PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 31st day of
October, 1997 by and between Medical Dynamics, Inc., a Colorado corporation (the
"Company"), and The Tail Wind Fund, Ltd., a British Virgin Islands limited
liability company (the "Investor").
In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. The following terms, as used herein, have the following
meanings:
1.1 "Affiliate" means, with respect to any person, any other person
which directly or indirectly controls, is controlled by, or is under common
control with, such person.
1.2 "Agreements" means this Agreement, the Registration Rights
Agreement and the Escrow Agreement.
1.3 "Closing" means the consummation of the transactions contemplated
by this Agreement, which shall occur simultaneously with the execution hereof.
1.4 "Common Stock" means the Common Stock, par value $.001 per share,
of the Company.
1.5 "Control" means the possession , direct or indirect, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
1.6 "Debenture" means the Convertible Debenture issued to the Investor
in the aggregate principal amount of $1,100,000, the form of which is attached
hereto as Exhibit A.
1.7 "Escrow Agreement" means the Escrow Agreement dated as of October
1, 1997, as supplemented by a letter agreement dated October 21, 1997, by and
among the Company, Xxxxxx Capital Group, Ltd. and LaSalle National Bank, the
form of which is attached hereto as Exhibit B.
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1.8 "Material Adverse Effect" means a material adverse effect on the
(i) condition (financial or otherwise), business, assets, results of operations
or prospects of the Company and its subsidiaries, taken as a whole; (ii) ability
of the Company to perform any of its material obligations under the terms of
this Agreement; or (iii) rights and remedies of the Investor under the terms of
this Agreement.
1.9 "Person" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.10 "Registration Rights Agreement" means the Registration Rights
Agreement relating to the Common Stock issuable pursuant to the conversion of
the Debentures and the exercise of the Warrants, in the form attached hereto as
Exhibit C, to be entered into as of the date hereof.
1.11 "SEC" means the Securities and Exchange Commission.
1.12 "SEC Filings" has the meaning set forth in Section 4.5.
1.13 "Securities" means the Debentures, the Common Stock issuable upon
the conversion of, or payable as accrued interest on, the Debentures, the
Warrants and the Common Stock issuable upon the exercise of Warrants.
1.14 "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.15 "1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
1.16 "Warrant" means the Warrant issued to the Investor to purchase up
to an aggregate of 84,615 shares of Common Stock at the exercise price stated
therein, the form of which is attached hereto as Exhibit D.
2. Purchase and Sale of Debenture and Issuance of Warrant. Subject to the
terms and conditions of this Agreement, and in reliance on the representations
and warranties contained herein, the Investor hereby purchases and the Company
hereby sells and issues to the Investor (a) the Debenture at an aggregate
purchase price of $1,100,000, issued and delivered concurrently herewith to
LaSalle National Bank (the "Escrow Agent") in accordance with the terms of the
Escrow Agreement, in ten equal Debenture forms of $110,000 face amount each and
(b) the Warrant issued and delivered concurrently herewith to the Escrow Agent
in accordance with the terms of the Escrow Agreement. The Debentures and Warrant
will be released from escrow pursuant to the terms of the Escrow Agreement.
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3. Payment of Purchase Price. The Investor shall cause the purchase price
to be paid in full by wire transfer to the Escrow Agent in accordance with the
terms of the Escrow Agreement. The purchase price shall be released from escrow
pursuant to the terms of the Escrow Agreement.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that:
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Colorado and has all requisite power and authority to carry
on its business and own its properties as now conducted and owned. The Company
and each of its subsidiaries is duly qualified or licensed to do business as a
foreign corporation in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property makes such qualification
or licensing necessary unless the failure to so qualify or be licensed would not
have a Material Adverse Effect.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) the performance of all obligations of the Company hereunder
or thereunder, and (iii) the authorization, issuance (or reservation for
issuance) and delivery of the Securities. The Agreements constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
4.3 Valid Issuance.
(a) The Company has reserved a sufficient number of shares of
Common Stock for issuance upon conversion of the Debenture and exercise of the
Warrant, and such shares, when issued in accordance with the respective terms of
the Debenture and the Warrant, will be duly authorized, validly issued, fully
paid, non-assessable and free and clear of all encumbrances and restrictions,
except for restrictions on transfer imposed by applicable securities laws.
(b) The authorized capital stock of the Company consists, solely of
15,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. The
Company currently has 9,255,736 shares of Common Stock and no shares of
preferred stock issued and outstanding and there are no other outstanding shares
of capital stock of the Company. All of the issued and outstanding shares of the
Company's Common Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights. Except as set forth on
Schedule 4.3, no one is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as
disclosed on Schedule 4.3 to this Agreement, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
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any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind, and
the Company and its subsidiaries do not have any present plan or intention to
issue any equity securities of any kind, or to transfer any equity securities of
any kind owned by them. Except as disclosed on Schedule 4.3, the Company does
not know of any voting agreements, buy-sell agreements, option or right of first
purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities held by them. Except
as disclosed on Schedule 4.3, the Company has not granted any Person the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
(c) There are currently 1,443,037 shares of Common Stock issuable
pursuant to outstanding options granted by the Company to employees and
consultants; 1,200,000 shares of Common Stock issuable to Xxxxxx Xxxxxxxx and
Chae Uk Xxx pursuant to the exercise of certain options contemplated by that
Agreement and Plan of Merger dated as of October 23, 1997 (the "Merger
Agreement") relating to the merger with Computer Age Dentist, Inc. ("CADI"); and
up to 250,000 shares of Common Stock issuable upon the exercise of certain
options to be issued to certain employees of CADI. The number of outstanding
shares of Common Stock, as indicated above, plus the number of shares of Common
Stock issuable pursuant to outstanding rights and agreements on a fully diluted
basis, assuming the complete exercise or conversion of all rights to acquire
capital stock of the Company until such rights and subsequent rights incident to
exercise or conversion are fully exercised or converted for Common Stock,
together represent 12,148,773 shares of Common Stock immediately prior to the
Closing.
4.4 Consents. The execution, delivery and performance by the Company
of the Agreements and the offer, issue and sale of the Securities require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws and the requirements of Nasdaq, which the
Company undertakes to file within the applicable time periods.
4.5 Delivery of SEC Filings; Business. The Company has delivered or
made available to the Investor true and correct copies of (i) its most recent
Annual Report on Form 10-KSB, (ii) its quarterly reports on Form 10-QSB for each
fiscal quarter subsequent to that fiscal year end, and (iii) any other documents
filed with the Securities and Exchange Commission (the "SEC") since the filing
of its most recent Annual Report on Form 10-KSB (collectively, the "SEC
Filings"). The Company and its subsidiaries are engaged only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description of the business of the Company and its subsidiaries.
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4.6 Use of Proceeds. The proceeds of the sale of the Securities
hereunder shall be used by the Company for working capital, operating capital
and, to the extent available, costs associated with the acquisition by the
Company of Computer Age Dentist, Inc. pursuant to the agreement described fully
on Schedule 4.3 hereto.
4.7 No Material Adverse Change. Except as set forth in Schedule 4.7,
since the filing of the Company's most recent Annual Report on Form 10-KSB or as
otherwise identified and described in subsequent reports filed by the Company
pursuant to the 1934 Act, there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's most recent Quarterly Report on
Form 10-QSB, except changes in the ordinary course of business which have not
had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or any of its
subsidiaries;
(iv) any waiver by the Company or any of its subsidiaries of a
valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or any of its subsidiaries, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its subsidiaries taken as a whole (as such business is presently conducted
and as it is proposed to be conducted);
(vi) any material change or amendment to a material contract or
arrangement by which the Company or any of their subsidiaries or any of its
assets or properties is bound or subject;
(vii) any material change in any compensation arrangement or
agreement with any employee of the Company or any of its subsidiaries who now
earns, or who would earn as a result of such change, in excess of $100,000 per
annum or any other officer of the Company or any of its subsidiaries;
(viii) any labor difficulties or labor union organizing activities
with respect to employees of the Company or any of its subsidiaries;
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(ix) any transaction entered into by the Company or any of its
subsidiaries other than in the ordinary course of business; or
(x) any other event or condition of any character which might have
a Material Adverse Effect that is not reflected in the SEC Filings.
4.8 SEC Filings; Material Contracts.
(a) As of its filing date, each report filed by the Company with
the SEC pursuant to the 1934 Act, complied as to form in all material respects
with the requirements of the 1934 Act and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each registration statement and any amendment thereto filed by
the Company pursuant to the 1933 Act and the rules and regulations thereunder,
as of the date such statement or amendment became effective, complied as to form
in all material respects with the 1933 Act and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its
issue date and as of the closing of any sale or securities pursuant thereto did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(c) Except as listed in Schedule 4.8 hereto, there are no
agreements or instruments currently in force and effect that constitute a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K) of the Company or that constitute a warrant, option, convertible security
or other right, agreement or arrangement of any character under which the
Company is or may be obligated to issue any equity security of any kind, or to
transfer any equity security of any kind. The Company has delivered to the
Investor prior to the Closing full and complete copies of all agreements
indicated in Schedule 4.8 hereto.
4.9 Disclosures. No representation or warranty made under any Section
hereof and no information furnished by the Company pursuant hereto, or in any
other document, certificate or statement furnished by the Company to the
Investor or any authorized representative of the Investor, pursuant to the
Agreements or in connection therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the respective
statements contained herein or therein, in light of the circumstances under
which the statements were made, not misleading.
4.10 Registration Rights. The registration rights granted to the
Investor pursuant to the Registration Rights Agreement are at least as favorable
to the Investor as those granted to any holder of any securities of the Company
are to such holder.
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4.11 No Breach, Violation or Default. The execution, delivery and
performance of the Agreements and the issuance and sale of the Securities will
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any such subsidiary is subject,
or the Certificate of Incorporation or By-Laws of the Company or any such
subsidiary.
4.12 Tax Returns and Payments. The Company and its subsidiaries have
correctly and timely prepared and filed all tax returns required to have been
filed by it with all appropriate federal, state and local governmental agencies
and timely paid all taxes owed by them. The charges, accruals and reserves on
the books of the Company and its subsidiaries in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid
assessments of the Company or any subsidiary nor, to the knowledge of the
Company, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, states or local taxing
authority except such as which are not material. All material taxes and other
assessments and levies which the Company or any subsidiary is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party. There are no tax liens or
claims pending or threatened against the Company or any subsidiary or any of
their respective assets or property. There are no outstanding tax sharing
agreements or other such arrangements between the Company or any subsidiary and
any other corporation or entity.
4.13 Title to Properties. Except as disclosed in the SEC Filings, the
Company and its subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.14 Certificates, Authorities and Permits. The Company and its
subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
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4.15 No Labor Disputes. No labor dispute with the employees of the
Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that might have a Material Adverse Effect.
4.16 Intellectual Property. The Company and its subsidiaries own or
possess adequate trademarks and trade names and have all other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "Intellectual Property Rights"), free and
clear of all liens, security interests, charges, encumbrances, equities and
other adverse claims, necessary to conduct the business now operated by them, or
presently employed by them, and presently contemplated to be operated by them,
and have not received any notice of infringement of or conflict with asserted
rights of others with respect to any Intellectual Property Rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect. No proprietary
technology of any Person was used in the design or development by the Company of
(or otherwise with respect to) any of the Intellectual Property Rights which
technology was not properly acquired by the Company from such Person.
4.17 Environmental Matters. Neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation which might lead to such a claim.
4.18 Litigation. Except as disclosed in the SEC Filings, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.19 Financial Statements. The financial statements included in each
SEC Filing present fairly the consolidated financial position of the Company and
its subsidiaries as of the dates shown and their consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with the generally accepted accounting
principles applied on a consistent basis.
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4.20 Insurance Coverage. The Company and its subsidiaries maintain in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted, and properties owned or
leased, by the Company and its subsidiaries, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.21 Compliance with Nasdaq Continued Listing Requirements. The
Company is in compliance with all applicable Nasdaq Small Cap Market continued
listing requirements.
5. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly existing
limited liability company and has all requisite corporate power and authority to
invest in the Securities pursuant to this Agreement. The Investor is not a
resident of the United States or any state, district or territory thereof.
5.2 Authorization. The execution, delivery and performance by the
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 Purchase Entirely for Own Account. The Securities to be received
by such Investor hereunder will be acquired for investment for the Investor's
own account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same.
5.4 Investment Experience. The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. The Investor has had an opportunity to
ask questions and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Neither
such inquiries nor any other due diligence investigation conducted by the
Investor shall modify, amend or affect the Investor's right to rely on the
Company's representations and warranties contained in this Agreement or made
pursuant to this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
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transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for resale
pursuant to the Registration Rights Agreement, certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933 (the "Act"). They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under the Act or an exemption from the registration
requirements of the Act."
(b) If required by the authorities of any state in connection with
the issuance of sale of the Securities, the legend required by such state
authority.
Upon registration for resale pursuant to the Registration Rights
Agreement, all certificates evidencing the Common Stock shall be issued free of
such restrictive legends.
5.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
6. Registration Rights Agreement. The parties acknowledge and agree that
part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
7.1 Rights of Investor upon Certain Sales. The Company agrees that for
so long as the Debenture is outstanding, it shall give thirty days advance
written notice to the Investor prior to any offer or sale of any of its equity
securities or any securities convertible into or exchangeable or exercisable for
such securities. In addition, prior to the closing of any such sale for cash,
the Investor shall have the following rights, which must be exercised in writing
by the Investor within ten business days following the receipt of notice from
the Company:
(a) With respect to any sale which is to take place from the date
hereof through the 90-day period following the effective date of the
registration contemplated by the Registration Rights Agreement, the Investor
shall have the right to require the Company to redeem the Debenture at a
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purchase price equal to 115% of the outstanding principal amount of the
Debenture, plus unpaid accrued interest thereon. Funds for such redemption must
be paid directly to the Investor upon closing by the Company of such sale out of
the proceeds from such sale.
(b) With respect to any sale which is to take place from the date
hereof through the period of one year following the effective date of any
registration contemplated by the Registration Rights Agreement, the Investor
shall have the right to participate in such offering and purchase such equity
securities for the same consideration and on the same terms and conditions as
contemplated for such third-party sale.
The provisions of subparagraphs (a) and (b) of this Section 7.1 shall not apply
in the event of the non-public offer and sale by the Company of shares of its
Common Stock for other than cash, so long as the Common Stock so issued is
restricted from further transfer or sale for a period of one year from the date
of such issuance. The foregoing notwithstanding, there shall be excepted from
the operation of this provision up to 240,000 shares of the Company to be issued
by the Company in connection with the Company's acquisition of Computer Age
Dentist, Inc., which shares shall be registered for resale by the Company within
the twelve months following the date of this Agreement.
7.2 Limitation on Acquisitions by Company. Commencing on the date
hereof and continuing for a period of one year following the effective date of
the registration contemplated by the Registration Rights Agreement, the Company
agrees that it shall not, directly or indirectly, in one or a series of
transactions, purchase all or substantially all of the assets of, or greater
than a majority of the outstanding securities of any entity having an after-tax
loss in excess of $100,000 for the most recent four fiscal quarters from the
closing date of any such acquisition by the Company (or the earlier date on
which the Company makes any payment, in cash, stock or kind, in connection
therewith), without obtaining the prior written consent of the Investor.
7.3 Opinion of Counsel. The Company has delivered, simultaneously with
the execution and delivery of this Agreement, the opinion of Friedlob Xxxxxxxxx,
its counsel, in the form attached hereto as Exhibit E.
7.4 Reservation of Common Stock Pursuant to Conversion of Debenture
and Exercise of Warrants. The Company hereby agrees to at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of permitting conversion of the Debenture and exercise of the
Warrant, such number of shares of Common Stock as shall from time to time equal
1.5 times the number of shares sufficient to permit the complete conversion of
the Debenture plus the number of shares of Common Stock as shall be necessary to
permit the exercise of the Warrant in accordance with the respective terms of
the Debenture and the Warrant.
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7.5 Reports. The Company will furnish to the Investor the following
reports:
(a) Quarterly Reports. As soon as available and in any event within
45 days after the end of each fiscal quarter of the Company, the Company's Form
10-QSB or, in the absence of a Form 10-QSB, consolidated balance sheets of the
Company and its subsidiaries as at the end of such period and the related
consolidated statements of operations, stockholders' equity and cash flows for
such period and for the portion of the Company's fiscal year ended on the last
day of such quarter, all in reasonable detail and certified by a principal
financial officer of the Company to have been prepared in accordance with
generally accepted accounting principles, subject to year-end and audit
adjustments.
(b) Annual Reports. As soon as available and in any event within 90
days after the end of each fiscal year of the Company, the Company's Form 10-KSB
or, in the absence of a Form 10-KSB, consolidated balance sheets of the Company
and its subsidiaries as at the end of such year and the related consolidated
statements of earnings, stockholders' equity and cash flows for such year, all
in reasonable detail and accompanied by the report on such consolidated
financial statements of an independent certified public accountant selected by
the Company and reasonably satisfactory to the Investor.
(c) Securities Filings. As promptly as practicable and in any event
within five days after the same are issued or filed, copies of (i) all press
releases issued by the Company or any subsidiary, and all notices, proxy
statements, financial statements, reports and documents as the Company or any
subsidiary shall send or make available generally to its stockholders or to
financial analysts, and (ii) all periodic and special reports, documents and
registration statements (other than on Form S-8) which the Company or any
subsidiary furnishes or files, or any officer or director of the Company or any
of its subsidiaries (in such person's capacity as such) furnishes or files with
the SEC.
(d) Material Adverse Effects. As promptly as practicable and in any
event within five days after any executive officer of the Company obtains
knowledge of the existence of any condition or event (including, without
limitation, the filing of any litigation against or the commencement of any
proceeding or investigation involving the Company or any subsidiary), which has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect, written notice specifying in reasonable detail the nature of such
condition or event and what action the Company proposes to take with respect
thereto.
(e) Other Information. Such other information relating to the
Company or its subsidiaries as from time to time may reasonably be requested by
the Investor provided the Company produces such information in its ordinary
course of business.
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7.6 No Conflicting Agreements. The Company will not, and will not
permit its subsidiaries to, take any action, enter into any agreement or make
any commitment which would conflict or interfere in any material respect with
the obligations to the Investor under the Agreements.
7.7 Insurance. The Company shall, and shall cause each subsidiary to,
have in full force and effect (a) insurance reasonably believed to be adequate
on all assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed to be adequate protection against all liabilities, claims
and risks against which it is customary for companies similarly situated as the
Company and the subsidiaries to insure.
7.8 Compliance with Laws. The Company will use reasonable efforts, and
will cause each of its subsidiaries to use reasonable efforts, to comply in all
material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities, except to the extent non-compliance (in
one instance or in the aggregate) would not have a Material Adverse Effect.
7.9 Corporate Governance. For so long as the Convertible Debenture, or
any portion thereof, is outstanding and/or the Investor is the beneficial owner
of the Company's Common Stock, the Company:
(a) Shall distribute to its shareholders copies of an annual report
containing audited financial statements of the Company and its subsidiaries a
reasonable period of time prior to the Company's annual meeting of shareholders;
(b) Shall maintain a minimum of two independent directors on its
board of directors;
(c) Shall hold an annual meeting of shareholders each and every
year;
(d) Shall solicit proxies and provide proxy statements for all
meetings of shareholders;
(e) From and after February 22, 1998, shall obtain shareholder
approval of (i) a plan or arrangement pursuant to which stock may be acquired by
officers or directors of the Company (except for warrants or rights issued
generally to shareholders of the Company or broadly based plans or arrangements
including other employees of the Company); (ii) an issuance of the Company's
securities when the issuance will result in a change of control; (iii) an
issuance of the Company's securities in connection with the acquisition of
another company if shareholder approval of such issuance is required under
applicable Nasdaq rules; and (iv) any other issuance of the Company's securities
if shareholder approval of such issuance is required under applicable Nasdaq
rules.
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7.10 Additional Authorized Capital. The Company hereby agrees that it
shall recommend to its shareholders, and seek to obtain from its shareholders,
approval of an increase in the authorized capital stock of the Company to at
least 20,000,000 shares of Common Stock, which approval shall be sought no later
than the 1998 annual meeting of shareholders of the Company to be held before
July 1, 1998.
8. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of five years and six months from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by
either party without the prior written consent of the other party hereto, except
that without the prior written consent of the Company, but after notice duly
given, the Investor may assign its rights and delegate its duties hereunder to
an Affiliate, and without the prior written consent of Investor, but after
notice duly given, the Company may assign its rights and delegate its duties
hereunder to any successor-in-interest corporation 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. 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.
9.2 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.
9.3 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.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, or if sent
by telex or telecopier, upon receipt of the correct answer back, or upon deposit
with the United States Post Office, by registered or certified mail, or upon
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deposit with an overnight air courier, in each case postage prepaid and
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days' advance written notice to
the other party:
If to the Company:
Medical Dynamics, Inc.
00 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Van X. Xxxxxxx
Telephone: 303/000-0000
Facsimile: 303/799-1378
with a copy to:
Friedlob Xxxxxxxxx et al.
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx, Xx.
Telephone: 303/000-0000
Facsimile: 303/595-3159
If to the Investor:
The Tail Wind Fund, Ltd.
Windermere House
000 Xxxx Xxx Xxxxxx
X.X. Xxx XX-0000
Nassau, Bahamas
Telephone:
Facsimile:
with a copy to:
The Tail Wind Fund, Ltd.
c/o European American Securities, Inc.
Xxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx XX0X 0XX
Xxxxxxx
Attn: Xxxxx Xxxxx
Telephone: 00-000-000-0000
Facsimile: 00-000-000-0000
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and with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: XxXxxx Xxxxxx
Telephone: 202/000-0000
Facsimile: 202/508-6200
9.5 Expenses. The Company shall pay all costs and expenses incurred
with respect to the negotiation, execution, delivery and performance of the
Agreements, including, without limitation, the fees of Xxxxx Xxxx LLP, counsel
to the Investor, in an amount up to $10,000.
9.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such securities, and the Company.
9.7 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.
9.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, and the Registration Rights Agreement constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.9 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.
9.10 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 laws.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company:
MEDICAL DYNAMICS, INC.
By:
--------------------------------
Name: Van X. Xxxxxxx
Title: President
The Investor: THE TAIL WIND FUND, LTD.
By:
--------------------------------
Name:
Title:
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