REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (the "Agreement") is made and entered as
of this ____ day of July, 1998 by and between Medical Dynamics, Inc., a Colorado
corporation (the "Company") and The Tail Wind Fund, Ltd. (the "Investor")
pursuant to the Purchase Agreement of even date herewith by and between the
Company and the Investor (the "Purchase Agreement").
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have the following
meanings:
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
the Company.
"Debenture" means the Debentures issued or issuable to the Investor
pursuant to the Purchase Agreement.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a registration made by
preparing and filing a registration statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon the conversion of the Debenture, (ii) the Common Stock issued as payment of
principal or accrued and unpaid interest on the Debentures (the number of shares
to be estimated for purposes of registration), (iii) the Common Stock acquired
upon the exercise of the Warrants, and (iv) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Common Stock, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which its rights under this Agreement are not assigned.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Warrant" means the Warrant to purchase shares of Common Stock issued to
the Investor pursuant to the Purchase Agreement.
2. Registration.
(a) Registration Statement. Promptly following the closing of the
transactions contemplated by the Purchase Agreement (the "Closing Date") (but no
later than thirty days after the Closing Date), the Company shall prepare and
file with the SEC a registration statement on Form S-3 (or, if Form S-3 is not
then available to the Company, on such form of registration statement as is then
available to effect such a registration of the Registrable Securities, subject
to the Investor's consent) covering the resale of the Registrable Securities.
Such Registration Statement, to the extent allowable under the 1933 Act and the
Rules promulgated thereunder (including rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Debentures
to prevent dilution resulting from stock splits, stock dividends or similar
transactions or by reason of changes in the Conversion Price of the Debentures
in accordance with the terms thereof. No securities other than Registrable
Securities shall be included in the Registration Statement without the consent
of the Investor. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the Investor and its counsel prior
to its filing or other submission.
(b) Expenses. The Company will pay all expenses associated with the
registration, excluding discounts, commissions, fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Securities, and reasonable fees and
expenses of counsel to the Investor.
(c) Effectiveness.
(i) The Company shall use its best efforts to obtain the
effectiveness of the Registration Statement as soon as practicable. If (A) the
Registration Statement is not declared effective by the SEC within 120 days
following the date hereof (the "Registration Date"), (B) after the Registration
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Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement (by reason of a stop order, or the Company's
failure to update the Registration Statement), or (C) the Common Stock is not
listed or included for quotation on the Nasdaq SmallCap Market System, The
Nasdaq National Market System, the New York Stock Exchange or the American Stock
Exchange, then the Company will make payments to the Investor, as liquidated
damages and not as a penalty, in an amount equal to 2% of the aggregate
principal amount of the Debenture for each month or portion thereof following
the Registration Date during which the registration is not effective (referred
to herein as the "Blackout Period") (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall bear all
reasonable fees or costs incurred by the Investor for legal counsel as a result
of the filing of any post-effective amendments to the Registration Statement.
The amounts payable as liquidated damages pursuant to this paragraph shall be
payable in lawful money of the United States on the last day of each month
during the Blackout Period.
(ii) The Company may terminate or suspend effectiveness of any
registration contemplated by this Section one time for a period of not more than
30 days if the Company shall deliver to the Investor a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would (A) be seriously detrimental to the
business of the Company for such registration to be effected or remain effective
at such time, (B) interfere with any proposed or pending material corporate
transaction involving the Company or any of its subsidiaries, or (C) result in
any premature disclosure thereof.
(d) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investor shall have the right to select one legal counsel and an investment
banker and manager to administer the offering, which investment banker or
manager shall be reasonably satisfactory to the Company.
3. Company Obligations. The Company will use its best efforts to effect the
registration and the resale of the Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will,
as expeditiously as possible:
(a) use its reasonable best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
which will terminate when all Registrable Securities covered by such
Registration Statement, as amended from time to time, have been sold;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all Registrable Securities; provided that, at a
time reasonably prior to the filing of a Registration Statement or Prospectus,
or any amendments or supplements thereto, the Company will furnish to the
Investor copies of all documents proposed to be filed, which documents will be
subject to the comments of the Investor and its counsel;
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(c) permit a single firm of counsel designated by the Investor to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects;
(d) furnish to the Investor and its legal counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(e) in the event the Investor selects underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering;
(f) at the request of the Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement or, if such securities are
not being sold by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriter, if any, and the Investor and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors;
(g) make reasonable effort to prevent the issuance of any stop order
or other suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
(h) furnish to the Investor at least five copies of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
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(i) deliver to the Investor as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as the Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities;
(j) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the Investor
and its counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as the Investor reasonably requests in writing and do any
and all other reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(k) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange, interdealer quotation system
or other market on which similar securities issued by the Company are then
listed;
(l) immediately notify the Investor at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(m) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration or the
disposition of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve months, beginning after the effective date of the applicable
Registration Statement, which earnings statement shall satisfy the provisions of
subsection 11(a) of the 1933 Act (for the purpose of this subsection 3(m),
"Availability Date" means the 45th day following the end of the fourth fiscal
quarter that includes the effective date of such Registration Statement, except
that, if such fourth fiscal quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the end of such fourth fiscal
quarter).
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4. Obligations of the Investor.
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities that the Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor if
the Investor elects to have any of the Registrable Securities included in the
Registration Statement.
(b) The Investor, by its acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless the Investor has notified the Company in writing of its
election to exclude all of the Registrable Securities from the Registration
Statement.
(c) In the event the Investor determines to engage the services of an
underwriter, the Investor agrees to enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the dispositions of the
Registrable Securities.
(d) The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event rendering the Registration Statement no
longer effective, the Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus filed with the SEC and declared effective
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities current at the time of receipt of
such notice.
(e) The Investor may not participate in any underwritten registration
hereunder unless it (i) agrees to sell the Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to the terms of this
Agreement.
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5. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify and
hold harmless, to the fullest extent permitted by law the Investor, its
officers, directors, partners and employees and each person who controls the
Investor (within the meaning of the 0000 Xxx) against all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses caused by (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or any preliminary prospectus or any amendment or supplement thereto or 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 the same are based upon any information furnished in writing
to the Company by the Investor, expressly for use therein, or (ii) any violation
by the Company of any federal, state or common law, rule or regulation
applicable to the Company in connection with any Registration Statement,
Prospectus or any preliminary prospectus, or any amendment or supplement
thereto, and shall reimburse, as incurred, each of the foregoing persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims. The foregoing is subject to the
condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus or Prospectus which is eliminated or remedied in any
Prospectus or amendment or supplement thereto, the above indemnity obligations
of the Company shall not inure to the benefit of any indemnified party if a copy
of such final Prospectus or amendment or supplement thereto had been made
available to such indemnified party and was not sent or given by such
indemnified party at or prior to the time such action is required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities.
(b) Indemnification by Holder of Registrable Securities. In connection
with any registration pursuant to the terms of this Agreement, the Investor will
furnish to the Company in writing such information as the Company reasonably
requests concerning the Investor or the proposed manner of distribution for use
in connection with any Registration Statement or Prospectus and agrees to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors and officers and each person who controls the Company
(within the meaning of the 0000 Xxx) against any losses, claims, damages,
liabilities and expense resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in the Registration
Statement or Prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information furnished in
writing by the holder of Registrable Securities to the Company specifically for
inclusion in such Registration Statement or Prospectus and that such information
was substantially relied upon by the Company in preparation of the Registration
Statement or Prospectus or any amendment or supplement thereto. In no event
shall the liability of the Investor be greater in amount than the dollar amount
of the proceeds (net of all expense paid by such holder and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
statement or omission) received by the Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
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(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest may
exist between such person and the indemnifying party with respect to such claims
(in which case, if the person notifies the indemnifying party in writing that
such person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys (in addition to local counsel) at any time for all such indemnified
parties. No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) Contribution. If for any reason the indemnification provided for
in the preceding clauses (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder and the amount of any damages such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission) received by it upon the sale of the Registrable Securities
giving rise to such contribution obligation.
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6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Investor.
Notwithstanding the foregoing, this Agreement shall automatically be amended in
accordance with the provisions of this Section 6.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made as set forth in the Purchase Agreement.
(c) Assignments and Transfers by Investor. This Agreement and all the
rights and obligations of the Investor hereunder may not be assigned or
transferred to any transferee or assignee except as set forth herein. The
Investor may make such assignment or transfer to any transferee or assignee of
any Registrable Securities, provided, that (i) such transfer is made expressly
subject to this Agreement and the transferee agrees in writing to be bound by
the terms and conditions hereof, and (ii) the Company is provided with written
notice of such assignment.
(d) Assignments and Transfers by the Company. This Agreement may not
be assigned by the Company without the prior written consent of Investor, except
that without the prior written consent of the Investor, but after notice duly
given, the Company shall assign its rights and delegate its duties hereunder to
any successor-in-interest corporation, and such successor-in-interest shall
assume such rights and duties, in the event of a merger or consolidation of the
Company with or into another corporation, or any merger or consolidation of
another corporation with or into the Company which results directly or
indirectly in an aggregate change in the ownership or control of more than 50%
of the voting rights of the equity securities of the Company, or the sale of all
or substantially all of the Company's assets.
(e) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) 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.
(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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(h) Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(i) Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(j) Further Assurances. The Parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Colorado without regard to
principles of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Company: MEDICAL DYNAMICS, INC.
By:_________________________
Name:
Title:
The Investor: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
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