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As filed with the Securities and Exchange Commission on January 28, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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. [ ]
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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].
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
Proposed Proposed
maximum maximum
Title of each class aggregate aggregate Amount of
of securities to be Amount to be price per offering registration
registered registered unit (1) price (1) fee
_______________________________________________________________________________
Common Stock, par
value $.01 per share 4,700,000 $1.86 $8,731,250 $2,576
_______________________________________________________________________________
(1) Estimated solely for the purpose of calculating the registration fee and
in accordance therewith (i) pursuant to Rule 457(c) includes 1,700,000
shares based upon the average of the high and low sales prices of the
Registrant's Common Stock on the American Stock Exchange on January 26,
1998 which amount was $1.3125 and (ii) pursuant to Rule 457(g) includes
3,000,000 shares subject to warrants based upon the price at which such
warrants may be exercised.
----------------------------
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.
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Subject to Completion Dated January 28, 1998
PROSPECTUS
MEDIA LOGIC, INC.
4,700,000 Shares of Common Stock
(Par Value $.01 Per Share)
----------------------------
The 4,700,000 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 and the fees of legal counsel for
Imprimis SB L.P. ("Imprimis") and Wexford Spectrum Investors LLC ("Wexford")
in connection with the registration of the shares offered by them herein,
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
other than Imprimis and Wexford 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 January 26, 1998, the closing sale price of the Common
Stock, as reported by the American Stock Exchange, was $1.3125 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 _________________, 1998.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
<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
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TABLE OF CONTENTS
PAGE
RISK FACTORS.......................................................... 4
THE COMPANY........................................................... 8
SELLING STOCKHOLDERS.................................................. 9
PLAN OF DISTRIBUTION.................................................. 10
LEGALITY OF COMMON STOCK.............................................. 10
EXPERTS............................................................... 10
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................... 10
3
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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 10K/A (collectively, the "Form
10-K") for the fiscal year ended March 31, 1997 and in the Company's
Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997 and
September 30, 1997 and under "Description of Business" in the Form 10-K,
incorporated into 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 years 1996 and 1997,
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, such competitors 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.
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.
4
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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 the
Company's new automated tape library products could have a material adverse
effect on 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 subordinated debentures (the "March Private
Placement") which resulted in approximately $3,530,000 in gross proceeds to
the Company and in October 1997 the Company completed a private placement of
convertible debentures (the "October Private Placement") which resulted in
$750,000 in gross proceeds to the Company. In addition, in December 1997,
the Company completed a private placement of the Common Stock (the "December
Private Placement") which resulted in $1,530,000 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 six months ended September 30, 1997,
the Company incurred a loss of $2,098,630 on revenues of $767,626. For the
fiscal year ended March 31, 1997, the Company incurred a loss of $4,122,288
on revenues of $3,644,478, and for the fiscal year ended March 31, 1996, the
Company incurred a loss of $7,818,819 on revenues of $3,578,236. These recent
losses 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 have a material adverse effect on 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 38.7% of the Company's Common Stock (including shares issuable
upon exercise of options held by such persons, which options are currently
exercisable and shares issuable upon exercise of warrants held by such
persons, which warrants are currently exercisable). 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 stockholder, Raymond Leclerc, has a contractual right to
Board representation and the purchasers in the December Private Placement
have the contractual right to Board representation in certain circumstances.
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 7,637,612 shares of
Common Stock are currently freely tradable on the open market. In addition,
there were a total of 575,138 options to purchase Common Stock outstanding
as of January 8, 1998 pursuant to the Company's stock option plans, and
399,672 of such options were vested and can be exercised at any time prior to
their respective expiration dates. Lee H. Elizer, the
5
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former Chief Executive Officer and President of MediaLogic ADL, is entitled
to receive 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.
In June 1997, the Company registered for resale, on a
registration statement on Form S-3 (the "June 1997 Registration Statement"),
up to 3,565,656 shares of Common Stock issuable upon conversion of $3,530,000
aggregate principal amount of 7% convertible subordinated debentures due 2000
(the "March Debentures"), and interest thereon, issued by the Company to the
selling stockholders named therein. The principal amount of the March
Debentures is convertible at any time into shares of the Company's Common
Stock based on a predetermined formula. In connection with the December
Private Placement, all of the remaining holders of the March Debentures and
the Company agreed to set a fixed conversion price for the March Debentures
of $.90 per share of Common Stock until January 28, 1998 and thereafter the
price at which the March 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
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 "March Conversion Date
Price"), subject to a $.90 minimum conversion price. Each individual $10,000
principal amount March Debenture may be converted only in its entirety. The
March Debentures bear interest at the rate of 7% per year. Interest is
payable only upon conversion of the March 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 registered 3,565,656 shares of Common Stock (the
"Registered Shares") pursuant to the June 1997 Registration Statement 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 declined
substantially. The Registered Shares represented the approximate number of
shares which would be issuable upon conversion of the March Debentures
(excluding shares issuable upon conversion of accrued interest) if the March
Conversion Date Price were $0.99 per share. An aggregate of 3,063,222 shares
have been offered pursuant to the Prospectus contained in the June 1997
Registration Statement as amended by Prospectus Supplement No. 1 dated
December 31, 1997, which number includes (i) 2,231,000 shares issued as of
December 31, 1997 for March Debentures already converted, (ii) 777,778 shares
issuable upon conversion of the remainder of the March Debentures outstanding
and (iii) 54,444 shares issuable upon conversion of approximately one year's
accrued interest, based on an assumed March Conversion Date Price of $.90 per
share for the principal amount and interest thereon of the March Debentures
outstanding as of December 31, 1997. If the March Debentures become
convertible into more than 3,565,656 shares, the Company would be obligated
to register additional shares of Common Stock. Through January 26, 1998,
approximately $2,930,000 aggregate principal amount of the March Debentures
have been converted into 2,288,574 shares of Common Stock, and approximately
$95,520 aggregate interest amount has been converted into 58,104 shares of
Common Stock.
In January 1998, the Company registered for resale, on a
registration statement on Form S-3 (the "January 1998 Registration
Statement"), 3,642,538 shares of Common Stock. Up to 891,668 of the shares of
Common Stock included in the January 1998 Registration Statement are issuable
upon conversion of $750,000 aggregate principal amount of 7% convertible
debentures due 2000 (the "October Debentures"), and interest thereon, issued
by the Company in the October Private Placement. The principal amount of the
October Debentures is convertible at any time into shares of the Company's
Common Stock based on a predetermined formula. The price at which the
October Debentures will convert will be $.90 until January 28, 1998 and
thereafter will be the lower of (i) $1.95, which amount is 120% of the
average closing bid price of the Common Stock as calculated over the five
trading-day period ending on October 29, 1997 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 "October Conversion Date Price"), subject to a $.90 minimum conversion
price. The October Debentures bear interest at the rate of 7% per year.
Interest is payable only upon conversion of the October 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 891,668 shares included in
the January 1998 Registration Statement represents the approximate number of
shares which would be issuable upon conversion of the October Debentures
(including shares issuable upon conversion of one year of accrued interest)
if the October Conversion Date Price were $0.90 per share. If the October
Debentures become convertible into more than 891,668 shares, the Company will
be obligated to register additional shares of Common Stock.
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650,870 of the shares of Common Stock included in the January
1998 Registration Statement are issuable upon exercise of warrants to
purchase Common Stock (the "Advent Warrants") issued to ACFS Limited
Partnership ("ACFS") and to Digital Media & Communications L.P. ("Digital
Media") in connection with the March Private Placement. The Advent Warrants
are exercisable at any time prior to September 22, 2001 at an exercise price
of $3.00 per share of Common Stock.
900,000 of the shares of Common Stock included in the
January 1998 Registration Statement are issuable upon exercise of warrants
to purchase Common Stock (the "Adar Warrants") issued to Adar Equities LLC,
("Adar") in connection with the March Private Placement. The Adar Warrants
are exercisable at any time prior to March 24, 2002 at an exercise price of
$3.00 per share of Common Stock.
200,000 of the shares of Common Stock included in the
January 1998 Registration Statement are issuable upon exercise of warrants
to purchase Common Stock (the "Rochon Warrants") issued to Rochon Capital
Group, Ltd. in connection with the March Private Placement. The Rochon
Warrants are exercisable at an exercise price of $2.00 per share of Common
Stock.
1,000,000 of the shares of Common Stock included in the
January 1998 Registration Statement were issued to Raymond W. Leclerc in a
private placement in September 1995.
All of the shares registered for resale by the holders thereof
which are included in the June 1997 Registration Statement and the
January 1998 Registration Statement 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.
1,700,000 of the Shares offered hereby were issued to Imprimis
and Wexford in the December Private Placement and 2,000,000 of the Shares
offered hereby are issuable upon exercise of warrants (the "Wexford
Warrants") to purchase Common Stock which were issued to Imprimis and Wexford
in connection with the December Private Placement. 1,000,000 of the Wexford
Warrants are exercisable at an exercise price of $3.00 per share and
1,000,000 of the Wexford Warrants are exercisable at an exercise price of
$1.50 per share. The Wexford Warrants may be exercised at any time prior to
December 29, 2002.
500,000 of the Shares offered hereby are issuable upon
exercise of warrants (the "Adar October Warrants") to purchase Common Stock
issued to Adar in connection with the October Private Placement. The Adar
October Warrants are exercisable at any time during the period commencing
January 26, 1998 and ending January 26, 2003 at an exercise price of $2.00
per share. 250,000 of the Shares offered hereby are issuable upon exercise of
warrants (the "Adar December Warrants") to purchase Common Stock issued to
Adar in connection with the December Private Placement. The Adar December
Warrants are exercisable at any time during the period commencing March
29, 1998 and ending on March 29, 2003 at an exercise price of $2.00 per
share.
250,000 of the Shares offered hereby are issuable upon
exercise of warrants (the "Boston Group Warrants") to purchase Common Stock
issued to Boston Group, L.P. in connection with the December Private
Placement. The Boston Group Warrants are exercisable at any time during the
period commencing March 29, 1998 and ending on March 29, 2003 at an
exercise price of $2.00 per share.
The Company has agreed to register for resale from time to
time by the purchasers thereof the shares of Common Stock issued in the
December Private Placement and the shares of Common Stock issuable upon
exercise of the Wexford Warrants, the Adar October Warrants, the Adar
December Warrants and the Boston Group Warrants. All of such shares
registered for resale by the holders thereof 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.
Absence of Dividends. The Company has not paid dividends since
its inception and does not anticipate paying any dividends in the foreseeable
future.
Dilution. Dilution is likely to occur upon exercise of
outstanding warrants and existing stock options and upon the conversion of
the March Debentures and the October Debentures. See "--Shares Eligible For
Future Sale."
American Stock Exchange Listing. The Company does not fully
satisfy the American Stock Exchange guidelines for continued listing and
there is no assurance that the listing of the Common Stock on the American
Stock Exchange will be continued.
7
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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 1998, 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
1,700,000 of the Shares offered hereby were issued to Imprimis
and Wexford in the December Private Placement pursuant to a Securities
Purchase Agreement between the Company and each of Imprimis and Wexford (the
Securities Purchase Agreements have been filed as Exhibits 99.1 and 99.2,
respectively, to the registration statement of which this Prospectus is a
part).
2,000,000 of the Shares offered hereby are issuable upon
exercise of the Wexford Warrants, which Warrants are filed as Exhibits 99.3,
99.4, 99.5 and 99.6 to the registration statement of which this Prospectus is
a part. 500,000 of the Shares offered hereby are issuable upon exercise of
the Adar October Warrants which were issued pursuant to a Warrant Agreement
between the Company and Adar, which Warrant Agreement is filed as Exhibit
99.7 to the registration statement of which this Prospectus is a part.
250,000 of the Shares offered hereby are issuable upon exercise of the Adar
December Warrants which were issued pursuant to a Warrant Agreement between
the Company and Adar, which Warrant Agreement is filed as Exhibit 99.8 to the
registration statement of which this Prospectus is a part. 250,000 of the
Shares offered hereby are issuable upon exercise of the Boston Group Warrants
which were issued pursuant to a Warrant Agreement between Boston Group, L.P.
and the Company, which Warrant Agreement is filed as Exhibit 99.9 to the
registration statement of which this Prospectus is a part.
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock by the Selling
Stockholders as of January 26, 1998, as adjusted to reflect the sale of the
Common Stock offered hereby by each Selling Stockholder.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR SHARES OWNED
TO OFFERING (1) NUMBER OF AFTER OFFERING (2)
----------------------- SHARES BEING ------------------
SELLING STOCKHOLDERS NUMBER PERCENT OFFERED NUMBER PERCENT
- -------------------- ---------- ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Imprimis SB L.P.(3)....................... 2,466,668 21.1% 2,466,668 0 --%
Adar Equities LLC(4)...................... 1,650,000 13.7 750,000 0 --
Wexford Spectrum Investors LLC(5)......... 1,233,332 11.2 1,233,332 0 --
Boston Group, L.P. (6).................... 250,000 2.4 250,000 0 --
</TABLE>
- ------------------------
(1) The number of shares of Common Stock issued and outstanding on January 26,
1998 was 10,378,611. The calculation of percentage ownership for each listed
Selling Stockholder is based upon the number of shares of Common Stock
issued and outstanding at January 26, 1998, plus the shares of Common Stock
issuable upon exercise of warrants which are offered hereby by such Selling
Stockholder.
(2) Assuming all shares offered hereby are sold to unaffiliated third parties.
(3) Includes 1,333,334 shares issuable upon exercise of the Wexford Warrants.
(4) Includes 900,000 shares issuable upon exercise of the Adar Warrants, 500,000
shares issuable upon exercise of the Adar October Warrants and 250,000
shares issuable upon exercise of the Adar December Warrants. The 900,000
shares issuable upon exercise of the Adar Warrants are being offered
pursuant to the Prospectus contained in the January 1998 Registration
Statement (the "January 1998 Prospectus") and Adar's ownership after
completion of the offering contemplated hereby assumes that such shares have
been sold pursuant to the January 1998 Prospectus.
(5) Includes 666,666 shares issuable upon exercise of the Wexford Warrants.
(6) Represents shares issuable upon exercise of the Boston Group Warrants.
9
<PAGE>
PLAN OF DISTRIBUTION
The 4,700,000 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 its best efforts to maintain the
effectiveness of the registration of the shares being offered hereunder until
the earliest of (i) the fifth anniversary of the effectiveness of the
Registration Statement of which this Prospectus is a part, (ii) such time
as the shares of Common Stock offered hereby by Wexford and Imprimis may be
sold pursuant to Section (k) of Rule 144 of the 1933 Act and (iii) the
date that Wexford and Imprimis no longer own any of the Shares being offered
hereby by them, subject to a minimum of nine months from the effectiveness of
the Registration Statement of which this Prospectus is a part.
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 in connection with any such sales.
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,
1997 and 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1997, 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,
1997, filed pursuant to Section 13 or 15(d) of the 1934 Act (File No. 1-9605).
(b) The Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended June 30, 1997 and September 30, 1997, filed pursuant to
Section 13 or 15(d) of the 1934 Act (File No. 1-9605).
(c) The Company's Current Report on Form 8-K filed with the
Commission on December 31, 1997.
(d) 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.
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.
10
<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 $ 2,576.00
AMEX Fees 17,500.00
Legal Fees and Expenses 15,000.00
Accounting Fees and Expenses 5,000.00
Miscellaneous 4,924.00
----------
TOTAL $45,000.00
----------
----------
The Selling Stockholders other than Imprimis SB L.P. and
Wexford Spectrum Investors LLC will bear the expense of their own legal
counsel, if any.
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
II-1
<PAGE>
or omissions as such Director or Officer, unless in such
proceeding he shall be finally adjudged liable by reason of
dereliction in 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.
Exhibit
Number Description
- ------- -----------
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
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 (contained on the signature page of this
Registration Statement)
99.1 Securities Purchase Agreement between Media Logic, Inc. and
Imprimis SB L.P. dated December 22, 1997
99.2 Securities Purchase Agreement between Media Logic, Inc. and
Wexford Spectrum Investors LLC dated December 22, 1997
99.3 Warrant to Purchase Shares of Common Stock, par value $.01 per
share, of Media Logic, Inc. (Warrant No. WX-1) dated December 29,
1997
99.4 Warrant to Purchase Shares of Common Stock, par value $.01 per
share, of Media Logic, Inc. (Warrant No. WX-2) dated December 29,
1997
99.5 Warrant to Purchase Shares of Common Stock, par value $.01 per
share, of Media Logic, Inc. (Warrant No. WX-3) dated December 29,
1997
99.6 Warrant to Purchase Shares of Common Stock, par value $.01 per
share, of Media Logic, Inc. (Warrant No. WX-4) dated December 29,
1997
99.7 Warrant Agreement between Media Logic, Inc. and Adar Equities
LLC, dated as of October 29, 1997
99.8* Warrant Agreement between Media Logic, Inc. and Adar Equities
LLC, dated as of January 9, 1998
99.9* Warrant Agreement between Media Logic, Inc. and Boston Group,
L.P. dated as of January 9, 1998
II-2
<PAGE>
* To be filed by amendment
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 Commission pursuant to Rule 424(b) (Section 230.424(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 January 28, 1998.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
----------------------------
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.
Signatures Title Date
- ------------ ------- -----
/s/ William E. Davis Director and Chief January 28, 1998
- -------------------- Executive Officer and President
William E. Davis, Jr. (principal executive officer)
/s/ Paul M. O'Brien Vice President and Chief Financial January 28, 1998
- ---------------------- Officer (principal financial and
Paul M. O'Brien accounting officer)
/s/ Joseph L. Mitchell Director January 27, 1998
- ----------------------
Joseph L. Mitchell
Director January 28, 1998
- ----------------------
Francis S. Wyman
/s/ Raymond W. Leclerc Director January 28, 1998
- ----------------------
Raymond W. Leclerc
/s/ Michael Salter Director January 21, 1998
- ---------------------
Michael Salter
<PAGE>
MEDIA LOGIC, INC.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
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
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. (reference is
made to Exhibit 5)
24 Power of Attorney contained on the signature page
of this Registration Statement)
99.1 Securities Purchase Agreement between Media
Logic, Inc. and Imprimis SB L.P. dated
December 22, 1997
99.2 Securities Purchase Agreement between Media
Logic, Inc. and Wexford Spectrum Investors
LLC dated December 22, 1997
99.3 Warrant to Purchase Shares of Common Stock,
par value $.01 per share, of Media Logic,
Inc. (Warrant No. WX-1) dated December 29,
1997
99.4 Warrant to Purchase Shares of Common Stock,
par value $.01 per share, of Media Logic,
Inc. (Warrant No. WX-2) dated December 29,
1997
99.5 Warrant to Purchase Shares of Common Stock,
par value $.01 per share, of Media Logic,
Inc. (Warrant No. WX-3) dated December 29,
1997
99.6 Warrant to Purchase Shares of Common Stock,
par value $.01 per share, of Media Logic,
Inc. (Warrant No. WX-4) dated December 29,
1997
99.7 Warrant Agreement between Media Logic, Inc.
and Adar Equities LLC, dated as of October
29, 1997
99.8* Warrant Agreement between Media Logic, Inc.
and Adar Equities LLC, dated as of January 9,
1998
99.9* Warrant Agreement between Media Logic, Inc.
and Boston Group, L.P. dated as of January 9,
1998
* To be filed by amendment
<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 May 19, 1997
included in Media Logic Inc.'s Form 10-K for the year ended March 31, 1997
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 27, 1998
<PAGE>
Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as December 22, 1997, is
entered into by and between MEDIA LOGIC, INC., a Massachusetts corporation
(the "Company"), and Imprimis SB L.P., a Delaware limited partnership (the
"Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, shares of the common stock, $.01 par
value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Upon the terms and subject to the conditions set
forth in this Agreement, the undersigned hereby agrees to purchase from the
Company 1,133,334 shares (the "Shares") of Common Stock for ninety cents
($0.90) per share, for an aggregate purchase price (the "Purchase Price") of
$1,020,000.60. The Purchase Price for the Shares shall be payable in United
States Dollars.
b. Form of Payment. In consideration of the issuance and sale of
the Shares and the Warrants (as hereinafter defined) by the Company to the
Buyer, the Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars pursuant to the wire
instructions set forth in Section 1(c). Immediately upon payment by the
Buyer to the Company of the Purchase Price of the Shares, the Company shall
deliver certificates evidencing such Shares duly executed on behalf of the
Company and countersigned by the Company's transfer agent to the Buyer,
together with warrant certificates, the form of which is attached hereto as
ANNEX I hereto, evidencing the Warrants (the "Warrants"), duly executed on
behalf of the Company, and the Shares and Warrants shall each be free and
clear of all security interests, liens, pledges, charges, escrows, options,
rights of first refusal, encumbrances, agreements, arrangements, commitments
or other claims of any kind or character (collectively, the "Claims"). The
obligation of the parties hereto as set forth in this Section 1(b) are
subject to the satisfaction of the conditions set forth (i) in the case of
the Buyer, in Section 7(c) and (ii) in the case of the Company, in Section
6(d), each of which may not be waived by either party hereto.
<PAGE>
c. Method of Payment. Payment of the Purchase Price shall be
made by wire transfer of funds to the Company in accordance with the
following instructions:
FLEET BANK OF MA
Account Name MEDIALOGIC, INC.
Account No. 050-0759123 Bank ABA #011500010
SWIFT address: FLTBUS3B Bank Phone # 800/841-4000
Please reference invoice # on Transfer
d. Affiliates. For purposes of this Agreement (except as expressly
defined in Section 3(t) solely for purposes of Section 3(t)), "Affiliate"
shall mean (a) such as is defined in the Securities Exchange Act of 1934, as
amended, and (b) as to each other, IMPRIMIS SB L.P. and WEXFORD SPECTRUM
INVESTORS LLC.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Shares pursuant to
the Registration Statement (as hereinafter defined), the Buyer is purchasing
the Shares in the ordinary course of its business and for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any
distribution thereof or any arrangement or understanding with any other
persons regarding the distribution or purchase of such Shares;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act
by reason of Rule 501(a)(3), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an
entity) and professional advisors (who are not affiliated with or compensated
in any way by the Company or any of its affiliates or selling agents), to
protect its own interests in connection with the transactions described in
this Agreement, and the related documents, and (iv) able to afford the entire
loss of its investment in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
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understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Shares which have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting
the generality of the foregoing, the Buyer has also had the opportunity to
obtain and to review the Company's (1) Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 (the "Form 10-K"), (2) Amendment No. 1 to
the Form 10-K on Form 10-K/A, (3) Quarterly Reports on Form 10-Q for the
fiscal quarters ended June 30, 1997 and September 30, 1997 and (4) Proxy
Statement dated August 11, 1997 (collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources it
can practically bring to bear on the purchase of the Shares, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to making an investment decision like that
involved in the purchase of the Shares and the Buyer understands that its
investment in the Shares involves a high degree of risk;
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Shares;
h. The Buyer has full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on
behalf of the Buyer and is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity) and to bankruptcy,
insolvency, fraudulent transfer, reorganization moratorium and other similar
laws affecting creditors' rights generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Shares.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Organization, Standing and Power. (i) The Company and its
wholly-owned subsidiary, MediaLogic ADL, Inc. (the "Subsidiary"), are duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively, and
each has all requisite corporate power and authority to own, lease and
operate its respective properties and to carry on its respective businesses
as now being conducted
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and as currently proposed to be conducted. The Company and the Subsidiary
are duly qualified to do business and are in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by them or because of the nature of their business
as now being conducted, except for those jurisdictions where the failure to
be so qualified would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the condition (financial or
otherwise), operations, business, assets, liabilities, earnings or prospects
of the Company and the Subsidiary taken as a whole ("Material Adverse
Effect").
(ii) The Company has, prior to the execution and delivery by the
Company of this Agreement, delivered to the Buyer a true and complete copy of
the Certificate of Incorporation (together with any amendments thereto) and
the By-laws of the Company. The minute books of the Company are true and
complete in all material respects.
b. Securities Purchase Agreement; Warrants and Stock. The
Company has all requisite corporate power and authority to execute and
deliver this Agreement, the certificates evidencing the Warrants, and the
certificates evidencing the Shares and to perform all of its obligations and
undertakings under such agreements and to carry out the transactions
contemplated under such agreements. This Agreement, the certificates
evidencing the Shares and the Warrants and the transactions contemplated
thereby, and the issuance and sale of the Shares and the Warrants, have each
been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery or performance by the Company of this
Agreement or the Warrants. This Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Warrants, when
executed and delivered by the Company, will be, valid and binding agreements
of the Company enforceable in accordance with their respective terms, subject
as to enforceability to general principles of equity (regardless of whether
such enforcement is considered in a proceeding at law or in equity) and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
c. Capitalization; Equity Interests. (i) As of the date of this
Agreement, the authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, of which 8,563,660 shares are issued and
outstanding. The outstanding shares of Common Stock have been duly
authorized and issued and are fully paid and non-assessable and not subject
to any purchase option or right of first refusal or preemptive,
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subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder.
(ii) Except for this Agreement, the Warrants and as set forth in
Schedule 3(c) of the Disclosure Schedule, (x) there are no bonds, debentures,
notes or other indebtedness or securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote, (y)
there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company is
a party or by which the Company is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of Common Stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call right, commitment, agreement, arrangement or undertaking and
(z) there are no outstanding rights, commitments, agreements, arrangements or
undertakings of any kind obligating the Company to repurchase, redeem or
otherwise acquire any shares of Common Stock or other voting securities of
the Company or any securities of the type described in clauses (x) or (y)
above. No dividends on any shares of Common Stock have been declared but not
yet paid.
(iii) Except for the Subsidiary, the Company does not have any
subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability
company, joint venture or other entity. The Company is not subject to any
liability for any claim that the Company violated any applicable Federal or
state securities laws in connection with the issuance of Common Stock or
other securities. There are no restrictions on the transfer of shares of
Common Stock other than those imposed by relevant state and Federal
securities laws. There are no voting trusts, voting agreements, proxies or
other agreements or instruments with respect to the voting of the Common
Stock to which the Company is a party, or to the best of the knowledge of any
of the Company's officers, directors or employees (the "Company's
Knowledge"), among or between any persons other than the Company. Except as
set forth in Schedule 3(c) of the Disclosure Schedule, no person has the
right to demand or other rights to cause the Company to file any registration
statement under the 1933 Act relating to any securities of the Company
presently outstanding or any right to participate in any such registration
statement.
(iv) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act, and the Common Stock is listed and traded on
the American Stock Exchange ("AMEX").
d. Non-contravention. The execution and delivery of this Agreement
and the Warrants by the Company, the issuance of the Shares and the Warrants,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Warrants and compliance by the Company with any of the
provisions hereof or thereof do not and will not conflict with or result in a
breach or violation by the Company of any of the terms or provisions of, or
constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a
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right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to any increased, additional,
accelerated or guaranteed rights or entitlement of any person or entity
under, or result in the creation of any Claim on the properties or assets of
the Company under (i) the restated articles of organization or by-laws of the
Company, (ii) any indenture, mortgage, note, bond, license, lease, contract,
commitment, arrangement, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or
(iv) to its knowledge, any judgment, decree or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its
properties or assets (v) any license, franchise, permit or other similar
authorization held by the Company, except such conflict, breach or default
which would not have a Material Adverse Effect on the transactions
contemplated herein.
e. Financial Statements. (i) The consolidated financial
statements (the "Financial Statements") of the Company set forth in the (A)
Company's Annual Report on Form 10-K for the year ended March 31, 1997,
reported on by Arthur Andersen LLP, (B) Amendment No. 1 to the Form 10-K on
Form 10-K/A, and (C) Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended June 30, 1997 and September 30, 1997, in each case fairly
present the consolidated financial position of the Company as of such dates
and the consolidated results of operation and cash flows for such periods
then ended in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis. Arthur Andersen LLP is an independent
accountant as defined under the 1933 Act and the rules and regulations
promulgated thereunder.
(ii) All reserves established by the Company are reflected on the
balance sheets contained in the Financial Statements or in the footnotes to
the Financial Statements of the Company and in management's reasonable
estimate are adequate in the aggregate and there are no loss contingencies
that are required to be accrued by Statement of Financial Accounting Standard
No. 5 of the Financial Accounting Standards Board which are not provided for
on such balance sheets. As of the date hereof, except for liabilities (A)
reflected on or reserved against on the balance sheet as of September 30,
1997 (the "Latest Balance Sheet") (B) incurred in the ordinary course of the
Company's business and consistent with past practice or (C) contemplated by
this Agreement, the Company has no liabilities (absolute, accrued, fixed,
contingent, known, unknown or otherwise) which would be required by GAAP to
be reflected or reserved against on the balance sheet of the Company and
which would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
(iii) Any forecasts and projections previously delivered to the
Buyer by the Company have been prepared in good faith and on the basis of
assumptions that are fair and reasonable in light of current and reasonably
foreseeable circumstances.
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f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Shares or the
Warrants to the Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained and except as
contemplated in Section 4(s) of this Agreement.
g. SEC Filings. None of the SEC filings with the Securities and
Exchange Commission since the filing of the 10-K on March 31, 1997 contained,
at the time they were filed, any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements made therein in light of the circumstances under which they
were made, not misleading. The Company has since December 22, 1996 timely
filed all requisite forms, reports and exhibits thereto with the Securities
and Exchange Commission.
h. Absence of Changes. Except as set forth on Schedule 3(h) of
the Disclosure Schedule and except as may apply in the context of the
Securities Purchase Agreement entered into between the Company and an
Affiliate of the Buyer of even date herewith (the "Affiliate Purchase
Agreement"), since September 30, 1997, the Company and the Subsidiary have
operated in the ordinary course consistent with past practice and there has
not been:
(i) any event, occurrence or development or state of circumstances
of facts which has had or would reasonably be expected to have a Material
Adverse Effect;
(ii) any payment, discharge or satisfaction of any Claim or
obligation of the Company or the Subsidiary or any amendment, termination or
waiver of any rights of value to the Company or the Subsidiary, except in the
ordinary course of business and consistent with past practice;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of Common Stock of
the Company or the Subsidiary any direct or indirect redemption, purchase or
other acquisition of any such shares;
(iv) any creation of any Claim on, or any assignment or other
disposition of, any property of the Company or the Subsidiary, except in the
ordinary course of business consistent with past practice, and which Claims,
assignments and dispositions together with all other such Claims, assignments
and dispositions would not have a Material Adverse Effect;
(v) any write-down of the value of any asset of the Company
or the Subsidiary or any write-off as uncollectible of any accounts or notes
receivable or any portion thereof, other than write-downs or write-offs which
in the aggregate do not exceed $25,000;
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(vi) any capital expenditure or commitment or addition to
property, plant or equipment of the Company or the Subsidiary, individually
or in the aggregate, in excess of $25,000;
(vii) (A) any change in any bonus, commission, pension,
profit-sharing or other benefit or compensation plan, policy or arrangement
or commitment or (B) any increase in any such compensation, bonus,
commission, pension, profit sharing or other benefit payable now or in the
future to any shareholder, director or officer of the Company or the
Subsidiary, or any Affiliate (as defined in the Exchange Act) of such person
(or, in each case, the entering into of any agreement to effect the same);
(viii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company or the Subsidiary, other than obligations incurred in the ordinary
course of business and consistent with past practice;
(ix) any issuance or sale, or any contract entered into for
the issuance or sale, of any shares of capital stock or securities
convertible into or exercisable for shares of capital stock of the Company or
the Subsidiary;
(x) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company or the Subsidiary;
(xi) any material damage, destruction or loss (whether or not
covered by insurance) affecting any asset or property of the Company or the
Subsidiary;
(xii) any change in the independent public accountants of
the Company or the Subsidiary or in the accounting methods or accounting
practices followed by the Company or the Subsidiary or any change in
depreciation or amortization policies or rates; or
(xiii) any agreement, whether in writing or otherwise, to take
any of the actions specified in the foregoing items (i) through (xii).
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as
disclosed in the documents referred to in Section 2(e), that has not been
disclosed in writing to the Buyer that (i) would reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company or the Subsidiary or (ii) would reasonably be expected to materially
and adversely affect the ability of the Company to perform its obligations
pursuant to this Agreement.
j. Absence of Litigation. Except as set forth in Schedule 3(j) of
the Disclosure Schedule, there is no action, suit, claim, legal, or
administrative or arbitration proceeding, inquiry or investigation before or
by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or the Subsidiary,
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wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect on the business or financial condition of the Company or the
Subsidiary or the transactions contemplated by this Agreement or any of the
documents contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
k. Absence of Events of Default. Except as set forth in Schedule
3(k) of the Disclosure Schedule, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a Material Adverse Effect on the Company's financial condition or
results of operations.
l. Assets, Property And Related Matters; Real Property. (i) The
Company or the Subsidiary has good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the Financial Statements,
free and clear of all Claims. To the Company's Knowledge, such assets (other
than inventory) are in good operating condition and repair, subject to
ordinary wear and tear and constitute all of the properties, interests,
assets and rights held for use or used in connection with the business and
operations of the Company or the Subsidiary and constitute all those
necessary to continue to operate the business of the Company or the
Subsidiary, as the case may be, consistent with current and historical
practice.
(ii) All leases of real property to which the Company or the
Subsidiary is a party ("Leases"), as set forth in Schedule 3(1) of the
Disclosure Schedule, are in writing and in full force and effect and
constitute valid and binding obligations of the Company and, to the Company's
Knowledge, of the other parties thereto, enforceable in accordance with their
respective terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles. The
Company or the Subsidiary holds good and valid title to the leasehold
interests under the Leases for the term of each such Lease, free and clear of
all Claims. The Leases have not been modified in any material respect,
except to the extent that such modifications are disclosed, in writing, in a
copy delivered to the Buyer. There exists no material default, or any event
which upon notice or the passage of time, or both, would give rise to any
material default, in the performance of the Company or the Subsidiary or, to
the Company's Knowledge, by any lessor under any such lease. Except as
disclosed on Schedule 3(l) of the Disclosure Schedule, the Company or the
Subsidiary have not, and to the Company's Knowledge, no other person has,
granted any oral or written right to anyone other than the Company or the
Subsidiary to lease, sublease or otherwise occupy any of its properties
through the end of the applicable lease periods.
(iii) The Company does not own, and has not previously owned,
any real property.
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m. Patents, Trademarks and Similar Rights.(h)Patents,
Trademarks and Similar Rights (i) Set forth on Schedule 3(m) of the
Disclosure Schedule is a true and complete list of the patents, patent
applications, trademarks (registered or unregistered) and service marks (and
any applications or registrations therefor), trade names, corporate names,
copyrights, copyright registrations and other intellectual property that
currently exists in written form owned or filed by, or licensed to, the
Company or the Subsidiary or used in the conduct of the Company's or the
Subsidiary's business as presently conducted ("Intellectual Property"). With
respect to registered trademarks, Schedule 3(m) of the Disclosure Schedule
sets forth a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. To
the Company's Knowledge, the Company has all rights to Intellectual Property
as are used or are necessary in connection with the businesses of the Company
and the Subsidiary as presently conducted, and the Company owns, or has the
right to use, execute, reproduce, display, perform, modify, enhance,
distribute, prepare derivative works of and sublicense, without payment to
any other person or entity, all Intellectual Property free and clear of all
Claims whatsoever. The consummation of the transactions contemplated hereby
will not conflict with, alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any
options, licenses or agreements of any kind relating to Intellectual Property
or the marketing or distribution thereof. Neither the Company nor the
Subsidiary is bound by or a party to any options, licenses or agreements of
any kind relating to the intellectual property of any other person or entity.
The conduct of the business of the Company and of the Subsidiary as
presently conducted does not, to the Company's Knowledge, violate, conflict
with or infringe the intellectual property of any other person or entity. No
claims are pending, or to the Company's Knowledge, threatened, against the
Company or the Subsidiary by any person or entity with respect to the
ownership, validity, enforceability, effectiveness or use of any Intellectual
Property and, during the past three years, neither the Company nor the
Subsidiary has received any communications alleging that the Company has
violated any rights relating to intellectual property of any person or entity.
n. Agreements.(j)Agreements (i) Schedule 3(n) of the Disclosure
Schedule contains a true and complete list or description of all written or
oral contracts, agreements and other instruments ("Contracts") to which the
Company or the Subsidiary is a party (A) relating to indebtedness for money
borrowed or the deferred purchase price of property or services or capital
leases in excess of $50,000, (B) relating to any forward commitments or to
other commitments in excess of $50,000 in any given year, (C) relating to any
joint venture, partnership or limited liability company; (D) relating to the
employment or compensation of any director, officer or shareholder of the
Company or the Subsidiary, or any Affiliate of such companies, and not
disclosed in the proxy statement filed in connection with the Company's
fiscal year ended March 31, 1997, (E) relating to the employment or
compensation of any employee, consultant, independent contractor or other
agent of the Company or the Subsidiary, or any Affiliate of such companies,
involving a payment in excess of $50,000 in any given year, (F) relating to
the sale or other disposition of any assets, properties or rights (other than
the sale of inventory), (G) which restricts the Company's
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or the Subsidiary's ability to do business in any geographic area or grants
to any person exclusive or similar rights in any line of business or in any
geographic area, (I) which restricts the Company's or the Subsidiary's
ability from soliciting employees of another entity or restricts another
entity's ability from soliciting the Company's or the Subsidiary's employees,
(J) relating to the lease of any machinery, equipment, vehicle or other
personal property owned by any other person or entity, for which the annual
rental exceeds $50,000; (K) relating to the lease of any real or personal
property to any other person or entity, for which the annual rental exceeds
$50,000; (L) relating to any advance, loan, extension of credit or capital
contribution to, or other investment in, any person or entity not in excess
of $50,000 in the aggregate; or (M) that is otherwise material to the
business, properties or assets of the Company or the Subsidiary and entered
into other than in the ordinary course of business.
(ii) All Contracts are valid, binding and in full force and effect
as to the Company or the Subsidiary and neither the Company nor, to the
Company's Knowledge, any other party thereto is in breach or violation of, or
default under, any such Contracts in any material respect.
o. Related Party Transactions(n)Related Party Transactions .
Except as set forth on Schedule 3(o) of the Disclosure Schedule, no current
or former partner, director, officer, employee or shareholder of the Company
or the Subsidiary or any associate or Affiliate thereof, or any parent,
spouse, child, brother, sister or any other relative with a relationship (by
blood, marriage or adoption) of not more remote than first cousin of any of
the foregoing (collectively, "Family Members"), is presently, or during the
12-month period ending on the date of this Agreement has been, directly or
indirectly (i) a party to any transaction with the Company (including any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or otherwise
requiring payments to, any such director, officer, employee or shareholder or
such associate) or (ii) to the Company's Knowledge, the direct or indirect
owner of an interest in any corporation, firm, association or business
organization (other than the ownership of less than two percent (2%) of the
outstanding capital stock of any publicly traded entity) which is a present
(or potential) competitor, lender, broker or customer of the Company or the
Subsidiary, nor does any member of management or any of their Family Members
receive income from any source other than the Company or the Subsidiary which
relates to the Company's or the Subsidiary's business or should properly
accrue to the Company or the Subsidiary. Schedule 3(o) of the Disclosure
Schedule sets forth a list of all Family Members who are currently employed
or who were employed by the Company or the Subsidiary at any time during the
last three fiscal years together with a description of job, title and annual
salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
p. Disclosure. No representation, warranty or statement of the
Company contained in this Agreement, or any other agreement contemplated by
this Agreement, or any certificate, schedule, annex or other writing
furnished to the Buyer by the Company, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statement contained herein or therein, in light of the circumstances under
which they were made, not misleading.
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q. Investment Company Act(s)Investment Company Act . The Company
is not an "investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the SEC
thereunder.
r. Securities Act(t)Securities Act of 1933 . Assuming that the
representations and warranties of the Buyer contained in Article 2 are true
and correct, the Company has complied with all applicable Federal and state
securities laws in connection with the issuance and sale of the Shares.
Neither the Company nor anyone acting on its behalf has offered to sell the
Shares or similar securities to, or solicited offers with respect thereto
from, or entered into any preliminary conversations or negotiations relating
thereto with, any person, so as to bring the issuance and sale of such Shares
under the registration provisions of the 1933 Act.
s. Brokers(u)Brokers . Other than the Placement Agents (as
defined below), no agent, broker, investment banker, person or firm acting on
behalf of the Company or under the authority of the Company is or will be
entitled to any broker's or finder's fee or any other commission or similar
fee directly or indirectly from any of the parties in connection with any of
the transactions contemplated by this Agreement.
t. Small Business Matters(u)Brokers . The Company, together with
its "Affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, e121.103), is a "small business concern" within the meaning of
the Small Business Investment Act of 1958 and the regulations thereunder (the
"SBIC Act"), including Title 13, Code of Federal Regulations, e121.301. The
information set forth in the Small Business Administration Forms 480, 652 and
Section A of Form 1031 which have been delivered on or prior to the date
hereof to the SBIC, regarding the Company is accurate and complete. Neither
the Company nor the Subsidiary or Affiliates thereof presently engages in,
and it shall not hereafter engage in, any activities , nor shall the Company
or its Subsidiary or Affiliates thereof use directly or indirectly the
proceeds from the sale of the shares of the capital stock of the Company
hereunder (including the Warrants and any capital stock issued respect
hereof) for any purpose for which a "small business investment company" (an
"SBIC") (as defined in Section 103(3) of the SBIC Act) is prohibited from
providing funds by the SBIC Act, including Title 13, Code of Federal
Regulations Section, Section 107.720.G.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictions On Transferability. The Company shall not be
required to register the transfer of any Shares on the books of the Company
unless: (i) such securities have been registered under applicable Federal
and state securities laws, (ii) such shares are being transferred pursuant to
Rule 144, or any successor rule, promulgated under the 1933 Act or (iii) the
Company shall have been provided with an opinion of counsel reasonably
satisfactory to it to the effect that the proposed transfer is exempt from
the registration requirement of the 1933 Act and the relevant state
securities laws.
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b. Restrictive Legend. The Buyer acknowledges and agrees that
until such time as the Shares have been registered under the 1933 Act as
contemplated herein and sold in accordance with an effective registration
statement, the Shares shall bear a restrictive legend in substantially the
following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES, A
TRANSFER PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER REASONABLE ACCEPTABLE
EVIDENCE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Shares and the Warrants
to the Buyer under any United States laws and regulations and any applicable
state securities or "Blue Sky" laws, or by any domestic securities exchange
or trading market, and to provide a copy thereof to the Buyer promptly after
such filing.
d. Reporting Status. So long as the Buyer beneficially owns any
of the Shares, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company
shall not terminate its status as an issuer required to file reports under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
e. Use of Proceeds. (i) The Company will use the proceeds from
the sale of the Shares and the Warrants and the exercise of any Warrants
(excluding amounts paid by the Company for legal fees and finder's fees in
connection with the sale of the Shares and the Warrants) for internal working
capital purposes, and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation, partnership
enterprise or other person.
(ii) The proceeds from the sale of the shares of capital stock
of the Company (including the Warrants and any capital stock issued in
respect thereof) pursuant to this Agreement (the "Proceeds") shall be used by
the Company for general corporate purposes. The Company, the Subsidiary and
Affiliates thereof shall provide to representatives of the Buyer which is an
SBIC and the SBA reasonable access to its books and records for the purpose
of confirming such use of the Proceeds or for other purposes related to the
qualifications of the financing provided hereunder or under any of the
Documents. If the Company breaches its representations and warranties made
in Section 3(t) in any materials respect, such SBIC may elect that any shares
of the Company's capital stock and the Warrants held by such SBIC be
repurchased by the Company at original cost plus accrued dividends or
interest thereon.
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(iii) So long as an SBIC holds any securities of the Company,
the Company, its subsidiaries and Affiliates thereof will comply at all times
with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(iv) Within 45 days after the end of each fiscal year, and at
any other time reasonably requested by any SBIC, the Company shall deliver to
such SBIC a written assessment, in form and substance satisfactory to such
SBIC of the economic impact of such SBIC's investment in the Company,
specifying (1) the full-time equivalent jobs created or retained in
connection with the investment, and (2) the impact of the investment on the
Company's business in terms of revenue and profits, and on taxes paid by the
Company, its subsidiaries and Affiliates thereof and their respective
employees. Upon advance written request, the Company promptly (and in any
event within 20 days of such request) shall furnish to any SBIC all
information (1) reasonably requested by such SBIC in order for such SBIC to
comply with the requirements of 13 C.F.R. Section 107.620 or to prepare and
file Small Business Administration Form 468 and (2) reasonably requested or
required by any Governmental Authority asserting jurisdiction over such SBIC.
Any submission of financial information pursuant to this Section shall be
under cover of a certificate executed by the president, chief executive
officer, chief financial officer or treasurer of the Company certifying that
such information (1) relates to the Company, its subsidiaries and affiliates
thereof (2) is accurate and (3) if applicable, has been audited by the
Company's independent auditors.
f. Broker's Fees. The Buyer acknowledges that the Company intends
(i) to pay The Boston Group, L.P. and First Granite Securities, Inc.
(together, the "Placement Agents") fees of ten percent (10%) and two percent
(2%), respectively, of the Purchase Price paid by the Buyer, and (ii) to
issue to the Placement Agents warrants to purchase an aggregate of 250,000
shares of Common Stock of the Company (the "Placement Agent Warrants", such
aggregate being the total number of Placement Agent Warrants to be issued
under this Agreement and the Affiliate Purchase Agreement) with an exercise
price per share equal to the greater of (a) $2.00 and (b) the Market Price
(as defined in Section 4(h) of this Agreement).
g. Expenses. The Company shall pay the Buyer a non-accountable
expense reimbursement (the "Expense Reimbursement") of $50,000 to cover the
Buyer's expenses, including legal fees and disbursements. The Expense
Reimbursement shall be payable in United States Dollars. In addition, the
Company shall pay any and all stamp and other documentary taxes payable or
determined to be payable in connection with the issuance of the Shares and
agrees to hold the Buyer harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.
h. Warrants. The Company shall issue to the Buyer the Warrants,
which shall consist of five-year warrants to purchase 1,333,334 shares of
Common Stock (the "Exercise Shares") of which (i) Warrants to purchase
666,667 shares of Common Stock shall be exercisable at a price per share
equal to the greater of (a) $1.50 or (b) the closing or last price of the
Common
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Stock on the Composite Tape or other comparable reporting system for the
trading day immediately preceding the Closing Date (the "Market Price"), and
(ii) Warrants to purchase 666,667 shares of Common Stock shall be exercisable
at a price per share such that the weighted average exercise price of the
1,333,334 Warrants issued by the Company to the Buyer under this Agreement
shall equal (a) $2.25, if the exercise price of the Warrants issued under
Section 4(h)(i) is less than or equal to $1.75, or (b) $2.15, if the exercise
price of the Warrants issued under Section 4(h)(i) is greater than $1.75;
provided, however, that in no case will the exercise price of any Warrants be
less than the Market Price.
i. Board of Directors. The Company's Board of Directors shall
refrain from filling one of its two currently existing vacancies until such
time as a Buyer Nominee (as defined below), if any, has been appointed a
Director by the Board of Directors. For the longer of (x) a period of one
(1) year beginning on the Closing Date and (y) the period that the Buyer and
its Affiliates hold, in the aggregate, shares of capital stock equal to at
least five percent (5%) of the outstanding Common Stock of the Company, the
Buyer shall have the right to request that its representative, who shall be
reasonably acceptable to the Company ("Buyer Nominee"), be appointed to the
Company's Board of Directors. Such request shall be made in writing to the
Company. Within ten (10) days after its receipt of such request, the
Company's Board of Directors shall appoint the Buyer Nominee as a member of
the Company's Board of Directors (the "Nominee Appointment"). At the first
Company annual shareholders meeting following the Nominee Appointment and at
each Company annual shareholders meeting thereafter, the Company shall
nominate one representative of the Buyer to the Company's Board of Directors;
provided, however, that this subsection 4(i) shall be applied in concert with
Section 4(i) of the Affiliate Purchase Agreement such that only one (1)
representative of IMPRIMIS SB L.P. and WEXFORD SPECTRUM INVESTORS LLC shall
serve on the Company's Board of Directors at any one time pursuant to Section
4(i) of this Agreement or Section 4(i) of the Affiliate Purchase Agreement.
j. Conduct Of Business. (i) From the date of this Agreement until
the Closing Date, the Company shall operate its business only in the ordinary
course of business consistent with past practice. The Company shall not,
until the Closing Date, directly or indirectly, cause or permit any state of
affairs, action or omission described in clauses (i) through (xiii) of
Section 3(h).
(ii) From the Closing Date and for so long as the Buyer and its
Affiliates, in the aggregate, hold an amount of shares of Common Stock equal
to at least five percent (5)% of the Common Stock then outstanding, the
Company shall not change its line of business without the prior written
consent of the Buyer.
(iii) The Company shall (i) take all actions required to assure
that the Company remains duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) take
all actions required to assure that the Company obtains and maintains all
material requisite governmental authority, licenses, and material permits to
conduct its business, (iii) conduct its business in material compliance with
all requirements of Federal and
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state law applicable to the Company, and (iv) use commercially reasonable
efforts to file all reports or filings with the Internal Revenue Service
required of a Qualified Small Business (as defined in Section 1202(d) of the
Internal Revenue Code of 1986, as amended), and provide each licensed SBIC
with all information requested by any Governmental Authority to permit such
SBIC to comply with its obligations under the SBIC Act. Each SBIC shall use
commercially reasonable efforts to protect any information which the Company
labels as confidential. If any such confidential information is required to
be disclosed by such SBIC in order to comply with any such request, the SBIC
shall cause to be filed a confidential treatment request on behalf of the
Company seeking to withhold from public availability all of such confidential
information. For purposes of this Section 4(j), the term "Governmental
Authority" shall mean any government or state (or any subdivision thereof),
whether domestic, foreign or multinational (including European Union), or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
k. Further Assurances. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Articles 6 and 7 are satisfied, insofar as such
matters are within the control of any of them.
l. Access And Information. From the date of this Agreement until
the first to occur of (x) the Closing Date and (y) the termination of this
Agreement in accordance with Article 11, the Company shall permit the Buyer
and its representatives to make such investigation of the business,
operations and properties of the Company as the Buyer deems necessary or
desirable in connection with the transactions contemplated by this Agreement.
Such investigation shall include access to the respective directors,
officers, employees, agents and representatives (including legal counsel and
independent accountants) of the Company and the properties, books, records
and commitments of the Company. The Company shall furnish the Buyer and its
representatives with such financial, operating and other data and
information, and copies of documents with respect to the Company or any of
the transactions contemplated by this Agreement, as the Buyer shall from time
to time reasonably request. Such access and investigation shall be made upon
reasonable notice and at reasonable places and times. Such access and
information shall not in any way affect or diminish any of the
representations or warranties hereunder. Without limiting the foregoing,
during such period, the Company shall keep the Buyer informed as to the
business and operations of the Company and shall consult with the Buyer as
appropriate.
m. Reporting Requirements. For so long as the Buyer and its
Affiliates, in the aggregate, or its transferees (except transferees who
acquire the Buyers' Common Stock in a transaction not exempt from the
registration requirements of the 1933 Act), hold an amount of shares of
Common Stock equal to at least five percent (5%) of the Common Stock then
outstanding, the Buyer shall have the right to request, and if so requested
the Company shall furnish to the Buyer, the following:
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(i) as soon as practicable after the end of each month and fiscal
quarter, and in any event within 45 days thereafter, copies of: (A) an
unaudited consolidated balance sheet of the Company as at the end of such
month and quarter, (B) unaudited consolidated statements of operations,
shareholders' equity and cash flows of the Company for the period ending with
such month and quarter and setting forth in comparative form the figures for
the corresponding periods in the preceding fiscal year certified by the chief
financial officer of the Company as complete and correct, and having been
prepared in accordance with GAAP (other than monthly balance sheets and
statements of operations, shareholders' equity and cash flows) subject to the
absence of footnotes and changes resulting from year-end adjustments;
(ii) such financial information (other than the information
described in clause (i) above) as the Company and Buyer may agree;
(iii) as soon as practicable after the end of each fiscal year of
the Company, and in any event within 90 days thereafter, copies of: (i) a
consolidated balance sheet of the Company as at the end of such year, and
(ii) consolidated statements of operations, shareholders' equity and cash
flows of the Company for such year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, together with
supporting notes thereto and accompanied by an opinion thereon of independent
accountants of recognized national standing, together with a summary prepared
by the Company concerning the Company's operations and financial condition;
(iv) no later than 60 days prior to the end of each fiscal year of
the Company, the proposed annual business plan and budget (including the
capital expenditures and financing plans) of the Company for the next fiscal
year;
(v) promptly after sending, making available, or filing the same,
all reports and financial statements that the Company sends or makes
available to the shareholders of the Company or files with the SEC; and
(vi) any other information respecting the business, properties or
the condition or operations, financial or otherwise, of the Company that the
Buyer may from time to time reasonably request, including, but not limited
to, business units analyses, performance reviews analyses and monthly sales
analyses.
The Buyer agrees that with respect to any information received by it
pursuant to this subsection (m) ("Requested Information"), the Buyer will use
the Requested Information solely for purposes of monitoring and/or assessing
its investment in the Company and not for any other purpose and will keep the
Requested Information confidential. The Buyer acknowledges that if, and to
the extent, it receives Requested Information which is non-public, material
information relating to the Company, it may be subject to legal restrictions
in connection with the
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"insider trading" provisions of the federal securities laws with respect to
such Requested Information.
n. No Shopping. From the date of this Agreement until the earlier
of (i) the Closing Date and (ii) the date this Agreement is terminated in
accordance with Article 11, the Company shall not, and shall ensure that any
directors, officers, agents, representatives or Affiliates of the Company do
not, directly or indirectly, solicit or initiate, enter into or conduct,
discussions concerning, or exchange information (including by way of
furnishing information concerning the Company or their respective businesses)
or enter into any negotiations concerning, or solicit, entertain or agree to
any proposals for, (i) a merger, consolidation or other business combination
involving the Company, (ii) a sale of any equity interest in the Company,
(iii) a sale of a significant portion of business or assets of the Company,
(iv) a recapitalization or restructuring of the Company or (v) a transaction
similar to any of the foregoing. In addition, during such time period, the
Company shall not authorize, direct or knowingly permit any officer,
shareholder, director, employee or agent of the Company to do any of the
foregoing and the Company shall notify the Buyer promptly of the identity of
any person who approaches the Company with respect to any of the foregoing,
as well as the price and terms of any such proposal, if applicable
o. Public Announcements. No press release or public announcement
related to this Agreement or the transactions contemplated hereby shall be
issued or made without the joint approval of the Buyer and the Company, the
Buyer's approval which shall not be unreasonably withheld, unless required by
applicable law or legal process in which case the Buyer and the Company shall
have the right, to the extent reasonably practicable, to review and comment
on such press release or announcement prior to publication.
p. Reserved Shares. The Company shall reserve and at all times
keep available, free from preemptive rights, out of its authorized but
unissued stock, a sufficient number of shares of Common Stock to provide for
the issuance of such shares upon the exercise of the Warrants.
q. Notification. The Company shall promptly notify the Buyer of
(i) any notice or other communications from any person or entity that the
consent of such person or entity is or may be required in connection with the
consummation of the transactions contemplated hereby and (ii) any notice or
other communication from any Governmental Authority (as defined in Section
4(j)(iii) of this Agreement) in connection with the consummation of the
transactions contemplated hereby.
r. Negative Covenants. For so long as the Buyer and its
Affiliates hold an aggregate amount of shares of Common Stock equal to at
least five percent (5%) of the Common Stock then outstanding on a fully
diluted basis, then the following actions by the Company or the Subsidiary,
shall require the prior written consent of the Buyer (in addition to any
stockholder or Board of Directors approval as may be required by applicable
statute, agreement or otherwise):
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(i) the purchase, construction, acquisition, sale, lease, exchange
or disposition of any property or asset, or the making of any investment,
other than in the ordinary course of business, the purchase price or value of
which exceeds $100,000;
(ii) the entry into any agreement or series of related agreements,
including any agreement to borrow money that, either individually or
collectively, (A) creates a monetary obligation or a liability greater than
$100,000 or (B) grants a mortgage on, a security interest in, a pledge or
otherwise encumbers, any material asset of the Company or the Subsidiary;
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the furnishing of services by,
or rental of real or personal property from, or otherwise requiring payments
or the issuance of securities (including stock options) (or any amendments,
modifications or waivers of any such contract, agreement or arrangement) to
any shareholder (who holds in excess of five percent (5%) of the issued and
outstanding voting securities of the Company) or any officer or director of
the Company or any of their respective Affiliates, or any Family Members of
any of the foregoing;
(iv) the initiation by the Company of a voluntary case, the filing
of, or authorization to file a bankruptcy petition, or request for relief,
under Title 11 of the United States Code (11 U.S.C. '1, et seq.) or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or consent by the Company to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or a general assignment by the
Company for the benefit of creditors, or the failure by the Company generally
to pay their respective debts as they become due, or the taking by the
Company of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement, transaction or
arrangement with any, officer, director or shareholder (who holds in excess
of five percent (5%) of the issued and outstanding voting securities of the
Company) of the Company, the Subsidiary or any of their respective Affiliates
or of any Family Members of any of the foregoing other than the reimbursement
of expenses of any such person in the ordinary course in accordance with the
policies of the Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other business combination or the
sale, assignment, lease or other disposition of all or substantially all of
the assets of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company, including the
capitalization of any subsidiaries of the Company, or any repurchase or
redemption of the Company's securities, other than (A) the issuance of shares
of Common Stock upon the exercise of stock options either currently
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outstanding or hereinafter granted pursuant to the Company's 1991 Stock
Option Plan, (B) the issuance of shares of Common Stock (1) upon the exercise
of warrants outstanding as of the date of this Agreement, (2) upon the
conversion of Debentures (as defined in Section 7(i) of this Agreement)
outstanding as of the date of this Agreement, (3) upon the exercise of the
Affiliate Warrants, or (4) upon the exercise of the Placement Agent Warrants,
and (C) as expressly provided in this Agreement;
(viii) any distributions or dividends, whether in cash, securities
or in property in kind, by the Company to its stockholders;
(ix) any material changes in accounting policies of the Company and
any removal or appointment of the Company's independent accountants;
(x) the settlement of legal, administrative or other suits or
proceedings in the Company's name in which the amount in dispute equals or
exceeds $100,000;
(xi) the establishment or amendment of, or the grant, acceleration
or waiver of any terms or conditions in, or determination or acceleration
pursuant to the terms of, any pension, retirement, savings, deferred
compensation, profit sharing, benefit or incentive plan or any stock option,
stock appreciation, stock purchase, performance or other similar plan, for
any or all current or former employees, officers or directors of the Company
or any of their respective Affiliates or of any Family Member of any of the
foregoing; provided that the granting of options to employees (other than
officers) for amounts less than 25,000 shares per employee, pursuant to the
Company's 1991 Stock Option Plan, under which a maximum of 414,808 options
are currently authorized but unissued and can therefore be additionally
granted, shall not require the consent of the Buyer;
(xii) the amendment of the Certificate of Incorporation or By-laws
in any respect;
(xiii) any change in any of the names under which the Company
conducts business
(xiv) the issuance of any new, or amendment to or modification or
restatement of any existing, warrants, options, Debentures, calls, rights,
commitments, agreements, arrangements or similar undertakings, other than (A)
the issuance of options pursuant to the Company's 1991 Stock Option Plan, (B)
as may be required to effect the transactions contemplated by this Agreement,
and (C) as expressly provided in this Agreement; or
(xv) any other transaction, agreement or arrangement or series of
related transactions, agreements or arrangements that is material to the
business of the Company or to the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the
Company, taken as a whole.
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s. Additional Listing Application. The Company shall, within two
(2) Business Days of the execution of this Agreement, file with AMEX an
Additional Listing Application (the "Initial Application") for the
Registrable Securities (as defined below, but for purposes of this Section
4(s), excluding the Warrants). To the extent that AMEX approves the Initial
Application as to only the Shares and not as to all Registrable Securities
(excluding the Warrants), the Company shall, within two (2) Business Days of
the Closing Date, file a second or amended Additional Listing Application for
the portion of the Registrable Securities (excluding the Warrants) the
listing of which was not approved pursuant to the Initial Application.
t. Registration of Warrants. The Company shall use its best
efforts to, within 60 days of the Closing Date, register (as such term is
defined in Section 18(a)(i) of this Agreement) the Warrants for public
trading in the United States securities markets.
5. CLOSING DATE.
The date and time of the issuance and sale of the Shares and the
Warrants (the "Closing Date") shall occur no later than 12:00 Noon, New York
time on the first NYSE trading day after the fulfillment or waiver of all
closing conditions pursuant to Sections 6 and 7, or such other mutually
agreed to time. The closing shall occur on such date at the offices of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Shares on the Closing Date is subject to the following conditions, any of
which may be waived by the Company (with the exception of the condition set
forth in Section 6(d)):
a. Delivery by the Buyer of good funds as payment in full of an
amount equal to the Purchase Price in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before
the Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
d. The Company shall have received notification from AMEX that the
Shares have been approved for listing by AMEX.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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The Company understands that the Buyer's obligation to purchase the
Shares on the Closing Date is conditioned upon the following, any of which
may be waived by the Buyer (with the exception of the condition set forth in
Section 7(c)):
a. Delivery by the Company to the Buyer of this Agreement, duly
executed by the Company;
b. Receipt by the Buyer from the Company of the Expense
Reimbursement;
c. Delivery by the Company to the Buyer of certificates evidencing
the Shares and the Warrants, each (i) duly and validly issued, (ii) in the
case of the Shares, listed upon AMEX pursuant to an Additional Listing
Application that has been approved by AMEX, and (iii) in accordance with this
Agreement;
d. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as
if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to
be performed on or before the Closing Date and reasonably satisfactory to the
Buyer.
e. All permits, consents, approvals, licenses, orders,
authorizations, registrations, declarations, filings and other actions that
are required in connection with the execution, delivery or performance of
this Agreement, the Warrants and the certificates evidencing the Shares or
the transactions contemplated hereby and thereby in order to prevent any of
the effects described in Section 3(d) with respect to any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which the Company is a party or by which any of
its properties or assets are bound or with respect to any license, franchise,
permit or other similar authorization held by the Company shall have been
obtained or taken.
f. There shall not have been any material adverse change in the
condition (financial or otherwise), operations, business, assets,
liabilities, earnings or prospects of the Company or the Subsidiary, taken as
a whole.
g. The Buyer shall have received a certificate of (i) an executive
officer of the Company, dated the Closing Date, in substantially the form of
Annex II and (ii) the Clerk or Assistant Clerk of the Company, dated the
Closing Date, in substantially the form of Annex III, together with a copy of
all documents referenced therein.
h. Delivery by the Company to the Buyer of an opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in substantially the form
attached hereto as ANNEX IV.
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i. Of the Company's 7% Convertible Subordinated Debentures Due
March 24, 2000 and the 7% Convertible Debentures Due October 29, 2000
(collectively, the "Debentures"), no less than ninety percent (90%) of the
Debentures have been either (i) converted into Common Stock at a price of
ninety cents ($0.90) per share of Common Stock, or (ii) agreed in writing by
the holders thereof to be amended such that each Debenture provides (A) for
the conversion thereof, for a period of thirty (30) days from the Closing
Date, into Common Stock at a price of ninety cents ($0.90) per share of
Common Stock and thereafter shall be convertible at the terms originally set
forth in such Debenture, and (B) for a minimum conversion price of ninety
cents ($0.90) per share of Common Stock.
j. The Company's authorized and outstanding capital stock as of the
Closing Date includes (i) no greater than 13,935,000 shares of Common Stock
outstanding, including (A) the Shares to be issued to the Buyer pursuant to
this Agreement and the shares of Common Stock to be issued pursuant to the
Affiliate Purchase Agreement, and the capital stock issuable upon exercise of
the Warrants and the warrants issued pursuant to the Affiliate Purchase
Agreement (the "Affiliate Warrants"), and (B) shares of Common Stock issuable
upon the conversion of any outstanding Debentures at a conversion price of
ninety cents ($0.90) per share, and (ii) no greater than 3,540,000
outstanding options or warrants to purchase Common Stock, including (A) all
options issued or authorized and unissued under the Company's 1991 Stock
Option Plan and (B) the Placement Agent Warrants, and excluding the Warrants
and the Affiliate Warrants.
k. The Buyer shall have received duplicate originals of (A) an
executed copy of U.S. Small Business Administration (the "SBA") Form 480 Size
Status Declaration, (B) an executed copy of SBA Form 652 Assurance of
Compliance for Nondiscrimination and (C) the information needed to complete
Part A and Part B of SBA Form 1031.
l. The Company shall be in compliance with the requirements of
Section 713(a) of the AMEX Listing Standards and Requirements in connection
with the issuance of the Shares.
m. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
n. The Market Price is less than or equal to $2.15.
8. LOCK-UP
The Buyer hereby covenants and agrees not to offer, sell, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
of the Company that are substantially similar to the Common Stock, including
but not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, the Common Stock or any
substantially similar securities until the expiration of a period of
seventy-five (75) days from the Closing Date; provided however, that this
Section 8 shall not apply, and have no effect upon the Buyer, if (i) there
has been a public announcement that a person or group of affiliated or
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associated persons (other than the Buyer and its Affiliates) has acquired
beneficial ownership of twenty percent (20%) or more of the outstanding
Common Stock or (ii) a tender offer or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of
affiliated or associated persons (other than the Buyer and its Affiliates) of
twenty percent (20%) or more of the outstanding Common Stock, has been
commenced or an announcement of an intention to make such an offer has been
made.
9. GOVERNING LAW; SPECIFIC ENFORCEMENT; MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. A facsimile
transmission of this signed Agreement shall be legal and binding on all
parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement
may be amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement, the Warrants and the schedules,
annexes and exhibits hereto or thereto contain the entire agreement among the
parties with respect to the transactions contemplated by this Agreement and
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
(ii) Each party expressly agrees that the other party will be
irreparably damaged if this Agreement is not specifically enforced,
including, without limitation, the covenant set forth in Section 4(i). Upon
a breach or threatened breach of the terms, covenants or conditions of this
Agreement, the non-breaching party shall, in addition to all other remedies,
be entitled to a temporary or permanent injunction, without any showing of
any actual damage, or a decree for specific performance, in accordance with
the provision hereof.
10. NOTICES.
All notices, requests and other communications to any party
hereunder shall be in writing and sufficient if delivered personally or sent
by telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
COMPANY: MEDIA LOGIC, INC.
310 South Street
Plainville, MA 02762
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Attention: Chief Executive Officer
Telecopier No.: (508) 695-8593
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Richard R. Kelly, Esq.
Telecopier No.: (617) 542-2241
BUYER: IMPRIMIS SB L.P.
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert H. Holtz
Telecopy: (203) 862-7310
With a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telecopy: (212) 841-1010
or to such other address or telecopy number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith. Each such notice, request or communication shall be effective when
received or, if given by mail, when delivered at the address specified in
this Section or on the fifth business day following the date on which such
communication is posted, whichever occurs first.
11. Termination. (a) This Agreement shall terminate on the earliest
to occur of any of the following events:
(i) the mutual written agreement of the Buyer and the Company;
(ii) at the discretion of either party, if the Closing shall
not have occurred prior to the close of business on December 31, 1997;
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<PAGE>
(iii) by written notice of the Buyer to the Company, if the
Company shall have materially breached any of its representations, warranties
or agreements contained in this Agreement; or
(iv) by written notice of the Company to the Buyer, if the
Buyer shall have materially breached any of its representations, warranties
or agreements contained in this Agreement.
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except
that if this Agreement terminates in accordance with Section 11(a) and the
Buyer receives reimbursement of its costs and expenses in accordance with
Section 4(h), then this Agreement shall terminate without any further
liability. Except as aforesaid, upon the termination of this Agreement, all
rights and obligations of the parties under this Agreement shall terminate,
except their obligations under Section 4(g) and Section 4(o).
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
Company's and the Buyer's representations, warranties, agreements and
covenants shall survive the execution and delivery hereof of this Agreement
and the delivery of the Shares and the Warrants. Neither the period of
survival nor the liability of the Company with respect to the representations
and warranties shall be reduced by any investigation made at any time by or
on behalf of the Buyer.
13. Indemnification. (a) The Company indemnifies and holds
harmless the Buyer and its Affiliates and each of their members, directors,
officers, employees and other agents and representatives from and against any
and all liabilities, judgments, claims, settlements, losses, damages
(including any diminution in value as appropriate), reasonable fees
(including attorneys' and other experts' fees and disbursements), liens,
taxes, penalties, obligations and expenses (collectively, "Losses") incurred
or suffered by any such person or entity arising from, by reason of or in
connection with any misrepresentation or breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement or
any certificate or other document delivered by the Company under this
Agreement. The Company shall indemnify and hold harmless the Buyer and its
Affiliates and each of their members, directors, officers, employees and
other agents and representatives from and against any and all Losses incurred
or suffered by the Buyer, arising from, by reason of or in connection with
any third party claim or action, or potential or threatened claim or action,
related to this Agreement and the transactions contemplated hereby.
(b) The Company shall not have any liability under Section 13(a)
unless the aggregate of all Losses relating thereto for which the Company
would, but for this Section 13(b), be liable exceeds $50,000, in which case
the Buyer shall be entitled to all Losses regardless of the limitation set
forth in this sentence. The limitation on liability set forth in the
immediately preceding sentence shall not apply (i) in the event of fraud,
intentional misrepresentation or intentional breach or (ii) in the case of
any representation or warranty set forth in Section 3(a) or Section 3(c).
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<PAGE>
(c) The Buyer indemnifies and holds harmless the Company and its
Affiliates, directors, officers, employees and other agents and
representatives, from and against any and all Losses incurred or suffered by
any such person or entity arising from, by reason of or in connection with
any misrepresentation or breach of any representation, warranty or agreement
of the Buyer contained in this Agreement or any certificate or other document
delivered by the Buyer under this Agreement.
(d) In case any claim or litigation which might give rise to any
obligation of a party under the indemnity and reimbursement provisions of
this Agreement (each an "Indemnifying Party") shall come to the attention of
the party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall notify in writing promptly the Indemnifying Party of
the existence, nature and amount of potential loss. Failure to give such
notice shall not affect the rights of the Indemnified Party, except to the
extent that the Indemnifying Party shall have been materially prejudiced by
such failure. The Indemnifying Party shall be entitled to participate in and,
if (i) such claim can properly be resolved by money damages alone and the
Indemnifying Party has the financial resources to pay such damages and (ii)
the Indemnifying Party admits that this indemnity fully covers the claim or
litigation, the Indemnifying Party shall be entitled to direct the defense of
any claim at its expense, but such defense shall be conducted by legal
counsel reasonably satisfactory to the Indemnified Party. No Indemnifying
Party shall be liable to an Indemnified Party for any settlement of any
action or claim without the consent of the Indemnifying Party; provided that
the Indemnifying Party shall not unreasonably withhold its consent to any
such settlement. No Indemnifying Party shall, except with the consent of the
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability and equitable claims in response to such claim or litigation.
(e) Nothing contained in this Article 13, or elsewhere in this
Agreement, shall be deemed an election of remedies under this Agreement or
limit in any way the liability of any party under any other agreement to
which such party is a party relating to this Agreement or the transactions
contemplated by this Agreement.
14. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other party; provided that notwithstanding
the foregoing, the Buyer may assign this Agreement and the rights and
obligations hereunder, in whole or in part, to an Affiliate. Any instrument
purporting to make an assignment in violation of this Section shall be void.
All covenants, agreements, representations, warranties and undertakings in
this Agreement made by and on behalf of any party hereto shall bind and inure
to the benefit of the successors and permitted assigns of such party.
15. Benefits of Agreement. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective
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<PAGE>
successors and assigns. This Agreement is for the sole benefit of the parties
hereto and not for the benefit of any third party.
16. Descriptive Headings; Certain Interpretations. (a)
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry into the subject matter of such representation, warranty or other
statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements
and amendments; (iv) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder; (v)
a reference to a person includes its permitted successors and assigns; (vi) a
reference to GAAP refers to United States GAAP; and (vii) a reference in this
Agreement to an Article, Section, Exhibit or Schedule is to the Article,
Section, Exhibit or Schedule of this Agreement.
17. General. All Exhibits, Annexes, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
18. REGISTRATION OF REGISTRABLE SECURITIES.7.tc{seq level1 \h \r0
Registration of Registrable Stock"
(a) Shelf Registration(a) Shelf Registration.
(i) The Company shall (x) within thirty (30) days of the Closing
Date file with the Securities and Exchange Commission (the "SEC") a Shelf
Registration Statement (as defined below) relating to the offer and sale of
(a) the Shares of Common Stock (including shares issuable or issued upon the
exercise of any Warrants or the exercise of any other exchange, conversion or
similar right), (b) any securities issued in respect of any such shares by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger or consolidation or reorganization and (c)
the Warrants (collectively, the "Registrable Securities") by the holders of
Registrable Securities from time to time in accordance with the methods of
distribution elected by such holders and set forth in such Shelf Registration
Statement. "Register," "registered" and "registration" each refer to a
registration of Registrable Securities effected by filing with the SEC a
registration statement in compliance with the Securities Act and the
declaration or ordering by the SEC of effectiveness of such registration
statement. "Shelf Registration" means a registration effected pursuant to
this Section 18. "Shelf Registration Statement" means a shelf registration
statement of the Company filed with the SEC pursuant to the provisions of
this Section 18 which covers some or all of the
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<PAGE>
Registrable Securities, as applicable, on Form S-3 under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein; provided, however, that the registration of the Warrants pursuant to
this Section 18 is subject to the prior approval of the Company's Board of
Directors.
(ii) The Company shall use its best efforts (x) to cause such Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as practicable but in no event more than ninety (90) days after the
Closing Date and (y) after the effectiveness of the Shelf Registration
Statement, promptly upon the request of the Buyer or any permitted transferee
or assignee pursuant to Section 18(h) holding any Registrable Securities
(such transferees and assignees, together with the Buyer, are collectively
referred to in this Section 18 as the "Investors"), to take any action
necessary to register the sale of any Registrable Securities of such Investor
and to identify such Investor as a selling securityholder.
(iii) If the Shelf Registration Statement covering the Registrable
Securities required to be filed by the Company under Section 18(a)(i) is not
declared effective by ninety (90) days after the Closing Date (the "Required
Effective Date"), then the Company will make payments to the Buyer in such
amounts and at such times as shall be determined pursuant to this Section
18(a)(iii). The amount to be paid by the Company to the Buyer shall be equal
to one (1) percent of the Purchase Price per calendar week (or any pro rata
portion thereof) from the Required Effective Date until the Shelf
Registration Statement is declared effective by the SEC and shall be paid to
the Buyer based upon the period between (x) the Required Effective Date and
the first Computation Date and (y) each Computation Date thereafter and the
immediately preceding Computation Date (the "Periodic Amount"). The full
amount of each Periodic Amount shall be paid to the Buyer in immediately
available funds within five (5) days after each Computation Date.
Notwithstanding the foregoing, the amount payable by the Company pursuant to
this provision shall not be payable (x) to the extent any delay in the
effectiveness of the Shelf Registration Statement occurs because of an act
of, or a failure to act or to act timely by, the Buyer or its counsel in
connection with any act for which the Buyer and its counsel have had adequate
and sufficient notice, or (y) in the event all of the Registrable Securities
may be sold pursuant to Section (k) of Rule 144 promulgated under the 1993
Act. As used in this Section, "Computation Date" means the date which is
thirty (30) days after the Required Effective Date, and, if the Shelf
Registration Statement required to be filed by the Company pursuant to this
Section is not then effective, thirty (30) days after the previous
Computation Date (pro rata for any partial period) until the Shelf
Registration Statement is so declared effective by the SEC.
(b) Registration Procedures. In connection with any Shelf
Registration Statement, the Company shall do each of the following:
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<PAGE>
(i) prepare promptly, and file with the SEC by thirty (30) days
after the Closing Date, a Shelf Registration Statement with respect to the
Registrable Securities and use its best efforts to cause to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be usable by the Investors for a period
(the "Registration Period") equal to the earliest of (1) five years from the
effective date of such Shelf Registration Statement, (2) the date when each
Investor may sell all Registrable Securities held by such Investor pursuant
to Section (k) of Rule 144 and (3) the date the Investors no longer owns any
Registrable Securities, which Shelf Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Shelf Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Shelf Registration Statement effective and current during the
entire Registration Period and, at all times during the Registration Period,
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by the Shelf Registration
Statement, including such amendments and supplements as may be necessary,
until all of such Registrable Securities have been disposed of in accordance
with the intended method of disposition from time to time by prospective
seller or sellers of such Registrable Securities as set forth in the Shelf
Registration Statement;
(iii) furnish to each selling Investor, and its legal counsel
identified to the Company, (1) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one copy
of the Shelf Registration Statement and any amendment thereto, each
prospectus and each amendment or supplement thereto, (2) each letter written
by or on behalf of the Company to the SEC or the staff of the SEC and each
item of correspondence from the SEC or the staff of the SEC relating to such
Shelf Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (y) such number of copies of a prospectus in conformity with
the requirements of the Securities Act, and such other documents, as such
Investor may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by such Investor;
(iv) permit a single firm of counsel designated by the Buyer and
reasonable satisfactory to the Company to review the Shelf Registration
Statement and all amendments and supplements thereto at a reasonable period
of time prior to their filing with the SEC, and not file any document in a
form to which such counsel reasonably objects in written notice to the
Company given within three (3) business days of counsel's receipt of the
Shelf Registration Statement or any amendment or supplement thereto;
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(v) use its best efforts to register or qualify the shares of
Registrable Securities covered by such Shelf Registration Statement under
such other securities or blue sky or other applicable laws of such
jurisdiction within the United States as each prospective seller shall
reasonably request, to enable such seller to consummate the public sale or
other disposition in such jurisdictions of the shares of Registrable
Securities owned by such seller;
(vi) as promptly as practicable after becoming aware of such event,
notify each holder of Registrable Securities of the happening of any event of
which the Company has knowledge, as a result of which the prospectus included
in the Shelf Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make statements therein in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Shelf
Registration Statement or other appropriate filing with the SEC to correct
such untrue statement or omission, and deliver a number of copies of such
supplement or amendment to each such holder as such holder may reasonable
request;
(vii) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(viii) use its best efforts to cause the Registrable Securities to
be listed for trading on the American Stock Exchange (or on any other
national securities exchange on which the Company's Common Stock is then
listed);
(ix) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Shelf Registration Statement;
(x) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Shelf Registration Statement and enable such
certificate for the Registrable Securities to be in such denominations or
amount as the case may be, as the Investors may reasonable request; and
(xi) take all other reasonable actions necessary to expedite and
facilitate disposition by any Investor of the Registrable Securities pursuant
to the Shelf Registration Statement.
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(c) Designation of Underwriter. In the case of any registration
effected pursuant to this Section 18, a majority in interest of the holders
of Registrable Securities shall have the right to designate the managing
underwriter in any underwritten offering.
(d) Cooperation by Prospective Sellers.
(i) Each prospective seller of Registrable Securities, and each
underwriter designated by each such seller, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the Shelf Registration Statement (and the
prospectus included therein). No holder of Registrable Securities may
participate in any offering unless such holder completes and executes all
questionnaires, indemnities, underwriting agreements and other documents
required in connection with the offering.
(ii) Failure of a prospective seller of Registrable Securities to
furnish the information and agreements described in this Agreement shall not
affect the obligations of the Company under this Agreement to remaining
sellers to furnish such information and agreements unless, in the reasonable
opinion of counsel to the Company or the underwriters, such failure impairs
or may impair the viability of the offering or the legality of the
registration or the underlying offering.
(iii) The Investor included in the registration will not (until
further notice by the Company) effect sales thereof (or deliver a prospectus to
any purchaser) after receipt of telegraphic or written notice from the Company
to suspend sales to permit the Company to correct or update a registration
statement or prospectus. In connection with any offering each Investor who is a
prospective seller, will not use any offering document, offering circular or
other offering materials with respect to the offer or sale of Registrable
Securities, other than the prospectuses provided by the Company and any
documents incorporated by reference therein.
(e) Expenses. All expenses incurred in complying with this
Section 18, including, without limitation, all registration, qualifications
and filing fees (including all expenses incident to filing with the American
Stock Exchange), fees and expenses of complying with securities and "blue
sky" laws, printing expenses and fees and disbursements of counsel for the
Company and one counsel for the Investors, and of the independent certified
public accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to this Section 18
shall not be borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Section 18 or registration or
qualification of any
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Registrable Securities pursuant to this Section 18, the Company shall
indemnify and hold harmless the seller of such shares, each underwriter of
such shares, if any, each broker or any other person acting on behalf of such
seller and each other person, if any, who controls any of the foregoing
persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the
foregoing persons may become subject under the Securities Act, the 1934 Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities as registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or any document
prepared or furnished by the Company incident to the registration or
qualification of any Registrable Securities pursuant to this Section 18, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made, not misleading, or any violation by the Company of the
Securities Act, the 1934 Act or any state securities or "blue sky" laws or
any rule regulation under the Securities Act, the 1934 Act or state
securities law or relating to action or inaction required of the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable (i) in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the registration statement, the preliminary prospectus or prospectus or in
any amendment or supplement thereof pursuant to this Section 18 in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller or such underwriter
specifically for use in the preparation thereof and (ii) to any broker or
other person acting on behalf of such seller to the extent that any such
loss, claim, damage or liability arises out of or is based upon any
representation or other statement of such broker or other person that is not
in conformity with the preliminary prospectus or prospectus.
(ii) Before Registrable Securities held by a prospective seller
shall be included in any registration pursuant to this Section 18 such
prospective seller and any underwriter acting on its behalf shall have agreed
to indemnify and hold harmless (in the same manner and to the same extent as
set forth in (i) above) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement and any
person who controls the Company within the meaning of the Securities Act,
with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or prospectus contained therein, or any
amendment or supplement thereof, if such untrue statement or omission was
made in reliance upon and in conformity
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with written information furnished to the Company through an instrument duly
executed by such seller or such underwriter, as the case may be, specifically
for use in the preparation of such registration statement, preliminary
prospectus, prospectus or amendment or supplement; provided that the maximum
amount of liability in respect of such indemnification shall be limited, in
the case of each prospective seller of Registrable Securities, to an amount
equal to the net proceeds actually received by such prospective seller from
the sale of Registrable Securities effected pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Section 18,
if pursuant to an underwritten public offering of Common Stock, the Company,
the selling shareholders and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions
covering indemnification among the parties thereto in connection with such
offering, the indemnification provisions as set forth in this Section 18
shall be deemed inoperative for purposes of such offering.
(iv) Each party entitled to indemnification under this Section
18(f) (the "indemnified party") shall give notice to the party required to
provide indemnification (the "indemnifying party") promptly after such
indemnified party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the indemnifying party (at its expense) to assume
the defense of any claim or any litigation resulting therefrom; provided that
counsel who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the indemnified party and shall not, without the
consent of the indemnified party, be counsel to the indemnifying party, and
the indemnified party may participate in such defense, but only at such
indemnified party's expense, and provided, further, that the omission by any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 18(f) except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result
of the failure to give notice. No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(g) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 18(f) to the fullest extent
permitted by law; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 18; (b) no
seller of Registrable
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Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
(h) Reports under Exchange Act. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities which continue to be "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed with the SEC by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
(i) Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities only if: (a) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished
to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such delay, or
the payments set forth in Section 18(a) hereof.
(j) Persons deemed to be Holders of Registrable Securities. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or
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<PAGE>
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
[THIS SPACE INTENTIONALLY LEFT BLANK]
36
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of the Buyer and the Company as of the date first
above written.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
--------------------------------
William E. Davis, Jr.
Chief Executive Officer
IMPRIMIS SB L.P.
By: IMPRIMIS SB GP LLC,
its General Partner
By: WEXFORD MANAGEMENT LLC,
its Manager
By: /s/ Robert H. Holtz
--------------------------------
Name: Robert H. Holtz
Title: Senior Vice President
Address of Buyer: 411 West Putnam Avenue
Suite 125
Greenwich, CT 06830
Telephone No.: (203) 862-7000
Telecopier No.: (203) 862-7300
37
<PAGE>
ANNEX I FORM OF WARRANT
ANNEX II FORM OF OFFICER'S CERTIFICATE OF THE COMPANY
ANNEX III FORM OF SECRETARY'S/ASSISTANT SECRETARY'S CERTIFICATE OF THE
COMPANY
ANNEX IV FORM OF OPINION OF MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND
POPEO, P.C.
38
<PAGE>
ANNEX I
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN
SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES
UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933,
(2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. [______]
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
Media Logic, Inc.
This is to Certify That IMPRIMIS SB L.P., or such holder's registered
assigns (the "Investor"), is the owner of [_________] Warrants (as defined
below), each of which entitles the registered holder thereof to purchase from
Media Logic, Inc., a Massachusetts corporation (the "Company"), one fully paid,
duly authorized and nonassessable share of Common Stock, par value $0.01 per
share, of the Company (the "Common Stock"), at any time or from time to time on
or before 5:00 p.m., New York City time, on December [__], 2002, at an exercise
price of $[____] per share (the "Exercise Price"), all on the terms and subject
to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable"), which is initially one (1) share, is subject to
adjustment from time to time pursuant to the provisions of Section 2 of this
Warrant Certificate. The Warrants evidenced by this certificate are part of a
series of Warrants being issued by the Company on the Issue Date (the
"Warrants"). The execution and delivery of this Warrant Certificate is a
condition
<PAGE>
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of December [__], 1997, between the Investor and the Company
(the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby may be
exercised, in whole or in part, by the registered holder hereof at any time or
from time to time on or before 5:00 p.m., New York City time, on December [__],
2002, upon delivery to the Company at the principal executive office of the
Company in the United States of America, of (i) this Warrant Certificate, (ii) a
written notice, in the form annexed hereto and entitled "Election To Purchase"
and (iii) payment of the Exercise Price for the shares of Common Stock issuable
upon exercise of such Warrants, which shall be payable by a certified or
official bank check payable to the order of the Company (collectively, the
"Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5) Business
Days after receipt of the Warrant Exercise Documentation, the Company shall
deliver or cause to be delivered (a) certificates representing the number
(rounded up to the nearest full share) of validly issued, fully paid and
nonassessable shares of Common Stock specified in the Warrant Exercise
Documentation, and (b) if less than the full number of Warrants evidenced hereby
are being exercised, a new Warrant Certificate or Certificates, of like tenor,
for the number of Warrants evidenced by this Warrant Certificate, less the
number of Warrants then being exercised. Such exercise shall be deemed to have
been made at the close of business on the date of delivery of the Warrant
Exercise Documentation so that the Person entitled to receive shares of Common
Stock upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such surrender
shall be effective to constitute the Person entitled to receive such shares as
the record holder thereof while the transfer books of the Company for the Common
Stock are closed for any purpose (but not for any period in excess of five
days); but any such surrender of this Warrant Certificate for exercise during
any period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been made
on the date the Warrant Exercise Documentation was received and for the Number
Issuable of Common Stock specified in the Warrant Exercise Documentation and at
the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
Section 2. Adjustments.
2
<PAGE>
(a) Adjustment of Number Issuable. The Number Issuable shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into a
larger number of shares; or
(C) combine the outstanding shares of Common Stock into
a smaller number of shares;
then, and in each such case (other than a dividend or distribution received by
or set aside for the benefit of the holder pursuant to Section 2(c) hereof), the
Number Issuable in effect immediately prior to such event shall be adjusted (and
any other appropriate actions shall be taken by the Company) so that the holder
of any Warrant evidenced hereby thereafter exercised shall be entitled to
receive the number of shares of Common Stock or other securities of the Company
which such holder would have owned or had been entitled to receive upon or by
reason of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event. An adjustment made pursuant
to this clause (i) shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision or combination to the close of business on the date upon
which such corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time or from
time to time issue or sell (x) shares of Common Stock or (y) securities
convertible into or exchangeable for shares of Common Stock, or any options,
warrants or other rights to acquire shares of Common Stock (other than
(A) shares of Common Stock issued upon exercise of the Warrants, (B) shares of
Common Stock issued upon conversion of the Debentures outstanding on the Issue
Date that have been amended pursuant to Section 7(i) of the Securities Purchase
Agreement, (C) shares of Common Stock issued pursuant to an employee stock
option plan, stock bonus plan or other incentive compensation plan or award,
each as approved by the Company's Board of Directors that, in the aggregate with
all other shares of Common Stock issued pursuant to any such plans (whether or
not approved by the Company's Board of Directors) constitute no more than ten
percent (10%) of the issued and outstanding Common Stock, and (D) shares of
Common Stock issued as a result of adjustments made under agreements related to
shares described in
3
<PAGE>
clauses (A), (B) and (C)) at a price per share that is less than the Current
Market Price per share of Common Stock then in effect as of the record date or
issue date, as the case may be, referred to in the following sentence (the
"Relevant Date") (treating the price per share of Common Stock, in the case of
the issuance of any security convertible or exchangeable or exercisable into
Common Stock as equal to (x) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (y) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 2, then, and in each such case, the Number Issuable then in effect shall
be adjusted by multiplying the Number Issuable in effect on the day immediately
prior to the Relevant Date by a fraction, (1) the numerator of which shall be
the sum of the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of additional shares of Common
Stock issued or to be issued (or the maximum number into which such convertible
or exchangeable securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised), and (2) the
denominator of which shall be the sum of the number of shares of Common Stock,
on a fully diluted basis, outstanding on the Relevant Date, plus the number of
shares of Common Stock which the aggregate consideration (plus the aggregate
amount of any additional consideration initially payable upon conversion or
exchange of such convertible or exchangeable securities or exercise of such
options, warrants or other rights) for the total number of such additional
shares of Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or other
rights may be exercised) would purchase at the Current Market Price per share of
Common Stock on the Relevant Date. Such adjustment shall be made whenever such
shares, securities, options, warrants or other rights are issued, and shall
become effective retroactively to a date immediately following the close of
business (x) in the case of an issuance to the stockholders of the Company, as
such, on the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and (y) in
all other cases, on the date (the "issue date") of such issuance; provided, that
if any convertible or exchangeable securities, options, warrants, or other
rights (or any portions thereof) which shall have given rise to an adjustment
pursuant to this Section 2(a)(ii) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the Number
Issuable, then the Number Issuable hereunder shall be readjusted (but to no
greater extent than originally adjusted) on the basis of (A) eliminating from
the computation any additional shares of Common Stock corresponding to such
convertible or exchangeable securities, options, warrants or other rights as
shall have expired or terminated, (B) treating the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such convertible and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually
4
<PAGE>
received and receivable therefor and (C) treating any of such convertible or
exchangeable securities, options, warrants or other rights which remain
outstanding as being subject to exercise or conversion. Solely for purposes of
this clause (ii), (I) Common Stock shall include the Common Stock, par value
$0.01 per share, of the Company and each other class of capital stock of the
Company that does not have a preference over any other class of capital stock of
the Company as to dividends or upon liquidation, dissolution or winding up of
the Company and, in each case, shall include any other class of capital stock of
the Company into which such stock is reclassified or reconstituted and (II) if
the provisions of any securities convertible into or exchangeable for shares of
Common Stock or options, warrants or other rights to acquire shares of Common
Stock are amended after the date of issuance so as to reduce the applicable
conversion price, exchange price or exercise price such amendment shall be
deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to time
after the Issue Date distribute to any holder of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another issuer, securities of the Company or another issuer or other
assets (excluding dividends or other distributions of shares of Common Stock or
other capital stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by or set aside for
the benefit of the holders of Common Stock pursuant to Section 2(c) below) or
rights or warrants to subscribe for or purchase securities of the Company
(excluding those in respect of which adjustment in the Number Issuable is made
pursuant to Section 2(a)(ii)), then, and in each such case, the Number Issuable
then in effect shall be adjusted by multiplying the Number Issuable in effect
immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Current Market Price per share on the record
date referred to below and (y) the denominator of which shall be such Current
Market Price per share less the then Fair Market Value (as determined in good
faith by the Board of Directors of the Company, a certified resolution with
respect to which shall be mailed to the holder of the Warrants evidenced hereby)
of the portion of the cash, evidences of indebtedness, securities or other
assets so distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator shall in no event be zero).
Such adjustment shall be made whenever any such distribution is made and shall
become effective retroactively to a date immediately following the close of
business on the record date for the determination of stockholders entitled to
receive such distribution.
(iv) In case the Company at any time or from time to time shall take
any action which could have a dilutive effect on the number of shares of Common
Stock that may be issued upon exercise of the Warrants, other than an action
described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or
Section 2(b), then, the Number Issuable shall be adjusted in such manner and at
such time as the Board of Directors of the Company reasonably determines to be
equitable under the circumstances (such determination to be
5
<PAGE>
evidenced in a resolution, a certified copy of which shall be mailed to the
holder of the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no adjustment
under this Section 2(a) need be made to the Number Issuable unless such
adjustment would require an increase or decrease of at least one percent (1%) of
the Number Issuable then in effect. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) of
such Number Issuable. Any adjustment to the Number Issuable carried forward and
not theretofore made shall be made immediately prior to the exercise of any
Warrants pursuant hereto.
(vi) The Company promptly shall deliver to each registered holder of
Warrants at least five (5) Business Days prior to effecting any transaction
which would result in an increase or decrease in the Number Issuable pursuant
to this Section 2(a) a notice thereof, together with a certificate, signed by
the Chief Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Clerk or an Assistant Clerk of the Company, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated and specifying the increased or decreased
Number Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward adjustments in
the Number Issuable, in addition to those otherwise required by this
Section 2(a), as the Board of Directors of the Company in their discretion
shall determine to be advisable in order that any stock dividend, subdivision
or combination of shares, distribution of rights or warrants to purchase stock
or securities, or distribution of securities convertible into or exchangeable
for Common Stock, hereafter made by the Company to its shareholders shall not
be taxable; provided, however, that any such adjustment shall be made, as
nearly as practicable, in a manner which treats all holders of Warrants with
similar protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale
of Assets. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which does
not result in any reclassification or change of outstanding Common Stock), or in
case of any sale or other disposition to another Person of all or substantially
all of the assets of the Company (any of the foregoing, a "Transaction"), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each holder of the Warrants evidenced hereby, at least
five (5) Business Days prior to effecting any of the foregoing Transactions, a
certificate that the holder
6
<PAGE>
of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock into
which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2 and shall contain other terms identical to the terms hereof. If, in
the case of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes stock, securities,
other property or cash of a Person other than the successor or purchasing
Persons and other than the Company, in connection with such Transaction, then
such certificate also shall be executed by such Person, and such Person shall,
in such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 2(b) similarly shall
apply to successive Transactions.
(c) Special Distributions. If the holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in cash,
in capital stock (which shall include, without limitation, any options, warrants
or other rights to acquire capital stock) of the Company, whether or not
pursuant to a shareholder rights plan, "poison pill" or similar arrangement) in
other securities, property or assets, to holders of Common Stock (a "Special
Distribution"), then the Board of Directors shall set aside the amount of such
dividend or distribution that any holder of Warrants would have been entitled to
receive had it exercised such Warrants prior to the record date for such
dividend or distribution. Upon the exercise of a Warrant evidenced hereby, the
holder shall be entitled to receive, such dividend or distribution that such
holder would have received had such Warrant been exercised immediately prior to
the record date for such dividend or distribution. Prior to any Special
Distribution described in this Section 2(c), the Company shall as provided in
Section 4 hereof notify each holder (not less than five (5) Business Days prior
to the occurrence of each Special Distribution) of its intent to make such
Special Distribution and the holder, if it elects to have such distribution set
aside the amount thereof rather than have an adjustment to the Number Issuable
as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company
by sending a Special Notice prior to the date of any such Special Distribution.
Section 3. Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from
time to time the holders of the Warrants evidenced hereby are entitled to
notice pursuant to the terms of Section 2, such notice shall provide (a) the
date on which a record is to be taken for the purpose of such dividend,
distribution, subdivision, combination or issuance of shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision, combination, shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options,
7
<PAGE>
warrants or other rights, are to be determined, (b) the issue date (as
defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees that
all shares of capital stock of the Company which may be issued upon the exercise
of the Warrants evidenced hereby will be duly authorized, validly issued and
fully paid and nonassessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate with
the holder of this Warrant so that it may prepare and file, in each case within
five Business Days of a request by such holder, notification and report forms in
compliance with the HSR Act, and shall otherwise fully comply with the
requirements of the HSR Act, to the extent required in connection with the
exercise of the Warrant. The Company shall bear all of its own expenses and all
of its own out of pocket expenses (including reasonable attorneys' fees, charges
and expenses) and filing fees of such holder in connection with any such
preparation and filing.
Section 6. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes.
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants proposed
for transfer, and with respect to the shares of Common Stock underlying such
Warrants, shall be effective under the Securities Act, (b) the Warrants are
transferred pursuant to Rule 144 under the Securities Act or (c) the Company
shall have received an opinion of counsel reasonably satisfactory to it that no
violation of such act or similar state acts will be involved in such transfer.
Thereupon, the Company shall issue in the name or names specified by the
registered holder hereof and, in the event of a partial transfer, in the name of
the registered holder hereof, a new Warrant Certificate or Certificates
evidencing the right to purchase such number of shares of Common Stock as shall
be equal to the number of shares of Common Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
8
<PAGE>
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an institutional investor, its own unsecured indemnity agreement shall be deemed
to be reasonably satisfactory), or, in the case of mutilation, upon surrender
and cancellation thereof, the Company will issue a new Warrant Certificate of
like tenor for a number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their respective
successors and permitted assigns. This Warrant Certificate shall be for the
sole benefit of the registered holder thereof. Nothing in this Warrant
Certificate shall be construed to give the registered holder hereof any rights
as a holder of shares of Common Stock until such time, if any, as the Warrants
evidenced by this Warrant Certificate are exercised in accordance with the
provisions hereof.
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the Preamble
hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed on
a national securities exchange, designated as a Nasdaq Stock Market security or
quoted in the over-the-counter-market by a member firm of the NYSE, the average
daily Market Price of the Common Stock for those days during the period of 15
days, ending on such date, on which the national securities exchanges were open
for trading, and (b) if the Common Stock is not then so listed, designated or
quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October 29,
2000.
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"Exercise Price" shall have the meaning assigned to such term in the
Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements Act
of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the
Preamble hereof.
"Issue Date" shall mean December [_], 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a Nasdaq
Stock Market security, the last trading price of the Common Stock on such date
as reported in the Wall Street Journal; or (b) if the Common Stock is not so
listed or designated, the average of the reported closing bid and ask prices of
the Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b) is
applicable, the Fair Market Value per share determined in good faith by the
Board of Directors of the Company which shall be deemed to be Fair Market Value
unless holders of at least 50% of Common Stock issued or issuable upon exercise
of the Warrants request that the Company obtain an opinion of a nationally
recognized investment banking firm chosen by the Company (who shall bear the
expense) and reasonably acceptable to such requesting holders of the Warrants,
in which event the Fair Market Value shall be as determined by such investment
banking firm.
"Number Issuable" shall have the meaning given it in the Preamble
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in
Section 2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term in
Section 2(c) hereof.
10
<PAGE>
"Special Notice" shall mean the notice sent by a holder to the Company
indicating its preference to have any Special Distribution set aside for its
benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in Section
2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
sufficient if delivered personally or sent by telecopy (with confirmation of
receipt) or by registered or certified mail, postage prepaid, return receipt
requested, (a) if to the holder of a Warrant, at such holder's last known
address or telecopy number appearing on the books of the Company; and (b) if to
the Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party. Each
such notice, request or communication shall be effective when received or, if
given by mail, when delivered at the address specified in this Section or on the
fifth Business Day following the date on which such communication is posted,
whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant shall
bear the following legend unless such shares or other securities have been
registered under the Securities Act and any applicable state securities laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER
THE SECURITIES ACT OF 1933, (B) SUCH SHARES ARE TRANSFERRED PURSUANT TO
RULE 144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (C) MEDIA LOGIC, INC.
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT
THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN
SUCH TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Common Stock by the exercise
of this Warrant, and no mere enumeration herein of the rights or
11
<PAGE>
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
12
<PAGE>
In Witness Whereof, the Company has caused this Warrant Certificate to be
duly executed as of the Issue Date.
Media Logic, Inc.
By:_________________________________
William E. Davis, Jr.
Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate to
____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Date:_________________________
___________________________________
Signature
(Signature must conform in all respects to name of holder as specified
on the face of this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate to purchase ____ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification
or other identifying number)
___________________________
___________________________
___________________________
(Please print name and address)
Date:_________________________
___________________________________
Signature
(Signature must conform in all respects to name of holder
as specified on the face of this Warrant Certificate)
<PAGE>
ANNEX II
Media Logic, Inc.
Officer's Certificate
I, William E. Davis, Jr., Chief Executive Officer and President of Media
Logic, Inc. (the "Company"), a Massachusetts corporation, Do Hereby Certify,
pursuant to (i) Section 7(g) of the Securities Purchase Agreement, dated as of
December 22, 1997 (the "Purchase Agreement"), between the Company and IMPRIMIS
SB L.P., as follows:
1. The representations and warranties of the Company contained in
Section 3 of the Purchase Agreement are true and correct as of the
date hereof; and
2. The Company has performed and complied with all obligations,
covenants, conditions and agreements required to be performed or
complied with under the Purchase Agreement or the Warrant on or prior
to the date hereof.
Capitalized terms used herein and not otherwise defined are defined in the
Purchase Agreement.
IN WITNESS WHEREOF, I have executed this certificate this _____ day of
December, 1997.
____________________________________
William E. Davis, Jr.,
Chief Executive Officer and President
<PAGE>
ANNEX III
Media Logic, Inc.
Assistant Clerk's Certificate
I, Paul M. O'Brien, Assistant Clerk of Media Logic Inc., a Massachusetts
corporation (the "Company"), Do Hereby Certify in the name and on behalf of the
Company as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of
the Restated Articles of Organization of the Company, together with
all amendments thereto through and including the date of this
certificate, as on file with and certified by the Secretary of State
of Massachusetts. Such documents have not been amended or modified,
no other charter documents have been filed with any relevant official
with respect to the Company and no amendment or modification to any of
such documents has been authorized on behalf of the Company.
2. Attached hereto as Exhibit B are true, correct and complete copies of
the By-laws of the Company as in effect on the date hereof. The
By-laws have not been amended or modified in any respect and are in
full force and effect.
3. Attached hereto as Exhibit C are true, correct and complete copies of
resolutions duly adopted by written consent of the Board of Directors
of the Company, dated October 15, 1997 and December 11, 1997, and such
resolutions (i) are the only proceedings adopted by such Board or any
committees thereof with respect to the matters referred to therein,
(ii) have not in any way been amended, modified, rescinded or revoked
since their adoption and (iii) remain in full force and effect on the
date hereof.
4. Each of the persons listed on Exhibit D hereto is a duly elected,
qualified and acting authorized officer of the Company serving in the
capacity set forth beside his name on Exhibit D. The signature of
each such officer set forth opposite his name on Exhibit D is his
genuine signature.
5. Attached hereto as Exhibit E is a true and correct copy of a
Certificate of Good Standing of the Company, issued on December 19,
1997, by the Secretary of State of the Commonwealth of Massachusetts.
2
<PAGE>
IN WITNESS WHEREOF, I have signed this certificate this ___ day of
December, 1997.
_________________________________
Paul M. O'Brien, Assistant Clerk
The undersigned hereby certifies that Paul M. O'Brien is the duly
elected, qualified and acting Assistant Clerk of the Company and that the
signature set forth above is his genuine signature.
_____________________________________
William E. Davis, Jr.
Chief Executive Officer and President
3
<PAGE>
ANNEX IV
December 29, 1997
IMPRIMIS SB L.P.
411 West Putnam Avenue, Suite 125
Greenwich, CT 06830
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7(h) of the Securities
Purchase Agreement, dated as of December 22, 1997 (the "Securities Purchase
Agreement"), by and between Media Logic, Inc., (the "Company") and you relating
to the sale and issuance by the Company of 1,133,334 shares (the "Shares") of
common stock of the Company, $.01 par value per share (the "Common Stock") and
warrants (the "Warrants") to purchase 1,333,334 shares of Common Stock of the
Company. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Securities Purchase Agreement.
We have acted as counsel for the Company in connection with the sale of the
Shares and the Warrants and in connection with the execution and delivery of the
Securities Purchase Agreement dated as of December 22, 1997, by and between the
Company and you. We have examined the Company's Restated Articles of
Organization and By-laws, as amended, to date, the Securities Purchase
Agreement, the Warrants, a Certificate of an Officer of the Company dated as of
the date hereof and delivered to you pursuant to Section 7(g) of the Securities
Purchase Agreement, a Certificate of the Assistant Clerk of the Company (the
"Assistant Clerk's Certificate") dated as of the date hereof and delivered to
you pursuant to Section 7(g) of the Securities Purchase Agreement, a Certificate
of Good Standing of the Company issued by the Secretary of State of the
Commonwealth of Massachusetts on December 19, 1997 as is attached to the
Assistant Clerk's Certificate as Exhibit E thereto and such records of the
corporate proceedings of the Company as we have deemed material. We have made
such inquiry of the officers of the Company and have examined such other Company
records, documents, agreements and instruments of the Company made available to
us and certificates of officers of the Company and of public officials and have
examined such questions of law as we have deemed necessary for the purposes of
this opinion. In rendering this opinion, we have relied, as to all questions of
fact material to this opinion, upon certificates of public officials and
officers of the Company, and representations and warranties of the Company
contained in the Securities Purchase Agreement and any certificates required
thereby. Any reference herein to "our knowledge" or any derivation thereof
shall mean knowledge of the particular attorneys in this firm who have performed
services for the Company on behalf of this firm without any independent
investigation except as otherwise described above.
We have assumed, without independently verifying such assumptions, the
genuineness of
<PAGE>
IMPRIMIS SB L.P.
December 29, 1997
Page 2
the signatures on all of the documents examined by us, the authenticity of all
documents furnished for our examination as originals, and the conformity to
original documents of all documents furnished to us as copies, including
documents transmitted by telecopy.
For purposes of this opinion, we have assumed that you have all requisite
power and authority and have taken all necessary action to effect the
transactions mentioned above, and we have assumed that you have complied with
all applicable federal or state laws and regulations in connection with the
purchase of the Shares and the Warrants and the execution and delivery of the
Securities Purchase Agreement.
The opinions hereinafter expressed are qualified (a) to the extent that the
validity or enforceability of any agreement or instrument or of any right
granted thereunder may be subject to or affected by any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, (b) by legal and
equitable limitations on the availability of specific performance as a remedy
and the discretion of the court in awarding equitable relief and (c) insofar as
indemnification or contribution for liabilities arising under the Securities Act
of 1933, as amended, may be deemed to be against public policy or otherwise
limited by applicable laws. Further, our opinion with respect to the Company's
agreement to file a listing application for the Warrants with the American Stock
Exchange and to use its best efforts to register the Warrants for public
trading, as set forth in Sections 4(s) and 4(t) of the Securities Purchase
Agreement, is subject to the approval of the Company's Board of Directors to so
register the Warrants, such approval which we have been informed that the
Company is seeking. We do not express any opinion with respect to the
securities or "blue sky" laws of any state or foreign jurisdiction.
Based upon the foregoing and subject to the final paragraph of this letter,
we are of the opinion that:
1. Each of the Company and the Subsidiary has been duly organized and is
validly existing as a corporation in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively. To our
knowledge, the Company and the Subsidiary are duly qualified to transact
business and are in good standing in all jurisdictions where the Company or the
Subsidiary owns or leases its respective property, maintains its respective
employees or conducts its respective business, except for jurisdictions in which
the failure to so qualify would not have a Material Adverse Effect on the
Company or the Subsidiary. The Company and the Subsidiary have all requisite
corporate power and authority to own their respective properties and conduct
their respective businesses as currently conducted.
<PAGE>
IMPRIMIS SB L.P.
December 29, 1997
Page 3
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.01 par value per share (the "Common Stock"). To our
knowledge, except for the Securities Purchase Agreement and the Warrants and
except as set forth on Schedule 3(c) of the Disclosure Schedule, (i) there are
no bonds, debentures, notes or other indebtedness or securities of the Company,
in any such case having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which shareholders
of the Company may vote, (ii) there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which the Company is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of Common Stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking,
and (iii) there are no outstanding rights, commitments, agreements,
arrangements, or undertakings of any kind obligating the Company to repurchase,
redeem or otherwise acquire any shares of Common Stock or other voting
securities of the Company or any securities of the type described in clauses (i)
and (ii) above.
3. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Company has timely filed all material required to be filed
pursuant to Sections 13(a) or 15(d) of the Exchange Act for a period of at least
12 months preceding the date hereof.
4. When issued, executed, delivered and sold by the Company in accordance
with the Securities Purchase Agreement, the Shares and the Warrants will have
been duly and validly issued, executed and delivered, will be fully paid and
non-assessable (provided that the Warrants' exercise price shall be payable upon
exercise of the Warrants) and not subject to any purchase option or right of
first refusal or preemptive, subscription or similar rights and will constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms and entitled to the benefits provided in the
Securities Purchase Agreement, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
The Exercise Shares have been duly authorized and reserved for issuance upon
Exercise of the Warrants and, when issued and delivered upon such exercise in
accordance with the Warrants, will by duly issued, fully paid and non-assessable
and not subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights.
5. The Company has the requisite corporate power and authority to enter
into the
<PAGE>
IMPRIMIS SB L.P.
December 29, 1997
Page 4
Securities Purchase Agreement, to sell and deliver the Shares, the Warrants and
the Exercise Shares as described in the Securities Purchase Agreement, and to
consummate the transactions that are contemplated in the Securities Purchase
Agreement. Subject to the Company's Board of Directors' authorization of the
registration of the Warrants under the Securities Exchange Act of 1934, as
amended, and the filing of a listing application with respect to the Warrants
with the American Stock Exchange, the Securities Purchase Agreement has been
duly and validly authorized by all necessary corporate action by the Company and
to our knowledge, no approval of any governmental or other body is required for
the execution and delivery of the Agreement by the Company or the consummation
of the transactions contemplated thereby (other than the American Stock Exchange
with respect to the listing of the Shares, Exercise Shares and Warrants). The
Securities Purchase Agreement has been duly and validly executed and delivered
by and on behalf of the Company and, subject to the Board of Directors' approval
set forth in the immediately preceding sentence with respect to the subject
matter thereof, is a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and except as to compliance with federal, state, and foreign securities laws, as
to which no opinion is expressed.
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Securities Purchase Agreement by the Company and
the performance of its obligations thereunder do not and will not constitute a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with or violate any provision of (i) the Company's
Restated Articles of Organization or By-laws, (ii) any indenture, mortgage, deed
of trust, material agreement or other instrument to which the Company is a party
or by which is or any of its property is bound, (iii) any applicable statute or
regulation, (iv) any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property, or (v) any license,
franchise, permit or other similar authorization held by the Company, except as
to defaults, violations or breaches which individually or in the aggregate would
not have a Material Adverse Effect on the Company.
7. The issuance of the Common Stock upon exercise of the Warrants in
accordance with the terms and conditions of the Securities Purchase Agreement
will not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed,
including the American Stock Exchange Listing Standards and Requirements.
<PAGE>
IMPRIMIS SB L.P.
December 29, 1997
Page 5
8. The Company complies with the eligibility requirements for the use of
Form S-3 under the Securities Act of 1933, as amended.
9. Except as described in Schedule 3(j) of the Disclosure Schedule to the
Securities Purchase Agreement, to our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceeding against the
Company or the Subsidiary which would, insofar as can reasonably be foreseen,
individually or in the aggregate, have a Material Adverse Effect on the Company
or the Subsidiary.
10. To our knowledge, except for the Subsidiary, the Company does not have
any subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
joint venture or other entity. To our knowledge, there are no restrictions on
the transfer of shares of Common Stock other than those imposed by relevant
state and federal securities laws. To our knowledge, there are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock nor are there any commitments,
agreements, arrangements or undertakings of any kind relating to dividend rights
or disposition of the Common Stock, to which the Company is a party. To our
knowledge, except as provided in the Securities Purchase Agreement and as set
forth in Schedule 3(c) of the Disclosure Schedule, no Person has the right to
demand or other rights to cause the Company to file any registration statement
under the Securities Act.
11. No permit, consent, approval, license or order of, authorization of,
or registration, declaration or filing with, any court or other governmental
entity is required to be obtained or made in connection with the execution,
delivery or performance of the Securities Purchase Agreement or the Warrants by
the Company or the consummation of the transactions contemplated thereby (other
than with respect to the American Stock Exchange in connection with the listing
of the Registrable Securities and the approvals required in connection with a
registration of the Registrable Securities).
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention including changes in law which may occur
hereafter. Our opinions above are limited to the laws of the Commonwealth of
Massachusetts, and the federal law of the United States of America and we
express no opinion with respect to the laws of any other jurisdiction. We
note that the Securities Purchase Agreement states that it is governed by the
law of the State of New York, and for purposes of the opinions set forth in
paragraph 5 above, we have assumed, with your consent, that the law of the
State of New York is identical to the law of the Commonwealth of
Massachusetts. Furthermore, we express or imply no opinion with respect to
compliance with anti-fraud statutes,
<PAGE>
IMPRIMIS SB L.P.
December 29, 1997
Page 6
rules or regulations of applicable state or federal law. This letter is
furnished to you as the purchaser of the Shares and Warrants and is solely for
your benefit and may not be relied upon by any other person or for any other
purpose.
Very truly yours,
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
SCHEDULE 3C
DEBENTURES
<TABLE>
<CAPTION>
HOLDER AMOUNT
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
One & Co.............................................................................................. $ 100,000
F.T.S. Worldwide...................................................................................... $ 300,000
Beauchamp Finance Ltd................................................................................. $ 120,000
Euro Factors Int'l, Inc............................................................................... $ 100,000
Ramlu Trading Corp.................................................................................... $ 80,000
F.T.S. Worldwide...................................................................................... $ 750,000
</TABLE>
WARRANTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES EXERCISE PRICE PER SHARE
- ----------------------------------------------------------------------- ----------------- ---------------------------
<S> <C> <C>
Digital Media and Communications, L.P.................................. 410,870 $3
ACFS Limited........................................................... 240,000 $3
Adar Equities LLC...................................................... 900,000 $3
Rochon Capital Group, Ltd.............................................. 200,000 $2
First Granite Securities, Inc.......................................... 500,000 $2
</TABLE>
OPTIONS
<TABLE>
<CAPTION>
OPTIONS AUTHORIZED
OPTIONS OUTSTANDING BUT UNISSUED
------------------- ------------------
<S> <C> <C>
Media Logic Inc.
1991 Stock Option Plan.... 610,592 414,808
</TABLE>
REGISTRATION RIGHTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Digital Media and Communications L.P........................................................... 410,870
ACFS Limited................................................................................... 240,000
Adar Equities LLC.............................................................................. 900,000
Rochon Capital Group, Ltd...................................................................... 200,000
First Granite Securities, Inc.................................................................. 500,000
F.T.S. Worldwide............................................................................... 833,334*
Boston Group LP................................................................................ 250,000**
First Granite Securities, Inc.
Raymond Leclerc................................................................................ 1,000,000
Lee H. Elizer.................................................................................. 8,000***
</TABLE>
- ------------------------
* Assumes $.90 conversion price for outstanding debentures
** Expected--See Schedule 3H
<PAGE>
*** Shares to be issued October 23, 1998 pursuant to Separation Agreement.
AGREEMENTS TO ISSUE SECURITIES
8,000 shares to be issued to Lee H. Elizer on October 23, 1998 pursuant to
Separation Agreement dated October 23, 1996.
REDEMPTION RIGHTS
F.T.S. Worldwide--$750,000 Debentures--pursuant to Section 2(d) of
Registration Rights Agreement dated October 27, 1997.
<PAGE>
SCHEDULE 3H
<TABLE>
<CAPTION>
HOLDER INSTRUMENT AMOUNT DATE
- ----------------------------------------- -------------------------- -------------------- --------------------
<S> <C> <C> <C>
F.T.S. Worldwide......................... Convertible Debenture $750,000 October 29, 1997
(Disclosed in Schedule 3C)
First Granite Securities, Inc............ Warrants 500,000 shares October 29, 1997
(Disclosed in Schedule 3C) exerciseable at $2
per share
Boston Group LP.......................... Warrants 250,000 shares To be issued upon
First Granite Securities, Inc. exerciseable at the execution of a
greater of $2 per securities purchase
share or the Market agreement and
Price per share payment of the
purchase price
</TABLE>
REGISTRATION RIGHTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- ---------------------------------------------- -----------------
<S> <C> <C>
Boston Group LP............................... 250,000 Subject to issuance of warrants as described
First Granite Securities, Inc. above
</TABLE>
<PAGE>
SCHEDULE 3J
PENDING LITIGATION
On or about January 16, 1996, Media Logic, Inc. and its subsidiary
MediaLogic ADL, Inc. (collectively, "Media Logic") commenced an action against
Christian P. Marlowe and Marlowe Engineering Company (collectively "Marlowe")
seeking (a) a declaration of the rights of Media Logic under certain technology
transfer and consulting agreements, and (b) damages for Marlowe's breach of
those Agreements. On June 5, 1996, Marlowe answered the complaint and
counterclaimed, asserting claims for breach of contract, misrepresentation,
promissory estoppel, violation of the implied covenant of good faith and fair
dealing, M.G.L.c. 93A, and declaratory judgment. On June 11, 1996, Marlowe
amended the counterclaim to include a defamation count relating to a press
release issued by Media Logic concerning the litigation. In August 1996, Media
Logic moved to dismiss the counterclaims. The Court denied Media Logic's motion
in November 1996. Currently the parties are engaged in pre-trial discovery.
<PAGE>
SCHEDULE 3K
EVENTS OF DEFAULT
None
<PAGE>
SCHEDULE 3L
LEASES
<TABLE>
<CAPTION>
LOCATION LANDLORD TERM DATE RENT/MONTH PURPOSE
- ---------------------------- ---------------------------- ----------- ------------- ----------------------------
<S> <C> <C> <C> <C>
31 South Street............. D&K Realty Trust 4/30/08 6950 company headquarters
Plainville, MA
1965 57th St................ Cottonwood Land and Farm 1/31/99 6949 former R&D offices
Boulder, CO Ltd.
This property has been sublet for the remainder of the lease term.
2280 Wilderness Place....... Avalon Investment Co. 3/31/00 2774 former R&D offices
Ste. B
Boulder, CO
Sublease for the remainder of this lease term to be executed as of January 1, 1998.
2340 E Trinity Mills........ F.E.S. Mgmnt. Mo/ Mo 770 sales office
Carrollton, TX
One O'Hare Center........... Alliance Business Center Mo/ Mo 1341 sales office
6250 River Road
Rosemount, IL
American Office Center...... Great Offices Inc Mo/ Mo 885 sales office
8 Corporate Park
Irvine, CA
</TABLE>
<PAGE>
SCHEDULE 3M
PATENT APPLICATIONS
U. S. Patent Application Serial No. 08/547,713
Entitled: TRANSFER MECHANISM
U.S. Patent Application Serial No. 08/548,413
Entitled: DATA LIBRARY
U.S. Patent Application Serial No. 08/548,483
Entitled: DATA STORAGE SYSTEM
U.S. Patent Application Serial No. 08/548,485
Entitled: CONVEYOR SYSTEM
U.S. Patent Application filed Nov. 17, 1997 (Serial No. not yet issued)
Entitled: TAPE LIBRARY
COPYRIGHTS
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION
TITLE NO. DATE
- ------------------------------------------------------------------------- --------------- ---------------------
<S> <C> <C>
ML5000 Rev. 4.21......................................................... TXU 526 355 July 17, 1992
ML3100 Rev. 4.42......................................................... TXU 575 165 September 3, 1993
ML3200-24 Rev. 2.05...................................................... TXU 592 148 September 3, 1993
ML3600/ML3200-48 Rev. 2.37............................................... TXU 592 149 September 3, 1993
</TABLE>
TRADEMARKS
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION
TITLE NO. DATE JURISDICTION
- -------------------------------------- ----------- -------------------- -------------------
<S> <C> <C> <C>
ACCUCOPY.............................. 1,896,826 May 30, 1995 United States
PROCESSLOGIC.......................... 1,930,272 October, 24, 1995 United States
MEDIALOGIC............................ 1,973,194 May 7, 1996 United States
MEDIALOGIC............................ 1,713,315 September 8, 1992 United States
</TABLE>
<PAGE>
SCHEDULE 3N
LEASE
<TABLE>
<CAPTION>
ANNUAL
LOCATION LANDLORD TERM DATE COMMITMENT PURPOSE
- ----------------- -------------------- ----------- ------------ ---------------------------
<S> <C> <C> <C> <C>
31 South Street D&K Realty Trust 4/30/08 $ 83,400 Company headquarters
Plainville, MA
</TABLE>
<PAGE>
SCHEDULE 3O
RELATED PARTY TRANSACTIONS
Lease with D&K Realty Trust on company headquarters at 310 South Street,
Plainville, MA. Principals in D&K Realty Trust are David Lennox, former
President and director of the company, and Klaus Peter, former Senior Vice
President and Director of the company. Neither Mr. Lennox nor Mr. Peter is
employed by the company nor does either Mr. Lennox or Mr. Peter have any
agreement of any type with the company other than pursuant to the above
referenced lease with D&K Realty Trust.
<PAGE>
Exhibit 99.2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as December 22, 1997, is
entered into by and between MEDIA LOGIC, INC., a Massachusetts corporation (the
"Company"), and WEXFORD SPECTRUM INVESTORS LLC, a Delaware limited liability
company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of the common stock, $.01 par value per
share, of the Company (the "Common Stock"), upon the terms and subject to the
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Upon the terms and subject to the conditions set forth
in this Agreement, the undersigned hereby agrees to purchase from the Company
566,666 shares (the "Shares") of Common Stock for ninety cents ($0.90) per
share, for an aggregate purchase price (the "Purchase Price") of $509,999.40.
The Purchase Price for the Shares shall be payable in United States Dollars.
b. Form of Payment. In consideration of the issuance and sale of
the Shares and the Warrants (as hereinafter defined) by the Company to the
Buyer, the Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars pursuant to the wire instructions
set forth in Section 1(c). Immediately upon payment by the Buyer to the Company
of the Purchase Price of the Shares, the Company shall deliver certificates
evidencing such Shares duly executed on behalf of the Company and countersigned
by the Company's transfer agent to the Buyer, together with warrant
certificates, the form of which is attached hereto as ANNEX I hereto, evidencing
the Warrants (the "Warrants"), duly executed on behalf of the Company, and the
Shares and Warrants shall each be free and clear of all security interests,
liens, pledges, charges, escrows, options, rights of first refusal,
encumbrances, agreements, arrangements, commitments or other claims of any kind
or character (collectively, the "Claims"). The obligation of the parties hereto
as set forth in this Section 1(b) are subject to the satisfaction of the
conditions set forth (i) in the case of the Buyer, in Section 7(c) and (ii) in
the case of the Company, in Section 6(d), each of which may not be waived by
either party hereto.
<PAGE>
c. Method of Payment. Payment of the Purchase Price shall be made
by wire transfer of funds to the Company in accordance with the following
instructions:
FLEET BANK OF MA
Account Name MEDIALOGIC, INC.
Account No. 050-0759123 Bank ABA #011500010
SWIFT address: FLTBUS3B Bank Phone # 800/841-4000
Please reference invoice # on Transfer
d. Affiliates. For purposes of this Agreement (except as expressly
defined in Section 3(t) solely for purposes of Section 3(t)), "Affiliate" shall
mean (a) such as is defined in the Securities Exchange Act of 1934, as amended,
and (b) as to each other, IMPRIMIS SB L.P. and WEXFORD SPECTRUM INVESTORS LLC.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Shares pursuant to the
Registration Statement (as hereinafter defined), the Buyer is purchasing the
Shares in the ordinary course of its business and for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof or any arrangement or understanding with any other persons regarding the
distribution or purchase of such Shares;
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Shares;
c. All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
d. The Buyer understands that the Shares are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
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understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K for the fiscal year ended March
31, 1997 (the "Form 10-K"), (2) Amendment No. 1 to the Form 10-K on Form 10-K/A,
(3) Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 1997
and September 30, 1997 and (4) Proxy Statement dated August 11, 1997
(collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources it can
practically bring to bear on the purchase of the Shares, is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to making an investment decision like that involved in the purchase
of the Shares and the Buyer understands that its investment in the Shares
involves a high degree of risk;
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
h. The Buyer has full right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity (regardless of whether such enforcement is considered in a proceeding at
law or in equity) and to bankruptcy, insolvency, fraudulent transfer,
reorganization moratorium and other similar laws affecting creditors' rights
generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Shares.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Organization, Standing and Power. (i) The Company and its
wholly-owned subsidiary, MediaLogic ADL, Inc. (the "Subsidiary"), are duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively, and
each has all requisite corporate power and authority to own, lease and
operate its respective properties and to carry on its respective businesses
as now being conducted and
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as currently proposed to be conducted. The Company and the Subsidiary are duly
qualified to do business and are in good standing in each jurisdiction in which
such qualification is necessary because of the property owned, leased or
operated by them or because of the nature of their business as now being
conducted, except for those jurisdictions where the failure to be so qualified
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the condition (financial or otherwise), operations,
business, assets, liabilities, earnings or prospects of the Company and the
Subsidiary taken as a whole ("Material Adverse Effect").
(ii) The Company has, prior to the execution and delivery by the
Company of this Agreement, delivered to the Buyer a true and complete copy of
the Certificate of Incorporation (together with any amendments thereto) and the
By-laws of the Company. The minute books of the Company are true and complete
in all material respects.
b. Securities Purchase Agreement; Warrants and Stock. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement, the certificates evidencing the Warrants, and the certificates
evidencing the Shares and to perform all of its obligations and undertakings
under such agreements and to carry out the transactions contemplated under such
agreements. This Agreement, the certificates evidencing the Shares and the
Warrants and the transactions contemplated thereby, and the issuance and sale of
the Shares and the Warrants, have each been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance by the
Company of this Agreement or the Warrants. This Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Warrants,
when executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or in equity) and
to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
c. Capitalization; Equity Interests. (i) As of the date of this
Agreement, the authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, of which 8,563,660 shares are issued and
outstanding. The outstanding shares of Common Stock have been duly authorized
and issued and are fully paid and non-assessable and not subject to any purchase
option or right of first refusal or preemptive, subscription or similar rights.
The Shares have been duly authorized and, when issued in accordance with this
Agreement, will (i) be duly issued, fully paid and non-assessable and not
subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder. The shares of Common Stock
initially issuable upon exercise of the Warrants (the "Exercise Shares") have
been duly authorized and reserved for issuance upon exercise and, when issued
upon such exercise, will (ii) be duly issued, fully paid and non-assessable and
not subject to any purchase option, or right of first refusal or preemptive,
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<PAGE>
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder.
(ii) Except for this Agreement, the Warrants and as set forth in
Schedule 3(c) of the Disclosure Schedule, (x) there are no bonds, debentures,
notes or other indebtedness or securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote, (y) there
are no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which the Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Common Stock or
other voting securities of the Company or obligating the Company to issue,
grant, extend or enter into any such security, option, warrant, call right,
commitment, agreement, arrangement or undertaking and (z) there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire any
shares of Common Stock or other voting securities of the Company or any
securities of the type described in clauses (x) or (y) above. No dividends on
any shares of Common Stock have been declared but not yet paid.
(iii) Except for the Subsidiary, the Company does not have any
subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
joint venture or other entity. The Company is not subject to any liability for
any claim that the Company violated any applicable Federal or state securities
laws in connection with the issuance of Common Stock or other securities. There
are no restrictions on the transfer of shares of Common Stock other than those
imposed by relevant state and Federal securities laws. There are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock to which the Company is a party, or to
the best of the knowledge of any of the Company's officers, directors or
employees (the "Company's Knowledge"), among or between any persons other than
the Company. Except as set forth in Schedule 3(c) of the Disclosure Schedule,
no person has the right to demand or other rights to cause the Company to file
any registration statement under the 1933 Act relating to any securities of the
Company presently outstanding or any right to participate in any such
registration statement.
(iv) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act, and the Common Stock is listed and traded on the
American Stock Exchange ("AMEX").
d. Non-contravention. The execution and delivery of this Agreement
and the Warrants by the Company, the issuance of the Shares and the Warrants,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Warrants and compliance by the Company with any of the
provisions hereof or thereof do not and will not conflict with or result in a
breach or violation by the Company of any of the terms or provisions of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a
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<PAGE>
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or to any increased, additional, accelerated or
guaranteed rights or entitlement of any person or entity under, or result in the
creation of any Claim on the properties or assets of the Company under (i) the
restated articles of organization or by-laws of the Company, (ii) any indenture,
mortgage, note, bond, license, lease, contract, commitment, arrangement, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or (iv) to its knowledge, any judgment, decree or order of any
court, United States federal or state regulatory body, administrative agency, or
other governmental body having jurisdiction over the Company or any of its
properties or assets (v) any license, franchise, permit or other similar
authorization held by the Company, except such conflict, breach or default which
would not have a Material Adverse Effect on the transactions contemplated
herein.
e. Financial Statements. (i) The consolidated financial
statements (the "Financial Statements") of the Company set forth in the (A)
Company's Annual Report on Form 10-K for the year ended March 31, 1997, reported
on by Arthur Andersen LLP, (B) Amendment No. 1 to the Form 10-K on Form 10-K/A,
and (C) Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1997 and September 30, 1997, in each case fairly present the
consolidated financial position of the Company as of such dates and the
consolidated results of operation and cash flows for such periods then ended in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis. Arthur Andersen LLP is an independent accountant as defined
under the 1933 Act and the rules and regulations promulgated thereunder.
(ii) All reserves established by the Company are reflected on the
balance sheets contained in the Financial Statements or in the footnotes to the
Financial Statements of the Company and in management's reasonable estimate are
adequate in the aggregate and there are no loss contingencies that are required
to be accrued by Statement of Financial Accounting Standard No. 5 of the
Financial Accounting Standards Board which are not provided for on such balance
sheets. As of the date hereof, except for liabilities (A) reflected on or
reserved against on the balance sheet as of September 30, 1997 (the "Latest
Balance Sheet") (B) incurred in the ordinary course of the Company's business
and consistent with past practice or (C) contemplated by this Agreement, the
Company has no liabilities (absolute, accrued, fixed, contingent, known, unknown
or otherwise) which would be required by GAAP to be reflected or reserved
against on the balance sheet of the Company and which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(iii) Any forecasts and projections previously delivered to the
Buyer by the Company have been prepared in good faith and on the basis of
assumptions that are fair and reasonable in light of current and reasonably
foreseeable circumstances.
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f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Shares or the Warrants to the
Buyer as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained and except as contemplated in Section 4(s)
of this Agreement.
g. SEC Filings. None of the SEC filings with the Securities and
Exchange Commission since the filing of the 10-K on March 31, 1997 contained, at
the time they were filed, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since December 22, 1996 timely filed all
requisite forms, reports and exhibits thereto with the Securities and Exchange
Commission.
h. Absence of Changes. Except as set forth on Schedule 3(h) of the
Disclosure Schedule and except as may apply in the context of the Securities
Purchase Agreement entered into between the Company and an Affiliate of the
Buyer of even date herewith (the "Affiliate Purchase Agreement"), since
September 30, 1997, the Company and the Subsidiary have operated in the ordinary
course consistent with past practice and there has not been:
(i) any event, occurrence or development or state of
circumstances of facts which has had or would reasonably be expected to have a
Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any Claim or
obligation of the Company or the Subsidiary or any amendment, termination or
waiver of any rights of value to the Company or the Subsidiary, except in the
ordinary course of business and consistent with past practice;
(iii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of Common Stock of the Company or
the Subsidiary any direct or indirect redemption, purchase or other acquisition
of any such shares;
(iv) any creation of any Claim on, or any assignment or other
disposition of, any property of the Company or the Subsidiary, except in the
ordinary course of business consistent with past practice, and which Claims,
assignments and dispositions together with all other such Claims, assignments
and dispositions would not have a Material Adverse Effect;
(v) any write-down of the value of any asset of the Company or
the Subsidiary or any write-off as uncollectible of any accounts or notes
receivable or any portion thereof, other than write-downs or write-offs which in
the aggregate do not exceed $25,000;
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(vi) any capital expenditure or commitment or addition to
property, plant or equipment of the Company or the Subsidiary, individually or
in the aggregate, in excess of $25,000;
(vii) (A) any change in any bonus, commission, pension,
profit-sharing or other benefit or compensation plan, policy or arrangement or
commitment or (B) any increase in any such compensation, bonus, commission,
pension, profit sharing or other benefit payable now or in the future to any
shareholder, director or officer of the Company or the Subsidiary, or any
Affiliate (as defined in the Exchange Act) of such person (or, in each case, the
entering into of any agreement to effect the same);
(viii) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company or the Subsidiary, other than obligations incurred in the ordinary
course of business and consistent with past practice;
(ix) any issuance or sale, or any contract entered into for the
issuance or sale, of any shares of capital stock or securities convertible into
or exercisable for shares of capital stock of the Company or the Subsidiary;
(x) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of value to the Company or the Subsidiary;
(xi) any material damage, destruction or loss (whether or not
covered by insurance) affecting any asset or property of the Company or the
Subsidiary;
(xii) any change in the independent public accountants of the
Company or the Subsidiary or in the accounting methods or accounting practices
followed by the Company or the Subsidiary or any change in depreciation or
amortization policies or rates; or
(xiii) any agreement, whether in writing or otherwise, to take any
of the actions specified in the foregoing items (i) through (xii).
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as disclosed
in the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or the
Subsidiary or (ii) would reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
j. Absence of Litigation. Except as set forth in Schedule 3(j) of
the Disclosure Schedule, there is no action, suit, claim, legal, or
administrative or arbitration proceeding, inquiry or investigation before or by
any court, public board or body pending or, to the knowledge of the Company,
threatened against or affecting the Company or the Subsidiary,
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wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect on the business or financial condition of the Company or the Subsidiary
or the transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
k. Absence of Events of Default. Except as set forth in Schedule
3(k) of the Disclosure Schedule, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's financial condition or results of
operations.
l. Assets, Property And Related Matters; Real Property. (i) The
Company or the Subsidiary has good title to, or a valid leasehold interest in,
as applicable, all of the assets reflected on the Financial Statements, free and
clear of all Claims. To the Company's Knowledge, such assets (other than
inventory) are in good operating condition and repair, subject to ordinary wear
and tear and constitute all of the properties, interests, assets and rights held
for use or used in connection with the business and operations of the Company or
the Subsidiary and constitute all those necessary to continue to operate the
business of the Company or the Subsidiary, as the case may be, consistent with
current and historical practice.
(ii) All leases of real property to which the Company or the
Subsidiary is a party ("Leases"), as set forth in Schedule 3(1) of the
Disclosure Schedule, are in writing and in full force and effect and constitute
valid and binding obligations of the Company and, to the Company's Knowledge, of
the other parties thereto, enforceable in accordance with their respective terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Company or the
Subsidiary holds good and valid title to the leasehold interests under the
Leases for the term of each such Lease, free and clear of all Claims. The
Leases have not been modified in any material respect, except to the extent that
such modifications are disclosed, in writing, in a copy delivered to the Buyer.
There exists no material default, or any event which upon notice or the passage
of time, or both, would give rise to any material default, in the performance of
the Company or the Subsidiary or, to the Company's Knowledge, by any lessor
under any such lease. Except as disclosed on Schedule 3(l) of the Disclosure
Schedule, the Company or the Subsidiary have not, and to the Company's
Knowledge, no other person has, granted any oral or written right to anyone
other than the Company or the Subsidiary to lease, sublease or otherwise occupy
any of its properties through the end of the applicable lease periods.
(iii) The Company does not own, and has not previously owned, any
real property.
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m. Patents, Trademarks and Similar Rights. (i) Set forth on
Schedule 3(m) of the Disclosure Schedule is a true and complete list of the
patents, patent applications, trademarks (registered or unregistered) and
service marks (and any applications or registrations therefor), trade names,
corporate names, copyrights, copyright registrations and other intellectual
property that currently exists in written form owned or filed by, or licensed
to, the Company or the Subsidiary or used in the conduct of the Company's or the
Subsidiary's business as presently conducted ("Intellectual Property"). With
respect to registered trademarks, Schedule 3(m) of the Disclosure Schedule sets
forth a list of all jurisdictions in which such trademarks are registered or
applied for and all registration and application numbers. To the Company's
Knowledge, the Company has all rights to Intellectual Property as are used or
are necessary in connection with the businesses of the Company and the
Subsidiary as presently conducted, and the Company owns, or has the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person or
entity, all Intellectual Property free and clear of all Claims whatsoever. The
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any options,
licenses or agreements of any kind relating to Intellectual Property or the
marketing or distribution thereof. Neither the Company nor the Subsidiary is
bound by or a party to any options, licenses or agreements of any kind relating
to the intellectual property of any other person or entity. The conduct of the
business of the Company and of the Subsidiary as presently conducted does not,
to the Company's Knowledge, violate, conflict with or infringe the intellectual
property of any other person or entity. No claims are pending, or to the
Company's Knowledge, threatened, against the Company or the Subsidiary by any
person or entity with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property and, during the past three
years, neither the Company nor the Subsidiary has received any communications
alleging that the Company has violated any rights relating to intellectual
property of any person or entity.
n. Agreements. (i) Schedule 3(n) of the Disclosure Schedule
contains a true and complete list or description of all written or oral
contracts, agreements and other instruments ("Contracts") to which the Company
or the Subsidiary is a party (A) relating to indebtedness for money borrowed or
the deferred purchase price of property or services or capital leases in excess
of $50,000, (B) relating to any forward commitments or to other commitments in
excess of $50,000 in any given year, (C) relating to any joint venture,
partnership or limited liability company; (D) relating to the employment or
compensation of any director, officer or shareholder of the Company or the
Subsidiary, or any Affiliate of such companies, and not disclosed in the proxy
statement filed in connection with the Company's fiscal year ended March 31,
1997, (E) relating to the employment or compensation of any employee,
consultant, independent contractor or other agent of the Company or the
Subsidiary, or any Affiliate of such companies, involving a payment in excess of
$50,000 in any given year, (F) relating to the sale or other disposition of any
assets, properties or rights (other than the sale of inventory), (G) which
restricts the Company's or the Subsidiary's ability to do business in any
geographic area or grants to any person exclusive or similar rights in any line
of business or in any geographic area, (I) which restricts the Company's
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or the Subsidiary's ability from soliciting employees of another entity or
restricts another entity's ability from soliciting the Company's or the
Subsidiary's employees, (J) relating to the lease of any machinery, equipment,
vehicle or other personal property owned by any other person or entity, for
which the annual rental exceeds $50,000; (K) relating to the lease of any real
or personal property to any other person or entity, for which the annual rental
exceeds $50,000; (L) relating to any advance, loan, extension of credit or
capital contribution to, or other investment in, any person or entity not in
excess of $50,000 in the aggregate; or (M) that is otherwise material to the
business, properties or assets of the Company or the Subsidiary and entered into
other than in the ordinary course of business.
(ii) All Contracts are valid, binding and in full force and effect as
to the Company or the Subsidiary and neither the Company nor, to the Company's
Knowledge, any other party thereto is in breach or violation of, or default
under, any such Contracts in any material respect.
o. Related Party Transactions. Except as set forth on Schedule
3(o) of the Disclosure Schedule, no current or former partner, director,
officer, employee or shareholder of the Company or the Subsidiary or any
associate or Affiliate thereof, or any parent, spouse, child, brother, sister or
any other relative with a relationship (by blood, marriage or adoption) of not
more remote than first cousin of any of the foregoing (collectively, "Family
Members"), is presently, or during the 12-month period ending on the date of
this Agreement has been, directly or indirectly (i) a party to any transaction
with the Company (including any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or shareholder or such associate) or (ii) to the Company's Knowledge,
the direct or indirect owner of an interest in any corporation, firm,
association or business organization (other than the ownership of less than two
percent (2%) of the outstanding capital stock of any publicly traded entity)
which is a present (or potential) competitor, lender, broker or customer of the
Company or the Subsidiary, nor does any member of management or any of their
Family Members receive income from any source other than the Company or the
Subsidiary which relates to the Company's or the Subsidiary's business or should
properly accrue to the Company or the Subsidiary. Schedule 3(o) of the
Disclosure Schedule sets forth a list of all Family Members who are currently
employed or who were employed by the Company or the Subsidiary at any time
during the last three fiscal years together with a description of job, title and
annual salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
p. Disclosure. No representation, warranty or statement of the
Company contained in this Agreement, or any other agreement contemplated by this
Agreement, or any certificate, schedule, annex or other writing furnished to the
Buyer by the Company, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statement contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
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q. Investment Company Act. The Company is not an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the SEC thereunder.
r. Securities Act. Assuming that the representations and warranties
of the Buyer contained in Article 2 are true and correct, the Company has
complied with all applicable Federal and state securities laws in connection
with the issuance and sale of the Shares. Neither the Company nor anyone acting
on its behalf has offered to sell the Shares or similar securities to, or
solicited offers with respect thereto from, or entered into any preliminary
conversations or negotiations relating thereto with, any person, so as to bring
the issuance and sale of such Shares under the registration provisions of the
1933 Act.
s. Brokers. Other than the Placement Agents (as defined below), no
agent, broker, investment banker, person or firm acting on behalf of the Company
or under the authority of the Company is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
any of the parties in connection with any of the transactions contemplated by
this Agreement.
t. Small Business Matters. The Company, together with its
"Affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
e121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder (the "SBIC Act"),
including Title 13, Code of Federal Regulations, e121.301. The information set
forth in the Small Business Administration Forms 480, 652 and Section A of Form
1031 which have been delivered on or prior to the date hereof to the SBIC,
regarding the Company is accurate and complete. Neither the Company nor the
Subsidiary or Affiliates thereof presently engages in, and it shall not
hereafter engage in, any activities, nor shall the Company or its Subsidiary or
Affiliates thereof use directly or indirectly the proceeds from the sale of the
shares of the capital stock of the Company hereunder (including the Warrants and
any capital stock issued respect hereof) for any purpose for which a "small
business investment company" (an "SBIC") (as defined in Section 103(3) of the
SBIC Act) is prohibited from providing funds by the SBIC Act, including Title
13, Code of Federal Regulations Section, Section 107.720.G.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictions On Transferability. The Company shall not be
required to register the transfer of any Shares on the books of the Company
unless: (i) such securities have been registered under applicable Federal and
state securities laws, (ii) such shares are being transferred pursuant to Rule
144, or any successor rule, promulgated under the 1933 Act or (iii) the Company
shall have been provided with an opinion of counsel reasonably satisfactory to
it to the effect that the proposed transfer is exempt from the registration
requirement of the 1933 Act and the relevant state securities laws.
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b. Restrictive Legend. The Buyer acknowledges and agrees that until
such time as the Shares have been registered under the 1933 Act as contemplated
herein and sold in accordance with an effective registration statement, the
Shares shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES, A TRANSFER PURSUANT TO RULE 144,
OR ANY SUCCESSOR RULE, UNDER THE SECURITIES ACT OR AN OPINION OF
COUNSEL OR OTHER REASONABLE ACCEPTABLE EVIDENCE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares and the Warrants to the Buyer
under any United States laws and regulations and any applicable state securities
or "Blue Sky" laws, or by any domestic securities exchange or trading market,
and to provide a copy thereof to the Buyer promptly after such filing.
d. Reporting Status. So long as the Buyer beneficially owns any of
the Shares, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") even if the Exchange Act
or the rules and regulations thereunder would permit such termination.
e. Use of Proceeds. (i) The Company will use the proceeds from the
sale of the Shares and the Warrants and the exercise of any Warrants (excluding
amounts paid by the Company for legal fees and finder's fees in connection with
the sale of the Shares and the Warrants) for internal working capital purposes,
and shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership enterprise or other person.
(ii) The proceeds from the sale of the shares of capital stock of
the Company (including the Warrants and any capital stock issued in respect
thereof) pursuant to this Agreement (the "Proceeds") shall be used by the
Company for general corporate purposes. The Company, the Subsidiary and
Affiliates thereof shall provide to representatives of the Buyer which is an
SBIC and the SBA reasonable access to its books and records for the purpose of
confirming such use of the Proceeds or for other purposes related to the
qualifications of the financing provided hereunder or under any of the
Documents. If the Company breaches its representations and warranties made in
Section 3(t) in any materials respect, such SBIC may elect that any shares of
the Company's capital stock and the Warrants held by such SBIC be repurchased by
the Company at original cost plus accrued dividends or interest thereon.
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(iii) So long as an SBIC holds any securities of the Company,
the Company, its subsidiaries and Affiliates thereof will comply at all times
with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(iv) Within 45 days after the end of each fiscal year, and
at any other time reasonably requested by any SBIC, the Company shall deliver to
such SBIC a written assessment, in form and substance satisfactory to such SBIC
of the economic impact of such SBIC's investment in the Company, specifying (1)
the full-time equivalent jobs created or retained in connection with the
investment, and (2) the impact of the investment on the Company's business in
terms of revenue and profits, and on taxes paid by the Company, its subsidiaries
and Affiliates thereof and their respective employees. Upon advance written
request, the Company promptly (and in any event within 20 days of such request)
shall furnish to any SBIC all information (1) reasonably requested by such SBIC
in order for such SBIC to comply with the requirements of 13 C.F.R. Section
107.620 or to prepare and file Small Business Administration Form 468 and (2)
reasonably requested or required by any Governmental Authority asserting
jurisdiction over such SBIC. Any submission of financial information pursuant
to this Section shall be under cover of a certificate executed by the president,
chief executive officer, chief financial officer or treasurer of the Company
certifying that such information (1) relates to the Company, its subsidiaries
and affiliates thereof (2) is accurate and (3) if applicable, has been audited
by the Company's independent auditors.
f. Broker's Fees. The Buyer acknowledges that the Company intends
(i) to pay The Boston Group, L.P. and First Granite Securities, Inc. (together,
the "Placement Agents") fees of ten percent (10%) and two percent (2%),
respectively, of the Purchase Price paid by the Buyer, and (ii) to issue to the
Placement Agents warrants to purchase an aggregate of 250,000 shares of Common
Stock of the Company (the "Placement Agent Warrants", such aggregate being the
total number of Placement Agent Warrants to be issued under this Agreement and
the Affiliate Purchase Agreement) with an exercise price per share equal to the
greater of (a) $2.00 and (b) the Market Price (as defined in Section 4(h) of
this Agreement).
g. Expenses. The Company shall pay the Buyer a non-accountable
expense reimbursement (the "Expense Reimbursement") of $50,000 to cover the
Buyer's expenses, including legal fees and disbursements. The Expense
Reimbursement shall be payable in United States Dollars. In addition, the
Company shall pay any and all stamp and other documentary taxes payable or
determined to be payable in connection with the issuance of the Shares and
agrees to hold the Buyer harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
h. Warrants. The Company shall issue to the Buyer the Warrants,
which shall consist of five-year warrants to purchase 666,666 shares of Common
Stock (the "Exercise Shares") of which (i) Warrants to purchase 333,333 shares
of Common Stock shall be exercisable at a price per share equal to the greater
of (a) $1.50 or (b) the closing or last price of the Common
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Stock on the Composite Tape or other comparable reporting system for the trading
day immediately preceding the Closing Date (the "Market Price"), and (ii)
Warrants to purchase 333,333 shares of Common Stock shall be exercisable at a
price per share such that the weighted average exercise price of the 666,666
Warrants issued by the Company to the Buyer under this Agreement shall equal (a)
$2.25, if the exercise price of the Warrants issued under Section 4(h)(i) is
less than or equal to $1.75, or (b) $2.15, if the exercise price of the Warrants
issued under Section 4(h)(i) is greater than $1.75; provided, however, that in
no case will the exercise price of any Warrants be less than the Market Price.
i. Board of Directors. The Company's Board of Directors shall
refrain from filling one of its two currently existing vacancies until such time
as a Buyer Nominee (as defined below), if any, has been appointed a Director by
the Board of Directors. For the longer of (x) a period of one (1) year
beginning on the Closing Date and (y) the period that the Buyer and its
Affiliates hold, in the aggregate, shares of capital stock equal to at least
five percent (5%) of the outstanding Common Stock of the Company, the Buyer
shall have the right to request that its representative, who shall be reasonably
acceptable to the Company ("Buyer Nominee"), be appointed to the Company's Board
of Directors. Such request shall be made in writing to the Company. Within ten
(10) days after its receipt of such request, the Company's Board of Directors
shall appoint the Buyer Nominee as a member of the Company's Board of Directors
(the "Nominee Appointment"). At the first Company annual shareholders meeting
following the Nominee Appointment and at each Company annual shareholders
meeting thereafter, the Company shall nominate one representative of the Buyer
to the Company's Board of Directors; provided, however, that this subsection
4(i) shall be applied in concert with Section 4(i) of the Affiliate Purchase
Agreement such that only one (1) representative of IMPRIMIS SB L.P. and WEXFORD
SPECTRUM INVESTORS LLC shall serve on the Company's Board of Directors at any
one time pursuant to Section 4(i) of this Agreement or Section 4(i) of the
Affiliate Purchase Agreement.
j. Conduct Of Business. (i) From the date of this Agreement until
the Closing Date, the Company shall operate its business only in the ordinary
course of business consistent with past practice. The Company shall not, until
the Closing Date, directly or indirectly, cause or permit any state of affairs,
action or omission described in clauses (i) through (xiii) of Section 3(h).
(ii) From the Closing Date and for so long as the Buyer and its
Affiliates, in the aggregate, hold an amount of shares of Common Stock equal to
at least five percent (5)% of the Common Stock then outstanding, the Company
shall not change its line of business without the prior written consent of the
Buyer.
(iii) The Company shall (i) take all actions required to assure that
the Company remains duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) take all actions
required to assure that the Company obtains and maintains all material requisite
governmental authority, licenses, and material permits to conduct its business,
(iii) conduct its business in material compliance with all requirements of
Federal and
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state law applicable to the Company, and (iv) use commercially reasonable
efforts to file all reports or filings with the Internal Revenue Service
required of a Qualified Small Business (as defined in Section 1202(d) of the
Internal Revenue Code of 1986, as amended), and provide each licensed SBIC with
all information requested by any Governmental Authority to permit such SBIC to
comply with its obligations under the SBIC Act. Each SBIC shall use
commercially reasonable efforts to protect any information which the Company
labels as confidential. If any such confidential information is required to be
disclosed by such SBIC in order to comply with any such request, the SBIC shall
cause to be filed a confidential treatment request on behalf of the Company
seeking to withhold from public availability all of such confidential
information. For purposes of this Section 4(j), the term "Governmental
Authority" shall mean any government or state (or any subdivision thereof),
whether domestic, foreign or multinational (including European Union), or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
k. Further Assurances. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Articles 6 and 7 are satisfied, insofar as such
matters are within the control of any of them.
l. Access And Information. From the date of this Agreement until
the first to occur of (x) the Closing Date and (y) the termination of this
Agreement in accordance with Article 11, the Company shall permit the Buyer and
its representatives to make such investigation of the business, operations and
properties of the Company as the Buyer deems necessary or desirable in
connection with the transactions contemplated by this Agreement. Such
investigation shall include access to the respective directors, officers,
employees, agents and representatives (including legal counsel and independent
accountants) of the Company and the properties, books, records and commitments
of the Company. The Company shall furnish the Buyer and its representatives
with such financial, operating and other data and information, and copies of
documents with respect to the Company or any of the transactions contemplated by
this Agreement, as the Buyer shall from time to time reasonably request. Such
access and investigation shall be made upon reasonable notice and at reasonable
places and times. Such access and information shall not in any way affect or
diminish any of the representations or warranties hereunder. Without limiting
the foregoing, during such period, the Company shall keep the Buyer informed as
to the business and operations of the Company and shall consult with the Buyer
as appropriate.
m. Reporting Requirements. For so long as the Buyer and its
Affiliates, in the aggregate, or its transferees (except transferees who acquire
the Buyers' Common Stock in a transaction not exempt from the registration
requirements of the 1933 Act), hold an amount of shares of Common Stock equal to
at least five percent (5%) of the Common Stock then outstanding, the Buyer shall
have the right to request, and if so requested the Company shall furnish to the
Buyer, the following:
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(i) as soon as practicable after the end of each month and fiscal
quarter, and in any event within 45 days thereafter, copies of: (A) an
unaudited consolidated balance sheet of the Company as at the end of such month
and quarter, (B) unaudited consolidated statements of operations, shareholders'
equity and cash flows of the Company for the period ending with such month and
quarter and setting forth in comparative form the figures for the corresponding
periods in the preceding fiscal year certified by the chief financial officer of
the Company as complete and correct, and having been prepared in accordance with
GAAP (other than monthly balance sheets and statements of operations,
shareholders' equity and cash flows) subject to the absence of footnotes and
changes resulting from year-end adjustments;
(ii) such financial information (other than the information described
in clause (i) above) as the Company and Buyer may agree;
(iii) as soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, copies of: (i) a
consolidated balance sheet of the Company as at the end of such year, and (ii)
consolidated statements of operations, shareholders' equity and cash flows of
the Company for such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, together with supporting
notes thereto and accompanied by an opinion thereon of independent accountants
of recognized national standing, together with a summary prepared by the Company
concerning the Company's operations and financial condition;
(iv) no later than 60 days prior to the end of each fiscal year of the
Company, the proposed annual business plan and budget (including the capital
expenditures and financing plans) of the Company for the next fiscal year;
(v) promptly after sending, making available, or filing the same, all
reports and financial statements that the Company sends or makes available to
the shareholders of the Company or files with the SEC; and
(vi) any other information respecting the business, properties or the
condition or operations, financial or otherwise, of the Company that the Buyer
may from time to time reasonably request, including, but not limited to,
business units analyses, performance reviews analyses and monthly sales
analyses.
The Buyer agrees that with respect to any information received by it
pursuant to this subsection (m) ("Requested Information"), the Buyer will use
the Requested Information solely for purposes of monitoring and/or assessing its
investment in the Company and not for any other purpose and will keep the
Requested Information confidential. The Buyer acknowledges that if, and to the
extent, it receives Requested Information which is non-public, material
information relating to the Company, it may be subject to legal restrictions in
connection with the
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"insider trading" provisions of the federal securities laws with respect to such
Requested Information.
n. No Shopping. From the date of this Agreement until the earlier
of (i) the Closing Date and (ii) the date this Agreement is terminated in
accordance with Article 11, the Company shall not, and shall ensure that any
directors, officers, agents, representatives or Affiliates of the Company do
not, directly or indirectly, solicit or initiate, enter into or conduct,
discussions concerning, or exchange information (including by way of furnishing
information concerning the Company or their respective businesses) or enter into
any negotiations concerning, or solicit, entertain or agree to any proposals
for, (i) a merger, consolidation or other business combination involving the
Company, (ii) a sale of any equity interest in the Company, (iii) a sale of a
significant portion of business or assets of the Company, (iv) a
recapitalization or restructuring of the Company or (v) a transaction similar to
any of the foregoing. In addition, during such time period, the Company shall
not authorize, direct or knowingly permit any officer, shareholder, director,
employee or agent of the Company to do any of the foregoing and the Company
shall notify the Buyer promptly of the identity of any person who approaches the
Company with respect to any of the foregoing, as well as the price and terms of
any such proposal, if applicable
o. Public Announcements. No press release or public announcement
related to this Agreement or the transactions contemplated hereby shall be
issued or made without the joint approval of the Buyer and the Company, the
Buyer's approval which shall not be unreasonably withheld, unless required by
applicable law or legal process in which case the Buyer and the Company shall
have the right, to the extent reasonably practicable, to review and comment on
such press release or announcement prior to publication.
p. Reserved Shares. The Company shall reserve and at all times keep
available, free from preemptive rights, out of its authorized but unissued
stock, a sufficient number of shares of Common Stock to provide for the issuance
of such shares upon the exercise of the Warrants.
q. Notification. The Company shall promptly notify the Buyer of (i)
any notice or other communications from any person or entity that the consent of
such person or entity is or may be required in connection with the consummation
of the transactions contemplated hereby and (ii) any notice or other
communication from any Governmental Authority (as defined in Section 4(j)(iii)
of this Agreement) in connection with the consummation of the transactions
contemplated hereby.
r. Negative Covenants. For so long as the Buyer and its Affiliates
hold an aggregate amount of shares of Common Stock equal to at least five
percent (5%) of the Common Stock then outstanding on a fully diluted basis, then
the following actions by the Company or the Subsidiary, shall require the prior
written consent of the Buyer (in addition to any stockholder or Board of
Directors approval as may be required by applicable statute, agreement or
otherwise):
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(i) the purchase, construction, acquisition, sale, lease, exchange or
disposition of any property or asset, or the making of any investment, other
than in the ordinary course of business, the purchase price or value of which
exceeds $100,000;
(ii) the entry into any agreement or series of related agreements,
including any agreement to borrow money that, either individually or
collectively, (A) creates a monetary obligation or a liability greater than
$100,000 or (B) grants a mortgage on, a security interest in, a pledge or
otherwise encumbers, any material asset of the Company or the Subsidiary;
(iii) the entry into any transaction, including any contract, agreement
or other arrangement providing for the furnishing of services by, or rental of
real or personal property from, or otherwise requiring payments or the issuance
of securities (including stock options) (or any amendments, modifications or
waivers of any such contract, agreement or arrangement) to any shareholder (who
holds in excess of five percent (5%) of the issued and outstanding voting
securities of the Company) or any officer or director of the Company or any of
their respective Affiliates, or any Family Members of any of the foregoing;
(iv) the initiation by the Company of a voluntary case, the filing
of, or authorization to file a bankruptcy petition, or request for relief,
under Title 11 of the United States Code (11 U.S.C. Section 1, et seq.) or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or consent by the Company to any such
relief or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or a general
assignment by the Company for the benefit of creditors, or the failure by the
Company generally to pay their respective debts as they become due, or the
taking by the Company of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement, transaction or arrangement
with any, officer, director or shareholder (who holds in excess of five percent
(5%) of the issued and outstanding voting securities of the Company) of the
Company, the Subsidiary or any of their respective Affiliates or of any Family
Members of any of the foregoing other than the reimbursement of expenses of any
such person in the ordinary course in accordance with the policies of the
Company;
(vi) the merger or the consolidation of the Company or the Subsidiary
with or into another entity or other business combination or the sale,
assignment, lease or other disposition of all or substantially all of the assets
of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization, restructuring
or other reorganization of the Company, including the capitalization of any
subsidiaries of the Company, or any repurchase or redemption of the Company's
securities, other than (A) the issuance of shares of Common Stock upon the
exercise of stock options either currently
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outstanding or hereinafter granted pursuant to the Company's 1991 Stock Option
Plan, (B) the issuance of shares of Common Stock (1) upon the exercise of
warrants outstanding as of the date of this Agreement, (2) upon the conversion
of Debentures (as defined in Section 7(i) of this Agreement) outstanding as of
the date of this Agreement, (3) upon the exercise of the Affiliate Warrants, or
(4) upon the exercise of the Placement Agent Warrants, and (C) as expressly
provided in this Agreement;
(viii) any distributions or dividends, whether in cash, securities or in
property in kind, by the Company to its stockholders;
(ix) any material changes in accounting policies of the Company and
any removal or appointment of the Company's independent accountants;
(x) the settlement of legal, administrative or other suits or
proceedings in the Company's name in which the amount in dispute equals or
exceeds $100,000;
(xi) the establishment or amendment of, or the grant, acceleration or
waiver of any terms or conditions in, or determination or acceleration pursuant
to the terms of, any pension, retirement, savings, deferred compensation, profit
sharing, benefit or incentive plan or any stock option, stock appreciation,
stock purchase, performance or other similar plan, for any or all current or
former employees, officers or directors of the Company or any of their
respective Affiliates or of any Family Member of any of the foregoing; provided
that the granting of options to employees (other than officers) for amounts less
than 25,000 shares per employee, pursuant to the Company's 1991 Stock Option
Plan, under which a maximum of 414,808 options are currently authorized but
unissued and can therefore be additionally granted, shall not require the
consent of the Buyer;
(xii) the amendment of the Certificate of Incorporation or By-laws in
any respect;
(xiii) any change in any of the names under which the Company conducts
business
(xiv) the issuance of any new, or amendment to or modification or
restatement of any existing, warrants, options, Debentures, calls, rights,
commitments, agreements, arrangements or similar undertakings, other than (A)
the issuance of options pursuant to the Company's 1991 Stock Option Plan, (B) as
may be required to effect the transactions contemplated by this Agreement, and
(C) as expressly provided in this Agreement; or
(xv) any other transaction, agreement or arrangement or series of
related transactions, agreements or arrangements that is material to the
business of the Company or to the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the Company,
taken as a whole.
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s. Additional Listing Application. The Company shall, within two
(2) Business Days of the execution of this Agreement, file with AMEX an
Additional Listing Application (the "Initial Application") for the Registrable
Securities (as defined below, but for purposes of this Section 4(s), excluding
the Warrants). To the extent that AMEX approves the Initial Application as to
only the Shares and not as to all Registrable Securities (excluding the
Warrants), the Company shall, within two (2) Business Days of the Closing Date,
file a second or amended Additional Listing Application for the portion of the
Registrable Securities (excluding the Warrants) the listing of which was not
approved pursuant to the Initial Application.
t. Registration of Warrants. The Company shall use its best efforts
to, within 60 days of the Closing Date, register (as such term is defined in
Section 18(a)(i) of this Agreement) the Warrants for public trading in the
United States securities markets.
5. CLOSING DATE.
The date and time of the issuance and sale of the Shares and the
Warrants (the "Closing Date") shall occur no later than 12:00 Noon, New York
time on the first NYSE trading day after the fulfillment or waiver of all
closing conditions pursuant to Sections 6 and 7, or such other mutually agreed
to time. The closing shall occur on such date at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares
on the Closing Date is subject to the following conditions, any of which may be
waived by the Company (with the exception of the condition set forth in Section
6(d)):
a. Delivery by the Buyer of good funds as payment in full of an
amount equal to the Purchase Price in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
d. The Company shall have received notification from AMEX that the
Shares have been approved for listing by AMEX.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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The Company understands that the Buyer's obligation to purchase the
Shares on the Closing Date is conditioned upon the following, any of which may
be waived by the Buyer (with the exception of the condition set forth in Section
7(c)):
a. Delivery by the Company to the Buyer of this Agreement, duly
executed by the Company;
b. Receipt by the Buyer from the Company of the Expense
Reimbursement;
c. Delivery by the Company to the Buyer of certificates evidencing
the Shares and the Warrants, each (i) duly and validly issued, (ii) in the case
of the Shares, listed upon AMEX pursuant to an Additional Listing Application
that has been approved by AMEX, and (iii) in accordance with this Agreement;
d. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date and the performance by the Company on or before the
Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date and reasonably satisfactory to the
Buyer.
e. All permits, consents, approvals, licenses, orders,
authorizations, registrations, declarations, filings and other actions that are
required in connection with the execution, delivery or performance of this
Agreement, the Warrants and the certificates evidencing the Shares or the
transactions contemplated hereby and thereby in order to prevent any of the
effects described in Section 3(d) with respect to any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Company is a party or by which any of its properties or
assets are bound or with respect to any license, franchise, permit or other
similar authorization held by the Company shall have been obtained or taken.
f. There shall not have been any material adverse change in the
condition (financial or otherwise), operations, business, assets, liabilities,
earnings or prospects of the Company or the Subsidiary, taken as a whole.
g. The Buyer shall have received a certificate of (i) an executive
officer of the Company, dated the Closing Date, in substantially the form of
ANNEX II and (ii) the Clerk or Assistant Clerk of the Company, dated the Closing
Date, in substantially the form of ANNEX III, together with a copy of all
documents referenced therein.
h. Delivery by the Company to the Buyer of an opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in substantially the form attached
hereto as ANNEX IV.
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i. Of the Company's 7% Convertible Subordinated Debentures Due March
24, 2000 and the 7% Convertible Debentures Due October 29, 2000 (collectively,
the "Debentures"), no less than ninety percent (90%) of the Debentures have been
either (i) converted into Common Stock at a price of ninety cents ($0.90) per
share of Common Stock, or (ii) agreed in writing by the holders thereof to be
amended such that each Debenture provides (A) for the conversion thereof, for a
period of thirty (30) days from the Closing Date, into Common Stock at a price
of ninety cents ($0.90) per share of Common Stock and thereafter shall be
convertible at the terms originally set forth in such Debenture, and (B) for a
minimum conversion price of ninety cents ($0.90) per share of Common Stock.
j. The Company's authorized and outstanding capital stock as of the
Closing Date includes (i) no greater than 13,935,000 shares of Common Stock
outstanding, including (A) the Shares to be issued to the Buyer pursuant to this
Agreement and the shares of Common Stock to be issued pursuant to the Affiliate
Purchase Agreement, and the capital stock issuable upon exercise of the Warrants
and the warrants issued pursuant to the Affiliate Purchase Agreement (the
"Affiliate Warrants"), and (B) shares of Common Stock issuable upon the
conversion of any outstanding Debentures at a conversion price of ninety cents
($0.90) per share, and (ii) no greater than 3,540,000 outstanding options or
warrants to purchase Common Stock, including (A) all options issued or
authorized and unissued under the Company's 1991 Stock Option Plan and (B) the
Placement Agent Warrants, and excluding the Warrants and the Affiliate Warrants.
k. The Buyer shall have received duplicate originals of (A) an
executed copy of U.S. Small Business Administration (the "SBA") Form 480 Size
Status Declaration, (B) an executed copy of SBA Form 652 Assurance of Compliance
for Nondiscrimination and (C) the information needed to complete Part A and Part
B of SBA Form 1031.
l. The Company shall be in compliance with the requirements of
Section 713(a) of the AMEX Listing Standards and Requirements in connection with
the issuance of the Shares.
m. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
n. The Market Price is less than or equal to $2.15.
8. LOCK-UP
The Buyer hereby covenants and agrees not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities of the
Company that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, the Common Stock or any substantially similar
securities until the expiration of a period of seventy-five (75) days from the
Closing Date; provided however, that this Section 8 shall not apply, and have no
effect upon the Buyer, if (i) there has been a public announcement that a person
or group of affiliated or
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associated persons (other than the Buyer and its Affiliates) has acquired
beneficial ownership of twenty percent (20%) or more of the outstanding
Common Stock or (ii) a tender offer or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of
affiliated or associated persons (other than the Buyer and its Affiliates) of
twenty percent (20%) or more of the outstanding Common Stock, has been
commenced or an announcement of an intention to make such an offer has been
made.
9. GOVERNING LAW; SPECIFIC ENFORCEMENT; MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement, the Warrants and the schedules, annexes and
exhibits hereto or thereto contain the entire agreement among the parties with
respect to the transactions contemplated by this Agreement and supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(ii) Each party expressly agrees that the other party will be
irreparably damaged if this Agreement is not specifically enforced, including,
without limitation, the covenant set forth in Section 4(i). Upon a breach or
threatened breach of the terms, covenants or conditions of this Agreement, the
non-breaching party shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without any showing of any actual damage, or
a decree for specific performance, in accordance with the provision hereof.
10. NOTICES.
All notices, requests and other communications to any party hereunder
shall be in writing and sufficient if delivered personally or sent by telecopy
(with confirmation of receipt) or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
COMPANY: MEDIA LOGIC, INC.
310 South Street
Plainville, MA 02762
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Attention: Chief Executive Officer
Telecopier No.: (508) 695-8593
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Richard R. Kelly, Esq.
Telecopier No.: (617) 542-2241
BUYER: WEXFORD SPECTRUM INVESTORS LLC
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert H. Holtz
Telecopy: (203) 862-7310
With a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telecopy: (212) 841-1010
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
11. TERMINATION. (a) This Agreement shall terminate on the earliest
to occur of any of the following events:
(i) the mutual written agreement of the Buyer and the Company;
(ii) at the discretion of either party, if the Closing shall not
have occurred prior to the close of business on December 31, 1997;
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(iii) by written notice of the Buyer to the Company, if the
Company shall have materially breached any of its representations, warranties or
agreements contained in this Agreement; or
(iv) by written notice of the Company to the Buyer, if the Buyer
shall have materially breached any of its representations, warranties or
agreements contained in this Agreement.
(b) Nothing in this Section shall relieve any party of any liability for a
breach of this Agreement prior to its termination, except that if this Agreement
terminates in accordance with Section 11(a) and the Buyer receives reimbursement
of its costs and expenses in accordance with Section 4(h), then this Agreement
shall terminate without any further liability. Except as aforesaid, upon the
termination of this Agreement, all rights and obligations of the parties under
this Agreement shall terminate, except their obligations under Section 4(g) and
Section 4(o).
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the Company's
and the Buyer's representations, warranties, agreements and covenants shall
survive the execution and delivery hereof of this Agreement and the delivery of
the Shares and the Warrants. Neither the period of survival nor the liability
of the Company with respect to the representations and warranties shall be
reduced by any investigation made at any time by or on behalf of the Buyer.
13. INDEMNIFICATION. (a) The Company indemnifies and holds harmless
the Buyer and its Affiliates and each of their members, directors, officers,
employees and other agents and representatives from and against any and all
liabilities, judgments, claims, settlements, losses, damages (including any
diminution in value as appropriate), reasonable fees (including attorneys' and
other experts' fees and disbursements), liens, taxes, penalties, obligations and
expenses (collectively, "Losses") incurred or suffered by any such person or
entity arising from, by reason of or in connection with any misrepresentation or
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or any certificate or other document delivered by
the Company under this Agreement. The Company shall indemnify and hold harmless
the Buyer and its Affiliates and each of their members, directors, officers,
employees and other agents and representatives from and against any and all
Losses incurred or suffered by the Buyer, arising from, by reason of or in
connection with any third party claim or action, or potential or threatened
claim or action, related to this Agreement and the transactions contemplated
hereby.
(b) The Company shall not have any liability under Section 13(a)
unless the aggregate of all Losses relating thereto for which the Company would,
but for this Section 13(b), be liable exceeds $50,000, in which case the Buyer
shall be entitled to all Losses regardless of the limitation set forth in this
sentence. The limitation on liability set forth in the immediately preceding
sentence shall not apply (i) in the event of fraud, intentional
misrepresentation or intentional breach or (ii) in the case of any
representation or warranty set forth in Section 3(a) or Section 3(c).
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<PAGE>
(c) The Buyer indemnifies and holds harmless the Company and its
Affiliates, directors, officers, employees and other agents and representatives,
from and against any and all Losses incurred or suffered by any such person or
entity arising from, by reason of or in connection with any misrepresentation
or breach of any representation, warranty or agreement of the Buyer contained in
this Agreement or any certificate or other document delivered by the Buyer under
this Agreement.
(d) In case any claim or litigation which might give rise to any
obligation of a party under the indemnity and reimbursement provisions of this
Agreement (each an "Indemnifying Party") shall come to the attention of the
party seeking indemnification hereunder (the "Indemnified Party"), the
Indemnified Party shall notify in writing promptly the Indemnifying Party of the
existence, nature and amount of potential loss. Failure to give such notice
shall not affect the rights of the Indemnified Party, except to the extent that
the Indemnifying Party shall have been materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in and, if (i) such
claim can properly be resolved by money damages alone and the Indemnifying Party
has the financial resources to pay such damages and (ii) the Indemnifying Party
admits that this indemnity fully covers the claim or litigation, the
Indemnifying Party shall be entitled to direct the defense of any claim at its
expense, but such defense shall be conducted by legal counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall be liable to
an Indemnified Party for any settlement of any action or claim without the
consent of the Indemnifying Party; provided that the Indemnifying Party shall
not unreasonably withhold its consent to any such settlement. No Indemnifying
Party shall, except with the consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability and equitable claims in
response to such claim or litigation.
(e) Nothing contained in this Article 13, or elsewhere in this
Agreement, shall be deemed an election of remedies under this Agreement or limit
in any way the liability of any party under any other agreement to which such
party is a party relating to this Agreement or the transactions contemplated by
this Agreement.
14. ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other party; provided that notwithstanding the
foregoing, the Buyer may assign this Agreement and the rights and obligations
hereunder, in whole or in part, to an Affiliate. Any instrument purporting to
make an assignment in violation of this Section shall be void. All covenants,
agreements, representations, warranties and undertakings in this Agreement made
by and on behalf of any party hereto shall bind and inure to the benefit of the
successors and permitted assigns of such party.
15. BENEFITS OF AGREEMENT. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective
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successors and assigns. This Agreement is for the sole benefit of the parties
hereto and not for the benefit of any third party.
16. DESCRIPTIVE HEADINGS; CERTAIN INTERPRETATIONS. (a) Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
(b) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry into the subject matter of such representation, warranty or other
statement.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "any"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference to a
person includes its permitted successors and assigns; (vi) a reference to GAAP
refers to United States GAAP; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
17. GENERAL. All Exhibits, Annexes, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
18. REGISTRATION OF REGISTRABLE SECURITIES.
(a) Shelf Registration.
(i) The Company shall (x) within thirty (30) days of the
Closing Date file with the Securities and Exchange Commission (the
"SEC") a Shelf Registration Statement (as defined below) relating to the
offer and sale of (a) the Shares of Common Stock (including shares
issuable or issued upon the exercise of any Warrants or the exercise of
any other exchange, conversion or similar right), (b) any securities
issued in respect of any such shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger or consolidation or reorganization and (c) the Warrants
(collectively, the "Registrable Securities") by the holders of
Registrable Securities from time to time in accordance with the methods
of distribution elected by such holders and set forth in such Shelf
Registration Statement. "Register," "registered" and "registration" each
refer to a registration of Registrable Securities effected by filing with
the SEC a registration statement in compliance with the Securities Act
and the declaration or ordering by the SEC of effectiveness of such
registration statement. "Shelf Registration" means a registration
effected pursuant to this Section 18. "Shelf Registration Statement"
means a shelf registration statement of the Company filed with the SEC
pursuant to the provisions of this Section 18 which covers some or all of
the
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Registrable Securities, as applicable, on Form S-3 under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC,
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein; provided, however, that the registration of the
Warrants pursuant to this Section 18 is subject to the prior approval of
the Company's Board of Directors.
(ii) The Company shall use its best efforts (x) to cause such
Shelf Registration Statement to be declared effective under the
Securities Act as promptly as practicable but in no event more than
ninety (90) days after the Closing Date and (y) after the effectiveness
of the Shelf Registration Statement, promptly upon the request of the
Buyer or any permitted transferee or assignee pursuant to Section 18(h)
holding any Registrable Securities (such transferees and assignees,
together with the Buyer, are collectively referred to in this Section 18
as the "Investors"), to take any action necessary to register the sale of
any Registrable Securities of such Investor and to identify such Investor
as a selling securityholder.
(iii) If the Shelf Registration Statement covering the
Registrable Securities required to be filed by the Company under Section
18(a)(i) is not declared effective by ninety (90) days after the Closing
Date (the "Required Effective Date"), then the Company will make payments
to the Buyer in such amounts and at such times as shall be determined
pursuant to this Section 18(a)(iii). The amount to be paid by the
Company to the Buyer shall be equal to one (1) percent of the Purchase
Price per calendar week (or any pro rata portion thereof) from the
Required Effective Date until the Shelf Registration Statement is
declared effective by the SEC and shall be paid to the Buyer based upon
the period between (x) the Required Effective Date and the first
Computation Date and (y) each Computation Date thereafter and the
immediately preceding Computation Date (the "Periodic Amount"). The full
amount of each Periodic Amount shall be paid to the Buyer in immediately
available funds within five (5) days after each Computation Date.
Notwithstanding the foregoing, the amount payable by the Company pursuant
to this provision shall not be payable (x) to the extent any delay in the
effectiveness of the Shelf Registration Statement occurs because of an
act of, or a failure to act or to act timely by, the Buyer or its counsel
in connection with any act for which the Buyer and its counsel have had
adequate and sufficient notice, or (y) in the event all of the
Registrable Securities may be sold pursuant to Section (k) of Rule 144
promulgated under the 1993 Act. As used in this Section, "Computation
Date" means the date which is thirty (30) days after the Required
Effective Date, and, if the Shelf Registration Statement required to be
filed by the Company pursuant to this Section is not then effective,
thirty (30) days after the previous Computation Date (pro rata for any
partial period) until the Shelf Registration Statement is so declared
effective by the SEC.
(b) Registration Procedures. In connection with any Shelf
Registration Statement, the Company shall do each of the following:
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(i) prepare promptly, and file with the SEC by thirty (30) days
after the Closing Date, a Shelf Registration Statement with respect to
the Registrable Securities and use its best efforts to cause to keep the
Shelf Registration Statement continuously effective in order to permit
the prospectus forming part thereof to be usable by the Investors for a
period (the "Registration Period") equal to the earliest of (1) five
years from the effective date of such Shelf Registration Statement, (2)
the date when each Investor may sell all Registrable Securities held by
such Investor pursuant to Section (k) of Rule 144 and (3) the date the
Investors no longer owns any Registrable Securities, which Shelf
Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;
(ii) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Shelf Registration
Statement and the prospectus used in connection therewith as may be
necessary to keep such Shelf Registration Statement effective and current
during the entire Registration Period and, at all times during the
Registration Period, to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
the Shelf Registration Statement, including such amendments and
supplements as may be necessary, until all of such Registrable Securities
have been disposed of in accordance with the intended method of
disposition from time to time by prospective seller or sellers of such
Registrable Securities as set forth in the Shelf Registration Statement;
(iii) furnish to each selling Investor, and its legal counsel
identified to the Company, (1) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one
copy of the Shelf Registration Statement and any amendment thereto, each
prospectus and each amendment or supplement thereto, (2) each letter
written by or on behalf of the Company to the SEC or the staff of the SEC
and each item of correspondence from the SEC or the staff of the SEC
relating to such Shelf Registration Statement (other than any portion of
any thereof which contains information for which the Company has sought
confidential treatment), and (y) such number of copies of a prospectus in
conformity with the requirements of the Securities Act, and such other
documents, as such Investor may reasonably request in order to facilitate
the public sale or other disposition of the Registrable Securities owned
by such Investor;
(iv) permit a single firm of counsel designated by the Buyer and
reasonable satisfactory to the Company to review the Shelf Registration
Statement and all amendments and supplements thereto at a reasonable
period of time prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects in written
notice to the Company given within three (3) business days of counsel's
receipt of the Shelf Registration Statement or any amendment or
supplement thereto;
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(v) use its best efforts to register or qualify the shares of
Registrable Securities covered by such Shelf Registration Statement under
such other securities or blue sky or other applicable laws of such
jurisdiction within the United States as each prospective seller shall
reasonably request, to enable such seller to consummate the public sale
or other disposition in such jurisdictions of the shares of Registrable
Securities owned by such seller; (vi) as promptly as practicable after
becoming aware of such event, notify each holder of Registrable
Securities of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Shelf
Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make statements therein in light of the
circumstances under which they were made, not misleading, and use its
best efforts promptly to prepare a supplement or amendment to the Shelf
Registration Statement or other appropriate filing with the SEC to
correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each such holder as such holder may
reasonable request;
(vii) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(viii) use its best efforts to cause the Registrable Securities to be
listed for trading on the American Stock Exchange (or on any other
national securities exchange on which the Company's Common Stock is then
listed);
(ix) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the Shelf Registration Statement;
(x) cooperate with the Investors to facilitate the timely
preparation and delivery of certificates for the Registrable Securities
to be offered pursuant to the Shelf Registration Statement and enable
such certificate for the Registrable Securities to be in such
denominations or amount as the case may be, as the Investors may
reasonable request; and
(xi) take all other reasonable actions necessary to expedite and
facilitate disposition by any Investor of the Registrable Securities pursuant
to the Shelf Registration Statement.
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(c) Designation of Underwriter. In the case of any registration
effected pursuant to this Section 18, a majority in interest of the holders
of Registrable Securities shall have the right to designate the managing
underwriter in any underwritten offering.
(d) Cooperation by Prospective Sellers.
(i) Each prospective seller of Registrable Securities, and
each under-writer designated by each such seller, will furnish to the
Company such information as the Company may reasonably require from such
seller or underwriter in connection with the Shelf Registration Statement
(and the prospectus included therein). No holder of Registrable
Securities may participate in any offering unless such holder completes
and executes all questionnaires, indemnities, underwriting agreements and
other documents required in connection with the offering.
(ii) Failure of a prospective seller of Registrable Securities
to furnish the information and agreements described in this Agreement
shall not affect the obligations of the Company under this Agreement to
remaining sellers to furnish such information and agreements unless, in
the reasonable opinion of counsel to the Company or the underwriters,
such failure impairs or may impair the viability of the offering or the
legality of the registration or the underlying offering.
(iii) The Investor included in the registration will not (until
further notice by the Company) effect sales thereof (or deliver a
prospectus to any purchaser) after receipt of telegraphic or written
notice from the Company to suspend sales to permit the Company to correct
or update a registration statement or prospectus. In connection with any
offering each Investor who is a prospective seller, will not use any
offering document, offering circular or other offering materials with
respect to the offer or sale of Registrable Securities, other than the
prospectuses provided by the Company and any documents incorporated by
reference therein.
(e) Expenses. All expenses incurred in complying with this Section 18,
including, without limitation, all registration, qualifications and filing
fees (including all expenses incident to filing with the American Stock
Exchange), fees and expenses of complying with securities and "blue sky"
laws, printing expenses and fees and disbursements of counsel for the Company
and one counsel for the Investors, and of the independent certified public
accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to this Section 18
shall not be borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Section 18 or registration or
qualification of any
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Registrable Securities pursuant to this Section 18, the Company shall
indemnify and hold harmless the seller of such shares, each underwriter
of such shares, if any, each broker or any other person acting on behalf
of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which any of
the foregoing persons may become subject under the Securities Act, the
1934 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable
Securities as registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or any document prepared or furnished by the Company
incident to the registration or qualification of any Registrable
Securities pursuant to this Section 18, or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were
made, not misleading, or any violation by the Company of the Securities
Act, the 1934 Act or any state securities or "blue sky" laws or any rule
regulation under the Securities Act, the 1934 Act or state securities law
or relating to action or inaction required of the Company in connection
with such registration or qualification under such state securities or
blue sky laws; and shall reimburse such seller, such underwriter, broker
or other person acting on behalf of such seller and each such controlling
person for any legal or any other expenses reasonably incurred by any of
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall
not be liable (i) in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in the registration statement, the preliminary prospectus or
prospectus or in any amendment or supplement thereof pursuant to this
Section 18 in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such
seller or such underwriter specifically for use in the preparation
thereof and (ii) to any broker or other person acting on behalf of such
seller to the extent that any such loss, claim, damage or liability
arises out of or is based upon any representation or other statement of
such broker or other person that is not in conformity with the
preliminary prospectus or prospectus.
(ii) Before Registrable Securities held by a prospective
seller shall be included in any registration pursuant to this Section 18
such prospective seller and any underwriter acting on its behalf shall
have agreed to indemnify and hold harmless (in the same manner and to the
same extent as set forth in (i) above) the Company, each director of the
Company, each officer of the Company who shall sign such registration
statement and any person who controls the Company within the meaning of
the Securities Act, with respect to any untrue statement or omission from
such registration statement, any preliminary prospectus or prospectus
contained therein, or any amendment or supplement thereof, if such untrue
statement or omission was made in reliance upon and in conformity
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with written information furnished to the Company through an instrument
duly executed by such seller or such underwriter, as the case may be,
specifically for use in the preparation of such registration statement,
preliminary prospectus, prospectus or amendment or supplement; provided
that the maximum amount of liability in respect of such indemnification
shall be limited, in the case of each prospective seller of Registrable
Securities, to an amount equal to the net proceeds actually received by
such prospective seller from the sale of Registrable Securities effected
pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Section
18, if pursuant to an underwritten public offering of Common Stock, the
Company, the selling shareholders and the underwriters enter into an
underwriting or purchase agreement relating to such offering which
contains provisions covering indemnification among the parties thereto in
connection with such offering, the indemnification provisions as set
forth in this Section 18 shall be deemed inoperative for purposes of such
offering.
(iv) Each party entitled to indemnification under this Section
18(f) (the "indemnified party") shall give notice to the party required
to provide indemnification (the "indemnifying party") promptly after such
indemnified party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the indemnifying party (at its expense)
to assume the defense of any claim or any litigation resulting therefrom;
provided that counsel who shall conduct the defense of such claim or
litigation shall be reasonably satisfactory to the indemnified party and
shall not, without the consent of the indemnified party, be counsel to
the indemnifying party, and the indemnified party may participate in such
defense, but only at such indemnified party's expense, and provided,
further, that the omission by any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under this Section 18(f) except to the extent that the
omission results in a failure of actual notice to the indemnifying party
and such indemnifying party is damaged solely as a result of the failure
to give notice. No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(g) Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 18(f) to the fullest extent
permitted by law; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 18; (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any seller of Registrable Securities who was not guilty
of such fraudulent misrepresentation; and (c) contribution by any seller of
Registrable
34
<PAGE>
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
(h) Reports under Exchange Act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities which continue to be "restricted securities" within the meaning of
Rule 144(a)(3) under the Securities Act, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements
of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed with the SEC by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such securities pursuant to Rule 144 without registration.
(i) Assignment of the Registration Rights. The rights to
have the Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Investors to any transferee of the
Registrable Securities only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned, (c) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such delay, or
the payments set forth in Section 18(a) hereof.
(j) Persons deemed to be Holders of Registrable Securities. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or
35
<PAGE>
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
[THIS SPACE INTENTIONALLY LEFT BLANK]
36
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a duly
authorized officer of each of the Buyer and the Company as of the date first
above written.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
-------------------------------
William E. Davis, Jr.
Chief Executive Officer
WEXFORD SPECTRUM INVESTORS LLC
By: WEXFORD MANAGEMENT LLC,
its Manager
By: /s/ Robert H. Holtz
-------------------------------
Name: Robert H. Holtz
Title: Senior Vice President
Address of Buyer: 411 West Putnam Avenue
Suite 125
Greenwich, CT 06830
Telephone No.: (203) 862-7000
Telecopier No.: (203) 862-7300
37
<PAGE>
ANNEX I FORM OF WARRANT
ANNEX II FORM OF OFFICER'S CERTIFICATE OF THE COMPANY
ANNEX III FORM OF SECRETARY'S/ASSISTANT SECRETARY'S
CERTIFICATE OF THE COMPANY
ANNEX IV FORM OF OPINION OF MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
38
<PAGE>
ANNEX I
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN
SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES
UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933,
(2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-3
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT WEXFORD SPECTRUM INVESTORS LLC, or such
holder's registered assigns (the "Investor"), is the owner of 333,333 Warrants
(as defined below), each of which entitles the registered holder thereof to
purchase from MEDIA LOGIC, INC., a Massachusetts corporation (the "Company"),
one fully paid, duly authorized and nonassessable share of Common Stock, par
value $0.01 per share, of the Company (the "Common Stock"), at any time or from
time to time on or before 5:00 p.m., New York City time, on December 29, 2002,
at an exercise price of $1.50 per share (the "Exercise Price"), all on the terms
and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "Number Issuable"), which is initially one (1) share, is
subject to adjustment from time to time pursuant to the provisions of Section 2
of this Warrant Certificate. The Warrants evidenced by this certificate are
part of a series of Warrants being issued by the Company on the
<PAGE>
Issue Date (the "Warrants"). The execution and delivery of this Warrant
Certificate is a condition precedent to the obligations of the Investor under
the Securities Purchase Agreement, dated as of December 22, 1997, between the
Investor and the Company (the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby
may be exercised, in whole or in part, by the registered holder hereof at any
time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares of
Common Stock issuable upon exercise of such Warrants, which shall be payable by
a certified or official bank check payable to the order of the Company
(collectively, the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the Company
shall deliver or cause to be delivered (a) certificates representing the number
(rounded up to the nearest full share) of validly issued, fully paid and
nonassessable shares of Common Stock specified in the Warrant Exercise
Documentation, and (b) if less than the full number of Warrants evidenced hereby
are being exercised, a new Warrant Certificate or Certificates, of like tenor,
for the number of Warrants evidenced by this Warrant Certificate, less the
number of Warrants then being exercised. Such exercise shall be deemed to have
been made at the close of business on the date of delivery of the Warrant
Exercise Documentation so that the Person entitled to receive shares of Common
Stock upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such surrender
shall be effective to constitute the Person entitled to receive such shares as
the record holder thereof while the transfer books of the Company for the Common
Stock are closed for any purpose (but not for any period in excess of five
days); but any such surrender of this Warrant Certificate for exercise during
any period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been made
on the date the Warrant Exercise Documentation was received and for the Number
Issuable of Common Stock specified in the Warrant Exercise Documentation and at
the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of Common
Stock issuable upon the exercise of the Warrants evidenced hereby. The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for shares
of Common Stock in any name other than that of the registered holder of the
Warrants evidenced hereby.
2
<PAGE>
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time after the
Issue Date:
(A) pay a dividend or make a distribution on the outstanding
shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into a
larger number of shares; or
(C) combine the outstanding shares of Common Stock into a
smaller number of shares;
then, and in each such case (other than a dividend or distribution
received by or set aside for the benefit of the holder pursuant to
Section 2(c) hereof), the Number Issuable in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be
taken by the Company) so that the holder of any Warrant evidenced hereby
thereafter exercised shall be entitled to receive the number of shares of
Common Stock or other securities of the Company which such holder would
have owned or had been entitled to receive upon or by reason of any of
the events described above, had such Warrant been exercised immediately
prior to the happening of such event. An adjustment made pursuant to
this clause (i) shall become effective retroactively (x) in the case of
any such dividend or distribution, to a date immediately following the
close of business on the record date for the determination of holders of
shares of Common Stock entitled to receive such dividend or distribution,
or (y) in the case of any such subdivision or combination to the close of
business on the date upon which such corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time
or from time to time issue or sell (x) shares of Common Stock or (y)
securities convertible into or exchangeable for shares of Common Stock,
or any options, warrants or other rights to acquire shares of Common
Stock (other than (A) shares of Common Stock issued upon exercise of the
Warrants, (B) shares of Common Stock issued upon conversion of the
Debentures outstanding on the Issue Date that have been amended pursuant
to Section 7(i) of the Securities Purchase Agreement, (C) shares of
Common Stock issued pursuant to an employee stock option plan, stock
bonus plan or other incentive compensation plan or award, each as
approved by the Company's Board of Directors that, in the aggregate with
all other shares of Common Stock issued pursuant to any such plans
(whether or not
3
<PAGE>
approved by the Company's Board of Directors) constitute no more than ten
percent (10%) of the issued and outstanding Common Stock, and (D) shares
of Common Stock issued as a result of adjustments made under agreements
related to shares described in clauses (A), (B) and (C)) at a price per
share that is less than the Current Market Price per share of Common
Stock then in effect as of the record date or issue date, as the case may
be, referred to in the following sentence (the "Relevant Date") (treating
the price per share of Common Stock, in the case of the issuance of any
security convertible or exchangeable or exercisable into Common Stock as
equal to (x) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional
consideration payable (without regard to any anti-dilution adjustments)
upon the conversion, exchange or exercise of such security into Common
Stock divided by (y) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security), in
each case, other than issuances or sales for which an adjustment is made
pursuant to another paragraph of this Section 2, then, and in each such
case, the Number Issuable then in effect shall be adjusted by multiplying
the Number Issuable in effect on the day immediately prior to the
Relevant Date by a fraction, (1) the numerator of which shall be the sum
of the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of additional shares of
Common Stock issued or to be issued (or the maximum number into which
such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially
may be exercised), and (2) the denominator of which shall be the sum of
the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of shares of Common
Stock which the aggregate consideration (plus the aggregate amount of any
additional consideration initially payable upon conversion or exchange of
such convertible or exchangeable securities or exercise of such options,
warrants or other rights) for the total number of such additional shares
of Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or
other rights may be exercised) would purchase at the Current Market Price
per share of Common Stock on the Relevant Date. Such adjustment shall be
made whenever such shares, securities, options, warrants or other rights
are issued, and shall become effective retroactively to a date
immediately following the close of business (x) in the case of an
issuance to the stockholders of the Company, as such, on the record date
for the determination of stockholders entitled to receive such shares,
securities, options, warrants or other rights and (y) in all other cases,
on the date (the "issue date") of such issuance; provided, that if any
convertible or exchangeable securities, options, warrants, or other
rights (or any portions thereof) which shall have given rise to an
adjustment pursuant to this Section 2(a)(ii) shall have expired or
terminated without the exercise thereof and/or if by reason of the terms
of such convertible or exchangeable securities, options, warrants or
other rights there shall have been an increase or increases, with the
passage of time or otherwise, in the Number Issuable, then the Number
Issuable hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (A) eliminating from the computation
any additional shares of Common Stock corresponding to such convertible
or
4
<PAGE>
exchangeable securities, options, warrants or other rights as shall have
expired or terminated, (B) treating the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous
exercise of such convertible and exchangeable securities, options,
warrants, or other rights as having been issued for the consideration
actually received and receivable therefor and (C) treating any of such
convertible or exchangeable securities, options, warrants or other rights
which remain outstanding as being subject to exercise or conversion.
Solely for purposes of this clause (ii), (I) Common Stock shall include
the Common Stock, par value $0.01 per share, of the Company and each
other class of capital stock of the Company that does not have a
preference over any other class of capital stock of the Company as to
dividends or upon liquidation, dissolution or winding up of the Company
and, in each case, shall include any other class of capital stock of the
Company into which such stock is reclassified or reconstituted and (II)
if the provisions of any securities convertible into or exchangeable for
shares of Common Stock or options, warrants or other rights to acquire
shares of Common Stock are amended after the date of issuance so as to
reduce the applicable conversion price, exchange price or exercise price
such amendment shall be deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by or set
aside for the benefit of the holders of Common Stock pursuant to Section
2(c) below) or rights or warrants to subscribe for or purchase securities
of the Company (excluding those in respect of which adjustment in the
Number Issuable is made pursuant to Section 2(a)(ii)), then, and in each
such case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share on the record date referred to below
and (y) the denominator of which shall be such Current Market Price per
share less the then Fair Market Value (as determined in good faith by the
Board of Directors of the Company, a certified resolution with respect to
which shall be mailed to the holder of the Warrants evidenced hereby) of
the portion of the cash, evidences of indebtedness, securities or other
assets so distributed or of such subscription rights or warrants
applicable to one share of Common Stock (but such denominator shall in no
event be zero). Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from time to time
shall take any
5
<PAGE>
action which could have a dilutive effect on the number of shares of
Common Stock that may be issued upon exercise of the Warrants, other than
an action described in any of Section 2(a)(i) through 2(a)(iii),
inclusive, or Section 2(b), then, the Number Issuable shall be adjusted
in such manner and at such time as the Board of Directors of the Company
reasonably determines to be equitable under the circumstances (such
determination to be evidenced in a resolution, a certified copy of which
shall be mailed to the holder of the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 2(a) need be made to the Number Issuable
unless such adjustment would require an increase or decrease of at least
one percent (1%) of the Number Issuable then in effect. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase
or decrease of at least one percent (1%) of such Number Issuable. Any
adjustment to the Number Issuable carried forward and not theretofore
made shall be made immediately prior to the exercise of any Warrants
pursuant hereto.
(vi) The Company promptly shall deliver to each registered
holder of Warrants at least five (5) Business Days prior to effecting any
transaction which would result in an increase or decrease in the Number
Issuable pursuant to this Section 2(a) a notice thereof, together with a
certificate, signed by the Chief Executive Officer or a Vice-President
and by the Treasurer or an Assistant Treasurer or the Clerk or an
Assistant Clerk of the Company, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated and specifying the increased or decreased Number Issuable
then in effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward
adjustments in the Number Issuable, in addition to those otherwise
required by this Section 2(a), as the Board of Directors of the Company
in their discretion shall determine to be advisable in order that any
stock dividend, subdivision or combination of shares, distribution of
rights or warrants to purchase stock or securities, or distribution of
securities convertible into or exchangeable for Common Stock, hereafter
made by the Company to its shareholders shall not be taxable; provided,
however, that any such adjustment shall be made, as nearly as
practicable, in a manner which treats all holders of Warrants with
similar protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation,
Merger or Sale of Assets. In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
Person (other than a consolidation
6
<PAGE>
or merger in which the Company is the resulting or surviving person and which
does not result in any reclassification or change of outstanding Common
Stock), or in case of any sale or other disposition to another Person of all
or substantially all of the assets of the Company (any of the foregoing, a
"Transaction"), the Company, or such successor or purchasing Person, as the
case may be, shall execute and deliver to each holder of the Warrants
evidenced hereby, at least five (5) Business Days prior to effecting any of
the foregoing Transactions, a certificate that the holder of each such
Warrant then outstanding shall have the right thereafter to exercise such
Warrant into the kind and amount of shares of stock or other securities (of
the Company or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which
such Warrant could have been exercised immediately prior to such Transaction.
Such certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 2 and shall contain other terms identical to the terms hereof. If,
in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes stock,
securities, other property or cash of a Person other than the successor or
purchasing Persons and other than the Company, in connection with such
Transaction, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to
issue such stock, securities, other property or cash to holders of the
Warrants upon exercise thereof as provided above. The provisions of this
Section 2(b) similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so elects by
sending a Special Notice to the Company, in the event that the Company shall
declare a dividend or make any other distribution (including, without
limitation, in cash, in capital stock (which shall include, without
limitation, any options, warrants or other rights to acquire capital stock)
of the Company, whether or not pursuant to a shareholder rights plan, "poison
pill" or similar arrangement) in other securities, property or assets, to
holders of Common Stock (a "Special Distribution"), then the Board of
Directors shall set aside the amount of such dividend or distribution that
any holder of Warrants would have been entitled to receive had it exercised
such Warrants prior to the record date for such dividend or distribution.
Upon the exercise of a Warrant evidenced hereby, the holder shall be entitled
to receive, such dividend or distribution that such holder would have
received had such Warrant been exercised immediately prior to the record date
for such dividend or distribution. Prior to any Special Distribution
described in this Section 2(c), the Company shall as provided in Section 4
hereof notify each holder (not less than five (5) Business Days prior to the
occurrence of each Special Distribution) of its intent to make such Special
Distribution and the holder, if it elects to have such distribution set aside
the amount thereof rather than have an adjustment to the Number Issuable as
provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company
by sending a Special Notice prior to the date of any such Special
Distribution.
Section 3. Redemption. The Company shall not have any right to redeem
any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from time
to time the
7
<PAGE>
holders of the Warrants evidenced hereby are entitled to notice pursuant to
the terms of Section 2, such notice shall provide (a) the date on which a
record is to be taken for the purpose of such dividend, distribution,
subdivision, combination or issuance of shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision, combination, shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, are to be determined, (b) the issue date (as
defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants,
such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the exercise of all outstanding
Warrants, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common stock to permit such reservation or
to permit the exercise of all outstanding Warrants. The Company shall
prepare and file, and cooperate with the holder of this Warrant so that it
may prepare and file, in each case within five Business Days of a request by
such holder, notification and report forms in compliance with the HSR Act,
and shall otherwise fully comply with the requirements of the HSR Act, to the
extent required in connection with the exercise of the Warrant. The Company
shall bear all of its own expenses and all of its own out of pocket expenses
(including reasonable attorneys' fees, charges and expenses) and filing fees
of such holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants
proposed for transfer, and with respect to the shares of Common Stock
underlying such Warrants, shall be effective under the Securities Act, (b)
the Warrants are transferred pursuant to Rule 144 under the Securities Act or
(c) the Company shall have received an opinion of counsel reasonably
satisfactory to it that no violation of such act or similar state acts will
be involved in such transfer. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall
8
<PAGE>
be equal to the number of shares of Common Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at
its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant Certificate
or Certificates in denominations specified by such holder for an aggregate
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case
of an institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their
respective successors and permitted assigns. This Warrant Certificate shall
be for the sole benefit of the registered holder thereof. Nothing in this
Warrant Certificate shall be construed to give the registered holder hereof
any rights as a holder of shares of Common Stock until such time, if any, as
the Warrants evidenced by this Warrant Certificate are exercised in
accordance with the provisions hereof.
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the
Preamble hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the
9
<PAGE>
determination thereof, (a) if the Common Stock is then listed on a national
securities exchange, designated as a Nasdaq Stock Market security or quoted
in the over-the-counter-market by a member firm of the NYSE, the average
daily Market Price of the Common Stock for those days during the period of 15
days, ending on such date, on which the national securities exchanges were
open for trading, and (b) if the Common Stock is not then so listed,
designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October
29, 2000.
"Exercise Price" shall have the meaning assigned to such term in
the Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion
to sell, in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements
Act of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the
Preamble hereof.
"Issue Date" shall mean December 29, 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a
Nasdaq Stock Market security, the last trading price of the Common Stock on
such date as reported in the Wall Street Journal; or (b) if the Common Stock
is not so listed or designated, the average of the reported closing bid and
ask prices of the Common Stock in the over-the-counter-market, on such date
as reported by any member firm of the NYSE selected by the Company; or (c) if
none of (a) or (b) is applicable, the Fair Market Value per share determined
in good faith by the Board of Directors of the Company which shall be deemed
to be Fair Market Value unless holders of at least 50% of Common Stock issued
or issuable upon exercise of the Warrants request that the Company obtain an
opinion of a nationally recognized investment banking firm chosen by the
Company (who shall bear the expense) and reasonably acceptable to such
requesting holders of the Warrants, in which event the Fair Market Value
shall be as determined by such investment banking firm.
"Number Issuable" shall have the meaning given it in the Preamble
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company,
10
<PAGE>
partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in
Section 2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term
in Section 2(c) hereof.
"Special Notice" shall mean the notice sent by a holder to the
Company indicating its preference to have any Special Distribution set aside
for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in
Section 2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing
and shall be sufficient if delivered personally or sent by telecopy (with
confirmation of receipt) or by registered or certified mail, postage prepaid,
return receipt requested, (a) if to the holder of a Warrant, at such holder's
last known address or telecopy number appearing on the books of the Company;
and (b) if to the Company, at its principal executive office, or the telecopy
number of such office, in the United States, or such other address or
telecopy number as the party to whom notice is to be given may have furnished
to the other party. Each such notice, request or communication shall be
effective when received or, if given by mail, when delivered at the address
specified in this Section or on the fifth Business Day following the date on
which such communication is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant
shall bear the following legend unless such shares or other securities have
been registered under the Securities Act and any applicable state securities
laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL
OR APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING
ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS (A) A REGISTRATION STATEMENT SHALL BE
11
<PAGE>
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES
ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (C) MEDIA LOGIC, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED
IN SUCH TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Common Stock
by the exercise of this Warrant, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By:
-------------------------------
Name:
Title:
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Date:
---------------------
Signature
-------------------------------
(Signature must conform in all respects to name of holder as specified
on the face of this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants represented
by this Warrant Certificate to purchase ____ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
Date:
-------------------------------
-------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on
the face of this Warrant Certificate)
<PAGE>
ANNEX II
MEDIA LOGIC, INC.
OFFICER'S CERTIFICATE
I, William E. Davis, Jr., Chief Executive Officer and President of
Media Logic, Inc. (the "Company"), a Massachusetts corporation, DO HEREBY
CERTIFY, pursuant to (i) Section 7(g) of the Securities Purchase Agreement,
dated as of December 22, 1997 (the "Purchase Agreement"), between the Company
and IMPRIMIS SB L.P., as follows:
1. The representations and warranties of the Company contained in
Section 3 of the Purchase Agreement are true and correct as of
the date hereof; and
2. The Company has performed and complied with all obligations,
covenants, conditions and agreements required to be performed or
complied with under the Purchase Agreement or the Warrant on or
prior to the date hereof.
Capitalized terms used herein and not otherwise defined are defined in the
Purchase Agreement.
IN WITNESS WHEREOF, I have executed this certificate this _____ day of
December, 1997.
-----------------------------------------
William E. Davis, Jr.,
Chief Executive Officer and President
<PAGE>
ANNEX III
MEDIA LOGIC, INC.
ASSISTANT CLERK'S CERTIFICATE
I, Paul M. O'Brien, Assistant Clerk of Media Logic Inc., a
Massachusetts corporation (the "Company"), DO HEREBY CERTIFY in the name and on
behalf of the Company as follows:
1. Attached hereto as Exhibit A is a true, correct and complete copy of
the Restated Articles of Organization of the Company, together with
all amendments thereto through and including the date of this
certificate, as on file with and certified by the Secretary of State
of Massachusetts. Such documents have not been amended or modified,
no other charter documents have been filed with any relevant official
with respect to the Company and no amendment or modification to any of
such documents has been authorized on behalf of the Company.
2. Attached hereto as Exhibit B are true, correct and complete copies of
the By-laws of the Company as in effect on the date hereof. The
By-laws have not been amended or modified in any respect and are in
full force and effect.
3. Attached hereto as Exhibit C are true, correct and complete copies of
resolutions duly adopted by written consent of the Board of Directors
of the Company, dated October 15, 1997 and December 11, 1997, and such
resolutions (i) are the only proceedings adopted by such Board or any
committees thereof with respect to the matters referred to therein,
(ii) have not in any way been amended, modified, rescinded or revoked
since their adoption and (iii) remain in full force and effect on the
date hereof.
4. Each of the persons listed on Exhibit D hereto is a duly elected,
qualified and acting authorized officer of the Company serving in the
capacity set forth beside his name on Exhibit D. The signature of
each such officer set forth opposite his name on Exhibit D is his
genuine signature.
5. Attached hereto as Exhibit E is a true and correct copy of a
Certificate of Good Standing of the Company, issued on December 19,
1997, by the Secretary of State of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, I have signed this certificate this ___ day of
December, 1997.
-------------------------------------
Paul M. O'Brien, Assistant Clerk
The undersigned hereby certifies that Paul M. O'Brien is the duly
elected, qualified and acting Assistant Clerk of the Company and that the
signature set forth above is his genuine signature.
-----------------------------------
William E. Davis, Jr.
Chief Executive Officer and President
<PAGE>
ANNEX IV
December 29, 1997
WEXFORD SPECTRUM INVESTORS, LLC
411 West Putnam Avenue, Suite 125
Greenwich, CT 06830
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7(h) of the Securities
Purchase Agreement, dated as of December 22, 1997 (the "Securities Purchase
Agreement"), by and between Media Logic, Inc., (the "Company") and you relating
to the sale and issuance by the Company of 566,666 shares (the "Shares") of
common stock of the Company, $.01 par value per share (the "Common Stock") and
warrants (the "Warrants") to purchase 666,666 shares of Common Stock of the
Company. Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to such terms in the Securities Purchase Agreement.
We have acted as counsel for the Company in connection with the sale of
the Shares and the Warrants and in connection with the execution and delivery
of the Securities Purchase Agreement dated as of December 22, 1997, by and
between the Company and you. We have examined the Company's Restated
Articles of Organization and By-laws, as amended, to date, the Securities
<PAGE>
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 3
Purchase Agreement, the Warrants, a Certificate of an Officer of the Company
dated as of the date hereof and delivered to you pursuant to Section 7(g) of the
Securities Purchase Agreement, a Certificate of the Assistant Clerk of the
Company (the "Assistant Clerk's Certificate") dated as of the date hereof and
delivered to you pursuant to Section 7(g) of the Securities Purchase Agreement,
a Certificate of Good Standing of the Company issued by the Secretary of State
of the Commonwealth of Massachusetts on December 19, 1997 as is attached to the
Assistant Clerk's Certificate as Exhibit E thereto and such records of the
corporate proceedings of the Company as we have deemed material. We have made
such inquiry of the officers of the Company and have examined such other Company
records, documents, agreements and instruments of the Company made available to
us and certificates of officers of the Company and of public officials and have
examined such questions of law as we have deemed necessary for the purposes of
this opinion. In rendering this opinion, we have relied, as to all questions of
fact material to this opinion, upon certificates of public officials and
officers of the Company, and representations and warranties of the Company
contained in the Securities Purchase Agreement and any certificates required
thereby. Any reference herein to "our knowledge" or any derivation thereof
shall mean knowledge of the particular attorneys in this firm who have performed
services for the Company on behalf of this firm without any independent
investigation except as otherwise described above.
We have assumed, without independently verifying such assumptions, the
genuineness of the signatures on all of the documents examined by us, the
authenticity of all documents furnished for our examination as originals, and
the conformity to original documents of all documents furnished to us as copies,
including documents transmitted by telecopy.
For purposes of this opinion, we have assumed that you have all requisite
power and authority and have taken all necessary action to effect the
transactions mentioned above, and we have assumed that you have complied with
all applicable federal or state laws and regulations in connection with the
purchase of the Shares and the Warrants and the execution and delivery of the
Securities Purchase Agreement.
The opinions hereinafter expressed are qualified (a) to the extent that the
validity or enforceability of any agreement or instrument or of any right
granted thereunder may be subject to or affected by any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, (b) by legal and
equitable limitations on the availability of specific performance as a remedy
and the discretion of the court in awarding equitable relief and (c) insofar as
indemnification or contribution for liabilities arising under the Securities Act
of 1933, as amended, may be deemed to be against public policy or otherwise
limited by applicable laws. Further, our opinion with respect to the Company's
agreement to file a listing application for the Warrants with the American Stock
Exchange and to use its best efforts to register the Warrants for public
trading, as set forth in Sections 4(s) and 4(t) of the Securities Purchase
Agreement, is subject to the approval of the Company's Board of Directors to so
register the Warrants, such approval which we have been informed that the
Company is seeking.
<PAGE>
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 4
We do not express any opinion with respect to the securities or "blue sky" laws
of any state or foreign jurisdiction.
Based upon the foregoing and subject to the final paragraph of this letter,
we are of the opinion that:
1. Each of the Company and the Subsidiary has been duly organized and is
validly existing as a corporation in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively. To our
knowledge, the Company and the Subsidiary are duly qualified to transact
business and are in good standing in all jurisdictions where the Company or the
Subsidiary owns or leases its respective property, maintains its respective
employees or conducts its respective business, except for jurisdictions in which
the failure to so qualify would not have a Material Adverse Effect on the
Company or the Subsidiary. The Company and the Subsidiary have all requisite
corporate power and authority to own their respective properties and conduct
their respective businesses as currently conducted.
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.01 par value per share (the "Common Stock"). To our
knowledge, except for the Securities Purchase Agreement and the Warrants and
except as set forth on Schedule 3(c) of the Disclosure Schedule, (i) there are
no bonds, debentures, notes or other indebtedness or securities of the Company,
in any such case having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which shareholders
of the Company may vote, (ii) there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company is a party or by which the Company is bound obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of Common Stock or other voting securities of the Company or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking,
and (iii) there are no outstanding rights, commitments, agreements,
arrangements, or undertakings of any kind obligating the Company to repurchase,
redeem or otherwise acquire any shares of Common Stock or other voting
securities of the Company or any securities of the type described in clauses (i)
and (ii) above.
3. The Common Stock is registered pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the Company has timely filed all material required to be filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act for a period of at least 12 months
preceding the date hereof.
4. When issued, executed, delivered and sold by the Company in accordance
with the Securities Purchase Agreement, the Shares and the Warrants will have
been duly and validly issued, executed and delivered, will be fully paid and
non-assessable (provided that the Warrants' exercise
<PAGE>
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 5
price shall be payable upon exercise of the Warrants) and not subject to any
purchase option or right of first refusal or preemptive, subscription or similar
rights and will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms and entitled to
the benefits provided in the Securities Purchase Agreement, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity). The Exercise Shares have been duly
authorized and reserved for issuance upon Exercise of the Warrants and, when
issued and delivered upon such exercise in accordance with the Warrants, will by
duly issued, fully paid and non-assessable and not subject to any purchase
option or right of first refusal or preemptive, subscription or similar rights.
5. The Company has the requisite corporate power and authority to enter
into the Securities Purchase Agreement, to sell and deliver the Shares, the
Warrants and the Exercise Shares as described in the Securities Purchase
Agreement, and to consummate the transactions that are contemplated in the
Securities Purchase Agreement. Subject to the Company's Board of Directors'
authorization of the registration of the Warrants under the Securities Exchange
Act of 1934, as amended, and the filing of a listing application with respect to
the Warrants with the American Stock Exchange, the Securities Purchase Agreement
has been duly and validly authorized by all necessary corporate action by the
Company and to our knowledge, no approval of any governmental or other body is
required for the execution and delivery of the Agreement by the Company or the
consummation of the transactions contemplated thereby (other than the American
Stock Exchange with respect to the listing of the Shares, Exercise Shares and
Warrants). The Securities Purchase Agreement has been duly and validly executed
and delivered by and on behalf of the Company and, subject to the Board of
Directors' approval set forth in the immediately preceding sentence with respect
to the subject matter thereof, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and except as to compliance with federal, state, and foreign
securities laws, as to which no opinion is expressed.
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Securities Purchase Agreement by the Company and
the performance of its obligations thereunder do not and will not constitute a
breach or violation of any of the terms and provisions of, or constitute a
default under or conflict with or violate any provision of (i) the Company's
Restated Articles of Organization or By-laws, (ii) any indenture, mortgage, deed
of trust, material agreement or other instrument to which the Company is a party
or by which is or any of its property is bound, (iii) any applicable statute or
regulation, (iv) any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property, or (v) any
<PAGE>
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 6
license, franchise, permit or other similar authorization held by the Company,
except as to defaults, violations or breaches which individually or in the
aggregate would not have a Material Adverse Effect on the Company.
7. The issuance of the Common Stock upon exercise of the Warrants in
accordance with the terms and conditions of the Securities Purchase Agreement
will not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed,
including the American Stock Exchange Listing Standards and Requirements.
8. The Company complies with the eligibility requirements for the use of
Form S-3 under the Securities Act of 1933, as amended.
9. Except as described in Schedule 3(j) of the Disclosure Schedule to the
Securities Purchase Agreement, to our knowledge, after due inquiry, there is no
pending or threatened litigation, investigation or other proceeding against the
Company or the Subsidiary which would, insofar as can reasonably be foreseen,
individually or in the aggregate, have a Material Adverse Effect on the Company
or the Subsidiary.
10. To our knowledge, except for the Subsidiary, the Company does not have
any subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
joint venture or other entity. To our knowledge, there are no restrictions on
the transfer of shares of Common Stock other than those imposed by relevant
state and federal securities laws. To our knowledge, there are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock nor are there any commitments,
agreements, arrangements or undertakings of any kind relating to dividend rights
or disposition of the Common Stock, to which the Company is a party. To our
knowledge, except as provided in the Securities Purchase Agreement and as set
forth in Schedule 3(c) of the Disclosure Schedule, no Person has the right to
demand or other rights to cause the Company to file any registration statement
under the Securities Act.
11. No permit, consent, approval, license or order of, authorization of,
or registration, declaration or filing with, any court or other governmental
entity is required to be obtained or made in connection with the execution,
delivery or performance of the Securities Purchase Agreement or the Warrants by
the Company or the consummation of the transactions contemplated thereby (other
than with respect to the American Stock Exchange in connection with the listing
of the Registrable Securities and the approvals required in connection with a
registration of the Registrable Securities).
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our
<PAGE>
WEXFORD SPECTRUM INVESTORS, LLC
December 29, 1997
Page 7
attention including changes in law which may occur hereafter. Our opinions
above are limited to the laws of the Commonwealth of Massachusetts, and the
federal law of the United States of America and we express no opinion with
respect to the laws of any other jurisdiction. We note that the Securities
Purchase Agreement states that it is governed by the law of the State of New
York, and for purposes of the opinions set forth in paragraph 5 above, we have
assumed, with your consent, that the law of the State of New York is identical
to the law of the Commonwealth of Massachusetts. Furthermore, we express or
imply no opinion with respect to compliance with anti-fraud statutes, rules or
regulations of applicable state or federal law. This letter is furnished to you
as the purchaser of the Shares and Warrants and is solely for your benefit and
may not be relied upon by any other person or for any other purpose.
Very truly yours,
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE>
SCHEDULE 3C
DEBENTURES
<TABLE>
<CAPTION>
HOLDER AMOUNT
- ----------------------------------------------------- ----------
<S> <C>
One & Co............................................. $ 100,000
F.T.S. Worldwide..................................... $ 300,000
Beauchamp Finance Ltd................................ $ 120,000
Euro Factors Int'l, Inc.............................. $ 100,000
Ramlu Trading Corp................................... $ 80,000
F.T.S. Worldwide..................................... $ 750,000
</TABLE>
WARRANTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES EXERCISE PRICE PER SHARE
- ------------------------------------------------ ----------------- ---------------------------
<S> <C> <C>
Digital Media and Communications, L.P........... 410,870 $ 3
ACFS Limited.................................... 240,000 $ 3
Adar Equities LLC............................... 900,000 $ 3
Rochon Capital Group, Ltd....................... 200,000 $ 2
First Granite Securities, Inc................... 500,000 $ 2
</TABLE>
OPTIONS
<TABLE>
<CAPTION>
OPTIONS AUTHORIZED
OPTIONS OUTSTANDING BUT UNISSUED
------------------- ------------------
<S> <C> <C>
Media Logic Inc.
1991 Stock Option Plan 610,592 414,808
</TABLE>
REGISTRATION RIGHTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- ------------------------------------------------------- -----------------
<S> <C>
Digital Media and Communications L.P................... 410,870
ACFS Limited........................................... 240,000
Adar Equities LLC...................................... 900,000
Rochon Capital Group, Ltd.............................. 200,000
First Granite Securities, Inc.......................... 500,000
F.T.S. Worldwide....................................... 833,334*
Boston Group LP........................................ 250,000**
First Granite Securities, Inc.
Raymond Leclerc........................................ 1,000,000
Lee H. Elizer.......................................... 8,000***
</TABLE>
- ------------------------
* Assumes $.90 conversion price for outstanding debentures
** Expected--See Schedule 3H
<PAGE>
*** Shares to be issued October 23, 1998 pursuant to Separation Agreement.
AGREEMENTS TO ISSUE SECURITIES
8,000 shares to be issued to Lee H. Elizer on October 23, 1998 pursuant to
Separation Agreement dated October 23, 1996.
REDEMPTION RIGHTS
F.T.S. Worldwide--$750,000 Debentures--pursuant to Section 2(d) of
Registration Rights Agreement dated October 27, 1997.
<PAGE>
SCHEDULE 3H
<TABLE>
<CAPTION>
HOLDER INSTRUMENT AMOUNT DATE
- ------------------------------------- ------------- ------------------------------------- -------------------
<S> <C> <C> <C>
F.T.S. Worldwide (Disclosed in Convertible $750,000 October 29,1997
Schedule 3C) Debenture
First Granite Securities, Inc. Warrants 500,000 shares October 29, 1997
(Disclosed in Schedule 3C) exerciseable at
$2 per share
First Boston Group LP Warrants 250,000 shares To be issued upon
Granite Securities, Inc. exerciseable execution of a
at the securities purchase
greater of agreement and
$2 per share payment of the
or the Market purchase price
Price per share
</TABLE>
REGISTRATION RIGHTS
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
- ---------------------------------------------- -----------------
<S> <C> <C>
Boston Group L.P. 250,000 Subject to issuance of
First Granite Securities, Inc. warrants as described
above
</TABLE>
<PAGE>
SCHEDULE 3J
PENDING LITIGATION
On or about January 16, 1996, Media Logic, Inc. and its subsidiary
MediaLogic ADL, Inc. (collectively, "Media Logic") commenced an action against
Christian P. Marlowe and Marlowe Engineering Company (collectively "Marlowe")
seeking (a) a declaration of the rights of Media Logic under certain technology
transfer and consulting agreements, and (b) damages for Marlowe's breach of
those Agreements. On June 5, 1996, Marlowe answered the complaint and
counterclaimed, asserting claims for breach of contract, misrepresentation,
promissory estoppel, violation of the implied covenant of good faith and fair
dealing, M.G.L.c. 93A, and declaratory judgment. On June 11, 1996, Marlowe
amended the counterclaim to include a defamation count relating to a press
release issued by Media Logic concerning the litigation. In August 1996, Media
Logic moved to dismiss the counterclaims. The Court denied Media Logic's motion
in November 1996. Currently the parties are engaged in pre-trial discovery.
<PAGE>
SCHEDULE 3K
EVENTS OF DEFAULT
None
<PAGE>
SCHEDULE 3L
LEASES
<TABLE>
<CAPTION>
LOCATION LANDLORD TERM DATE RENT/MONTH PURPOSE
- ----------------- --------------------------------- ----------- ------------- ---------------------------------
<C> <S> <C> <C> <C>
31 South Street D&K Realty Trust 4/30/08 6950 company headquarters
Plainville, MA
1965 57th St. Cottonwood Land 1/31/99 6949 former R&D offices
Boulder, CO and Farm Ltd.
</TABLE>
This property has been sublet for the remainder of the lease term.
<TABLE>
<C> <S> <C> <C> <C>
2280 Wilderness Avalon Investment Co. 3/31/00 2774 former R&D offices
Place Ste. B
Boulder, CO
</TABLE>
Sublease for the remainder of this lease term to be executed as of January
1, 1998.
<TABLE>
<C> <S> <C> <C> <C>
2340 E Trinity Mills F.E.S. Mgmnt. Mo/Mo 770 sales office
Carrollton, TX
One O'Hare Center Alliance Business Mo/Mo 1341 sales office
6250 River Road Center
Rosemount, IL
American Office Center Great Offices Inc Mo/Mo 885 sales office
8 Corporate Park
Irvine, CA
</TABLE>
<PAGE>
SCHEDULE 3M
PATENT APPLICATIONS
U. S. Patent Application Serial No. 08/547,713
Entitled: TRANSFER MECHANISM
U.S. Patent Application Serial No. 08/548,413
Entitled: DATA LIBRARY
U.S. Patent Application Serial No. 08/548,483
Entitled: DATA STORAGE SYSTEM
U.S. Patent Application Serial No. 08/548,485
Entitled: CONVEYOR SYSTEM
U.S. Patent Application filed Nov. 17, 1997 (Serial No. not yet issued)
Entitled: TAPE LIBRARY
COPYRIGHTS
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION
TITLE NO. DATE
- ------------------------------------------ --------------- ---------------------
<S> <C> <C>
ML5000 Rev. 4.21 TXU 526 355 July 17, 1992
ML3100 Rev. 4.42 TXU 575 165 September 3, 1993
ML3200-24 Rev. 2.05 TXU 592 148 September 3, 1993
ML3600/ML3200-48 Rev. 2.37 TXU 592 149 September 3, 1993
</TABLE>
TRADEMARKS
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION
TITLE NO. DATE JURISDICTION
- -------------------------------------- ----------- -------------------- -------------
<S> <C> <C> <C>
ACCUCOPY.............................. 1,896,826 May 30, 1995 United States
PROCESSLOGIC.......................... 1,930,272 October, 24, 1995 United States
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
MEDIALOGIC............................ 1,973,194 May 7, 1996 United States
MEDIALOGIC............................ 1,713,315 September 8, 1992 United States
</TABLE>
<PAGE>
SCHEDULE 3N
<TABLE>
<CAPTION>
ANNUAL
LEASE -------------------------
LOCATION LANDLORD TERM DATE COMMITMENT PURPOSE
- ----------------- ------------------------------------------------------- ----------- ------------ -----------
<C> <S> <C> <C> <C>
31 South Street D&K Realty Trust 4/30/08 $ 83,400 Company
Plainville, MA headquarters
</TABLE>
<PAGE>
SCHEDULE 3O
RELATED PARTY TRANSACTIONS
Lease with D&K Realty Trust on company headquarters at 310 South Street,
Plainville, MA. Principals in D&K Realty Trust are David Lennox, former
President and director of the company, and Klaus Peter, former Senior Vice
President and Director of the company. Neither Mr. Lennox nor Mr. Peter is
employed by the company nor does either Mr. Lennox or Mr. Peter have any
agreement of any type with the company other than pursuant to the above
referenced lease with D&K Realty Trust.
<PAGE>
Exhibit 99.3
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED
IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE
144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT IMPRIMIS SB L.P., or such holder's registered
assigns (the "Investor"), is the owner of 666,667 Warrants (as defined
below), each of which entitles the registered holder thereof to purchase from
MEDIA LOGIC, INC., a Massachusetts corporation (the "Company"), one fully
paid, duly authorized and nonassessable share of Common Stock, par value
$0.01 per share, of the Company (the "Common Stock"), at any time or from
time to time on or before 5:00 p.m., New York City time, on December 29,
2002, at an exercise price of $1.50 per share (the "Exercise Price"), all on
the terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable"), which is initially one (1) share, is subject
to adjustment from time to time pursuant to the provisions of Section 2 of
this Warrant Certificate. The Warrants evidenced by this certificate are
part of a series of Warrants
<PAGE>
being issued by the Company on the Issue Date (the "Warrants"). The
execution and delivery of this Warrant Certificate is a condition precedent
to the obligations of the Investor under the Securities Purchase Agreement,
dated as of December 22, 1997, between the Investor and the Company (the
"Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby may
be exercised, in whole or in part, by the registered holder hereof at any
time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares
of Common Stock issuable upon exercise of such Warrants, which shall be
payable by a certified or official bank check payable to the order of the
Company (collectively, the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (a) certificates representing
the number (rounded up to the nearest full share) of validly issued, fully
paid and nonassessable shares of Common Stock specified in the Warrant
Exercise Documentation, and (b) if less than the full number of Warrants
evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days); but
any such surrender of this Warrant Certificate for exercise during any period
while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for the
Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of
Common Stock issuable upon the exercise of the Warrants evidenced hereby.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved
2
<PAGE>
in the issue of any certificate for shares of Common Stock in any name other
than that of the registered holder of the Warrants evidenced hereby.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make a distribution on the outstanding
shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into a
larger number of shares; or
(C) combine the outstanding shares of Common Stock into a
smaller number of shares;
then, and in each such case (other than a dividend or distribution received
by or set aside for the benefit of the holder pursuant to Section 2(c)
hereof), the Number Issuable in effect immediately prior to such event shall
be adjusted (and any other appropriate actions shall be taken by the Company)
so that the holder of any Warrant evidenced hereby thereafter exercised shall
be entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or had been
entitled to receive upon or by reason of any of the events described above,
had such Warrant been exercised immediately prior to the happening of such
event. An adjustment made pursuant to this clause (i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such corporate
action becomes effective.
(ii) If after the Issue Date, the Company shall at any time or
from time to time issue or sell (x) shares of Common Stock or (y) securities
convertible into or exchangeable for shares of Common Stock, or any options,
warrants or other rights to acquire shares of Common Stock (other than (A)
shares of Common Stock issued upon exercise of the Warrants, (B) shares of
Common Stock issued upon conversion of the Debentures outstanding on the
Issue Date that have been amended pursuant to Section 7(i) of the Securities
Purchase Agreement, (C) shares of Common Stock issued pursuant to an employee
stock
3
<PAGE>
option plan, stock bonus plan or other incentive compensation plan or award,
each as approved by the Company's Board of Directors that, in the aggregate
with all other shares of Common Stock issued pursuant to any such plans
(whether or not approved by the Company's Board of Directors) constitute no
more than ten percent (10%) of the issued and outstanding Common Stock, and
(D) shares of Common Stock issued as a result of adjustments made under
agreements related to shares described in clauses (A), (B) and (C)) at a
price per share that is less than the Current Market Price per share of
Common Stock then in effect as of the record date or issue date, as the case
may be, referred to in the following sentence (the "Relevant Date") (treating
the price per share of Common Stock, in the case of the issuance of any
security convertible or exchangeable or exercisable into Common Stock as
equal to (x) the sum of the price for such security convertible, exchangeable
or exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (y) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 2, then, and in each such case, the Number Issuable then in effect
shall be adjusted by multiplying the Number Issuable in effect on the day
immediately prior to the Relevant Date by a fraction, (1) the numerator of
which shall be the sum of the number of shares of Common Stock, on a fully
diluted basis, outstanding on the Relevant Date, plus the number of
additional shares of Common Stock issued or to be issued (or the maximum
number into which such convertible or exchangeable securities initially may
convert or exchange or for which such options, warrants or other rights
initially may be exercised), and (2) the denominator of which shall be the
sum of the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of shares of Common Stock
which the aggregate consideration (plus the aggregate amount of any
additional consideration initially payable upon conversion or exchange of
such convertible or exchangeable securities or exercise of such options,
warrants or other rights) for the total number of such additional shares of
Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or
other rights may be exercised) would purchase at the Current Market Price per
share of Common Stock on the Relevant Date. Such adjustment shall be made
whenever such shares, securities, options, warrants or other rights are
issued, and shall become effective retroactively to a date immediately
following the close of business (x) in the case of an issuance to the
stockholders of the Company, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (y) in all other cases, on the date
(the "issue date") of such issuance; provided, that if any convertible or
exchangeable securities, options, warrants, or other rights (or any portions
thereof) which shall have given rise to an adjustment pursuant to this
Section 2(a)(ii) shall have expired or terminated without the exercise
thereof and/or if by
4
<PAGE>
reason of the terms of such convertible or exchangeable securities, options,
warrants or other rights there shall have been an increase or increases, with
the passage of time or otherwise, in the Number Issuable, then the Number
Issuable hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (A) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have
expired or terminated, (B) treating the additional shares of Common Stock, if
any, actually issued or issuable pursuant to the previous exercise of such
convertible and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually received and receivable
therefor and (C) treating any of such convertible or exchangeable securities,
options, warrants or other rights which remain outstanding as being subject
to exercise or conversion. Solely for purposes of this clause (ii), (I)
Common Stock shall include the Common Stock, par value $0.01 per share, of
the Company and each other class of capital stock of the Company that does
not have a preference over any other class of capital stock of the Company as
to dividends or upon liquidation, dissolution or winding up of the Company
and, in each case, shall include any other class of capital stock of the
Company into which such stock is reclassified or reconstituted and (II) if
the provisions of any securities convertible into or exchangeable for shares
of Common Stock or options, warrants or other rights to acquire shares of
Common Stock are amended after the date of issuance so as to reduce the
applicable conversion price, exchange price or exercise price such amendment
shall be deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to time
after the Issue Date distribute to any holder of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Company or another issuer, securities of the Company or another issuer or
other assets (excluding dividends or other distributions of shares of Common
Stock or other capital stock for which adjustment in the Number Issuable is
made under Section 2(a)(i) or dividends or other distributions received by or
set aside for the benefit of the holders of Common Stock pursuant to Section
2(c) below) or rights or warrants to subscribe for or purchase securities of
the Company (excluding those in respect of which adjustment in the Number
Issuable is made pursuant to Section 2(a)(ii)), then, and in each such case,
the Number Issuable then in effect shall be adjusted by multiplying the
Number Issuable in effect immediately prior to the date of such distribution
by a fraction (x) the numerator of which shall be the Current Market Price
per share on the record date referred to below and (y) the denominator of
which shall be such Current Market Price per share less the then Fair Market
Value (as determined in good faith by the Board of Directors of the Company,
a certified resolution with respect to which shall be mailed to the holder of
the Warrants evidenced hereby) of the portion of the cash,
5
<PAGE>
evidences of indebtedness, securities or other assets so distributed or of
such subscription rights or warrants applicable to one share of Common Stock
(but such denominator shall in no event be zero). Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) In case the Company at any time or from time to time shall
take any action which could have a dilutive effect on the number of shares of
Common Stock that may be issued upon exercise of the Warrants, other than an
action described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or
Section 2(b), then, the Number Issuable shall be adjusted in such manner and
at such time as the Board of Directors of the Company reasonably determines
to be equitable under the circumstances (such determination to be evidenced
in a resolution, a certified copy of which shall be mailed to the holder of
the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no adjustment
under this Section 2(a) need be made to the Number Issuable unless such
adjustment would require an increase or decrease of at least one percent (1%)
of the Number Issuable then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) of such Number Issuable. Any adjustment to the Number Issuable
carried forward and not theretofore made shall be made immediately prior to
the exercise of any Warrants pursuant hereto.
(vi) The Company promptly shall deliver to each registered holder
of Warrants at least five (5) Business Days prior to effecting any
transaction which would result in an increase or decrease in the Number
Issuable pursuant to this Section 2(a) a notice thereof, together with a
certificate, signed by the Chief Executive Officer or a Vice-President and by
the Treasurer or an Assistant Treasurer or the Clerk or an Assistant Clerk of
the Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Number Issuable then in effect
following such adjustment.
(vii) Notwithstanding anything contrary contained in this Section
2(a), the Company shall be entitled to make such upward adjustments in the
Number Issuable, in addition to those otherwise required by this Section
2(a), as the Board of Directors of the Company in their discretion shall
determine to be advisable in order that any stock dividend, subdivision or
combination of shares, distribution of rights or warrants to purchase stock
or securities, or distribution of securities convertible into or exchangeable
for Common Stock, hereafter made by
6
<PAGE>
the Company to its shareholders shall not be taxable; provided, however,
that any such adjustment shall be made, as nearly as practicable, in a
manner which treats all holders of Warrants with similar protections on
an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other
than a consolidation or merger in which the Company is the resulting or
surviving person and which does not result in any reclassification or change
of outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each
holder of the Warrants evidenced hereby, at least five (5) Business Days
prior to effecting any of the foregoing Transactions, a certificate that the
holder of each such Warrant then outstanding shall have the right thereafter
to exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock
into which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 2 and shall contain other terms identical to the terms hereof.
If, in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes stock,
securities, other property or cash of a Person other than the successor or
purchasing Persons and other than the Company, in connection with such
Transaction, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to
issue such stock, securities, other property or cash to holders of the
Warrants upon exercise thereof as provided above. The provisions of this
Section 2(b) similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in
cash, in capital stock (which shall include, without limitation, any options,
warrants or other rights to acquire capital stock) of the Company, whether or
not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) in other securities, property or assets, to holders of Common
Stock (a "Special Distribution"), then the Board of Directors shall set aside
the amount of such dividend or distribution that any holder of Warrants would
have been entitled to receive had it exercised such Warrants prior to the
record date for such dividend or distribution. Upon the exercise of a
Warrant evidenced hereby, the holder shall be entitled to receive, such
dividend or distribution that such holder would have received had such
Warrant been exercised immediately prior to the record date for such dividend
or
7
<PAGE>
distribution. Prior to any Special Distribution described in this Section
2(c), the Company shall as provided in Section 4 hereof notify each holder
(not less than five (5) Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution and the holder,
if it elects to have such distribution set aside the amount thereof rather
than have an adjustment to the Number Issuable as provided in Section
2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by sending a Special
Notice prior to the date of any such Special Distribution.
Section 3. Redemption. The Company shall not have any right to redeem
any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from time
to time the holders of the Warrants evidenced hereby are entitled to notice
pursuant to the terms of Section 2, such notice shall provide (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
subdivision, combination or issuance of shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision, combination, shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, are to be determined, (b) the issue date (as
defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees that
all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants,
such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the exercise of all outstanding
Warrants, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common stock to permit such reservation or
to permit the exercise of all outstanding Warrants. The Company shall
prepare and file, and cooperate with the holder of this Warrant so that it
may prepare and file, in each case within five Business Days of a request by
such holder, notification and report forms in compliance with the HSR Act,
and shall otherwise fully comply with the requirements of the HSR Act, to the
extent required in connection with the exercise of the Warrant. The Company
shall bear all of its own expenses and all of its own out of pocket expenses
(including reasonable attorneys' fees, charges and expenses) and filing fees
of such holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
8
<PAGE>
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants
proposed for transfer, and with respect to the shares of Common Stock
underlying such Warrants, shall be effective under the Securities Act, (b)
the Warrants are transferred pursuant to Rule 144 under the Securities Act or
(c) the Company shall have received an opinion of counsel reasonably
satisfactory to it that no violation of such act or similar state acts will
be involved in such transfer. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case
of an institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants evidenced
by this Warrant Certificate will inure to the benefit of and be binding upon
the registered holder thereof and the Company and their respective successors
and permitted assigns. This Warrant Certificate shall be for the sole benefit
of the registered holder thereof. Nothing in this Warrant Certificate shall
be construed to give the registered holder hereof any rights as a holder of
shares of Common Stock until such time, if any, as the Warrants evidenced by
this Warrant Certificate are exercised in accordance with the provisions
hereof.
9
<PAGE>
Section 12. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the Preamble
hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed
on a national securities exchange, designated as a Nasdaq Stock Market
security or quoted in the over-the-counter-market by a member firm of the
NYSE, the average daily Market Price of the Common Stock for those days
during the period of 15 days, ending on such date, on which the national
securities exchanges were open for trading, and (b) if the Common Stock is
not then so listed, designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October
29, 2000.
"Exercise Price" shall have the meaning assigned to such term in the
Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements Act
of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the Preamble
hereof.
"Issue Date" shall mean December 29, 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a
Nasdaq Stock Market
10
<PAGE>
security, the last trading price of the Common Stock on such date as reported
in the Wall Street Journal; or (b) if the Common Stock is not so listed or
designated, the average of the reported closing bid and ask prices of the
Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b)
is applicable, the Fair Market Value per share determined in good faith by
the Board of Directors of the Company which shall be deemed to be Fair Market
Value unless holders of at least 50% of Common Stock issued or issuable upon
exercise of the Warrants request that the Company obtain an opinion of a
nationally recognized investment banking firm chosen by the Company (who
shall bear the expense) and reasonably acceptable to such requesting holders
of the Warrants, in which event the Fair Market Value shall be as determined
by such investment banking firm.
"Number Issuable" shall have the meaning given it in the Preamble hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in Section
2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term in
Section 2(c) hereof.
"Special Notice" shall mean the notice sent by a holder to the Company
indicating its preference to have any Special Distribution set aside for its
benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in Section
2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the Preamble
hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
sufficient if
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<PAGE>
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested, (a)
if to the holder of a Warrant, at such holder's last known address or
telecopy number appearing on the books of the Company; and (b) if to the
Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party.
Each such notice, request or communication shall be effective when received
or, if given by mail, when delivered at the address specified in this Section
or on the fifth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant
shall bear the following legend unless such shares or other securities have
been registered under the Securities Act and any applicable state securities
laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A
REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (B) SUCH SHARES ARE
TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR
RULE, UNDER SUCH ACT OR (C) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH
TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Common Stock by the
exercise of this Warrant, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
------------------------------------
William E. Davis, Jr.
Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate to
____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security
on the books of the Company. Such agent may substitute another to act for
such agent.
Date:_________________________
________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants represented by
this Warrant Certificate to purchase ____ shares of Common Stock issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
___________________________
___________________________
___________________________
(Please print name and address)
Date:_________________________
________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
<PAGE>
Exhibit 99.4
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED
IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE
144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-2
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT IMPRIMIS SB L.P., or such holder's registered
assigns (the "Investor"), is the owner of 666,667 Warrants (as defined
below), each of which entitles the registered holder thereof to purchase from
MEDIA LOGIC, INC., a Massachusetts corporation (the "Company"), one fully
paid, duly authorized and nonassessable share of Common Stock, par value
$0.01 per share, of the Company (the "Common Stock"), at any time or from
time to time on or before 5:00 p.m., New York City time, on December 29,
2002, at an exercise price of $3.00 per share (the "Exercise Price"), all on
the terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable"), which is initially one (1) share, is subject
to adjustment from time to time pursuant to the provisions of Section 2 of
this Warrant Certificate. The Warrants evidenced by this certificate are
part of a series of Warrants
<PAGE>
being issued by the Company on the Issue Date (the "Warrants"). The
execution and delivery of this Warrant Certificate is a condition precedent
to the obligations of the Investor under the Securities Purchase Agreement,
dated as of December 22, 1997, between the Investor and the Company (the
"Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby may
be exercised, in whole or in part, by the registered holder hereof at any
time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares
of Common Stock issuable upon exercise of such Warrants, which shall be
payable by a certified or official bank check payable to the order of the
Company (collectively, the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (a) certificates representing
the number (rounded up to the nearest full share) of validly issued, fully
paid and nonassessable shares of Common Stock specified in the Warrant
Exercise Documentation, and (b) if less than the full number of Warrants
evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days); but
any such surrender of this Warrant Certificate for exercise during any period
while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for the
Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of
Common Stock issuable upon the exercise of the Warrants evidenced hereby.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved
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<PAGE>
in the issue of any certificate for shares of Common Stock in any name other
than that of the registered holder of the Warrants evidenced hereby.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall be
subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make a distribution on the outstanding
shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into a
larger number of shares; or
(C) combine the outstanding shares of Common Stock into a
smaller number of shares;
then, and in each such case (other than a dividend or distribution received
by or set aside for the benefit of the holder pursuant to Section 2(c)
hereof), the Number Issuable in effect immediately prior to such event shall
be adjusted (and any other appropriate actions shall be taken by the Company)
so that the holder of any Warrant evidenced hereby thereafter exercised shall
be entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or had been
entitled to receive upon or by reason of any of the events described above,
had such Warrant been exercised immediately prior to the happening of such
event. An adjustment made pursuant to this clause (i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such corporate
action becomes effective.
(ii) If after the Issue Date, the Company shall at any time or
from time to time issue or sell (x) shares of Common Stock or (y) securities
convertible into or exchangeable for shares of Common Stock, or any options,
warrants or other rights to acquire shares of Common Stock (other than (A)
shares of Common Stock issued upon exercise of the Warrants, (B) shares of
Common Stock issued upon conversion of the Debentures outstanding on the
Issue Date that have been amended pursuant to Section 7(i) of the Securities
Purchase Agreement, (C) shares of Common Stock issued pursuant to an employee
stock
3
<PAGE>
option plan, stock bonus plan or other incentive compensation plan or award,
each as approved by the Company's Board of Directors that, in the aggregate
with all other shares of Common Stock issued pursuant to any such plans
(whether or not approved by the Company's Board of Directors) constitute no
more than ten percent (10%) of the issued and outstanding Common Stock, and
(D) shares of Common Stock issued as a result of adjustments made under
agreements related to shares described in clauses (A), (B) and (C)) at a
price per share that is less than the Current Market Price per share of
Common Stock then in effect as of the record date or issue date, as the case
may be, referred to in the following sentence (the "Relevant Date") (treating
the price per share of Common Stock, in the case of the issuance of any
security convertible or exchangeable or exercisable into Common Stock as
equal to (x) the sum of the price for such security convertible, exchangeable
or exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (y) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), in each case, other than issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 2, then, and in each such case, the Number Issuable then in effect
shall be adjusted by multiplying the Number Issuable in effect on the day
immediately prior to the Relevant Date by a fraction, (1) the numerator of
which shall be the sum of the number of shares of Common Stock, on a fully
diluted basis, outstanding on the Relevant Date, plus the number of
additional shares of Common Stock issued or to be issued (or the maximum
number into which such convertible or exchangeable securities initially may
convert or exchange or for which such options, warrants or other rights
initially may be exercised), and (2) the denominator of which shall be the
sum of the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of shares of Common Stock
which the aggregate consideration (plus the aggregate amount of any
additional consideration initially payable upon conversion or exchange of
such convertible or exchangeable securities or exercise of such options,
warrants or other rights) for the total number of such additional shares of
Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or
other rights may be exercised) would purchase at the Current Market Price per
share of Common Stock on the Relevant Date. Such adjustment shall be made
whenever such shares, securities, options, warrants or other rights are
issued, and shall become effective retroactively to a date immediately
following the close of business (x) in the case of an issuance to the
stockholders of the Company, as such, on the record date for the
determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (y) in all other cases, on the date
(the "issue date") of such issuance; provided, that if any convertible or
exchangeable securities, options, warrants, or other rights (or any portions
thereof) which shall have given rise to an adjustment pursuant to this
Section 2(a)(ii) shall have expired or terminated without the exercise
thereof and/or if by
4
<PAGE>
reason of the terms of such convertible or exchangeable securities, options,
warrants or other rights there shall have been an increase or increases, with
the passage of time or otherwise, in the Number Issuable, then the Number
Issuable hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (A) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have
expired or terminated, (B) treating the additional shares of Common Stock, if
any, actually issued or issuable pursuant to the previous exercise of such
convertible and exchangeable securities, options, warrants, or other rights
as having been issued for the consideration actually received and receivable
therefor and (C) treating any of such convertible or exchangeable securities,
options, warrants or other rights which remain outstanding as being subject
to exercise or conversion. Solely for purposes of this clause (ii), (I)
Common Stock shall include the Common Stock, par value $0.01 per share, of
the Company and each other class of capital stock of the Company that does
not have a preference over any other class of capital stock of the Company as
to dividends or upon liquidation, dissolution or winding up of the Company
and, in each case, shall include any other class of capital stock of the
Company into which such stock is reclassified or reconstituted and (II) if
the provisions of any securities convertible into or exchangeable for shares
of Common Stock or options, warrants or other rights to acquire shares of
Common Stock are amended after the date of issuance so as to reduce the
applicable conversion price, exchange price or exercise price such amendment
shall be deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to time
after the Issue Date distribute to any holder of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Company or another issuer, securities of the Company or another issuer or
other assets (excluding dividends or other distributions of shares of Common
Stock or other capital stock for which adjustment in the Number Issuable is
made under Section 2(a)(i) or dividends or other distributions received by or
set aside for the benefit of the holders of Common Stock pursuant to Section
2(c) below) or rights or warrants to subscribe for or purchase securities of
the Company (excluding those in respect of which adjustment in the Number
Issuable is made pursuant to Section 2(a)(ii)), then, and in each such case,
the Number Issuable then in effect shall be adjusted by multiplying the
Number Issuable in effect immediately prior to the date of such distribution
by a fraction (x) the numerator of which shall be the Current Market Price
per share on the record date referred to below and (y) the denominator of
which shall be such Current Market Price per share less the then Fair Market
Value (as determined in good faith by the Board of Directors of the Company,
a certified resolution with respect to which shall be mailed to the holder of
the Warrants evidenced hereby) of the portion of the cash,
5
<PAGE>
evidences of indebtedness, securities or other assets so distributed or of
such subscription rights or warrants applicable to one share of Common Stock
(but such denominator shall in no event be zero). Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) In case the Company at any time or from time to time shall
take any action which could have a dilutive effect on the number of shares of
Common Stock that may be issued upon exercise of the Warrants, other than an
action described in any of Section 2(a)(i) through 2(a)(iii), inclusive, or
Section 2(b), then, the Number Issuable shall be adjusted in such manner and
at such time as the Board of Directors of the Company reasonably determines
to be equitable under the circumstances (such determination to be evidenced
in a resolution, a certified copy of which shall be mailed to the holder of
the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no adjustment
under this Section 2(a) need be made to the Number Issuable unless such
adjustment would require an increase or decrease of at least one percent (1%)
of the Number Issuable then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one
percent (1%) of such Number Issuable. Any adjustment to the Number Issuable
carried forward and not theretofore made shall be made immediately prior to
the exercise of any Warrants pursuant hereto.
(vi) The Company promptly shall deliver to each registered holder
of Warrants at least five (5) Business Days prior to effecting any
transaction which would result in an increase or decrease in the Number
Issuable pursuant to this Section 2(a) a notice thereof, together with a
certificate, signed by the Chief Executive Officer or a Vice-President and by
the Treasurer or an Assistant Treasurer or the Clerk or an Assistant Clerk of
the Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Number Issuable then in effect
following such adjustment.
(vii) Notwithstanding anything contrary contained in this Section
2(a), the Company shall be entitled to make such upward adjustments in the
Number Issuable, in addition to those otherwise required by this Section
2(a), as the Board of Directors of the Company in their discretion shall
determine to be advisable in order that any stock dividend, subdivision or
combination of shares, distribution of rights or warrants to purchase stock
or securities, or distribution of securities convertible into or exchangeable
for Common Stock, hereafter made by
6
<PAGE>
the Company to its shareholders shall not be taxable; provided, however,
that any such adjustment shall be made, as nearly as practicable, in a
manner which treats all holders of Warrants with similar protections on
an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other
than a consolidation or merger in which the Company is the resulting or
surviving person and which does not result in any reclassification or change
of outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each
holder of the Warrants evidenced hereby, at least five (5) Business Days
prior to effecting any of the foregoing Transactions, a certificate that the
holder of each such Warrant then outstanding shall have the right thereafter
to exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock
into which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 2 and shall contain other terms identical to the terms hereof.
If, in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes stock,
securities, other property or cash of a Person other than the successor or
purchasing Persons and other than the Company, in connection with such
Transaction, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to
issue such stock, securities, other property or cash to holders of the
Warrants upon exercise thereof as provided above. The provisions of this
Section 2(b) similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in
cash, in capital stock (which shall include, without limitation, any options,
warrants or other rights to acquire capital stock) of the Company, whether or
not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) in other securities, property or assets, to holders of Common
Stock (a "Special Distribution"), then the Board of Directors shall set aside
the amount of such dividend or distribution that any holder of Warrants would
have been entitled to receive had it exercised such Warrants prior to the
record date for such dividend or
7
<PAGE>
distribution. Upon the exercise of a Warrant evidenced hereby, the holder
shall be entitled to receive, such dividend or distribution that such holder
would have received had such Warrant been exercised immediately prior to the
record date for such dividend or distribution. Prior to any Special
Distribution described in this Section 2(c), the Company shall as provided in
Section 4 hereof notify each holder (not less than five (5) Business Days
prior to the occurrence of each Special Distribution) of its intent to make
such Special Distribution and the holder, if it elects to have such
distribution set aside the amount thereof rather than have an adjustment to
the Number Issuable as provided in Section 2(a)(i), 2(a)(ii) or 2(a)(iii),
shall notify the Company by sending a Special Notice prior to the date of any
such Special Distribution.
Section 3. Redemption. The Company shall not have any right to redeem
any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from time
to time the holders of the Warrants evidenced hereby are entitled to notice
pursuant to the terms of Section 2, such notice shall provide (a) the date on
which a record is to be taken for the purpose of such dividend, distribution,
subdivision, combination or issuance of shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision, combination, shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options,
warrants or other rights, are to be determined, (b) the issue date (as
defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees that
all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants,
such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the exercise of all outstanding
Warrants, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common stock to permit such reservation or
to permit the exercise of all outstanding Warrants. The Company shall
prepare and file, and cooperate with the holder of this Warrant so that it
may prepare and file, in each case within five Business Days of a request by
such holder, notification and report forms in compliance with the HSR Act,
and shall otherwise fully comply with the requirements of the HSR Act, to the
extent required in connection with the exercise of the Warrant. The Company
shall bear all of its own expenses and all of its own out of pocket expenses
(including reasonable attorneys' fees, charges and expenses) and filing fees
of such holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
8
<PAGE>
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants
proposed for transfer, and with respect to the shares of Common Stock
underlying such Warrants, shall be effective under the Securities Act, (b)
the Warrants are transferred pursuant to Rule 144 under the Securities Act or
(c) the Company shall have received an opinion of counsel reasonably
satisfactory to it that no violation of such act or similar state acts will
be involved in such transfer. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case
of an institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants evidenced
by this Warrant Certificate will inure to the benefit of and be binding upon
the registered holder thereof and the Company and their respective successors
and permitted assigns. This Warrant Certificate shall be for the sole benefit
of the registered holder thereof. Nothing in this Warrant Certificate shall
be construed to give the registered holder hereof any rights as a holder of
shares of Common Stock until such time, if any, as the Warrants evidenced by
this Warrant Certificate are exercised in accordance with the provisions
hereof.
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<PAGE>
Section 12. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the Preamble
hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed
on a national securities exchange, designated as a Nasdaq Stock Market
security or quoted in the over-the-counter-market by a member firm of the
NYSE, the average daily Market Price of the Common Stock for those days
during the period of 15 days, ending on such date, on which the national
securities exchanges were open for trading, and (b) if the Common Stock is
not then so listed, designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October
29, 2000.
"Exercise Price" shall have the meaning assigned to such term in the
Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements Act
of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the Preamble
hereof.
"Issue Date" shall mean December 29, 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a
Nasdaq Stock Market
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<PAGE>
security, the last trading price of the Common Stock on such date as reported
in the Wall Street Journal; or (b) if the Common Stock is not so listed or
designated, the average of the reported closing bid and ask prices of the
Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b)
is applicable, the Fair Market Value per share determined in good faith by
the Board of Directors of the Company which shall be deemed to be Fair Market
Value unless holders of at least 50% of Common Stock issued or issuable upon
exercise of the Warrants request that the Company obtain an opinion of a
nationally recognized investment banking firm chosen by the Company (who
shall bear the expense) and reasonably acceptable to such requesting holders
of the Warrants, in which event the Fair Market Value shall be as determined
by such investment banking firm.
"Number Issuable" shall have the meaning given it in the Preamble hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in Section
2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term in
Section 2(c) hereof.
"Special Notice" shall mean the notice sent by a holder to the Company
indicating its preference to have any Special Distribution set aside for its
benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in Section
2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the Preamble
hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be
sufficient if
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<PAGE>
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested, (a)
if to the holder of a Warrant, at such holder's last known address or
telecopy number appearing on the books of the Company; and (b) if to the
Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party.
Each such notice, request or communication shall be effective when received
or, if given by mail, when delivered at the address specified in this Section
or on the fifth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant
shall bear the following legend unless such shares or other securities have
been registered under the Securities Act and any applicable state securities
laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A
REGISTRATION STATEMENT SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (B) SUCH SHARES ARE
TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR
RULE, UNDER SUCH ACT OR (C) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH
TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Common Stock by the
exercise of this Warrant, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
------------------------------------
William E. Davis, Jr.
Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate to
____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security
on the books of the Company. Such agent may substitute another to act for
such agent.
Date:_________________________
_________________________________________
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase ____ shares of Common
Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
___________________________
___________________________
___________________________
(Please print name and address)
Date:_________________________
_________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
<PAGE>
Exhibit 99.5
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED
IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE
144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-3
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
This is to Certify That WEXFORD SPECTRUM INVESTORS LLC, or such holder's
registered assigns (the "Investor"), is the owner of 333,333 Warrants (as
defined below), each of which entitles the registered holder thereof to
purchase from Media Logic, Inc., a Massachusetts corporation (the "Company"),
one fully paid, duly authorized and nonassessable share of Common Stock, par
value $0.01 per share, of the Company (the "Common Stock"), at any time or
from time to time on or before 5:00 p.m., New York City time, on December 29,
2002, at an exercise price of $1.50 per share (the "Exercise Price"), all on
the terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each such
Warrant (the "Number Issuable"), which is initially one (1) share, is subject
to adjustment from time to time pursuant to the provisions of Section 2 of
this Warrant
<PAGE>
Certificate. The Warrants evidenced by this certificate are part of a series
of Warrants being issued by the Company on the Issue Date (the "Warrants").
The execution and delivery of this Warrant Certificate is a condition
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of December 22, 1997, between the Investor and the
Company (the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have
the meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced
hereby may be exercised, in whole or in part, by the registered holder hereof
at any time or from time to time on or before 5:00 p.m., New York City time,
on December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares
of Common Stock issuable upon exercise of such Warrants, which shall be
payable by a certified or official bank check payable to the order of the
Company (collectively, the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (a) certificates representing
the number (rounded up to the nearest full share) of validly issued, fully
paid and nonassessable shares of Common Stock specified in the Warrant
Exercise Documentation, and (b) if less than the full number of Warrants
evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days); but
any such surrender of this Warrant Certificate for exercise during any period
while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for the
Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of
Common Stock issuable upon the exercise of the Warrants evidenced hereby.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved
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<PAGE>
in the issue of any certificate for shares of Common Stock in any name other
than that of the registered holder of the Warrants evidenced hereby.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall
be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to
time after the Issue Date:
(A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares; or
(C) combine the outstanding shares of Common Stock into
a smaller number of shares;
then, and in each such case (other than a dividend or distribution
received by or set aside for the benefit of the holder pursuant to
Section 2(c) hereof), the Number Issuable in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be
taken by the Company) so that the holder of any Warrant evidenced hereby
thereafter exercised shall be entitled to receive the number of shares
of Common Stock or other securities of the Company which such holder
would have owned or had been entitled to receive upon or by reason of
any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event. An adjustment made
pursuant to this clause (i) shall become effective retroactively (x) in
the case of any such dividend or distribution, to a date immediately
following the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend
or distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such
corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time or
from time to time issue or sell (x) shares of Common Stock or (y)
securities convertible into or exchangeable for shares of Common Stock,
or any options, warrants or other rights to acquire shares of Common
Stock (other than (A) shares of Common Stock issued upon exercise of the
Warrants, (B) shares of Common Stock issued upon conversion of the
Debentures outstanding on the Issue Date that have been amended pursuant
to Section 7(i) of the Securities Purchase Agreement, (C) shares of
Common Stock issued pursuant to an employee stock
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<PAGE>
option plan, stock bonus plan or other incentive compensation plan or
award, each as approved by the Company's Board of Directors that, in the
aggregate with all other shares of Common Stock issued pursuant to any
such plans (whether or not approved by the Company's Board of Directors)
constitute no more than ten percent (10%) of the issued and outstanding
Common Stock, and (D) shares of Common Stock issued as a result of
adjustments made under agreements related to shares described in clauses
(A), (B) and (C)) at a price per share that is less than the Current
Market Price per share of Common Stock then in effect as of the record
date or issue date, as the case may be, referred to in the following
sentence (the "Relevant Date") (treating the price per share of Common
Stock, in the case of the issuance of any security convertible or
exchangeable or exercisable into Common Stock as equal to (x) the sum of
the price for such security convertible, exchangeable or exercisable
into Common Stock plus any additional consideration payable (without
regard to any anti-dilution adjustments) upon the conversion, exchange
or exercise of such security into Common Stock divided by (y) the number
of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security), in each case, other than
issuances or sales for which an adjustment is made pursuant to another
paragraph of this Section 2, then, and in each such case, the Number
Issuable then in effect shall be adjusted by multiplying the Number
Issuable in effect on the day immediately prior to the Relevant Date by
a fraction, (1) the numerator of which shall be the sum of the number of
shares of Common Stock, on a fully diluted basis, outstanding on the
Relevant Date, plus the number of additional shares of Common Stock
issued or to be issued (or the maximum number into which such
convertible or exchangeable securities initially may convert or exchange
or for which such options, warrants or other rights initially may be
exercised), and (2) the denominator of which shall be the sum of the
number of shares of Common Stock, on a fully diluted basis, outstanding
on the Relevant Date, plus the number of shares of Common Stock which
the aggregate consideration (plus the aggregate amount of any additional
consideration initially payable upon conversion or exchange of such
convertible or exchangeable securities or exercise of such options,
warrants or other rights) for the total number of such additional shares
of Common Stock so issued (or into which such convertible or
exchangeable securities may convert or exchange or for which such
options, warrants or other rights may be exercised) would purchase at
the Current Market Price per share of Common Stock on the Relevant Date.
Such adjustment shall be made whenever such shares, securities,
options, warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business (x)
in the case of an issuance to the stockholders of the Company, as such,
on the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and
(y) in all other cases, on the date (the "issue date") of such issuance;
provided, that if any convertible or exchangeable securities, options,
warrants, or other rights (or any portions thereof) which shall have
given rise to an adjustment pursuant to this Section 2(a)(ii) shall have
expired or terminated without the exercise thereof and/or if by
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<PAGE>
reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the Number
Issuable, then the Number Issuable hereunder shall be readjusted (but to
no greater extent than originally adjusted) on the basis of (A)
eliminating from the computation any additional shares of Common Stock
corresponding to such convertible or exchangeable securities, options,
warrants or other rights as shall have expired or terminated, (B)
treating the additional shares of Common Stock, if any, actually issued
or issuable pursuant to the previous exercise of such convertible and
exchangeable securities, options, warrants, or other rights as having
been issued for the consideration actually received and receivable
therefor and (C) treating any of such convertible or exchangeable
securities, options, warrants or other rights which remain outstanding
as being subject to exercise or conversion. Solely for purposes of this
clause (ii), (I) Common Stock shall include the Common Stock, par value
$0.01 per share, of the Company and each other class of capital stock of
the Company that does not have a preference over any other class of
capital stock of the Company as to dividends or upon liquidation,
dissolution or winding up of the Company and, in each case, shall
include any other class of capital stock of the Company into which such
stock is reclassified or reconstituted and (II) if the provisions of any
securities convertible into or exchangeable for shares of Common Stock
or options, warrants or other rights to acquire shares of Common Stock
are amended after the date of issuance so as to reduce the applicable
conversion price, exchange price or exercise price such amendment shall
be deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment in the Number Issuable is made under
Section 2(a)(i) or dividends or other distributions received by or set
aside for the benefit of the holders of Common Stock pursuant to Section
2(c) below) or rights or warrants to subscribe for or purchase
securities of the Company (excluding those in respect of which
adjustment in the Number Issuable is made pursuant to Section 2(a)(ii)),
then, and in each such case, the Number Issuable then in effect shall be
adjusted by multiplying the Number Issuable in effect immediately prior
to the date of such distribution by a fraction (x) the numerator of
which shall be the Current Market Price per share on the record date
referred to below and (y) the denominator of which shall be such Current
Market Price per share less the then Fair Market Value (as determined in
good faith by the Board of Directors of the Company, a certified
resolution with respect to which shall be mailed to the holder of the
Warrants evidenced hereby) of the portion of the cash,
5
<PAGE>
evidences of indebtedness, securities or other assets so distributed or
of such subscription rights or warrants applicable to one share of
Common Stock (but such denominator shall in no event be zero). Such
adjustment shall be made whenever any such distribution is made and
shall become effective retroactively to a date immediately following the
close of business on the record date for the determination of
stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from time to time
shall take any action which could have a dilutive effect on the number
of shares of Common Stock that may be issued upon exercise of the
Warrants, other than an action described in any of Section 2(a)(i)
through 2(a)(iii), inclusive, or Section 2(b), then, the Number Issuable
shall be adjusted in such manner and at such time as the Board of
Directors of the Company reasonably determines to be equitable under the
circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holder of the Warrants
evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 2(a) need be made to the Number Issuable
unless such adjustment would require an increase or decrease of at least
one percent (1%) of the Number Issuable then in effect. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment, which, together with any
adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least one percent (1%) of such Number
Issuable. Any adjustment to the Number Issuable carried forward and not
theretofore made shall be made immediately prior to the exercise of any
Warrants pursuant hereto.
(vi) The Company promptly shall deliver to each registered
holder of Warrants at least five (5) Business Days prior to effecting
any transaction which would result in an increase or decrease in the
Number Issuable pursuant to this Section 2(a) a notice thereof, together
with a certificate, signed by the Chief Executive Officer or a
Vice-President and by the Treasurer or an Assistant Treasurer or the
Clerk or an Assistant Clerk of the Company, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated and specifying the increased or decreased
Number Issuable then in effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward
adjustments in the Number Issuable, in addition to those otherwise
required by this Section 2(a), as the Board of Directors of the Company
in their discretion shall determine to be advisable in order that any
stock dividend, subdivision or combination of shares, distribution of
rights or warrants to purchase stock or securities, or distribution of
securities convertible into or exchangeable for Common Stock, hereafter
made by
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<PAGE>
the Company to its shareholders shall not be taxable; provided, however,
that any such adjustment shall be made, as nearly as practicable, in a
manner which treats all holders of Warrants with similar protections on
an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger
or Sale of Assets. In case of any capital reorganization or reclassification
or other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other
than a consolidation or merger in which the Company is the resulting or
surviving person and which does not result in any reclassification or change
of outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each
holder of the Warrants evidenced hereby, at least five (5) Business Days
prior to effecting any of the foregoing Transactions, a certificate that the
holder of each such Warrant then outstanding shall have the right thereafter
to exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock
into which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 2 and shall contain other terms identical to the terms hereof.
If, in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes stock,
securities, other property or cash of a Person other than the successor or
purchasing Persons and other than the Company, in connection with such
Transaction, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to
issue such stock, securities, other property or cash to holders of the
Warrants upon exercise thereof as provided above. The provisions of this
Section 2(b) similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so elects by
sending a Special Notice to the Company, in the event that the Company shall
declare a dividend or make any other distribution (including, without
limitation, in cash, in capital stock (which shall include, without
limitation, any options, warrants or other rights to acquire capital stock)
of the Company, whether or not pursuant to a shareholder rights plan, "poison
pill" or similar arrangement) in other securities, property or assets, to
holders of Common Stock (a "Special Distribution"), then the Board of
Directors shall set aside the amount of such dividend or distribution that
any holder of Warrants would have been entitled to receive had it exercised
such Warrants prior to the record date for such dividend or distribution.
Upon the exercise of a Warrant evidenced hereby, the holder shall be entitled
to receive, such dividend or distribution that such holder would have
received had such Warrant been exercised immediately prior to the record date
for such dividend or
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<PAGE>
distribution. Prior to any Special Distribution described in this Section
2(c), the Company shall as provided in Section 4 hereof notify each holder
(not less than five (5) Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution and the holder,
if it elects to have such distribution set aside the amount thereof rather
than have an adjustment to the Number Issuable as provided in Section
2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by sending a Special
Notice prior to the date of any such Special Distribution.
Section 3. Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or
from time to time the holders of the Warrants evidenced hereby are entitled
to notice pursuant to the terms of Section 2, such notice shall provide (a)
the date on which a record is to be taken for the purpose of such dividend,
distribution, subdivision, combination or issuance of shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision, combination, shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, are to be determined, (b) the issue date
(as defined in Section 2(a)(ii) hereof) or (c) the date on which such
Transaction, dissolution, liquidation or winding up is expected to become
effective.
Section 5. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants,
such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the exercise of all outstanding
Warrants, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common stock to permit such reservation or
to permit the exercise of all outstanding Warrants. The Company shall
prepare and file, and cooperate with the holder of this Warrant so that it
may prepare and file, in each case within five Business Days of a request by
such holder, notification and report forms in compliance with the HSR Act,
and shall otherwise fully comply with the requirements of the HSR Act, to the
extent required in connection with the exercise of the Warrant. The Company
shall bear all of its own expenses and all of its own out of pocket expenses
(including reasonable attorneys' fees, charges and expenses) and filing fees
of such holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
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Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants
proposed for transfer, and with respect to the shares of Common Stock
underlying such Warrants, shall be effective under the Securities Act, (b)
the Warrants are transferred pursuant to Rule 144 under the Securities Act or
(c) the Company shall have received an opinion of counsel reasonably
satisfactory to it that no violation of such act or similar state acts will
be involved in such transfer. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will,
at its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant Certificate
or Certificates in denominations specified by such holder for an aggregate
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case
of an institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their
respective successors and permitted assigns. This Warrant Certificate shall
be for the sole benefit of the registered holder thereof. Nothing in this
Warrant Certificate shall be construed to give the registered holder hereof
any rights as a holder of shares of Common Stock until such time, if any, as
the Warrants evidenced by this Warrant Certificate are exercised in
accordance with the provisions hereof.
9
<PAGE>
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock"k shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the
Preamble hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed
on a national securities exchange, designated as a Nasdaq Stock Market
security or quoted in the over-the-counter-market by a member firm of the
NYSE, the average daily Market Price of the Common Stock for those days
during the period of 15 days, ending on such date, on which the national
securities exchanges were open for trading, and (b) if the Common Stock is
not then so listed, designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October
29, 2000.
"Exercise Price" shall have the meaning assigned to such term in
the Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion
to sell, in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements
Act of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the
Preamble hereof.
"Issue Date" shall mean December 29, 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a
Nasdaq Stock Market
10
<PAGE>
security, the last trading price of the Common Stock on such date as reported
in the Wall Street Journal; or (b) if the Common Stock is not so listed or
designated, the average of the reported closing bid and ask prices of the
Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b)
is applicable, the Fair Market Value per share determined in good faith by
the Board of Directors of the Company which shall be deemed to be Fair Market
Value unless holders of at least 50% of Common Stock issued or issuable upon
exercise of the Warrants request that the Company obtain an opinion of a
nationally recognized investment banking firm chosen by the Company (who
shall bear the expense) and reasonably acceptable to such requesting holders
of the Warrants, in which event the Fair Market Value shall be as determined
by such investment banking firm.
"Number Issuable" shall have the meaning given it in the Preamble
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in
Section 2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term
in Section 2(c) hereof.
"Special Notice" shall mean the notice sent by a holder to the
Company indicating its preference to have any Special Distribution set aside
for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in
Section 2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing
and shall be sufficient if
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<PAGE>
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested, (a)
if to the holder of a Warrant, at such holder's last known address or
telecopy number appearing on the books of the Company; and (b) if to the
Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party.
Each such notice, request or communication shall be effective when received
or, if given by mail, when delivered at the address specified in this Section
or on the firth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant
shall bear the following legend unless such shares or other securities have
been registered under the Securities Act and any applicable state securities
laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE
STATE SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO
EXEMPTIONS CONTAINED IN SAID LAWS. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES
ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER
SUCH ACT OR (C) MEDIA LOGIC, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Common Stock
by the exercise of this Warrant, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
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<PAGE>
In Witness Whereof, the Company has caused this Warrant Certificate to be
duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
---------------------------------
Name: William E. Davis, Jr.
Title: Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to ____________________ whose Social Security Number or Tax ID
Number is _________________ and whose record address is ____________________,
and irrevocably appoints ________________ as agent to transfer this security
on the books of the Company. Such agent may substitute another to act for
such agent.
Date:
-------------------------
--------------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase ____ shares of Common
Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security, tax identification
or other identifying number)
-------------------------------
-------------------------------
-------------------------------
(Please print name and address)
Date:
------------------------------
---------------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Warrant
Certificate)
<PAGE>
Exhibit 99.6
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED
IN SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, (2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE
144, OR ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL
HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-4
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
This is to Certify That WEXFORD SPECTRUM INVESTORS LLC, or such
holder's registered assigns (the "Investor"), is the owner of 333,333
Warrants (as defined below), each of which entitles the registered holder
thereof to purchase from Media Logic, Inc., a Massachusetts corporation (the
"Company"), one fully paid, duly authorized and nonassessable share of Common
Stock, par value $0.01 per share, of the Company (the "Common Stock"), at any
time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, at an exercise price of $3.00 per share (the "Exercise
Price"), all on the terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "Number Issuable"), which is initially one (1) share, is
subject to adjustment from time to time pursuant to the provisions of Section
2 of this Warrant
<PAGE>
Certificate. The Warrants evidenced by this certificate are part of a series
of Warrants being issued by the Company on the Issue Date (the "Warrants").
The execution and delivery of this Warrant Certificate is a condition
precedent to the obligations of the Investor under the Securities Purchase
Agreement, dated as of December 22, 1997, between the Investor and the
Company (the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have
the meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced hereby
may be exercised, in whole or in part, by the registered holder hereof at any
time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares
of Common Stock issuable upon exercise of such Warrants, which shall be
payable by a certified or official bank check payable to the order of the
Company (collectively, the "Warrant Exercise Documentation").
(b) As promptly as practicable, and in any event within five (5)
Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (a) certificates representing
the number (rounded up to the nearest full share) of validly issued, fully
paid and nonassessable shares of Common Stock specified in the Warrant
Exercise Documentation, and (b) if less than the full number of Warrants
evidenced hereby are being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate, less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the
date of delivery of the Warrant Exercise Documentation so that the Person
entitled to receive shares of Common Stock upon such exercise shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time. No such surrender shall be effective to
constitute the Person entitled to receive such shares as the record holder
thereof while the transfer books of the Company for the Common Stock are
closed for any purpose (but not for any period in excess of five days); but
any such surrender of this Warrant Certificate for exercise during any period
while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been
made on the date the Warrant Exercise Documentation was received and for the
Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price.
(c) The Company shall pay all expenses in connection with, and all
taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of
Common Stock issuable upon the exercise of the Warrants evidenced hereby.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved
2
<PAGE>
in the issue of any certificate for shares of Common Stock in any name other
than that of the registered holder of the Warrants evidenced hereby.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall
be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to
time after the Issue Date:
(A) pay a dividend or make a distribution on the
outstanding shares of Common Stock in capital stock of the Company;
(B) subdivide the outstanding shares of Common Stock into
a larger number of shares; or
(C) combine the outstanding shares of Common Stock into a
smaller number of shares;
then, and in each such case (other than a dividend or distribution
received by or set aside for the benefit of the holder pursuant to
Section 2(c) hereof), the Number Issuable in effect immediately
prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the Company) so that the holder of any
Warrant evidenced hereby thereafter exercised shall be entitled to
receive the number of shares of Common Stock or other securities of
the Company which such holder would have owned or had been entitled
to receive upon or by reason of any of the events described above,
had such Warrant been exercised immediately prior to the happening
of such event. An adjustment made pursuant to this clause (i)
shall become effective retroactively (x) in the case of any such
dividend or distribution, to a date immediately following the close
of business on the record date for the determination of holders of
shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision or
combination to the close of business on the date upon which such
corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at any time
or from time to time issue or sell (x) shares of Common Stock or
(y) securities convertible into or exchangeable for shares of
Common Stock, or any options, warrants or other rights to acquire
shares of Common Stock (other than (A) shares of Common Stock
issued upon exercise of the Warrants, (B) shares of Common Stock
issued upon conversion of the Debentures outstanding on the Issue
Date that have been amended pursuant to Section 7(i) of the
Securities Purchase Agreement, (C) shares of Common Stock issued
pursuant to an employee stock
3
<PAGE>
option plan, stock bonus plan or other incentive compensation plan
or award, each as approved by the Company's Board of Directors
that, in the aggregate with all other shares of Common Stock issued
pursuant to any such plans (whether or not approved by the
Company's Board of Directors) constitute no more than ten percent
(10%) of the issued and outstanding Common Stock, and (D) shares of
Common Stock issued as a result of adjustments made under
agreements related to shares described in clauses (A), (B) and (C))
at a price per share that is less than the Current Market Price per
share of Common Stock then in effect as of the record date or issue
date, as the case may be, referred to in the following sentence
(the "Relevant Date") (treating the price per share of Common
Stock, in the case of the issuance of any security convertible or
exchangeable or exercisable into Common Stock as equal to (x) the
sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the
conversion, exchange or exercise of such security into Common Stock
divided by (y) the number of shares of Common Stock initially
underlying such convertible, exchangeable or exercisable security),
in each case, other than issuances or sales for which an adjustment
is made pursuant to another paragraph of this Section 2, then, and
in each such case, the Number Issuable then in effect shall be
adjusted by multiplying the Number Issuable in effect on the day
immediately prior to the Relevant Date by a fraction, (1) the
numerator of which shall be the sum of the number of shares of
Common Stock, on a fully diluted basis, outstanding on the Relevant
Date, plus the number of additional shares of Common Stock issued
or to be issued (or the maximum number into which such convertible
or exchangeable securities initially may convert or exchange or for
which such options, warrants or other rights initially may be
exercised), and (2) the denominator of which shall be the sum of
the number of shares of Common Stock, on a fully diluted basis,
outstanding on the Relevant Date, plus the number of shares of
Common Stock which the aggregate consideration (plus the aggregate
amount of any additional consideration initially payable upon
conversion or exchange of such convertible or exchangeable
securities or exercise of such options, warrants or other rights)
for the total number of such additional shares of Common Stock so
issued (or into which such convertible or exchangeable securities
may convert or exchange or for which such options, warrants or
other rights may be exercised) would purchase at the Current Market
Price per share of Common Stock on the Relevant Date. Such
adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business
(x) in the case of an issuance to the stockholders of the Company,
as such, on the record date for the determination of stockholders
entitled to receive such shares, securities, options, warrants or
other rights and (y) in all other cases, on the date (the "issue
date") of such issuance; provided, that if any convertible or
exchangeable securities, options, warrants, or other rights (or any
portions thereof) which shall have given rise to an adjustment
pursuant to this Section 2(a)(ii) shall have expired or terminated
without the exercise thereof and/or if by
4
<PAGE>
reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase
or increases, with the passage of time or otherwise, in the Number
Issuable, then the Number Issuable hereunder shall be readjusted
(but to no greater extent than originally adjusted) on the basis of
(A) eliminating from the computation any additional shares of
Common Stock corresponding to such convertible or exchangeable
securities, options, warrants or other rights as shall have expired
or terminated, (B) treating the additional shares of Common Stock,
if any, actually issued or issuable pursuant to the previous
exercise of such convertible and exchangeable securities, options,
warrants, or other rights as having been issued for the
consideration actually received and receivable therefor and (C)
treating any of such convertible or exchangeable securities,
options, warrants or other rights which remain outstanding as being
subject to exercise or conversion. Solely for purposes of this
clause (ii), (I) Common Stock shall include the Common Stock, par
value $0.01 per share, of the Company and each other class of
capital stock of the Company that does not have a preference over
any other class of capital stock of the Company as to dividends or
upon liquidation, dissolution or winding up of the Company and, in
each case, shall include any other class of capital stock of the
Company into which such stock is reclassified or reconstituted and
(II) if the provisions of any securities convertible into or
exchangeable for shares of Common Stock or options, warrants or
other rights to acquire shares of Common Stock are amended after
the date of issuance so as to reduce the applicable conversion
price, exchange price or exercise price such amendment shall be
deemed to be a new issuance of such securities.
(iii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its
Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the
resulting or surviving corporation and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the
Company or another issuer, securities of the Company or another
issuer or other assets (excluding dividends or other distributions
of shares of Common Stock or other capital stock for which
adjustment in the Number Issuable is made under Section 2(a)(i) or
dividends or other distributions received by or set aside for the
benefit of the holders of Common Stock pursuant to Section 2(c)
below) or rights or warrants to subscribe for or purchase
securities of the Company (excluding those in respect of which
adjustment in the Number Issuable is made pursuant to Section
2(a)(ii)), then, and in each such case, the Number Issuable then in
effect shall be adjusted by multiplying the Number Issuable in
effect immediately prior to the date of such distribution by a
fraction (x) the numerator of which shall be the Current Market
Price per share on the record date referred to below and (y) the
denominator of which shall be such Current Market Price per share
less the then Fair Market Value (as determined in good faith by the
Board of Directors of the Company, a certified resolution with
respect to which shall be mailed to the holder of the Warrants
evidenced hereby) of the portion of the cash,
5
<PAGE>
evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable
to one share of Common Stock (but such denominator shall in no
event be zero). Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a
date immediately following the close of business on the record date
for the determination of stockholders entitled to receive such
distribution.
(iv) In case the Company at any time or from time to time
shall take any action which could have a dilutive effect on the
number of shares of Common Stock that may be issued upon exercise
of the Warrants, other than an action described in any of Section
2(a)(i) through 2(a)(iii), inclusive, or Section 2(b), then, the
Number Issuable shall be adjusted in such manner and at such time
as the Board of Directors of the Company reasonably determines to
be equitable under the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be
mailed to the holder of the Warrants evidenced hereby).
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 2(a) need be made to the Number
Issuable unless such adjustment would require an increase or
decrease of at least one percent (1%) of the Number Issuable then
in effect. Any lesser adjustment shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at
least one percent (1%) of such Number Issuable. Any adjustment to
the Number Issuable carried forward and not theretofore made shall
be made immediately prior to the exercise of any Warrants pursuant
hereto.
(vi) The Company promptly shall deliver to each registered
holder of Warrants at least five (5) Business Days prior to
effecting any transaction which would result in an increase or
decrease in the Number Issuable pursuant to this Section 2(a) a
notice thereof, together with a certificate, signed by the Chief
Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Clerk or an Assistant Clerk of the
Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated
and specifying the increased or decreased Number Issuable then in
effect following such adjustment.
(vii) Notwithstanding anything contrary contained in this
Section 2(a), the Company shall be entitled to make such upward
adjustments in the Number Issuable, in addition to those otherwise
required by this Section 2(a), as the Board of Directors of the
Company in their discretion shall determine to be advisable in
order that any stock dividend, subdivision or combination of
shares, distribution of rights or warrants to purchase stock or
securities, or distribution of securities convertible into or
exchangeable for Common Stock, hereafter made by
6
<PAGE>
the Company to its shareholders shall not be taxable; provided,
however, that any such adjustment shall be made, as nearly as
practicable, in a manner which treats all holders of Warrants with
similar protections on an equal basis.
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another Person (other
than a consolidation or merger in which the Company is the resulting or
surviving person and which does not result in any reclassification or change
of outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any
of the foregoing, a "Transaction"), the Company, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each
holder of the Warrants evidenced hereby, at least five (5) Business Days
prior to effecting any of the foregoing Transactions, a certificate that the
holder of each such Warrant then outstanding shall have the right thereafter
to exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock
into which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 2 and shall contain other terms identical to the terms hereof.
If, in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes stock,
securities, other property or cash of a Person other than the successor or
purchasing Persons and other than the Company, in connection with such
Transaction, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations
of such successor or purchasing Person and acknowledge its obligations to
issue such stock, securities, other property or cash to holders of the
Warrants upon exercise thereof as provided above. The provisions of this
Section 2(b) similarly shall apply to successive Transactions.
(c) Special Distributions. If the holder so elects by sending a
Special Notice to the Company, in the event that the Company shall declare a
dividend or make any other distribution (including, without limitation, in
cash, in capital stock (which shall include, without limitation, any options,
warrants or other rights to acquire capital stock) of the Company, whether or
not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement) in other securities, property or assets, to holders of Common
Stock (a "Special Distribution"), then the Board of Directors shall set aside
the amount of such dividend or distribution that any holder of Warrants would
have been entitled to receive had it exercised such Warrants prior to the
record date for such dividend or distribution. Upon the exercise of a
Warrant evidenced hereby, the holder shall be entitled to receive, such
dividend or distribution that such holder would have received had such
Warrant been exercised immediately prior to the record date for such dividend
or
7
<PAGE>
distribution. Prior to any Special Distribution described in this Section
2(c), the Company shall as provided in Section 4 hereof notify each holder
(not less than five (5) Business Days prior to the occurrence of each Special
Distribution) of its intent to make such Special Distribution and the holder,
if it elects to have such distribution set aside the amount thereof rather
than have an adjustment to the Number Issuable as provided in Section
2(a)(i), 2(a)(ii) or 2(a)(iii), shall notify the Company by sending a Special
Notice prior to the date of any such Special Distribution.
Section 3. Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from
time to time the holders of the Warrants evidenced hereby are entitled to
notice pursuant to the terms of Section 2, such notice shall provide (a) the
date on which a record is to be taken for the purpose of such dividend,
distribution, subdivision, combination or issuance of shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision, combination, shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options, warrants
or other rights, are to be determined, (b) the issue date (as defined in Section
2(a)(ii) hereof) or (c) the date on which such Transaction, dissolution,
liquidation or winding up is expected to become effective.
Section 5. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants,
such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the exercise of all outstanding
Warrants, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common stock to permit such reservation or
to permit the exercise of all outstanding Warrants. The Company shall
prepare and file, and cooperate with the holder of this Warrant so that it
may prepare and file, in each case within five Business Days of a request by
such holder, notification and report forms in compliance with the HSR Act,
and shall otherwise fully comply with the requirements of the HSR Act, to the
extent required in connection with the exercise of the Warrant. The Company
shall bear all of its own expenses and all of its own out of pocket expenses
(including reasonable attorneys' fees, charges and expenses) and filing fees
of such holder in connection with any such preparation and filing.
Section 6. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
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<PAGE>
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered holder hereof, at the
principal executive office of the Company in the United States of America;
provided that (a) a registration statement with respect to the Warrants
proposed for transfer, and with respect to the shares of Common Stock
underlying such Warrants, shall be effective under the Securities Act,
(b) the Warrants are transferred pursuant to Rule 144 under the Securities
Act or (c) the Company shall have received an opinion of counsel reasonably
satisfactory to it that no violation of such act or similar state acts will
be involved in such transfer. Thereupon, the Company shall issue in the name
or names specified by the registered holder hereof and, in the event of a
partial transfer, in the name of the registered holder hereof, a new Warrant
Certificate or Certificates evidencing the right to purchase such number of
shares of Common Stock as shall be equal to the number of shares of Common
Stock then purchasable hereunder.
Section 8. Denominations. The Company covenants that it will, at
its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant Certificate
or Certificates in denominations specified by such holder for an aggregate
number of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case
of an institutional investor, its own unsecured indemnity agreement shall be
deemed to be reasonably satisfactory), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new Warrant
Certificate of like tenor for a number of Warrants equal to the number of
Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their
respective successors and permitted assigns. This Warrant Certificate shall
be for the sole benefit of the registered holder thereof. Nothing in this
Warrant Certificate shall be construed to give the registered holder hereof
any rights as a holder of shares of Common Stock until such time, if any, as
the Warrants evidenced by this Warrant Certificate are exercised in
accordance with the provisions hereof.
9
<PAGE>
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in the
Preamble hereof.
"Company" shall have the meaning assigned to such term in the
Preamble hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) if the Common Stock is then listed
on a national securities exchange, designated as a Nasdaq Stock Market
security or quoted in the over-the-counter-market by a member firm of the
NYSE, the average daily Market Price of the Common Stock for those days
during the period of 15 days, ending on such date, on which the national
securities exchanges were open for trading, and (b) if the Common Stock is
not then so listed, designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible Subordinated
Debentures Due March 24, 2000 and the 7% Convertible Debentures Due October
29, 2000.
"Exercise Price" shall have the meaning assigned to such term in
the Preamble hereof.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion
to sell, in an arm's-length transaction.
"HSR Act" shall mean the Hart Scott Rodino Anti-Trust Improvements
Act of 1976, and the rules and regulations of the Federal Trade Commission
promulgated thereunder.
"Investor" shall have the meaning assigned to such term in the
Preamble hereof.
"Issue Date" shall mean December 29, 1997.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on the American Stock
Exchange or any other national securities exchange or is designated as a
Nasdaq Stock Market
10
<PAGE>
security, the last trading price of the Common Stock on such date as reported
in the Wall Street Journal; or (b) if the Common Stock is not so listed or
designated, the average of the reported closing bid and ask prices of the
Common Stock in the over-the-counter-market, on such date as reported by any
member firm of the NYSE selected by the Company; or (c) if none of (a) or (b)
is applicable, the Fair Market Value per share determined in good faith by
the Board of Directors of the Company which shall be deemed to be Fair Market
Value unless holders of at least 50% of Common Stock issued or issuable upon
exercise of the Warrants request that the Company obtain an opinion of a
nationally recognized investment banking firm chosen by the Company (who
shall bear the expense) and reasonably acceptable to such requesting holders
of the Warrants, in which event the Fair Market Value shall be as determined
by such investment banking firm.
"Number Issuable" shall have the meaning given it in the Preamble
hereof.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Relevant Date" shall have the meaning assigned to such term in
Section 2(a)(ii) hereof.
"Securities Act" shall mean the Securities Act of 1933.
"Special Distribution" shall have the meaning assigned to such term
in Section 2(c) hereof.
"Special Notice" shall mean the notice sent by a holder to the
Company indicating its preference to have any Special Distribution set aside
for its benefit upon exercise of the Warrant.
"Transaction" shall have the meaning assigned to such term in
Section 2(b) hereof.
"Warrants" shall have the meaning assigned to such term in the
Preamble hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 13. Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing
and shall be sufficient if
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<PAGE>
delivered personally or sent by telecopy (with confirmation of receipt) or by
registered or certified mail, postage prepaid, return receipt requested, (a)
if to the holder of a Warrant, at such holder's last known address or
telecopy number appearing on the books of the Company; and (b) if to the
Company, at its principal executive office, or the telecopy number of such
office, in the United States, or such other address or telecopy number as the
party to whom notice is to be given may have furnished to the other party.
Each such notice, request or communication shall be effective when received
or, if given by mail, when delivered at the address specified in this Section
or on the fifth Business Day following the date on which such communication
is posted, whichever occurs first.
Section 14. Share Legend. Each certificate representing shares of
Common Stock or any other securities issued upon exercise of this Warrant
shall bear the following legend unless such shares or other securities have
been registered under the Securities Act and any applicable state securities
laws:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR
APPLICABLE STATE SECURITIES LAWS AND INSTEAD ARE BEING
ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT SHALL BE
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, (B) SUCH SHARES
ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (C) MEDIA LOGIC, INC. SHALL HAVE RECEIVED
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT NO
VIOLATION OF SUCH ACT OR SIMILAR STATE ACTS WILL BE INVOLVED
IN SUCH TRANSFER."
Section 15. No Rights or Liabilities as a Stockholder. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Common Stock
by the exercise of this Warrant, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
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<PAGE>
In Witness Whereof, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
Media Logic, Inc.
By: /s/ William E. Davis
--------------------------------------------
Name: William E. Davis Jr.
Title: Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant Certificate to
____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Date:_________________________
_______________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase ____ shares of Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
(Please insert social security, tax identification or other identifying number)
______________________________
______________________________
______________________________
(Please print name and address)
Date:
______________________________
___________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant Certificate)
<PAGE>
Exhibit 99.7
MEDIA LOGIC, INC.
AND
ADAR EQUITIES, LLC
WARRANT AGREEMENT
Dated as of October 29, 1997
<PAGE>
WARRANT AGREEMENT (the "Agreement"), dated as of October 29, 1997
by and between MEDIA LOGIC, INC. (the "Company"), and ADAR EQUITIES, LLC (the
"Placement Agent").
The Company proposes to issue to the Placement Agent the warrants as
hereinafter described (the "Warrants") to purchase 500,000 shares of common
stock of the Company, $.01 per value per share ("Common Stock") (such number
of shares being hereinafter referred to as the "Shares"), each Warrant
entitling the holder ("Holder") thereof to purchase one share of Common
Stock. All capitalized terms used herein and not otherwise defined herein
shall have the same meanings as assigned thereto in that certain Placement
Agency Agreement, dated as of October 29, 1997, by and between the Company
and the Placement Agent.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements set forth herein and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Issuance of Warrants: Form of Warrant. On January 14, 1998 (the
"Issue Date") the Company shall issue, sell and deliver the Warrants to the
Placement Agent or its bona fide officers or principals. The form of the
Warrant and the form of Election to Purchase to be attached thereto shall be
substantially as set forth on Exhibit A attached hereto. The Warrants shall
be executed on behalf of the Company by the manual or facsimile signature of
the present or any future Chairman or Co-Chairman, President or any Vice
President of the Company, under its corporate seal affixed or in facsimile,
and attested by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company.
2. Registration. The Warrants shall be numbered and shall be
registered in a Warrant register (the "Warrant Register"). The Company shall
be entitled to treat the registered holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claims to or interest in such Warrant on
the part of any other person, and shall not be liable for any registration or
transfer of Warrants which are registered or are to be registered in the name
of a fiduciary or the nominee of a fiduciary unless made with the actual
knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with such knowledge of such
facts that its participation therein amounts to bad faith. The Warrants
shall be registered initially in the name of the Placement Agent in such
denominations as the Placement Agency may request in writing to the Company;
provided, however, that the Placement Agent may designate that all or a
portion of the Warrants be issued in varying amounts directly to its bona
fide officers or principals and to itself. Such designation will only be
made by the Placement Agent if it determines that such issuances would not
violate the interpretation of the Board of Governors of the National
Association of Securities Dealers, Inc. (the "NASD"), relating to the review
of corporate financing arrangements.
3. Transfer of Warrants. The Holder of a Warrant Certificate, by its
acceptance thereof, acknowledges that the Warrants are "restricted
securities" which have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and
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<PAGE>
represents that the Warrants are being acquired as an investment and not with
a view to the distribution thereof and will not transfer such Warrants,
except to bona fide officers, directors, shareholders, principals, employees
or registered representatives of the Holder upon written request to the
Company delivered in accordance with Section 10 hereof and upon delivery of
the Warrant Certificate duly endorsed by the Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a
new Warrant or Warrants to the persons entitled thereto. The Warrants may be
exchanged at the option of the Holder thereof for other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock upon surrender to the
Company or its duly authorized agent. The Company may require payment of a
sum sufficient to cover all taxes and other governmental charges that may be
imposed in connection with any voluntary transfer, exchange or other
disposition of the Warrants. Notwithstanding the foregoing, the Company
shall have no obligation to cause Warrants to be transferred on its books to
any person, if such transfer would violate the Securities Act or applicable
state securities laws.
4. Exercise of Warrants.
Term of Warrants: Exercise of Warrants. Each Warrant entitles the
registered owner thereof to purchase one Share at a purchase price equal
to $2.00 per Share ( the "Exercise Price") and shall be exercisable for
sixty (60) months commencing on January 26, 1998. Subject to the
provisions of this Agreement, each Holder shall have the right, which
may be exercised as set forth in such Warrants, to purchase from the
Company (and the Company shall issue and sell to such Holder) the number
of fully paid and nonassessable shares (rounded up to the nearest full
share) specified in such Warrants, upon surrender to the Company, or its
duly authorized agent, of such Warrants, with the form of Election to
Purchase attached thereto duly completed and signed, with signatures
guaranteed by a member firm of a national securities exchange, a
commercial bank (not a savings bank or savings and loan association) or
trust company located in the United States or a member of the NASD and
upon payment to the Company of the Exercise Price for the number of
Shares in respect of which such Warrants are then exercised. Payment of
such Exercise Price may be made in cash or by certified check or
official blank check payable to the order of the Company. No adjustment
shall be made for any dividends on any Shares issuable upon exercise of
a Warrant. Upon each surrender of Warrants and payment of the Exercise
Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch (and in no event more than three business
days from the date of each such surrender and payment) to or upon the
written order of the Holder of such Warrants and in such name or names
as such Holder may designate, a certificate or certificates for the
number of full Shares so purchased upon the exercise of such Warrants.
Such certificate or certificates shall be deemed to have been issued and
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<PAGE>
any person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender
of Warrants and payment of the Exercise Price as aforesaid; provided,
however, that if, at the date of surrender of such Warrants and payment
of such Exercise Price, the transfer books for the Common Stock or other
class of securities issuable upon the exercise of such Warrants shall be
closed, the certificates for the Shares shall be issuable as of the date
on which such books shall next be opened and until such date the Company
shall be under no duty to deliver any certificate for such Shares;
provided, further, however, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a
period longer than twenty (20) days. The rights of purchase represented
by the Warrants shall be exercisable, at the election of the Holder(s)
thereof, either in full or from time to time in part and, in the event
that any Warrant is exercised in respect of less than all of the Shares
issuable upon such exercise, a new Warrant or Warrants will be issued
for the remaining number of Shares specified in the Warrant so
surrendered.
5. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue or delivery of any certificates for Shares in a name other than
that of the Holder of Warrants in respect of which such Shares are issued.
6. Mutilated or Missing Warrants. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company shall issue and deliver
in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right
or interest, but only upon receipt of evidence reasonably satisfactory to the
Company of such mutilation, loss, theft or destruction of such Warrant and
indemnity, if requested, reasonably satisfactory to the Company. An
applicant for such substitute Warrants shall also comply with such other
reasonable regulations to pay such other reasonable charges and expenses as
the Company may prescribe.
7. Reservation of Shares, etc. The Company shall at all times keep
reserved, out of the authorized and unissued Common Stock of the Company, a
number of shares of Common Stock sufficient to provide for the exercise of
the rights of purchase represented by the outstanding Warrants. American
Stock Transfer & Trust Co., transfer agent for the Common Stock (the
"Transfer Agent"), and every subsequent transfer agent, if any, for the
Company's securities issuable upon the exercise of the Warrants will be
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's
securities issuable upon the exercise of the Warrants. The Company will
supply the Transfer Agent or any subsequent transfer agent with duly executed
certificates for such purpose. All Warrants surrendered in the exercise of
the rights thereby evidenced shall be canceled, and such canceled Warrants
shall constitute sufficient evidence of the number of Shares that have been
issued upon the exercise of such Warrants.
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<PAGE>
8. Registration Rights.
(a) Demand Registration Rights. The Company covenants and agrees
with the Placement Agent and any other or subsequent Holders of the
Registrable Securities (as defined in paragraph (f) of this Section 8) that,
subject to the availability of audited financial statements which would
comply with Regulation S-X under the Securities Act, upon written request of
the then Holder(s) of at least a majority of the Warrants or the Registrable
Securities, or both, which were originally issued to the Placement Agent or
its designees, made at any time within the period commencing on the Issue
Date and ending five years after the Issue Date, the Company will file as
promptly as practicable and, in any event, within 60 days after receipt of
such written request, at its expense (other than the fees of counsel and
sales commissions for such Holders), no more than once, a post-effective
amendment (the "Amendment") to a registration statement, or a new
registration statement which shall be on Form S-3 if the Company is then
eligible to use Form S-3, or a Regulation A Offering Statement (an "Offering
Statement") under the Securities Act, registering or qualifying the
Registrable Securities for sale. Within fifteen (15) days after receiving
any such notice, the Company shall not be obligated to any such other Holder
unless such other holder shall accept such offer by notice in writing to the
Company within ten (10) days thereafter. The Company will use its best
efforts, through its officers, directors, auditors and counsel in all matters
necessary or advisable, to file and cause to become effective such Amendment,
registration statement or Offering Statement as promptly as practicable and
for a period of nine months thereafter to reflect in the Amendment,
registration statement or Offering Statement financial statements which are
prepared in accordance with Section 10(a)(3) of the Securities Act and any
facts or events arising that, individually, or in the aggregate, represent a
fundamental and/or material change in the information set forth in the
Amendment, registration statement or Offering Statement to enable any Holders
of the Warrants to either sell such Warrants or to exercise such Warrants and
sell Shares, or to enable any holders of Shares to sell such Shares, during
said nine-month period.
(b) Piggyback Registration Rights. The Company covenants and
agrees with the Placement Agent and any other Holders or subsequent Holders
of the Registrable Securities that if, at any time within the period
commencing on the Issue Date and ending five years after the Issue Date, it
proposes to file a registration statement or Offering Statement with respect
to any class of equity or equity-related security under the Securities Act in
a primary registration on behalf of the Company and/or in a secondary
registration on behalf of holders of such securities and the registration
form or Offering Statement to be used may be used for registration of the
Registrable Securities other than on Form S-8 or Form S-4 or their then
equivalents, the Company will give prompt written notice (which, in the case
of a registration statement or notification pursuant to the exercise of
demand registration rights other than those provided in Section 8(a) of this
Agreement, shall be within ten (10) business days after the Company's receipt
of notice of such exercise and, in any event, shall be at least 30 days prior
to such filing) to the Holders of Registrable Securities (regardless of
whether some of the Holders shall have therefore availed themselves of the
right provided in Section 8(a) of this Agreement) at the addresses appearing
on the records of the Company of its intention to file a registration
statement or Offering Statement and will offer to include in such
registration statement or
5
<PAGE>
Offering Statement all but not less than 20% of the Registrable Securities
and limited, in the case of a Regulation A offering, to the amount of the
available exemption, subject to paragraphs (i) and (ii) of this paragraph
(b), such number of Registrable Securities with respect to which the Company
has received written requests for inclusion therein within ten (10) days
after the giving of notice by the Company. All registrations requested
pursuant to this paragraph (b) are referred to herein as "Piggyback
Registrations". All Piggyback Registrations pursuant to this paragraph (b)
will be made solely at the Company's expense.
(i) Priority on Primary Registrations. If a Piggyback
Registration includes an underwritten primary registration on behalf of
such Company and the underwriter(s) for such offering determines in good
faith and advises the Company in writing that in its/their opinion the
number of Registrable Securities requested to be included in such
registration exceeds the number that can be sold in such offering
without materially adversely affecting the distribution of such
securities that the Company, the Company will include in such
registration (A) first, the securities that the Company proposes to sell
and (B) second, the Registrable Securities requested to be included in
such registration, apportioned pro rata among the Holders of Registrable
Securities, provided, however, the Company will use its best efforts to
include not less than 20% of the Registrable Securities, and (C) third,
securities of the holders of other securities requesting registration.
(ii) Priority on Secondary Registrations. If a Piggyback
Registration consists only of an underwritten secondary registration on
behalf of holders of securities of the Company (other than pursuant to
Section 8(a)), and the underwriter(s) for such offering advises the
Company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the
number which can be sold in such offering without materially adversely
affecting the distribution of such securities by the Company, the
Company will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such
registration and the Registrable Securities requested to be included in
such registration, pro rata among all such holders on the basis of the
number of shares requested to be included by each such holder, provided,
however, the Company will use its best efforts to include not less than
20% of the Registrable Securities, and (B) second, other securities
requested to be included in such registration.
Notwithstanding the foregoing, if any such underwriter shall determine in
good faith and advise the Company in writing that the distribution of the
Registrable Securities requested to be included in the registration concurrently
with the securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company, then the Holders of
such Registrable Securities shall delay their offering and sale for such period
ending on the earliest of (1) 60 days following the effective date of the
Company's registration statement, (2) the day upon which the underwriting
syndicate, if any, for such offering shall have been disbanded or, (3) such date
as the Company, managing underwriter and
6
<PAGE>
Holders of Registrable Securities shall otherwise agree. In the event of
such delay, the Company shall file such supplements, post-effective
amendments and take any such other steps as may be necessary to permit such
Holders to make their proposed offering and sale for a period of 120 days
immediately following the end of such period of delay. If any party
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company, the underwriter, and the
Placement Agent. Notwithstanding the foregoing, the Company shall not be
required to file a registration statement to include Shares pursuant to
Section 8(a) or 8(b) if independent counsel, satisfactory to counsel for the
Company and counsel for the Placement Agent, renders an opinion to the
Company that the Shares proposed to be disposed of may be transferred
pursuant to the provisions of Rule 144 under the Securities Act or otherwise
without registration under the Securities Act.
(c) Other Registration Rights. In addition to the rights above
provided, the Company will cooperate with the then Holders of the Registrable
Securities in preparing and signing any registration statement or Offering
Statement, in addition to the registration statements and Offering Statements
discussed above, required in order to sell or transfer the Registrable
Securities and will supply all information required therefor, but such
additional registration statement or Offering Statement, shall be at the then
Holders' cost and expense; provided, however, that if the Company elects to
register or qualify additional shares of Common Stock, the cost and expense
of such registration statement or Offering Statement will be pro rated
between the Company and the Holders of the Registrable Securities according
to the aggregate sales price of the securities being issued. Notwithstanding
the foregoing, the Company will not be required to file a registration
statement or Offering Statement pursuant to this paragraph (c), (i) at a time
when the audited financial statements required to be included therein are not
available, which time shall be limited to the period commencing 45 days after
the end of the Company's last fiscal year and ending 90 days after the end of
such fiscal year, (ii) within 180 days after completion of a public offering
by the Company of any of its Common Stock or equity-related securities or
(iii) if it would adversely impact the Company in its capital raising plans
or otherwise (in which latter case filing may be delayed no longer than 180
days.)
(d) Action to be Taken by the Company. In connection with the
registration of Registrable Securities in accordance with paragraphs (a), (b)
or (c) of this Section 8, the Company agrees to:
(i) Bear the expenses of any registration or qualification under
paragraphs (a) or (b) of this Section 8, including, but not limited to,
reasonable legal accounting and printing fees, provided, however, that
in no event shall the Company be obligated to pay (A) any fees and
disbursements of special counsel for Holders of Registrable Securities,
(B) any underwriters' discount or commission in respect of such
Registrable Securities, (C) any stock transfer taxes attributable to the
sale of the Registrable Securities, or (D) upon the exercise of any
demand registration right provided for in paragraph (a) of this Section
8, the cost of any liability or similar insurance required by an
underwriter, to the extent that such costs are attributable solely to
the offering of such Registrable
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Securities, payment of which shall, in each case, be the sole
responsibility of the Holders of the Registrable Securities; and
(ii) Use its best efforts to register or qualify the Registrable
Securities for offer or sale under state securities or Blue Sky laws of
such jurisdictions in which the Placement Agent or such Holders shall
reasonably request, provided, however, that no qualification shall be
required in any jurisdiction where, as a result thereof, the Company would
be subject to service of process or to taxation as a foreign corporation
doing business in such jurisdiction to which it is not the subject, and to
do any and all other acts and things which may be necessary to enable the
Holders to consummate the proposed sale, transfer or other disposition of
such securities in any jurisdiction.
(e) Action to be Taken by the Holders. In connection with the
registration of Registrable Securities in accordance with paragraphs (a), (b)
or (c) of this Section 8, the Company's obligation shall be conditioned as to
each such public offering upon a timely receipt by the Company in writing of:
(i) Information as to the terms of such public offering furnished
by or on behalf of each Holder intending to make a public offering of
his, her or its Registrable Securities; and
(ii) Such other information as the Company may reasonably require from
such Holders, or any underwriter for any of them, for inclusion in such
registration statement or Notification on Form 1-A.
(f) For purposes of this Section 8, (i) the term "Holder" shall
include holders of Shares, and (ii) the term "Registrable Securities" shall
mean the Shares, if issued.
(g) Without limiting or qualifying any section or provision of
this Warrant Agreement, or any Holder's rights hereunder, the Company hereby
agrees to file a registration statement registering for resale all of the
Shares as soon as practicable after the Issue Date, and further agrees that
such registration will occur without further notice on the part of the
Company and without further action on the part of the original Holder of the
Warrants.
9. Notices to Holders.
(a) Nothing contained in this Agreement or in any of the Warrants
shall be construed as conferring upon the Holders thereof the right to vote
or to receive dividends or to consent or to receive notice as shareholders in
respect of the meetings of shareholders or the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that in the event that a meeting of shareholders
shall be called to consider and take action on a proposal for the voluntary
dissolution of the Company, other than in connection with a consolidation,
merger or sale of all, or substantially all, of its property, assets,
business and good will as an entirety, then and in that event the
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Company shall cause a notice thereof to be sent by first-class mail, postage
prepaid, at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books in relation to such meeting, to
each registered Holder of Warrants at such Holder's address appearing on the
Warrant Register; but failure to mail or to receive such notice or any defect
therein or in the mailing thereof shall not affect the validity of any action
taken in connection with such voluntary dissolution.
(b) In the event the Company intends to make any distribution on
its Common Stock (or other securities which may be issuable in lieu thereof
upon the exercise of Warrants), including, without limitation, any such
distribution to be made in connection with a consolidation or merger in which
the Company is the continuing corporation, or to issue subscription rights or
warrants to holders of its Common Stock, the Company shall cause a notice of
its intention to make such distribution to be sent by first-class mail,
postage prepaid, at least twenty (20) days prior to the date fixed as a
record date or the date of closing the transfer books in relation to such
distribution, to each registered Holder of Warrants at such Holder's address
appearing on the Warrant Register, but failure to mail or to receive such
notice or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such distribution.
10. Notices. Any notice pursuant to this Agreement to be given or made
by this Holder of any Warrant and/or the holder of any Share to or on the
Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed as follows or to such other address as the Company
may designate by notice given in accordance with this Section 10, to the
Holders of Warrants and/or the holders of Shares:
MEDIA LOGIC, INC.
310 South Street
Plainville, MA 02762
Attention: Chief Financial Officer
Notices or demands authorized by this Agreement to be given or made by
the Company to or on the Holder of any Warrant and/or the holder of any
Shares shall be sufficiently given or made (except as otherwise provided in
this Agreement) if sent by first-class mail, postage prepaid, addressed to
such Holder or such holder of Shares at the address of such Holder or such
holder of Shares as shown on the Warrant Register or the books of the
Company, as the case may be.
11. Governing Law. This Agreement and each Warrant issued hereunder
shall be governed by and construed in accordance with the substantive laws of
the State of New York. The Company hereby agrees to accept service of
process by notice given to it pursuant to the provisions of Section 10.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
MEDIA LOGIC, INC.
By: /s/ William E. Davis
------------------------------------
Name: William E. Davis, Jr.
Title: Chief Executive Officer
ADAR EQUITIES, LLC
By: /s/ Ari S. Parnes
------------------------------------
Name: Ari S. Parnes
Title: Managing Director
10
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No. 1 EXHIBIT A
500,000 Warrants
MEDIA LOGIC, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received Adar Equities, LLC, or registered
assigns, is the owner of the number of Warrants set forth above, each of
which entitles the owner thereof to purchase one fully paid and nonassessable
share of common stock, $.01 par value (the "Common Stock"), of MEDIA LOGIC,
INC., a Massachusetts corporation (the "Company"), at the purchase price
equal to the Exercise Price, as defined in the Warrant Agreement, dated as of
October 29, 1997 (the "Warrant Agreement"), between the Company and First
Granite Securities, Inc., upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number
of Warrants evidenced by this Warrant Certificate (and the number of shares
which may be purchased upon exercise thereof, rounded up to the nearest full
share) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of the date of original issuance of the
Warrants, based on the shares of Common Stock of the Company as constituted
as such date.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, duties and immunities
hereunder of the Company and the holders of the Warrant Certificates. Copies
of the Warrant Agreement are on file at the principal officer of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number
of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered entitled such holder to
purchase. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender thereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants not
exercised.
No holder of this Warrant Certificate shall be entitled to vote, receive
dividends, subscription rights or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue of stock, reclassification of
stock, change of par value or change of stock to no par value,
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<PAGE>
consolidation, merger, conveyance, or otherwise) or, except as provided in
the Warrant Agreement, to receive notice of meetings, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised and
the Shares shall have become deliverable as provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Stock or other class
of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates
for shares purchasable upon such exercise until the date of the reopening of
said transfer books, provided, however, that such books shall not be closed
for longer than a 20-day period.
[signature page follows]
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IN WITNESS WHEREOF, THE COMPANY has caused the signature (or facsimile
signature) of its President and its Secretary or Assistant Secretary to be
printed hereon and its corporate seal (or facsimile) to be printed hereon.
Dated: January 14, 1998
MEDIA LOGIC, INC.
By:_______________________________
Name: William E. Davis, Jr.
Title: Chief Executive Officer
Attest:
By:_________________________
Name:
Title:
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FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the Warrant Certificates.)
FOR VALUE RECEIVED-------------------------------- hereby sells,
assigns and transfers unto this Warrant Certificate, together with all right,
title and interest therein, and does hereby irrevocable constitute and
appoint --------------------------, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:___________________________
Signature__________________________
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular,
without alteration, or enlargement or any change whatsoever.
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FORM OF
ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate).
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocable elects to exercise Warrants
represented by this Warrant Certificate to purchase------------- shares of
Common Stock issuable upon the exercise of such Warrants and requests that
certificates for such shares be issued in the name of:
(Please insert social security, tax identification or other
identifying number)
--------------------------------
--------------------------------
--------------------------------
(Please print name and address)
Date:--------------------------------
------------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
Signature Guaranteed:
15
