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: March 18, 1999
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 or other 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
<PAGE>
Item 5. Other Events.
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Amendment to Tail Wind Agreements
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On March 18, 1999, Medical Dynamics, Inc. ("MEDY") entered into an
agreement with The Tail Wind Fund, Ltd. ("Tail Wind") to amend the terms of the
Purchase Agreement dated July 31, 1998, by which Tail Wind purchased $1,100,000
of convertible debentures and committed to purchase an additional $400,000 in
debentures (the "1998 Debentures"), as announced in MEDY's Form 8-K reporting an
event of July 31, 1998. Tail Wind acquired the additional $400,000 in 1998
Debentures in November 1998 pursuant to the first amendment to the Purchase
Agreement. Earlier amendments to the Purchase Agreement were reported in a
current report on Form 8-K reporting an event of March 4, 1999.
The current amendment accomplished the following:
1. Tail Wind agreed to consent to a variable rate transaction. As a result of
Tail Wind's consent, MEDY accomplished a variable rate transaction as
described under "Resonance Limited Purchase" below.
2. Tail Wind surrendered 84,615 common stock purchase warrants it had acquired
in an earlier (October 1997) debenture purchase transaction. MEDY has
canceled these warrants.
3. Tail Wind and MEDY agreed to reduce the conversion price for the 1998
Debentures from 100% of "Market Price" (defined in the Tail Wind agreement
to be the average of the two lowest closing bid prices of the Common Stock
as reported by The Nasdaq Stock Market over the 60 trading day period
immediately preceding the determination date) to 85% of Market Price as
defined.
4. Tail Wind agreed to waive approximately $120,000 liquidated damages payable
by MEDY as a result of the registration statement for the shares underlying
the 1998 Debentures and warrants issued in connection therewith not being
effective within the time periods required in the Registration Rights
agreement. After March 18, 1999, the liquidated damages will accrue at the
rate of $30,000 per month until the registration statement is effective.
5. MEDY also agreed to pay Tail Wind $20,000 to reimburse Tail Wind for
expenses incurred in connection with the registration statement and the
amendments.
Resonance Limited Purchase
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On March 18, 1999, Resonance Limited, an unaffiliated company located in
the Isle of Man, British Isles, purchased 523,834 shares of MEDY common stock
for $800,000. MEDY agreed to file a registration statement related to these
shares not later than April 16, 1999 and to obtain effectiveness of that
registration statement by no later than July 30, 1999. In addition, MEDY agreed
to issue "additional shares" to Resonance at various "determination dates." The
determination dates are two, four, and six months after the registration
statement for the shares issued to Resonance becomes effective. The number of
additional shares to be issued to Resonance are intended to compensate Resonance
for one-third of the decrease in market price of MEDY common stock (if any)
during the period following the original purchase. MEDY is obligated to issue no
more than 2,060,033 shares and warrants pursuant to this obligation (the "Future
Priced Securities Cap").
<PAGE>
After six months from the effective date of the registration statement for
the shares purchased by Resonance (and subject to the Future Priced Securities
cap), MEDY will issue Resonance a warrant to purchase 523,834 shares for a six
month period at $1.5272. Following the issuance of the additional shares and the
warrant, MEDY will be obligated to file an additional registration relating to
the additional shares (if any) and shares of common stock underlying the
warrant. The number of shares underlying the warrant may be reduced in number if
necessary to comply with the Nasd's future priced securities limitation. The
issuance of the common shares and warrants to Resonance will result in a
dilution adjustment to warrants held by Tail Wind.
After paying expenses of and fees related to the transaction, MEDY will
receive net proceeds of approximately $700,000. MEDY will use the proceeds for
working capital.
Item 7. Financial Statements and Exhibits
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(A) and (B) Financial Statements
None
(C) Exhibits
1. Amendment No. 3 to Purchase Agreement between Medical Dynamics, Inc.
and The Tail Wind Fund, Ltd.
2. Purchase Agreement between Medical Dynamics, Inc. and Resonance
Limited.
3. Registration Rights Agreement between Medical Dynamics and Resonance
Limited.
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.
March 23, 1999 By: /s/ Van A. Horsley
---------------------------------
Van A. Horsley, President
Amendment No. 3 to
PURCHASE AGREEMENT
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and
Amendment No. 1 to
REGISTRATION RIGHTS AGREEMENT
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THIS AGREEMENT (this "Amendment") is dated as of March 18, 1999, and
constitutes: (i) Amendment No. 2 to the Purchase Agreement (the "Purchase
Agreement") 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") which Purchase Agreement was made as of the
31st day of July, 1998, as amended by Amendment No. 1 dated October 30, 1998;
and (ii) Amendment No. 1 to the Registration Rights Agreement (the "Registration
Rights Agreement") between the Company and the Investor which Registration
Rights Agreement was made as of the 31st day of July, 1998.
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. Amendments to the Purchase Agreement. The Purchase Agreement be and hereby
is amended as follows:
(a) All references in the Purchase Agreement or documents referenced
therein to the "Registration Rights Agreement" shall mean the
Registration Rights Agreement as amended hereby.
(b) Pursuant to Paragraph 7.1 of the Purchase Agreement, the Investor
hereby consents to the issuance of one Variable Rate Transaction of up
to $800,000 subject to review and approval of the agreements by which
such Variable Rate Transaction will be implemented, and provided that
to the extent the aggregate purchase price exceeds $750,000, at least
one-half of the amount in excess of $750,000 will be spent by the
Company for advertising and public relations as an increment over the
amount dedicated to that purpose in the Company's fiscal 1998.
2. Registration Rights Agreement. The Registration Rights Agreement be and
hereby is amended as follows:
(a) Paragraph 2(c) of the Registration Rights Agreement to provide that
the liquidated damages penalty provided therein is waived through
March 18, 1999, provided further that the Company will have nine
months to pay any liquidated damages penalty to the Investor.
Amendment - Medical Dynamics, Inc. and The Tail Wind Fund, Ltd. Page 1
<PAGE>
3. Convertible Debentures. The convertible debentures dated July 31, 1999
(CD98-001 through CD98-011) and dated November 18, 1998 (CD98-012 through
CD98-015) (each a "Debenture") be and hereby are amended as follows which
amendment is in addition to Amendment No. 1 to the Convertible Debenture
dated July 31, 1999:
(a) The first sentence of Paragraph 2(f) be and hereby is amended to read
as follows:
"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 85% 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)."
(b) The last clause of Paragraph 2(f) which provided for a minimum Ceiling
Price ("but in no event shall the Ceiling Price be adjusted to an
amount less than $2.25") be and hereby is deleted. As a result of such
amendment, Paragraph 2(f) of the Debenture concludes as follows:
". . .; provided, however, that the Ceiling Price shall be adjusted
effective upon the second anniversary of the Purchase Agreement to
105% of the Market Price on such date, if such adjustment would result
in a lower price."
4. Surrender of 1997 Common Stock Purchase Warrants. The Investor hereby
surrenders for cancellation common stock purchase warrants it holds for the
purchase of 84,615 shares of the Company's common stock dated October 31,
1997, and the Company hereby cancels said warrants. The Investor will
deliver the original warrant agreement to the Company.
5. Reimbursement of Expenses. Upon the completion of the Variable Rate
Transaction described in Paragraph 1(b), above, the Company will pay the
Investor $20,000 to reimburse the Investor for expenses it has incurred.
6. This Amendment to the Purchase Agreement and the Registration Rights
Agreement constitutes a part of and a modification to the Purchase
Agreement, the Registration Rights Agreement, Warrant Agreements, and the
Debentures as set forth herein, and references herein to the Purchase
Agreement, the Registration Rights Agreement, Warrant Agreement, and the
Debentures shall mean the Purchase Agreement, the Registration Rights
Agreement, Warrant Agreements, and the Debentures as modified hereby.
Except as modified hereby, the Purchase Agreement, the Registration Rights
Agreement, the Warrant Agreements, and the Debentures shall remain in ful
force and effect in accordance with its stated provisions.
7. This Amendment may be signed in counterparts, each of which shall
constitute an original and which together shall constitute one and the same
agreement. Either party hereby may confirm legal delivery of the signed
counterparts by facsimile delivery of a copy of this Amendment to the other
party.
Amendment - Medical Dynamics, Inc. and The Tail Wind Fund, Ltd. Page 2
<PAGE>
8. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company and the Investor have made this Amendment
as of the date first above written.
MEDICAL DYNAMICS, INC. THE TAIL WIND FUND, LTD.
By:____________________________ By: ________________________________
Van A. Horsley, President Name:
Title:
Amendment - Medical Dynamics, Inc. and The Tail Wind Fund, Ltd. Page 3
<PAGE>
PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT (the "Agreement"), dated as of March 17, 1999, is
entered into by and between RESONANCE LIMITED, a British Virgin Island Company
(the "Purchaser") and MEDICAL DYNAMICS, INC., a Colorado corporation (the
"Company").
The parties hereto agree as follows:
1. Purchase and Sale. Upon the basis of the representations and
warranties, and subject to the terms and conditions set forth in this Agreement,
the Company covenants and agrees to sell to the Purchaser for $800,000 (the
"Purchase Price"):
(a) Such number of shares of the Company's Common Stock, par
value $.001 per share (the "Shares" and such Shares deliverable to Purchaser
under this Section 1(a) being referred to as the "Purchased Shares")which, when
valued at 82% of their Market Price, as hereinafter defined, as of the date of
this Agreement (the "Effective Date") most nearly equals $800,000.
(b) On the expiration of two months, four months and six months
following the Registration Date (as defined below) additional Shares
("Additional Shares") if the Per Share Market Price (as defined below) times the
number of Purchased Shares (the "Market Value of the Purchased Shares") on any
such date (each a "Determination Date") is less than the Purchase Price, such
full number of Additional Shares the Market Value of which on any applicable
Determination Date is most nearly equal in value to one third the amount, if
any, by which the Purchase Price exceeds the Market Value of the Purchased
Shares on such Determination Date. By way of example, if the Market Price on the
Effective Date were $2.00 and $1.10 on the First Determination Date two months
following the Registration Date the number of Additional Shares deliverable on
the First Determination Date would be determined as follows:
<PAGE>
(1) Number of Purchased Shares $800,000 / ($2.00 x .82) = 487,805
(2) Value of Purchased Shares on First
Determination Date $487,805 x $1.10 = $536,585
(3) Difference in value of Purchased
Shares $800,000 - $536,585 = $263,413
(4) Number of Shares represented by
Difference in Value 263,413 / $1.10 = 239,467
(5) Additional Shares issuable on
First Determination Date 239,467 / 3 = 79,822 Shares
Anything herein to the contrary notwithstanding, the Company will not be
obligated to issue any Additional Shares to the extent the total number of
Purchased Shares and Shares otherwise issuable under this Paragraph 1(b) would
exceed 2,060,033 shares (20% of the total number of Shares outstanding as of the
Effective Date).
(c) At the expiration of six months from the Registration Date,
such number of warrants in the form annexed hereto as Exhibit A (the "Warrants")
as are equal to the lesser of the number of Purchased Shares issuable pursuant
to Paragraph 1(a) and the amount by which 2,060,333 exceeds the number of shares
issuable under Paragraphs 1(a) and 1(b).
For purposes herein, (i) the Per Share Market Price shall mean
the average closing bid price of a Share for the 20 trading days immediately
preceding the date on which the Per Share Market Price is to be determined and
(ii) the Registration Date shall be the date on which the Registration Statement
on Form S-3 or any successor form filed pursuant to the Registration Rights
Agreement referred to in Section 7(b) herein becomes effective.
2. Closing. The closing of the purchase and sale of the Purchased
Shares pursuant to Section 1 hereof shall take place on March 19, 1999 by the
transfer of the Purchase Price by wire transfer in exchange for certificates for
the Purchased Shares which shall be held in escrow pending the Closing by
counsel for the Purchaser. The Additional Shares, if any, shall be issued and
delivered to Purchaser promptly after each Determination Date as provided in
Section 1(b) above and the Warrants shall be issued and delivered on the
expiration of nine months from the Effective Date.
3. Representations, Warranties and Covenants of the Purchaser. The
Purchaser understands, and represents and warrants to, and agrees with, the
Company, that:
(a) The Purchased Shares, Additional Shares, Warrants and Shares
issuable on exercise of the Warrants (the "Warrant Shares") have not been and,
unless registered under the Securities Act of 1933, as amended (the "Securities
Act"), in accordance with the Registration Rights Agreement (as defined in
<PAGE>
Section 7(b)), will not be registered under the Securities Act, or any other
applicable securities law, and, accordingly, may not be offered, sold,
transferred, pledged, hypothecated or otherwise disposed of ("Transferred")
unless registered under the Securities Act or Transferred in a transaction
exempt from registration under the Securities Act and any other applicable
securities law.
(b) The Purchaser is an "accredited investor" within the meaning
of Rule 215(a) under the Securities Act (an "Accredited Investor"). The
Purchaser has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Shares. The Purchaser is aware that it may be required to bear the economic risk
of an investment in the Shares for an indefinite period, and it is able to bear
such risk for an indefinite period.
(c) The Purchaser is acquiring or will acquire the Shares issued
or issuable to it hereunder or upon exercise of the Warrants (collectively the
"Registrable Shares") for its own account for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution thereof.
(d) The Company has furnished or made available to the Purchaser
a full and complete set of its most recent definitive proxy statement in
connection with its annual meeting of stockholders and its Annual Report on Form
10-KSB for its most recently completed fiscal year, its Form 10-QSB's for its
first fiscal quarter since the end of its most recently completed fiscal year
and any Form 8-K's and Registration Statements filed during its current fiscal
year, which the Company has filed pursuant to the Securities Exchange Act of
1934, as amended (collectively, the "SEC Documents").
(e) The Purchaser's investment decision is based solely on the
SEC Documents and its own inquiry, including (to the extent the Purchaser
determines appropriate and without limitation), Purchaser's discussion with its
attorneys, accountants, investment, financial, and tax advisors. The Purchaser
was not presented the investment opportunity described in this Agreement through
any form of public advertising or general solicitation. The Purchaser will
notify the Company immediately if it becomes aware of any information which
would lead it to believe that information on which it relied in making its
investment decision is inaccurate or incomplete in any material respect.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the state of Colorado and is duly
qualified as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the Company and its
subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Common Stock is listed and trades on the Nasdaq Small
Cap Market. The Company has filed all materials required to be filed pursuant to
all reporting obligations under either Section 13(a) or 15(d) of the Exchange
<PAGE>
Act for at least twelve (12) months immediately preceding the offer or sale of
the Purchased Shares, and has received no notice, either oral or written, with
respect to the continued eligibility for such listing. The Company has timely
made all filings required under the Exchange Act during the twelve month period
preceding the date hereof and is eligible to use Form S-3 to register Shares for
sale by the Purchaser.
(b) This Agreement, the Registration Rights Agreement (as
referred to in Section 6(b)) and the Warrants have been duly authorized, by all
necessary corporate action including if necessary approval by shareholders,
executed and delivered by the Company and constitute valid and binding
agreements, enforceable in accordance with their respective terms, and the
Company has full corporate power and authority necessary to enter into such
agreements and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates is required for execution of this Agreement, the
Registration Rights Agreement and the performance of its obligations under such
agreements, including, without limitation, the issuance and sale of the
Purchased Shares and Additional Shares.
(d) Neither the sale of the Shares pursuant to this Agreement,
nor the performance of its obligations under this Agreement, or the Registration
Rights Agreement by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation or by-laws of the Company, (B) any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company,
(C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company is a
party, by which the Company is bound, or to which any of the properties of the
Company is subject, (D) the terms of any "lockup" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (E) any
NASD Rule applicable to the Company and the continued listing of its Shares; or
(ii) result in the creation or imposition of any lien, claim
or other encumbrance upon any of the assets of the Company.
(e) The Registrable Shares, when issued and delivered as herein
provided (i) will be free and clear of any security interests, liens, claims or
other encumbrances, (ii) will be duly and validly authorized and issued, (iii)
will be fully paid and nonassessable, (iv) will not have been issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company, and (v) will not subject the holders thereof to
personal liability by reason of being such holders.
<PAGE>
(f) Except as set forth in the SEC Documents, there is no pending
or, to the best knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of its affiliates that would
materially affect the results of operations of the Company or the execution by
the Company of, or the performance by the Company of its obligations under, this
Agreement or the Registration Rights Agreement.
(g) The Company, any person representing the Company, and, to the
best knowledge of the Company, any other person selling or offering to sell the
Shares in connection with the transaction contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the Shares which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
(h) Except as disclosed to the Purchaser or any of its affiliates
in writing and except as noted by the NASD that the characteristics of Future
Price Securities often exert downward pressure on the bid price of the issuer's
common stock, the Company is not in possession of any material non-public
information that, if publicly disclosed, would, or could reasonably be expected
to, have an effect on the price of the shares, which is listed for trading on
the National Association of Securities Dealers Automated Quotations Small
Capitalization system ("NASDAQ").
(i) Assuming the accuracy of, and compliance with, the
representations, warranties and covenants of the Purchaser in this Agreement,
the sale of the Shares pursuant to this Agreement has been made in accordance
with the provisions and requirements of Section 4(2) under the Securities Act
("Section 4(2)") and any applicable state law.
(j) Neither the Company, any affiliate of the Company, nor any
person acting on behalf of the Company or any such affiliate has engaged, or
will engage, in any general solicitation or general advertising with respect to
the Purchased Shares.
(k) The Company undertakes and agrees to make all necessary
filings in connection with its sale of the Registrable Shares as required by the
United States laws and NASD regulations for listing on NASDAQ.
(l) Except as set forth in the SEC Documents, since September 30,
1998, there has been no material adverse development in the assets, liabilities,
business properties, operations, financial condition or results of operations of
the Company and its subsidiaries taken as a whole, except as disclosed in the
filings in the SEC Documents.
(m) Neither the filing of the 10-KSB for 1998 nor any of the
filings of the Company with the SEC since then contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements therein,
<PAGE>
in light of the circumstances under which they were made, not misleading. The
Company has since January 1, 1997 timely filed all requisite forms, reports and
exhibits thereto with the SEC.
(n) Except as set forth in the SEC Documents, there is no known
fact to the Company or any subsidiary (other than general economic conditions
generally known to the public) that has not been disclosed in writing to the
Purchaser that (i) could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise) or in the earnings, business
affairs, business prospects, properties or assets of the Company or any
subsidiary, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company or any subsidiary to perform its obligations
pursuant to this Agreement.
5. Covenants of the Company. The Company covenants and agrees with the
Purchaser:
(a) to comply with all requirements of Section 4(2) with respect
to the sale of the Purchased Shares;
(b) to notify the Purchaser promptly if at any time during the
period beginning on the date of this Agreement and ending on the Closing Date
(i) any event shall have occurred as a result of which any oral communication
made by the Company, any person representing the Company, or, to the best
knowledge of the Company, by any other person in connection with the
transactions contemplated by this Agreement would include an untrue statement of
a material fact or omit to state an material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (ii) there is any public disclosure of material
information regarding the Company or its financial condition or results of
operation;
(c) to cause the Purchased Shares, the Additional Shares, the
Warrants and the Warrant Shares to be, upon delivery, fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges, security
interests or other encumbrances;
(d) to have at all times authorized and reserved for issuance,
free from preemptive rights, a sufficient number of Shares to cover the
Additional Shares and the Shares issuable upon exercise of the Warrants;
(e) to comply with all relevant requirements and procedures of
the NASD in connection with the issuance and listing of the Registrable
Securities on NASDAQ.
6. Conditions Precedent to the Purchaser's Obligations. The
obligations of the Purchaser hereunder are subject to the performance by the
Company of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
(a) The representations and warranties made by the Company in
this Agreement shall, unless waived by the Purchaser, be true and correct in all
material respects as of the date hereof and at the Closing Date, with the same
force and effect as if they had been made on and as of the Closing Date.
<PAGE>
(b) The Company and the Purchaser shall have entered into a
Registration Rights Agreement (the "Registration Rights Agreement") in
substantially the form annexed hereto as Exhibit B.
(c) The Company will provide an opinion of counsel in form and
substance agreed to by Purchaser.
(d) None of the following shall have occurred: (i) any general
suspension of trading in, or limitation on prices listed for, the Common Stock
on the NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect to banks in the United States, (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) in the case of the foregoing
existing at the date of thi Agreement, a material acceleration or worsening
thereof, (v) any limitation by the federal or state authorities on the extension
of credit by lending institutions that materially and adversely affects the
Purchaser.
7. Conditions Precedent to the Company's Obligations. The obligations
of the Company hereunder are subject to the performance by the Purchaser of its
obligations hereunder and to the satisfaction of the condition precedent that
the representations and warranties made by the Purchaser in this Agreement
shall, unless waived by the Company, be true and correct in all material
respects as of the date hereof and at the Closing Date, with the same force and
effect as if they had been made on and as of the Closing Date.
8. Legend. Each certificate evidencing the Shares, and any
certificates issued upon transfer or exchange of such Shares shall be stamped or
imprinted with a legend substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE; AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN
EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
9. Fees and Expenses. The Company shall at the Closing pay the fees
and expenses of Purchaser's counsel. In addition, the Company will at the
Closing pay Ayeh Trading Inc. $20,000 to cover its due diligence investigation
of the Company on behalf of the Purchaser provided that the Closing occurs on or
before February 28, 1999 or would have occurred on or prior to that date but for
the Company's inability to close as of such date.
<PAGE>
10. Survival of the Representations, Warranties, etc. The respective
agreements, representations, warranties, indemnities and other statements made
by or on behalf of the Company and the Purchaser, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of any payment for the Purchased
Shares.
11. Notices. All notices, requests and other communications hereunder
must be in writing and delivered to the parties at the following addresses or
facsimile numbers:
If to the Purchaser, to: Resonance Limited
Burleigh Manor
Peel Road
British Isles
Isle of Man
With a copy to: Morse, Zelnick, Rose & Lander, LLP
450 Park Avenue
New York, New York 10022
Attention: Howard L. Weinreich
Telecopy: (212) 838-9190
If to the Company, to: Medical Dynamics, Inc.
99 Inverness Drive East
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1378
With a copy to: Norton Lidstone, LLC
5445 DTC Parkway, Suite 850
Englewood, Colorado 80111
Attention: Herrick K. Lidstone, Jr., Esq.
Telecopy: (303) 221-5553
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
12. Miscellaneous.
<PAGE>
(a) This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
(b) This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their respective successors and permitted assigns.
(c) This agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado (without giving effect to
conflicts of laws principles). Subject to applicable law, the Company agrees
that final judgment against it in any legal action or proceeding arising out of
or relating to this Agreement or the Registration Rights Agreement shall be
conclusive and may be enforced in any other jurisdiction within or outside the
United States by suit on the judgment, a certified copy of which judgment shall
be conclusive evidence thereof and the amount of its indebtedness, or by such
other means provided by law.
(d) The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
(e) The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid, illegal or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(f) This Agreement, including the schedules and exhibits hereto,
constitutes the sole and entire agreement of the parties with respect to the
subject matter hereof.
13. Time of Essence. Time shall be of the essence in this Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer(s) of each party hereto as of the date first
above written.
RESONANCE LIMITED
By: _________________________
MEDICAL DYNAMICS, INC.
By: _________________________
EXHIBIT A
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.
MEDICAL DYNAMICS, INC.
WARRANT TO PURCHASE 523,834 SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE
This is to certify that, for VALUE RECEIVED, RESONANCE LIMITED
("Warrantholder"), is entitled to purchase, subject to the provisions of this
Warrant, from MEDICAL DYNAMICS, INC., a Colorado corporation ("Company"), and
pursuant to a Purchase Agreement by and between the Company and the
Warrantholder dated as of March 17, 1999 (the "Purchase Agreement") up to
523,834 shares of the Company's Shares of Common Stock, par value $.001 per
share (the "Shares"), at any time not later than 5:00 P.M., Mountain time, [on
September 16, 1999 or upon the expiration of twelve months from the Registration
Date, whichever is later (the "Expiration Date")], at an exercise price per
share equal to [the purchase price of each Purchased Share as determined under
Section 1(a) of the Purchase Agreement (the "Warrant Price"). Unless otherwise
defined herein capitalized terms shall have the meaning ascribed to them in the
Purchase Agreement. The number of Shares 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. The Warrant Shares will be registered on a Form S-3 or successor
form which the Company has agreed to file pursuant to a Registration Rights
Agreement.
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
<PAGE>
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 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
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 the extent that any Warrant remain outstanding at 5:01 P.M., Mountain
time on the Expiration Date, 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 Shares 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 if not sold in a registered offering 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.
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.
<PAGE>
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 Shares. 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 Shares, 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 Shares ("Transfer Agent"), and every subsequent
transfer agent for the Shares 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 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 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 Shares 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 be payable in lawful money of the United States of
America.
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.
(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 Shares in
Shares, subdivide its outstanding Shares 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 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 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.
<PAGE>
(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
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 Shares (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 outstanding multiplied by the Market Price per Share (as defined below),
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 outstanding multiplied by such current Market Price per
Share. For purposes herein the Market Price of a Share shall be the closing
price of the Shares on the trading day immediately preceding the date for which
the Market Price is to be determined. Such adjustment shall be made successively
whenever such a record date is fixed.
<PAGE>
(d) 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.
(e) 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, 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.
(f) Shares 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 9(c)) 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. Redemption. The Company may redeem the Warrant upon 15 days
advance notice at a price of $2.50 per each Warrant Share covered by the
Warrant. The Company shall exercise its right of redemption by notice to the
Warrantholder which notice shall specify a closing not less than 15 days nor
more than 30 days from the issuance of such notice. At the Closing the Warrant
unless exercised shall be surrendered for the redemption price payable in cash
or by certified check.
<PAGE>
Section 14. Identity of Transfer Agent. The Transfer Agent for the Shares
is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York
10004. Forthwith upon the appointment of any subsequent transfer agent for the
Shares 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 mail to
the Warrantholder a statement setting forth the name and address of such
transfer agent.
Section 15. 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 15.
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 15. All such
notices, requests, demands, directions and other communications shall, when
mailed be effective when deposited in the mails addressed as aforesaid.
Section 16. 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 as of March 17,
1999.
Section 17. 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 18. 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.
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:
<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 Shares* ("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
* 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>
the 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.
EXHIBIT B
MEDICAL DYNAMICS, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered as
of this 17th day of March, 1999 by and between MEDICAL DYNAMICS, INC., a
Colorado corporation (the "Company") and RESONANCE LIMITED (the "Investor")
pursuant to Section 7(b) of the Purchase Agreement dated March 17, 1999 by and
between the Company and the Investor (the "Purchase Agreement"). Unless the
context otherwise requires capitalized terms shall have the meanings ascribed to
them in 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.
"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 the Common Stock issued or issuable
under the Purchase Agreement or under the Warrants issuable under the Purchase
Agreement.
"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.
<PAGE>
"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 Effective 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 Warrants to
prevent dilution resulting from stock splits, stock dividends or similar
transactions or by reason of changes in the Exercise Price of the Warrants in
accordance with the terms thereof. 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. In the event
that Additional Shares or Warrant Shares are not able to be included in the
Registration Statement to be filed as provided above, they shall be included in
a second Registration Statement covering such shares which the Company shall
file and cause to become effective as soon as possible after the number of
Additional Shares and Warrant Shares has been determined.
(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.
(c) Effectiveness.
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 135 days following the
date hereof (the "Registration Date"), (B) after the Registration 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 $15,000 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
<PAGE>
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. In addition to the foregoing, the
Company shall pay as additional liquidated damages an amount equal to 2% or a
pro rata portion thereof of the Purchase Price for each 30 days or portion
thereof subsequent to the expiration of 30 days from the Closing and prior to
the Blackout Period that the Registration Statement has not been unfiled with
the SEC.
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;
(c) permit a single firm of counsel designated by the Investor to review at
Investor's expense 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 which
underwriters shall be reasonably acceptable to the Company, 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;
<PAGE>
(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);
(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;
(1) 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
<PAGE>
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 1 l(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).
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 are 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.
<PAGE>
(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.
(f) The Investor agrees that it will treat all confidential non-public
information which it receives hereunder in confidence and will not use such
information only for the purposes contemplated hereunder.
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
<PAGE>
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.
(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.
<PAGE>
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.
(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.
<PAGE>
(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.
(1) 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: RESONANCE LIMITED
By:_________________________________
Name:
Title:
