Exhibit 99.2
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 WEXFORD SPECTRUM INVESTORS LLC, a Delaware limited liability
company (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
566,666 shares (the "Shares") of Common Stock for ninety cents ($0.90) per
share, for an aggregate purchase price (the "Purchase Price") of $509,999.40.
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
2
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 and
3
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, subscription or similar rights.
The Shares have been duly authorized and, when issued in accordance with this
Agreement, will (i) be 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 and (ii) not subject the holder thereof to
personal liability by reason of being such holder. The shares of Common Stock
initially issuable upon exercise of the Warrants (the "Exercise Shares") have
been duly authorized and reserved for issuance upon exercise and, when issued
upon such exercise, will (ii) be duly issued, fully paid and non-assessable and
not subject to any purchase option, or right of first refusal or preemptive,
4
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
5
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.
6
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;
7
(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,
8
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.
9
m. 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. (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 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
10
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. 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. 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. 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. 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. 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.
12
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.
13
(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 666,666 shares of Common
Stock (the "Exercise Shares") of which (i) Warrants to purchase 333,333 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 333,333 shares of Common Stock shall be exercisable at a
price per share such that the weighted average exercise price of the 666,666
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. Section 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: WEXFORD SPECTRUM INVESTORS LLC
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 SECURITIES.
(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 under-writer 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 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
34
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
WEXFORD SPECTRUM INVESTORS LLC
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. WX-3
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT WEXFORD SPECTRUM INVESTORS LLC, or such
holder's registered assigns (the "Investor"), is the owner of 333,333 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 29, 2002,
at an exercise price of $1.50 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 22, 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 29, 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.
2
Section 2. Adjustments.
(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
3
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 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
4
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 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
5
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 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
6
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 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
7
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,
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
8
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.
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
9
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.
"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 29, 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,
10
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.
"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
11
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 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:
-------------------------------
Name:
Title:
[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.
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
ANNEX IV
December 29, 1997
WEXFORD SPECTRUM INVESTORS, LLC
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 566,666 shares (the "Shares") of
common stock of the Company, $.01 par value per share (the "Common Stock") and
warrants (the "Warrants") to purchase 666,666 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
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 3
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 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.
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 4
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.
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
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 5
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 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
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 6
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.
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
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 7
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, 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 (Disclosed in Convertible $750,000 October 29,1997
Schedule 3C) Debenture
First Granite Securities, Inc. Warrants 500,000 shares October 29, 1997
(Disclosed in Schedule 3C) exerciseable at
$2 per share
First Boston Group LP Warrants 250,000 shares To be issued upon
Granite Securities, Inc. exerciseable execution of a
at the securities purchase
greater of agreement and
$2 per share payment of the
or the Market purchase price
Price per share
REGISTRATION RIGHTS
HOLDER NUMBER OF SHARES
---------------------------------------------- -----------------
Boston Group L.P. 250,000 Subject to issuance of
First Granite Securities, Inc. warrants as described
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
Plainville, MA
1965 57th St. Cottonwood Land 1/31/99 6949 former R&D offices
Boulder, CO and Farm Ltd.
This property has been sublet for the remainder of the lease term.
2280 Wilderness Avalon Investment Co. 3/31/00 2774 former R&D offices
Place Ste. B
Boulder, CO
Sublease for the remainder of this lease term to be executed as of January
1, 1998.
0000 X Xxxxxxx Xxxxx F.E.S. Mgmnt. Mo/Mo 770 sales office
Carrollton, TX
One X'Xxxx Center Alliance Business Mo/Mo 1341 sales office
0000 Xxxxx Xxxx Xxxxxx
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
ANNUAL
LEASE -------------------------
LOCATION LANDLORD TERM DATE COMMITMENT PURPOSE
----------------- ------------------------------------------------------- ----------- ------------ -----------
00 Xxxxx Xxxxxx D&K Realty Trust 4/30/08 $ 83,400 Company
Xxxxxxxxxx, XX xxxxxxxxxxxx
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.
