SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported)
December 24, 1997
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COMPUMED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-14210 95-2860434
---------------- ----------------------- ---------------
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification
of Incorporation) No.)
1230 Rosecrans Avenue, Suite 1000
Manhattan Beach, California 90266
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Address of principal executive offices) (zip code)
Registrant's telephone number, including area code - (310) 643-5106
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ITEM 5. OTHER EVENTS
On December 24, 1997, CompuMed, Inc. (the "Company") closed
the placement (the "Placement") of 17,500 shares of Series 1
Class C 7% Convertible Preferred Stock (the "Series C-1 Preferred
Stock") to eight purchasers (the "Purchasers") at a price of $100
per share, or an aggregate purchase price of $1,750,000 pursuant
to Securities Purchase Agreements.
The Series C-1 Preferred Stock is immediately convertible
into shares of the Company's Common Stock at a conversion ratio
equal to $100 divided by the lesser of (i) 75% of the average
closing bid price of the Common Stock for the ten consecutive
trading days prior to the closing or (ii) 75% of the average
closing bid price for the ten consecutive trading days prior to
the notice of conversion. In the event the closing bid price of
the Common Stock is less than $1.00 per share on the trading day
immediately preceding the receipt of a conversion notice, the
holder requesting conversion would be limited to converting not
more than 5% of the shares he initially purchased, which
limitation would continue for a period of 30 days. The Company
has the right to force conversion of any or all outstanding
Series C-1 Preferred Stock on November 30, 1999 at the then
conversion ratio. There is no minimum conversion price. Should
the value of the Common Stock fall substantially prior to
conversion, the holders of the Preferred Stock could obtain a
significant share of the Common Stock upon their conversions.
Upon conversion of the Series C-1 Preferred Stock, the holder
would receive warrants (the "Warrants") to purchase the same
number of shares of Common Stock as being issued on the
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conversion, at an exercise price equal to the conversion price
and exercisable for three years from issuance, subject to
possible reduction as mentioned below.
The Securities Purchase Agreements also provide that the
Purchasers would purchase 17,500 shares of Series 2 Class C 7%
Convertible Preferred Stock (the "Series C-2 Preferred Stock" and
together with the Series C-1 Preferred Stock, the "Class C
Preferred Stock"), with the outside date for closing being
February 15, 1998, which date may be extended to 30 days after
the effectiveness of a registration statement (mentioned below)
if the Company's Common Stock has not maintained certain price
and volume minimums. The Series C-2 Preferred Stock is identical
to the Series C-1 Preferred Stock except that (i) the percentage
to be used for the conversion ratio would be 77.5% for Series C-2
Preferred Stock purchased by December 31, 1997 and be 80% for
such Stock purchased after December 31, 1997 and (ii) the Company
would have the right to force conversion on December 31, 1999.
Should a Purchaser of Series C-1 Preferred Stock not acquire his
portion of the Series C-2 Preferred Stock, he would forfeit one-
half of the Warrants otherwise issuable to him upon the
conversion of his Series C-1 Preferred Stock. Upon conversion of
Series C-2 Preferred Stock, the holder would be granted warrants
similar to the Warrants.
As a condition to the initial closing of the Placement, the
Company entered into a Registration Rights Agreement with each
Purchaser agreeing to file a registration statement with the
Securities and Exchange Commission covering the Common Stock
underlying his Class C Preferred Stock and Warrants. The Company
is subject to certain monetary penalties if the registration
statement is not filed within 30 days of the closing or is not
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declared effective within 90 days of the initial closing, absent
certain delays in the registration process.
The net proceeds from the Placement of the Series C-1
Preferred Stock was approximately $1,660,000 (after payment of a
4% fee to the distributor and other placement expenses). The
Company will use the net proceeds for on-going research and
development activities and general working capital.
On December 24, 1997, the Company also issued warrants (the
"1995 Warrants") exercisable for the purchase of 200,000 shares
of its Common Stock to the distributor of certain placements
effected by the Company in 1995 and 1996. The 1995 Warrants were
originally issued for 142,857 shares at an exercise price of $
1.10 per share and exercisable until December 1, 1999. In
settlement of certain claims made by the distributor, the Company
agreed to increase the number of 1995 Warrants to 342,857 shares,
provided that warrants for 142,857 of such shares would become
exercisable only if the Company closed the entire $1,750,000
offering of Series C-2 Preferred Stock by December 31, 1997.
Since the December 31, 1997 closing of Series C-2 Preferred Stock
was for less than $1,750,000, the Warrants for an additional
142,857 shares did not become exercisable. The shares of Common
Stock underlying the 1995 Warrants are also be included in the
registration statement to be filed pursuant to the Registration
Rights Agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
3.1 Certificate of Designation for the Class C 7%
Convertible Preferred Stock, filed on December 11, 1997
3.2 Certificate of Correction for the Class C 7%
Convertible Preferred Stock, filed on December 24,
1997.
10.1 Form of Securities Purchase Agreement for the sale of
Series I Class C 7% Convertible Preferred Stock
(without annexes)
10.2 Form of Warrant Agreement
10.3 Form of Registration Rights Agreement
99 Press Release, dated January 9, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: January 8, 1998
COMPUMED, INC.
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(Registrant)
/s/ James Linesch
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James Linesch
President
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EXHIBIT INDEX
Exhibit
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3.1 Certificate of Designation for the Class C Preferred
Stock, filed on December 11, 1997
3.2 Certificate of Correction for the Class C Preferred
Stock, filed on December 24, 1997.
10.1 Form of Securities Purchase Agreement (without annexes)
10.2 Form of Warrant Agreement
10.3 Form of Registration Rights Agreement
99 Press Release
Exhibit 3.1
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
CLASS C 7% CONVERTIBLE PREFERRED STOCK
OF
COMPUMED, INC.
___
(Pursuant to Section 151(g) of
the Delaware General Corporation Law)
___
1. The name of the corporation is CompuMed, Inc. (the
"Corporation"), a corporation organized and existing under the
laws of the State of Delaware.
2. The Certificate of Incorporation, as amended, of the
Corporation authorizes the issuance of One Million (1,000,000)
shares of Preferred Stock, $.10 par value per share, and
expressly vests in the Board of Directors of the Corporation the
authority to issue any or all of said shares in one or more
series and by resolution or resolutions to establish such voting
powers, full or limited, or no voting powers and such
designations, preferences, and relative, participating, optional
or other special rights and qualifications, or restrictions
hereof, as shall be stated and expressed in such resolution or
resolutions.
3. The Board of Directors of the Corporation, pursuant to
the authority expressly vested in it as aforesaid, pursuant to a
Unanimous Written Consent, dated as of October 14, 1997, has
adopted the following resolutions creating a Series C issue of
Preferred Stock:
"RESOLVED, that Thirty Five Thousand (35,000) of the
One Million (1,000,000) authorized shares of Preferred Stock
of the Corporation shall be designated Class C 7%
Convertible Preferred Stock (the "Class C Preferred Stock")
which class shall consist of two series of 17,500 shares
each, the Series 1 Class C Preferred Stock ("Series 1
Stock") and Series 2 Class C Preferred Stock ("Series 2
Stock") and shall possess the rights and privileges set
forth below:
A. General. All shares of Class C Preferred
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Stock shall be identical with each other in all respects
except for the Conversion Price and the forced conversion
for the Series 1 Stock and Series 2 Stock as described in
Part D below. All of the shares of Class C Preferred Stock
shall be of such rank as to any other outstanding series of
Preferred Stock, if any, of the Corporation as to dividends
and as to distributions upon liquidation, dissolution or
winding up, as shall be provided in the resolutions of the
Board of Directors of the Corporation creating such other
series, subject in each case to the conditions contained
herein, provided, however, that while any shares of Class C
Preferred Stock are outstanding the Corporation shall not
create any other series of Preferred Stock with a
liquidation preference senior to the liquidation preference
on the Class C Preferred Stock.
B. Dividends. (i) The holder of each issued and
---------
outstanding share of Class C Preferred Stock shall be
entitled to receive dividends at a rate of $7.00 per share
per annum, when and as declared by the Board of Directors of
the Corporation. No dividends shall be declared or paid
with respect to the Corporation's Common Stock (other than a
dividend payable solely in Common Stock of the Corporation),
or upon any other class of Preferred Stock of the
Corporation which may then be outstanding with a dividend
preference subordinate to the dividend preference of the
Class C Preferred Stock, unless a dividend of equal or
greater amount per share (on an as-if-converted to Common
Stock basis in accordance with Part D below) is first
declared and paid with respect to the Class C Preferred
Stock and also any outstanding shares of Class A $3.50
Cumulative Convertible Preferred Stock (the "Class A
Preferred Stock") and outstanding shares of Class B $3.50
Convertible Voting Preferred Stock (the "Class B Preferred
Stock"). At the sole option of the Corporation, dividends
on each share of Class C Preferred Stock shall be paid in
either (a) cash, out of the assets at the time legally
available for such purpose, or (b) shares of Common Stock in
an amount determined by dividing (x) the amount of the
dividend payable thereon by (y) the Conversion Price of the
Series 1 Stock (as such term is defined in Part D hereof) in
effect on the dividend declaration date.
(ii) No dividends shall be paid on the Class C
Preferred Stock at such time as such payment would violate
the laws of the State of Delaware.
C. Liquidation Preference. (i) In the event of
----------------------
any liquidation, dissolution or winding-up of the
Corporation, either voluntary or involuntary (a
"Liquidation"), the holders of shares of the Class C
Preferred Stock then issued and outstanding shall be
entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from
capital, surplus or earnings, before any payment shall be
made to the holders of shares of the Common Stock or upon
any other series of Preferred Stock of the Corporation with
a liquidation preference subordinate to the liquidation
preference of Class C Preferred Stock, an amount per share
equal to one hundred dollars ($100) plus any declared,
unpaid and accrued dividends. If, upon any Liquidation of
the Corporation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to
pay the holders of shares of the Class C Preferred Stock and
the holders of the Class A Preferred Stock, the Class B
Preferred Stock, and any other series of Preferred Stock
with a liquidation preference equal to the liquidation
preference of the Class C Preferred Stock the full amounts
to which they shall respectively be entitled, the holders of
shares of the Class C Preferred Stock and the holders of the
Class A Preferred Stock, the Class B Preferred Stock, and
any other series of Preferred Stock with liquidation
preference equal to the liquidation preference of the Class
C Preferred Stock shall receive all of the assets of the
Corporation available for distribution and each such holder
of shares of the Class C Preferred Stock and the holders of
any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Class
C Preferred Stock shall share ratably in any distribution in
accordance with the amounts due such stockholders. After
payment shall have been made to the holders of shares of
Class C Preferred Stock of the full amount to which they
shall be entitled, as aforesaid, the holders of shares of
the Class C Preferred Stock shall be entitled to no further
distributions thereon and the holders of shares of the
Common Stock and of shares of any other series of stock of
the Corporation shall be entitled to share, according to
their respective rights and preferences, in all remaining
assets of the Corporation available for distribution to its
stockholders.
(ii) A merger or consolidation of the Corporation
with or into any other corporation, or a sale, lease,
exchange, or transfer of all or any part of the assets
of the Corporation which shall not in fact result in
the liquidation (in whole or in part) of the
Corporation and the distribution of its assets to its
stockholders shall not be deemed to be a voluntary or
involuntary liquidation (in whole or in part),
dissolution, or winding-up of the Corporation within
the meaning of this Part C.
D. Conversion of Class C Preferred Stock. The
-------------------------------------
holders of Class C Preferred Stock shall have the following
conversion rights:
(i) Right to Convert. Each share of Class C
----------------
Preferred Stock shall be convertible, on and after the
Conversion Date and at the Conversion Ratio set forth below,
into fully paid and nonassessable shares of Common Stock.
(ii) Mechanics of Conversion. Subject to paragraphs
-----------------------
(iii) and (x) below, each holder of Class C Preferred Stock
who desires to convert the same into shares of Common Stock
shall provide notice to the Corporation by the execution and
delivery to it of a notice of conversion (the "Conversion
Notice") for not less than $50,000 aggregate liquidation
preference of Preferred Stock, or the balance of the
holder's certificates for Class C Preferred Stock if less
than $50,000 aggregate liquidation preference. The date on
which a Conversion Notice for the shares of Class C
Preferred Stock to be converted is duly received by the
Corporation by mail at its then principal executive offices
or by facsimile to (310) 643-2363 (or such other facsimile
number as the Corporation shall designate in writing to each
record holder) shall be a "Notice Date". The Corporation
shall use its reasonable best efforts to issue and deliver,
within three (3) business days after it receives the
certificate or certificates for the shares of Class C
Preferred Stock to be converted, with proper endorsement if
necessary, from the holder electing conversion, a
certificate or certificates for the number of shares of
Common Stock to which the holder shall be entitled upon the
conversion.
(iii) Conversion Date. Shares of the Class C
---------------
Preferred Stock shall become convertible into shares of
Common Stock commencing immediately after issuance (the
"Conversion Date").
(iv) Conversion Ratio. In addition to such
----------------
shares of Common Stock as may be issued upon the election of
the Corporation pursuant to Part B hereinabove (dividends),
each share of Class C Preferred Stock shall be convertible
into the number of shares of Common Stock according to the
following formula:
N x 100
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CONVERSION PRICE
where:
N = the number of shares of either the
Series 1 Stock or the Series 2
Stock (with separate formulas used
for each Series) for which
conversion is being elected.
Conversion
Price = Series 1 Stock: The Conversion
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Price for the Series 1 Stock shall
be the lesser of: (a) the product
------
of (i) the average closing bid
price, as reported on the Nasdaq
SmallCap Market (or on such
national securities exchange or
automated trading system on which
the Common Stock is then primarily
traded), of the Corporation's
Common Stock for the ten (10)
consecutive trading days
immediately preceding the Notice
Date and (ii) .75 or (b) the
--
average closing bid price, as
reported on the Nasdaq SmallCap
Market (or on such national
securities exchange or automated
trading system on which the Common
Stock is then primarily traded), of
the Corporation's Common Stock for
the ten (10) consecutive trading
days immediately preceding the
closing day for the initial
issuance of the Series 1 Stock.
Series 2 Stock: The Conversion
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Price for the Series 2 Stock shall
be the lesser of: (a) the product
------
of (i) the average closing bid
price, as reported on the Nasdaq
SmallCap Market (or on such
national securities exchange or
automated trading system on which
the Common Stock is then primarily
traded), of the Corporation's
Common Stock for the ten (10)
consecutive trading days
immediately preceding the Notice
Date and (ii) .775 or (b) the
--
average closing bid price, as
reported on the Nasdaq SmallCap
Market (or on such national
securities exchange or automated
trading system on which the Common
Stock is then primarily traded), of
the Corporation's Common Stock for
the ten (10) consecutive trading
days immediately preceding the
closing day for the initial
issuance of the Series 2 Stock.
(v) Forced Conversion. The Corporation, at its
-----------------
sole discretion, may convert any or all shares of the
Series I Stock outstanding on November 30, 1999 and the
Series 2 Stock outstanding on December 31, 1999 into
Common Stock on such respective dates at the Conversion
Ratio then in effect. Each of November 30, 1999 and
December 31, 1999, as applicable, shall be deemed to be
the Notice Date with respect to such conversion;
provided, however, that if either such date is not a
day on which the Nasdaq SmallCap Market (or such
national securities exchange or automated trading
system on the Common Stock is then primarily traded) is
open for trading, the deemed Notice Date shall be the
next succeeding day on which the Nasdaq SmallCap Market
(or such national securities system or automated
trading system) is open for trading. If the conversion
pursuant to this paragraph is for less than all Series
1 Stock or Series 2 Stock then outstanding, the
Corporation may choose the shares to be converted
either by lot or pro rata.
(vi) Fractional Shares. No fractional share
-----------------
shall be issued upon the conversion of any shares of
Class C Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion
of shares of Class C Preferred Stock by a holder
thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned
aggregation, the conversion would result in the
issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional
share, round up or down any fractional share to the
nearest whole share of Common Stock.
(vii) Adjustment to Conversion Ratio.
------------------------------
(a) If, prior to the conversion of all shares of
Class C Preferred Stock, the number of outstanding shares of
Common Stock or the Class C Preferred Stock is increased by
a stock split, stock dividend or other similar event, or if
the number of outstanding shares of Common Stock is
decreased by a combination or reclassification of shares, or
other similar event, the Board of Directors of the
Corporation shall make an equitable adjustment in the
Conversion Ratio, if necessary, to reflect such event in
order to preserve substantially the initial Conversion
Ratio. The Corporation shall send to each holder of Class C
Preferred Stock written notice of each change in the
Conversion Ratio.
(b) If, prior to the conversion of all shares of
Class C Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which
shares of Common Stock of the Corporation shall be changed
into the same or a different number of shares of the same or
another class or classes of stock or securities of the
Corporation or another entity, then the holders of Class C
Preferred Stock shall thereafter have the right to purchase
and receive upon conversion of shares of Class C Preferred
Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such
shares of stock and/or securities as may be issued or
payable with respect to or in exchange for the number of
shares of Common Stock immediately theretofore purchasable
and receivable upon the conversion of shares of Class C
Preferred Stock held by such holders had such merger,
consolidation, exchange of shares, recapitalization or
reorganization not taken place. In any case subject to this
subsection (b) appropriate provisions shall be made with
respect to the rights and interests of the holders of the
Class C Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number or type
of shares issuable upon conversion of the Class C Preferred
Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The
Corporation shall not effect any transaction described in
this subsection (b) unless the resulting successor or
acquiring entity (if not the Corporation) assumes by written
instrument the obligation to deliver to the holders of the
Class C Preferred Stock such shares of stock and/or
securities as, in accordance with the foregoing provisions,
the holders of the Class C Preferred Stock may be entitled
to purchase upon conversion.
(viii) Reservation of Stock Issuable Upon
----------------------------------
Conversion. The Corporation shall at all times reserve
----------
and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Class C
Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to
effect the conversion of all then outstanding shares of
the Class C Preferred Stock. If at any time the number
of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then
outstanding shares of the Class C Preferred Stock, the
Corporation shall use its best efforts to take such
corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such
purpose.
(ix) Status of Converted Stock. Upon the
-------------------------
Corporation receiving a notice of conversion for any
shares of Class C Preferred Stock pursuant to this Part
D, the shares covered by such notice of conversion
shall no longer be deemed outstanding and all rights
with respect to such shares shall cease and be canceled
and such shares shall return to the status of
authorized but unissued Preferred Stock of no
designated class or series, and shall not be issuable
by the Corporation as Class C Preferred Stock.
(x) Limitation on Conversion. If the closing bid
------------------------
price of the Common Stock on the last trading day
immediately preceding a Notice Date is less than $1.00
per share (or as adjusted pursuant to paragraph (vii)
of this Part D), as reported on the Nasdaq SmallCap
Market (or on such national securities exchange or
automated trading system on which the Common Stock is
then primarily traded) (such Notice Date being the
"Limitation Notice Date"), then the number of shares of
Series 1 Stock or Series 2 Stock which may be converted
by the Holder requesting conversion (the "Reguesting
Holder") shall be limited to an amount which does not
exceed an aggregate of five (5%) percent of the amount
of shares of Series 1 Stock or Series 2 Stock, as
applicable, initially purchased by the Requesting
Holder (such limitation being the "Conversion
Limitation"). The Conversion Limitation shall be for a
period of thirty (30) calendar days commencing on the
Limitation Notice Date (the "Limitation Period"). The
Conversion Limitation shall be measured as of each
Notice Date. If a Requesting Holder gives a Conversion
Notice during a Limitation Period to which such
Requesting Holder (or any assignor or transferor of the
Requesting Holder) is then subject, the foregoing
calculation in the first sentence of this paragraph
shall govern the number of shares of Series 1 Stock or
Series 2 Stock convertible by such Requesting Holder
(and any assignor or transferor of the Requesting
Holder) even though the closing bid price may be
greater than $1.00 per share (or as adjusted) at the
Notice Date for the subsequent Conversion Notice.
E. Voting. The holders of the Class C Preferred
------
Stock shall have no voting power whatsoever, and no
holder of Class C Preferred Stock shall vote or
otherwise participate in any proceeding in which
actions shall be taken by the Corporation or the
stockholders thereof or be entitled to notification as
to any meeting of the Board of Directors or the
stockholders, except (I) as otherwise required by the
General Corporation Law of the State of Delaware, or
(II) as to any repeal, amendment or modification to
this Certificate of Designation, which repeal,
amendment or modification shall require the affirmative
vote of the holders of a majority of the then
outstanding shares of Class C Preferred Stock.
F. Redemption. Neither the Corporation nor the
----------
holders of Class C Preferred Stock shall have any right
to permit or compel, as the case may be, the redemption
by the Corporation of the outstanding shares of Class C
Preferred Stock.
G. Preemptive Rights. The holders of the Class C
-----------------
Preferred Stock are not entitled to any preemptive or
subscription rights in respect of any securities of the
Corporation.
FURTHER RESOLVED, that the statements contained in
the foregoing resolutions creating and designating the
Class C Preferred Stock and fixing the number, powers,
preferences and relative, optional, participating, and
other special rights and the qualifications,
limitations, restrictions, and other distinguishing
characteristics thereof shall, upon the effective date
of said series, be deemed to be included in and be a
part of the Certificate of Incorporation of the
Corporation pursuant to the provisions of Sections 104
and 151 of the General Corporation Law of the State of
Delaware."
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be executed by a duly authorized
officer on the 10 day of December, 1997.
----
COMPUMED, INC.
By: /s/ James Liniesch
------------------------------
James Linesch, President
Exhibit 3.2
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE
CLASS C 7% CONVERTIBLE PREFERRED STOCK
OF
COMPUMED,INC.
It is hereby certified that:
1. The name of the corporation (hereinafter the
"Corporation") is COMPUMED, INC.
2. The Certificate of the Powers, Designations,
Preferences and Relative, Participating, Optional
and Other Rights and the Qualifications, Limitations
and Restrictions of the Class C 7% Convertible
Preferred Stock of the Corporation, which was
filed by the Secretary of State of Delaware
on December 11, 1997 (the "Certificate of
Designation"), is hereby corrected.
3. The defect to be corrected in the Certificate
of Designation is that it omitted a portion of
the calculation of the conversion terms of
the Series 2 Stock.
4. The last subparagraph of paragraph (iv) of
Part D of the Certificate of Designation
shall read as follows:
"Series 2 Stock: The
--------------
Conversion Price for the
Series 2 Stock shall be
the lesser of: (a) the
------
product of (i) the
average closing bid
price, as reported on the
Nasdaq SmallCap Market
(or on such national
securities exchange or
automated trading system
on which the Common Stock
is then primarily
traded), of the
Corporation's Common
Stock for the ten (10)
consecutive trading days
immediately preceding the
Notice Date and (ii) .775
or (b) the average
--
closing bid price, as
reported on the Nasdaq
SmallCap Market (or on
such national securities
exchange or automated
trading system on which
the Common Stock is then
primarily traded), of the
Corporation's Common
Stock for the ten (10)
consecutive trading days
immediately preceding the
closing day for the
initial issuance of the
Series 2 Stock; provided
that with respect to any
Series 2 Stock issued
after December 31,
1997, the amount in sub-
clause (ii) above shall
be .80 (instead of
.775)".
Dated: December 23, 1997.
/s/ James Linesch
-------------------------
James Linesch, President
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October
31, 1997, is entered into by and between CompuMed, Inc., a
Delaware corporation, with headquarters located at Suite 1000,
1230 Rosencrans Avenue, Manhattan Beach, California 90266 (the
"Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon exemptions from
securities registration afforded under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act") and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms
and subject to the conditions of this Agreement, Class C 7%
Convertible Preferred Stock, $.10 par value per share, of the
Company which will be convertible into shares of Common Stock,
$.01 par value per share (the "Common Stock"), of the Company
upon the terms and subject to the conditions of such Preferred
Stock, and subject to acceptance of this Agreement by the
Company;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE; CERTAIN DEFINITIONS. (i) The
undersigned hereby agrees to initially purchase from the Company
Class C 7% Convertible Preferred Stock of the Company, in the
amount set forth on the signature page of this Agreement (the
"Initial Preferred Stock"), out of a total offering of
$3,500,000.00 in liquidation value of such Preferred Stock, and
having the terms and conditions set forth in the Certificate of
Designations to the Certificate of Incorporation of the Company
attached hereto as ANNEX I (the "Certificate of Designations").
The purchase price for the Initial Preferred Stock shall be as
set forth on the signature page hereto and shall be payable in
United States Dollars.
(ii) As used herein, the term "Preferred Stock" means,
unless the context otherwise requires, (a) the Initial Preferred
Stock and, subject to the provisions of Section 4(g) hereof, the
Additional Preferred Stock (as defined below), together with (b)
all shares, if any, of 7% Convertible Preferred Stock issued as
dividends thereon.
(iii) As used herein, the term "Securities" means
the Preferred Stock and the Common Stock issuable upon conversion
of the Preferred Stock.
B. FORM OF PAYMENT. The Buyer shall pay the purchase
price for the Initial Preferred Stock by delivering immediately
available good funds in United States Dollars to the escrow agent
(the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as ANNEX II (the "Joint Escrow Instructions").
Promptly following payment by the Buyer to the Escrow Agent of
the purchase price for the Initial Preferred Stock, the Company
shall deliver a Certificate representing the Initial Preferred
Stock duly executed on behalf of the Company, to the Escrow
Agent. By signing this Agreement, each of the Buyer and the
Company, subject to acceptance by the Escrow Agent, agrees to all
of the terms and conditions of, and becomes a party to, the Joint
Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth herein in
full.
C. METHOD OF PAYMENT. Payment into escrow of the
purchase price for the Preferred Stock shall be made by wire
transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger
& Prager, Esqs.
Account No. 637-1661229
Not later than 1:00 p.m., New York time, on the date which is two
(2) New York Stock Exchange trading days after the Company shall
have accepted this Agreement and returned a signed counterpart of
this Agreement to the Escrow Agent by facsimile, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for
the Initial Preferred Stock, in immediately available funds.
Time is of the essence with respect to such payment, and failure
by the Buyer to make such payment shall allow the Company to
cancel this Agreement.
D. ESCROW PROPERTY. The purchase price and the
certificate(s) representing the Initial Preferred Stock delivered
to the Escrow Agent as contemplated by Sections 1(b) and (c)
hereof are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and
agrees with, the Company as follows:
A. Without limiting the Buyer's right to sell the
Common Stock pursuant to the Registration Statement (as that term
is defined in the Registration Rights Agreement defined below),
the Buyer is purchasing the Preferred Stock and will be acquiring
the shares of Common Stock issuable upon conversion of the
Preferred Stock (the "Converted Shares") for its own account for
investment only and not with a view towards the resale, public
sale or distribution thereof and not with a view to or for sale
in connection with any distribution thereof.
B. The Buyer is (i) an "accredited investor" as that
term is defined in Rule 501 of the General Rules and Regulations
under the 1933 Act by reason of Rule 501(a)(3), (ii) experienced
in making investments of the kind described in this Agreement and
the related documents, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling
agents), to protect its own interests in connection with the
transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its
investment in the Securities.
C. All subsequent offers and sales of the Preferred
Stock and Common Stock representing the Converted Shares (such
Common Stock sometimes referred to as the "Shares") by the Buyer
shall be made pursuant to registration of the Shares under the
1933 Act or pursuant to an exemption from registration.
D. The Buyer understands that the Preferred Stock is
being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility
of the Buyer to acquire the Preferred Stock.
E. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer
and sale of the Preferred Stock and the offer of the Shares which
have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had
the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-K for the fiscal year ended September 30,
1996, (2) Quarterly Reports on Form 10-Q for the fiscal quarters
ended December 31, 1996, March 31, 1997 and June 30, 1997, (3)
and Proxy Statement dated February 20, 1997 (collectively, the
"Company's SEC Documents").
F. The Buyer understands that the Buyer's investment
in the Securities involves a high degree of risk.
G. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of
the Securities.
H. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is
a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
I. (i) The Buyer is aware of obligations of 5%
beneficial owners to file SEC reports and he will be responsible
for his own compliance; and (ii) he acknowledges that a 4% cash
commission is being paid in connection with the offering.
3. COMPANY REPRESENTATIONS, ETC.
Except as disclosed in ANNEX V or in the Company's SEC
Documents, the Company represents and warrants to the Buyer that:
A. CONCERNING THE PREFERRED STOCK. The Preferred
Stock has been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of
being such holder. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Preferred
Stock.
B. REPORTING COMPANY STATUS. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the requisite
corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified
as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted
or property owned by it makes such qualification necessary other
than those jurisdictions in which the failure to so qualify would
not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or
otherwise) of the Company. The Company has registered its Common
Stock pursuant to Section 12 of the 1934 Act, and the Common
Stock is listed and traded on The NASDAQ/Small Cap Market. The
Company has received notice with respect to the continued
eligibility of the Common Stock for such listing, after
correspondence the Company demonstrated compliance for the
continuation of such listing.
C. AUTHORIZED SHARES. The Company has sufficient
authorized and unissued shares of Common Stock as may be
reasonably necessary to effect the conversion of the Preferred
Stock based upon current market price. The Converted Shares have
been duly authorized and, when issued upon conversion of, or as
interest on, the Preferred Stock in accordance with its terms,
will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by
reason of being such holder.
D. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. This Agreement and the Registration Rights
Agreement, and the transactions contemplated hereby and thereby,
have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Registration Rights Agreement, when
executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general
principles of equity, and to bankruptcy, insolvency, moratorium,
and other similar laws affecting the enforcement of creditors'
rights generally.
E. NON-CONTRAVENTION. The execution and delivery of
this Agreement and the Registration Rights Agreement by the
Company, the issuance of the Securities, and the consummation by
the Company of the other transactions contemplated by this
Agreement and the Registration Rights Agreement do not and will
not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under, the
(i) certificate of incorporation or by-laws of the Company, each
as currently in effect, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or
assets are bound, (iii) any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any
court, United States federal or state regulatory body,
administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets,
or (iv) the Company's listing agreement for its Common Stock,
except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein.
F. APPROVALS. No authorization, approval or consent
of any court, governmental body, regulatory agency, self-
regulatory organization, or stock exchange or market or the
stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations,
approvals and consents that have been obtained.
G. SEC FILINGS. None of the Company's SEC Documents
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 made
therein, in light of the circumstances under which they were
made, not misleading. Except as set forth on ANNEX V hereto, the
Company has since September 1, 1996 timely filed all requisite
forms, reports and exhibits thereto with the Securities and
Exchange Commission.
H. ABSENCE OF CERTAIN CHANGES. Since January 1,
1997, there has been no material adverse change and no material
adverse development in the business, properties, operations,
financial condition, or results of operations of the Company,
except as disclosed in ANNEX V or in the Company's SEC Documents.
I. FULL DISCLOSURE. There is no fact known to the
Company (other than general economic conditions known to the
public generally, and other than facts disclosed in the documents
referred to in Section 2(e) hereof), that has not been disclosed
in writing to the Buyer that (i) would reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs, properties or assets of
the Company or (ii) would reasonably be expected to materially
and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement or any of the documents
and agreements contemplated hereby (collectively, including this
Agreement, the "Transaction Agreements").
J. ABSENCE OF LITIGATION. Except to the extent
disclosed in the Company's SEC documents, there is no action,
suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material
adverse effect on the properties, business, condition (financial
or otherwise), results of operations or prospects of the Company
and its subsidiaries taken as a whole or the transactions
contemplated by any of the Transaction Agreements or which would
adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations
under, any of the Transaction Agreements.
K. ABSENCE OF EVENTS OF DEFAULT. Except as set forth
in Section 3(e) hereof, no Event of Default (or its equivalent
term), as defined in the respective agreement to which the
Company is a party, and no event which, with the giving of notice
or the passage of time or both, would become an Event of Default
(or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of
operations.
L. NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed
of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound.
M. PRIOR ISSUES. Except as set forth in ANNEX V,
during the twelve (12) months preceding the date hereof, the
Company has not issued any securities. The presently outstanding
unconverted shares of each such issuance as at September 30, 1997
are set forth in ANNEX V.
N. DILUTION. The number of Shares issuable upon
conversion of the Preferred Stock may increase substantially in
certain circumstances, including, but not necessarily limited to,
the circumstance wherein the trading price of the Common Stock
declines prior to the conversion. The Company's executive
officers and directors have analyzed the nature of the
securities being sold hereby and recognize that they have a
potential 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
specifically acknowledges that its obligation to issue the Shares
upon conversion of the Preferred Stock is binding upon the
Company and enforceable regardless of the dilution such issuance
may have on the ownership interests of other shareholders of the
Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges
that (1) the Preferred Stock has not been and is not being
registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement, the Shares have
not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder
or (B) the Buyer shall have delivered to the Company an opinion
of counsel, reasonably satisfactory in form, scope and substance
to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made
only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any resale of the Securities under
circumstances in which the seller, or the person through whom the
sale is made, may be deemed to be an underwriter, as that term is
used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (3) neither the Company nor any other person
is under any obligation to register the Securities (other than
pursuant to the Registration Rights Agreement) under the 1933 Act
or to comply with the terms and conditions of any exemption
thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and
agrees that the Preferred Stock and the Warrants have not been
registered under the 1933 Act, and, until such time as the Shares
have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with such
Registration Statement, certificates and other instruments
representing any of the Securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any of the Securities):
THE SECURITIES REPRESENTED HEREBY (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree to enter into the Registration Rights Agreement, in
substantially the form attached hereto as ANNEX IV (the
"Registration Rights Agreement"), on or before the Closing Date
(as defined below).
D. FILINGS. The Company undertakes and agrees to
make all necessary filings in connection with the sale of the
Preferred Stock to the Buyer under any United States federal,
state and local laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
E. REPORTING STATUS. So long as the Buyer
beneficially owns any of the Preferred Stock, the Company shall
file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under
the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination. The Company will take
all reasonable action under its control to continue the listing
and trading of its Common Stock on The NASDAQ/Small Cap Market
and will comply in all respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers, Inc. ("NASD") or the
NASDAQ/Small Cap Market.
F. USE OF PROCEEDS. The Company will use the
proceeds from the sale of the Preferred Stock (excluding amounts
paid by the Company for legal fees and distributor fees in
connection with the sale of the Preferred Stock) for working
capital purposes , and shall not, directly or indirectly, use
such proceeds for any loan or other payment to any officer,
director or principal shareholder of the Company or any of their
respective affiliates.
G. (i) FUTURE PURCHASES. The Buyer unconditionally
and irrevocably agrees to purchase up to an additional amount
equal to the Purchase Price for the Initial Preferred Stock, in
liquidation value of Preferred Stock (the "Additional Preferred
Stock") in one or more tranches (the "Additional Tranches"),
subject to the satisfaction of the conditions provided in this
Agreement relating to the Buyer's purchase of the Additional
Preferred Stock. The closing for $875,000 of Additional Tranche
shall occur no later than December 31, 1997, and the balance by
February 15, 1998 if the average closing bid price of the
Company's Common Stock for the ten (10) consecutive trading days
ending the fifth day prior to the requested closing date is not
less than $1.50 per share; otherwise the closing date would be
not later than thirty (30) trading days after the effective date
of the Company's registration statement, upon the same terms and
conditions as those applicable to the Initial Preferred Stock
issued pursuant to this Agreement, except as set forth below.
The Buyer's obligation to purchase the Additional Preferred Stock
on each Additional Closing Date (as defined below) shall be
contingent upon the satisfaction of the following conditions: On
such Additional Closing Date (i) the representations and
warranties of the Company contained in Section 3 hereof shall be
true and correct in all material respects (and the Company's
issuance of the Additional Preferred Stock shall constitute the
Company's making each such representation and warranty as of such
date), and (ii) the average closing bid price (as defined in the
Certificate of Designations) on the Additional Closing Date shall
exceed $1.00 per share, (iii) the average dollar volume for the
twenty (20) trading days preceding such Additional Closing Date
shall have equaled or exceeded $_____________, and (iv) there
shall have been no material adverse changes (financial or
otherwise) in the business or conditions of the Company from the
Closing Date through and including the Additional Closing Date
(and the Company's issuance of the Additional Preferred Stock
shall constitute the Company's making each such representation
and warranty as of such date). Each share of Additional
Preferred Stock shall (x) have terms similar to those of the
Initial Preferred Stock, except that the Conversion Price formula
will use eighty (80%) percent of the average closing bid price
for the ten (10) trading days prior to the conversion for any
amount that closes after December 31, 1997, and 77.5% of the
average closing bid price for all other amounts raised in the
second tranche, and (y) be convertible until December 31, 1999,
and shall be deemed automatically converted, to the extent not
previously converted, on December 31, 1999.
(ii) If the Buyer does not honor its commitment to
purchase the Additional Preferred Stock on the Additional Closing
Date, and no other buyer of the securities being issued
simultaneous herewith elects to purchase the Additional Preferred
Stock, the Buyer shall waive his rights to exercise one-half
(1/2) of the Warrants issued pursuant to paragraph 4.i. below.
Accordingly, one-half (1/2) of the initial warrants would be
issued into escrow subject to the Buyer's or such other buyer's
closing of the purchase of the Additional Tranche. Such escrowed
Warrants will be (a) returned to the Company in the event of such
waiver contemplated by the first sentence of this subparagraph
(ii), and (b) released to the Buyer upon the closing or the sale
of the Additional Preferred Stock to the Buyer or such other
buyer, but not later than thirty (30) trading days after the
Effective Date.
(iii) The Company agrees that, if the
Additional Closing Date occurs as contemplated by Paragraph (i)
above, then, upon the subsequent conversion of the Additional
Preferred Stock, the Company will issue to the Buyer converting
such Additional Preferred Stock warrants (the "Additional
Warrants") to purchase the same number of shares of Common Stock
as are being issued upon such conversion at the conversion price
applicable to such conversion. Such Additional Warrants shall be
exercisable for a period of five (5) years from the date of issue
and shall, (i) except to the extent inconsistent with the
foregoing provisions of this Paragraph (iii), have the same terms
as the Warrants, and (ii) be deemed to be included in the term
"Warrants" herein.
H. CERTAIN AGREEMENTS. (i) The Company covenants
and agrees that it will not, without the prior written consent of
80% in interest of all the Buyers, enter into any subsequent or
further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the expiration of
one hundred (100) days after the effective date of the
Registration Statement (the "Effective Date"), unless the full
second tranche is funded subsequent to February 15, 1998, in
which event the above date shall be reduced to sixty (60) days.
(ii) The provisions of subparagraph (h)(i) will not
apply to (w) the issuance of securities (other than for cash) in
connection with a merger, consolidation, sale of assets,
disposition or acquisition of a business, product or license by
the Company, strategic alliance, bank loan or other credit
facility agreement, (x) the exchange of the capital stock for
assets, stock or other joint venture interests, (y) as
compensation to employees and consultants, or (z) the exercise of
outstanding warrants or options or settlement of class actions.
(iii) Any action contemplated under subparagraph
(h)(ii) is subject to the condition that registration rights, if
any, in connection with such action shall not require the filing
of a Registration Statement in respect of such stock prior to
thirty (30) days after the Effective Date.
I. WARRANTS. Each Buyer, simultaneous with the
conversion of the Preferred Stock and the Additional Preferred
Stock, shall receive transferable divisible Warrants equal with
respect to the Preferred Stock to the number of shares issued
upon such conversion, and exercisable at the Conversion Price of
such conversion, and with respect to the Additional Preferred
Stock equal to the number of shares issued upon such conversion,
and exercisable at the Conversion Price at the time of
conversion. The shares underlying such Warrants shall be
included in the Registration Statement under the Registration
Rights Agreement, and shall be exercisable commencing ninety (90)
days after issuance and for a period of thirty-six (36) months
thereafter.
J. AVAILABLE SHARES. The Company shall have at all
times authorized and reserved for issuance, free from preemptive
rights, shares of Common Stock sufficient to yield the number of
shares of Common Stock issuable at conversion and upon exercise
of the Warrants as may be required to satisfy the conversion
rights of the Buyer pursuant to the terms and conditions of the
Preferred Stock.
K. HEDGING TRANSACTIONS. The Company understands
that the Buyer may be a so-called "hedge" fund, and the Company
hereby expressly agrees that except during the ten (10) business
days prior to delivery of a Conversion Notice, or the closing of
the Additional Shares, the Buyer shall not in any way be
prohibited or restricted from any purchases or sales of any
securities or other instruments of, or related to, the Company or
any of its securities, including, but not necessarily limited to,
puts, calls, futures contracts, short sales and hedging and
arbitrage transactions. The Buyer acknowledges that such
purchases, sales and other transactions may be subject to various
federal and state securities laws and agrees to comply with all
such applicable securities laws.
L. LIMITATION ON ISSUANCE OF SHARES. The Company may
be limited in the number of shares of Common Stock it may issued
in respect of the Additional Preferred Stock by the applicable
rules and regulations of the principal securities market on which
the Common Stock is listed or traded ("Cap Regulations").
Without limiting the other provisions thereof, (i) the placement
proceeds from that part of Additional Preferred Stock closed
after February 15, 1998 would be held in escrow pending a
stockholder vote at the Company's 1998 stockholders meeting on
approval of the placement at the agreed terms, (ii) the Company
will at its next annual meeting, take all steps reasonably
necessary under the Cap Regulations to be in a position to issue
shares of Common Stock on conversion of the Additional Preferred
Stock without violating the Cap Regulations, and (iii) if,
despite taking such steps, or prior thereto, the Company still
cannot issue such shares of Common Stock without violating the
Cap Regulations, the holder of Additional Preferred Stock which
cannot be converted as a result of the Cap Regulations shall have
the option, exercisable in such holder's sole and absolute
discretion, to elect, within thirty (30) days after the
shareholder's meeting, to require the Company to issue shares of
Common Stock in accordance with such holder's notice of
conversion at a conversion purchase price equal to the average of
the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to certain equitable
adjustments for certain events occurring during such period)
during the sixty (60) trading days immediately preceding the date
of notice of conversion, assuming same is permitted without
violation of Cap Regulations. Upon shareholder approval or
NASDAQ consent, the escrow shall be released to the Company.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of
the aggregate purchase price for the Initial Preferred Stock in
accordance with Section 1(c) hereof, the Company will irrevocably
instruct its transfer agent to issue Common Stock from time to
time upon conversion of the Preferred Stock in such amounts as
specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act,
registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer in connection with
each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in
this Section 5 and stop transfer instructions to give effect to
Section 4(a) hereof prior to registration and sale of the Shares
under the 1933 Act will be given by the Company to the transfer
agent and that the Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement,
and applicable law. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement to comply with all
applicable securities laws with respect to the sale of any of the
Securities. If the Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration
of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as
provided in clause (2) of Section 4(a) of this Agreement) permit
the transfer of the Securities and, in the case of the Converted
Shares, promptly instruct the Company's transfer agent to issue
one or more certificates for Common Stock without legend in such
name and in such denominations as specified by the Buyer.
b. Subject to the completeness and accuracy of the
Buyer's representations and warranties herein, upon the
conversion of any Preferred Stock by a person who is a non-U.S.
Person, and following the expiration of any applicable Restricted
Period (as those terms are defined in Regulation S), the Company,
shall, at its expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's
transfer agent shall issue stock certificates without restrictive
legend or stop orders in the name of Buyer (or its nominee (being
a non-U.S. Person) or such non-U.S. Persons as may be designated
by Buyer) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon
such conversion, as applicable, with opinion of counsel
satisfactory to Company of the exemption. Nothing in this
Section 5, however, shall affect in any way Buyer's or such
nominee's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities.
c. The Company will permit the Buyer to exercise its
right to convert the Preferred Stock by telecopying an executed
and completed Conversion Certificte to the Company and
delivering within three (3) business days thereafter, the
original Conversion Certificate and the certificates representing
the Preferred Stock being converted to the Company by express
courier, with a copy to the transfer agent. Each date on which a
Conversion Certificate is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company will transmit the certificates
representing the Converted Shares (together with the certificates
representing the Preferred Stock not being so converted) to the
Buyer via express courier, by electronic transfer or otherwise,
within five (5) business days after receipt by the Company of the
original Conversion Certificate and the certificate representing
the Preferred Stock being converted (the "Delivery Date").
d. The Company understands that a delay in the
issuance of the Shares of Common Stock beyond the Delivery Date
could result in economic loss to the Buyer. As compensation to
the Buyer for such loss, the Company agrees to pay late payments
to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days
Late" is defined as the number of business days beyond seven (7)
business days from Delivery Date:
Late Payment For Each $10,000
of Liquidation Value of
Preferred
No. Business Days Late Stock Being Converted
---------------------- ------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for
each Business Day
Late beyond 10 days
The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall
limit the Buyer's right to pursue actual damages for the
Company's failure to issue and deliver the Common Stock to the
Buyer. Furthermore, in addition to any other remedies which may
be available to the Buyer, in the event that the Company fails
for any reason to effect delivery of such shares of Common Stock
within five (5) business days after the Delivery Date, the Buyer
will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of
Conversion.
e. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided
the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of the Buyer, so long as the certificates therefor
do not bear a legend and the Buyer thereof is not obligated to
return such certificate for the placement of a legend thereon,
the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon
conversion to the Buyer by crediting the account of Buyer's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission
system.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company
to the Escrow Agent pursuant to Section 1(b) hereof, on a
delivery against payment basis, on the Closing Date and on the
Additional Closing Date, respectively.
7. CLOSING DATE.
The date and time of the issuance and sale of the
Initial Preferred Stock (the "Closing Date") shall occur no
later than 12:00 Noon, New York time on the first NYSE trading
day after the fulfillment or waiver of all closing conditions
pursuant to Sections 8 and 9 hereof, or such other time as is
mutually agreed upon by the Company and the Buyer. The date and
time of the issuance and sale of any Additional Preferred Stock
(the "Additional Closing Date") shall occur on the date specified
by either party upon at least fifteen (15) business days advance
notice to the other party; provided, however, that it shall be a
-------- -------
condition of the Additional Closing Date that each of the
conditions contemplated by Sections 8 and 9 hereof shall have
been satisfied or waived on or before such date. Each closing of
the purchase and issuance of Preferred Stock shall occur on the
Closing Date or Additional Closing Date, as the case may be, at
the offices of the Escrow Agent.
Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Property
only upon satisfaction of the conditions set forth in Sections 8
and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to
sell the Initial Preferred Stock to the Buyer pursuant to this
Agreement on the Closing Date and on the Additional Closing Date
is conditioned upon:
A. The receipt and acceptance by the Company of this
Agreement (such acceptance to be evidenced by the Company's
execution and delivery of this Agreement) for the sale of at
least One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) in liquidation value of Preferred Stock (or such
lesser amount as the Company, in its sole discretion, shall
determine);
B. Delivery by the Buyer to the Escrow Agent of good
funds as payment in full of an amount equal to the purchase price
for the relevant Preferred Stock in accordance with Section 1(c)
hereof;
C. The accuracy in all material respects on the
Closing Date or the Additional Closing Date, as the case may be,
of the representations and warranties of the Buyer contained in
this Agreement, each as if made on such Closing Date, and the
performance by the Buyer on or before such Closing Date or
Additional Closing Date of all covenants and agreements of the
Buyer required to be performed on or before such Closing Date;
and
D. There shall not be in effect any law, rule or
regulation prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which
shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Initial Preferred Stock on the Closing Date and the
Additional Preferred Stock on the Additional Closing Date is
conditioned upon:
A. The receipt and acceptance by the Buyer of this
Agreement (to be evidenced by the Buyer's execution and delivery
of this Agreement);
B. Delivery by the Company to the Escrow Agent of
certificate(s) representing the relevant Preferred Stock in
accordance with this Agreement;
C. The accuracy in all material respects on the
Closing Date or the Additional Closing Date, as the case may be,
of the representations and warranties of the Company contained in
this Agreement, each as if made on such Closing Date or
Additional Closing Date, and the performance by the Company on or
before such Closing Date or Additional Closing Date of all
covenants and agreements of the Company required to be performed
on or before such date; and
D. On the Closing Date or Additional Closing Date, as
the case may be, the Buyer shall have received (i) an opinion of
counsel for the Company, dated the Closing Date or Additional
Date, in form, scope and substance reasonably satisfactory to the
Buyer, to the effect set forth in ANNEX III attached hereto, and
(ii) the Registration Rights Agreement duly executed and
delivered by the Company.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York for
contracts to be wholly performed in such state and without giving
effect to the principles thereof regarding the conflict of laws.
Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City
of New York in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such
jurisdictions.
b. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto.
c. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original.
d. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the
interpretation of, this Agreement.
e. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with
enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof.
11. NOTICES. Any notice required or permitted
hereunder shall be given in writing (unless otherwise specified
herein) and shall be deemed effectively given on the earliest of
(i) the date delivered, if delivered by personal
delivery as against written receipt therefor, or by
confirmed facsimile transmission,
(ii) the seventh business day after deposit, postage
prepaid, in the United States Postal Service by
registered or certified mail, or
(iii) the third business day after mailing by
international express courier, with delivery costs and
fees prepaid,
in each case, addressed to each of the other parties thereunto
entitled at the following addresses (or at such other addresses
as such party may designate by ten (10) days' advance written
notice similarly given to each of the other parties hereto):
COMPANY: CompuMed, Inc.
Suite 1000
1230 Rosecrans Avenue
Manhattan Beach, CA 90266
ATTN: James Linesch, President
Telecopier No.: (310) 643-2363
Telephone No.: (310) 643-5106 x115
with a copy to:
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Attention: Bruce A. Rich, Esq.
Telecopier No.: (212) 603-2001
BUYER: At the address set forth on the signature page of
this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Telecopier No. (212) 213-2077
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the
Preferred Stock and the Purchase Price, and shall inure to the
benefit of the Buyer and its successors and assigns for a period
of one (1) year or until the Buyer sells his Securities,
whichever is the earlier.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed by the Buyer or one of its officers thereunto duly
authorized as of the date set forth below.
NUMBER OF SHARES OF
INITIAL PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF
SUCH INITIAL PREFERRED STOCK: $
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and correct and that it has caused
this Securities Purchase Agreement to be duly executed on its
behalf this ________ day of ___________________, 1997.
________________________________ ______________________________
Address Printed Name of Subscriber
________________________________
By: _______________________________
Telecopier No. _________________ (Signature of Authorized
Person)
_________________________________
_____________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts
this Agreement and represents that the foregoing statements are
true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf.
COMPUMED, INC.
By: _________________________________________
Title: ____________________________________
Date: _________________________________________
EXHIBIT 10.2
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER,
A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES
AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM
SUCH REGISTRATION.
COMPUMED, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable
--------
consideration, the receipt of which is hereby acknowledged by
CompuMed, Inc., a Delaware corporation (the "Company"),
________________________ or registered assigns (the "Holder") is
hereby granted the right to purchase at any time until 5:00 P.M.,
New York City time, on ___________, ____ (the "Expiration Date"),
______________________ (_______) fully paid and nonassessable
shares of the Company's Common Stock, par value $.01per share
(the "Common Stock") at an initial exercise price of $____ per
share (the "Exercise Price"), subject to further adjustment as
set forth in Section 6 hereof.
2. Exercise of Warrants. This Warrant is exercisable
--------------------
in whole or in part at the Exercise Price per share of Common
Stock payable hereunder, payable in cash or by certified or
official bank check. Upon surrender of this Warrant Certificate
with the annexed Notice of Exercise Form duly executed, together
with payment of the Exercise Price for the shares of Common Stock
purchased, the Holder shall be entitled to receive a certificate
or certificates for the shares of Common Stock so purchased.
3. Reservation of Shares. The Company hereby agrees
---------------------
that at all times during the term of this Warrant there shall be
reserved for issuance upon exercise of this Warrant such number
of shares of its Common Stock as shall be required for issuance
upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by
-----------------------------
the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) receipt of reasonably satisfactory
indemnification, and (in the case of mutilation) upon surrender
and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become
void.
5. Rights of the Holder. The Holder shall not, by
--------------------
virtue hereof, be entitled to any rights of a stockholder in the
Company, either at law or equity, and the rights of the Holder
are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth
herein.
6. Protection Against Dilution.
---------------------------
6.1 Adjustment Mechanism. If an adjustment of
--------------------
the Exercise Price is required pursuant to this Section 6, the
Holder shall be entitled to purchase such number of additional
shares of Common Stock as will cause (i) the total number of
shares of Common Stock Holder is entitled to purchase pursuant to
this Warrant, multiplied by (ii) the adjusted purchase price per
share, to equal (iii) the dollar amount of the total number of
shares of Common Stock Holder is entitled to purchase before
adjustment multiplied by the total purchase price before
adjustment.
6.2 Capital Adjustments. In case of any stock
-------------------
split or reverse stock split, stock dividend, reclassification of
the Common Stock, recapitalization, merger or consolidation, or
like capital adjustment affecting the Common Stock of the
Company, the provisions of this Section 6 shall be applied as if
such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been
fairly allocated to the stock resulting from such capital
adjustment; and in other respects the provisions of this Section
shall be applied in a fair, equitable and reasonable manner so as
to give effect, as nearly as may be, to the purposes hereof. A
rights offering to stockholders shall be deemed a stock dividend
to the extent of the bargain purchase element of the rights.
7. Transfer to Comply with the Securities Act;
-------------------------------------------
Registration Rights.
--------------------
(a) This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been
issued to the Holder for investment and not with a view to the
distribution of either the Warrant or the Warrant Shares.
Neither this Warrant nor any of the Warrant Shares or any other
security issued or issuable upon exercise of this Warrant may be
sold, transferred, pledged or hypothecated in the absence of an
effective registration statement under the Act relating to such
security or an opinion of counsel satisfactory to the Company
that registration is not required under the Act. Each
certificate for the Warrant, the Warrant Shares and any other
security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance
satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration
statement, which shall include the Warrant Shares, on Form S-3 or
another available form (the "Registration Statement"), pursuant
to the Act, and to have the registration of the Warrant Shares
completed and effective by the 90th calendar day after the
Original Issuance Date (the "Effective Date"), pursuant to the
terms of the Registration Rights Agreement between the Company
and Holder dated as of October 31, 1997.
8. Notices. Any notice or other communication
-------
required or permitted hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail,
postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile
transmission, or, if mailed, two days after the date of deposit
in the United States mails, as follows:
(i) if the to Company, to:
CompuMed, Inc.
1230 Rosecrans Avenue
Manhattan Beach, California 90266
Attn: President
(ii) if to the Holder, to:
Any party may be notice given in accordance with this Section to
the other parties designate another address or person for receipt
of notices hereunder.
9. General Provisions.
-------------------
(i) No fractional shares or script representing
fractional shares shall be issued upon the exercise of this
Warrant.
(ii) The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company.
(iii) No adjustment in the Exercise Price
shall be required unless such adjustment would require an
increase or decrease of at least five cents (5 cents) in such
price.
10. Supplements and Amendments; Whole Agreement. This
-------------------------------------------
Warrant may be amended or supplemented only by an instrument in
writing signed by the parties hereto. This Warrant of even date
herewith contain the full understanding of the parties hereto
with respect to the subject matter hereof and thereof and there
are no representations, warranties, agreements or understandings
other than expressly contained herein and therein.
11. Governing Law. This Warrant shall be deemed to be
-------------
a contract made under the laws of the State of New York and for
all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made
and performed entirely within such State.
12. Counterparts. This Warrant may be executed in any
------------
number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
13. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Warrant are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed
this Warrant as of the __th day of _____________ 1997.
COMPUMED, INC.
By:_______________________________________
Its __________________________________
Attest:
________________________
<PAGE>
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the
right, represented by the Warrant Certificate dated as of
____________, 1997, to purchase __________ shares of the Common
Stock, par value $.01 per share, of CompuMed, Inc., and tenders
herewith [payment of $_________] [_______ warrants to purchase
__________ shares of Common Stock] in accordance with Section 2
of said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:______________________
By:__________________________________
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
(TO BE SIGNED ONLY UPON ASSIGNMENT OF WARRANT)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
_________________________________________________________________
(Name and Address of Assignee must be Printed or Typewritten)
the right to purchase Common Stock represented by this Warrant to
the extent of ______ Shares as to which such right is
exercisable, hereby irrevocably constituting and appointing
________________, Attorney to transfer said Warrant on the books
of the Company, with full power of substitution in the premises.
Dated: ___________________, 199__
_________________________________________
Signature of Registered Holder
Signature Guaranteed:
_______________________________________
________________________
* The Warrant and the Warrant Agreement contain restrictions
on sale, assignment or transfer of this Warrant.
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October
31, 1997 (this "Agreement"), is made by and between CompuMed,
Inc., a Delaware corporation (the "Company"), and the entities
named on the signature page hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions
of the Securities Purchase Agreements, dated as of October 31,
1997, between the Initial Investors and the Company (the
"Securities Purchase Agreement"), (i) the Company has agreed to
issue and sell to the Initial Investors in one or more tranches
175 shares of Class C 7% Convertible Preferred Stock, $.10 par
value, of the Company (the "Preferred Stock"), at an aggregate
purchase price of $1,750,000, which Preferred Stock (as that term
is defined in the Securities Purchase Agreement) is convertible
into shares of Common Stock , $.01 par value, of the Company (the
"Common Stock") and (ii) the Initial Investor has made a
commitment to purchase an additional ___ shares of Preferred
Stock on the terms set forth in the Securities Purchase Agreement
(said aggregate ___ shares of Preferred Stock referred to herein
as the "Preferred Shares"), and the Company has agreed to issue
to the Investor Warrants to purchase shares of Common Stock
("Warrant Shares"); and
WHEREAS, the shares of Preferred Stock, and at the
election of the Company, dividends thereon are convertible into
shares of Common Stock (the "Conversion Shares") upon the terms
and subject to the conditions of the Certificate of Designations
(as defined in the Securities Purchase Agreement); and
WHEREAS, to induce the Initial Investor to execute and
deliver the Securities Purchase Agreement, the Company has agreed
to provide certain registration rights under the Securities Act
of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "Securities
Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Initial Investor hereby agree
as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms
shall have the following meanings:
(i) "Investor" means the Initial Investor and any
permitted transferee or assignee who agrees to become bound by
the provisions of this Agreement in accordance with Section 9
hereof.
(ii) "Potential Material Event" means any of the
following: (a) the possession by the Company of material
information not ripe for disclosure in a registration statement,
which shall be evidenced by determination in good faith by the
Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to
the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good
faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at
such time, which determination shall be accompanied by a good
faith determination by the Board of Directors of the Company that
the registration statement would be materially misleading absent
the inclusion of such information.
(iii) "Register," "Registered," and "Registration"
refer to a registration effected by preparing and filing a
Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act
or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iv) "Registrable Securities" means the Conversion
Shares and the Warrant Shares.
(v) "Registration Statement" means a registration
statement of the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in
the Securities Purchase Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company shall prepare
and file with the SEC, on the later of December 19, 1997 or
thirty (30) days from the Closing Date, either a Registration
Statement on Form S-3 or an amendment to any pending Company
Registration Statement on Form S-3 registering for resale by the
Investor all of the Registrable Securities (or such lesser
number as may be required by the SEC, but in no event less than
the number of shares into which the Preferred Shares would be
convertible at the time of filing of the Form S-3), and such
Registration Statement or amended Registration Statement shall
state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon
conversion of the Preferred Shares resulting from adjustment in
the Conversion Price, or to prevent dilution resulting from stock
splits, or stock dividends. The Company shall use its best
efforts to cause the Registration Statement to be declared
effective no later than ninety (90) days after the Closing Date.
If at any time the number of shares of Common Stock into which
the Preferred Shares may be converted exceeds the aggregate
number of shares of Common Stock then registered, the Company
shall, within ten (10) business days after receipt of a written
notice from any Investor, either (i) amend the Registration
Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared
effective by the SEC at that time, to register all shares of
Common Stock into which the Preferred Stock may be converted, or
(ii) if such Registration Statement has been declared effective
by the SEC at that time, file with the SEC an additional
Registration Statement on Form S-3 to register the shares of
Common Stock into which the Preferred Shares may be converted
that exceed the aggregate number of shares of Common Stock
already registered.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the SEC
on the later of December 19, 1997 or thirty (30) days from the
Closing Date (the "Required Filing Date"), the Company will make
payment to the Initial Investor in such amounts and at such times
as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the
Registrable Securities is not effective within the earlier of (a)
five (5) days after notice by the SEC that it may be declared
effective or (b) ninety (90) days following the Closing Date
(the "Required Effective Date"), or after a Suspension Period
(as defined below), then the Company will make payments to the
Initial Investor in such amounts and at such times as shall be
determined pursuant to this Section 2(b), unless the delay in the
Effective Date is caused by extensive requests for additional
information or questions regarding the structure of the offering.
(iii) The amount (the "Periodic Amount") to be
paid by the Company to the Initial Investor shall be determined
as of each Computation Date (as defined below) and such amount
shall be equal to (A) one-half of one percent (0.5%) of the
purchase price paid by the Initial Investor (the "Purchase
Price") for all Preferred Shares then purchased and outstanding
pursuant to the Securities Purchase Agreement for each seven
calendar day period (or part thereof) from the date following the
Required Filing Date or the Required Effective Date, as the case
may be, to the date on which the Registration Statement is filed
(with respect to payments due as contemplated by Section 2(b)(i)
hereof) or declared effective (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), or after a Suspension
Period (as contemplated by Section 3(g) hereof), as the case may
be. By way of illustration and not in limitation of the
foregoing, if the Registration Statement is timely filed but is
not declared effective until one hundred fifteen (115) days after
the Closing Date, the Periodic Amount will aggregate two percent
(2%) of the purchase price of the Preferred Shares (0.5% for each
of days 91-97, 98-104, 105-111 and 112-115).
(iv) Each Periodic Amount will be payable by the
Company in cash or other immediately available funds to the
Investor upon demand of the Investor.
(v) The parties acknowledge that the damages
which may be incurred by the Investor if the Registration
Statement is not filed by the Required Filing Date or if the
Registration Statement has not been declared effective by the
Required Registration Date may be difficult to ascertain. The
parties agree that the Periodic Amount represent a reasonable
estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be
payable to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a failure
to act or to act timely by an Investor or its counsel, or any
other person whose securities are included therein, or in the
event all of the Registrable Securities may be sold pursuant to
Rule 144 or another available exemption under the Act.
3. OBLIGATIONS OF THE COMPANY. In connection with
the registration of the Registrable Securities, the Company shall
do each of the following:
(a) Prepare promptly, and file with the SEC by the
later of December 19, 1997 or thirty (30) days after the Closing
Date, a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2(a), above,
and thereafter use its reasonable best efforts to cause each
Registration Statement relating to Registrable Securities to
become effective the earlier of (a) five (5) days after notice
by the SEC that it may be declared effective or (b) ninety (90)
days following the initial Closing Date, and keep the
Registration Statement effective at all times until the earliest
(the "Registration Period") of (i) the date that is two (2) years
after the Additional Closing Date, (ii) the date when the
Investors may sell all Registrable Securities under Rule 144 or
(iii) the date the Investors no longer own any of the Registrable
Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with
the Registration Statement as may be necessary to keep the
Registration effective at all times during the Registration
Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel
designated by the Initial Investor to review the Registration
Statement and all amendments and supplements thereto a reasonable
period of time (but not less than three (3) business days) prior
to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects;
(d) Furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its
legal counsel identified to the Company, (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each
amendment or supplement thereto, and (ii) such number of copies
of a 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) As promptly as practicable after becoming aware of
such event, notify each Investor of the happening of any event of
which the Company has knowledge, as a result of which the
prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use
its best efforts promptly to prepare a supplement or amendment to
the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor
as such Investor may reasonably request;
(f) As promptly as practicable after becoming aware of
such event, notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the SEC of a Notice of
Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(g) Notwithstanding the foregoing, if at any time or
from time to time after the date of effectiveness of the
Registration Statement, the Company notifies the Investors in
writing of the existence of a Potential Material Event, the
Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice
with respect to a Potential Material Event until such Investor
receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however,
--------- --------
that the Company may not so suspend the right to such holders of
Registrable Securities for more than two twenty (20) day periods
in the aggregate during any 12-month period ("Suspension Period")
with at least a ten (10) business day interval between such
periods, during the periods the Registration Statement is
required to be in effect unless such greater time may be required
by law;
(h) Use its reasonable efforts to secure designation
of all the Registrable Securities covered by the Registration
Statement on the "Small Capitalization Market" of the National
Association of Securities Dealers Automated Quotations System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on The
NASDAQ SmallCap Market; or if, despite the Company's reasonable
efforts to satisfy the preceding clause, the Company is
unsuccessful in doing so, to secure OTC Bulletin Board
authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with
respect to such Registrable Securities;
(i) Provide a transfer agent, which may be a single
entity, for the Registrable Securities not later than the
effective date of the Registration Statement;
(j) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may
reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such
Registration Statement) an appropriate instruction and opinion of
such counsel; and
(k) Take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of the
Registrable Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with
the registration of the Registrable Securities, the Investors
shall have the following obligations:
(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 of a
particular Investor that such 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 five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to
have any of such Investor's Registrable Securities included in
the Registration Statement. If at least two (2) business days
prior to the filing date the Company has not received the
Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive
Investor;
(b) Each Investor by such Investor's 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 such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 3(e) or 3(f), above, such Investor will
immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e)
or 3(f) and, if so directed by the Company, such 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 such Investor's possession, of the prospectus covering
such Registrable Securities current at the time of receipt of
such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses
(other than underwriting discounts and commissions of the
Investor) incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without
limitation, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of
counsel for the Company.
6. INDEMNIFICATION. In the event any Registrable
Securities are included in a Registration Statement under this
Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Investor who holds such
Registrable Securities, the directors, if any, of such Investor,
the officers, if any, of such Investor, each person, if any, who
controls any Investor within the meaning of the Securities Act or
the Exchange Act (each, an "Indemnified Person" or "Indemnified
Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to
which any of them may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under
which the statements therein were made, not misleading or (iii)
any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or
any state securities law (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to
clause (b) of this Section 6, the Company shall reimburse the
Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section
6(a) shall not (I) apply to a Claim arising out of or based upon
a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf
of such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was
timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a
failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (III) apply to
amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Each Investor will
indemnify the Company and its officers, directors and agents
against any claims arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of
the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by
the Company to this Section 6. Such indemnity shall remain in
full force and effect regardless of any investigation made by or
on behalf of the Indemnified Person and shall survive the
transfer of the Registrable Securities by the Investors pursuant
to Section 9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party
under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified
Party, as the case may be; provided, however, that an Indemnified
-------- -------
Person or Indemnified Party shall have the right to retain its
own counsel, with the reasonable fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other person represented by such
counsel in such proceeding. In such event, the indemnifying party
shall pay for only one separate legal counsel for the Indemnified
Party or Indemnified Person; such legal counsel to be selected by
the Indemnified Person or Indemnified Party, (I) subject to the
consent of the indemnifying party (which consent shall not be
unreasonably withheld or delayed), and (II) if the Indemnified
Parties or Indemnified Persons are Investors, by the Investors
holding a majority in interests of the Registrable Securities
included in the Registration Statement to which the Claim
relates. Except as provided in the immediately preceding
sentences, in case any such action is brought against any
Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, after notice from
the indemnifying party to such Indemnified Person or Indemnified
Party of the indemnifying person s election so to assume (alone
or with other indemnifying persons) the defense thereof, the
indemnifying party will not be liable to such Indemnified Person
or Indemnified Party under this Section 6 for any legal or other
reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation,
unless the indemnifying party shall not defend such action to its
final conclusion. The Indemnified Person or Indemnified Party
shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but, except as
provided above, the fees and reasonable out-of-pocket expenses
subsequently incurred by such Indemnified Person or Indemnified
Party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party
shall not pursue the action of its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in
the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the
Indemnified Person or Indemnified Party. The failure to deliver
written notice to the indemnifying party within a reasonable time
of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that
the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the
indemnifying party agrees to make the maximum contribution with
respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided,
--------
however, that (a) no contribution shall be made under
-------
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6;
(b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor
owns Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the
Company and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights
to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assigned by the Investors
to any transferee of the Registrable Securities (or all or any
portion of any Warrants of the Company which is convertible into
such securities) only if: (a) the Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy
of such agreement is furnished to the Company within a reasonable
time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state
securities laws, and (d) at or before the time the Company
received the written notice contemplated by clause (b) of this
sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein.
In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such
delay to any investor, or the payments set forth in Section 2(c)
hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision
of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written
consent of the Company and Investors who hold an eighty (80%)
percent interest of the Registrable Securities then outstanding
and held by the Investors. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
persons or entities with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given
hereunder shall be in writing and shall be deemed to be
sufficiently given when personally delivered (by hand, by
courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return
receipt requested, properly addressed and with proper postage
pre-paid (i) if to the Company, CompuMed, Inc., Suite 1000, 1230
Rosecrans Avenue, Manhattan Beach, CA 90266, ATTN:James Linesch,
President, Telecopier No.: (310) 643-2363; (ii) if to the Initial
Investor, at the address set forth under its name in the
Securities Purchase Agreement, with a copy to Samuel Krieger,
Esq., Krieger & Prager, 319 Fifth Avenue, Third Floor, New York,
NY 10016, Telecopier No.: (212) 213-2077; and (iii) if to any
other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as
each such party furnishes by notice given in accordance with this
Section 11(b), and shall be effective, when personally delivered,
upon receipt and, when so sent by registered or certified mail,
four (4) calendar days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof.
(d) This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York
for contracts to be wholly performed in such state and without
giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of
New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such
jurisdictions.
(e) If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof,
this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the
context may require.
(h) The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the
meaning thereof.
(i) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a
copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(j) The Company acknowledges that any failure by the
Company to perform its obligations under Section 3(a) hereof, or
any delay in such performance could result in loss to the
Investors, and the Company agrees that, in addition to any other
liability the Company may have by reason of such failure or
delay, the Company shall be liable for all direct damages caused
by any such failure or delay, unless the same is the result of
force majeure. Neither party shall be liable for consequential
damages.
(k) This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject
matter hereof. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with
enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above
written.
CompuMed, Inc.
By:_____________________________________
Name:
Title:
_______________________________________
By:____________________________________
Name:
Title:
Exhibit 99
FOR IMMEDIATE RELEASE
Contact:
James Linesch
President and Chief Executive Officer
CompuMed, Inc.
(310) 643-5106, ext. 115
email: [email protected]
Noonan/Russo Communications, Inc.
Heather Hennessy (media) ext. 274
Jan Medina (investor) ext. 216
(212) 696-4455
email: [email protected]
COMPUMED ANNOUNCES $1.75 MILLION INVESTMENT FROM INSTITUTIONAL
INVESTORS
Manhattan Beach, CA - January 9, 1998 - CompuMed, Inc. (Nasdaq:
CMPD) today disclosed that they have completed the sale of 17,500
shares of Series 1 Class C 7% Convertible Preferred Stock for
$1,750,000 to a group of institutional and accredited investors.
The group has agreed to invest an additional $1,750,000 in Series
2, Class C 7% Preferred Stock subject to certain conditions.
"This equity investment strengthens CompuMed's balance sheet and
enhances the Company's ability to expand its development efforts
in osteoporosis and arthritis detection", stated James Linesch,
President of CompuMed. "The potential market for the
OsteoView(R) 2000 digital bone densitometer represents an
excellent business opportunity for our Company and our
shareholders. We will also be able to pursue related strategies
that will enhance shareholder value."
CompuMed, based in Manhattan Beach, California, develops
solutions to important medical problems through the use of
computer technology. The Company is currently developing a bone
densitomer, the OsteoView, for the assessment of osteoporosis and
arthritis. In addition, CompuMed is focused on telemedicine
services for cardiology and currently provides on-line computer
interpretation of electrocardiograms (ECGs) to physicians and
healthcare providers.
The securities were sold in a private placement under Regulation
D of the Securities Act of 1933, and have not been registered
under the Act and may not be offered or sold in the United States
absent registration or an applicable exemption from the
registration requirements. Interest on the Preferred shares may
be paid in cash or in kind at the election of the Company. Full
details of the Preferred Stock sales are provided on Form 8K as
filed with the Securities and Exchange Commission.
This news release contains forward-looking statements as defined
by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and
underlying assumptions and other statements that are other than
statements of historical facts. These statements are subject to
uncertainties and risks including, but not limited to, product
development and consumer demand and acceptance, changes in
technology, ability to raise capital, the availability of
appropriate acquisition candidates and/or business partnerships,
economic conditions, impact of competition and pricing, capacity
and supply constraints or difficulties, government regulation and
other risks. All such forward-looking statements whether written
or oral, and whether made by or on behalf of the Company are
expressly qualified by these cautionary statements and any other
cautionary statements which may accompany the forward-looking
statements. In addition, the Company disclaims any obligation to
update any forward-looking statements to reflect events or
circumstances after the date hereof.
Editors' note: This release is available on the Internet at
www.compumed.net and www.noonanrusso.com
