposed

to be filed by the Company; provided, however, that if a greater number of

Warrant Shares is offered for participation in the proposed offering than in

the reasonable opinion of the managing underwriter of the proposed offering

(which opinion shall be in writing and delivered to the Holders) can be

accommodated without adversely affecting the proposed offering, then the number

of Warrant Shares proposed to be offered by such Holders for registration, as

well as the number of securities of any other selling shareholders

participating in the registration, shall not be included or shall be

proportionately reduced to a number deemed satisfactory by the managing

underwriter.  With respect to each

inclusion of securities in a registration statement pursuant to this Section 9(a),

the selling Holders shall pay the underwriting discounts or commissions and

transfer taxes applicable to the selling Holders’ shares, and the Company shall

pay all other costs and expenses of the registration, including but not limited

to all registration, filing and NASD fees, printing expenses, fees and

disbursements of counsel and accountants for the Company and the selling

Holders (provided the Company shall pay the fees and expenses of only one such

counsel for all Holders), all internal expenses, and legal fees and disbursements

and other expenses of complying with state securities laws of any jurisdictions

in which the securities to be offered are to be registered or qualified.  The Company need not maintain the

effectiveness of any such registration, qualification, notification or

approval, whether or not at the request of the Holders, more than nine (9)

months following the effective date thereof.

 

b.             Indemnification.  The Company hereby indemnifies each of the

Holders of this Warrant and of any Warrant Shares, and the officers and

directors, if any, who control such Holders, within the meaning of

Section 15 of the 1933 Act, against all losses, claims, damages, and

liabilities caused by (1) any untrue statement or alleged untrue statement

of a material fact contained in any Registration Statement or Prospectus (and

as amended or supplemented if the Company shall have furnished any amendments

thereof or supplements thereto), any Preliminary Prospectus (not corrected in

the final, amended or supplemented prospectus furnished to such Holders for

distribution) or any state securities law filings; (2) 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 except insofar as

such losses, claims, damages, or liabilities are caused by any untrue statement

or omission contained in information furnished in writing to the Company by

such Holder expressly for use therein; and each such Holder by its acceptance

hereof severally agrees that it will indemnify and hold harmless the Company,

each of its officers who signs such Registration Statement, and each person, if

any, who controls the Company, within the meaning of Section 15 of the

1933 Act, with respect to losses, claims, damages, or liabilities which are

caused by any untrue statement or omission contained in information furnished

in writing to the Company by such Holder expressly for use therein.

 

c.             Cooperation.  Upon the exercise of registration rights

pursuant hereto, each Holder agrees to supply the Company with such information

as may be required by the Company to register or qualify the shares to be

registered.

 

10.          Miscellaneous.

 

a.             This

Warrant, the Agreement and the Notes constitutes the entire agreement between

the parties hereto pertaining to the subject matter hereof and thereof and

supersedes all prior agreements, understandings, negotiations and discussions,

whether oral or written, of the parties hereto, pertaining to such subject

matter.

 

b.             This

Warrant shall be subject to and governed by the terms and conditions contained

in Article VIII of the Agreement.

 

* * * * *

 

IN WITNESS WHEREOF, Applied Epi, Inc. has caused this

Warrant to be signed by its duly authorized officer and to be dated February

15, 2001.

 

	

   

  	

  APPLIED EPI, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  _______________________________

  
	

   

  	

   

  

 

SUBSCRIPTION

FORM

 

(To be signed upon

exercise of Warrant)

 

The undersigned, the

Holder of the within Warrant, hereby irrevocably elects to exercise the

purchase right represented by such Warrant for, and to purchase thereunder,

_________________ of the shares of Common Stock of Applied Epi, Inc. to which

such Warrant relates and herewith makes payment of $__________________ therefor

in cash or by certified check and requests that the certificate for such shares

be issued in the name and delivered to the address set forth below.

 

Dated:  __________________

 

	

   

  	

   

  
	

   

  	

  (Signature)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Name)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Name in which shares

  are to be issued, if different)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Address)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Social Security or Tax

  Identification No.

  
	

   

  	

   

  

 

Accepted by Applied Epi,

Inc.

on this __ day of

_____________, 200_.

 

By: _____________________

Its:

______________________

 

ASSIGNMENT FORM

(To be signed upon

authorized transfer of Warrant)

 

FOR VALUE RECEIVED, the

undersigned hereby sells, assigns, and transfers unto

____________________________ the right to purchase ____________ shares of

Common Stock of Applied Epi, Inc. to which the within Warrant relates and

appoints __________________ attorney, to transfer said right on the books of

Applied Epi, Inc., with full power of substitution in the premises.

 

Dated:  ________________

 

	

   

  	

   

  
	

   

  	

  (Signature)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Name)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Name of transferee)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Address of transferee)

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  (Social Security

  or Tax Identification No. of transferee)

  
	

   

  	

   

  

 

Accepted by Applied Epi,

Inc.

on this __ day of

_____________, 200_.

 

 

By: _____________________

Its:

______________________

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