SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 9, 1998
MEDICAL DYNAMICS, INC.
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(Exact name of Registrant as specified in its charter)
Commission file number: 0-8632
Colorado 84-0631765
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(State orother jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
99 Inverness Drive East
Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(303) 790-2990
not applicable
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former name or former address, if applicable
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Item 5. Other Events.
On July 31, 1998, MEDY sold convertible debentures in the aggregate amount
of $1,100,000 to Tail Wind Fund, Ltd. ("Tail Wind") pursuant to Regulation D,
and (assuming certain conditions are met), Tail Wind committed to purchase
additional convertible debentures aggregating $400,000 in December 1998. The
following provides the information required by Item 701 of Regulation S-B.
(A) The title of the securities sold is: 8% convertible debenture, convertible
into shares of MEDY common stock at the rate equal to the Market Price (as
defined in the debenture) but not greater than the "Ceiling Price" (a price
equal to 120% of the closing bid prices for the 20 days preceding the date
the contemplated registration statement becomes effective). Interest on the
principal amount is payable semi-annually, and the principal amount of the
debenture is payable in full on July 31, 2003. MEDY is entitled to make
payment of interest in shares of its common stock valued at the Market
Price (as defined).
(B) Rochon Capital Ltd., San Rafael, California, acted as placement agent for
the transaction. The investor, Tail Wind, is a sophisticated, accredited
investor, an existing shareholder and debenture holder of MEDY.
(C) The total offering price was $1,500,000, including $1,100,000 purchased on
July 31, 1998 and an additional $400,000 expected to be purchased in
December 1998. A commission of 6% was paid to the placement agent, and
legal fees and expenses of $12,500 were reimbursed to the purchaser. A
commission of 6% will be paid on the December 1998 investment when made.
(D) The transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended. The facts establishing such
exemption include (without limitation) the following: the offer and sale of
securities were made to a single, existing security holder of MEDY with no
public advertising or general solicitation. The purchaser is a
sophisticated entity which negotiated the investment at arms' length after
performing such due diligence into MEDY as the purchaser determined to be
necessary, and after consultation with its professional advisors as the
purchaser deemed to be necessary..
(E) The debenture is convertible into shares of MEDY common stock as described
in paragraph (A), above. In addition, MEDY issued a five-year warrant to
the purchaser to acquire 110,000 shares of MEDY common stock, exercisable
at $2.58 per share, and an additional warrant to acquire 40,000 shares will
be issued in December 1998 in connection with the $400,000 purchase.
One-third of the principal amount of the debenture is convertible from and
after November 29, 1998, an additional one-third from and after January 27,
1999; and the entire debenture from and after March 29, 1999.
(F) MEDY undertook to file a registration on Form S-3 and (subject to certain
conditions) obtain its effectiveness by November 30, 1998. The registration
statement will allow resale of the MEDY shares underlying the convertible
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debentures and the warrant, but only after issuance through conversion or
exercise, if the investor actually elects to convert the debentures or
exercise the warrants. If the registration statement is not effective as
required under the Registration Rights Agreement, MEDY will be obligated to
pay liquidated damages to the investor equal to 2% of the aggregate
principal amount of the debentures for each month during which the
Registration Statement is not effective.
Item 7. Financial Statements and Exhibits
(A) and (B) Financial Statements
None
(C) Exhibits
(1) Purchase Agreement between Medical Dynamics, Inc. and The Tail Wind
Fund, Ltd.
(2) Form of Convertible Debenture
(3) Registration Rights Agreement between Medical Dynamics, Inc. and The
Tail Wind Fund, Ltd.
(4) Common Stock Purchase Warrant issued to The Tail Wind Fund, Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MEDICAL DYNAMICS, INC.
August 6, 1998 By: /s/ Van A Horsley
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Van A. Horsley, President
PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT ("Agreement") is made as of the 31st day of July,
1998 by and between Medical Dynamics, Inc., a Colorado corporation (the
"Company"), and The Tail Wind Fund, Ltd., a British Virgin Islands limited
liability company (the "Investor").
In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. The following terms, as used herein, have the following
meanings:
1.1 "Affiliate" means, with respect to any person, any other person
which directly or indirectly controls, is controlled by, or is under common
control with, such person.
1.2 "Agreements" means this Agreement and the Registration Rights
Agreement.
1.3 "Closing" means the consummation of the transactions contemplated
by this Agreement, which shall occur as provided herein.
1.4 "Common Stock" means the Common Stock, par value $.001 per share,
of the Company.
1.5 "Control" means the possession , direct or indirect, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
1.6 "Debenture" means the Convertible Debenture issued to the Investor
in the form attached hereto as Exhibit A.
1.7 "Material Adverse Effect" means a material adverse effect on the
(i) condition (financial or otherwise), business, assets, results of operations
or prospects of the Company and its subsidiaries, taken as a whole; (ii) ability
of the Company to perform any of its material obligations under the terms of
this Agreement; or (iii) rights and remedies of the Investor under the terms of
this Agreement.
1.8 "Person" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.9 "Registration Rights Agreement" means the Registration Rights
Agreement relating to the Common Stock issuable pursuant to the conversion of
the Debentures and the exercise of the Warrants, in the form attached hereto as
Exhibit B, to be entered into as of the date hereof.
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1.10 "SEC" means the Securities and Exchange Commission.
1.11 "SEC Filings" has the meaning set forth in Section 4.5.
1.12 "Securities" means the Debentures, the Common Stock issuable upon
the conversion of, or payable as accrued interest on, the Debentures, the
Warrants and the Common Stock issuable upon the exercise of Warrants.
1.13 "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.14 "1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
1.15 "Warrants" means (a) the "First Investment Warrant," which is the
Warrant issued to the Investor on the First Closing Date to purchase up to an
aggregate of 110,000 shares of Common Stock at the exercise price stated
therein, the form of which is attached hereto as Exhibit C and (b) the "Second
Investment Warrant," which is the Warrant to be issued to the Investor on the
Second Closing Date to purchase up to an aggregate of 40,000 shares of Common
Stock at the exercise price stated therein, the form of which is attached hereto
as Exhibit D.
2. Purchase and Sale of Debenture and Issuance of Warrant.
2.1 First Investment. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, the Investor hereby purchases and the Company hereby sells and issues to
the Investor (a) the Debenture at an aggregate purchase price of $1,100,000,
issued and delivered concurrently herewith in eleven equal Debenture forms of
$100,000 face amount each and (b) the First Investment Warrant issued and
delivered concurrently herewith (the "First Investment").
2.2 Second Investment. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
herein, upon the satisfaction of the conditions set forth below, on or before
December 31, 1998, the Investor shall purchase and the Company shall sell and
issue to the Investor (a) Debentures at an aggregate purchase price of $400,000,
which shall be issued and delivered against receipt of funds as contemplated by
Section 3, below, in four equal Debenture forms of $100,000 face amount each and
(b) the Second Investment Warrant (the "Second Investment"). The obligation of
the Investor to make the Second Investment shall be subject to the satisfaction
of the following conditions:
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(a) The average closing bid price of the Common Stock for the
month of November 1998 shall be $2.10 or above;
(b) The effective date of the registration statement contemplated
by the Registration Rights Agreement is within 120 days of the date hereof;
(c) The registration statement on Form S-3 (Registration No. 333-
42631) is not subject to any suspension of effectiveness and has not been so
subject for a period in excess of ten (10) days during the period commencing on
the date hereof and ending on November 30, 1998;
(d) The representations and warranties of the Company shall be
true and correct as of the date of the Second Investment;
(e) The trading in the Common Stock shall not have been suspended
by the SEC or the Nasdaq Stock Market, and the Common Stock shall not have been
delisted from the Nasdaq Stock Market;
(f) The Company shall have delivered to the Investor an opinion
of Company's counsel in form and substance similar to the opinion delivered in
connection with the First Investment.
2.3 Closing Dates and Closings. The date and time of the issuance and
sale of the Debentures and Warrants pursuant to this Agreement (the "Closing
Dates") shall be (i) in the case of the First Investment, the date hereof (the
"First Closing Date"); and (ii) in the case of the Second Investment, December
31, 1998 or such earlier date in the month of December 1998 as the parties may
mutually agree (the "Second Closing Date"). On each Closing Date, the Investor
shall cause the purchase price for the Debentures being purchased on that
Closing Date to be paid into escrow as provided in the Escrow Agreement attached
hereto as Exhibit E, and the Company shall cause the Debentures and Warrant
subscribed for hereby with respect to that Closing Date to be executed, issued
and delivered to the Escrow Agent as provided in the Escrow Agreement. The
parties expressly acknowledge and agree that on or before the Second Closing
Date, the Company also shall cause to be delivered to the Investor a certificate
of an officer of the Company to the effect that the conditions precedent to the
Second Investment (as set forth in Section 2.2 above) have been satisfied and
that the representations and warranties of the Company set forth herein are true
and correct as of such date and will be true and correct as of the Second
Closing Date.
3. Payment of Purchase Price. The Investor shall cause the purchase price
to be paid in full by wire transfer to the Escrow Agent pursuant to the terms of
the Escrow Agreement.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that:
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4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Colorado and has all requisite power and authority to carry
on its business and own its properties as now conducted and owned. The Company
and each of its subsidiaries is duly qualified or licensed to do business as a
foreign corporation in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property makes such qualification
or licensing necessary unless the failure to so qualify or be licensed would not
have a Material Adverse Effect.
4.2 Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) the performance of all obligations of the Company hereunder
or thereunder, and (iii) the authorization, issuance (or reservation for
issuance) and delivery of the Securities. The Agreements constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
4.3 Valid Issuance.
(a) The Company has reserved a sufficient number of shares of
Common Stock for issuance upon conversion of the Debentures and exercise of the
Warrants, and such shares, when issued in accordance with the respective terms
of the Debentures and the Warrants, will be duly authorized, validly issued,
fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws.
(b) The authorized capital stock of the Company consists, solely
of 30,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As
of July 27, 1998, the Company has 9,991,739 shares of Common Stock and no shares
of preferred stock issued and outstanding and there are no other outstanding
shares of capital stock of the Company. All of the issued and outstanding shares
of the Company's Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. Except as set forth
on Schedule 4.3, no one is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as
disclosed on Schedule 4.3 to this Agreement, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind, and
the Company and its subsidiaries do not have any present plan or intention to
issue any equity securities of any kind, or to transfer any equity securities of
any kind owned by them. Except as disclosed on Schedule 4.3, the Company does
not know of any voting agreements, buy-sell agreements, option or right of first
purchase agreements or other agreements of any kind among any of the
securityholders of the Company relating to the securities held by them. Except
as disclosed on Schedule 4.3, the Company has not granted any Person the right
to require the Company to register any securities of the Company under the 1933
Act, whether on a demand basis or in connection with the registration of
securities of the Company for its own account or for the account of any other
Person.
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(c) The number of outstanding shares of Common Stock, as
indicated above, plus the number of shares of Common Stock issuable pursuant to
outstanding rights and agreements, assuming the complete exercise or conversion
of all rights to acquire capital stock of the Company until such rights and
subsequent rights incident to exercise or conversion are fully exercised or
converted for Common Stock, together represent a total of 13,887,691 shares of
Common Stock immediately prior to the Closing, plus an indeterminable number of
shares of Common Stock issuable to the Investor pursuant to convertible
debentures previously issued to the investor.
4.4 Consents. The execution, delivery and performance by the Company
of the Agreements and the offer, issue and sale of the Securities require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws and the requirements of Nasdaq, which the
Company undertakes to file within the applicable time periods.
4.5 Delivery of SEC Filings; Business. The Company has delivered or
made available to the Investor true and correct copies of (i) its most recent
Annual Report on Form 10- KSB, (ii) its quarterly reports on Form 10-QSB for
each fiscal quarter subsequent to that fiscal year end, and (iii) any other
documents filed with the Securities and Exchange Commission (the "SEC") since
the filing of its most recent Annual Report on Form 10-KSB (collectively, the
"SEC Filings"). The Company and its subsidiaries are engaged only in the
business described in the SEC Filings and the SEC Filings contain a complete and
accurate description of the business of the Company and its subsidiaries.
4.6 Use of Proceeds. The proceeds of the sale of the Securities
hereunder shall be used by the Company for working capital and operating
capital.
4.7 No Material Adverse Change. Except as set forth in Schedule 4.7,
since the filing of the Company's most recent Annual Report on Form 10-KSB or as
otherwise identified and described in subsequent reports filed by the Company
pursuant to the 1934 Act, there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's most recent Quarterly Report on
Form 10-QSB, except changes in the ordinary course of business which have not
had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
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(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or any of its
subsidiaries;
(iv) any waiver by the Company or any of its subsidiaries of a
valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results or
business of the Company and its subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(vi) any material change or amendment to a material contract or
arrangement by which the Company or any of their subsidiaries or any of its
assets or properties is bound or subject;
(vii) any material change in any compensation arrangement or
agreement with any employee of the Company or any of its subsidiaries who now
earns, or who would earn as a result of such change, in excess of $100,000 per
annum or any other officer of the Company or any of its subsidiaries;
(viii) any labor difficulties or labor union organizing
activities with respect to employees of the Company or any of its subsidiaries;
(ix) any transaction entered into by the Company or any of its
subsidiaries other than in the ordinary course of business; or
(x) any other event or condition of any character which might
have a Material Adverse Effect that is not reflected in the SEC Filings.
4.8 SEC Filings; Material Contracts.
(a) As of its filing date, each report filed by the Company with
the SEC pursuant to the 1934 Act, complied as to form in all material respects
with the requirements of the 1934 Act and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(b) Each registration statement and any amendment thereto filed
by the Company pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933
Act, as of its issue date and as of the closing of any sale or securities
pursuant thereto did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
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(c) Except as listed in Schedule 4.8 hereto, there are no
agreements or instruments currently in force and effect that constitute a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K) of the Company or that constitute a warrant, option, convertible security
or other right, agreement or arrangement of any character under which the
Company is or may be obligated to issue any equity security of any kind, or to
transfer any equity security of any kind. The Company has delivered to the
Investor prior to the Closing full and complete copies of all agreements
indicated in Schedule 4.8 hereto.
4.9 Registration Rights. The registration rights granted to the
Investor pursuant to the Registration Rights Agreement are at least as favorable
to the Investor as those granted to any holder of any securities of the Company
are to such holder.
4.10 No Breach, Violation or Default. The execution, delivery and
performance of the Agreements and the issuance and sale of the Securities will
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any such subsidiary is subject,
or the Certificate of Incorporation or By-Laws of the Company or any such
subsidiary.
4.11 Tax Returns and Payments. The Company and its subsidiaries have
correctly and timely prepared and filed all tax returns required to have been
filed by it with all appropriate federal, state and local governmental agencies
and timely paid all taxes owed by them. The charges, accruals and reserves on
the books of the Company and its subsidiaries in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material unpaid
assessments of the Company or any subsidiary nor, to the knowledge of the
Company, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, states or local taxing
authority except such as which are not material. All material taxes and other
assessments and levies which the Company or any subsidiary is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party. There are no tax liens or
claims pending or threatened against the Company or any subsidiary or any of
their respective assets or property. There are no outstanding tax sharing
agreements or other such arrangements between the Company or any subsidiary and
any other corporation or entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings, the
Company and its subsidiaries have good and marketable title to all real
properties and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
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4.13 Certificates, Authorities and Permits. The Company and its
subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
4.14 No Labor Disputes. No labor dispute with the employees of the
Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that might have a Material Adverse Effect.
4.15 Intellectual Property. The Company and its subsidiaries own or
possess adequate trademarks and trade names and have all other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "Intellectual Property Rights"), free and
clear of all liens, security interests, charges, encumbrances, equities and
other adverse claims, necessary to conduct the business now operated by them, or
presently employed by them, and presently contemplated to be operated by them,
and have not received any notice of infringement of or conflict with asserted
rights of others with respect to any Intellectual Property Rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect. No proprietary
technology of any Person was used in the design or development by the Company of
(or otherwise with respect to) any of the Intellectual Property Rights which
technology was not properly acquired by the Company from such Person.
4.16 Environmental Matters. Neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation which might lead to such a claim.
4.17 Litigation. Except as disclosed in the SEC Filings, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
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4.18 Financial Statements. The financial statements included in each
SEC Filing present fairly the consolidated financial position of the Company and
its subsidiaries as of the dates shown and their consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with the generally accepted accounting
principles applied on a consistent basis.
4.19 Insurance Coverage. The Company and its subsidiaries maintain in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted, and properties owned or
leased, by the Company and its subsidiaries, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.20 Compliance with Nasdaq Continued Listing Requirements. The
Company is in compliance with all applicable Nasdaq Small Cap Market continued
listing requirements and has not received any notice from Nasdaq concerning a
possible delisting of the Company's Common Stock within the last twelve months.
4.21 Acknowledgment of Dilution. The number of shares of Common Stock
issuable upon conversion of the Debentures may increase substantially in certain
circumstances, including the circumstance where the trading price of the Common
Stock declines. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereunder and recognize
that such Securities have a dilutive effect. The Board of Directors of the
Company has concluded in its good faith business judgment that such issuance is
in the best interests of the Company. The Company acknowledges that its
obligations to issue shares of Common Stock in accordance with the terms of the
Debentures upon conversion of the Debentures are binding upon it and enforceable
regardless of the dilution that such issuance may have on the ownership interest
of the other stockholders of the Company.
4.22 Brokers and Finders. The Company has taken no action which would
give rise to any claim by any Person for a broker's commission, finder's fee or
similar payment by the Company or the Investor related to this Agreement or the
transactions contemplated hereby, except for amounts which are payable to Rochon
Capital Group, Ltd. which shall be the sole responsibility of the Company and
shall be paid exclusively by the Company out of escrow from the proceeds hereof.
4.23 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D
under the 1933 Act) in connection with the offer or sale of any of the
Securities.
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4.24 No Integrated Offering Requiring Registration. Neither the
Company nor any of its Affiliates, nor any Person acting on its or their behalf,
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the offer and sale of the Securities under the 1933 Act, or
cause the offering of the Securities to be integrated with any prior offering(s)
by the Company for purposes of the 1933 Act or any applicable shareholder
approval provisions, including those under the rules of Nasdaq.
4.25 Year 2000. All of the products which are being offered and sold
by the Company are now Year 2000 compliant, which for the purpose of this
Section 4.25 means that such products contain and/or rely on computer software
programs which are capable of handling and processing dates beyond the year
1999. The Company has undertaken all commercially reasonable efforts to ensure
that its operational computer systems also are prepared to handle and process
dates beyond the year 1999.
4.26 Disclosures. No representation or warranty made under any Section
hereof and no information furnished by the Company pursuant hereto, or in any
other document, certificate or statement furnished by the Company to the
Investor or any authorized representative of the Investor, pursuant to the
Agreements or in connection therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the respective
statements contained herein or therein, in light of the circumstances under
which the statements were made, not misleading.
5. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
5.1 Organization and Existence. The Investor is a validly existing
limited liability company and has all requisite corporate power and authority to
invest in the Securities pursuant to this Agreement. The Investor is not a
resident of the United States or any state, district or territory thereof.
5.2 Authorization. The execution, delivery and performance by the
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 Purchase Entirely for Own Account. The Securities to be received
by such Investor hereunder will be acquired for investment for the Investor's
own account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. The
Investor is not a registered broker dealer or a Person engaged in the business
of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.
10
<PAGE>
5.5 Disclosure of Information. The Investor has had an opportunity to
ask questions and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities. Neither
such inquiries nor any other due diligence investigation conducted by the
Investor shall modify, amend or affect the Investor's right to rely on the
Company's representations and warranties contained in this Agreement or made
pursuant to this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for resale
pursuant to the Registration Rights Agreement, certificates evidencing the
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933 (the "Act"). They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under the Act or an exemption from the
registration requirements of the Act."
(b) If required by the authorities of any state in connection
with the issuance of sale of the Securities, the legend required by such state
authority.
Upon registration for resale pursuant to the Registration Rights
Agreement, all certificates evidencing the Common Stock shall be issued free of
such restrictive legends.
5.8 Accredited Investor. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
6. Registration Rights Agreement. The parties acknowledge and agree that
part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
11
<PAGE>
7.1 Capital Raising Limitations. From the date hereof through the
eight-month period following the later of (A) the effective date of the
registration statement contemplated by the Registration Rights Agreement and (B)
the Second Closing Date (the "Restricted Period"), without the prior written
consent of the Investor (which consent may be withheld in such Investor's sole
discretion), the Company shall not issue or sell, or agree to issue or sell (a)
any equity or debt securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (i) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
Common Stock at any time after the initial issuance of such debt or equity
securities; or (ii) with a fixed conversion, exercise or exchange price that is
subject to being reset at some future date(s) after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock; or (b) any securities of the Company pursuant to an "equity
line" structure which provides for the sale, from time to time, of securities of
the Company which are registered for resale pursuant to the 1933 Act (the
transactions in this sentence being collectively referred to as "Variable Rate
Transactions"). The Restricted Period shall be extended by that number of days,
if any, during which any Blackout Period (as defined in the Registration Rights
Agreement) has been in effect.
7.2 Rights of Investor upon Additional Offerings. The Company agrees
that for the period of one year following the later of (A) the effective date of
the registration contemplated by the Registration Rights Agreement and (B) the
Second Closing Date, the Company shall give thirty days advance written notice
to the Investor prior to any offer or sale of any of its equity securities or
any securities convertible into or exchangeable or exercisable for such
securities. In addition, prior to the closing of any such sale, the Investor
shall have the right to participate in such offering and purchase such equity
securities for the same consideration and on the same terms and conditions as
contemplated for such third-party sale, which right must be exercised in writing
by the Investor within ten business days following receipt of the notice from
the Company. If, subsequent to the Company giving notice to the Investor
hereunder, the terms and conditions of the proposed third-party sale are changed
in any way, the Company shall be required to provide a new notice to the
Investor hereunder and the Investor shall have the right to participate in the
offering on such changed terms and conditions as provided hereunder.
7.3 Limitation on Acquisitions by Company. Commencing on the date
hereof and continuing for a period of one year following the effective date of
the registration statement contemplated by the Registration Rights Agreement,
the Company agrees that it shall not, directly or indirectly, in one or a series
of transactions, purchase all or substantially all of the assets of, or greater
than a majority of the outstanding securities of any entity having an after-tax
loss in excess of $100,000 for the most recent four fiscal quarters from the
closing date of any such acquisition by the Company (or the earlier date on
which the Company makes any payment, in cash, stock or kind, in connection
therewith), without obtaining the prior written consent of the Investor.
12
<PAGE>
7.4 Opinion of Counsel. The Company has delivered, simultaneously with
the execution and delivery of this Agreement, the opinion of Norton Lidstone
LLC, its counsel, in the form attached hereto as Exhibit F.
7.5 Reservation of Common Stock Pursuant to Conversion of Debenture
and Exercise of Warrants. The Company hereby agrees to at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of permitting conversion of the Debenture and exercise of the
Warrant, such number of shares of Common Stock as shall from time to time equal
1.5 times the number of shares sufficient to permit the complete conversion of
the Debenture plus the number of shares of Common Stock as shall be necessary to
permit the exercise of the Warrant in accordance with the respective terms of
the Debenture and the Warrant.
7.6 Reports. So long as the Investor holds Debentures or Warrants, the
Company will deliver to the Investor the following reports by overnight courier
to the address set forth in Section 9.4:
(a) Quarterly Reports. As soon as available and in any event
within 45 days after the end of each fiscal quarter of the Company, the
Company's Form 10-QSB or, in the absence of a Form 10-QSB, consolidated balance
sheets of the Company and its subsidiaries as at the end of such period and the
related consolidated statements of operations, stockholders' equity and cash
flows for such period and for the portion of the Company's fiscal year ended on
the last day of such quarter, all in reasonable detail and certified by a
principal financial officer of the Company to have been prepared in accordance
with generally accepted accounting principles, subject to year-end and audit
adjustments.
(b) Annual Reports. As soon as available and in any event within
90 days after the end of each fiscal year of the Company, the Company's Form
10-KSB or, in the absence of a Form 10-KSB, consolidated balance sheets of the
Company and its subsidiaries as at the end of such year and the related
consolidated statements of earnings, stockholders' equity and cash flows for
such year, all in reasonable detail and accompanied by the report on such
consolidated financial statements of an independent certified public accountant
selected by the Company and reasonably satisfactory to the Investor.
(c) Securities Filings. As promptly as practicable and in any
event within five days after the same are issued or filed, copies of (i) all
press releases issued by the Company or any subsidiary, and all notices, proxy
statements, financial statements, reports and documents as the Company or any
subsidiary shall send or make available generally to its stockholders or to
financial analysts, and (ii) all periodic and special reports, documents and
registration statements (other than on Form S-8) which the Company or any
subsidiary furnishes or files, or any officer or director of the Company or any
of its subsidiaries (in such person's capacity as such) furnishes or files with
the SEC.
13
<PAGE>
(d) Other Information. Such other information relating to the
Company or its subsidiaries as from time to time may reasonably be requested by
the Investor provided the Company produces such information in its ordinary
course of business.
7.7 Press Releases. At least 48 hours prior to issuance, the Company
shall submit for comment by facsimile to the Investor any press release or other
publicity concerning the Investor, the Transaction Agreements or the
transactions contemplated thereby.
7.8 No Conflicting Agreements. The Company will not, and will not
permit its subsidiaries to, take any action, enter into any agreement or make
any commitment which would conflict or interfere in any material respect with
the obligations to the Investor under the Agreements.
7.9 Insurance. The Company shall, and shall cause each subsidiary to,
have in full force and effect (a) insurance reasonably believed to be adequate
on all assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed to be adequate protection against all liabilities, claims
and risks against which it is customary for companies similarly situated as the
Company and the subsidiaries to insure.
7.10 Compliance with Laws. The Company will use reasonable efforts,
and will cause each of its subsidiaries to use reasonable efforts, to comply in
all material respects with all applicable laws, rules, regulations, orders and
decrees of all governmental authorities, except to the extent non-compliance (in
one instance or in the aggregate) would not have a Material Adverse Effect.
7.11 Corporate Governance. For so long as the Convertible Debenture,
or any portion thereof, is outstanding and/or the Investor is the beneficial
owner of the Company's Common Stock, the Company:
(a) Shall distribute to its shareholders copies of an annual
report containing audited financial statements of the Company and its
subsidiaries a reasonable period of time prior to the Company's annual meeting
of shareholders;
(b) Shall maintain a minimum of two independent directors on its
board of directors;
(c) Shall hold an annual meeting of shareholders each and every
year;
(d) Shall solicit proxies and provide proxy statements for all
meetings of shareholders;
(e) Shall obtai shareholder approval of (i) a plan or arrangement
pursuant to which stock may be acquired by officers or directors of the Company
(except for warrants or rights issued generally to shareholders of the Company
or broadly based plans or arrangements including other employees of the
Company); (ii) an issuance of the Company's securities when the issuance will
14
<PAGE>
result in a change of control; (iii) an issuance of the Company's securities in
connection with the acquisition of another company if shareholder approval of
such issuance is required under applicable Nasdaq rules; and (iv) any other
issuance of the Company's securities if shareholder approval of such issuance is
required under applicable Nasdaq rules.
8. Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement for a period of five years and six months from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement may not be assigned by
either party without the prior written consent of the other party hereto, except
that without the prior written consent of the Company, but after notice duly
given, the Investor may assign its rights and delegate its duties hereunder to
an Affiliate, and without the prior written consent of Investor, but after
notice duly given, the Company may assign its rights and delegate its duties
hereunder to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company which results
directly or indirectly in an aggregate change in the ownership or control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company's assets. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
9.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.4 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, or if sent
by telex or telecopier, upon receipt of the correct answer back, or upon deposit
with the United States Post Office, by registered or certified mail, or upon
deposit with an overnight air courier, in each case postage prepaid and
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days' advance written notice to
the other party:
15
<PAGE>
If to the Company:
Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, CO 80112
Attn: Van A. Horsley
Telephone: 303/790-2990
Facsimile: 303/799-1378
with a copy to:
Norton Lidstone LLC
5445 DTC Parkway, Suite 850
Denver, CO 80111
Attn: Herrick Lidstone, Jr.
Telephone: 303/221-5552
Facsimile: 303/221-5553
If to the Investor:
The Tail Wind Fund, Ltd.
Windermere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
Telephone:
Facsimile:
with a copy to:
The Tail Wind Fund, Ltd.
c/o European American Securities, Inc.
One Regent Street, 4th Floor
London SW1Y 4NS
England
Attn: David Crook
Telephone: 44-171-468-7660
Facsimile: 44-171-468-7657
and with a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
16
<PAGE>
9.5 Expenses. The Company shall pay the fees of Bryan Cave LLP,
counsel to the Investor, in an amount up to $12,500.
9.6 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such securities, and the Company.
9.7 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.8 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, and the Registration Rights Agreement constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.9 Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
9.10 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Colorado without regard
to principles of conflicts of laws.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company: MEDICAL DYNAMICS, INC.
By:_________________________
Name: Van A. Horsley
Title: President
The Investor: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
18
<PAGE>
Schedule 4.3
------------
See attached Schedule 4.3
19
<PAGE>
Schedule 4.7
------------
None.
20
<PAGE>
Schedule 4.8
------------
None.
21
CD98-001
CONVERTIBLE DEBENTURE
---------------------
$100,000 July __, 1998
FOR VALUE RECEIVED, the undersigned, Medical Dynamics, Inc., a Colorado
corporation (the "Company"), promises to pay to the order of The Tail Wind Fund,
Ltd., or the holder hereof, on July __, 2003 ("Due Date"), the principal sum of
One Hundred Thousand Dollars ($100,000), or, if less, the unpaid principal
amount outstanding at such time, in either case together with all accrued and
unpaid interest thereon.
The Company also promises to pay interest semi-annually from the date
hereof on the principal amount hereof unpaid during such period (including
amounts converted during the period for the time such was outstanding) at a rate
of eight percent (8%) per annum. Interest on this Debenture shall be computed on
the basis of a 360-day year. Interest through the last day of the preceding
calendar semi-annual period shall be payable on or before the fifth day of each
January and July, commencing in January 1999.
This Debenture is one of the Debentures referred to in and issued pursuant
to the Purchase Agreement dated July __, 1998, between the Company and the
Investor named therein (the "Purchase Agreement"), and is entitled to the
benefits of, and subject to the terms and provisions of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to them in the Purchase Agreement.
1. Payments
All payments by the Company hereunder shall be payable in lawful money of
the United States in immediately available funds by wire transfer to an account
designated in writing by the Investor, or in the case of conversion of principal
and, at the option of the Company, payment of interest, in shares of common
stock of the Company, par value $.001 per share (the "Common Stock"), valued at
the Conversion Price (for the conversion of principal) and at the Market Price
(for the payment of interest), not later than 5:00 p.m., Mountain time on the
day when due to the holder at the following address:
The Tail Wind Fund, Ltd.
c/o Mees Pierson Fund Services
Fourth Floor Russell House
Dublin 2 IRELAND 1M14LE
United Kingdom
or at such other place as the holder hereof may from time to time designate in
writing to the Company. Whenever any payment to be made pursuant to this
Debenture shall be stated to be due on a public holiday, Saturday or Sunday,
such payment may be made on the next succeeding business day. Such extension of
time shall not in such case be included in computing interest, if any, in
connection with such payment.
<PAGE>
2. Conversion of Debenture
(a) From time to time, until all unpaid principal and accrued and
unpaid interest under this Debenture is paid, the holder of this Debenture shall
have the right to convert (i) at any time from and after one hundred twenty
(120) days after the original issuance hereof, up to one-third of the principal
amount of this Debenture, (ii) at any time from and after one hundred eighty
(180) days after the original issuance hereof, up to an aggregate of two-thirds
of the principal amount of this Debenture, and (iii) at any time from and after
two hundred forty (240) days after the original issuance hereof, all of the
principal amount of this Debenture, in whole or in part, into an amount of duly
authorized, fully-paid and non-assessable shares of Common Stock determined by
dividing such principal amount to be so converted by the Conversion Price (as
hereinafter defined), and upon the terms and subject to the conditions
hereinafter specified in this Section 2. Any unpaid principal amount of this
Debenture outstanding on the Due Date, together with any accrued and unpaid
interest thereon, shall automatically convert to Common Stock at the Conversion
Price (defined below).
(b) In order to convert this Debenture into shares of Common Stock,
the holder shall: (i) fax a copy of the fully executed notice of conversion in
the form attached hereto ("Notice of Conversion") to the Company at the office
of the Company or its designated transfer agent, if any, for the Debentures,
which notice shall specify the amount of the Debenture to be converted, the
applicable Conversion Price, and a calculation of the number of shares of Common
Stock issuable upon such conversion (together with a copy of the first page of
this Debenture) prior to 5:00 p.m., Mountain time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(ii) surrender the original Debenture being converted, along with a copy of the
Notice of Conversion as soon as practicable thereafter to the office of the
Company or the transfer agent, if any, for the Debentures; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the Debenture
is delivered to the Company or its transfer agent as provided above, or the
holder notifies the Company or its transfer agent that such original Debenture
has been lost, stolen or destroyed. In the case of a dispute as to the
calculation of the Conversion Price, the Company shall promptly issue such
number of shares of Common Stock that are not disputed in accordance with
subparagraph (c) below. The Company shall submit the disputed calculations to
its outside accountant via facsimile within two (2) business days of receipt of
the Notice of Conversion. The accountant shall audit the calculations and notify
the Company and the holder of the results no later than 48 hours from the time
it receives the disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
(c) Upon the surrender of the Debenture as described above accompanied
by the Notice of Conversion, the Company shall issue and, within two (2)
business days (the "Delivery Period") after such surrender (or, in the case of
lost, stolen or destroyed Debenture, after provision of an agreement and
indemnification by the holder to the Company), direct its transfer agent to
deliver to or upon the order of the holder (i) that number of shares of Common
Stock for the portion of the Debenture converted as shall be determined in
2
<PAGE>
accordance herewith and (ii) a new Debenture representing the balance of the
principal amount of the Debenture surrendered but not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Company shall pay to the holder $250 in cash for
the third day beyond such Delivery Period that the Company fails to deliver
Common Stock issuable upon surrender of the Debenture with a Notice of
Conversion, and $500 per day in cash for each day thereafter, until such time as
the earlier of the date that the Company has delivered all such Common Stock and
the tenth day beyond such Delivery Period. Such cash amount shall be paid to
such holder by the fifth day of the month following the month in which it has
accrued. In the event the Company fails to deliver such Common Stock prior to
the expiration of five (5) business days after the Delivery Period for any
reason (whether due to a requirement of law or a stock exchange or otherwise),
the holder shall be entitled to a 1% discount on the Conversion Price for the
next conversion noticed by such holder to the Company. In the event the Company
fails to deliver such Common Stock prior to the expiration of the ten (10)
business day period after the Delivery Period for any reason (whether due to a
requirement of law or a stock exchange or otherwise), such holder shall be
entitled to (in addition to any other remedies available to the holder)
Conversion Default Payments in accordance with Section 2(h) hereof beginning on
the expiration of such ten (10) business day period.
(d) If any conversion of this Debenture would result in a fractional
share of Common Stock or the right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded.
(e) The "Conversion Date" shall be the date specified in the Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
faxed to the Company before 5:00 p.m., Mountain time, on the Conversion Date,
and (ii) that the original Debenture is surrendered along with a copy of the
Notice of Conversion as soon as practicable thereafter to the office of the
Company or the transfer agent for the Debentures. The person or persons entitled
to received the shares of Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such securities as of the
Conversion Date and all rights with respect to the Debenture fully surrendered
shall forthwith terminate except the right to receive the shares of Common Stock
or other securities or property issuable on such conversion.
(f) The Conversion Price per share ( "Conversion Price") at which
shares of Common Stock shall be issuable upon conversion of this Debenture shall
be equal to 100% of the Market Price on the business day immediately preceding
the Conversion Date; provided, however, that the Conversion Price shall not
exceed the Ceiling Price (defined below). "Market Price" shall mean the average
of the two lowest closing bid prices of the Common Stock as reported by The
Nasdaq Stock Market over the sixty trading day period ending on the date in
question. The "Ceiling Price" shall mean 120% of the average closing bid price
of the Common Stock for the twenty trading days prior to the effective date of
the registration statement contemplated by the Registration Rights Agreement
entered into by and between the parties on July __, 1998; provided, however,
that the Ceiling Price shall be adjusted effective upon the second anniversary
of the Purchase Agreement to 120% of the Market Price on such date, if such
adjustment would result in a lower price, but in no event shall the Ceiling
Price be adjusted to an amount less than $2.25.
3
<PAGE>
(g) In order to prevent dilution of the conversion rights granted
under this Section 2, the Conversion Price shall be subject to adjustment from
time to time as follows:
(i) If the Common Stock shall be changed into the same or a
different number of shares of any class or classes of capital stock, whether by
capital reorganization, recapitalization, reclassification or otherwise or in
the event of a merger or consolidation of the Company with or into another
corporation or the sale of substantially all of the Company's assets to any
other person, then and in each such event the holder of this Debenture shall
have the right thereafter to convert this Debenture or any portion thereof into
the kind and amount of shares of capital stock and other securities and property
receivable upon such reorganization, recapitalization, reclassification, merger,
consolidation, sale or other change by a holder of the number of shares of
Common Stock into which this Debenture might have been converted immediately
prior to such reorganization, recapitalization, reclassification, merger,
consolidation, sale or change.
(ii) If any event occurs of the type contemplated by the
provisions of this Section 2(g) but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's board of directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holder of this Debenture;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 2(g) or decrease the number of
shares of Common Stock issuable upon conversion of this Debenture.
(iii) Immediately upon any adjustment of the Conversion Price,
the Company shall give written notice thereof to the holder of this Debenture,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(h) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of
effecting the conversion of this Debenture, such number of shares of Common
Stock as shall from time to time be issuable upon the conversion of this
Debenture; and if at any time the number of authorized but unissued and issued
but not outstanding shares of the Common Stock, on a fully diluted basis, shall
not be sufficient to effect the conversion of this Debenture at the Conversion
Price then in effect, the Company will take such corporate action as may be
necessary to increase its authorized but unissued or issued but not outstanding
shares of the Common Stock to such number of shares as shall be sufficient for
such purpose. The Company covenants that all shares of Common Stock which shall
be so issuable, when issued upon conversion of this Debenture, shall be duly and
validly issued, fully-paid and non-assessable. If at any time a holder submits a
Conversion Notice, the Company does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Section 2 (a "Conversion Default"), the Company shall
4
<PAGE>
issue to the holder all of the shares of Common Stock which are available to
effect such conversion. The number of shares included in the Notice of
Conversion which exceeds the amount which is then convertible into available
shares of Common Stock (the "Excess Amount") shall, notwithstanding anything to
the contrary contained herein, not be convertible into Common Stock in
accordance with the terms hereof until (and at the holder's option at any time
after) the date additional shares of Common Stock are authorized by the Company
to permit such conversion, at which time the Conversion Price in respect thereof
shall be the lesser of (i) the Conversion Price on the Conversion Default Date
(as defined below) and (ii) the Conversion Price on the Conversion Date elected
by the holder in respect thereof. The Company shall pay to the holder payments
("Conversion Default Payments") for a Conversion Default in the amount of
(N/365), multiplied by the sum of the principal amount of the Debenture sought
to be converted, multiplied by the Excess Amount on the first day of the
Conversion Default (the "Conversion Default Date"), multiplied by .36, where N =
the number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of shares
of Common Stock to effect conversion of the full amount of the Debenture. The
Company shall send notice to the holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of holder's
accrued Conversion Default Payments. The accrued Conversion Default Payments for
each calendar month shall be paid in cash or shall be convertible into Common
Stock at the Conversion Price, at the holder's option, as follows:
(i) In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(ii) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at the
Conversion Price (as in effect at the time of Conversion) at any time after the
fifth day of the month following the month in which it has accrued in accordance
with the terms of this Section 2.
Nothing herein shall limit the holder's right to pursue actual damages for the
Company's failure to maintain a sufficient number of authorized shares of Common
Stock, and each holder shall have the right to pursue all remedies available at
law or in equity (including a decree of specific performance and/or injunctive
relief).
(i) Notwithstanding anything to the contrary herein, conversion of
this Debenture shall not be permitted, and the Company shall not pay any amounts
due to the holder of this Debenture in the form of shares of Common Stock, if
such conversion or payments would result in the holder of this Debenture owning
more than 4.99% of the issued and outstanding shares of Common Stock following
conversion or payment (such percentage to be calculated in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934).
(j) The issuance of certificates for shares of the Common Stock upon
the conversion of this Debenture shall be made without charge to the holder
hereof for any issuance tax in respect of the issuance of such certificates or
other cost incurred by the Company in connection with such conversion and the
related issuance of shares of Common Stock.
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3. Covenant. The Company agrees at all times that it will not, by any
amendment of the Company's Articles of Incorporation, or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, seek to avoid the observance
or performance hereof, but will at all times take such actions as are necessary
or appropriate in order to protect the rights of the holder of this Debenture.
4. Events of Default
(a) In addition to the Default provisions provided above in respect of
Conversion, an "Event of Default" shall exist if any of the following occurs and
is continuing:
(i) Failure to make any payment of principal or interest on the
Debenture when such payment is due, other than the final payment due on the Due
Date;
(ii) Failure to make payment of all outstanding principal and
interest on the Debenture on the Due Date;
(iii) Failure to comply with any other provision of this
Debenture and such failure continues for more than five (5) business days after
the holder hereof has given written notice of such failure to the Company;
(iv) The Common Stock is not listed or included for quotation on
The Nasdaq SmallCap Market System, The Nasdaq National Market System, the New
York Stock Exchange or the American Stock Exchange;
(v) Any levy, seizure, attachment, execution or similar process
shall be levied on a material portion of the Company's property; or
(vi) A receiver, custodian, liquidator or trustee of the Company,
or of any of the property of the Company, is appointed by court order; or the
Company is adjudicated bankrupt or insolvent; or any of the property of the
Company is sequestered by court order; or a petition to reorganize the Company
under any bankruptcy, reorganization or insolvency law is filed against the
Company and is not dismissed within sixty (60) days after such filing; or the
Company files a voluntary bankruptcy petition or requesting reorganization or
arrangement under any provision of any bankruptcy, reorganization or insolvency
law, or consents to the filing of any petition against it under any such law; or
the Company makes a general assignment for the benefit of its creditors, or
admits in writing its inability to pay its debts generally as they become due,
or consents to the appointment of a receiver, trustee or liquidator of the
Company or of all or any part of the property of the Company.
(b) If an Event of Default specified in Section 4(a)(i) exists, then
this Debenture shall accrue additional interest on all unpaid amounts of
principal and interest from the date of the Event of Default at a rate equal to
the greater of (i) fifteen percent (15%) per annum or (ii) the highest amount
allowable by law.
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(c) If an Event of Default other than an Event of Default specified in
Section 4(a)(i) exists, then the holder of this Debenture may exercise any
right, power or remedy conferred upon it by law, and shall have the right to
declare by written notice the entire principal and all interest accrued on such
Debenture to be, and such Debenture shall thereupon become, forthwith due and
payable without any declaration, presentment, demand, protest or notice of any
kind. The Company shall forthwith pay to the holder of this Debenture the entire
principal and interest accrued on such Debenture.
5. Registration. The initial holder of this Debenture is entitled to the
benefit of certain registration rights in respect of the shares of Common Stock
into which this Debenture may be coverted pursuant to that Registration Rights
Agreement dated effective July __, 1998.
6. Miscellaneous
(a) Every maker, endorser and guarantor of this Debenture or the
obligation represented by this Debenture waives presentment, demand, notice,
protest and all other demands or notices, in connection with the delivery,
acceptance, endorsement, performance, default or enforcement of this Debenture,
assents to any and all extensions or postponements of the time of payment or any
other indulgences, including without limitation, the release or substitution of
collateral, and agrees to be bound by all of the terms contained in the
Debenture.
(b) No delay or omission by the holder hereof in exercising any right
or remedy hereunder shall constitute a waiver of any such right or remedy. A
waiver on one occasion shall not operate as a bar to or waiver of any such right
or remedy on any future occasion.
(c) The Company shall pay all reasonable costs and expenses of
collection, including attorney's fees, incurred or paid by the holder hereof in
enforcing this Debenture and the obligations evidenced hereby.
(d) This Debenture may be amended only by written agreement of the
Company and the holder hereof.
(e) This Debenture is governed by the laws of the State of Colorado
and is executed as a sealed instrument as of the date first above written.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be executed
and delivered by its duly authorized officer as of the day and year first
written above.
MEDICAL DYNAMICS, INC.
By:__________________________________
Title:_______________________________
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MEDICAL DYNAMICS, INC.
CONVERTIBLE DEBENTURE
NOTICE OF CONVERSION
MEDICAL DYNAMICS, INC.
99 Iverness Drive East
Englewood, CO 80112
The undersigned hereby elects to convert $_______________ of the
Convertible Debenture represented by the within Convertible Debenture for, and
to acquire thereunder _______________ shares of Common Stock ("Conversion
Shares") as provided for therein, and requests that certificates for the
Conversion Shares be issued as follows:
--------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the amount of the principal of the Convertible Debenture being converted
hereby shall not be all of the principal amount of such Convertible Debenture,
that a new Convertible Debenture or the balance of such Convertible Debenture be
issued forthwith to the holder or the undersigned's Assignee as below indicated
and delivered to the address stated below. The undersigned hereby represents and
warrants that sales of the Conversion Shares will be made only pursuant to the
Prospectus covering the registered resale of the Conversion Shares, and that it
will comply with all applicable prospectus delivery requirements.
Dated:___________________, ____
Signature:______________________________
------------------------------
Name (please print)
------------------------------
Address
------------------------------
------------------------------
Federal Identification or Soc Sec #
9
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and entered as
of this ____ day of July, 1998 by and between Medical Dynamics, Inc., a Colorado
corporation (the "Company") and The Tail Wind Fund, Ltd. (the "Investor")
pursuant to the Purchase Agreement of even date herewith by and between the
Company and the Investor (the "Purchase Agreement").
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have the following
meanings:
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
the Company.
"Debenture" means the Debentures issued or issuable to the Investor
pursuant to the Purchase Agreement.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a registration made by
preparing and filing a registration statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" shall mean (i) the Common Stock issued or issuable
upon the conversion of the Debenture, (ii) the Common Stock issued as payment of
principal or accrued and unpaid interest on the Debentures (the number of shares
to be estimated for purposes of registration), (iii) the Common Stock acquired
upon the exercise of the Warrants, and (iv) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Common Stock, excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which its rights under this Agreement are not assigned.
<PAGE>
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Warrant" means the Warrant to purchase shares of Common Stock issued to
the Investor pursuant to the Purchase Agreement.
2. Registration.
(a) Registration Statement. Promptly following the closing of the
transactions contemplated by the Purchase Agreement (the "Closing Date") (but no
later than thirty days after the Closing Date), the Company shall prepare and
file with the SEC a registration statement on Form S-3 (or, if Form S-3 is not
then available to the Company, on such form of registration statement as is then
available to effect such a registration of the Registrable Securities, subject
to the Investor's consent) covering the resale of the Registrable Securities.
Such Registration Statement, to the extent allowable under the 1933 Act and the
Rules promulgated thereunder (including rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Debentures
to prevent dilution resulting from stock splits, stock dividends or similar
transactions or by reason of changes in the Conversion Price of the Debentures
in accordance with the terms thereof. No securities other than Registrable
Securities shall be included in the Registration Statement without the consent
of the Investor. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the Investor and its counsel prior
to its filing or other submission.
(b) Expenses. The Company will pay all expenses associated with the
registration, excluding discounts, commissions, fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals relating
to the distribution of the Registrable Securities, and reasonable fees and
expenses of counsel to the Investor.
(c) Effectiveness.
(i) The Company shall use its best efforts to obtain the
effectiveness of the Registration Statement as soon as practicable. If (A) the
Registration Statement is not declared effective by the SEC within 120 days
following the date hereof (the "Registration Date"), (B) after the Registration
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Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement (by reason of a stop order, or the Company's
failure to update the Registration Statement), or (C) the Common Stock is not
listed or included for quotation on the Nasdaq SmallCap Market System, The
Nasdaq National Market System, the New York Stock Exchange or the American Stock
Exchange, then the Company will make payments to the Investor, as liquidated
damages and not as a penalty, in an amount equal to 2% of the aggregate
principal amount of the Debenture for each month or portion thereof following
the Registration Date during which the registration is not effective (referred
to herein as the "Blackout Period") (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall bear all
reasonable fees or costs incurred by the Investor for legal counsel as a result
of the filing of any post-effective amendments to the Registration Statement.
The amounts payable as liquidated damages pursuant to this paragraph shall be
payable in lawful money of the United States on the last day of each month
during the Blackout Period.
(ii) The Company may terminate or suspend effectiveness of any
registration contemplated by this Section one time for a period of not more than
30 days if the Company shall deliver to the Investor a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would (A) be seriously detrimental to the
business of the Company for such registration to be effected or remain effective
at such time, (B) interfere with any proposed or pending material corporate
transaction involving the Company or any of its subsidiaries, or (C) result in
any premature disclosure thereof.
(d) Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investor shall have the right to select one legal counsel and an investment
banker and manager to administer the offering, which investment banker or
manager shall be reasonably satisfactory to the Company.
3. Company Obligations. The Company will use its best efforts to effect the
registration and the resale of the Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will,
as expeditiously as possible:
(a) use its reasonable best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
which will terminate when all Registrable Securities covered by such
Registration Statement, as amended from time to time, have been sold;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all Registrable Securities; provided that, at a
time reasonably prior to the filing of a Registration Statement or Prospectus,
or any amendments or supplements thereto, the Company will furnish to the
Investor copies of all documents proposed to be filed, which documents will be
subject to the comments of the Investor and its counsel;
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<PAGE>
(c) permit a single firm of counsel designated by the Investor to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects;
(d) furnish to the Investor and its legal counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of the Registration Statement and any amendment
thereto, each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(e) in the event the Investor selects underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering;
(f) at the request of the Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement or, if such securities are
not being sold by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriter, if any, and the Investor and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors;
(g) make reasonable effort to prevent the issuance of any stop order
or other suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
(h) furnish to the Investor at least five copies of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
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<PAGE>
(i) deliver to the Investor as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as the Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities;
(j) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the Investor
and its counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as the Investor reasonably requests in writing and do any
and all other reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(k) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange, interdealer quotation system
or other market on which similar securities issued by the Company are then
listed;
(l) immediately notify the Investor at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing; and
(m) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration or the
disposition of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at least twelve months, beginning after the effective date of the applicable
Registration Statement, which earnings statement shall satisfy the provisions of
subsection 11(a) of the 1933 Act (for the purpose of this subsection 3(m),
"Availability Date" means the 45th day following the end of the fourth fiscal
quarter that includes the effective date of such Registration Statement, except
that, if such fourth fiscal quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the end of such fourth fiscal
quarter).
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<PAGE>
4. Obligations of the Investor.
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities that the Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least three (3) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Investor of the information the Company requires from the Investor if
the Investor elects to have any of the Registrable Securities included in the
Registration Statement.
(b) The Investor, by its acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless the Investor has notified the Company in writing of its
election to exclude all of the Registrable Securities from the Registration
Statement.
(c) In the event the Investor determines to engage the services of an
underwriter, the Investor agrees to enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the dispositions of the
Registrable Securities.
(d) The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event rendering the Registration Statement no
longer effective, the Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus filed with the SEC and declared effective
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities current at the time of receipt of
such notice.
(e) The Investor may not participate in any underwritten registration
hereunder unless it (i) agrees to sell the Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions and any
expenses in excess of those payable by the Company pursuant to the terms of this
Agreement.
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5. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify and
hold harmless, to the fullest extent permitted by law the Investor, its
officers, directors, partners and employees and each person who controls the
Investor (within the meaning of the 1933 Act) against all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorney's fees) and expenses caused by (i) any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or any preliminary prospectus or any amendment or supplement thereto or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon any information furnished in writing
to the Company by the Investor, expressly for use therein, or (ii) any violation
by the Company of any federal, state or common law, rule or regulation
applicable to the Company in connection with any Registration Statement,
Prospectus or any preliminary prospectus, or any amendment or supplement
thereto, and shall reimburse, as incurred, each of the foregoing persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims. The foregoing is subject to the
condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus or Prospectus which is eliminated or remedied in any
Prospectus or amendment or supplement thereto, the above indemnity obligations
of the Company shall not inure to the benefit of any indemnified party if a copy
of such final Prospectus or amendment or supplement thereto had been made
available to such indemnified party and was not sent or given by such
indemnified party at or prior to the time such action is required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities.
(b) Indemnification by Holder of Registrable Securities. In connection
with any registration pursuant to the terms of this Agreement, the Investor will
furnish to the Company in writing such information as the Company reasonably
requests concerning the Investor or the proposed manner of distribution for use
in connection with any Registration Statement or Prospectus and agrees to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors and officers and each person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expense resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in the Registration
Statement or Prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information furnished in
writing by the holder of Registrable Securities to the Company specifically for
inclusion in such Registration Statement or Prospectus and that such information
was substantially relied upon by the Company in preparation of the Registration
Statement or Prospectus or any amendment or supplement thereto. In no event
shall the liability of the Investor be greater in amount than the dollar amount
of the proceeds (net of all expense paid by such holder and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
statement or omission) received by the Investor upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
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<PAGE>
(c) Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest may
exist between such person and the indemnifying party with respect to such claims
(in which case, if the person notifies the indemnifying party in writing that
such person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys (in addition to local counsel) at any time for all such indemnified
parties. No indemnifying party will, except with the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(d) Contribution. If for any reason the indemnification provided for
in the preceding clauses (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder and the amount of any damages such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission) received by it upon the sale of the Registrable Securities
giving rise to such contribution obligation.
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6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Investor.
Notwithstanding the foregoing, this Agreement shall automatically be amended in
accordance with the provisions of this Section 6.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made as set forth in the Purchase Agreement.
(c) Assignments and Transfers by Investor. This Agreement and all the
rights and obligations of the Investor hereunder may not be assigned or
transferred to any transferee or assignee except as set forth herein. The
Investor may make such assignment or transfer to any transferee or assignee of
any Registrable Securities, provided, that (i) such transfer is made expressly
subject to this Agreement and the transferee agrees in writing to be bound by
the terms and conditions hereof, and (ii) the Company is provided with written
notice of such assignment.
(d) Assignments and Transfers by the Company. This Agreement may not
be assigned by the Company without the prior written consent of Investor, except
that without the prior written consent of the Investor, but after notice duly
given, the Company shall assign its rights and delegate its duties hereunder to
any successor-in-interest corporation, and such successor-in-interest shall
assume such rights and duties, in the event of a merger or consolidation of the
Company with or into another corporation, or any merger or consolidation of
another corporation with or into the Company which results directly or
indirectly in an aggregate change in the ownership or control of more than 50%
of the voting rights of the equity securities of the Company, or the sale of all
or substantially all of the Company's assets.
(e) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(g) Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9
<PAGE>
(h) Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(i) Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(j) Further Assurances. The Parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Colorado without regard to
principles of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Company: MEDICAL DYNAMICS, INC.
By:_________________________
Name:
Title:
The Investor: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
10
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT COVERING THIS WARRANT UNDER SAID ACT OR AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. MOUNTAIN TIME ON JULY __, 2003 ("EXPIRATION DATE").
MEDICAL DYNAMICS, INC.
WARRANT TO PURCHASE 110,000 SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE
This is to certify that, for VALUE RECEIVED, The Tail Wind Fund, Ltd.
("Warrantholder"), is entitled to purchase, subject to the provisions of this
Warrant, from Medical Dynamics, Inc., a Colorado corporation ("Company"), up to
110,000 shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"), at any time not later than 5:00 P.M., Mountain time, on the
Expiration Date, at an exercise price per share equal to $2.58 (the "Warrant
Price"). The number of shares of Common Stock purchasable upon exercise of this
Warrant (the "Warrant Shares") and the Warrant Price shall be subject to
adjustment from time to time as described herein.
Section 1. Registration. The Company shall maintain books for the transfer
and registration of the Warrant. Upon the initial issuance of the Warrant, the
Company shall issue and register the Warrant in the name of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended ("Securities Act") or an exemption from registration
thereunder. Subject to such restrictions, the Company shall transfer from time
to time, the Warrant, upon the books to be maintained by the Company for that
purpose, upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer upon any such transfer, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise the Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement"), to the Company during
normal business hours on any business day at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of the
Company of the Warrant Price for the Warrant Shares specified in the Exercise
<PAGE>
Agreement or (ii) delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined below) for the Warrant Shares specified
in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered (or evidence of loss, theft or destruction thereof), the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
To effect a Cashless Exercise, the holder shall submit to the Company with
the Exercise Agreement, written notice of the holder's intention to do so,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof. In the event of a
Cashless Exercise, in lieu of paying the Warrant Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be entitled
by a fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current Market Price per share of the
Common Stock. For this purpose, the "Market Price" of the Common Stock shall be
the closing price of the Common Stock on the trading day first preceding the
date of the Exercise Agreement.
To the extent that any Warrant Shares remain outstanding at 5:01 P.M.,
Mountain time on July __, 2003, such outstanding Warrant Shares shall
automatically expire and be of no further force and effect, and the holders
thereof shall have no further right to exercise or transfer the same.
Section 4. Compliance with the Securities Act of 1933. Neither this Warrant
nor the Common Stock issued upon exercise hereof nor any other security issued
or issuable upon exercise of this Warrant may be offered or sold except as
provided in this agreement and in conformity with the Securities Act of 1933, as
amended, and then only against receipt of an agreement of such person to whom
such offer of sale is made to comply with the provisions of this Section 4 with
respect to any resale or other disposition of such security. The Company may
cause the legend set forth on the first page of this Warrant to be set forth on
each Warrant or similar legend on any security issued or issuable upon exercise
of this Warrant, unless counsel for the Company is of the opinion as to any such
security that such legend is unnecessary.
2
<PAGE>
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of the Warrant in respect of which
such shares are issued, and in such case, the Company shall not be required to
issue or deliver any certificate for Warrant Shares or any Warrant until the
person requesting the same has paid to the Company the amount of such tax or has
established to the Company's satisfaction that such tax has been paid. The
holder shall be responsible for income taxes due under federal or state law, if
any such tax is due.
Section 6. Mutilated or Missing Warrants. In case the Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of Warrant Shares, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby represents and
warrants that there have been reserved, and the Company shall at all applicable
times keep reserved, out of the authorized and unissued Common Stock, a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrant, and the Continental Stock Transfer & Trust Company,
the transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for the Common Stock or other shares of the Company's capital
stock issuable upon the exercise of any of the right of purchase aforesaid shall
be irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares of Common Stock as shall be requisite for such
purpose. The Company agrees that all Warrant Shares issued upon exercise of the
Warrant shall be, at the time of delivery of the certificates for such Warrant
Shares, duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock of the Company. The Company will keep a conformed copy of this
Warrant on file with the Transfer Agent and with every subsequent transfer agent
for the Common Stock or other shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrant. The
Company will supply from time to time the Transfer Agent with duly executed
stock certificates required to honor the outstanding Warrant.
Section 8. Warrant Price. The Warrant Price, subject to adjustment as
provided in Section 9, shall, if payment is made in cash or by certified check,
be payable in lawful money of the United States of America.
3
<PAGE>
Section 9. Adjustments. Subject and pursuant to the provisions of this
Section 9, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter. If the adjustment provisions contained in this Section 9 are less
favorable to the holders of this Warrant than adjustment provisions available to
any other holder (the "Other Holder") of convertible securities of the Company
or warrants, options or similar rights exercisable for Common Stock of the
Company with respect to such securities ("Other Rights") are to any such Other
Holder, this Warrant shall be immediately and automatically amended, without the
requirement of any action by the holder or the Company, to provide the holder of
this Warrant with adjustment rights at least as favorable as such Other Rights.
(a) If the Company shall at any time or from time to time while the
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares into a
smaller number of shares or issue by reclassification of its outstanding shares
of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation, or sale, transfer or other disposition of all or substantially all
of the Company's properties to another corporation shall be effected, then, as a
condition of such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition, lawful and adequate provision shall be made
whereby each Warrantholder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions herein specified and in
lieu of the Warrant Shares immediately theretofore issuable upon exercise of the
Warrant, such shares of stock, securities or properties as may be issuable or
payable with respect to or in exchange for a number of outstanding Warrant
Shares equal to the number of Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place, and
in any such case appropriate provision shall be made with respect to the rights
and interests of each Warrantholder to the end that the provisions hereof
(including, without limitations, provision for adjustment of the Warrant Price)
shall thereafter be applicable, as nearly equivalent as may be practicable in
relation to any shares of stock, securities or properties thereafter deliverable
upon the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or simultaneously
4
<PAGE>
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Company, the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant.
The above provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 9(a)), or
subscription rights or warrants, the Warrant Price to be in effect after such
record date shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Market Price per share of Common Stock (as determined pursuant to Section
3), less the fair market value (as determined by the Company's Board of
Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding multiplied
by such current Market Price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
(d) If the Company shall at any time or from time to time after the
date of issuance hereof issue or sell in a financing transaction (which shall
not include any sales or issuances of Common Stock after the date hereof
pursuant to contractual obligations in effect on the date hereof), (A) any
shares of Common Stock for a consideration per share less than the lesser of (i)
the Market Price (as defined above) on the date of such issuance and (ii) the
Warrant Price, or (B) any securities convertible into shares of Common Stock
("Convertible Securities") for which the conversion or exercise price (which,
for the purposes of this Section 9(d), shall be the total obtained by dividing
(x) the total amount received by the Company as consideration for the issuance
of such Convertible Securities plus any amount payable to the Company on
conversion or exercise thereof, by (y) the number of shares of Common Stock
issuable upon the conversion or exercise thereof) is less than the lesser of (i)
the Market Price (as defined above) on the date of such issuance and (ii) the
Warrant Price, then the Warrant Price shall be reduced to a price equal to 120%
of such per share consideration, or conversion or exercise price. Such
adjustments shall be made successively whenever such sales are made.
5
<PAGE>
(e) An adjustment shall become effective immediately after the record
date in the case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment.
(f) In the event that, as a result of an adjustment made pursuant to
Section 9(a), the holder of the Warrant shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of the Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(g) Shares of Common Stock owned by or held for the account of the
Company or any majority-owned subsidiary shall not be deemed outstanding for the
purpose of any computation under this Agreement.
Section 10. Fractional Interest. The Company shall not be required to issue
fractions of Warrant Shares upon the exercise of the Warrant. If any fraction of
a Warrant Share would, except for the provisions of this Section, be issuable
upon the exercise of the Warrant (or specified portions thereof), the Company
shall purchase such fraction for an amount in cash equal to the current market
value of such fraction based upon the current Market Price (determined pursuant
to Section 3) of a Warrant Share. All calculations under this Section 10 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
Section 11. Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this Warrant
shall be for the sole and exclusive benefit of the Company and the
Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall forthwith give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The certificate of the Company's independent certified
public accountants shall be conclusive evidence of the correctness of any
computation made, absent manifest error. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity of
the subject adjustment.
Section 13. Identity of Transfer Agent. The Transfer Agent for the Common
Stock is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004. Forthwith upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
6
<PAGE>
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or made by the
Warrantholder to or on the Company shall be sufficiently given or made if sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, CO 80112
Attn: Van A. Horsley
Telephone: 303/790-2990
Facsimile: 303/799-1378
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 14.
Any notice pursuant hereto to be given or made by the Company to or on the
Warrantholder shall be sufficiently given or made if sent by certified mail,
return receipt requested, postage prepaid, to the address set forth on the books
of the Company or, as to each of the Company and the Warrantholder, at such
other address as shall be designated by such party by written notice to the
other party complying as to delivery with the terms of this Section 14. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
Section 15. Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Registration Rights Agreement dated effective July __,
1998.
Section 16. Successors. All the covenants and provisions hereof by or for
the benefit of the Investor shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 17. Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of Colorado and for all purposes shall be
construed in accordance with the laws of said State.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be duly
executed, as of the day and year first above written.
MEDICAL DYNAMICS, INC.
By:___________________________
Name:
Title:
Attest:
_______________________________
8
<PAGE>
MEDICAL DYNAMICS, INC.
WARRANT EXERCISE FORM
MEDICAL DYNAMICS, INC.
99 Iverness Drive East
Englewood, CO 80112
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE) [] payment by cash or certified check; []
conversion of the within Warrant by surrender of the Warrant, _______________
shares of Common Stock* ("Warrant Shares") provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:
--------------------------------
Name
--------------------------------
Address
--------------------------------
--------------------------------
--------------------------------
Federal Tax Identification No.
or Social Security No.
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of the Warrant be registered in the
* NOTE: If conversion of the Warrant is made by surrender of the Warrant and
the number of shares indicated exceeds the maximum number of shares to
which a holder is entitled, the Company will issue such maximum number
of shares.
<PAGE>
name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
Dated:___________________, ____
Signature:______________________________
------------------------------
Name (please print)
------------------------------
Address
------------------------------
------------------------------
Federal Identification or
Social Security No.
Note: The above signature must
correspond with the name of the
registered holder as written on
the first page of the Warrant in
every particular, without
alteration or enlargement or any
change whatever, unless the
Warrant has been assigned.
