Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as December 22, 1997, is
entered into by and between MEDIA LOGIC, INC., a Massachusetts corporation
(the "Company"), and Imprimis SB L.P., a Delaware limited partnership (the
"Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, shares of the common stock, $.01 par
value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Upon the terms and subject to the conditions set
forth in this Agreement, the undersigned hereby agrees to purchase from the
Company 1,133,334 shares (the "Shares") of Common Stock for ninety cents
($0.90) per share, for an aggregate purchase price (the "Purchase Price") of
$1,020,000.60. The Purchase Price for the Shares shall be payable in United
States Dollars.
b. Form of Payment. In consideration of the issuance and sale of
the Shares and the Warrants (as hereinafter defined) by the Company to the
Buyer, the Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars pursuant to the wire
instructions set forth in Section 1(c). Immediately upon payment by the
Buyer to the Company of the Purchase Price of the Shares, the Company shall
deliver certificates evidencing such Shares duly executed on behalf of the
Company and countersigned by the Company's transfer agent to the Buyer,
together with warrant certificates, the form of which is attached hereto as
ANNEX I hereto, evidencing the Warrants (the "Warrants"), duly executed on
behalf of the Company, and the Shares and Warrants shall each be free and
clear of all security interests, liens, pledges, charges, escrows, options,
rights of first refusal, encumbrances, agreements, arrangements, commitments
or other claims of any kind or character (collectively, the "Claims"). The
obligation of the parties hereto as set forth in this Section 1(b) are
subject to the satisfaction of the conditions set forth (i) in the case of
the Buyer, in Section 7(c) and (ii) in the case of the Company, in Section
6(d), each of which may not be waived by either party hereto.
c. Method of Payment. Payment of the Purchase Price shall be
made by wire transfer of funds to the Company in accordance with the
following instructions:
FLEET BANK OF MA
Account Name MEDIALOGIC, INC.
Account No. 050-0000000 Bank ABA #000000000
SWIFT address: XXXXXX0X Bank Phone # 800/000-0000
Please reference invoice # on Transfer
d. Affiliates. For purposes of this Agreement (except as expressly
defined in Section 3(t) solely for purposes of Section 3(t)), "Affiliate"
shall mean (a) such as is defined in the Securities Exchange Act of 1934, as
amended, and (b) as to each other, IMPRIMIS SB L.P. and WEXFORD SPECTRUM
INVESTORS LLC.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Shares pursuant to
the Registration Statement (as hereinafter defined), the Buyer is purchasing
the Shares in the ordinary course of its business and for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any
distribution thereof or any arrangement or understanding with any other
persons regarding the distribution or purchase of such Shares;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act
by reason of Rule 501(a)(3), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an
entity) and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling agents), to
protect its own interests in connection with the transactions described in
this Agreement, and the related documents, and (iv) able to afford the entire
loss of its investment in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
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understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Shares which have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting
the generality of the foregoing, the Buyer has also had the opportunity to
obtain and to review the Company's (1) Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 (the "Form 10-K"), (2) Amendment No. 1 to
the Form 10-K on Form 10-K/A, (3) Quarterly Reports on Form 10-Q for the
fiscal quarters ended June 30, 1997 and September 30, 1997 and (4) Proxy
Statement dated August 11, 1997 (collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources it
can practically bring to bear on the purchase of the Shares, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to making an investment decision like that
involved in the purchase of the Shares and the Buyer understands that its
investment in the Shares involves a high degree of risk;
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Shares;
h. The Buyer has full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on
behalf of the Buyer and is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity) and to bankruptcy,
insolvency, fraudulent transfer, reorganization moratorium and other similar
laws affecting creditors' rights generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Shares.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Organization, Standing and Power. (i) The Company and its
wholly-owned subsidiary, MediaLogic ADL, Inc. (the "Subsidiary"), are duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively, and
each has all requisite corporate power and authority to own, lease and
operate its respective properties and to carry on its respective businesses
as now being conducted
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and as currently proposed to be conducted. The Company and the Subsidiary
are duly qualified to do business and are in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by them or because of the nature of their business
as now being conducted, except for those jurisdictions where the failure to
be so qualified would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the condition (financial or
otherwise), operations, business, assets, liabilities, earnings or prospects
of the Company and the Subsidiary taken as a whole ("Material Adverse
Effect").
(ii) The Company has, prior to the execution and delivery by the
Company of this Agreement, delivered to the Buyer a true and complete copy of
the Certificate of Incorporation (together with any amendments thereto) and
the By-laws of the Company. The minute books of the Company are true and
complete in all material respects.
b. Securities Purchase Agreement; Warrants and Stock. The
Company has all requisite corporate power and authority to execute and
deliver this Agreement, the certificates evidencing the Warrants, and the
certificates evidencing the Shares and to perform all of its obligations and
undertakings under such agreements and to carry out the transactions
contemplated under such agreements. This Agreement, the certificates
evidencing the Shares and the Warrants and the transactions contemplated
thereby, and the issuance and sale of the Shares and the Warrants, have each
been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery or performance by the Company of this
Agreement or the Warrants. This Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Warrants, when
executed and delivered by the Company, will be, valid and binding agreements
of the Company enforceable in accordance with their respective terms, subject
as to enforceability to general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or in equity) and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
c. Capitalization; Equity Interests. (i) As of the date of this
Agreement, the authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, of which 8,563,660 shares are issued and
outstanding. The outstanding shares of Common Stock have been duly
authorized and issued and are fully paid and non-assessable and not subject
to any purchase option or right of first refusal or preemptive,
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subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder.
(ii) Except for this Agreement, the Warrants and as set forth in
Schedule 3(c) of the Disclosure Schedule, (x) there are no bonds, debentures,
notes or other indebtedness or securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote, (y)
there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company is
a party or by which the Company is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of Common Stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call right, commitment, agreement, arrangement or undertaking and
(z) there are no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company to repurchase, redeem or
otherwise acquire any shares of Common Stock or other voting securities of
the Company or any securities of the type described in clauses (x) or (y)
above. No dividends on any shares of Common Stock have been declared but not
yet paid.
(iii) Except for the Subsidiary, the Company does not have any
subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability
company, joint venture or other entity. The Company is not subject to any
liability for any claim that the Company violated any applicable Federal or
state securities laws in connection with the issuance of Common Stock or
other securities. There are no restrictions on the transfer of shares of
Common Stock other than those imposed by relevant state and Federal
securities laws. There are no voting trusts, voting agreements, proxies or
other agreements or instruments with respect to the voting of the Common
Stock to which the Company is a party, or to the best of the knowledge of any
of the Company's officers, directors or employees (the "Company's
Knowledge"), among or between any persons other than the Company. Except as
set forth in Schedule 3(c) of the Disclosure Schedule, no person has the
right to demand or other rights to cause the Company to file any registration
statement under the 1933 Act relating to any securities of the Company
presently outstanding or any right to participate in any such registration
statement.
(iv) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act, and the Common Stock is listed and traded on
the American Stock Exchange ("AMEX").
d. Non-contravention. The execution and delivery of this Agreement
and the Warrants by the Company, the issuance of the Shares and the Warrants,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Warrants and compliance by the Company with any of the
provisions hereof or thereof do not and will not conflict with or result in a
breach or violation by the Company of any of the terms or provisions of, or
constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a
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right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to any increased, additional,
accelerated or guaranteed rights or entitlement of any person or entity
under, or result in the creation of any Claim on the properties or assets of
the Company under (i) the restated articles of organization or by-laws of the
Company, (ii) any indenture, mortgage, note, bond, license, lease, contract,
commitment, arrangement, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or
(iv) to its knowledge, any judgment, decree or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its
properties or assets (v) any license, franchise, permit or other similar
authorization held by the Company, except such conflict, breach or default
which would not have a Material Adverse Effect on the transactions
contemplated herein.
e. Financial Statements. (i) The consolidated financial
statements (the "Financial Statements") of the Company set forth in the (A)
Company's Annual Report on Form 10-K for the year ended March 31, 1997,
reported on by Xxxxxx Xxxxxxxx LLP, (B) Amendment No. 1 to the Form 10-K on
Form 10-K/A, and (C) Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, 1997 and September 30, 1997, in each case fairly
present the consolidated financial position of the Company as of such dates
and the consolidated results of operation and cash flows for such periods
then ended in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis. Xxxxxx Xxxxxxxx LLP is an independent
accountant as defined under the 1933 Act and the rules and regulations
promulgated thereunder.
(ii) All reserves established by the Company are reflected on the
balance sheets contained in the Financial Statements or in the footnotes to
the Financial Statements of the Company and in management's reasonable
estimate are adequate in the aggregate and there are no loss contingencies
that are required to be accrued by Statement of Financial Accounting Standard
No. 5 of the Financial Accounting Standards Board which are not provided for
on such balance sheets. As of the date hereof, except for liabilities (A)
reflected on or reserved against on the balance sheet as of September 30,
1997 (the "Latest Balance Sheet") (B) incurred in the ordinary course of the
Company's business and consistent with past practice or (C) contemplated by
this Agreement, the Company has no liabilities (absolute, accrued, fixed,
contingent, known, unknown or otherwise) which would be required by GAAP to
be reflected or reserved against on the balance sheet of the Company and
which would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
(iii) Any forecasts and projections previously delivered to the
Buyer by the Company have been prepared in good faith and on the basis of
assumptions that are fair and reasonable in light of current and reasonably
foreseeable circumstances.
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f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Shares or the
Warrants to the Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained and except as
contemplated in Section 4(s) of this Agreement.
g. SEC Filings. None of the SEC filings with the Securities and
Exchange Commission since the filing of the 10-K on March 31, 1997 contained,
at the time they were filed, 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 made therein in light of the circumstances under which they
were made, not misleading. The Company has since December 22, 1996 timely
filed all requisite forms, reports and exhibits thereto with the Securities
and Exchange Commission.
h. Absence of Changes. Except as set forth on Schedule 3(h) of
the Disclosure Schedule and except as may apply in the context of the
Securities Purchase Agreement entered into between the Company and an
Affiliate of the Buyer of even date herewith (the "Affiliate Purchase
Agreement"), since September 30, 1997, the Company and the Subsidiary have
operated in the ordinary course consistent with past practice and there has
not been:
(i) any event, occurrence or development or state of circumstances
of facts which has had or would reasonably be expected to have a Material
Adverse Effect;
(ii) any payment, discharge or satisfaction of any Claim or
obligation of the Company or the Subsidiary or any amendment, termination or
waiver of any rights of value to the Company or the Subsidiary, except in the
ordinary course of business and consistent with past practice;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of Common Stock of
the Company or the Subsidiary any direct or indirect redemption, purchase or
other acquisition of any such shares;
(iv) any creation of any Claim on, or any assignment or other
disposition of, any property of the Company or the Subsidiary, except in the
ordinary course of business consistent with past practice, and which Claims,
assignments and dispositions together with all other such Claims, assignments
and dispositions would not have a Material Adverse Effect;
(v) any write-down of the value of any asset of the Company
or the Subsidiary or any write-off as uncollectible of any accounts or notes
receivable or any portion thereof, other than write-downs or write-offs which
in the aggregate do not exceed $25,000;
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(vi) any capital expenditure or commitment or addition to
property, plant or equipment of the Company or the Subsidiary, individually
or in the aggregate, in excess of $25,000;
(vii) (A) any change in any bonus, commission, pension,
profit-sharing or other benefit or compensation plan, policy or arrangement
or commitment or (B) any increase in any such compensation, bonus,
commission, pension, profit sharing or other benefit payable now or in the
future to any shareholder, director or officer of the Company or the
Subsidiary, or any Affiliate (as defined in the Exchange Act) of such person
(or, in each case, the entering into of any agreement to effect the same);
(viii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company or the Subsidiary, other than obligations incurred in the ordinary
course of business and consistent with past practice;
(ix) any issuance or sale, or any contract entered into for
the issuance or sale, of any shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the Company or
the Subsidiary;
(x) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company or the Subsidiary;
(xi) any material damage, destruction or loss (whether or not
covered by insurance) affecting any asset or property of the Company or the
Subsidiary;
(xii) any change in the independent public accountants of
the Company or the Subsidiary or in the accounting methods or accounting
practices followed by the Company or the Subsidiary or any change in
depreciation or amortization policies or rates; or
(xiii) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xii).
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as
disclosed in the documents referred to in Section 2(e), that has not been
disclosed in writing to the Buyer that (i) would reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company or the Subsidiary or (ii) would reasonably be expected to materially
and adversely affect the ability of the Company to perform its obligations
pursuant to this Agreement.
j. Absence of Litigation. Except as set forth in Schedule 3(j) of
the Disclosure Schedule, there is no action, suit, claim, legal, or
administrative or arbitration proceeding, inquiry or investigation before or
by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or the Subsidiary,
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wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect on the business or financial condition of the Company or the
Subsidiary or the transactions contemplated by this Agreement or any of the
documents contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
k. Absence of Events of Default. Except as set forth in Schedule
3(k) of the Disclosure Schedule, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a Material Adverse Effect on the Company's financial condition or
results of operations.
l. Assets, Property And Related Matters; Real Property. (i) The
Company or the Subsidiary has good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the Financial Statements,
free and clear of all Claims. To the Company's Knowledge, such assets (other
than inventory) are in good operating condition and repair, subject to
ordinary wear and tear and constitute all of the properties, interests,
assets and rights held for use or used in connection with the business and
operations of the Company or the Subsidiary and constitute all those
necessary to continue to operate the business of the Company or the
Subsidiary, as the case may be, consistent with current and historical
practice.
(ii) All leases of real property to which the Company or the
Subsidiary is a party ("Leases"), as set forth in Schedule 3(1) of the
Disclosure Schedule, are in writing and in full force and effect and
constitute valid and binding obligations of the Company and, to the Company's
Knowledge, of the other parties thereto, enforceable in accordance with their
respective terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles. The
Company or the Subsidiary holds good and valid title to the leasehold
interests under the Leases for the term of each such Lease, free and clear of
all Claims. The Leases have not been modified in any material respect,
except to the extent that such modifications are disclosed, in writing, in a
copy delivered to the Buyer. There exists no material default, or any event
which upon notice or the passage of time, or both, would give rise to any
material default, in the performance of the Company or the Subsidiary or, to
the Company's Knowledge, by any lessor under any such lease. Except as
disclosed on Schedule 3(l) of the Disclosure Schedule, the Company or the
Subsidiary have not, and to the Company's Knowledge, no other person has,
granted any oral or written right to anyone other than the Company or the
Subsidiary to lease, sublease or otherwise occupy any of its properties
through the end of the applicable lease periods.
(iii) The Company does not own, and has not previously owned,
any real property.
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m. Patents, Trademarks and Similar Rights.(h)Patents,
Trademarks and Similar Rights (i) Set forth on Schedule 3(m) of the
Disclosure Schedule is a true and complete list of the patents, patent
applications, trademarks (registered or unregistered) and service marks (and
any applications or registrations therefor), trade names, corporate names,
copyrights, copyright registrations and other intellectual property that
currently exists in written form owned or filed by, or licensed to, the
Company or the Subsidiary or used in the conduct of the Company's or the
Subsidiary's business as presently conducted ("Intellectual Property"). With
respect to registered trademarks, Schedule 3(m) of the Disclosure Schedule
sets forth a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. To
the Company's Knowledge, the Company has all rights to Intellectual Property
as are used or are necessary in connection with the businesses of the Company
and the Subsidiary as presently conducted, and the Company owns, or has the
right to use, execute, reproduce, display, perform, modify, enhance,
distribute, prepare derivative works of and sublicense, without payment to
any other person or entity, all Intellectual Property free and clear of all
Claims whatsoever. The consummation of the transactions contemplated hereby
will not conflict with, alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any
options, licenses or agreements of any kind relating to Intellectual Property
or the marketing or distribution thereof. Neither the Company nor the
Subsidiary is bound by or a party to any options, licenses or agreements of
any kind relating to the intellectual property of any other person or entity.
The conduct of the business of the Company and of the Subsidiary as
presently conducted does not, to the Company's Knowledge, violate, conflict
with or infringe the intellectual property of any other person or entity. No
claims are pending, or to the Company's Knowledge, threatened, against the
Company or the Subsidiary by any person or entity with respect to the
ownership, validity, enforceability, effectiveness or use of any Intellectual
Property and, during the past three years, neither the Company nor the
Subsidiary has received any communications alleging that the Company has
violated any rights relating to intellectual property of any person or entity.
n. Agreements.(j)Agreements (i) Schedule 3(n) of the Disclosure
Schedule contains a true and complete list or description of all written or
oral contracts, agreements and other instruments ("Contracts") to which the
Company or the Subsidiary is a party (A) relating to indebtedness for money
borrowed or the deferred purchase price of property or services or capital
leases in excess of $50,000, (B) relating to any forward commitments or to
other commitments in excess of $50,000 in any given year, (C) relating to any
joint venture, partnership or limited liability company; (D) relating to the
employment or compensation of any director, officer or shareholder of the
Company or the Subsidiary, or any Affiliate of such companies, and not
disclosed in the proxy statement filed in connection with the Company's
fiscal year ended March 31, 1997, (E) relating to the employment or
compensation of any employee, consultant, independent contractor or other
agent of the Company or the Subsidiary, or any Affiliate of such companies,
involving a payment in excess of $50,000 in any given year, (F) relating to
the sale or other disposition of any assets, properties or rights (other than
the sale of inventory), (G) which restricts the Company's
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or the Subsidiary's ability to do business in any geographic area or grants
to any person exclusive or similar rights in any line of business or in any
geographic area, (I) which restricts the Company's or the Subsidiary's
ability from soliciting employees of another entity or restricts another
entity's ability from soliciting the Company's or the Subsidiary's employees,
(J) relating to the lease of any machinery, equipment, vehicle or other
personal property owned by any other person or entity, for which the annual
rental exceeds $50,000; (K) relating to the lease of any real or personal
property to any other person or entity, for which the annual rental exceeds
$50,000; (L) relating to any advance, loan, extension of credit or capital
contribution to, or other investment in, any person or entity not in excess
of $50,000 in the aggregate; or (M) that is otherwise material to the
business, properties or assets of the Company or the Subsidiary and entered
into other than in the ordinary course of business.
(ii) All Contracts are valid, binding and in full force and effect
as to the Company or the Subsidiary and neither the Company nor, to the
Company's Knowledge, any other party thereto is in breach or violation of, or
default under, any such Contracts in any material respect.
o. Related Party Transactions(n)Related Party Transactions .
Except as set forth on Schedule 3(o) of the Disclosure Schedule, no current
or former partner, director, officer, employee or shareholder of the Company
or the Subsidiary or any associate or Affiliate thereof, or any parent,
spouse, child, brother, sister or any other relative with a relationship (by
blood, marriage or adoption) of not more remote than first cousin of any of
the foregoing (collectively, "Family Members"), is presently, or during the
12-month period ending on the date of this Agreement has been, directly or
indirectly (i) a party to any transaction with the Company (including any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise
requiring payments to, any such director, officer, employee or shareholder or
such associate) or (ii) to the Company's Knowledge, the direct or indirect
owner of an interest in any corporation, firm, association or business
organization (other than the ownership of less than two percent (2%) of the
outstanding capital stock of any publicly traded entity) which is a present
(or potential) competitor, lender, broker or customer of the Company or the
Subsidiary, nor does any member of management or any of their Family Members
receive income from any source other than the Company or the Subsidiary which
relates to the Company's or the Subsidiary's business or should properly
accrue to the Company or the Subsidiary. Schedule 3(o) of the Disclosure
Schedule sets forth a list of all Family Members who are currently employed
or who were employed by the Company or the Subsidiary at any time during the
last three fiscal years together with a description of job, title and annual
salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
p. Disclosure. No representation, warranty or statement of the
Company contained in this Agreement, or any other agreement contemplated by
this Agreement, or any certificate, schedule, annex or other writing
furnished to the Buyer by the Company, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under
which they were made, not misleading.
11
q. Investment Company Act(s)Investment Company Act . The Company
is not an "investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the SEC
thereunder.
r. Securities Act(t)Securities Act of 1933 . Assuming that the
representations and warranties of the Buyer contained in Article 2 are true
and correct, the Company has complied with all applicable Federal and state
securities laws in connection with the issuance and sale of the Shares.
Neither the Company nor anyone acting on its behalf has offered to sell the
Shares or similar securities to, or solicited offers with respect thereto
from, or entered into any preliminary conversations or negotiations relating
thereto with, any person, so as to bring the issuance and sale of such Shares
under the registration provisions of the 1933 Act.
s. Brokers(u)Brokers . Other than the Placement Agents (as
defined below), no agent, broker, investment banker, person or firm acting on
behalf of the Company or under the authority of the Company is or will be
entitled to any broker's or finder's fee or any other commission or similar
fee directly or indirectly from any of the parties in connection with any of
the transactions contemplated by this Agreement.
t. Small Business Matters(u)Brokers . The Company, together with
its "Affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, e121.103), is a "small business concern" within the meaning of
the Small Business Investment Act of 1958 and the regulations thereunder (the
"SBIC Act"), including Title 13, Code of Federal Regulations, e121.301. The
information set forth in the Small Business Administration Forms 480, 652 and
Section A of Form 1031 which have been delivered on or prior to the date
hereof to the SBIC, regarding the Company is accurate and complete. Neither
the Company nor the Subsidiary or Affiliates thereof presently engages in,
and it shall not hereafter engage in, any activities , nor shall the Company
or its Subsidiary or Affiliates thereof use directly or indirectly the
proceeds from the sale of the shares of the capital stock of the Company
hereunder (including the Warrants and any capital stock issued respect
hereof) for any purpose for which a "small business investment company" (an
"SBIC") (as defined in Section 103(3) of the SBIC Act) is prohibited from
providing funds by the SBIC Act, including Title 13, Code of Federal
Regulations Section, Section 107.720.G.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictions On Transferability. The Company shall not be
required to register the transfer of any Shares on the books of the Company
unless: (i) such securities have been registered under applicable Federal
and state securities laws, (ii) such shares are being transferred pursuant to
Rule 144, or any successor rule, promulgated under the 1933 Act or (iii) the
Company shall have been provided with an opinion of counsel reasonably
satisfactory to it to the effect that the proposed transfer is exempt from
the registration requirement of the 1933 Act and the relevant state
securities laws.
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b. Restrictive Legend. The Buyer acknowledges and agrees that
until such time as the Shares have been registered under the 1933 Act as
contemplated herein and sold in accordance with an effective registration
statement, the Shares shall bear a restrictive legend in substantially the
following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES, A
TRANSFER PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER REASONABLE ACCEPTABLE
EVIDENCE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Shares and the Warrants
to the Buyer under any United States laws and regulations and any applicable
state securities or "Blue Sky" laws, or by any domestic securities exchange
or trading market, and to provide a copy thereof to the Buyer promptly after
such filing.
d. Reporting Status. So long as the Buyer beneficially owns any
of the Shares, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company
shall not terminate its status as an issuer required to file reports under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
e. Use of Proceeds. (i) The Company will use the proceeds from
the sale of the Shares and the Warrants and the exercise of any Warrants
(excluding amounts paid by the Company for legal fees and finder's fees in
connection with the sale of the Shares and the Warrants) for internal working
capital purposes, and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation, partnership
enterprise or other person.
(ii) The proceeds from the sale of the shares of capital stock
of the Company (including the Warrants and any capital stock issued in
respect thereof) pursuant to this Agreement (the "Proceeds") shall be used by
the Company for general corporate purposes. The Company, the Subsidiary and
Affiliates thereof shall provide to representatives of the Buyer which is an
SBIC and the SBA reasonable access to its books and records for the purpose
of confirming such use of the Proceeds or for other purposes related to the
qualifications of the financing provided hereunder or under any of the
Documents. If the Company breaches its representations and warranties made
in Section 3(t) in any materials respect, such SBIC may elect that any shares
of the Company's capital stock and the Warrants held by such SBIC be
repurchased by the Company at original cost plus accrued dividends or
interest thereon.
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(iii) So long as an SBIC holds any securities of the Company,
the Company, its subsidiaries and Affiliates thereof will comply at all times
with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(iv) Within 45 days after the end of each fiscal year, and at
any other time reasonably requested by any SBIC, the Company shall deliver to
such SBIC a written assessment, in form and substance satisfactory to such
SBIC of the economic impact of such SBIC's investment in the Company,
specifying (1) the full-time equivalent jobs created or retained in
connection with the investment, and (2) the impact of the investment on the
Company's business in terms of revenue and profits, and on taxes paid by the
Company, its subsidiaries and Affiliates thereof and their respective
employees. Upon advance written request, the Company promptly (and in any
event within 20 days of such request) shall furnish to any SBIC all
information (1) reasonably requested by such SBIC in order for such SBIC to
comply with the requirements of 13 C.F.R. Section 107.620 or to prepare and
file Small Business Administration Form 468 and (2) reasonably requested or
required by any Governmental Authority asserting jurisdiction over such SBIC.
Any submission of financial information pursuant to this Section shall be
under cover of a certificate executed by the president, chief executive
officer, chief financial officer or treasurer of the Company certifying that
such information (1) relates to the Company, its subsidiaries and affiliates
thereof (2) is accurate and (3) if applicable, has been audited by the
Company's independent auditors.
f. Broker's Fees. The Buyer acknowledges that the Company intends
(i) to pay The Boston Group, L.P. and First Granite Securities, Inc.
(together, the "Placement Agents") fees of ten percent (10%) and two percent
(2%), respectively, of the Purchase Price paid by the Buyer, and (ii) to
issue to the Placement Agents warrants to purchase an aggregate of 250,000
shares of Common Stock of the Company (the "Placement Agent Warrants", such
aggregate being the total number of Placement Agent Warrants to be issued
under this Agreement and the Affiliate Purchase Agreement) with an exercise
price per share equal to the greater of (a) $2.00 and (b) the Market Price
(as defined in Section 4(h) of this Agreement).
g. Expenses. The Company shall pay the Buyer a non-accountable
expense reimbursement (the "Expense Reimbursement") of $50,000 to cover the
Buyer's expenses, including legal fees and disbursements. The Expense
Reimbursement shall be payable in United States Dollars. In addition, the
Company shall pay any and all stamp and other documentary taxes payable or
determined to be payable in connection with the issuance of the Shares and
agrees to hold the Buyer harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.
h. Warrants. The Company shall issue to the Buyer the Warrants,
which shall consist of five-year warrants to purchase 1,333,334 shares of
Common Stock (the "Exercise Shares") of which (i) Warrants to purchase
666,667 shares of Common Stock shall be exercisable at a price per share
equal to the greater of (a) $1.50 or (b) the closing or last price of the
Common
14
Stock on the Composite Tape or other comparable reporting system for the
trading day immediately preceding the Closing Date (the "Market Price"), and
(ii) Warrants to purchase 666,667 shares of Common Stock shall be exercisable
at a price per share such that the weighted average exercise price of the
1,333,334 Warrants issued by the Company to the Buyer under this Agreement
shall equal (a) $2.25, if the exercise price of the Warrants issued under
Section 4(h)(i) is less than or equal to $1.75, or (b) $2.15, if the exercise
price of the Warrants issued under Section 4(h)(i) is greater than $1.75;
provided, however, that in no case will the exercise price of any Warrants be
less than the Market Price.
i. Board of Directors. The Company's Board of Directors shall
refrain from filling one of its two currently existing vacancies until such
time as a Buyer Nominee (as defined below), if any, has been appointed a
Director by the Board of Directors. For the longer of (x) a period of one
(1) year beginning on the Closing Date and (y) the period that the Buyer and
its Affiliates hold, in the aggregate, shares of capital stock equal to at
least five percent (5%) of the outstanding Common Stock of the Company, the
Buyer shall have the right to request that its representative, who shall be
reasonably acceptable to the Company ("Buyer Nominee"), be appointed to the
Company's Board of Directors. Such request shall be made in writing to the
Company. Within ten (10) days after its receipt of such request, the
Company's Board of Directors shall appoint the Buyer Nominee as a member of
the Company's Board of Directors (the "Nominee Appointment"). At the first
Company annual shareholders meeting following the Nominee Appointment and at
each Company annual shareholders meeting thereafter, the Company shall
nominate one representative of the Buyer to the Company's Board of Directors;
provided, however, that this subsection 4(i) shall be applied in concert with
Section 4(i) of the Affiliate Purchase Agreement such that only one (1)
representative of IMPRIMIS SB L.P. and WEXFORD SPECTRUM INVESTORS LLC shall
serve on the Company's Board of Directors at any one time pursuant to Section
4(i) of this Agreement or Section 4(i) of the Affiliate Purchase Agreement.
j. Conduct Of Business. (i) From the date of this Agreement until
the Closing Date, the Company shall operate its business only in the ordinary
course of business consistent with past practice. The Company shall not,
until the Closing Date, directly or indirectly, cause or permit any state of
affairs, action or omission described in clauses (i) through (xiii) of
Section 3(h).
(ii) From the Closing Date and for so long as the Buyer and its
Affiliates, in the aggregate, hold an amount of shares of Common Stock equal
to at least five percent (5)% of the Common Stock then outstanding, the
Company shall not change its line of business without the prior written
consent of the Buyer.
(iii) The Company shall (i) take all actions required to assure
that the Company remains duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) take
all actions required to assure that the Company obtains and maintains all
material requisite governmental authority, licenses, and material permits to
conduct its business, (iii) conduct its business in material compliance with
all requirements of Federal and
15
state law applicable to the Company, and (iv) use commercially reasonable
efforts to file all reports or filings with the Internal Revenue Service
required of a Qualified Small Business (as defined in Section 1202(d) of the
Internal Revenue Code of 1986, as amended), and provide each licensed SBIC
with all information requested by any Governmental Authority to permit such
SBIC to comply with its obligations under the SBIC Act. Each SBIC shall use
commercially reasonable efforts to protect any information which the Company
labels as confidential. If any such confidential information is required to
be disclosed by such SBIC in order to comply with any such request, the SBIC
shall cause to be filed a confidential treatment request on behalf of the
Company seeking to withhold from public availability all of such confidential
information. For purposes of this Section 4(j), the term "Governmental
Authority" shall mean any government or state (or any subdivision thereof),
whether domestic, foreign or multinational (including European Union), or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
k. Further Assurances. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Articles 6 and 7 are satisfied, insofar as such
matters are within the control of any of them.
l. Access And Information. From the date of this Agreement until
the first to occur of (x) the Closing Date and (y) the termination of this
Agreement in accordance with Article 11, the Company shall permit the Buyer
and its representatives to make such investigation of the business,
operations and properties of the Company as the Buyer deems necessary or
desirable in connection with the transactions contemplated by this Agreement.
Such investigation shall include access to the respective directors,
officers, employees, agents and representatives (including legal counsel and
independent accountants) of the Company and the properties, books, records
and commitments of the Company. The Company shall furnish the Buyer and its
representatives with such financial, operating and other data and
information, and copies of documents with respect to the Company or any of
the transactions contemplated by this Agreement, as the Buyer shall from time
to time reasonably request. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not in any way affect or diminish any of the
representations or warranties hereunder. Without limiting the foregoing,
during such period, the Company shall keep the Buyer informed as to the
business and operations of the Company and shall consult with the Buyer as
appropriate.
m. Reporting Requirements. For so long as the Buyer and its
Affiliates, in the aggregate, or its transferees (except transferees who
acquire the Buyers' Common Stock in a transaction not exempt from the
registration requirements of the 1933 Act), hold an amount of shares of
Common Stock equal to at least five percent (5%) of the Common Stock then
outstanding, the Buyer shall have the right to request, and if so requested
the Company shall furnish to the Buyer, the following:
16
(i) as soon as practicable after the end of each month and fiscal
quarter, and in any event within 45 days thereafter, copies of: (A) an
unaudited consolidated balance sheet of the Company as at the end of such
month and quarter, (B) unaudited consolidated statements of operations,
shareholders' equity and cash flows of the Company for the period ending with
such month and quarter and setting forth in comparative form the figures for
the corresponding periods in the preceding fiscal year certified by the chief
financial officer of the Company as complete and correct, and having been
prepared in accordance with GAAP (other than monthly balance sheets and
statements of operations, shareholders' equity and cash flows) subject to the
absence of footnotes and changes resulting from year-end adjustments;
(ii) such financial information (other than the information
described in clause (i) above) as the Company and Buyer may agree;
(iii) as soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days thereafter, copies of: (i) a
consolidated balance sheet of the Company as at the end of such year, and
(ii) consolidated statements of operations, shareholders' equity and cash
flows of the Company for such year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, together with
supporting notes thereto and accompanied by an opinion thereon of independent
accountants of recognized national standing, together with a summary prepared
by the Company concerning the Company's operations and financial condition;
(iv) no later than 60 days prior to the end of each fiscal year of
the Company, the proposed annual business plan and budget (including the
capital expenditures and financing plans) of the Company for the next fiscal
year;
(v) promptly after sending, making available, or filing the same,
all reports and financial statements that the Company sends or makes
available to the shareholders of the Company or files with the SEC; and
(vi) any other information respecting the business, properties or
the condition or operations, financial or otherwise, of the Company that the
Buyer may from time to time reasonably request, including, but not limited
to, business units analyses, performance reviews analyses and monthly sales
analyses.
The Buyer agrees that with respect to any information received by it
pursuant to this subsection (m) ("Requested Information"), the Buyer will use
the Requested Information solely for purposes of monitoring and/or assessing
its investment in the Company and not for any other purpose and will keep the
Requested Information confidential. The Buyer acknowledges that if, and to
the extent, it receives Requested Information which is non-public, material
information relating to the Company, it may be subject to legal restrictions
in connection with the
17
"xxxxxxx xxxxxxx" provisions of the federal securities laws with respect to
such Requested Information.
n. No Shopping. From the date of this Agreement until the earlier
of (i) the Closing Date and (ii) the date this Agreement is terminated in
accordance with Article 11, the Company shall not, and shall ensure that any
directors, officers, agents, representatives or Affiliates of the Company do
not, directly or indirectly, solicit or initiate, enter into or conduct,
discussions concerning, or exchange information (including by way of
furnishing information concerning the Company or their respective businesses)
or enter into any negotiations concerning, or solicit, entertain or agree to
any proposals for, (i) a merger, consolidation or other business combination
involving the Company, (ii) a sale of any equity interest in the Company,
(iii) a sale of a significant portion of business or assets of the Company,
(iv) a recapitalization or restructuring of the Company or (v) a transaction
similar to any of the foregoing. In addition, during such time period, the
Company shall not authorize, direct or knowingly permit any officer,
shareholder, director, employee or agent of the Company to do any of the
foregoing and the Company shall notify the Buyer promptly of the identity of
any person who approaches the Company with respect to any of the foregoing,
as well as the price and terms of any such proposal, if applicable
o. Public Announcements. No press release or public announcement
related to this Agreement or the transactions contemplated hereby shall be
issued or made without the joint approval of the Buyer and the Company, the
Buyer's approval which shall not be unreasonably withheld, unless required by
applicable law or legal process in which case the Buyer and the Company shall
have the right, to the extent reasonably practicable, to review and comment
on such press release or announcement prior to publication.
p. Reserved Shares. The Company shall reserve and at all times
keep available, free from preemptive rights, out of its authorized but
unissued stock, a sufficient number of shares of Common Stock to provide for
the issuance of such shares upon the exercise of the Warrants.
q. Notification. The Company shall promptly notify the Buyer of
(i) any notice or other communications from any person or entity that the
consent of such person or entity is or may be required in connection with the
consummation of the transactions contemplated hereby and (ii) any notice or
other communication from any Governmental Authority (as defined in Section
4(j)(iii) of this Agreement) in connection with the consummation of the
transactions contemplated hereby.
r. Negative Covenants. For so long as the Buyer and its
Affiliates hold an aggregate amount of shares of Common Stock equal to at
least five percent (5%) of the Common Stock then outstanding on a fully
diluted basis, then the following actions by the Company or the Subsidiary,
shall require the prior written consent of the Buyer (in addition to any
stockholder or Board of Directors approval as may be required by applicable
statute, agreement or otherwise):
18
(i) the purchase, construction, acquisition, sale, lease, exchange
or disposition of any property or asset, or the making of any investment,
other than in the ordinary course of business, the purchase price or value of
which exceeds $100,000;
(ii) the entry into any agreement or series of related agreements,
including any agreement to borrow money that, either individually or
collectively, (A) creates a monetary obligation or a liability greater than
$100,000 or (B) grants a mortgage on, a security interest in, a pledge or
otherwise encumbers, any material asset of the Company or the Subsidiary;
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the furnishing of services by,
or rental of real or personal property from, or otherwise requiring payments
or the issuance of securities (including stock options) (or any amendments,
modifications or waivers of any such contract, agreement or arrangement) to
any shareholder (who holds in excess of five percent (5%) of the issued and
outstanding voting securities of the Company) or any officer or director of
the Company or any of their respective Affiliates, or any Family Members of
any of the foregoing;
(iv) the initiation by the Company of a voluntary case, the filing
of, or authorization to file a bankruptcy petition, or request for relief,
under Title 11 of the United States Code (11 U.S.C. '1, et seq.) or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or consent by the Company to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or a general assignment by the
Company for the benefit of creditors, or the failure by the Company generally
to pay their respective debts as they become due, or the taking by the
Company of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement, transaction or
arrangement with any, officer, director or shareholder (who holds in excess
of five percent (5%) of the issued and outstanding voting securities of the
Company) of the Company, the Subsidiary or any of their respective Affiliates
or of any Family Members of any of the foregoing other than the reimbursement
of expenses of any such person in the ordinary course in accordance with the
policies of the Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other business combination or the
sale, assignment, lease or other disposition of all or substantially all of
the assets of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company, including the
capitalization of any subsidiaries of the Company, or any repurchase or
redemption of the Company's securities, other than (A) the issuance of shares
of Common Stock upon the exercise of stock options either currently
19
outstanding or hereinafter granted pursuant to the Company's 1991 Stock
Option Plan, (B) the issuance of shares of Common Stock (1) upon the exercise
of warrants outstanding as of the date of this Agreement, (2) upon the
conversion of Debentures (as defined in Section 7(i) of this Agreement)
outstanding as of the date of this Agreement, (3) upon the exercise of the
Affiliate Warrants, or (4) upon the exercise of the Placement Agent Warrants,
and (C) as expressly provided in this Agreement;
(viii) any distributions or dividends, whether in cash, securities
or in property in kind, by the Company to its stockholders;
(ix) any material changes in accounting policies of the Company and
any removal or appointment of the Company's independent accountants;
(x) the settlement of legal, administrative or other suits or
proceedings in the Company's name in which the amount in dispute equals or
exceeds $100,000;
(xi) the establishment or amendment of, or the grant, acceleration
or waiver of any terms or conditions in, or determination or acceleration
pursuant to the terms of, any pension, retirement, savings, deferred
compensation, profit sharing, benefit or incentive plan or any stock option,
stock appreciation, stock purchase, performance or other similar plan, for
any or all current or former employees, officers or directors of the Company
or any of their respective Affiliates or of any Family Member of any of the
foregoing; provided that the granting of options to employees (other than
officers) for amounts less than 25,000 shares per employee, pursuant to the
Company's 1991 Stock Option Plan, under which a maximum of 414,808 options
are currently authorized but unissued and can therefore be additionally
granted, shall not require the consent of the Buyer;
(xii) the amendment of the Certificate of Incorporation or By-laws
in any respect;
(xiii) any change in any of the names under which the Company
conducts business
(xiv) the issuance of any new, or amendment to or modification or
restatement of any existing, warrants, options, Debentures, calls, rights,
commitments, agreements, arrangements or similar undertakings, other than (A)
the issuance of options pursuant to the Company's 1991 Stock Option Plan, (B)
as may be required to effect the transactions contemplated by this Agreement,
and (C) as expressly provided in this Agreement; or
(xv) any other transaction, agreement or arrangement or series of
related transactions, agreements or arrangements that is material to the
business of the Company or to the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the
Company, taken as a whole.
20
s. Additional Listing Application. The Company shall, within two
(2) Business Days of the execution of this Agreement, file with AMEX an
Additional Listing Application (the "Initial Application") for the
Registrable Securities (as defined below, but for purposes of this Section
4(s), excluding the Warrants). To the extent that AMEX approves the Initial
Application as to only the Shares and not as to all Registrable Securities
(excluding the Warrants), the Company shall, within two (2) Business Days of
the Closing Date, file a second or amended Additional Listing Application for
the portion of the Registrable Securities (excluding the Warrants) the
listing of which was not approved pursuant to the Initial Application.
t. Registration of Warrants. The Company shall use its best
efforts to, within 60 days of the Closing Date, register (as such term is
defined in Section 18(a)(i) of this Agreement) the Warrants for public
trading in the United States securities markets.
5. CLOSING DATE.
The date and time of the issuance and sale of the Shares and the
Warrants (the "Closing Date") shall occur no later than 12:00 Noon, New York
time on the first NYSE trading day after the fulfillment or waiver of all
closing conditions pursuant to Sections 6 and 7, or such other mutually
agreed to time. The closing shall occur on such date at the offices of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Shares on the Closing Date is subject to the following conditions, any of
which may be waived by the Company (with the exception of the condition set
forth in Section 6(d)):
a. Delivery by the Buyer of good funds as payment in full of an
amount equal to the Purchase Price in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before
the Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
d. The Company shall have received notification from AMEX that the
Shares have been approved for listing by AMEX.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
21
The Company understands that the Buyer's obligation to purchase the
Shares on the Closing Date is conditioned upon the following, any of which
may be waived by the Buyer (with the exception of the condition set forth in
Section 7(c)):
a. Delivery by the Company to the Buyer of this Agreement, duly
executed by the Company;
b. Receipt by the Buyer from the Company of the Expense
Reimbursement;
c. Delivery by the Company to the Buyer of certificates evidencing
the Shares and the Warrants, each (i) duly and validly issued, (ii) in the
case of the Shares, listed upon AMEX pursuant to an Additional Listing
Application that has been approved by AMEX, and (iii) in accordance with this
Agreement;
d. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as
if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to
be performed on or before the Closing Date and reasonably satisfactory to the
Buyer.
e. All permits, consents, approvals, licenses, orders,
authorizations, registrations, declarations, filings and other actions that
are required in connection with the execution, delivery or performance of
this Agreement, the Warrants and the certificates evidencing the Shares or
the transactions contemplated hereby and thereby in order to prevent any of
the effects described in Section 3(d) with respect to any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which the Company is a party or by which any of
its properties or assets are bound or with respect to any license, franchise,
permit or other similar authorization held by the Company shall have been
obtained or taken.
f. There shall not have been any material adverse change in the
condition (financial or otherwise), operations, business, assets,
liabilities, earnings or prospects of the Company or the Subsidiary, taken as
a whole.
g. The Buyer shall have received a certificate of (i) an executive
officer of the Company, dated the Closing Date, in substantially the form of
Annex II and (ii) the Clerk or Assistant Clerk of the Company, dated the
Closing Date, in substantially the form of Annex III, together with a copy of
all documents referenced therein.
h. Delivery by the Company to the Buyer of an opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in substantially the form
attached hereto as ANNEX IV.
22
i. Of the Company's 7% Convertible Subordinated Debentures Due
March 24, 2000 and the 7% Convertible Debentures Due October 29, 2000
(collectively, the "Debentures"), no less than ninety percent (90%) of the
Debentures have been either (i) converted into Common Stock at a price of
ninety cents ($0.90) per share of Common Stock, or (ii) agreed in writing by
the holders thereof to be amended such that each Debenture provides (A) for
the conversion thereof, for a period of thirty (30) days from the Closing
Date, into Common Stock at a price of ninety cents ($0.90) per share of
Common Stock and thereafter shall be convertible at the terms originally set
forth in such Debenture, and (B) for a minimum conversion price of ninety
cents ($0.90) per share of Common Stock.
j. The Company's authorized and outstanding capital stock as of the
Closing Date includes (i) no greater than 13,935,000 shares of Common Stock
outstanding, including (A) the Shares to be issued to the Buyer pursuant to
this Agreement and the shares of Common Stock to be issued pursuant to the
Affiliate Purchase Agreement, and the capital stock issuable upon exercise of
the Warrants and the warrants issued pursuant to the Affiliate Purchase
Agreement (the "Affiliate Warrants"), and (B) shares of Common Stock issuable
upon the conversion of any outstanding Debentures at a conversion price of
ninety cents ($0.90) per share, and (ii) no greater than 3,540,000
outstanding options or warrants to purchase Common Stock, including (A) all
options issued or authorized and unissued under the Company's 1991 Stock
Option Plan and (B) the Placement Agent Warrants, and excluding the Warrants
and the Affiliate Warrants.
k. The Buyer shall have received duplicate originals of (A) an
executed copy of U.S. Small Business Administration (the "SBA") Form 480 Size
Status Declaration, (B) an executed copy of SBA Form 652 Assurance of
Compliance for Nondiscrimination and (C) the information needed to complete
Part A and Part B of SBA Form 1031.
l. The Company shall be in compliance with the requirements of
Section 713(a) of the AMEX Listing Standards and Requirements in connection
with the issuance of the Shares.
m. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
n. The Market Price is less than or equal to $2.15.
8. LOCK-UP
The Buyer hereby covenants and agrees not to offer, sell, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
of the Company that are substantially similar to the Common Stock, including
but not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, the Common Stock or any
substantially similar securities until the expiration of a period of
seventy-five (75) days from the Closing Date; provided however, that this
Section 8 shall not apply, and have no effect upon the Buyer, if (i) there
has been a public announcement that a person or group of affiliated or
23
associated persons (other than the Buyer and its Affiliates) has acquired
beneficial ownership of twenty percent (20%) or more of the outstanding
Common Stock or (ii) a tender offer or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of
affiliated or associated persons (other than the Buyer and its Affiliates) of
twenty percent (20%) or more of the outstanding Common Stock, has been
commenced or an announcement of an intention to make such an offer has been
made.
9. GOVERNING LAW; SPECIFIC ENFORCEMENT; MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. A facsimile
transmission of this signed Agreement shall be legal and binding on all
parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement
may be amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement, the Warrants and the schedules,
annexes and exhibits hereto or thereto contain the entire agreement among the
parties with respect to the transactions contemplated by this Agreement and
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
(ii) Each party expressly agrees that the other party will be
irreparably damaged if this Agreement is not specifically enforced,
including, without limitation, the covenant set forth in Section 4(i). Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement, the non-breaching party shall, in addition to all other remedies,
be entitled to a temporary or permanent injunction, without any showing of
any actual damage, or a decree for specific performance, in accordance with
the provision hereof.
10. NOTICES.
All notices, requests and other communications to any party
hereunder shall be in writing and sufficient if delivered personally or sent
by telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
COMPANY: MEDIA LOGIC, INC.
000 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
24
Attention: Chief Executive Officer
Telecopier No.: (000) 000-0000
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
BUYER: IMPRIMIS SB L.P.
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxx & Xxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
or to such other address or telecopy number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in
this Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
11. Termination. (a) This Agreement shall terminate on the earliest
to occur of any of the following events:
(i) the mutual written agreement of the Buyer and the Company;
(ii) at the discretion of either party, if the Closing shall
not have occurred prior to the close of business on December 31, 1997;
25
(iii) by written notice of the Buyer to the Company, if the
Company shall have materially breached any of its representations, warranties
or agreements contained in this Agreement; or
(iv) by written notice of the Company to the Buyer, if the
Buyer shall have materially breached any of its representations, warranties
or agreements contained in this Agreement.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except
that if this Agreement terminates in accordance with Section 11(a) and the
Buyer receives reimbursement of its costs and expenses in accordance with
Section 4(h), then this Agreement shall terminate without any further
liability. Except as aforesaid, upon the termination of this Agreement, all
rights and obligations of the parties under this Agreement shall terminate,
except their obligations under Section 4(g) and Section 4(o).
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
Company's and the Buyer's representations, warranties, agreements and
covenants shall survive the execution and delivery hereof of this Agreement
and the delivery of the Shares and the Warrants. Neither the period of
survival nor the liability of the Company with respect to the representations
and warranties shall be reduced by any investigation made at any time by or
on behalf of the Buyer.
13. Indemnification. (a) The Company indemnifies and holds
harmless the Buyer and its Affiliates and each of their members, directors,
officers, employees and other agents and representatives from and against any
and all liabilities, judgments, claims, settlements, losses, damages
(including any diminution in value as appropriate), reasonable fees
(including attorneys' and other experts' fees and disbursements), liens,
taxes, penalties, obligations and expenses (collectively, "Losses") incurred
or suffered by any such person or entity arising from, by reason of or in
connection with any misrepresentation or breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement or
any certificate or other document delivered by the Company under this
Agreement. The Company shall indemnify and hold harmless the Buyer and its
Affiliates and each of their members, directors, officers, employees and
other agents and representatives from and against any and all Losses incurred
or suffered by the Buyer, arising from, by reason of or in connection with
any third party claim or action, or potential or threatened claim or action,
related to this Agreement and the transactions contemplated hereby.
(b) The Company shall not have any liability under Section 13(a)
unless the aggregate of all Losses relating thereto for which the Company
would, but for this Section 13(b), be liable exceeds $50,000, in which case
the Buyer shall be entitled to all Losses regardless of the limitation set
forth in this sentence. The limitation on liability set forth in the
immediately preceding sentence shall not apply (i) in the event of fraud,
intentional misrepresentation or intentional breach or (ii) in the case of
any representation or warranty set forth in Section 3(a) or Section 3(c).
26
(c) The Buyer indemnifies and holds harmless the Company and its
Affiliates, directors, officers, employees and other agents and
representatives, from and against any and all Losses incurred or suffered by
any such person or entity arising from, by reason of or in connection with
any misrepresentation or breach of any representation, warranty or agreement
of the Buyer contained in this Agreement or any certificate or other document
delivered by the Buyer under this Agreement.
(d) In case any claim or litigation which might give rise to any
obligation of a party under the indemnity and reimbursement provisions of
this Agreement (each an "Indemnifying Party") shall come to the attention of
the party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall notify in writing promptly the Indemnifying Party of
the existence, nature and amount of potential loss. Failure to give such
notice shall not affect the rights of the Indemnified Party, except to the
extent that the Indemnifying Party shall have been materially prejudiced by
such failure. The Indemnifying Party shall be entitled to participate in and,
if (i) such claim can properly be resolved by money damages alone and the
Indemnifying Party has the financial resources to pay such damages and (ii)
the Indemnifying Party admits that this indemnity fully covers the claim or
litigation, the Indemnifying Party shall be entitled to direct the defense of
any claim at its expense, but such defense shall be conducted by legal
counsel reasonably satisfactory to the Indemnified Party. No Indemnifying
Party shall be liable to an Indemnified Party for any settlement of any
action or claim without the consent of the Indemnifying Party; provided that
the Indemnifying Party shall not unreasonably withhold its consent to any
such settlement. No Indemnifying Party shall, except with the consent of the
Indemnified Party, consent to entry of any judgment or enter into any
settlement which 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 and equitable claims in response to such claim or litigation.
(e) Nothing contained in this Article 13, or elsewhere in this
Agreement, shall be deemed an election of remedies under this Agreement or
limit in any way the liability of any party under any other agreement to
which such party is a party relating to this Agreement or the transactions
contemplated by this Agreement.
14. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other party; provided that notwithstanding
the foregoing, the Buyer may assign this Agreement and the rights and
obligations hereunder, in whole or in part, to an Affiliate. Any instrument
purporting to make an assignment in violation of this Section shall be void.
All covenants, agreements, representations, warranties and undertakings in
this Agreement made by and on behalf of any party hereto shall bind and inure
to the benefit of the successors and permitted assigns of such party.
15. Benefits of Agreement. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective
27
successors and assigns. This Agreement is for the sole benefit of the parties
hereto and not for the benefit of any third party.
16. Descriptive Headings; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry into the subject matter of such representation, warranty or other
statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements
and amendments; (iv) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder; (v)
a reference to a person includes its permitted successors and assigns; (vi) a
reference to GAAP refers to United States GAAP; and (vii) a reference in this
Agreement to an Article, Section, Exhibit or Schedule is to the Article,
Section, Exhibit or Schedule of this Agreement.
17. General. All Exhibits, Annexes, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
18. REGISTRATION OF REGISTRABLE XXXXXXXXXX.0.xx{seq xxxxx0 \x \x0
Xxxxxxxxxxxx of Registrable Stock"
(a) Shelf Registration(a) Shelf Registration.
(i) The Company shall (x) within thirty (30) days of the Closing
Date file with the Securities and Exchange Commission (the "SEC") a Shelf
Registration Statement (as defined below) relating to the offer and sale of
(a) the Shares of Common Stock (including shares issuable or issued upon the
exercise of any Warrants or the exercise of any other exchange, conversion or
similar right), (b) any securities issued in respect of any such shares by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger or consolidation or reorganization and (c)
the Warrants (collectively, the "Registrable Securities") by the holders of
Registrable Securities from time to time in accordance with the methods of
distribution elected by such holders and set forth in such Shelf Registration
Statement. "Register," "registered" and "registration" each refer to a
registration of Registrable Securities effected by filing with the SEC a
registration statement in compliance with the Securities Act and the
declaration or ordering by the SEC of effectiveness of such registration
statement. "Shelf Registration" means a registration effected pursuant to
this Section 18. "Shelf Registration Statement" means a shelf registration
statement of the Company filed with the SEC pursuant to the provisions of
this Section 18 which covers some or all of the
28
Registrable Securities, as applicable, on Form S-3 under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein; provided, however, that the registration of the Warrants pursuant to
this Section 18 is subject to the prior approval of the Company's Board of
Directors.
(ii) The Company shall use its best efforts (x) to cause such Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as practicable but in no event more than ninety (90) days after the
Closing Date and (y) after the effectiveness of the Shelf Registration
Statement, promptly upon the request of the Buyer or any permitted transferee
or assignee pursuant to Section 18(h) holding any Registrable Securities
(such transferees and assignees, together with the Buyer, are collectively
referred to in this Section 18 as the "Investors"), to take any action
necessary to register the sale of any Registrable Securities of such Investor
and to identify such Investor as a selling securityholder.
(iii) If the Shelf Registration Statement covering the Registrable
Securities required to be filed by the Company under Section 18(a)(i) is not
declared effective by ninety (90) days after the Closing Date (the "Required
Effective Date"), then the Company will make payments to the Buyer in such
amounts and at such times as shall be determined pursuant to this Section
18(a)(iii). The amount to be paid by the Company to the Buyer shall be equal
to one (1) percent of the Purchase Price per calendar week (or any pro rata
portion thereof) from the Required Effective Date until the Shelf
Registration Statement is declared effective by the SEC and shall be paid to
the Buyer based upon the period between (x) the Required Effective Date and
the first Computation Date and (y) each Computation Date thereafter and the
immediately preceding Computation Date (the "Periodic Amount"). The full
amount of each Periodic Amount shall be paid to the Buyer in immediately
available funds within five (5) days after each Computation Date.
Notwithstanding the foregoing, the amount payable by the Company pursuant to
this provision shall not be payable (x) to the extent any delay in the
effectiveness of the Shelf Registration Statement occurs because of an act
of, or a failure to act or to act timely by, the Buyer or its counsel in
connection with any act for which the Buyer and its counsel have had adequate
and sufficient notice, or (y) in the event all of the Registrable Securities
may be sold pursuant to Section (k) of Rule 144 promulgated under the 1993
Act. As used in this Section, "Computation Date" means the date which is
thirty (30) days after the Required Effective Date, and, if the Shelf
Registration Statement required to be filed by the Company pursuant to this
Section is not then effective, thirty (30) days after the previous
Computation Date (pro rata for any partial period) until the Shelf
Registration Statement is so declared effective by the SEC.
(b) Registration Procedures. In connection with any Shelf
Registration Statement, the Company shall do each of the following:
29
(i) prepare promptly, and file with the SEC by thirty (30) days
after the Closing Date, a Shelf Registration Statement with respect to the
Registrable Securities and use its best efforts to cause to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by the Investors for a period
(the "Registration Period") equal to the earliest of (1) five years from the
effective date of such Shelf Registration Statement, (2) the date when each
Investor may sell all Registrable Securities held by such Investor pursuant
to Section (k) of Rule 144 and (3) the date the Investors no longer owns any
Registrable Securities, which Shelf Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any 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, in light of the circumstances in which they were made,
not misleading;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Shelf Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Shelf Registration Statement effective and current during the
entire Registration Period and, at all times during the Registration Period,
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by the Shelf Registration
Statement, including such amendments and supplements as may be necessary,
until all of such Registrable Securities have been disposed of in accordance
with the intended method of disposition from time to time by prospective
seller or sellers of such Registrable Securities as set forth in the Shelf
Registration Statement;
(iii) furnish to each selling Investor, and its legal counsel
identified to the Company, (1) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one copy
of the Shelf Registration Statement and any amendment thereto, each
prospectus and each amendment or supplement thereto, (2) 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 relating to such
Shelf Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (y) such number of copies of a prospectus in conformity with
the requirements of the Securities Act, and such other documents, as such
Investor may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by such Investor;
(iv) permit a single firm of counsel designated by the Buyer and
reasonable satisfactory to the Company to review the Shelf Registration
Statement and all amendments and supplements thereto at 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 in written notice to the
Company given within three (3) business days of counsel's receipt of the
Shelf Registration Statement or any amendment or supplement thereto;
30
(v) use its best efforts to register or qualify the shares of
Registrable Securities covered by such Shelf Registration Statement under
such other securities or blue sky or other applicable laws of such
jurisdiction within the United States as each prospective seller shall
reasonably request, to enable such seller to consummate the public sale or
other disposition in such jurisdictions of the shares of Registrable
Securities owned by such seller;
(vi) as promptly as practicable after becoming aware of such event,
notify each holder of Registrable Securities of the happening of any event of
which the Company has knowledge, as a result of which the prospectus included
in the Shelf Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make statements therein in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Shelf
Registration Statement or other appropriate filing with the SEC to correct
such untrue statement or omission, and deliver a number of copies of such
supplement or amendment to each such holder as such holder may reasonable
request;
(vii) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(viii) use its best efforts to cause the Registrable Securities to
be listed for trading on the American Stock Exchange (or on any other
national securities exchange on which the Company's Common Stock is then
listed);
(ix) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Shelf Registration Statement;
(x) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Shelf Registration Statement and enable such
certificate for the Registrable Securities to be in such denominations or
amount as the case may be, as the Investors may reasonable request; and
(xi) take all other reasonable actions necessary to expedite and
facilitate disposition by any Investor of the Registrable Securities pursuant
to the Shelf Registration Statement.
31
(c) Designation of Underwriter. In the case of any registration
effected pursuant to this Section 18, a majority in interest of the holders
of Registrable Securities shall have the right to designate the managing
underwriter in any underwritten offering.
(d) Cooperation by Prospective Sellers.
(i) Each prospective seller of Registrable Securities, and each
underwriter designated by each such seller, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the Shelf Registration Statement (and the
prospectus included therein). No holder of Registrable Securities may
participate in any offering unless such holder completes and executes all
questionnaires, indemnities, underwriting agreements and other documents
required in connection with the offering.
(ii) Failure of a prospective seller of Registrable Securities to
furnish the information and agreements described in this Agreement shall not
affect the obligations of the Company under this Agreement to remaining
sellers to furnish such information and agreements unless, in the reasonable
opinion of counsel to the Company or the underwriters, such failure impairs
or may impair the viability of the offering or the legality of the
registration or the underlying offering.
(iii) The Investor included in the registration will not (until
further notice by the Company) effect sales thereof (or deliver a prospectus to
any purchaser) after receipt of telegraphic or written notice from the Company
to suspend sales to permit the Company to correct or update a registration
statement or prospectus. In connection with any offering each Investor who is a
prospective seller, will not use any offering document, offering circular or
other offering materials with respect to the offer or sale of Registrable
Securities, other than the prospectuses provided by the Company and any
documents incorporated by reference therein.
(e) Expenses. All expenses incurred in complying with this
Section 18, including, without limitation, all registration, qualifications
and filing fees (including all expenses incident to filing with the American
Stock Exchange), fees and expenses of complying with securities and "blue
sky" laws, printing expenses and fees and disbursements of counsel for the
Company and one counsel for the Investors, and of the independent certified
public accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to this Section 18
shall not be borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Section 18 or registration or
qualification of any
32
Registrable Securities pursuant to this Section 18, the Company shall
indemnify and hold harmless the seller of such shares, each underwriter of
such shares, if any, each broker or any other person acting on behalf of such
seller and each other person, if any, who controls any of the foregoing
persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the
foregoing persons may become subject under the Securities Act, the 1934 Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities as registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or any document
prepared or furnished by the Company incident to the registration or
qualification of any Registrable Securities pursuant to this Section 18, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made, not misleading, or any violation by the Company of the
Securities Act, the 1934 Act or any state securities or "blue sky" laws or
any rule regulation under the Securities Act, the 1934 Act or state
securities law or relating to action or inaction required of the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable (i) in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the registration statement, the preliminary prospectus or prospectus or in
any amendment or supplement thereof pursuant to this Section 18 in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller or such underwriter
specifically for use in the preparation thereof and (ii) to any broker or
other person acting on behalf of such seller to the extent that any such
loss, claim, damage or liability arises out of or is based upon any
representation or other statement of such broker or other person that is not
in conformity with the preliminary prospectus or prospectus.
(ii) Before Registrable Securities held by a prospective seller
shall be included in any registration pursuant to this Section 18 such
prospective seller and any underwriter acting on its behalf shall have agreed
to indemnify and hold harmless (in the same manner and to the same extent as
set forth in (i) above) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement and any
person who controls the Company within the meaning of the Securities Act,
with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or prospectus contained therein, or any
amendment or supplement thereof, if such untrue statement or omission was
made in reliance upon and in conformity
33
with written information furnished to the Company through an instrument duly
executed by such seller or such underwriter, as the case may be, specifically
for use in the preparation of such registration statement, preliminary
prospectus, prospectus or amendment or supplement; provided that the maximum
amount of liability in respect of such indemnification shall be limited, in
the case of each prospective seller of Registrable Securities, to an amount
equal to the net proceeds actually received by such prospective seller from
the sale of Registrable Securities effected pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Section 18,
if pursuant to an underwritten public offering of Common Stock, the Company,
the selling shareholders and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions
covering indemnification among the parties thereto in connection with such
offering, the indemnification provisions as set forth in this Section 18
shall be deemed inoperative for purposes of such offering.
(iv) Each party entitled to indemnification under this Section
18(f) (the "indemnified party") shall give notice to the party required to
provide indemnification (the "indemnifying party") promptly after such
indemnified party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the indemnifying party (at its expense) to assume
the defense of any claim or any litigation resulting therefrom; provided that
counsel who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the indemnified party and shall not, without the
consent of the indemnified party, be counsel to the indemnifying party, and
the indemnified party may participate in such defense, but only at such
indemnified party's expense, and provided, further, that the omission by any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 18(f) except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result
of the failure to give notice. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which
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.
(g) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 18(f) to the fullest extent
permitted by law; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 18; (b) no
seller of Registrable
34
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
(h) Reports under Exchange Act. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities which continue to be "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed with the SEC by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
(i) Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities only if: (a) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished
to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such delay, or
the payments set forth in Section 18(a) hereof.
(j) Persons deemed to be Holders of Registrable Securities. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or
35
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
[THIS SPACE INTENTIONALLY LEFT BLANK]
36
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of the Buyer and the Company as of the date first
above written.
MEDIA LOGIC, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx, Xx.
Chief Executive Officer
IMPRIMIS SB L.P.
By: IMPRIMIS SB GP LLC,
its General Partner
By: WEXFORD MANAGEMENT LLC,
its Manager
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
Address of Buyer: 000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
37
ANNEX I FORM OF WARRANT
ANNEX II FORM OF OFFICER'S CERTIFICATE OF THE COMPANY
ANNEX III FORM OF SECRETARY'S/ASSISTANT SECRETARY'S CERTIFICATE OF THE
COMPANY
ANNEX IV FORM OF OPINION OF MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND
POPEO, P.C.
38
ANNEX I
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN
SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES
UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933,
(2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. [______]
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
Media Logic, Inc.
This is to Certify That IMPRIMIS SB L.P., or such holder's registered
assigns (the "Investor"), is the owner of [_________] Warrants (as defined
below), each of which entitles the registered holder thereof to purchase from
Media Logic, Inc., a Massachusetts corporation (the "Company"), one fully paid,
duly authorized and nonassessable share of Common Stock, par value $0.01 per
share, of the Company (the "Common Stock"), at any time or from time to time on
or before 5:00 p.m., New York City time, on December [__], 2002, at an exercise
price of $[____] per share (the "Exercise Price"), all on the terms and subject
to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable"), which is initially one (1) share, is subject to
adjustment from time to time pursuant to the provisions of Section 2 of this
Warrant Certificate. The Warrants evidenced by this certificate are part of a
series of Warrants being issued by the Company on the Issue Date (the
"Warrants"). The execution and delivery of this Warrant Certificate is a
condition
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of December [__], 1997, between the Investor and the Company
(the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby may be
exercised, in whole or in part, by the registered holder hereof at any time or
from time to time on or before 5:00 p.m., New York City time, on December [__],
2002, upon delivery to the Company at the principal executive office of the
Company in the United States of America, of (i) this Warrant Certificate, (ii) a
written notice, in the form annexed hereto and entitled "Election To Purchase"
and (iii) payment of the Exercise Price for the shares of Common Stock issuable
upon exercise of such Warrants, which shall be payable by a certified or
official bank check payable to the order of the Company (collectively, the
"Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5) Business
Days after receipt of the Warrant Exercise Documentation, the Company shall
deliver or cause to be delivered (a) certificates representing the number
(rounded up to the nearest full share) of validly issued, fully paid and
nonassessable shares of Common Stock specified in the Warrant Exercise
Documentation, and (b) if less than the full number of Warrants evidenced hereby
are being exercised, a new Warrant Certificate or Certificates, of like tenor,
for the number of Warrants evidenced by this Warrant Certificate, less the
number of Warrants then being exercised. Such exercise shall be deemed to have
been made at the close of business on the date of delivery of the Warrant
Exercise Documentation so that the Person entitled to receive shares of Common
Stock upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such surrender
shall be effective to constitute the Person entitled to receive such shares as
the record holder thereof while the transfer books of the Company for the Common
Stock are closed for any purpose (but not for any period in excess of five
days); but any such surrender of this Warrant Certificate for exercise during
any period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been made
on the date the Warrant Exercise Documentation was received and for the Number
Issuable of Common Stock specified in the Warrant Exercise Documentation and at
the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
Section 2. Adjustments.
2
(a) Adjustment of Number Issuable. The Number Issuable shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into a
larger number of shares; or
(C) combine the outstanding shares of Common Stock into
a smaller number of shares;
then, and in each such case (other than a dividend or distribution received by
or set aside for the benefit of the holder pursuant to Section 2(c) hereof), the
Number Issuable in effect immediately prior to such event shall be adjusted (and
any other appropriate actions shall be taken by the Company) so that the holder
of any Warrant evidenced hereby thereafter exercised shall be entitled to
receive the number of shares of Common Stock or other securities of the Company
which such holder would have owned or had been entitled to receive upon or by
reason of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event. An adjustment made pursuant
to this clause (i) shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision or combination to the close of business on the date upon
which such corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time or from
time to time issue or sell (x) shares of Common Stock or (y) securities
convertible into or exchangeable for shares of Common Stock, or any options,
warrants or other rights to acquire shares of Common Stock (other than
(A) shares of Common Stock issued upon exercise of the Warrants, (B) shares of
Common Stock issued upon conversion of the Debentures outstanding on the Issue
Date that have been amended pursuant to Section 7(i) of the Securities Purchase
Agreement, (C) shares of Common Stock issued pursuant to an employee stock
option plan, stock bonus plan or other incentive compensation plan or award,
each as approved by the Company's Board of Directors that, in the aggregate with
all other shares of Common Stock issued pursuant to any such plans (whether or
not approved by the Company's Board of Directors) constitute no more than ten
percent (10%) of the issued and outstanding Common Stock, and (D) shares of
Common Stock issued as a result of adjustments made under agreements related to
shares described in
3
clauses (A), (B) and (C)) at a price per share that is less than the Current
Market Price per share of Common Stock then in effect as of the record date or
issue date, as the case may be, referred to in the following sentence (the
"Relevant Date") (treating the price per share of Common Stock, in the case of
the issuance of any security convertible or exchangeable or exercisable into
Common Stock as equal to (x) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (y) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 2, then, and in each such case, the Number Issuable then in effect shall
be adjusted by multiplying the Number Issuable in effect on the day immediately
prior to the Relevant Date by a fraction, (1) the numerator of which shall be
the sum of the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of additional shares of Common
Stock issued or to be issued (or the maximum number into which such convertible
or exchangeable securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised), and (2) the
denominator of which shall be the sum of the number of shares of Common Stock,
on a fully diluted basis, outstanding on the Relevant Date, plus the number of
shares of Common Stock which the aggregate consideration (plus the aggregate
amount of any additional consideration initially payable upon conversion or
exchange of such convertible or exchangeable securities or exercise of such
options, warrants or other rights) for the total number of such additional
shares of Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or other
rights may be exercised) would purchase at the Current Market Price per share of
Common Stock on the Relevant Date. Such adjustment shall be made whenever such
shares, securities, options, warrants or other rights are issued, and shall
become effective retroactively to a date immediately following the close of
business (x) in the case of an issuance to the stockholders of the Company, as
such, on the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and (y) in
all other cases, on the date (the "issue date") of such issuance; provided, that
if any convertible or exchangeable securities, options, warrants, or other
rights (or any portions thereof) which shall have given rise to an adjustment
pursuant to this Section 2(a)(ii) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the Number
Issuable, then the Number Issuable hereunder shall be readjusted (but to no
greater extent than originally adjusted) on the basis of (A) eliminating from
the computation any additional shares of Common Stock corresponding to such
convertible or exchangeable securities, options, warrants or other rights as
shall have expired or terminated, (B) treating the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such convertible and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually
4
received and receivable therefor and (C) treating any of such convertible or
exchangeable securities, options, warrants or other rights which remain
outstanding as being subject to exercise or conversion. Solely for purposes of
this clause (ii), (I) Common Stock shall include the Common Stock, par value
$0.01 per share, of the Company and each other class of capital stock of the
Company that does not have a preference over any other class of capital stock of
the Company as to dividends or upon liquidation, dissolution or winding up of
the Company and, in each case, shall include any other class of capital stock of
the Company into which such stock is reclassified or reconstituted and (II) if
the provisions of any securities convertible into or exchangeable for shares of
Common Stock or options, warrants or other rights to acquire shares of Common
Stock are amended after the date of issuance so as to reduce the applicable
conversion price, exchange price or exercise price such amendment shall be
deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to time
after the Issue Date distribute to any holder of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another issuer, securities of the Company or another issuer or other
assets (excluding dividends or other distributions of shares of Common Stock or
other capital stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by or set aside for
the benefit of the holders of Common Stock pursuant to Section 2(c) below) or
rights or warrants to subscribe for or purchase securities of the Company
(excluding those in respect of which adjustment in the Number Issuable is made
pursuant to Section 2(a)(ii)), then, and in each such case, the Number Issuable
then in effect shall be adjusted by multiplying the Number Issuable in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price per share on the record
date referred to below and (y) the denominator of which shall be such Current
Market Price per share less the then Fair Market Value (as determined in good
faith by the Board of Directors of the Company, a certified resolution with
respect to which shall be mailed to the holder of the Warrants evidenced hereby)
of the portion of the cash, evidences of indebtedness, securities or other
assets so distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator shall in no event be zero).
Such adjustment shall be made whenever any such distribution is made and shall
become effective retroactively to a date immediately following the close of
business on the record date for the determination of stockholders entitled to
receive such distribution.
(iv) In case the Company at any time or from time to time shall take
any action which could have a dilutive effect on the number of shares of Common
Stock that may be issued upon exercise of the Warrants, other than an action
described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or
Section 2(b), then, the Number Issuable shall be adjusted in such manner and at
such time as the Board of Directors of the Company reasonably determines to be
equitable under the circumstances (such determination to be
5
evidenced in a resolution, a certified copy of which shall be mailed to the
holder of the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no adjustment
under this Section 2(a) need be made to the Number Issuable unless such
adjustment would require an increase or decrease of at least one percent (1%) of
the Number Issuable then in effect. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) of
such Number Issuable. Any adjustment to the Number Issuable carried forward and
not theretofore made shall be made immediately prior to the exercise of any
Warrants pursuant hereto.
(vi) The Company promptly shall deliver to each registered holder of
Warrants at least five (5) Business Days prior to effecting any transaction
which would result in an increase or decrease in the Number Issuable pursuant
to this Section 2(a) a notice thereof, together with a certificate, signed by
the Chief Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Clerk or an Assistant Clerk of the Company, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated and specifying the increased or decreased
Number Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward adjustments in
the Number Issuable, in addition to those otherwise required by this
Section 2(a), as the Board of Directors of the Company in their discretion
shall determine to be advisable in order that any stock dividend, subdivision
or combination of shares, distribution of rights or warrants to purchase stock
or securities, or distribution of securities convertible into or exchangeable
for Common Stock, hereafter made by the Company to its shareholders shall not
be taxable; provided, however, that any such adjustment shall be made, as
nearly as practicable, in a manner which treats all holders of Warrants with
similar protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale
of Assets. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which does
not result in any reclassification or change of outstanding Common Stock), or in
case of any sale or other disposition to another Person of all or substantially
all of the assets of the Company (any of the foregoing, a "Transaction"), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each holder of the Warrants evidenced hereby, at least
five (5) Business Days prior to effecting any of the foregoing Transactions, a
certificate that the holder
6
of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock into
which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2 and shall contain other terms identical to the terms hereof. If, in
the case of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes stock, securities,
other property or cash of a Person other than the successor or purchasing
Persons and other than the Company, in connection with such Transaction, then
such certificate also shall be executed by such Person, and such Person shall,
in such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 2(b) similarly shall
apply to successive Transactions.
(c) Special Distributions. If the holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in cash,
in capital stock (which shall include, without limitation, any options, warrants
or other rights to acquire capital stock) of the Company, whether or not
pursuant to a shareholder rights plan, "poison pill" or similar arrangement) in
other securities, property or assets, to holders of Common Stock (a "Special
Distribution"), then the Board of Directors shall set aside the amount of such
dividend or distribution that any holder of Warrants would have been entitled to
receive had it exercised such Warrants prior to the record date for such
dividend or distribution. Upon the exercise of a Warrant evidenced hereby, the
holder shall be entitled to receive, such dividend or distribution that such
holder would have received had such Warrant been exercised immediately prior to
the record date for such dividend or distribution. Prior to any Special
Distribution described in this Section 2(c), the Company shall as provided in
Section 4 hereof notify each holder (not less than five (5) Business Days prior
to the occurrence of each Special Distribution) of its intent to make such
Special Distribution and the holder, if it elects to have such distribution set
aside the amount thereof rather than have an adjustment to the Number Issuable
as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company
by sending a Special Notice prior to the date of any such Special Distribution.
Section 3. Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from
time to time the holders of the Warrants evidenced hereby are entitled to
notice pursuant to the terms of Section 2, such notice shall provide (a) the
date on which a record is to be taken for the purpose of such dividend,
distribution, subdivision, combination or issuance of shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision, combination, shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options,
7
warrants or other rights, are to be determined, (b) the issue date (as
defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees that
all shares of capital stock of the Company which may be issued upon the exercise
of the Warrants evidenced hereby will be duly authorized, validly issued and
fully paid and nonassessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate with
the holder of this Warrant so that it may prepare and file, in each case within
five Business Days of a request by such holder, notification and report forms in
compliance with the HSR Act, and shall otherwise fully comply with the
requirements of the HSR Act, to the extent required in connection with the
exercise of the Warrant. The Company shall bear all of its own expenses and all
of its own out of pocket expenses (including reasonable attorneys' fees, charges
and expenses) and filing fees of such holder in connection with any such
preparation and filing.
Section 6. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants proposed
for transfer, and with respect to the shares of Common Stock underlying such
Warrants, shall be effective under the Securities Act, (b) the Warrants are
transferred pursuant to Rule 144 under the Securities Act or (c) the Company
shall have received an opinion of counsel reasonably satisfactory to it that no
violation of such act or similar state acts will be involved in such transfer.
Thereupon, the Company shall issue in the name or names specified by the
registered holder hereof and, in the event of a partial transfer, in the name of
the registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
8
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an institutional investor, its own unsecured indemnity agreement shall be deemed
to be reasonably satisfactory), or, in the case of mutilation, upon surrender
and cancellation thereof, the Company will issue a new Warrant Certificate of
like tenor for a number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their respective
successors and permitted assigns. This Warrant Certificate shall be for the
sole benefit of the registered holder thereof. Nothing in this Warrant
Certificate shall be construed to give the registered holder hereof any rights
as a holder of shares of Common Stock until such time, if any, as the Warrants
evidenced by this Warrant Certificate are exercised in accordance with the
provisions hereof.
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the Preamble
hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed on
a national securities exchange, designated as a Nasdaq Stock Market security or
quoted in the over-the-counter-market by a member firm of the NYSE, the average
daily Market Price of the Common Stock for those days during the period of 15
days, ending on such date, on which the national securities exchanges were open
for trading, and (b) if the Common Stock is not then so listed, designated or
quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October 29,
2000.
9
"Exercise Price" shall have the meaning assigned to such term in the
Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"HSR Act" shall mean the Xxxx Xxxxx Xxxxxx Anti-Trust Improvements Act
of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the
Preamble hereof.
"Issue Date" shall mean December [_], 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a Nasdaq
Stock Market security, the last trading price of the Common Stock on such date
as reported in the Wall Street Journal; or (b) if the Common Stock is not so
listed or designated, the average of the reported closing bid and ask prices of
the Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b) is
applicable, the Fair Market Value per share determined in good faith by the
Board of Directors of the Company which shall be deemed to be Fair Market Value
unless holders of at least 50% of Common Stock issued or issuable upon exercise
of the Warrants request that the Company obtain an opinion of a nationally
recognized investment banking firm chosen by the Company (who shall bear the
expense) and reasonably acceptable to such requesting holders of the Warrants,
in which event the Fair Market Value shall be as determined by such investment
banking firm.
"Number Issuable" shall have the meaning given it in the Preamble
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in
Section 2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term in
Section 2(c) hereof.
10
"Special Notice" shall mean the notice sent by a holder to the Company
indicating its preference to have any Special Distribution set aside for its
benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in Section
2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
sufficient if delivered personally or sent by telecopy (with confirmation of
receipt) or by registered or certified mail, postage prepaid, return receipt
requested, (a) if to the holder of a Warrant, at such holder's last known
address or telecopy number appearing on the books of the Company; and (b) if to
the Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party. Each
such notice, request or communication shall be effective when received or, if
given by mail, when delivered at the address specified in this Section or on the
fifth Business Day following the date on which such communication is posted,
whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant shall
bear the following legend unless such shares or other securities have been
registered under the Securities Act and any applicable state securities laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER
THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE TRANSFERRED PURSUANT TO
RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (C) MEDIA LOGIC, INC.
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN
SUCH TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Common Stock by the exercise
of this Warrant, and no mere enumeration herein of the rights or
11
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
12
In Witness Whereof, the Company has caused this Warrant Certificate to be
duly executed as of the Issue Date.
Media Logic, Inc.
By:_________________________________
Xxxxxxx X. Xxxxx, Xx.
Chief Executive Officer and President
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate to
____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Date:_________________________
___________________________________
Signature
(Signature must conform in all respects to name of holder as specified
on the face of this Warrant Certificate)
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate to purchase ____ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification
or other identifying number)
___________________________
___________________________
___________________________
(Please print name and address)
Date:_________________________
___________________________________
Signature
(Signature must conform in all respects to name of holder
as specified on the face of this Warrant Certificate)
ANNEX II
Media Logic, Inc.
Officer's Certificate
I, Xxxxxxx X. Xxxxx, Xx., Chief Executive Officer and President of Media
Logic, Inc. (the "Company"), a Massachusetts corporation, Do Hereby Certify,
pursuant to (i) Section 7(g) of the Securities Purchase Agreement, dated as of
December 22, 1997 (the "Purchase Agreement"), between the Company and IMPRIMIS
SB L.P., as follows:
1. The representations and warranties of the Company contained in
Section 3 of the Purchase Agreement are true and correct as of the
date hereof; and
2. The Company has performed and complied with all obligations,
covenants, conditions and agreements required to be performed or
complied with under the Purchase Agreement or the Warrant on or prior
to the date hereof.
Capitalized terms used herein and not otherwise defined are defined in the
Purchase Agreement.
IN WITNESS WHEREOF, I have executed this certificate this _____ day of
December, 1997.
____________________________________
Xxxxxxx X. Xxxxx, Xx.,
Chief Executive Officer and President
ANNEX III
Media Logic, Inc.
Assistant Clerk's Certificate
I, Xxxx X. X'Xxxxx, Assistant Clerk of Media Logic Inc., a Massachusetts
corporation (the "Company"), Do Hereby Certify in the name and on behalf of the
Company as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of
the Restated Articles of Organization of the Company, together with
all amendments thereto through and including the date of this
certificate, as on file with and certified by the Secretary of State
of Massachusetts. Such documents have not been amended or modified,
no other charter documents have been filed with any relevant official
with respect to the Company and no amendment or modification to any of
such documents has been authorized on behalf of the Company.
2. Attached hereto as Exhibit B are true, correct and complete copies of
the By-laws of the Company as in effect on the date hereof. The
By-laws have not been amended or modified in any respect and are in
full force and effect.
3. Attached hereto as Exhibit C are true, correct and complete copies of
resolutions duly adopted by written consent of the Board of Directors
of the Company, dated October 15, 1997 and December 11, 1997, and such
resolutions (i) are the only proceedings adopted by such Board or any
committees thereof with respect to the matters referred to therein,
(ii) have not in any way been amended, modified, rescinded or revoked
since their adoption and (iii) remain in full force and effect on the
date hereof.
4. Each of the persons listed on Exhibit D hereto is a duly elected,
qualified and acting authorized officer of the Company serving in the
capacity set forth beside his name on Exhibit D. The signature of
each such officer set forth opposite his name on Exhibit D is his
genuine signature.
5. Attached hereto as Exhibit E is a true and correct copy of a
Certificate of Good Standing of the Company, issued on December 19,
1997, by the Secretary of State of the Commonwealth of Massachusetts.
2
IN WITNESS WHEREOF, I have signed this certificate this ___ day of
December, 1997.
_________________________________
Xxxx X. X'Xxxxx, Assistant Clerk
The undersigned hereby certifies that Xxxx X. X'Xxxxx is the duly
elected, qualified and acting Assistant Clerk of the Company and that the
signature set forth above is his genuine signature.
_____________________________________
Xxxxxxx X. Xxxxx, Xx.
Chief Executive Officer and President
3
ANNEX IV
December 29, 1997
IMPRIMIS SB L.P.
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7(h) of the Securities
Purchase Agreement, dated as of December 22, 1997 (the "Securities Purchase
Agreement"), by and between Media Logic, Inc., (the "Company") and you relating
to the sale and issuance by the Company of 1,133,334 shares (the "Shares") of
common stock of the Company, $.01 par value per share (the "Common Stock") and
warrants (the "Warrants") to purchase 1,333,334 shares of Common Stock of the
Company. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Securities Purchase Agreement.
We have acted as counsel for the Company in connection with the sale of the
Shares and the Warrants and in connection with the execution and delivery of the
Securities Purchase Agreement dated as of December 22, 1997, by and between the
Company and you. We have examined the Company's Restated Articles of
Organization and By-laws, as amended, to date, the Securities Purchase
Agreement, the Warrants, a Certificate of an Officer of the Company dated as of
the date hereof and delivered to you pursuant to Section 7(g) of the Securities
Purchase Agreement, a Certificate of the Assistant Clerk of the Company (the
"Assistant Clerk's Certificate") dated as of the date hereof and delivered to
you pursuant to Section 7(g) of the Securities Purchase Agreement, a Certificate
of Good Standing of the Company issued by the Secretary of State of the
Commonwealth of Massachusetts on December 19, 1997 as is attached to the
Assistant Clerk's Certificate as Exhibit E thereto and such records of the
corporate proceedings of the Company as we have deemed material. We have made
such inquiry of the officers of the Company and have examined such other Company
records, documents, agreements and instruments of the Company made available to
us and certificates of officers of the Company and of public officials and have
examined such questions of law as we have deemed necessary for the purposes of
this opinion. In rendering this opinion, we have relied, as to all questions of
fact material to this opinion, upon certificates of public officials and
officers of the Company, and representations and warranties of the Company
contained in the Securities Purchase Agreement and any certificates required
thereby. Any reference herein to "our knowledge" or any derivation thereof
shall mean knowledge of the particular attorneys in this firm who have performed
services for the Company on behalf of this firm without any independent
investigation except as otherwise described above.
We have assumed, without independently verifying such assumptions, the
genuineness of
IMPRIMIS SB L.P.
December 29, 1997
Page 2
the signatures on all of the documents examined by us, the authenticity of all
documents furnished for our examination as originals, and the conformity to
original documents of all documents furnished to us as copies, including
documents transmitted by telecopy.
For purposes of this opinion, we have assumed that you have all requisite
power and authority and have taken all necessary action to effect the
transactions mentioned above, and we have assumed that you have complied with
all applicable federal or state laws and regulations in connection with the
purchase of the Shares and the Warrants and the execution and delivery of the
Securities Purchase Agreement.
The opinions hereinafter expressed are qualified (a) to the extent that the
validity or enforceability of any agreement or instrument or of any right
granted thereunder may be subject to or affected by any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, (b) by legal and
equitable limitations on the availability of specific performance as a remedy
and the discretion of the court in awarding equitable relief and (c) insofar as
indemnification or contribution for liabilities arising under the Securities Act
of 1933, as amended, may be deemed to be against public policy or otherwise
limited by applicable laws. Further, our opinion with respect to the Company's
agreement to file a listing application for the Warrants with the American Stock
Exchange and to use its best efforts to register the Warrants for public
trading, as set forth in Sections 4(s) and 4(t) of the Securities Purchase
Agreement, is subject to the approval of the Company's Board of Directors to so
register the Warrants, such approval which we have been informed that the
Company is seeking. We do not express any opinion with respect to the
securities or "blue sky" laws of any state or foreign jurisdiction.
Based upon the foregoing and subject to the final paragraph of this letter,
we are of the opinion that:
1. Each of the Company and the Subsidiary has been duly organized and is
validly existing as a corporation in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively. To our
knowledge, the Company and the Subsidiary are duly qualified to transact
business and are in good standing in all jurisdictions where the Company or the
Subsidiary owns or leases its respective property, maintains its respective
employees or conducts its respective business, except for jurisdictions in which
the failure to so qualify would not have a Material Adverse Effect on the
Company or the Subsidiary. The Company and the Subsidiary have all requisite
corporate power and authority to own their respective properties and conduct
their respective businesses as currently conducted.
IMPRIMIS SB L.P.
December 29, 1997
Page 3
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.01 par value per share (the "Common Stock"). To our
knowledge, except for the Securities Purchase Agreement and the Warrants and
except as set forth on Schedule 3(c) of the Disclosure Schedule, (i) there are
no bonds, debentures, notes or other indebtedness or securities of the Company,
in any such case having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which shareholders
of the Company may vote, (ii) there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which the Company is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of Common Stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking,
and (iii) there are no outstanding rights, commitments, agreements,
arrangements, or undertakings of any kind obligating the Company to repurchase,
redeem or otherwise acquire any shares of Common Stock or other voting
securities of the Company or any securities of the type described in clauses (i)
and (ii) above.
3. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Company has timely filed all material required to be filed
pursuant to Sections 13(a) or 15(d) of the Exchange Act for a period of at least
12 months preceding the date hereof.
4. When issued, executed, delivered and sold by the Company in accordance
with the Securities Purchase Agreement, the Shares and the Warrants will have
been duly and validly issued, executed and delivered, will be fully paid and
non-assessable (provided that the Warrants' exercise price shall be payable upon
exercise of the Warrants) and not subject to any purchase option or right of
first refusal or preemptive, subscription or similar rights and will constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms and entitled to the benefits provided in the
Securities Purchase Agreement, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
The Exercise Shares have been duly authorized and reserved for issuance upon
Exercise of the Warrants and, when issued and delivered upon such exercise in
accordance with the Warrants, will by duly issued, fully paid and non-assessable
and not subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights.
5. The Company has the requisite corporate power and authority to enter
into the
IMPRIMIS SB L.P.
December 29, 1997
Page 4
Securities Purchase Agreement, to sell and deliver the Shares, the Warrants and
the Exercise Shares as described in the Securities Purchase Agreement, and to
consummate the transactions that are contemplated in the Securities Purchase
Agreement. Subject to the Company's Board of Directors' authorization of the
registration of the Warrants under the Securities Exchange Act of 1934, as
amended, and the filing of a listing application with respect to the Warrants
with the American Stock Exchange, the Securities Purchase Agreement has been
duly and validly authorized by all necessary corporate action by the Company and
to our knowledge, no approval of any governmental or other body is required for
the execution and delivery of the Agreement by the Company or the consummation
of the transactions contemplated thereby (other than the American Stock Exchange
with respect to the listing of the Shares, Exercise Shares and Warrants). The
Securities Purchase Agreement has been duly and validly executed and delivered
by and on behalf of the Company and, subject to the Board of Directors' approval
set forth in the immediately preceding sentence with respect to the subject
matter thereof, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and except as to compliance with federal, state, and foreign securities laws, as
to which no opinion is expressed.
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Securities Purchase Agreement by the Company and
the performance of its obligations thereunder do not and will not constitute a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with or violate any provision of (i) the Company's
Restated Articles of Organization or By-laws, (ii) any indenture, mortgage, deed
of trust, material agreement or other instrument to which the Company is a party
or by which is or any of its property is bound, (iii) any applicable statute or
regulation, (iv) any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property, or (v) any license,
franchise, permit or other similar authorization held by the Company, except as
to defaults, violations or breaches which individually or in the aggregate would
not have a Material Adverse Effect on the Company.
7. The issuance of the Common Stock upon exercise of the Warrants in
accordance with the terms and conditions of the Securities Purchase Agreement
will not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed,
including the American Stock Exchange Listing Standards and Requirements.
IMPRIMIS SB L.P.
December 29, 1997
Page 5
8. The Company complies with the eligibility requirements for the use of
Form S-3 under the Securities Act of 1933, as amended.
9. Except as described in Schedule 3(j) of the Disclosure Schedule to the
Securities Purchase Agreement, to our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceeding against the
Company or the Subsidiary which would, insofar as can reasonably be foreseen,
individually or in the aggregate, have a Material Adverse Effect on the Company
or the Subsidiary.
10. To our knowledge, except for the Subsidiary, the Company does not have
any subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
joint venture or other entity. To our knowledge, there are no restrictions on
the transfer of shares of Common Stock other than those imposed by relevant
state and federal securities laws. To our knowledge, there are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock nor are there any commitments,
agreements, arrangements or undertakings of any kind relating to dividend rights
or disposition of the Common Stock, to which the Company is a party. To our
knowledge, except as provided in the Securities Purchase Agreement and as set
forth in Schedule 3(c) of the Disclosure Schedule, no Person has the right to
demand or other rights to cause the Company to file any registration statement
under the Securities Act.
11. No permit, consent, approval, license or order of, authorization of,
or registration, declaration or filing with, any court or other governmental
entity is required to be obtained or made in connection with the execution,
delivery or performance of the Securities Purchase Agreement or the Warrants by
the Company or the consummation of the transactions contemplated thereby (other
than with respect to the American Stock Exchange in connection with the listing
of the Registrable Securities and the approvals required in connection with a
registration of the Registrable Securities).
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention including changes in law which may occur
hereafter. Our opinions above are limited to the laws of the Commonwealth of
Massachusetts, and the federal law of the United States of America and we
express no opinion with respect to the laws of any other jurisdiction. We
note that the Securities Purchase Agreement states that it is governed by the
law of the State of New York, and for purposes of the opinions set forth in
paragraph 5 above, we have assumed, with your consent, that the law of the
State of New York is identical to the law of the Commonwealth of
Massachusetts. Furthermore, we express or imply no opinion with respect to
compliance with anti-fraud statutes,
IMPRIMIS SB L.P.
December 29, 1997
Page 6
rules or regulations of applicable state or federal law. This letter is
furnished to you as the purchaser of the Shares and Warrants and is solely for
your benefit and may not be relied upon by any other person or for any other
purpose.
Very truly yours,
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
SCHEDULE 3C
DEBENTURES
HOLDER AMOUNT
------------------------------------------------------------------------------------------------------ ----------
One & Co.............................................................................................. $ 100,000
F.T.S. Worldwide...................................................................................... $ 300,000
Xxxxxxxxx Finance Ltd................................................................................. $ 120,000
Euro Factors Int'l, Inc............................................................................... $ 100,000
Ramlu Trading Corp.................................................................................... $ 80,000
F.T.S. Worldwide...................................................................................... $ 750,000
WARRANTS
HOLDER NUMBER OF SHARES EXERCISE PRICE PER SHARE
----------------------------------------------------------------------- ----------------- ---------------------------
Digital Media and Communications, L.P.................................. 410,870 $3
ACFS Limited........................................................... 240,000 $3
Adar Equities LLC...................................................... 900,000 $3
Xxxxxx Capital Group, Ltd.............................................. 200,000 $2
First Granite Securities, Inc.......................................... 500,000 $2
OPTIONS
OPTIONS AUTHORIZED
OPTIONS OUTSTANDING BUT UNISSUED
------------------- ------------------
Media Logic Inc.
1991 Stock Option Plan.... 610,592 414,808
REGISTRATION RIGHTS
HOLDER NUMBER OF SHARES
----------------------------------------------------------------------------------------------- -----------------
Digital Media and Communications L.P........................................................... 410,870
ACFS Limited................................................................................... 240,000
Adar Equities LLC.............................................................................. 900,000
Xxxxxx Capital Group, Ltd...................................................................... 200,000
First Granite Securities, Inc.................................................................. 500,000
F.T.S. Worldwide............................................................................... 833,334*
Boston Group LP................................................................................ 250,000**
First Granite Securities, Inc.
Xxxxxxx Xxxxxxx................................................................................ 1,000,000
Xxx X. Xxxxxx.................................................................................. 8,000***
------------------------
* Assumes $.90 conversion price for outstanding debentures
** Expected--See Schedule 3H
*** Shares to be issued October 23, 1998 pursuant to Separation Agreement.
AGREEMENTS TO ISSUE SECURITIES
8,000 shares to be issued to Xxx X. Xxxxxx on October 23, 1998 pursuant to
Separation Agreement dated October 23, 1996.
REDEMPTION RIGHTS
F.T.S. Worldwide--$750,000 Debentures--pursuant to Section 2(d) of
Registration Rights Agreement dated October 27, 1997.
SCHEDULE 3H
HOLDER INSTRUMENT AMOUNT DATE
----------------------------------------- -------------------------- -------------------- --------------------
F.T.S. Worldwide......................... Convertible Debenture $750,000 October 29, 1997
(Disclosed in Schedule 3C)
First Granite Securities, Inc............ Warrants 500,000 shares October 29, 1997
(Disclosed in Schedule 3C) exerciseable at $2
per share
Boston Group LP.......................... Warrants 250,000 shares To be issued upon
First Granite Securities, Inc. exerciseable at the execution of a
greater of $2 per securities purchase
share or the Market agreement and
Price per share payment of the
purchase price
REGISTRATION RIGHTS
HOLDER NUMBER OF SHARES
---------------------------------------------- -----------------
Boston Group LP............................... 250,000 Subject to issuance of warrants as described
First Granite Securities, Inc. above
SCHEDULE 3J
PENDING LITIGATION
On or about January 16, 1996, Media Logic, Inc. and its subsidiary
MediaLogic ADL, Inc. (collectively, "Media Logic") commenced an action against
Xxxxxxxxx X. Xxxxxxx and Xxxxxxx Engineering Company (collectively "Xxxxxxx")
seeking (a) a declaration of the rights of Media Logic under certain technology
transfer and consulting agreements, and (b) damages for Xxxxxxx'x breach of
those Agreements. On June 5, 1996, Xxxxxxx answered the complaint and
counterclaimed, asserting claims for breach of contract, misrepresentation,
promissory estoppel, violation of the implied covenant of good faith and fair
dealing, M.G.L.c. 93A, and declaratory judgment. On June 11, 0000, Xxxxxxx
amended the counterclaim to include a defamation count relating to a press
release issued by Media Logic concerning the litigation. In August 1996, Media
Logic moved to dismiss the counterclaims. The Court denied Media Logic's motion
in November 1996. Currently the parties are engaged in pre-trial discovery.
SCHEDULE 3K
EVENTS OF DEFAULT
None
SCHEDULE 3L
LEASES
LOCATION LANDLORD TERM DATE RENT/MONTH PURPOSE
---------------------------- ---------------------------- ----------- ------------- ----------------------------
00 Xxxxx Xxxxxx............. D&K Realty Trust 4/30/08 6950 company headquarters
Xxxxxxxxxx, XX
0000 57th St................ Cottonwood Land and Farm 1/31/99 6949 former R&D offices
Boulder, CO Ltd.
This property has been sublet for the remainder of the lease term.
2280 Wilderness Place....... Avalon Investment Co. 3/31/00 2774 former R&D offices
Ste. B
Boulder, CO
Sublease for the remainder of this lease term to be executed as of January 1, 1998.
2340 E Trinity Xxxxx........ F.E.S. Mgmnt. Mo/ Mo 770 sales office
Carrollton, TX
One X'Xxxx Center........... Alliance Business Center Mo/ Mo 1341 sales office
0000 Xxxxx Xxxx
Xxxxxxxxx, XX
American Office Center...... Great Offices Inc Mo/ Mo 885 sales office
0 Xxxxxxxxx Xxxx
Xxxxxx, XX
SCHEDULE 3M
PATENT APPLICATIONS
U. S. Patent Application Serial No. 08/547,713
Entitled: TRANSFER MECHANISM
U.S. Patent Application Serial No. 08/548,413
Entitled: DATA LIBRARY
U.S. Patent Application Serial No. 08/548,483
Entitled: DATA STORAGE SYSTEM
U.S. Patent Application Serial No. 08/548,485
Entitled: CONVEYOR SYSTEM
U.S. Patent Application filed Nov. 17, 1997 (Serial No. not yet issued)
Entitled: TAPE LIBRARY
COPYRIGHTS
REGISTRATION REGISTRATION
TITLE NO. DATE
------------------------------------------------------------------------- --------------- ---------------------
ML5000 Rev. 4.21......................................................... TXU 526 355 July 17, 1992
ML3100 Rev. 4.42......................................................... TXU 575 165 September 3, 1993
ML3200-24 Rev. 2.05...................................................... TXU 592 148 September 3, 1993
ML3600/ML3200-48 Rev. 2.37............................................... TXU 592 149 September 3, 1993
TRADEMARKS
REGISTRATION REGISTRATION
TITLE NO. DATE JURISDICTION
-------------------------------------- ----------- -------------------- -------------------
ACCUCOPY.............................. 1,896,826 May 30, 0000 Xxxxxx Xxxxxx
PROCESSLOGIC.......................... 1,930,272 October, 24, 0000 Xxxxxx Xxxxxx
MEDIALOGIC............................ 1,973,194 May 7, 0000 Xxxxxx Xxxxxx
MEDIALOGIC............................ 1,713,315 September 8, 0000 Xxxxxx Xxxxxx
SCHEDULE 3N
LEASE
ANNUAL
LOCATION LANDLORD TERM DATE COMMITMENT PURPOSE
----------------- -------------------- ----------- ------------ ---------------------------
00 Xxxxx Xxxxxx D&K Realty Trust 4/30/08 $ 83,400 Company headquarters
Xxxxxxxxxx, XX
XXXXXXXX 0X
RELATED PARTY TRANSACTIONS
Lease with D&K Realty Trust on company headquarters at 000 Xxxxx Xxxxxx,
Xxxxxxxxxx, XX. Principals in D&K Realty Trust are Xxxxx Xxxxxx, former
President and director of the company, and Xxxxx Xxxxx, former Senior Vice
President and Director of the company. Neither Xx. Xxxxxx nor Mr. Xxxxx is
employed by the company nor does either Xx. Xxxxxx or Mr. Xxxxx have any
agreement of any type with the company other than pursuant to the above
referenced lease with D&K Realty Trust.
