<PAGE>
As filed with the Securities and Exchange Commission on May 20, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MEDIA LOGIC, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts
----------------------------
(State or other jurisdiction
of incorporation or organization)
04-2772354
----------------
(I.R.S. Employer
Identification No.)
310 South Street, Plainville, Massachusetts 02762
(508) 695-2006
------------------------------------
(Address, including zip code,
and telephone, including area code,
of registrant's principal executive offices)
William E. Davis, Jr.
Chief Executive Officer
Media Logic, Inc.
310 South Street
Plainville, Massachusetts 02762
(508) 695-2006
----------------------------
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Copy to:
Richard R. Kelly, Esquire
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
-----------------------------------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x].
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT (1) PRICE (1) FEE
- ---------------------------------- ------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per share.............. 3,565,656 $ 2.53125 $ 9,025,567 $2,736
</TABLE>
- ------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
upon the average of the high and low sales prices of the Registrant's Common
Stock on the American Stock Exchange on May 14, 1997.
---------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
MEDIA LOGIC, INC.
1,907,626 Shares of Common Stock
(Par Value $.01 Per Share)
The 1,907,626 shares of Common Stock of Media Logic, Inc., a Massachusetts
corporation (the "Company"), offered hereby are being sold by the selling
stockholders identified herein (the "Selling Stockholders"). Such offers and
sales may be made on the American Stock Exchange, or otherwise, at prices and
on terms then prevailing, or at prices related to the then-current market
price, or in negotiated transactions, or by underwriters pursuant to an
underwriting agreement in customary form, or in a combination of any such
methods of sale. The Selling Stockholders may also sell such shares in
accordance with Rule 144 under the Securities Act of 1933, as amended (the
"1933 Act"). The Selling Stockholders are identified and certain information
with respect to the Selling Stockholders is provided under the caption "Selling
Stockholders" herein, to which reference is made. The expenses of the
registration of the securities offered hereby, including fees of counsel for
the Company, will be paid by the Company. The following expenses will be borne
by the Selling Stockholders: underwriting discounts and selling commissions,
if any, and the fees of legal counsel, if any, for the Selling Stockholders,
except that the Company has agreed to pay the fees and expenses of one counsel
to the Selling Stockholders, not to exceed $5,000, in connection with the
registration of the shares offered herein. The filing by the Company of this
Prospectus in accordance with the requirements of Form S-3 is not an admission
that the person whose shares are included herein is an "affiliate" of the
Company.
The Selling Stockholders have advised the Company that they have not engaged
any person as an underwriter or selling agent for any of such shares, but they
may in the future elect to do so, and they will be responsible for paying such a
person or persons customary compensation for so acting. The Selling Stockholders
and any broker executing selling orders on behalf of any Selling Stockholder may
be deemed to be "underwriters" within the meaning of the 1933 Act, in which
event commissions received by any such broker may be deemed to be underwriting
commissions under the 1933 Act. The Company will not receive any of the proceeds
from the sale of the securities offered hereby. The Common Stock is listed on
the American Stock Exchange under the symbol TST. On May 14, 1997, the closing
sale price of the Common Stock, as reported by the American Stock Exchange, was
$2.50 per share.
-------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
No person is authorized in connection with any offering made hereby to give
any information or to make any representations other than as contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus is not
an offer to sell, or a solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
-------------------------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to certain informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at its regional
offices located at 7 World Trade Center, Suite 1300, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such reports, proxy statements and other information can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, DC 20549 at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov. The Company's
Common Stock is traded on the American Stock Exchange. Reports and other
information concerning the Company may be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006-1181.
Additional updating information with respect to the securities covered herein
may be provided in the future to purchasers by means of appendices to this
Prospectus.
The Company has filed with the Commission in Washington, DC a registration
statement (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the 1933 Act with respect to the securities
offered or to be offered hereby. This Prospectus does not contain all of the
information included in the Registration Statement, certain items of which are
omitted in accordance with the rules and regulations of the Commission. For
further information about the Company and the securities offered hereby,
reference is made to the Registration Statement and the exhibits thereto.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any document incorporated herein by reference, excluding exhibits. Requests
should be made to Media Logic, Inc., 310 South Street, Plainville, MA 02762,
telephone (508) 695-2006 and directed to the attention of Paul M. O'Brien, Vice
President and Chief Financial Officer.
2
<PAGE>
TABLE OF CONTENTS
PAGE
-----
RISK FACTORS........................................................ 4
THE COMPANY......................................................... 8
SELLING STOCKHOLDERS................................................ 9
PLAN OF DISTRIBUTION................................................ 11
LEGALITY OF COMMON STOCK............................................ 11
EXPERTS............................................................. 11
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE................... 11
3
<PAGE>
RISK FACTORS
An investment in the shares being offered by this Prospectus involves a
high degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
carefully consider the following risk factors before purchasing the shares
offered hereby. This Prospectus contains and incorporates by reference
forward-looking statements within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 which are based on management's
current expectations. To the extent that any of the statements contained
herein relating to the Company's products and its operations are forward
looking, such statements are based on management's current expectations and
involve a number of uncertainties and risks.
Reference is also made in particular to the discussion set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K and Amendment No. 1
to the Form 10-K on Form 10-K/A for the fiscal year ended March 31, 1996
(collectively, the "Form 10-K"), the Company's Quarterly Report on Form 10-Q
and Amendment No. 1 to the Form 10-Q on Form 10-Q/A for the quarter ended
June 30 1996, the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996, and under "Description of Business" in the
Form 10-K, incorporated in this Prospectus by reference. Both the
forward-looking statements contained in this Prospectus and those
incorporated herein by reference are based on current expectations that
involve a number of uncertainties including those set forth in the risk
factors below. Actual results could differ materially from those projected in
the forward-looking statements.
SHIFT IN BUSINESS FOCUS. While, in fiscal year 1996, the Company still
derived most of its revenue from sales of its certifiers, evaluators and
duplicators for floppy disks and tape, the Company has shifted its focus to
its automated tape libraries for the data storage market. In fiscal year
1996, the Company sold only pre-production units of its automated data
library ("ADL") products. The Company first commenced sales of its production
units of ADL products, other than evaluation units, in the second quarter of
fiscal year 1997 and therefore has limited experience in selling its ADL
products. The Company expects to derive a substantial majority of its total
revenue and net income from sales of its ADL products in the future.
Continued growth of the Company's ADL business will depend upon several
factors, including demand for these libraries, the Company's ability to
develop new products to meet the changing requirements of its customers,
technological change and competitive pressures. There can be no assurance
that the Company's ADL business will take hold and grow.
COMPETITION. Competition in the data storage market, including the
automated tape library market, is intense, with a large number of companies
in these markets. Many of the Company's current and potential competitors
have longer operating histories, greater name recognition, larger installed
customer bases and significantly greater financial, technical and marketing
resources than the Company. As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements,
or to devote greater resources to the promotion and sale of their products
than the Company. An increase in competition could result in price reductions
and loss of market share. Such competition and any resulting reduction in
gross margins could have a material adverse effect on the Company's business,
financial condition and results of operations.
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCT DEVELOPMENT. The
computer industry in general, and the markets for the Company's automated
tape library products in particular, are characterized by rapidly changing
technology, frequent new product introductions, and significant competition.
In order to keep pace with this rapidly changing market environment, the
Company must continually develop and incorporate into its products new
technological advances and features desired by the marketplace at acceptable
prices. The successful development and commercialization of new products
involves many risks, including the identification of new product
opportunities, timely completion of the development process, the control and
recoupment of development and production costs and acceptance by customers of
the Company's products. There can be no assurance that the Company will be
successful in identifying, developing, manufacturing and marketing new
products in a timely and cost effective manner, that products or technologies
developed by others will not render the Company's products or technologies
uncompetitive, or that the Company's products will be accepted in the
marketplace.
4
<PAGE>
PROTECTION OF PROPRIETARY TECHNOLOGY. The Company's ability to compete
effectively with other companies will depend, in part, on the ability of the
Company to maintain the proprietary nature of its technology. There can be no
assurance that competitors in both the United States and foreign countries,
many of which have substantially greater resources and have made substantial
investments in competing technologies, do not have or will not obtain patents
that will prevent, limit or interfere with the Company's ability to make and
sell its products or intentionally infringe the Company's patents. While the
Company possesses or licenses certain patent rights, it relies in large part
on unpatented proprietary technology, and there can be no assurance that
others may not independently develop the same or similar technology, whether
or not patented, or otherwise obtain access to the Company's proprietary
technology.
CYCLICAL NATURE OF THE COMPUTER INDUSTRY. The computer industry is
highly cyclical and has historically experienced periodic downturns. The
cyclical nature of the computer industry is beyond the control of the
Company. As an example, the Company experienced a substantial reduction in
demand for its original product line (floppy disk certification, testing and
duplication equipment). A similar decrease in demand for products in the
category of its new products (automated tape libraries) could materially
adversely affect its business and products.
UNCERTAINTIES RELATED TO COMPANY'S ABILITY TO RAISE ADDITIONAL NECESSARY
CAPITAL. The Company has spent and expects to continue to spend substantial
funds for continuation of the research and development of product candidates
and will also require additional funds in order to manufacture, market and
sell its products. In March 1997, the Company completed a private placement
of convertible debentures (the "Private Placement") which resulted in
approximately $3,530,000 in gross proceeds to the Company. However, because
of its continuing losses from operations, the Company anticipates that unless
revenues increase significantly, it will require additional capital in order
to continue its operations. See "--Recent Losses." The Company has no
assurance that it will be able to raise such additional capital, if needed,
in a timely manner or on favorable terms, if at all. If the Company is unable
to increase revenues significantly and/or secure additional financing, the
Company could be forced to curtail or discontinue its operations.
RECENT LOSSES. For the nine month period ended December 31, 1996, the
Company incurred a loss of $3,159,224. For the fiscal year ended March 31,
1996, the Company incurred a loss of $7,818,919 on revenues of $3,578,236,
and for the fiscal year ended March 31, 1995, the Company incurred a loss of
$9,981,320 on revenues of $5,835,694. These recent losses and reductions in
revenues are primarily the result of a decline in the revenues generated in
the Company's traditional markets during a period when the Company was making
a large investment in its ADL technology. The Company believes that the
trends that resulted in its losses could continue for the foreseeable future.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent on the performance of its senior management, including its
Chief Executive Officer and President, William E. Davis, Jr., its Vice
President of Sales, B. Edward Fitzgibbons, its Director of Engineering, James
Hackathorn, and its Vice President and Chief Financial Officer, Paul M.
O'Brien. Competition for highly skilled employees with technical, management
and other specialized training is intense in the computer industry. The
Company's failure to attract additional qualified employees or to retain the
services of key personnel could materially adversely affect the Company's
business.
VOLATILITY OF SHARE PRICE. Market prices for securities of technology
companies have been volatile. The market price for the Company's Common Stock
has fluctuated significantly since public trading commenced in 1987, and it
is likely that the market price will continue to fluctuate in the future.
Quarterly fluctuations in operating results, announcements by the Company or
the Company's present or potential competitors, technological innovations or
new commercial products or services, developments or disputes concerning
patent or proprietary rights and other events or factors may have a
significant impact on the Company's business and on the market price of the
Common Stock.
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. The directors, officers
and principal stockholders of the Company and certain of their affiliates
and/or family members beneficially own in the aggregate approximately 51.9%
of the Company's Common Stock (including shares issuable upon exercise of
options held by such persons, which options are currently exercisable, shares
issuable upon exercise of warrants held by such persons, which warrants are
currently exercisable and shares issuable upon conversion of debentures held
by such persons at the assumed conversion price of $1.98, which debentures
will be convertible within 60 days of the date of this Prospectus). As a
result of such ownership, these stockholders will exert influence over all
matters requiring approval by the stockholders of the Company, including the
election of directors. One shareholder, Raymond Leclerc, has a contractual
right to Board representation.
Certain Charter and By-Law Provisions and Massachusetts Laws May Affect
Stock Price. The Company's Restated Articles of Organization and By-laws
contain provisions that may make it more difficult for a third party to
acquire control of, or discourage acquisition bids for, the Company. In
addition, certain Massachusetts laws contain provisions that may have the
effect of making it more difficult for a third party to acquire control of,
or discourage acquisition bids for, the Company. These provisions could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the public market could have an adverse effect on the price of the
Company's Common Stock. Approximately 3,818,263 shares of Common Stock are
currently freely tradable on the open market. In addition, approximately
2,502,646 shares are eligible for sale
5
<PAGE>
pursuant to Rule 701 or Rule 144 of the 1933 Act. Also, there were a total of
604,088 options to purchase Common Stock outstanding as of May 5, 1997
pursuant to the Company's stock option plans, and 333,787 of such options
were vested and can be exercised at any time prior to their respective
expiration dates. As of May 5, 1997, 151,016 shares of Common Stock were
issuable upon exercise of a warrant issued to Rochon Capital Group, Ltd.
("Rochon") in connection with the Private Placement and 900,000 shares of
Common Stock were issuable upon exercise of a warrant issued to Adar Equities
LLC ("Adar") in connection with the Private Placement. Pursuant to their
respective warrant agreements with the Company, each of Rochon and Adar has a
right, commencing March 24, 1998 and ending 4 years thereafter, to demand
registration under the 1933 Act by the Company of the shares underlying the
warrants or to include the shares underlying the warrants in certain
registrations filed by the Company under the 1933 Act. Under certain
circumstances, Rochon and Adar may demand registration under the 1933 Act by
the Company of the shares underlying the warrants prior to March 24, 1998,
provided they agree to pay a pro rata share of the expenses of such
registration. Additionally, as of May 5, 1997, 240,000 shares of Common Stock
were issuable upon exercise of a warrant issued to ACFS Limited Partnership
("ACFS") in connection with the Private Placement and 410,870 shares of
Common Stock were issuable upon exercise of a warrant issued to Digital Media
& Communications L.P. ("Digital Media") in connection with the Private
Placement. The Company has agreed to use its best efforts to register under
the 1933 Act the shares underlying the warrants issued to ACFS and Digital
Media no later than September 22, 1997. In September 1995, the Company issued
1,000,000 shares of Common Stock to Raymond W. Leclerc in a private
placement. Mr. Leclerc has the right under an agreement with the Company to
include his shares in certain registrations filed by the Company under the
1933 Act, such right which he has waived in connection with the registration
statement of which this Prospectus is a part. Also, Lee H. Elizer, the former
Chief Executive Officer and President of by MediaLogic ADL, is entitled to
receive 7,000 shares of Common Stock in October 1997 and 8,000 shares of
Common Stock in October 1998, which, under the terms of his separation
agreement with the Company, are expected to be registered under the 1933 Act
following their issuance.
The Shares offered hereby are issuable upon conversion of $3,530,000
aggregate principal amount 7% convertible subordinated debentures, due 2000
(the "Debentures"), and interest thereon, issued by the Company to the
Selling Stockholders in the Private Placement. The principal amount of the
Debentures is convertible into shares of the Company's Common Stock based on
a predetermined formula at any time beginning on the earlier of (i) the date
on which the registration statement of which this Prospectus is a part is
declared effective or (ii) the 91st calendar date after the date of issuance
of the Debentures, or June 23, 1997. The price at which the Debentures will
convert will be the lower of (i) $2.805, which amount is 120% of the average
closing bid price of the Common Stock as calculated over the five trading-day
period ending on March 21, 1997 (the "Closing Date Price") and (ii) 80% of
the average closing bid price of the Common Stock as calculated over the five
trading-day period ending on the trading day immediately preceding the date
of conversion (the "Conversion Date Price"). Each individual $10,000
principal amount Debenture may be converted only in its entirety. The
Debentures bear interest at the rate of 7% per year. Interest is payable only
upon conversion of the Debentures and, at the Company's option, is payable
either in cash or in shares of the Company's Common Stock based on the
average closing sale price of the Common Stock as calculated over the five
trading-day period ending on the trading day immediately preceding the date
of conversion.
The Company has agreed to register for resale from time to time by the
purchasers thereof the shares of Common Stock underlying the Debentures. All
of the shares registered for resale by the holders thereof, including the
shares offered hereby, may be reoffered and resold in the public trading
market from time to time during the period the Company has agreed to maintain
the effectiveness of the registration statement registering those shares.
Pursuant to the registration statement of which this Prospectus is a part,
the Company has registered 3,565,656 shares of Common Stock for issuance upon
conversion of the Debentures. The Company has registered this number of
shares to insure that there would be a sufficient number of registered shares
in the event that the market price for the Company's Common Stock declines
substantially. The 3,565,656 shares registered represents the approximate
number of shares which would be issuable upon conversion of the Debentures
(excluding shares issuable upon conversion of accrued interest) if the
Conversion Date Price were $0.99 per share. An aggregate of 1,907,626 shares
are offered hereby, which number is an estimate of the number of shares
issuable upon conversion of the Debentures based on an assumed Conversion
Date Price of $1.98 per share (80% of the average of the closing bid prices
of the Common Stock on the five trading days ended May 14, 1997, as reported
on the American Stock Exchange), and assuming approximately 124,798 shares
would be issuable upon conversion of approximately one year's accrued
interest of $247,100. In the event the actual Conversion Date Price is less
than $1.98, more than 1,907,626 shares will be issuable upon conversion of
the principal amount of the Debentures (including shares issuable upon
conversion of accrued interest) and the Company would be required to amend
this Prospectus to increase the number of shares offered hereby accordingly.
If the Debentures become convertible into more than 3,565,656 shares, the
Company will be obligated to register additional shares of Common Stock.
ABSENCE OF DIVIDENDS. The Company has not paid dividends since its
inception and does not anticipate paying any dividends in the foreseeable
future.
6
<PAGE>
DILUTION. Dilution is likely to occur upon conversion of the Debentures
and also upon the exercise of existing stock options and warrants. The
Debentures can be converted into shares of the Company's Common Stock at any
time beginning on the earlier of (i) the date on which the registration
statement of which this Prospectus is a part is declared effective or (ii)
the 91st calendar date after the date of issuance of the Debentures, or June
23, 1997. See "--Shares Eligible For Future Sale."
7
<PAGE>
THE COMPANY
Media Logic, Inc. was incorporated in 1982 to develop and manufacture
certification equipment to be used by manufacturers of flexible storage media
such as floppy disks. The Company's principal product line is automated tape
library systems for data storage and retrieval, which was introduced in fiscal
year 1996.
The Company's data storage libraries have been developed by MediaLogic ADL,
Inc. ("MediaLogic ADL"), a subsidiary of the Company which was established in
1994 to develop, market and sell automated data storage libraries. In fiscal
year 1996, MediaLogic ADL introduced automated tape libraries in 4mm and 8mm
tape technologies and expects to introduce in fiscal year 1997, automated tape
libraries with digital linear tape ("DLT") technology. Tape drives from a number
of manufacturers are supported by the libraries as are system management and
software configurations from a variety of vendors. In fiscal 1996, the Company
sold only pre-production units, and began delivering production units in the
second quarter of fiscal 1997. Potential customers for the ADL line of automated
tape libraries are data dependent companies in all types of businesses.
The certification, test and duplication product line, representing the
Company's historical products, but which is not expected to be the basis for the
bulk of the Company's future business, includes: (1) certifiers which are used
by computer disk manufacturers to test each disk as it is manufactured and to
sort disks into three industry established quality categories, (2) tape
certification and evaluation equipment used by manufacturers and suppliers of
magnetic tapes, to evaluate and qualify the quality of the tapes, and (3) floppy
disk duplication equipment utilizing industrial disk drives which have been
developed by the Company for use by software publishers and duplicators.
The principal executive offices of the Company are located at 310 South
Street, Plainville, Massachusetts 02762, and the Company's telephone number is
(508) 695-2006.
8
<PAGE>
SELLING STOCKHOLDERS
The shares offered hereby by the Selling Stockholders are issuable upon
conversion of the Company's 7% convertible subordinated debentures, due 2000
(the "Debentures"), issued to the Selling Stockholders in a private placement
(the "Private Placement") pursuant to subscription agreements between each of
the Selling Stockholders and the Company (the form of which Debentures and
subscription agreements are filed as Exhibits 99.1 and 99.2, respectively, to
the registration statement of which this Prospectus is a part). The number of
shares offered hereby represents the number of shares issuable as of the date of
this Prospectus, assuming that one year's interest of approximately $247,100 has
accrued under the Debentures. The number of shares issuable upon conversion of
the Debentures will increase if the market price for the Company's Common Stock
decreases. In addition, the number of shares issuable upon conversion of accrued
interest under the Debentures will change if the Debentures are held for more or
less than one year. The Company has registered the resale of 3,565,656 shares of
Common Stock pursuant to the registration statement of which this Prospectus is
a part. See "Risk Factors -- Shares Eligible For Future Sale."
The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock by the Selling Stockholders as of May 5,
1997, as adjusted to reflect the sale of the Common Stock offered hereby by each
Selling Stockholder.
<TABLE>
<CAPTION>
SHARES SHARES
---------------------- ----------------------
<S> <C> <C> <C> <C> <C>
OWNED PRIOR TO OWNED AFTER
OFFERING (1)(2) NUMBER OF OFFERING (3)
---------------------- SHARES BEING ----------------------
SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
- ----------------------------------------------------------- --------- ----------- ------------ --------- -----------
Digital Media & Communications Limited Partnership (4)..... 978,294 13.4% 567,424 410,870 6.1%
F.T.S. Worldwide Corporation............................... 540,404 7.9% 540,404 0 --
Beauchamp Finance, Ltd..................................... 216,161 3.3% 216,161 0 --
Euro Factors International Inc............................. 189,142 2.9% 189,142 0 --
Millenco, L.P.............................................. 162,122 2.5% 162,122 0 --
Ramlu Trading Corp......................................... 135,101 2.1% 135,101 0 --
ONE & CO (5)............................................... 54,040 * 54,040 0 --
J.N. Industries Inc........................................ 43,732 * 43,732 500 *
</TABLE>
- ------------------------
* Less than 1%.
(1) Based on 6,320,909 shares of Common Stock outstanding as of May 5, 1997.
Assumes that the Debentures are convertible at the assumed conversion price
of $1.98, which is 80% of the average of the closing bid prices of the
Common Stock on the five trading days ended May 14, 1997, as reported by the
American Stock Exchange. The actual number of shares issuable upon
conversion of the Debentures will depend on the timing of such conversion.
Also includes an aggregate of approximately 124,798 shares of Common Stock
that would be issuable upon conversion of approximately one year's accrued
interest at the rate of 7% per year. The actual number of shares issuable
upon conversion of interest will depend on the timing of the conversion of
principal.
(2) The price at which the Debentures will convert into shares of Common Stock
will be the lower of (i) $2.805, which amount is 120% of the average closing
bid price of the Common Stock as calculated over the five trading-day period
ending on March 21, 1997 (the "Closing Date Price") and (ii) 80% of the
average closing bid price of the Common Stock as calculated over the five
trading-day period ending on the trading day immediately preceding the date
of conversion (the "Conversion Date Price"). The actual conversion price or
prices will vary accordingly, and the number and percentage of shares of
Common Stock beneficially owned and being offered by each Selling
Stockholder will be adjusted at the time of conversion to reflect changes in
9
<PAGE>
the average closing bid price of the Common Stock, the amount of accrued
interest at the time of conversion, and stock splits, stock dividends and
other similar events.
(3) Assuming all shares offered hereby are sold to unaffiliated third parties.
(4) Includes 410,870 shares issuable upon exercise of a warrant to purchase
Common Stock of the Company at an exercise price of $3.00 per share,
exercisable at any time prior to September 22, 2001.
(5) ONE & CO acts as investment manager for Debentures held by several
investors. Kenneth S. Safe, Jr. and John K. Spring, general partners of ONE
& CO, may be deemed to be the beneficial owners of the portfolio securities
owned by ONE & CO. However, Kenneth S. Safe, Jr. and John K. Spring disclaim
beneficial ownership with respect to portfolio securities owned by ONE & CO
to the extent that such beneficial ownership exceeds their pecuniary
interest therein.
10
<PAGE>
PLAN OF DISTRIBUTION
The 1,907,626 shares of Common Stock of the Company offered hereby may be
offered and sold from time to time by the Selling Stockholders, or by pledgees,
donees, transferees or other successors in interest. The Selling Stockholders
will act independently of the Company in making decisions with respect to the
timing, manner and size of each sale. Such sales may be made on the American
Stock Exchange or otherwise, at prices related to the then current market price
or in negotiated transactions, including pursuant to an underwritten offering or
one or more of the following methods: (a) purchases by a broker-dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (b) ordinary brokerage transactions and transactions in which a
broker solicits purchasers; and (c) block trades in which a broker-dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction. In effecting
sales, brokers or dealers engaged by the Selling Stockholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the Selling Stockholders or from the purchasers in
amounts to be negotiated immediately prior to the sale. The Selling Stockholders
may also sell such shares in accordance with Rule 144 under the 1933 Act.
The Company has agreed to use diligent efforts to maintain the effectiveness
of the registration of the shares being offered hereunder until March 24, 1999
(two years after the closing date of the Private Placement) or such shorter
period which will terminate when all shares of Common Stock underlying the
Debentures either (i) have been effectively registered under the 1933 Act and
disposed of in accordance with such registration statement, (ii) are eligible
for distribution to the public pursuant to Rule 144 under the 1933 Act or (iii)
are eligible for distribution to the public by the holders thereof pursuant to
Rule 144(k) under the 1933 Act.
The Selling Stockholders and any brokers participating in such sales may be
deemed to be underwriters within the meaning of the 1933 Act. There can be no
assurance that the Selling Stockholders will sell any or all of the shares of
Common Stock offered hereunder.
All proceeds from any such sales will be the property of the Selling
Stockholders who will bear the expense of underwriting discounts and selling
commissions, if any, and the Selling Stockholders' own legal fees, if any,
except that the Company has agreed to pay the fees and expenses of one counsel
to the Selling Stockholders, not to exceed $5,000.
LEGALITY OF COMMON STOCK
The validity of the issuance of the shares of Common Stock offered hereby is
being passed upon for the Company by Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., Boston, Massachusetts. Richard R. Kelly, Esq., a member of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., is the Clerk of the Company.
EXPERTS
The consolidated balance sheets of the Company as of March 31, 1996 and 1995
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended March 31, 1996,
incorporated by reference in this Prospectus and elsewhere in the registration
statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K and Amendment No. 1 to the
Form 10-K on Form 10-K/A for the fiscal year ended March 31, 1996, filed
pursuant to Section 13 or 15(d) of the 1934 Act (File No. 1-9605).
(b) The Company's Quarterly Report on Form 10-Q and Amendment No. 1 to
the Form 10-Q on Form 10-Q/A for the fiscal quarter ended June 30, 1996, the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996, and the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1996, filed pursuant to Section 13 or
15(d) of the 1934 Act (File No. 1-9605).
(c) The description of the Company's capital stock contained in the
Company's registration statement on Form 8-A under the 1934 Act (File No.
1-9605), including amendments or reports filed for the purpose of updating
such description.
11
<PAGE>
All reports and other documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act,
prior to the filing of a post-effective amendment which indicates that all
securities covered by this Prospectus have been sold or which deregisters all
such securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
12
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
registration fee, the amounts stated are estimates.
SEC Registration Fee..................... $ 2,736
AMEX Fees................................ 17,500
Legal Fees and Expenses.................. 15,000
Accounting Fees and Expenses............. 5,000
Miscellaneous............................ 5,000
----------
TOTAL................................ $45,236
----------
----------
The Selling Stockholders will bear the expense of their own legal counsel,
if any, except that the Company has agreed to pay the fees and expenses of one
counsel to the Selling Stockholders, not to exceed $5,000.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VI.A of the Company's Restated Articles of Organization provides
that no Director of the Company shall be personally liable to the corporation or
to any of its stockholders for monetary damages for any breach of fiduciary duty
by such Director as a Director notwithstanding any provision of law imposing
such liability; provided, however, that, to the extent required from time to
time by applicable law, Article VI.A shall not eliminate the liability of a
Director, to the extent such liability is provided by applicable law, (a) for
any breach of a Director's duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith which involve
intentional misconduct or a knowing violation of law, (c) under Section 61 or
Section 62 of the Business Corporation Law of the Commonwealth of Massachusetts,
or (d) for any transaction from which the Director derived an improper personal
benefit. No amendment to or repeal of Article VI.A shall apply to or have any
effect on the liability or alleged liability of any Director for or with respect
to any acts or omissions of such Director occurring prior to the effective date
of such amendment or repeal.
In addition, the Company's By-Laws provide as follows:
Article First, Section 12. Indemnity. (a) The Corporation shall
indemnify and reimburse out of the corporate funds any person (or the
personal representative of any person) who at any time serves or shall have
served as a Director, officer or employee of the Corporation, or as a
Director, officer or employee of another Corporation the majority of the
stock of which is owned by the Corporation, whether or not in office at the
time, against and for any and all claims and liabilities to which he may be
or become subject by reason of such service, and against and for any and all
expenses necessarily incurred in connection with the defense or reasonable
settlement of any legal or administrative proceedings to which he is made a
party by reason of such service, except in relation to matters as to which
he shall be finally adjudged not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Corporation or to the extent that such matter relates to service with
respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan. In effecting
such indemnity and reimbursement, the stockholders may enter into such
agreements and direct the officers of the Corporation to make such payment
or payments and take such other action (including employment of counsel to
defend against such claims and liabilities) as may in their judgment be
reasonably necessary or desirable. Such indemnification or reimbursement
shall not be deemed to exclude any other rights or privileges to which such
person may be entitled.
(b) The Board of Directors may by vote act to indemnify any or all
officers of the Corporation from liability for acts done by them in good
faith on behalf of the Corporation.
(c) The Directors may vote to defray the expense of defending any claims
brought against one or more Directors or other Officers on account of any
action purported to have been done in any official capacity, and may vote to
reimburse any such Director or other Officer for any sum paid by him to
settle any such claim; provided that if it shall be finally determined by
judgment or decree of any court that any such Director or other Officer is
personally liable on account of any such claim, he shall reimburse the
Company for his pro rata share of any expense so defrayed or reimbursement
so made by the Company.
(d) To the extent legally permissible, the Corporation shall indemnify
each of its Directors and Officers against all liabilities including
expenses imposed upon or reasonably incurred by him in connection with any
action, suit or other proceeding in which he may be involved or with which
he may be threatened, while in office or thereafter, by reason of his acts
or omissions as such Director or Officer, unless in such proceeding he shall
be finally adjudged liable by reason of dereliction in
II-1
<PAGE>
the performance of his duty as such Director or Officer; provided,
however, that such indemnification shall not cover liabilities in
connection with any matter which shall be disposed of through a
compromise payment by such Director or Officer, pursuant to a consent
decree or otherwise, unless such compromise shall be approved as in the
best interests of the Corporation, after notice that it involves such
indemnification, by a vote of the Board of Directors in which no
interested Director participates, or by a vote or the written approval
of the holders of a majority of the outstanding stock at the time having
the right to vote for Directors, not counting as outstanding any stock
owned by any interested Director or Officer. The rights of
indemnification hereby provided shall not be exclusive of or affect any
other rights to which any Director or Officer may be entitled. As used
in this paragraph, the terms "Director" and "Officer" include their
respective heirs, executors and administrators, and an "interested"
Director or Officer is one against whom as such the proceedings in
question or another proceeding on the same or similar grounds is then
pending.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<S> <C>
4.1 Article 4 of Restated Articles of Organization of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1993)
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-18, No. 33-14722-B, effective July 23, 1987)
4.3 Form of Common Stock Certificate (incorporated by reference to Exhibit 10.7 to the Registrant's
Registration Statement on Form S-18, No. 33-14722B, effective July 23, 1987)
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to the legality of the
securities being registered
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see Exhibit 5)
24 Power of Attorney (filed in Part II of this Registration Statement)
99.1 Form of Media Logic, Inc. Convertible Subordinated Debenture Due 2000, dated March 24, 1997
99.2 Form of Subscription Agreement among and Media Logic, Inc. and the purchasers named on the signature
pages thereto, dated March 24, 1997
99.3 Form of Registration Rights Agreement among Media Logic, Inc. and the
purchasers named on the signature pages thereto, dated
March 24, 1997
</TABLE>
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the
II-2
<PAGE>
Commission pursuant to Rule 424(b) (Section230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant with or furnished to the Commission
pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the 1934 Act) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Request for Acceleration of Effective Date or Filing of Registration
Statement on Form S-8
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Plainville, Massachusetts on May 19, 1997.
MEDIA LOGIC, INC.
BY: /S/ William E. Davis, Jr.
-----------------------------------------
William E. Davis, Jr.
CHIEF EXECUTIVE
OFFICER AND PRESIDENT
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William E. Davis, Jr. and Paul M. O'Brien, or
any of them, his attorneys-in-fact, and agents each with the power of
substitution, for him in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration
statement (or any other registration statement for the same offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933), and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as full to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them or their or his
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ------ ----
<S> <C> <C>
/s/ F. Michael Hruby Chairman of the Board May 19, 1997
- ------------------------------
F. Michael Hruby
/s/ William E. Davis, Jr. Director and Chief May 19, 1997
- ------------------------------ Executive Officer and President
William E. Davis, Jr. (principal executive officer)
/s/ Paul M. O'Brien Vice President and Chief Financial May 19, 1997
- ------------------------------ Officer (principal financial and
Paul M. O'Brien accounting officer)
/s/ Harold B. Shukovsky, Ph.D. Director May 19, 1997
- ------------------------------
Harold B. Shukovsky, Ph.D.
/s/ Joseph L. Mitchell Director May 19, 1997
- ------------------------------
Joseph L. Mitchell
Director
- ------------------------------
Francis S. Wyman
/s/ Raymond W. Leclerc Director May 19, 1997
- ------------------------------
Raymond W. Leclerc
</TABLE>
II-4
<PAGE>
MEDIA LOGIC, INC.
-----------------
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
EXHIBIT Sequential
NUMBER DESCRIPTION Page No.
- ----------- ----------- ----------
<S> <C> <C>
4.1 Article 4 of Restated Articles of Organization of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1993)
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-18, No. 33-14722-B, effective July 23, 1987).
4 .3 Form of Common Stock Certificate (incorporated by reference to Exhibit 10.7 to the Registrant's
Registration Statement on Form S-18, No. 33-14722-B, effective July 23, 1987)
5 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to the legality of the
securities being registered (filed herewith) 18
23.1 Consent of Arthur Andersen LLP (filed herewith) 20
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (Reference is made to Exhibit 5) --
24 Power of Attorney (filed in Part II of this Registration Statement) --
99.1 Form of Media Logic, Inc. 7% Convertible Subordinated Debenture Due 2000, dated March 24, 1997 21
99.2 Form of Subscription Agreement among and Media Logic, Inc. and the purchasers named on the signature
pages thereto, dated March 24, 1997 23
99.3 Form of Registration Rights Agreement among Media Logic, Inc. and the purchasers named on
the signature pages thereto, dated March 24, 1997 58
</TABLE>
II-5
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300 www.Mintz.com
Fax: 202/434-7400
May 19, 1997
Media Logic, Inc.
310 South Street
Plainville, Massachusetts 02762
Gentlemen:
We have acted as counsel to Media Logic, Inc., a Massachusetts
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission of a Registration Statement on
Form S-3 (the "Registration Statement"), pursuant to which the Company is
registering under the Securities Act of 1933, as amended, a total of
3,565,656 shares (the "Shares") of its common stock, $.01 par value per share
(the "Common Stock"), for resale to the public. The Shares are to be sold by
the selling stockholder identified in the Registration Statement. This
opinion is being rendered in connection with the filing of the Registration
Statement. All capitalized terms used herein and not otherwise defined shall
have the respective meanings given to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Restated
Articles of Organization and By-Laws, both as currently in effect; such other
records of the corporate proceedings of the Company and certificates of the
Company's officers as we have deemed relevant; and the Registration Statement
and the exhibits thereto.
Richard R. Kelly, Clerk of the Company, is a member of our firm.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, photostatic or facsimile copies and
the authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when
sold, will be duly and validly issued, fully paid and non-assessable
shares of the Common Stock.
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
May 19, 1997
Page 2
Our opinion is limited to the General Corporation Laws of The
Commonwealth of Massachusetts, and we express no opinion with respect to the
laws of any other jurisdiction. No opinion is expressed herein with respect
to the qualification of the Shares under the securities or blue sky laws of
any state or any foreign jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto. We hereby further
consent to the reference to us under the caption "Legality of Common Stock"
in the prospectus included in the Registration Statement.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
-------------------------------
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated June 5, 1996
included in Media Logic, Inc.'s Form 10-K for the year ended March 31, 1996
and to all references to our Firm included in this registration statement.
/s/: Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 16, 1997
<PAGE>
EXHIBIT 99.1
[FORM OF DEBENTURE]
NEITHER THE DEBENTURES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THEY MAY BE CONVERTED ("DEBENTURE SHARES") HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THE DEBENTURES HAVE BEEN, AND ANY DEBENTURE SHARES UPON
ISSUANCE WILL HAVE BEEN, ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE DEBENTURES OR DEBENTURE SHARES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS. THESE DEBENTURES AND ANY DEBENTURE SHARES ISSUED ARE
SUBJECT TO CERTAIN REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
$ ____________ No. _____
MEDIA LOGIC, INC.
March 24, 1997
7% Convertible Subordinated Debenture Due 2000
Due March 24, 2000
MEDIA LOGIC, INC., a Massachusetts corporation (the "Company"), for value
received, promises to pay to _________________________________________________
_____________ or registered assigns on March 24, 2000, based on a principal
amount of ________________ Dollars ($ _______), shares of Common Stock of the
Company at the then-current conversion price, unless sooner prepaid or converted
into shares of Common Stock of the Company, together with accrued and unpaid
interest from the date of issue hereof.
The Company promises to pay interest on the principal amount of this
Debenture at the rate per annum of $700 per $10,000 Debenture (equal to seven
percent of the aggregate principal amount of a $10,000 Debenture). Interest
is payable only in accordance with applicable law and only upon conversion or
redemption of the Debentures and is payable either in shares (the "Interest
Shares") of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), at the average Market Price of the Common Stock over the
five trading-day period preceding the Conversion Date of the Debenture or in
cash, at the option of the Company. Interest on the Debentures will accrue
from the date of issuance. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
<PAGE>
The Debentures will mature on March 24, 2000 and shall automatically
convert on such date into Conversion Shares at the then-current Conversion
Price.
The Company has issued this Debenture under a Subscription Agreement
between the Company and the Purchaser named therein (the "Subscription
Agreement"). Capitalized terms herein are used as defined in the
Subscription Agreement unless otherwise defined herein. The terms of the
Debentures include those stated in the Subscription Agreement, which are
incorporated herein by reference. The Debentures are subject to all such
terms, and the Holder is referred to the Subscription Agreement for a
statement of them.
The Debentures are general unsecured obligations of the Company limited
to $4,000,000 aggregate principal amount plus interest and penalty payments.
This Debenture may be converted into shares of Common Stock of the
Company as provided in Section 9 of the Subscription Agreement. The
Debenture is subordinated to all Senior Indebtedness of the Company.
The Company will characterize the Debentures as preferred stock of the
Company for federal income tax purposes. Pursuant to Section 385(c) of the
Internal Revenue Code of 1986, as amended, this characterization is binding
on all Holders. A Holder treating the Debenture in a manner inconsistent
with such characterization must disclose the inconsistent treatment on such
Holder's tax return. This characterization, however, is not binding on the
Internal Revenue Service, and neither the Company nor the Holder is excused
from any interest or penalties resulting from improper characterization.
The Company will furnish to any Holder upon written request and without
charge a copy of the Subscription Agreement. It also will furnish the text
of this Debenture in larger type. Requests may be made to Media Logic, Inc.,
310 South Street, Plainville, Massachusetts 02762, Attention: President.
This Debenture shall be governed and construed in accordance with the
laws of the State of New York.
EXECUTED as an instrument under seal this 24th day of March, 1997.
MEDIA LOGIC, INC.
By:
---------------------------
William E. Davis, Jr.
Chief Executive Office and
President
2
<PAGE>
EXHIBIT 99.2
SUMMARY INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Subscription Agreement which follows)
A. Complete all of the following items from the Subscription Agreement:
1. The Signature Page
2. Appendix I-1 - Debenture Certificate Questionnaire.
3. Appendix I-2 - Registration Statement Questionnaire.
B. Complete and sign the signature page to the Registration Rights Agreement
(Appendix III to the Subscription Agreement).
C. Return each of the foregoing by facsimile to David S. Lippes at Stroock &
Stroock & Lavan LLP, at telecopier number (310) 556-5959.
D. Return each of the foregoing by overnight courier to:
Rochon Capital Group, Ltd.
1000 Fourth Street
Suite 775
San Rafael, California 94901
Attn: Phillip L. Neiman
Telephone: (415) 459-4944
E. Wire transfer to the Escrow Agent for receipt on or before 12:00 p.m.
(Chicago time) on March 31, 1997, funds in the amount of the aggregate
purchase price of the Debenture as follows:
LaSalle National Bank, Chicago, IL
ABA 0710-00-505
LASALLE CHGO/CTR/BNF = Media Logic/AC-2090067
RFB= 62-7713-30-8
OBI = Sarah Webb X2444
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made as of March 24,
1997, by and between Media Logic, Inc., a corporation organized under the laws
of the Commonwealth of Massachusetts (the "Company"), and the purchaser whose
name and address is set forth on the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
1. Designation and Authorization of Sale of the Debentures. Subject to
the terms and conditions of this Agreement, the Company has authorized the sale
of up to $4,000,000 aggregate principal amount of 7% Convertible Subordinated
Debentures Due 2000 (the "Debentures"). The Debentures will be convertible into
shares (the "Conversion Shares") of the Company's common stock, par value $.01
per share (the "Common Stock"), on the terms set forth in Section 9 hereof.
Holders of Debentures shall receive an interest payment equal to $700 per
Debenture per annum (equivalent to 7% of the Purchase Price). The interest
shall be payable upon conversion or redemption of each Debenture either in
shares of Common Stock (the "Interest Shares") or in cash, at the option of the
Company, on the terms set forth in Section 10 hereof. The Debentures will be
issued only as fully registered Debentures, in denominations of $10,000 and
integral multiples thereof, without coupons.
2. Agreement to Sell and Purchase the Debentures.
(a) At the Closing (as defined in Section 3), the Company will sell to the
Purchaser, and the Purchaser will buy from the Company, upon the terms and
conditions hereinafter set forth, Debentures in the aggregate principal amount
set forth on the signature page hereof.
(b) The Company expects to enter into this same form of subscription
agreement with certain other investors (the "Other Purchasers") and to complete
sales of the Debentures to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the "Purchasers," and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Documents"
shall mean this Agreement, the Registration Rights Agreement (as defined below),
the Escrow Agreement (as defined below) and the Form of Debenture,
collectively, together with any schedules or exhibits thereto. The term
"Placement Agent" shall mean Rochon Capital Group, Ltd.
(c) The Placement Agent reserves the right to reject in its sole
discretion this subscription for Debentures in whole or in part at any time
before the Closing Date notwithstanding prior receipt by the Purchaser of notice
of acceptance of his subscription, if the Placement Agent deems such action to
be in the best interests of the Company, or if the placement is over-subscribed,
or for any other reason. The Company reserves the right to reject this
subscription if the Company reasonably believes that the Purchaser is not an
"accredited investor" (as defined in Rule 501 under the Securities Act of 1933,
as amended (the "Securities Act").
(d) In the event of the rejection of this subscription for Debentures, the
Purchaser's subscription payment will be returned to the Purchaser with interest
and this Agreement shall have no force and effect. In the event the Purchaser's
subscription is accepted, on the Closing Date funds shall be released to the
Company and the certificates representing the Debentures shall be released to
the Purchaser.
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3. Delivery of the Debenture Certificates at the Closing. The completion
of the purchase and sale of the Debentures (the "Closing") shall occur at the
offices of LaSalle National Bank, Chicago, Illinois (the "Escrow Agent"), at
12:00 p.m. (Chicago Time) on or before March 31, 1997 (the "Closing Date"),
unless extended by mutual agreement of the Company and the Placement Agent. The
Purchaser shall wire Federal Reserve funds in an amount equal to the aggregate
price set forth on the signature page hereof to the Escrow Agent for receipt no
later than 12:00 p.m. (Chicago Time) on the Closing Date. Such funds will be
held in escrow until the Closing Date. At the Closing, the Company shall
deliver to the Purchaser, through the Escrow Agent, one or more debenture
certificates registered in the name of the Purchaser, or in such nominee name(s)
as designated by the Purchaser, representing the number of Debentures set forth
on the signature page hereof. The name(s) in which the Debenture certificates
are to be registered shall be set forth in the Debenture Certificate
Questionnaire attached hereto as part of Appendix I. The Company's obligation
to complete the purchase and sale of the Debentures and deliver such
certificate(s) to the Purchaser at the Closing shall be subject to the following
conditions, either of which may be waived by the Company: (a) receipt by the
Escrow Agent of Federal Reserve funds in the full amount of the purchase price
for the Debentures being purchased hereunder; and (b) the accuracy of the
representations and warranties made by the Purchasers and the fulfillment of
those undertakings of the Purchasers to be fulfilled prior to the Closing. The
Purchaser's obligations to accept delivery of such Debenture certificate(s) and
to pay for the Debentures shall be subject to the following conditions, either
of which may be waived by the Purchaser: (a) Receipt by the Company of a notice
from the American Stock Exchange ("ASE") waiving the requirements set forth in
Section 713(a) of the ASE's Listing Standards and Requirements as they relate to
the sale of the Debentures, and the continuing effectiveness of such notice; and
(b) the accuracy of the representations and warranties made by the Company
herein and the fulfillment in all material respects of those undertakings of the
Company to be fulfilled prior to Closing. The Purchaser's obligations hereunder
are expressly not conditioned on the purchase by any or all of the Other
Purchasers of the Debentures that they have agreed to purchase from the Company.
4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Purchaser as follows:
4.1. Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to conduct its business as currently
conducted. Each of the Company and its subsidiaries is qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the failure to so qualify would have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise), net worth or results
of operations of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Effect").
4.2. Authorized Capital Stock; Authorization of Securities. The Company
has authorized and outstanding capital stock as set forth under the heading
"Capitalization" in the Confidential Offering Memorandum, including all exhibits
thereto and documents incorporated by reference therein as the same may be
amended or supplemented from time to time (the "Offering Memorandum"); the
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform to the description thereof contained in
or incorporated by reference into the Offering Memorandum. All issued and
outstanding shares of capital stock of each subsidiary of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as disclosed in or contemplated by the Offering Memorandum and the financial
statements of the Company, and the
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related notes thereto, included in the Offering Memorandum, neither the
Company nor any subsidiary has outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments
to issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's
stock, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder, set forth in the Offering
Memorandum accurately an fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights.
4.3. Issuance, Sale and Delivery of the Debentures. When issued, executed,
delivered and sold by the Company in accordance with this Agreement and paid for
by the Purchaser, the Debentures will have been duly and validly issued,
executed and delivered and will (i) constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms and entitled to the benefits provided in the Purchase Agreements,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity, and (ii) be convertible into the Conversion Shares
in accordance with the terms of the Agreements. The Conversion Shares, the
Interest Shares (as defined in the Form of Debenture) and the Penalty Shares (as
defined in the Registration Rights Agreement) have been duly authorized and,
when issued, delivered and paid for in the manner set forth in this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, and will
conform to the description thereof contained in the Offering Memorandum. The
Conversion Shares, Interest Shares, and Penalty Shares, including any shares of
Common Stock issuable by reason of the anti-dilution provisions of the
Debentures, are hereinafter collectively referred to as the "Underlying Common
Shares." No preemptive rights or other rights to subscribe for or purchase
exist with respect to the issuance and sale of the Debentures or the issuance of
the Underlying Common Shares by the Company pursuant to this Agreement. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the issuance and sale of the Debentures or the
issuance of the Underlying Common Shares to be sold by the Company as
contemplated herein.
4.4. Due Execution, Delivery and Performance of the Agreements. The
Company has full corporate power and authority to enter into the Agreements and
the Documents and perform the transactions contemplated hereby and thereby. The
Agreements and the Documents have been duly authorized, executed and delivered
by the Company. The performance of the Agreements and the Documents by the
Company and the consummation of the transactions therein contemplated will not
violate any provision of the Restated Articles of Organization or By-Laws, or
other organizational documents, of the Company or any of its subsidiaries, and
will not conflict with, result in the breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a default under
any agreement, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of its
respective properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
the Company or any of its subsidiaries or any of their respective properties.
No consent, approval, authorization or other order of any court, regulatory
body, administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the Blue Sky laws
applicable to the offering of the Debentures. Upon their execution and
delivery, and assuming the valid execution thereof by the respective Purchasers,
the Agreements and the Documents will constitute valid and binding obligations
of the Company, enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as
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<PAGE>
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.5. No Defaults. Except as to defaults, violations and breaches which
individually or in the aggregate would not be material to the Company, neither
the Company nor any of its subsidiaries is in violation or default of any
provision of its certificate of incorporation or bylaws, or other organizational
documents, or is in breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound, except as set forth in the Offering
Memorandum; and there does not exist any state of fact which constitutes an
event of default on the part of the Company or any such subsidiary as defined in
such documents or which, with notice or lapse of time or both, would constitute
such an event of default, except such defaults which individually or in the
aggregate would have a Material Adverse Effect, except as set forth in the
Offering Memorandum.
4.6. No Actions. Except as disclosed in the Offering Memorandum or
incorporated by reference therein, there are no legal or governmental actions,
suits or proceedings pending or, to the best of the Company's knowledge,
threatened to which the Company or any of its subsidiaries is or may be a part
or of which property owned or leased by the Company or any of its subsidiaries
is or may be the subject, or related to environmental or discrimination matters,
which actions, suits or proceedings might, individually or in the aggregate,
prevent or adversely affect the transactions contemplated by this Agreement or
result in a Material Adverse Effect; and no labor disturbance by the employees
of the Company or any of its subsidiaries exists or is imminent which might be
expected to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body administrative agency or
other governmental body.
4.7. Properties. The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements included in
the Offering Memorandum or incorporated by reference therein, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such financial statements, or (ii) those which are not
material in amount and do not adversely affect the use made and promised to be
made of such property by the Company and its subsidiaries. The Company or the
applicable subsidiary holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
the business of the Company. Except as disclosed in the Offering Memorandum or
incorporated by reference therein, the Company owns or leases all such
properties as are necessary to its operations as now conducted or as proposed to
be conducted.
4.8. No Material Change; No Material Misstatement or Omission.
(a) Since December 31, 1996 and except as described in or specifically
contemplated by the Offering Memorandum or as disclosed to the Placement Agent,
(i) the Company and its subsidiaries have not incurred any material liabilities
or obligations, indirect, or contingent, or entered into any material verbal or
written agreement or other transaction which is not in the ordinary course of
business or which could result in a material reduction in the future earnings of
the Company and its subsidiaries; (ii) the Company and its subsidiaries have not
sustained any material loss or interference with their respective businesses or
properties from fire, flood, windstorm, accident, other calamity or any other
cause, whether or not covered by insurance; (iii) the Company has not paid or
declared any dividends or other distributions with respect to its capital stock
and the Company and its subsidiaries are not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock, other than the sale of the Debentures
hereunder or indebtedness material to the Company and its
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<PAGE>
subsidiaries (other than in the ordinary course of business); and (v) there
has not been a Material Adverse Effect.
(b) As of the date thereof, the Offering Memorandum did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
4.9. Intellectual Property. Except as disclosed in or specifically
contemplated by the Offering Memorandum, the Company has sufficient trademarks,
trade names, patent rights, copyrights, licenses, and governmental
authorizations to conduct its businesses as now conducted; and the Company has
no knowledge of any material infringement by it of trademark, trade name rights,
patent rights, copyrights, licenses, trade secrets or other similar rights of
others, and no claim has been made against the Company regarding trademark,
trade name, patent, copyright, license, trade secrecy or other infringement
which could have a Material Adverse Effect.
4.10. Compliance. The Company has not been advised, and has no reason to
believe, that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material Adverse Effect.
4.11. Taxes. The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of tax
deficiency which has been or might be asserted or threatened against the Company
or its subsidiaries which could have a Material Adverse Effect.
4.12. Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Debentures to be sold to the Purchaser hereunder
will be, or will have been, fully paid or provided for by the Company and all
laws imposing such taxes will be or will have been fully complied with.
4.13. Investment Company. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.14. Offering Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Debentures that has not been superseded by the
Offering Memorandum.
4.15. Insurance. Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
4.16. Contributions. Neither the Company nor any of its subsidiaries has,
directly or indirectly, at any time during the last five years (i) made any
unlawful contribution to any candidate for public office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
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4.17. Compliance with NASD Rules and Regulations; Sales and Purchases of
Common Stock. The offering and sale of the Debentures pursuant to the terms and
conditions of the Offering Memorandum and the Agreements does not violate any
rule or regulation promulgated by the NASD. At any time from the Closing Date
up to but not including the 90th day after the Closing Date, the Company agrees
not to engage in any short sale or purchase of any shares of Common Stock of the
Company (or any securities convertible into, exercisable for or exchangeable or
exercisable for shares of Common Stock of the Company).
4.18. Legal Opinion. Prior to closing, Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., counsel to the Company, will deliver its legal opinion to the
Placement Agent in the form of Appendix V hereto and stating that each of the
Purchasers may rely thereon as though such opinion was addressed directly to
such Purchasers.
4.19. Certificate. A certificate of the Company executed by the President
and Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date in form and substance satisfactory to the Purchasers to the
effect that the representations and warranties of the Company set forth in this
Section 4 are true and correct as of the date of this Agreement and as of the
Closing Date, and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied on or prior to such
Closing Date.
4.20. Additional Information. The information contained in the following
documents which the Company has furnished to the Purchaser, or will furnish
prior to the Closing, is or will be true and correct in all material respects as
of their respective filing dates:
(a) the Company's Annual Report on Form 10-K for the year ended March 31,
1996;
(b) the Company's Amendment No.1 to Form 10-K on Form 10-K/A;
(c) the Company's Proxy Statement dated August 9, 1996;
(d) the Company's Quarterly Reports on Form 10-Q dated June 30, 1996 and
September 30, 1996, and December 31, 1996;
(e) the Confidential Offering Memorandum dated March 17, 1997 containing
certain summary information relating to the sale of the Debentures to
the Purchasers by the Company pursuant to the Agreements; and
(f) all other documents, if any (the "Other Exchange Act Documents"),
filed by the Company with the Securities and Exchange Commission (the
"Commission") since the date of filing of the aforementioned Form 10-K
with the Commission pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
4.21. Securities Law Compliance. Assuming the compliance by the Placement
Agent with its representations, warranties and covenants set forth in the
Placement Agency Agreement to which this Subscription Agreement relates between
the Company and the Placement Agent and the compliance by the Purchasers with
their representations and warranties set forth herein and in the other
Agreements, the issuance, offer and sale by the Company to the Purchasers of the
Debentures is exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) or 3(b) thereof. During the past 12 months, except for
the Company's Annual Report on Form 10-K for the year ended March 31, 1996, the
Company has timely filed all reports and other filings applicable to it pursuant
to the Exchange Act.
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4.22. Lock-up. Except for any shares of Common Stock to be registered on
behalf of Lee H. Elizer pursuant to his Separation Agreement with the Company,
the Company agrees not to sell or offer to sell any Common Stock (or securities
convertible into or exchangeable for Common Stock) which become or are capable
of becoming freely-tradeable within the 90-day period immediately following the
effectiveness of the Registration Statement to be filed by the Company pursuant
to Section 7 hereof.
4.23. Payment of the Debentures. The Company shall pay the principal of,
premium, if any, and interest on the Debentures on the dates and in the manner
provided herein and in the Debentures. The Company shall pay interest on
overdue principal and premium, if any, at the rate borne by the Debentures; it
shall pay interest, including post-petition interest in the event of a
proceeding under Title 11 of the U.S. Code or any similar Federal or State law
for the relief of debtors ("Bankruptcy Law"), on overdue installments of
interest at the same rate to the extent lawful.
4.24. Waiver of Stay, Extension or Usury Laws. The Company expressly
waives (to the extent that it may lawfully do so) any of its rights under any
stay or extension law or any usury law or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of, premium,
if any, or interest on Debentures as contemplated herein, wherever enacted, now
or at any time hereafter in force, or that may affect the covenants or the
performance of this Purchase Agreement, and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law.
4.25. Notice of Default. The Company will, so long as any Debentures are
outstanding, deliver to the Purchaser, within 10 days of becoming aware of any
Default or Event of Default (as defined below) in the performance of any
covenant, agreement or condition in this Purchase Agreement, a certificate
signed by two officers of the Company specifying such Default or Event of
Default, the period of existence thereof and what action the Company is taking
or proposes to take with respect thereto.
4.26. Limitation on Interest and Other Distributions. The Company will not
declare or pay any interest or make any distribution to holders of its capital
stock, or purchase, redeem or otherwise acquire or retire for value any of its
capital stock or permit any Subsidiary to purchase, redeem or otherwise acquire
or retire for value any of the its capital stock if at the time of any of the
aforementioned actions an Event of Default has occurred of which the Company has
knowledge and is continuing or would exist immediately after giving effect to
such action.
5. Representations, Warranties and Covenants of the Purchaser.
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(a) The Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser, taking into account the personnel and resources
it can practically bring to bear on the purchase of Debentures, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Debentures, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Debentures; (ii) the Purchaser is acquiring the number
of Debentures set forth on the signature page hereof in the ordinary course of
its business and for its own account for investment only and with no present
intention of distributing any of such Debentures or Underlying Common Shares or
any arrangement or understanding with any other persons regarding the
distribution or purchase of such Debentures or Underlying Common Shares (this
representation and warranty does not limit the Purchaser's right to sell
pursuant to an exemption from registration or pursuant to the Registration
Statement or, other than with respect to any claims arising out of a breach of
this representation and warranty, the Purchaser's right to indemnification under
the Registration Rights Agreement); (iii) the Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Debentures or Underlying Common Shares except in compliance with the Securities
Act, and the rules and regulations promulgated thereunder, and under the
Exchange Act, and the rules and regulations promulgated thereunder, and the
terms and conditions of this Agreement; (iv) the Purchaser has completed or
caused to be completed the Registration Statement Questionnaire and the
Debenture Certificate Questionnaire, both attached hereto as Appendix I, for use
in preparation of the Registration Statement and the answers thereto are true
and correct to the best knowledge of the Purchaser as of the date hereof and
will be true and correct as of the effective date of the Registration Statement;
(v) the Purchaser has, in connection with its decision to purchase the number of
Debentures set forth on the signature page hereof, relied solely upon the
Confidential Offering Memorandum, receipt of which is hereby acknowledged, and
the representations and warranties of the Company contained in writing herein,
and has not relied upon any other statements, representations, warranties,
covenants or assurances of the Company or the Placement Agent; (vi) the
Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D ("Regulation D") promulgated under the Securities Act; and
(vii) the Purchaser understands that the Debentures and, except as provided in
Section 9 hereof, the Underlying Common Shares will contain a legend to the
following effect (provided that certificates for the Debentures shall omit the
last sentence thereof):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT. THESE SECURITIES ARE SUBJECT TO CERTAIN
REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT, A
COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.
(b) The Purchaser hereby covenants with the Company that it will not
directly or indirectly make any offer, sale, pledge, transfer or other
disposition of the Debentures or the Underlying Common Shares other than in
accordance with all applicable federal and state securities laws and the terms
and conditions of this Agreement, including, but not limited to, the other
representations, warranties and covenants of the Purchaser in this Section 5.
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(c) The Purchaser hereby covenants with the Company not to make any sale
of the Underlying Common Shares without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied, and the Purchaser
acknowledges and agrees that the Underlying Common Shares are not transferable
on the books of the Company unless the certificate submitted to the transfer
agent evidencing the Underlying Common Shares is accompanied by a certificate:
(i) in the form of Appendix IV hereto, (ii) executed by an officer of, or other
authorized person designated by, the Purchaser, and (iii) to the effect that (A)
the Underlying Common Shares have been sold in accordance with the Registration
Statement and (B) the requirement of delivering a current prospectus has been
satisfied.
(d) The Purchaser further represents and warrants to, and covenants with,
the Company that (i) the Purchaser has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(e) The Purchaser acknowledges that it has had such access to financial
and other information concerning the Company and the Debentures as it deemed
necessary in connection with its decision to purchase the Debentures, including
an opportunity to ask questions and request information from the Company and its
management, all such questions have been answered and all information requested
has been provided to the satisfaction of the Purchaser, and the Purchaser has
not relied on any third party, including the Placement Agent, to conduct due
diligence.
(f) If the Purchaser proposes to sell, pledge, assign or otherwise
transfer or convey, directly or indirectly, any of the Debentures or the
Underlying Common Shares prior to the date that the Registration Statement
becomes effective, then the Purchaser shall provide the Company, prior to the
sale of any such Debentures or the Underlying Common Shares with a legal opinion
in form and substance satisfactory to the Company of legal counsel satisfactory
to the Company that such sale, pledge, assignment, transfer or conveyance is
exempt from the registration requirements under the Securities Act and any
applicable state securities and blue sky laws.
(g) The Purchaser acknowledges that the Company will characterize the
Debentures as preferred stock of the Company for federal income tax purposes,
and that, pursuant to Section 385(c) of the Internal Revenue Code of 1986, as
amended, this characterization is binding on all holders. Any holder treating
the Debenture in a manner inconsistent with such characterization must disclose
the inconsistent treatment on such holder's tax return. This characterization,
however, is not binding on the Internal Revenue Service, and neither the Company
nor the holder is excused from any interest or penalties resulting from improper
characterization.
6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser in writing herein and in the closing
certificates delivered pursuant hereto shall survive the execution of this
Agreement, the delivery to the Purchaser of the Debentures being purchased and
the payment therefor.
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7. Registration of the Underlying Common Shares. In recognition of the
fact that Purchasers, even though purchasing Debentures for investment, may wish
to be legally permitted to sell their Underlying Common Shares when they deem
appropriate, the Company hereby covenants and agrees to prepare and file with
the Commission a registration statement (the "Registration Statement") with
respect to the resale of the Underlying Common Shares, as set forth in the
Registration Rights Agreement.
8. Reserved.
9. Conversion of Debentures.
9.1. Conversion. The Debentures shall be convertible at the option of the
holder into fully paid and non-assessable shares (rounded up to the nearest full
share) of Common Stock of the Company beginning on the earlier of (i) the
effective date of the Registration Statement or (ii) the 91st calendar day after
the date of issuance of the Debentures (the "Issue Date") at a conversion price
equal to the lower of (the "Conversion Price") (x) 120% of the average closing
bid price of the Common Stock as calculated over the five trading-day period
ending on the last trading day prior to the Subscription Date (as defined
herein) and (y) 80% of the average closing bid price of the Common Stock as
calculated over the five trading-day period ending on the trading day
immediately preceding the date on which the Company receives (by telecopier)
each Conversion Notice. The number of Conversion Shares issuable upon conversion
of each Debenture shall be determined by dividing $10,000 by the Conversion
Price in effect on the Conversion Date, as defined below. An individual
Debenture may only be permitted to convert in its entirety. Partial conversion
of an individual Debenture is not permitted.
9.2. Mechanics of Conversion.
(a) Conversions and Exchanges. The holder of any Debentures may exercise
the conversion right as to any number thereof by delivering via facsimile to the
Company, at the office of the Company at 310 South Street, Plainville,
Massachusetts, a Conversion Notice. The Conversion Notice shall state (i) that
the holder elects to convert its Debenture(s), (ii) the number of Debentures
which such holder is converting, (iii) subject to applicable securities laws,
the name(s) in which the certificate(s) representing the Conversion Shares and
Interest Shares, if any, to which such holder is entitled are to be issued, and
(iv) the telecopier number to which the Company shall telecopy its confirmation
described below. Notice given by telecopier to telecopier number (508) 695-8593
shall be deemed notice for purposes of this paragraph and shall be deemed given
at the time of the holder's transmittal. Within one business day of receipt of
any Conversion Notice, the Company shall, by telecopier, confirm receipt thereof
at the telecopier number included thereon, which confirmation shall set forth,
subject to Section 12.3 hereof, the number of Conversion Shares and Interest
Shares, if any, to be issued by the Company as a result of such conversion. The
Conversion Notice shall be deemed accepted by the Company provided the holder
surrenders, or causes any agent for the holder to surrender, the certificate(s)
for Debenture(s) to be converted, duly endorsed or assigned in blank, to the
Company, at the location set forth above, within three business days after
delivery of the Conversion Notice. Provided that the certificate(s) are
delivered in accordance with the preceding sentence, the conversion shall be
deemed to have been effected on the date of delivery of the Conversion Notice by
telecopier, and such date is referred to herein as the "Conversion Date."
Within four business days of receipt by the Company of the certificate(s)
representing the Debenture(s), the Company shall issue to such holder a
certificate or certificates representing the number of Conversion Shares and
Interest Shares, if any, which such holder is entitled to receive together with
a check or cash in respect of any fractional interest in a share of Common Stock
as provided in Section 9.3 hereof. Unless (i) such Conversion Shares and/or
Interest Shares have been held long enough to satisfy the holding period set
forth in Rule 144(k) (or
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any successor provision) promulgated under the Securities Act, (ii) such
shares become freely tradeable pursuant to another exemption under the
Securities Act, or (iii) the converting holder purchased such shares pursuant
to a current prospectus under an effective registration statement covering
the purchase and sale of such shares, the certificate(s) representing the
Conversion Shares and the Interest Shares will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. THESE
SHARES ARE SUBJECT TO CERTAIN REGISTRATION RIGHTS AS SET FORTH IN A
REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM
THE CORPORATION.
(b) Right of Rescission. The holder of the Debentures submitted for
conversion shall have the right to rescind such holder's conversion if the
Underlying Common Shares to which such holder is entitled are not issued by the
Company within four business days of receipt by the Company of the Debentures
being converted.
(c) Exchanges. After the Registration Statement is declared effective by
the Commission, if any holder of legended Conversion Shares and Interest Shares,
or any holder of Debentures who simultaneously submits a Conversion Notice,
shall deliver to the Company (i) the certificate representing such shares or
Debentures, as the case may be, and (ii) a letter of representations to the
effect of Sections 5(b) and 5(c) herein, then the Company shall within four
business days after receipt by the Company of the foregoing issue new shares in
exchange for the aforementioned legended shares or Debentures, which new shares
shall be legended as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES MAY BE SOLD
PURSUANT TO THE REGISTRATION STATEMENT PROVIDED THAT THE HOLDER
COMPLIES WITH THE PROSPECTUS DELIVERY REQUIREMENTS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE SALE IS IN COMPLIANCE WITH
THE PLAN OF DISTRIBUTION SET FORTH IN THE PROSPECTUS. THE SHARES ARE
SUBJECT TO CERTAIN REGISTRATION RIGHTS AS SET FORTH IN A REGISTRATION
RIGHTS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE
CORPORATION.
Upon the sale by any holder of Conversion Shares and any Interest Shares
pursuant to and in accordance with the Registration Statement and delivery to
the Company by such holder of a certificate in the form of Appendix IV hereto,
then the Company shall within four business days after receipt by the Company of
the foregoing issue new shares which shall not bear any legend regarding
limitations on transferability thereof.
(d) Names. The person in whose name the certificate(s) for the Conversion
Shares and any Interest Shares are to be issued shall be deemed to have become a
stockholder of record on the applicable Conversion Date unless the transfer
books of the Company are closed on that date, in which event he or she shall be
deemed to have become a stockholder of record on the next succeeding date on
which the transfer books are open, but the Conversion Price shall be that in
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effect on the Conversion Date. Upon conversion of only a portion of the number
of whole Debentures covered by a certificate representing Debentures surrendered
for conversion, the Company shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Company, a new certificate covering the number of Debentures representing
the unconverted portion of the certificate so surrendered, which new certificate
shall entitle in all respects the holder thereof to the rights of Debentures
represented thereby to the same extent as if the certificate theretofore
covering such unconverted shares had not been surrendered for conversion.
(e) Penalties for Failure to Convert or Exchange. In the event the
Company does not issue to any holder of Debentures certificate(s) for the
Underlying Common Shares to which such holder is entitled within four business
days (the "Final Conversion Date") of receipt by the Company of the Debentures
being converted pursuant to Section 9.2(b) and/or (c), then the Company shall
pay said holder liquidated damages equal to 25% of the aggregate principal
amount of Debentures being converted on each of the first four business days
immediately following the Final Issue Date or until the Underlying Common Shares
to which such holder is entitled have been issued by the Company, whichever is
earlier, and shall pay liquidated damages equal to 100% of the aggregate
principal amount of Debentures being converted on the fifth business day
following the Final Issue Date if the Underlying Common Shares to which such
holder is entitled have not been issued by the Company by such date. In the
event the Company does not issue to any holder of Underlying Common Shares
certificate(s) for shares upon their exchange as provided in Section 9.2(c)
within four business days (the "Final Exchange Date") of receipt by the Company
of the shares being exchanged, then the Company shall pay said holder, on each
of the first four business days immediately following the Final Exchange Date or
until the Underlying Common Shares to which such holder is entitled have been
issued by the Company, whichever is earlier, for each share of Common Stock
being exchanged, liquidated damages equal to 25% of the closing bid price of the
Common Stock on the day such shares were received by the Company, and shall pay,
for each share of Common Stock being exchanged, liquidated damages equal to 100%
of the closing bid price of the Common Stock on the day such shares were
received by the Company on the fifth business day following the Final Exchange
Date if the Underlying Common Shares to which such holder is entitled have not
been issued by the Company by such date.
9.3. Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of Debentures. If more than one Debenture shall
be surrendered for conversion at any one time by the same holder, the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate amount of Debentures so surrendered. Instead of
any fractional shares of Common Stock which would otherwise be issuable upon
conversion of any amount of Debentures, the Company shall pay a cash adjustment
in respect of such fractional interest in an amount determined on the basis of
the then Current Market Price per share of Common Stock. Fractional interests
shall not be entitled to interest, and the holders thereof shall not be entitled
to any rights as stockholders of the Company in respect of such fractional
interests.
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9.4. Adjustments to Conversion Price for Certain Events. The Conversion
Price shall be subject to adjustment from time to time as set forth in this
subsection.
(a) In case at any time, or from time to time, the Company shall: (i)
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a interest or other distribution payable in shares of capital
stock; (ii) subdivide its outstanding shares of Common Stock into a larger
number of shares; (iii) combine its outstanding shares of Common Stock into a
smaller number of shares; or (iv) issue by reclassification or recapitalization
of its Common Stock any other class or series of shares of the Company
(including any such reclassification or recapitalization in connection with a
consolidation or merger in which the Company is the continuing corporation), the
Conversion Price in effect at the time of the record date for such interest or
of the effective date of such subdivision, combination, reclassification or
recapitalization shall be proportionately adjusted so that the holder of any
Debentures surrendered for conversion after such time shall be entitled to
receive the aggregate number and kind of shares which, if such Debentures had
been converted immediately prior to such time, such holder would have owned or
have been entitled to receive. Such adjustment shall be made successively
whenever any event listed above shall occur. In the event that such interest or
distribution is not so made, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such record date has not
been fixed.
(b) In case at any time or from time to time the Company shall (except as
hereinafter provided) issue or sell any shares of Common Stock after March 31,
1997, except Common Stock which may be issued pursuant to (i) the terms of this
Agreement and the Debentures, (ii) the exercise of options granted pursuant to
any stock option plan currently in existence or which may hereafter be adopted
by the Company where the exercise price of such options is not less than the
fair market value of a share of Common Stock on the date such option were
granted, (iii) the exercise of up to 100,000 options granted pursuant to any
stock option plan currently in existence or which may hereafter be adopted by
the Company where the exercise price of such options is less than the fair
market value of a share of Common Stock on the date such options were granted,
(iv) any obligations of the Company to issue securities pursuant to the terms of
any employment or separation arrangements in effect on the date hereof, (v) any
shares which may be issued to Christian P. Marlowe and/or Marlowe Engineering
Company in connection with current litigation, and (vi) any shares issued in
connection with warrants issued on the Closing Date to the Placement Agent or
Adar Equities LLC, (collectively, "Additional Shares of Common Stock"), at a
discount to the Current Market Price (as defined below) which is greater than
the then applicable discount set forth in Section 9.1, the then applicable
discount shall be adjusted to reflect the greater discount. For the purposes of
this subsection, the date as of which the Current Market Price for such
Additional Shares of Common Stock shall be computed shall be the earlier of (x)
the date on which the Company shall enter into a legally binding contract for
the issuance or sale of such Additional Shares of Common Stock or (y) the date
of the actual issuance of such Additional Shares of Common Stock. The
provisions of this subsection shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under subsection (a)
of this Section 9.4. No adjustment shall be made under this subsection upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities (as defined below), if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights or upon the issuance of
such Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to subsection (c) of this Section 9.4. Adjustments shall be
made successively whenever such an issuance of Additional Shares of Common Stock
shall occur. In the event that such Additional Shares of Common Stock are not
so issued or sold, the Conversion Price shall again be adjusted to be the
Conversion Price
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which would then be in effect if such issuance had not occurred.
The "Current Market Price" per share of Common Stock at any date herein
specified shall the average of the daily market prices for five consecutive
Trading Days (as defined below) ending on the last trading day prior to such
date, except that for purposes of Section 9.3 hereof, the "Current Market Price"
per share of Common Stock shall mean the market prices on the Trading Day
therein specified. The market price for each such Trading Day shall be
(i) if the Common Stock is quoted on the Nasdaq National Market or Nasdaq Small
Cap Market, the reported last sales price, or (ii) if the Common Stock is listed
or admitted to trading on a national securities exchange, the last reported
sales prices regular way, or (iii) if the Common Stock is quoted on the NASD OTC
Bulletin Board, the average of the closing bid and asked prices regular way, or
(iv) if the Common Stock is not so quoted, as reasonably determined by the Board
of Directors of the Company.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exercisable or
exchangeable for, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
arrival of a specified date or the happening of a specified event.
"Trading Day" shall mean any day on which trading takes place (i) in the
over-the-counter-market and prices reflecting such trading are published by the
National Association of Securities Dealers Automated Quotation System or, (ii)
if the Common Stock is then listed or admitted to trading on a national
securities exchange, on the principal national securities exchange on which the
Common Stock is then listed or admitted to trading.
(c) In case at any time, or from time to time, the Company shall take a
record of the holders of the Common Stock for the purpose of entitling them to
receive a distribution of, or shall otherwise issue, any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities and the consideration per share for which Additional
Shares of Common Stock may at any time thereafter be issuable pursuant to such
warrants or other rights or pursuant to the terms of such Convertible Securities
shall be less than the Current Market Price, then the Conversion Price
immediately thereafter shall be adjusted as provided in subsection (d) of this
section 9.4 on the basis that (i) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued as of the date for the determination of the Current
Market Price per share of Common Stock as hereinafter provided, and (ii) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received and receivable by
the Company for the issuance of such Additional Shares of Common Stock pursuant
to such warrants or other rights or pursuant to the terms of such Convertible
Securities. For the purposes of this subsection (c), the date as of which the
Current Market Price per share of Common Stock shall be computed shall be the
earliest of (x) the date on which the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive any such
warrants or other rights, (y) the date on which the Company shall enter into a
legally binding contract for the issuance of such warrants or other rights or
(z) the date of actual issuance of such warrants or other rights. Such
reduction shall be made successively whenever such a record date is fixed. In
the event that such rights or warrants are not so issued or (if issued) to the
extent not exercised, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record date had not been
fixed or such unexercised rights or warrants had not been issued.
(d) In case at any time, or from time to time, the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a distribution, by interest
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or otherwise, of evidences of its indebtedness or assets (including
securities, but excluding (i) any interest or distribution referred to in
subsection (a) of this Section 9.4 and (ii) any interest or distribution paid
in cash out of funds legally available therefor of the Company), then in each
such case the Conversion Price in effect after such record date shall be
determined by multiplying the Conversion Price in effect immediately prior to
such record date by a fraction, of which the numerator shall be the total
number of outstanding shares of Common Stock multiplied by the Current Market
Price on such record date, less the fair market value (as determined by the
Board of Directors of the Company, whose determination shall be conclusive)
of the portion of the assets or evidences of indebtedness so to be
distributed, and of which the denominator shall be the total number of
outstanding shares of Common Stock multiplied by such Current Market Price.
Such adjustment shall be made successively whenever such a record date is
fixed. In the event that such distribution is not so made, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be
in effect if such record date had not been fixed.
(e) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least five percent (5%)
in such conversion price; provided, however, that any adjustment which by reason
of this subsection (e) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subsection shall be made to the nearest cent or to the nearest 1/100 of a share.
9.5. Automatic Conversion. The Debentures shall mature three years after
the Issue Date (the "Maturity Date") and shall automatically convert into
Conversion Shares at the then current Conversion Price on the Maturity Date.
All accrued but unpaid interest on the Debentures shall be payable to the
holders on the Maturity Date in either Interest Shares or cash, at the option of
the Company.
9.6. No Impairment. The Company will not, by amendment of its certificate
of incorporation or through any reorganization (pursuant to any petition under
the Bankruptcy Code or otherwise), transfer of assets, consolidation, merger or
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 9 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Debentures against impairment.
9.7. Notice Provisions.
(a) Whenever any conversion price shall be adjusted pursuant hereto, the
Company shall forthwith obtain a certificate signed by the Company's chief
financial officer, setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which the Company's independent public accountants
determined the fair value of any evidences of indebtedness, shares of stock,
other securities or property or assets or warrants or other subscription or
purchase rights referred to in subsections 9.4(b) through 9.4(e) hereof) and
specifying the new conversion prices and (if applicable) describing the amount
and kind of common stock, securities, property or assets or cash which may be
received upon conversion of the Debentures, after giving effect to such
adjustment. The Company shall promptly cause a signed copy of such certificate
to be delivered to each holder of Debentures.
(b) In case the Company shall propose (i) to pay any interest payable in
stock of any class to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock, (ii) to offer to the holders
of its
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Common Stock rights to subscribe for or to purchase any Convertible
Securities or Additional Shares of Common Stock or shares of stock of any class
or any other securities, rights or options, (iii) to effect any reclassification
of its Common Stock (other than a reclassification involving only the
subdivision or combination of outstanding shares of Common Stock), (iv) to
effect any capital reorganization, (v) to effect any consolidation, merger or
sale, transfer or other distribution of all or substantially all its property,
assets or business, (vi) to file a voluntary petition seeking liquidation,
reorganization, arrangement, readjustment of debts or for any other relief under
the Bankruptcy Code or under any other act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign, now or hereafter existing, or
(vii) to effect the liquidation, dissolution, winding-up or reorganization of
the Company, then in each such case, the Company shall give to each holder of
Debentures a notice of such proposed action, which shall specify the date on
which a record is to be taken for the purposes of such stock interest,
distribution or rights, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, filing of
bankruptcy, liquidation, dissolution or winding-up is to take place and the date
of participation therein by the holders of Common Stock, if any such date is to
be fixed, and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Common Stock
and the conversion prices after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be so given in the case
of any action covered by (i) or (ii) above at least 20 days prior to the record
date for determining holders of the Common Stock for purposes of such action
and, in the case of any other such action, at least 20 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
9.8. Treasury Stock. The sale or other disposition of any issued shares of
Common Stock owned or held by or for the account of the Company shall be deemed
an issuance thereof for purposes of subsection 9.4 hereof, but until so issued
such shares shall not be deemed to be outstanding.
9.9. Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for a cash consideration, the
consideration received by the Company therefor shall be deemed to be the amount
of the cash received by the Company therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering price, in
any such case excluding any amounts paid or receivable for accrued interest or
accrued interest and without deduction of any compensation, discounts or
expenses paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issue thereof. To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined by the Board of Directors of the Company. The consideration for any
Additional Shares of Common Stock issuable pursuant to any warrants or other
rights to subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants or other rights, plus the additional
consideration payable to the Company upon the exercise of such warrants or other
rights. The consideration for any Additional Shares of Common Stock issuable
pursuant to the terms of any Convertible Securities shall be the consideration
received by the Company for issuing any warrants or other rights to subscribe
for or purchase such Convertible Securities, plus the consideration paid or
payable to the Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any, payable to
the Company upon the exercise of the right of conversion or
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exchange in such Convertible Securities. In case of the issuance at any time
of any Additional Shares of Common Stock or Convertible Securities in payment
or satisfaction of any interest upon any class of stock other than Common
Stock or in payment of any debt, the Company shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such interest or debt so paid or
satisfied.
9.10. Fractional Interests. In computing adjustments under this Section 9,
fractional interests in Common Stock shall be taken into account to the nearest
one-hundredth of a share.
9.11. Anti-Dilution Provisions. No adjustment shall be made as a result of
any increase in the number of Additional Shares of Common Stock issuable or any
decrease in the consideration payable upon any issuance of Additional Shares of
Common Stock, pursuant to any provisions intended solely to avoid dilution
contained in any warrants, rights or Convertible Securities.
9.12. When Adjustment Not Required.
(a) If the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a interest or distribution or
subscription or purchase rights and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such interest, distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(b) If the Company declares or makes any interest or distribution with
respect to Common Stock, other than regular cash interest or interest payable
solely in shares of Common Stock, and each holder of any Debentures concurrently
receives interest or distributions equal in amount and in the same kind of
property (whether cash, securities or other property) as such holder would be
entitled to receive if all of the outstanding Debentures were converted into
Common Stock as of the record date of such interest or distribution with respect
to Common Stock, then thereafter no adjustment shall be required with respect to
such interest or distribution.
9.13. Other Action Affecting Common Stock. If a set of facts shall occur
which, without being specifically controlled by the other provisions of this
Section 9, would not fairly protect the conversion rights of the Debentures in
accordance with the essential intent and principles of such provisions, then the
Board of Directors of the Company shall in good faith make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
9.14. Necessary Corporate Action. Before taking any action which would
result in an adjustment in the Conversion Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
9.15. Taxes Upon Conversion. The Company shall pay all documentary, stamp
or other transaction taxes attributable to the issuance or delivery of shares of
Common Stock upon conversion of any Debentures.
9.16. Reservation of Common Stock; Cancellation of Converted Debentures.
The Company 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 Debentures, the full number of whole shares of
Common Stock then deliverable upon the conversion of all Debentures at the
time outstanding (assuming full payment of interest with Interest Shares),
subject to adjustment as
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provided herein. All shares of Common Stock which shall be so issuable
shall, when issued upon conversion of all or any portion of the Debentures, be
duly and validly issued and fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof. All Debentures
converted pursuant hereto shall be canceled by the Company.
9.17. Interest Constitutes Corporate Debt. All interest accrued and unpaid
on Debentures to and including the date of conversion, whether or not declared
by the Board of Directors, shall constitute a debt of the Company payable
without interest to the converting holders and shall be paid by the Company on
the Conversion Date, in its option, either in cash or by the issuance of
Interest Shares as provided in Section 10 hereof.
10. Interest. Each holder of Debentures shall be entitled to receive a
cumulative annual interest payment of $700 for each Debenture held. Interest is
payable only upon conversion or redemption of the Debentures pursuant to Section
9 or Section 11 hereof and are payable either (i) in Interest Shares, with the
number thereof to be determined by dividing the accrued interest payable by the
average Market Price of the Common Stock over the five trading-day period
preceding the Conversion Date and rounded up to the nearest full share, or (ii)
in cash, at the option of the Company. Interest on the Debentures shall
accumulate from the Issue Date through the date of conversion or redemption, as
the case may be, on the basis of a calendar year consisting of 12 months each
consisting of 30 days. Interest shall be payable in cash only out of the assets
of the Company legally available for the payment thereof.
11. Redemption.
11.1. Mandatory Redemption. The Company shall redeem Debentures subject to
a Conversion Notice by paying to the holder cash equal to $12,500 per Debenture,
together with cash in the amount of all accrued and unpaid interest thereon
through the Redemption Date (as defined in subsection 11.3 herein), if (i) a
Conversion Notice is submitted which, if accepted, would otherwise require the
Company to issue, in combination with all Debentures previously converted, a
number of shares of Common Stock in excess of 20% of the number of shares of
Common Stock outstanding on the day prior to the Issue Date and (ii) the ASE has
not issued a waiver with respect to such rule.
11.2. Mechanics of Redemption. If any Debentures subject to a Conversion
Notice are to be redeemed pursuant hereto, notice thereof (the "Redemption
Notice") shall be sent immediately upon receipt by the Company of such
Conversion Notice to the holder(s) requesting conversion by telecopier and for
overnight delivery by a nationally recognized overnight express courier service
to such holder at such holder's address and telecopier number as the same shall
appear on the books of the Company. The Company shall redeem the Debentures it
is redeeming on the seventh calendar day following the date on which the Company
provides a Redemption Notice (the "Redemption Date"). The Redemption Notice
shall state that (a) the Debentures will be redeemed at the close of business on
the Redemption Date, (b) the redemption price, (c) the place at which
certificates for the Debentures called for redemption must be surrendered to
collect the redemption price, (d) interest on Debentures called for redemption
cease to accrue at the close of the last day prior to the Redemption Date and
(e) the section of this Agreement pursuant to which they are to be redeemed.
If, on the Redemption Date, the Company fails to pay to the holder(s) the
redemption price in cash for all of the outstanding Debentures, then the Company
shall pay in cash to the holder(s) thereof, as liquidated damages, an amount
equal to two percent of the redemption price for each 30 calendar day period, or
portion thereof, during which the redemption price remains unpaid, which period
shall commence on the Redemption Date. Any payments required to be made by the
Company pursuant to the preceding sentence shall be made in cash and on the last
day of each period as described therein and shall not have the effect of
reducing the redemption price.
18
<PAGE>
11.3. Partial Redemption. If less than all of the outstanding Debentures
are to be redeemed, the amounts to be redeemed shall be determined pro rata
relative to each holder's percentage of ownership of the outstanding aggregate
amount as of the date of the Redemption Notice. From and after the Redemption
Date, unless the Company shall default in the payment of redemption price
pursuant to the Redemption Notice, all interest on the Debentures shall cease to
accrue and all rights of the holders thereof as security-holders of the Company,
except the right to receive the redemption price (but without interest thereon),
shall cease and terminate.
11.4. Transfer Books. To facilitate the redemption of any Debentures, the
Board of Directors is authorized to cause the transfer books for such Debentures
to be closed as to the shares to be redeemed, unless the rules of any national
securities exchange or automated quotation system on which the Debentures may be
listed or quoted prohibit the closing of such transfer books.
12. Events of Default.
12.1. Definition. An "Event of Default", as used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order or any court or any order, rule or
regulation of any administrative or governmental body):
(1) the Company defaults in the payment of interest on any Debenture
when the same becomes due and payable and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Debenture when the same becomes due and payable
upon redemption or otherwise;
(3) the failure to perform any covenant or agreement of the Company
contained in Section 2(a), 3, 4.12, 4.25, 4.26, 7, 9, 11, 13 or 15 of this
Agreement or the Debentures which continues uncured for 60 days;
(4) acceleration of any indebtedness for money borrowed (including
obligations under leases required to be capitalized on the balance sheet of
the Company under generally accepted accounting principles but not
including any indebtedness or obligation for which recourse is limited to
property purchased) in an aggregate principal amount in excess of
$1,000,000, whether existing on the date of the execution of this Agreement
or thereafter created, if such acceleration is not annulled within 30 days
after written notice to the Company by the holders of at least 50% in
principal amount of outstanding Debentures;
(5) there shall be a default under any bond, debenture, note or other
evidence of Indebtedness (as defined below) or under any mortgage,
indenture or other instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness of the Company or any
Subsidiary, whether any such Indebtedness now exists or shall hereafter be
created, if (a) either (i) such event of default results from the failure
to pay any such Indebtedness at maturity or (ii) as a result of such event
of default, the maturity of such Indebtedness has been accelerated prior to
its stated maturity and such acceleration shall not be rescinded or
annulled or the accelerated amount paid within ten days after notice to the
Company of such acceleration, or such Indebtedness having been discharged,
and (b) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal or interest thereon, or the maturity of which has been so
accelerated, aggregates $1,000,000 or more;
19
<PAGE>
(6) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(c) consents to the appointment of a custodian of it or for all
or substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law:
(a) for relief against the Company in an involuntary case or
proceeding,
(b) appointing a receiver, trustee, liquidator or similar
official of the Company or for all or substantially all of its
property under any Bankruptcy Law, or
(c) ordering the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
"Indebtedness," as used herein, means, without duplication: (i) all
indebtedness for borrowed money whether or not evidenced by a promissory note,
draft or similar instrument; (ii) that portion of obligations with respect to
any lease that is properly classified as a liability on a balance sheet in
accordance with generally accepted accounting principles; (iii) notes payable
and drafts accepted representing extensions of credit; (iv) any balance owed for
all or any part of the deferred purchase price of property or services, which
purchase price is due more than six months from the date of incurrence of the
obligation in respect thereof (except any such balance that constitutes (x) a
trade payable or an accrued liability arising in the ordinary course of business
or (y) a trade draft or note payable issued in the ordinary course of business
in connection with the purchase of goods or services), if and to the extent such
debt would appear as a liability upon a balance sheet of such person prepared in
accordance with generally accepted accounting principles; (v) any debt of others
described in the preceding clauses (i) through (iv) which such person has
guaranteed or for which it is otherwise liable; and (vi) any deferral,
amendment, renewal, extension, supplement or refunding of any of the foregoing
Indebtedness; provided, however, that, in computing the "Indebtedness" of any
person, there shall be excluded any particular indebtedness if, upon or prior to
the maturity thereof and at the time of determination of such indebtedness,
there shall have been deposited with a depository in trust money (or evidences
of indebtedness if permitted by the instrument creating such indebtedness) in
the necessary amount to pay, redeem or satisfy such indebtedness as it becomes
due, and the amount so deposited shall not be included in any computation of the
assets of such person.
12.2. Acceleration. If an Event of Default (other than an Event of
Default specified in Section 12.1(5) or 12.1(6) occurs and is continuing, the
Purchasers of 50% in principal amount of the Debentures then outstanding by
notice to the Company may declare to be due and payable immediately the
principal amount of the Debentures plus accrued interest to the date of
acceleration. Upon any such declaration, such amount shall be due and
payable immediately, and upon payment of such amount all of the Company's
obligations with respect to the Debentures shall terminate. If an Event of
Default specified in Section 12.1(5) or 12.1(6) occurs, all unpaid
20
<PAGE>
principal and accrued interest on the Debentures then outstanding shall
become and be immediately due and payable without any declaration or the act
on the part of the Purchaser. Purchasers of at least 50% of the aggregate
principal amount of the Debentures by written notice to the Company may
rescind an acceleration and its consequences if (i) all existing Events of
Default, other than the non-payment of the principal of the Debentures, which
have become due solely by such declaration of acceleration, have been cured
or waived, (ii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal and
premium, if any, which has become due otherwise than by such declaration of
acceleration, has been paid, and (iii) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction.
12.3. Other Remedies. If an Event of Default occurs and is continuing, the
Purchaser may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal, and premium, if any, or interest on the
Debentures or to enforce the performance of any provision of the Debentures or
this Agreement.
A delay or omission by the Purchaser in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
13. Subordination.
13.1. Debentures Subordinated to Senior Indebtedness.
(a) The Company and the Purchaser agree that the payment of the principal
of, premium, if any, and interest on the Debentures (all of the foregoing, a
"Payment or Distribution") is subordinated and junior in right of payment, to
the extent and in the manner provided in this Section 13 to the prior payment in
full in cash of all Senior Indebtedness whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed. "Senior Indebtedness"
means the principal, premium, if any, and unpaid interest on and all other
amounts payable under or in respect of Indebtedness of the Company for money
borrowed; provided, however, that Senior Indebtedness shall not include (i)
Indebtedness owed to a subsidiary or (ii) the principal, premium, if any, and
interest on any Indebtedness of the Company which by its terms is expressly
subordinated in right of payment to the Debentures.
A Payment or Distribution shall include any asset of any kind or character,
and may consist of cash, securities or other property, by set-off or otherwise,
and shall include, without limitation, any purchase, redemption or other
acquisition of Debentures.
(b) The Senior Indebtedness of the Company shall continue to be Senior
Indebtedness and entitled to the benefit of these subordination provisions
irrespective of any amendment, modification or waiver of any term of any
instrument relating to refinancing of the Senior Indebtedness.
(c) All the provisions of this Agreement and the Debentures shall be
subject to the provisions of this Section 13 so far as they may be applicable
thereto.
(d) No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company, the Purchaser or the
holders of the Senior Indebtedness, or by any noncompliance by the Company or
the Purchaser with any of the terms, provisions and covenants of the Debentures
or this Agreement, regardless of any knowledge thereof that any such holder of
Senior Indebtedness
21
<PAGE>
may have or be otherwise charged with.
(e) In the event that the Debentures are declared due and payable before
their expressed maturity because of the occurrence of a default hereunder, (i)
the Company will give prompt notice in writing of such happening to the holders
of Senior Indebtedness and (ii) all Senior Indebtedness shall forthwith become
immediately due and payable upon demand, regardless of the expressed maturity
thereof.
13.2. Company Not to Make Payments with Respect to Debentures in Certain
Circumstances. No Payment or Distribution shall be made by the Company on
account of principal of, premium, if any, or interest on the Debentures, whether
upon stated maturity, upon redemption or acceleration, or otherwise, or on
account of the purchase or other acquisition of Debentures, whether upon stated
maturity, upon redemption or acceleration, or otherwise, if there shall have
occurred and be continuing a default with respect to any Senior Indebtedness
permitting the acceleration thereof or with respect to the payment of any Senior
Indebtedness and (a) such default is the subject of a judicial proceeding or
(b) notice of such default in writing or by telegram has been given to the
Company by any holder or holders of any Senior Indebtedness, unless and until
the Company shall have received written notice from such holder or holders that
such default or event of default shall have been cured or waived or shall have
ceased to exist.
Upon any acceleration of the principal of the Debentures or any payment by
the Company or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution or
winding up or liquidation or reorganization of the Company, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due upon all Senior Indebtedness shall first be
paid in full in cash, or payment thereof provided for to the satisfaction of the
holders thereof, before any Payment or Distribution is made on account of the
redemption price or principal of (and premium, if any) or interest on the
Debentures; and (subject to the power of a court of competent jurisdiction to
make other equitable provision, which shall have been determined by such court
to give effect to the rights conferred in this Section 13.2 upon the Senior
Indebtedness and the holders thereof with respect to the Debentures or the
Purchasers thereof or the Purchaser, by a lawful plan of reorganization or
readjustment under applicable law) upon any such dissolution or winding up or
liquidation or reorganization, any Payment or Distribution by the Company or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Purchaser would be entitled except for the
provisions of this Section 13.2, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such Payment or Distribution directly to the holders of Senior
Indebtedness of the Company or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness, before any Payment or Distribution is
made to the Purchaser.
In the event that, notwithstanding the foregoing, any Payment or
Distribution by the Company of any kind or character, whether such payment shall
be in cash, property or securities, prohibited by the foregoing, and the Company
shall have made payment to the Purchaser before all Senior Indebtedness is paid
in full in cash, or provision is made for such payment to the satisfaction of
the holders thereof, and if such fact shall then have been or thereafter be made
known to the Purchaser, then and in such event such Payment or Distribution
shall be paid over by the Purchaser or delivered to the holders of Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the
22
<PAGE>
payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in cash, after giving effect to any
concurrent Payment or Distribution to or for the holders of such Senior
Indebtedness, and, until so delivered, the same shall be held in trust by the
Purchaser as the property of the holders of Senior Indebtedness.
The holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Purchaser, without incurring
responsibility to the Purchaser and without impairing or releasing the
obligations of the Purchaser hereunder to the holders of Senior Indebtedness:
(i) change the manner, place or terms of payment or change or extend the time of
payment of, or renew or alter, Senior Indebtedness, or otherwise amend in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Indebtedness;
(iii) release any person liable in any manner for the collection of Senior
Indebtedness; (iv) apply any amounts received to any liability of the Company
owing to holders of Senior Indebtedness; and/or (v) exercise or refrain from
exercising any rights against the Company and any other person.
13.3. Subrogation of Debentures. Subject to the payment in full in cash
of all amounts then due (whether by acceleration of the maturity thereof or
otherwise) on account of all Senior Indebtedness at the time outstanding, the
Purchaser shall be subrogated to the rights of the holders of Senior
Indebtedness to receive Payments or Distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Debentures shall be paid in
full; and, for the purposes of such subrogation, no Payments or Distributions to
the holders of Senior Indebtedness to which the Purchaser would be entitled
except for the provisions of this Section 13.3, and no payments over pursuant to
the provisions of this Section 13.3 to the holders of Senior Indebtedness by
Purchaser, shall, as between the Company, the Company's creditors other than
holders of Senior Indebtedness, and Purchaser, be deemed to be a payment by the
Company to or on account of the Senior Indebtedness. It is understood that the
provisions of this Section 13.3 are and are intended solely for the purpose of
defining the relative rights of the Purchaser, on the one hand, and the holders
of Senior Indebtedness, on the other hand.
Nothing contained in this Section or elsewhere in this Agreement or in the
Debentures is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Purchaser, the obligation
of the Company, which is absolute and unconditional, to pay to the Purchaser the
principal of, premium, if any, and interest on the Debentures as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Purchaser and creditors of the
Company other than the Purchaser, nor shall anything herein or therein prevent
the Purchaser from exercising all remedies otherwise permitted by applicable law
upon default under this Agreement, subject to the rights, if any, under this
Section 13.3 of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Section 13.3, the Purchaser shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which any dissolution,
winding up, liquidation or reorganization proceedings are pending, or
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to Purchaser for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section
13.3.
23
<PAGE>
13.4. No Impairment of Subordination. No right of any present or future
holder of any Senior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or the Purchaser or by any act, or failure to
act, in good faith, by any holder of Senior Indebtedness, or by any
noncompliance by the Company or the Purchaser with the terms, provisions and
covenants of this Agreement, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
13.5. Section 13 Not To Prevent Events of Default. The failure to make a
payment on account of principal of, premium, if any, or interest on the
Debentures by reason of any provision in this Section 13 shall not be construed
as preventing the occurrence of an Event of Default with respect to such
Debentures under Section 12.
13.6. Debentures Senior to Subordinated Indebtedness. The indebtedness
represented by the Debentures will be senior and prior in right of payment to
all Subordinated Indebtedness, to the extent and in the manner provided in such
Subordinated Indebtedness. "Subordinated Indebtedness" means the principal,
premium, if any, and interest on any Indebtedness of the Company which by its
terms is expressly subordinated in right of payment to the Debentures.
14. Broker's Fee. The Purchaser acknowledges that the Company intends to
pay the Placement Agent a fee of up to 10% and to issue the Placement Agent or
its designee warrants to purchase Common Stock of the Company in respect of the
sale of the Debentures to the Purchaser. Each of the parties hereto represents
that, on the basis of any actions and agreements by it, there are no other
brokers or finders entitled to compensation in connection with the sale of the
Debentures to the Purchaser, except as may have been previously disclosed to the
Placement Agent.
15. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be by telecopier, with a copy being mailed
by a nationally recognized overnight express courier, and shall be deemed given
when receipt is acknowledged by transmit confirmation report and shall be
addressed as follows:
(a) if to the Company, to:
310 South Street
Plainville, Massachusetts 02762
Attn: Chief Financial Officer
Telephone: (508) 695-2006
Telecopier: (598) 695-8593
or to such other person at such other place as the Company shall
designate to the Purchaser in writing;
(b) if to the Purchaser, at its address and telecopier number as set forth
at the end of this Agreement, or at such other address or addresses as
may have been furnished to the Company in writing.
16. Changes. Any provision of this Agreement or the Debentures may be
amended or waived if the Company shall obtain the written agreement thereto of
the holder or holders of at least 50% of the principal amount of the Debentures
at the time outstanding, except that, without the written agreement of the
holder or holders of all the Debentures at the time outstanding, no such
amendment or waiver shall (i) change the maturity of any Debentures or change
the principal of, or the rate of interest or any premium payable with respect
to, any Debenture, (ii) change the percentage of the unpaid principal amount of
the Debentures required with respect to any
24
<PAGE>
amendment or waiver, or (iii) amend, modify or revise any of the provisions
of Sections 1 and 2, or of this Section 16. Each holder of the Debentures at
the time or thereafter outstanding shall be bound by any such amendment or
waiver complying with the foregoing requirements, whether or not a notation
thereof shall have been placed on the Debenture. Executed or true and
correct copies of any amendment or waiver shall be delivered by the Company
to each holder of outstanding Debentures promptly following the date on which
such amendment shall extend to or affect any provision or obligation not
expressly amended or waived.
No course of dealing between the Company and any Purchaser or the holder of
any Debenture, and no delay in exercising any rights hereunder or under any
Debenture, shall imply or otherwise operate as a waiver of any rights of any
Purchaser or the holder of any Debenture. For the purpose of determining
whether the holders of outstanding Debentures of the requisite unpaid principal
amount at any time have taken any action authorized by this Section, or by any
other provision of this Agreement and for all other purposes of this Agreement,
any Debentures owned by the Company or any affiliate of the Company shall not be
deemed outstanding.
17. Headings. The headings in this Agreement are for convenience of
reference only and shall not affect the meanings herein.
18. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without reference to its
rules as to conflicts of law) and the federal law of the United States of
America. Each party to this Agreement irrevocably agrees that any legal action
or proceeding arising out of or relating to this Agreement or any agreement or
transactions contemplated hereby shall be brought in the courts of the State of
New York or of the United States of America for the District of New York and
hereby expressly submits to the personal jurisdiction and venue of such courts
for the purposes thereof and expressly waives any claim for improper venue and
any claim that such courts are an inconvenient forum.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original. Facsimile signatures
are considered to be originals and shall have the same effect.
21. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Remainder of Page Intentionally Left Blank]
25
<PAGE>
IN WITNESS WHEREOF, the Purchaser has duly caused this Agreement to be
executed by its duly authorized representative as of the day and year first
above written.
Print or Type: Name of Purchaser
(Individual or Institution):
_______________________________________
Name of Individual representing
Purchaser (if an Institution):
_______________________________________
Title of Individual representing
Purchaser (if an Institution):
_______________________________________
Signature by: Individual Purchaser or Individual
representing Purchaser:
_______________________________________
Address:_______________________________
_______________________________________
Telephone:_____________________________
Telecopier:____________________________
AGGREGATE AMOUNT OF
DEBENTURES PURCHASED: _________________
ACCEPTED AND AGREED TO
THIS ___ DAY OF MARCH 1997:
MEDIA LOGIC, INC.
By:_______________________________________
Name:
Title:
26
<PAGE>
Appendix I-1
(one of two)
MEDIA LOGIC, INC.
DEBENTURE CERTIFICATE QUESTIONNAIRE
-----------------------------------
In connection with the preparation of the certificate(s) for the
Debentures, please provide us with the following information:
1. The exact name in which your
Debentures are to be
registered in (this is the
name that will appear on your
certificate(s)). You may use
the name of a registered
holder if appropriate:
___________________________
2. The relationship between the
Purchaser and the registered
holder, if any:
__________________________
3. The mailing address of the
registered holder named in
item 1 above:
_________________________
_________________________
_________________________
_________________________
4. The Social Security Number or
Tax Identification Number of the
registered holder named in item 1:
__________________________
<PAGE>
Appendix I-2
(two of two)
MEDIA LOGIC INC.
REGISTRATION STATEMENT QUESTIONNAIRE
------------------------------------
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Please state the name of the beneficial owner of the Debentures. This
is the name that will appear in the "Selling Securityholder" section of the
Registration Statement.
- --------------------------------------------------------------------------------
2. Please provide the number of: (1) Debentures purchased by the person
or entity named in Item 1 above; (2) shares of Common Stock that the person or
entity named in Item 1 above owned at March 1, 1997.
(1) (2)
Amount of Number of Shares of
Debentures Common Stock Owned
Purchased At March 1, 1997
--------- ----------------
3. Unless you check the following box, all Underlying Common Shares
relating to the Debentures listed above will be included in the Registration
Statement.
/ /
If you checked the foregoing box, please indicate a lesser number of Debentures
to be used to determine the number of Underlying Common Shares to be included in
the Registration Statement.
- --------------------------------------------------------------------------------
4. Have you, your organization or the beneficial owner named above had
any position, office or other material relationship within the past three years
with the Company or its affiliates other than as disclosed in the Prospectus
included in the Registration Statement?
____ Yes ____ No
If yes, please indicate the nature of any such relationships below:
- --------------------------------------------------------------------------------
<PAGE>
Appendix II
CONVERSION NOTICE
URGENT/FOR IMMEDIATE ATTENTION
addressed to:
Media Logic, Inc.
310 South Street
Plainville, Massachusetts 02762
Attn: Chief Financial Officer
Telephone: (508) 695-2006
Telecopier: (508) 695-8593
Name of Nominee or Registered Holder:
_________________________________________________________________
(Print)
Telecopier number to which confirmation of receipt of this Conversion Notice
should be sent:
_________________________________________________________________
(Print)
Amount of Debentures being converted hereby: _________________________________
If you want the Common Stock certificate, if any, made out in another person's
name, fill in the form below:
(INSERT OTHER PERSON'S SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER, WHERE APPLICABLE)
-----------------------------------------
-----------------------------------------
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, title, address and zip code)
Date:_____________________________________________________________
Signature:_________________________________________________________
<PAGE>
Appendix III
REGISTRATION RIGHTS AGREEMENT
<PAGE>
Appendix IV
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
------------------------------------------
The undersigned, [an officer of, or other person duly authorized by]
________________________________________________________________________________
[fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of the
securities evidenced by the attached certificate, and as such, sold such
securities on ____________ in accordance with registration statement
No. ____________, and the requirement of delivering a current prospectus and
current annual and quarterly reports by the Company has been complied with in
connection with such sale.
Print or Type:
Name of Purchaser
(Individual or
Institution): ____________________________________________
Name of Individual
representing
Purchaser (if an
Institution): ____________________________________________
Title of Individual
representing
Purchaser (if an
Institution): ____________________________________________
Signature by:
Individual Purchaser
or Individual
representing
Purchaser: ____________________________________________
<PAGE>
Appendix V
Form of Opinion of Counsel to the Company
-----------------------------------------
1. The Company and each of its subsidiaries has been duly organized and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation with full power and authority to own and lease its
properties and to conduct its business as now being conducted; the Company and
each of its subsidiaries is duly qualified to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure to so qualify would not, singly or in the aggregate,
have a material adverse effect on the business, properties, prospects, condition
(financial or otherwise), net worth or results of operations of the Company and
its subsidiaries taken as a whole.
2. The Company has authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Confidential Offering Memorandum (the
"Offering Memorandum"); the issued and outstanding shares of the Company's
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and conform to
the description thereof contained in or incorporated by reference into the
Offering Memorandum. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Offering Memorandum and the financial statements of the Company and the related
notes thereto included in the Offering Memorandum, neither the Company nor any
subsidiary has outstanding any options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations.
3. The Debentures have been duly and validly authorized and, when issued,
executed, delivered and sold by the Company in accordance with the Agreements,
will have been duly and validly issued, executed and delivered and will
constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms and entitled to the benefits
provided in the Agreements, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity. The
Warrants to be issued by the Company will be, upon issuance thereof, duly
authorized, fully paid and non-assessable. No further approval or authority of
the stockholders or the Board of Directors of the Company will be required for
the issuance and sale of the Debentures or the issuance of the Underlying Common
Shares.
4. The Conversion Shares have been duly authorized and reserved for
issuance upon conversion of the Debentures and, when issued and delivered upon
such conversion in accordance with the Form of Debenture, will be fully paid and
non-assessable and will not have been issued in violation of or subject to any
preemptive rights or other similar rights or, to such counsel's knowledge,
similar contractual rights. The Interest Shares have been duly authorized and
reserved for issuance upon payment of the interest on the Debentures and, when
issued and delivered upon such payment, will fully paid and non-assessable and
will not have been issued in violation of or subject to any preemptive rights or
other similar rights or, to such counsel's knowledge, similar contractual
rights. The Penalty Shares have been duly authorized and reserved for issuance
upon payment of such penalties and, when issued and delivered upon such
<PAGE>
payment, will be fully paid and non-assessable and will not have been issued
in violation of or subject to any preemptive rights or other similar rights
or, to such counsel's knowledge, similar contractual rights. The Rochon
Warrant Shares have been duly authorized and reserved for issuance upon
exercise of the Rochon Warrants and will fully paid and non-assessable and
will not have been issued in violation of or subject to any preemptive or
other similar rights or, to such counsel's knowledge, similar contractual
rights.
5. The Company has full corporate power and authority to enter into the
Placement Agency Agreement, the Escrow Agreement, each of the Warrant
Agreements, each of the Subscription Agreements and each of the Registration
Rights Agreements (collectively, the "Agreements"). The Agreements have been
duly authorized, executed and delivered by the Company. The performance of the
Agreements by the Company and the consummation of the transactions therein
contemplated will not violate any provision of the certificate of incorporation
or bylaws, or other organizational documents, of the Company or any of its
subsidiaries, and will not conflict with, result in the breach or violation of,
or constitute, either by itself or upon notice or the passage of time or both, a
default under any agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any of its respective properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
the Company or any of its subsidiaries or any of their respective properties.
To such counsel's knowledge, no consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental body
is required for the execution and delivery of the Agreements or the consummation
of the transactions contemplated thereby, except for compliance with the Blue
Sky laws applicable to the offering of the Debentures. Upon their execution and
delivery, and assuming the valid execution thereof by the respective Purchasers,
the Agreements will constitute valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' and contracting parties' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6. Except as to defaults, violations and breaches which individually or
in the aggregate would not be material to the Company or which are described in
the Offering Memorandum, neither the Company nor any of its subsidiaries is in
violation or default of any provision of its certificate of incorporation or
bylaws, or other organizational documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist any state of fact which constitutes an event of default on
the part of the Company or any such subsidiary as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event of
default, except such defaults which individually or in the aggregate would have
a Material Adverse Effect.
7. Except as described in the Offering Memorandum, to such counsel's
knowledge, there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or threatened,
against or affecting the Company or any of its subsidiaries which might,
singly or in the aggregate, have a Material Adverse Effect, or which might
materially and adversely affect the Agreements; to such counsel's knowledge,
all pending legal or governmental proceedings to which the Company or any of
its subsidiaries is a party or of which any of their property or assets is
the subject which are not described in the Offering
<PAGE>
Memorandum, including ordinary routine litigation incidental to the business,
are, considered in the aggregate, not material to the business of the Company
and its subsidiaries taken as a whole.
8. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the Company has timely filed all material required to be filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act for a period of at least 12 months
preceding the date hereof. The Company complies with the eligibility
requirements for the use of Form S-3 under the Securities Act of 1933, as
amended. The issuance of the Underlying Common Stock in accordance with the
terms and conditions of the Agreements will not violate the applicable listing
agreement between the Company and any securities exchange or market on which the
Company's securities are listed.
9. Assuming the compliance by the Placement Agent with its
representations, warranties and covenants set forth in the Placement Agency
Agreement dated March 17, 1997 between the Company and the Placement Agent
and the compliance by the Investors with the representations and warranties
set forth in their respective Subscription Agreements, the issuance, offer
and sale by the Company to the Investors of the Debentures is exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) or
3(b) thereof.
<PAGE>
EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of March 24, 1997 by and between Media Logic, Inc., a Massachusetts
corporation (the "Company"), and the purchaser whose name and address is set
forth on the signature page hereof (the "Purchaser").
This Agreement is made pursuant to the Subscription Agreement, dated as of
the date hereof, between the Company and the Purchaser (the "Subscription
Agreement"). In order to induce the Purchaser to enter into the Subscription
Agreement, the Company has agreed to provide for the benefit of the Purchaser
and the Other Purchasers (as defined below) of the Debentures (as defined
below), and any subsequent holders of Registrable Securities (as defined below),
the registration rights set forth in this Agreement.
The Company proposes to enter into substantially this same form of
registration rights agreement with certain other investors (the "Other
Purchasers") and expects to complete sales of Debentures to them. The Purchaser
and the Other Purchasers are hereinafter sometimes collectively referred to as
the "Purchasers," and this Agreement and the other registration rights
agreements executed by the Company and the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
Agent" shall mean Rochon Capital Group, Ltd.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Closing Date: Has the meaning such term is given in the Subscription
Agreement.
Commission: The Securities and Exchange Commission.
Common Stock: The shares of common stock, par value $.01 per share of the
Company.
Confidential Offering Memorandum: The Offering Memorandum, including all
exhibits thereto and documents incorporated by reference therein, dated March
17, 1997 prepared by the Company in connection with the private placement of the
Debentures, as the same may be amended or supplemented from time to time.
Conversion Notice: Has the meaning such term is given in the Certificate
of Designations.
Conversion Price: The Conversion Price has the meaning assigned to such
term in the Certificate of Designations.
Conversion Shares: Shares of Common Stock issuable upon the conversion of
the Debentures. Each Debenture will be convertible into that number of
Conversion Shares determined by dividing the subscription price of $10,000 per
Debenture by the Conversion Price.
<PAGE>
Debentures: 7% Convertible Subordinated Debentures Due 2000.
Effective Date: The date that the Registration Statement is declared
effective by the Commission.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holder: Each beneficial holder from time to time of Registrable
Securities.
Indemnified Holder: See Section 6(a).
Interest Shares: Shares of Common Stock, or cash at the election of the
Company, issuable to holders of Debentures as an interest payment equal to $700
per annum per Debenture, payable upon conversion by each holder of the
Debentures, at the then-current Conversion Price.
NASD: National Association of Securities Dealers, Inc.
Penalty Commencement Date: The earlier of (i) the fifth day after the
Commission notifies the Company of the Commission's willingness to declare the
Registration Statement effective, or (ii) the 90th calendar day after the
Closing Date.
Penalty Payment: See Section 3.
Penalty Shares: See Section 3.
Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in any Registration Statement, as
supplemented by any prospectus supplement and as amended by all amendments,
including post-effective amendments and all material incorporated by reference
in such prospectus.
Registrable Securities: The Underlying Common Shares; provided that an
Underlying Common Share ceases to be a Registrable Security when it (i) has been
effectively registered under Section 5 of the Securities Act and disposed of in
accordance with any Registration Statement, (ii) is eligible for distribution to
the public pursuant to Rule 144 under the Securities Act ("Rule 144") (or any
similar provisions then in force) or (iii) is eligible for distribution to the
public by the Holder pursuant to Rule 144(k) (or any similar provisions then in
force).
Registration Expenses: See Section 5.
Registration Statement: Any registration statement of the Company which,
in accordance with Section 3 hereof, covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such Registration Statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such Registration Statement.
Securities Act: The Securities Act of 1933, as amended.
Subscription Date: March 28, 1997 or such other date agreed upon by the
Company and
2
<PAGE>
the Placement Agent.
Underlying Common Shares: The Conversion Shares, the Interest Shares and
the Penalty Shares, including any shares of Common Stock which may be issuable
by reason of the anti-dilution provisions of the Debentures.
2. Securities Subject to this Agreement
Each holder from time to time of Registrable Securities shall be entitled
to the benefits of this Agreement. A Person is deemed to be a Holder of
Registrable Securities whenever such Person is the beneficial owner of
Registrable Securities. The Company is entitled to treat the record holder of
Registrable Securities as beneficial owner of Registrable Securities unless
otherwise notified by such holder.
3. Registration Statement: Timing of Filing, Effectiveness and Period of
Usability
Subject to the provisions of Section 4 hereof, the Company shall, as soon
as possible after the Closing Date, prepare and file with the Commission a
Registration Statement on Form S-3 (or any other form of registration statement
on which it may file for registration under the Securities Act) registering
resales of the Underlying Common Shares by the Holders from time to time through
the automated quotation system of the American Stock Exchange or the facilities
of any national securities exchange or the Nasdaq National Market if the Common
Stock is then listed or quoted thereon or in privately-negotiated transactions.
The Registration Statement shall register all of the Underlying Common Shares.
The Company will use its best efforts to cause the initial Registration
Statement to be declared effective by the Commission as soon as possible after
the Closing Date. The Company hereby agrees that it shall (i) prepare and file
such post-effective amendments to the initial Registration Statement and/or such
additional Registration Statements as may be necessary to ensure that at all
times there shall be registered with the Commission for resale by the Holders
from time to time as provided in this Section 3 sufficient shares of Common
Stock to account for all Underlying Common Shares which become issuable from
time to time with respect to the Debentures (as a result of changes in the
Conversion Price and/or issuances of Penalty Shares and by reason of the
anti-dilution provisions of the Debentures), and (ii) cause such post-effective
amendments to the initial Registration Statement and/or such additional
Registration Statements to be declared effective by the Commission prior to the
issuance of any shares of Common Stock covered thereby.
If the Registration Statement is not declared effective by the Commission
on or before the Penalty Commencement Date, the Company will have the
obligation to pay penalty payments (the "Penalty Payments") at the rate of
$200 per Debenture per month following the Penalty Commencement Date until
the Registration Statement is declared effective. The first Penalty Payment
shall be payable on the earlier to occur of the 30th calendar day following
the Penalty Commencement Date or the date the Registration Statement is
declared effective. Subsequent Penalty Payments shall be payable on each
30-day anniversary on the Penalty Commencement Date, except if the
Registration Statement shall be declared effective prior thereto in which
case the subsequent Penalty Payment shall be made concurrently with such
effectiveness. Any date on which a Penalty Payment is required to be paid is
referred to herein as a "Penalty Payment Date." Penalty Payments shall be
paid to the holders of record of the Debentures on each Penalty Payment Date.
With respect to Debentures which have been converted into Conversion Shares
and Interest Shares prior to a Penalty Payment Date, the Penalty Payment with
respect to such converted Debentures shall be paid to the holders on such
Penalty Payment Date of the Conversion Shares and Interest Shares issued upon
conversion of such Debentures, and the payments made thereto shall be made in
proportion to the number of Conversion Shares and
3
<PAGE>
Interest Shares issued upon conversion of such Debentures. The Company shall
have the option to pay Penalty Payments in respect of the first two Penalty
Payment Dates either in cash or in shares of Common Stock which shall be
registered pursuant to the Registration Statement (the "Penalty Shares")
together with the Conversion Shares and the Interest Shares, and Penalty
Payments with respect to all subsequent Penalty Payment Dates shall be paid
by the Company solely in cash. The Penalty Payment shall accrue and be
prorated for partial months, assuming a 360-day year of twelve 30-day months.
The number of Penalty Shares to be issued in payment of any Penalty Payment
shall be determined by dividing the amount of such Penalty Payment by the
average price of the Common Stock over the five (5) trading days preceding
the applicable Penalty Payment Date.
The Company agrees to use diligent efforts to keep the Registration
Statement(s) continuously effective and usable for resale of Registrable
Securities until two years (the "Effectiveness Period") from the Closing Date or
such shorter period which will terminate when all Underlying Common Shares have
ceased to be Registrable Securities.
4. Registration Procedures
In connection with the Company's obligation to file Registration Statements
as provided in Section 3 hereof, the Company will as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement, and such supplements to
the Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form utilized by the Company or by the Securities
Act or rules and regulations thereunder for shelf registration or otherwise
necessary to keep the Registration Statement effective for the applicable period
and cause the Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(b) notify Purchaser and the Holders of Registrable Securities
promptly, and confirm such advice in writing,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, and
(3) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose;
(c) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(d) furnish, without charge, to Purchaser and, upon request, each
Holder of Registrable Securities, at least one conformed copy of the
Registration Statement and any post-
4
<PAGE>
effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference);
(e) deliver to Purchaser and each Holder of Registrable Securities
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; the Company consents to the use of the Prospectus or any
amendment or supplement thereto by each Purchaser and each Holder of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement thereto;
(f) use its reasonable efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the Holders
thereof to consummate the disposition of such Registrable Securities in such
jurisdictions as the Holders may reasonably specify in response to inquiries to
be made by the Company, provided that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(g) if any event shall occur as a result of which it is necessary, in
the opinion of counsel for the Company, to amend or supplement the Prospectus in
order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered by a Holder, promptly prepare a supplement
or post-effective amendment to the Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the Holders of the
Registrable Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(h) obtain a CUSIP number for all Registrable Securities (unless
already obtained), not later than the Effective Date;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act (in accordance with Rule 158 thereunder or
otherwise), no later than 45 days after the end of the 12-month period (or 90
days, if such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the Effective Date, which
statements shall cover said 12-month period;
(j) if at any time an event of the kind described in Section 4(g)
shall occur, notify Purchaser and the Holders of Registrable Securities that the
use of the Prospectus must be discontinued (the Company will not declare any
such "black-out" periods in excess of twenty business days during any twelve
month period, unless otherwise required by law); and
(k) on or prior to the date the Registration Statement is declared
effective by the Commission, cause all of the Underlying Common Shares to be
listed for trading on the American Stock Exchange (or on any other national
securities exchange) on which the Company's Common Stock is then listed.
Each Holder of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding the distribution of such
5
<PAGE>
Registrable Securities as the Company may from time to time reasonably
request in writing.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company
described in this paragraph 4(k), such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 4(g) hereof,
or until it is advised in writing by the Company (which notice the Company shall
give as promptly as possible), that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the Company,
such Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
5. Registration Expenses
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation:
(1) all registration, filing and listing fees;
(2) the Company's printing, messenger, telephone and delivery
expenses;
(3) fees and expenses of counsel for the Company;
(4) fees and expenses of all independent certified public accountants
of the Company (including the expenses of any special audit necessary to satisfy
the requirements of the Securities Act);
(5) fees and expenses associated with any NASD filing required to be
made in connection with the Registration Statement; and
(6) fees and expenses of one counsel to the holders of the
Registrable Securities, not to exceed $5,000
(all such expenses being herein called "Registration Expenses"); shall be borne
by the Company, regardless of whether the Registration Statement becomes
effective.
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on a securities exchange or the American Stock Exchange.
6. Indemnification and Contribution
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder of Registrable Securities, its officers, directors,
employees and agents and each Person who controls such Holder within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each such person being sometimes hereinafter referred to as an
"Indemnified Holder") from and against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
legal expenses) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
or Prospectus or in any amendment or supplement thereto or in any
6
<PAGE>
preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent
that any such losses, claims, damages, liabilities or expenses arise out of
or are based upon any untrue statement or alleged untrue statement or
omission or alleged omission thereof based upon information furnished in
writing to the Company by such Holder or its agent expressly for use therein;
provided further, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement, omission or alleged omission was completely
corrected in an amendment or supplement to the Prospectus and if, having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or
concurrently with the sale of a Registrable Security to the person asserting
such loss, claim, damage, liability or expense who purchased such Registrable
Security which is the subject thereof from such Holder. This indemnity will
be in addition to any liability which the Company may otherwise have.
If any action or proceeding (including any governmental investigation or
inquiry) shall be brought or asserted against any Indemnified Holder in respect
of which indemnity may be sought from the Company, such Indemnified Holder shall
promptly notify the Company in writing (but the omission to so notify the
Company shall not relieve it of any liability that it may have against any
Indemnified Holder otherwise than under this subsection), and the Company shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Holder and the payment of all expenses.
Indemnified Holders shall have the right, collectively, to employ their own
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of the Indemnified
Holders unless (a) the Company has agreed to pay such fees and expenses or (b)
the Company shall have failed to assume the defense of such action or proceeding
and have failed to employ counsel reasonably satisfactory to the Indemnified
Holders in any such action or proceeding or (c) the named parties to any such
action or proceeding (including any impleaded parties) include the Indemnified
Holders and the Company, and the Indemnified Holders shall have been advised by
counsel that there may be one or more legal defenses available to the
Indemnified Holders which are different from or additional to those available to
the Company (in which case, if the Indemnified Holders notify the Company in
writing that they elect to employ their own counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of the Indemnified Holders, it being understood,
however, that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for the Indemnified Holders which firm shall be designated in writing by
the Indemnified Holders representing at least a majority of the aggregate
principal amount of the outstanding Registrable Securities). Any such fees and
expenses payable by the Company shall be paid to the Indemnified Holders
entitled thereto as incurred by the Indemnified Holders. The Company shall not
be liable for any settlement of any such action or proceeding effected without
its written consent, but if settled with its written consent, or if there be a
final judgment for the plaintiff in any such action or proceeding, the Company
agrees to indemnify and hold harmless the Indemnified Holders from and against
any loss or liability by reason of such settlement or judgment.
(b) Indemnification by Holder of Registrable Securities. Each Holder of
Registrable
7
<PAGE>
Securities agrees to indemnify and hold harmless the Company, its respective
directors and officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Holder, but only with respect to information relating to such
Holder furnished in writing by such Holder expressly for use in any
Registration Statement or Prospectus, or any amendment or supplement thereto,
or any preliminary prospectus. In case any action or proceeding shall be
brought against the Company or its respective directors or officers or any
such controlling person, in respect of which indemnity may be sought against
a Holder of Registrable Securities, such Holder shall have the rights and
duties given the Company, and the Company or its respective directors or
officers or such controlling person shall have the rights and duties given to
each holder by the preceding paragraph. In no event shall the liability of
any Holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Contribution. If the indemnification provided for in this Section 6
is unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company from the sale of the Debentures to Purchaser pursuant to the
Subscription Agreement on the one hand and each Holder of Registrable Securities
from the offering of the Registrable Securities by such Holder, on the other
hand, or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and each Holder of Registrable Securities on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, or liabilities, as well as the other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and each Holder of Registrable Securities on the other shall be deemed to be in
the same proportion as the aggregate amount paid by Purchaser to the Company
pursuant to the Subscription Agreement for the Registrable Securities purchased
by such Holder that were sold pursuant to the Registration Statement bears to
the difference (the "Difference") between the amount such Holder paid for the
Registrable Securities that were sold pursuant to the Registration Statement and
the amount received by such Holder from such sale. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the particular
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company and the Holders of Registrable Securities agree that it would not be
just and equitable if contributions pursuant to this subsection (c) were to be
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable consideration referred to in the first
sentence of this subsection (c). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (c) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending against any action or claim that is the subject of
this subsection (c). Notwithstanding the provisions of this subsection (c),
each Holder of Registrable Securities shall not be required to contribute any
amount in excess of the amount by which the Difference exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
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of the Securities Act), shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
7. Rule 144 and Rule 144A
For so long as the Company is subject to the reporting requirements of
Section 13 or 15 of the Exchange Act, the Company covenants that it will file
the reports required to be filed by it under the Securities Act and Section
13(a) or 15(d) of the Exchange Act and the rules and regulations promulgated by
the Commission thereunder. If the Company is not subject to the reporting
requirements of Section 13 or 15 of the Exchange Act, the Company also covenants
that it will provide the information required pursuant to Rule 144A(d)(4) under
the Securities Act upon the request of any Holder of Registrable Securities
which continue to be "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act and it will take such further action as any
holder of such Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell its Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, so long as such provision does not
require the public filing of information relating to the Company which the
Company is not otherwise required to file, (b) Rule 144A under the Securities
Act, as such Rule may be amended from time to time, or (c) any similar rule or
regulation hereafter adopted by the Commission that does not require the public
filing of information relating to the Company. Upon the request of any Holder
of Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
8. Miscellaneous
(a) No Inconsistent Agreements. The Company will not on or after the date
of this Agreement enter into any agreement with respect to their securities
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders of Registrable Securities hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any such agreements.
(b) Adjustments Affecting Registrable Securities. The Company will not
take any action, or permit any change to occur, with respect to the Registrable
Securities which would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of a
majority of the Registrable Securities.
(d) Notices. All notices, requests, consents and other communications
hereunder shall be by telecopier, with a copy being mailed by a nationally
recognized overnight express courier, and shall be deemed given when receipt is
acknowledged by transmit confirmation report, and shall be delivered as
addressed as follows:
(1) if to the Purchaser, at the most current address given by the
Purchaser to the Company in accordance with the provisions of this Section 8(d),
which address initially is as set forth on the signature page hereto;
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(2) if to a Holder of Registrable Securities, at its address of
record as indicated on the books of the transfer agent and registrar for the
Registrable Securities; and
(3) if to the Company, initially at its address set forth in Section
9 of the Subscription Agreement and thereafter at such other addresses, notice
of which is given in accordance with the provisions of this Section 8(d).
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same agreement. Facsimile signatures are
considered to be originals and shall have the same effect.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not affect the meanings herein.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without reference to its
rules as to conflicts of law) and the federal law of the United States of
America.
(i) Severability. In the event that any one or more of the provisions
contained herein is held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions hereof shall not be
affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Subscription Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Calculation of Majority. For purposes of determining whether the
Holders of a majority of the Registrable Securities have taken action pursuant
thereto, any Debentures then outstanding shall be deemed to have been converted
into Underlying Common Shares, which shares shall be treated as outstanding for
purposes hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
MEDIA LOGIC, INC.
By:________________________________
Name: William E. Davis
Title: Chief Executive Officer
Print or Type:
Name of Purchaser
(Individual or Institution):
___________________________________
Name of Individual representing
Purchaser (if an Institution):
___________________________________
Title of Individual representing
Purchaser (if an Institution):
___________________________________
Signature by:
Individual Purchaser or Individual
representing Purchaser:
___________________________________
Address: __________________________
Telephone: ________________________
Telecopier: _______________________
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