<PAGE>
As filed with the Securities and Exchange Commission on June 2, 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)
Gregory Scorziello
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. [ ]
<PAGE>
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
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of each class offering aggregate Amount of
of securities to be Amount to be price per offering registration
registered registered unit (1) price (1) fee
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Common Stock, par 4,097,790 $1.16 $4,753,437 $1,410
value $.01 per share
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
and, in accordance therewith, pursuant to Rule 457(c) includes 4,097,790
shares based upon the average of the high and low sales prices of the
Registrant's Common Stock on the American Stock Exchange on May 28, 1998
which amount was $1.16.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion Dated June 2, 1998
PROSPECTUS
MEDIA LOGIC, INC.
4,097,790 Shares of Common Stock
(Par Value $.01 Per Share)
The 4,097,790 shares of Common Stock of Media Logic, Inc., a Massachusetts
corporation (the "Company"), offered hereby are being sold by the selling
stockholders identified herein (the "Selling Stockholders"). Such offers and
sales may be made on the American Stock Exchange, or otherwise, at prices and on
terms then prevailing, or at prices related to the then-current market price, or
in negotiated transactions, or by underwriters pursuant to an underwriting
agreement in customary form, or in a combination of any such methods of sale.
The Selling Stockholders may also sell such shares in accordance with Rule 144
under the Securities Act of 1933, as amended (the "1933 Act"). The Selling
Stockholders are identified and certain information with respect to the Selling
Stockholders is provided under the caption "Selling Stockholders" herein, to
which reference is made. The expenses of the registration of the securities
offered hereby, including fees of counsel for the Company, will be paid by the
Company. The following expenses will be borne by the Selling Stockholders:
underwriting discounts and selling commissions, if any, and the fees of legal
counsel, if any, for the Selling Stockholders 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 June __, 1998, the closing
sale price of the Common Stock, as reported by the American Stock Exchange, was
$________ 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.
<PAGE>
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 John T. Loughran, Controller.
2
<PAGE>
TABLE OF CONTENTS
PAGE
<TABLE>
<S> <C>
RISK FACTORS.......................................................................... 4
THE COMPANY........................................................................... 8
SELLING STOCKHOLDERS.................................................................. 9
PLAN OF DISTRIBUTION.................................................................. 11
LEGALITY OF COMMON STOCK.............................................................. 11
EXPERTS............................................................................... 11
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................................... 11
</TABLE>
3
<PAGE>
RISK FACTORS
An investment in the shares being offered by this Prospectus involves a high
degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
carefully consider the following risk factors before purchasing the shares
offered hereby. This Prospectus contains and incorporates by reference
forward-looking statements within the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 which are based on management's current
expectations. To the extent that any of the statements contained herein relating
to the Company's products and its operations are forward looking, such
statements are based on management's current expectations and involve a number
of uncertainties and risks.
Reference is also made in particular to the discussion set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K and amendment No. 1 to
the Form 10K 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, September 30, 1997 and December 31, 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. In fiscal years 1996, 1997 and 1998, the Company still
derived most of its revenue from sales of its certifiers, evaluators and
duplicators for floppy disks and tape. Beginning with fiscal year 1999 the
Company will shift 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 still 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
<PAGE>
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, 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 and 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. In addition,
in May 1998, the Company completed a private placement of the Common Stock
(the "May 1998 Private Placement") which resulted in $1,850,000 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. The Company expects that existing cash will sustain its
operations at current spending levels through September, 1998. 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. In addition, the auditors' report with respect to the Company's
consolidated financial statements for the year ended March 31, 1997 included
an explanatory paragraph regarding the uncertainty of the Company's ability
to continue as a going concern. There can be no assurance that the auditors'
report with respect to the Company's consolidated financial statements for
the year ended March 31, 1998 will not include a similar explanatory
paragraph. If the Company is unable to increase revenues significantly and/or
secure additional financing, the Company could be forced to curtail or
discontinue its operations.
Recent Losses. For the nine months ended December 31, 1997, the Company incurred
a loss of $3,048,747 on revenues of $1,218,375. 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, Gregory Scorziello. Competition for highly
skilled employees with technical, management and other specialized training is
intense in the computer industry. The Company has recently experienced turnover
in certain of its senior management positions. While the Company has filled all
open positions, there is no assurance that this management turnover will not
continue. The 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 51.6% 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 8,340,077 shares of Common Stock are currently
freely tradable on the open market. In addition, there were a total of 539,459
options to purchase Common Stock outstanding as of
5
<PAGE>
May 27, 1998 pursuant to the Company's stock option plans, and 435,436 of such
options were vested and can be exercised at any time prior to their respective
expiration dates. Lee H. Elizer, the 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 was convertible at any
time into shares of the Company's Common Stock based on a predetermined formula.
As of January 28, 1998, all of the holders of the March Debentures had converted
their Debentures into an aggregate of 3,039,567 shares of Common Stock, all of
which shares may be sold pursuant to the Prospectus contained in the June 1997
Registration Statement as amended by the Prospectus Supplements thereto dated
December 31, 1997 and February 20, 1998.
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 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 represent 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. As of May 27,
1998, $180,000 aggregate principal amount of October Debentures and the accrued
interest thereon have been converted into 203,438 shares of Common Stock. If the
October Debentures become convertible into more than 891,668 shares, the Company
will be obligated to register additional shares of Common Stock.
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.
In March 1998, the Company registered for resale, on a registration statement on
Form S-3 (the "March 1998 Registration Statement"), 4,700,000 shares of Common
Stock. 3,950,000 of those shares were issued by the Company in connection with
the December Private Placement.
1,700,000 of the Shares included in the March 1998 Registration Statement were
issued to Imprimis SB L.P. ("Imprimis") and Wexford Spectrum Investors LLC
("Wexford") in the December Private Placement and 2,000,000 of the Shares
included in the March 1998 Registration Statement 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.
6
<PAGE>
500,000 of the Shares included in the March 1998 Registration Statement 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 included in the March 1998 Registration
Statement 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 included in the March 1998 Registration Statement 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.
All of the shares registered for resale by the holders thereof which are
included in the June 1997 Registration Statement, the January 1998 Registration
Statement and the March 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.
2,048,895 of the Shares offered hereby were issued to the Selling Stockholders
in the May 1998 Private Placement and 2,048,895 of the Shares offered hereby are
issuable upon exercise of warrants (the "May 1998 Warrants") to purchase Common
Stock, which were issued to the Selling Stockholders in connection with the May
1998 Private Placement. 1,011,115 of the May 1998 Warrants are exercisable at an
exercise price of $1.50 per share, 1,011,115 of the May 1998 Warrants are
exercisable at an exercise price of $3.00 per share and 26,666 of the May 1998
Warrants, issued to Michael Salter, are exercisable at an exercise price of
$1.125 per share. The May 1998 Warrants are exercisable at any time prior to
5:00 P.M. on various dates between May 1, 2003 and May [28], 2003.
The Company has agreed to register for resale from time to time by the
purchasers thereof the shares of Common Stock issued in the May 1998 Private
Placement and the shares of Common Stock issuable upon exercise of the May 1998
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 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
<PAGE>
THE COMPANY
Media Logic, Inc. was incorporated in 1982 to develop and manufacture
certification equipment to be used by manufacturers of flexible storage media
such as floppy disks. The Company's principal product line is automated tape
library systems for data storage and retrieval, which was introduced in fiscal
year 1996.
The Company's data storage libraries have been developed by MediaLogic ADL, Inc.
("MediaLogic ADL"), a subsidiary of the Company which was established in 1994 to
develop, market and sell automated data storage libraries. In fiscal year 1996,
MediaLogic ADL introduced automated tape libraries in 4mm and 8mm tape
technologies and, in fiscal year 1988, introduced prototype 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
1,993,339 of the Shares offered hereby were issued to the Selling Stockholders
in the May 1998 Private Placement pursuant to Securities Purchase Agreements
between each of the Selling Stockholders and the Company (the form of which
Securities Purchase Agreement has been filed as Exhibit 99.1 to the registration
statement of which this Prospectus is a part).
1,993,339 of the Shares offered hereby are issuable upon exercise of Warrants
issued to the Selling Stockholders in the May 1998 Private Placement (the form
of which Warrants are filed as Exhibit 99.2 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 May
28, 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>
ADB Leasing Corporation (3) 222,224 1.7% 222,224 0 --%
N.H.B.D. LP (3) 222,224 1.7% 222,224 0 --
Michael G. Salter (4) 1,138,232 8.7% 1,097,778 40,454 *
Gregory Scorziello (5) 155,556 1.2% 55,556 100,000 *
Internacional Perifericos y Memorias, S.A. (6) 1,666,668 12.0% 1,666,668 0 --
Alexander Stewart and Hilda H. Stewart, JTWROS (7) 166,668 1.3% 166,668 0 --
Harvey Klein (8) 166,668 1.3% 166,668 0 --
Dr. Chaim Citronenbaum (9) 83,334 * 83,334 0 --
Sterling Asset Management Group Corp. (9) 83,334 * 83,334 0 --
David H. Wilson (10) 514,792 3.9% 388,892 125,900 --
Robert B. MacDonald Jr. (11) 80,556 * 55,556 25,000 --
Preston Ford Inc. (12) 74,456 * 55,556 18,900 --
Byron Walker (13) 111,112 * 111,112 0 --
</TABLE>
*Less than 1%.
(1) The number of shares of Common Stock issued and outstanding on May 28, 1998
was [13,000,073]. The calculation of percentage ownership for each listed
Selling Stockholder is based upon the number of shares of Common Stock issued
and outstanding at May 28, 1998, plus the shares of Common Stock issuable upon
exercise of currently exercisable warrants held by such Selling Stockholder.
(2) Assuming all shares offered hereby are sold to unaffiliated third parties.
(3) Includes 111,112 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 55,556 at an exercise price of $1.50 per share and
55,556 at an exercise price of $3.00 per share.
(4) Mr. Salter is the Chairman of the Board of Directors of the Company.
Includes 522,223 shares issuable upon exercise of warrants to purchase Common
Stock of the Company, 261,111 at an exercise price of $1.50 per share and
261,112 at an exercise price of $3.00 per share, and 26,666 shares issuable upon
exercise of a warrant to purchase Common Stock of the Company at an exercise
price of $1.125 per share. Includes 20,454 shares which may be purchased upon
the exercise of stock options.
(5) Mr. Scorziello is the President and Chief Executive Officer and a Director
of the Company. Includes 27,778 shares issuable upon exercise of warrants to
purchase Common Stock of the Company, 13,889 at an exercise price of $1.50 per
share and 13,889 at an exercise price of $3.00 per share. Includes 100,000
shares which may be purchased within 60 days of May 27, 1998 upon the exercise
of stock options.
(6) Includes 833,334 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 416,667 at an exercise price of $1.50 per share and
416,667 at an exercise price of $3.00 per share.
9
<PAGE>
(7) Includes 83,334 shares issuable upon exercise of warrants to purchase Common
Stock of the Company, 41,667 at an exercise price of $1.50 per share and 41,667
at an exercise price of $3.00 per share.
(8) Includes 111,112 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 83,334 at an exercise price of $1.50 per share and
27,778 at an exercise price of $3.00 per share.
(9) Includes 27,778 shares issuable upon exercise of warrants to purchase Common
Stock of the Company at an exercise price of $3.00 per share.
(10) Includes 55,556 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 27,778 at an exercise price of $1.50 per share and
27,778 at an exercise price of $3.00 per share. Also includes 46,679 shares and
27,778 warrants owned by Preston Ford, Inc. Mr. Wilson is the President of
Preston Ford, Inc., has sole voting and investment power with respect to such
shares and may be deemed to be the beneficial owner of such shares. Also
includes 111,112 shares and 111,112 warrants owned by ADB Leasing Corporation.
Mr. Wilson is the President of ADB Leasing Corporation, has sole voting and
investment power with respect to such shares and may be deemed to be the
beneficial owner of such shares. See notes 3 and 12.
(11) Includes 27,778 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 13,889 at an exercise price of $1.50 per share and
13,889 at an exercise price of $3.00 per share.
(12) Includes 27,778 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 13,889 at an exercise price of $1.50 per share and
13,889 at an exercise price of $3.00 per share.
(13) Includes 55,556 shares issuable upon exercise of warrants to purchase
Common Stock of the Company, 27,778 at an exercise price of $1.50 per share and
27,778 at an exercise price of $3.00 per share.
10
<PAGE>
PLAN OF DISTRIBUTION
The 4,097,790 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 the Selling Stockholders may be sold pursuant to Section (k)
of Rule 144 of the 1933 Act and (iii) the date that the Selling Stockholders no
longer own any of the Shares being offered hereby by them.
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.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. owns an aggregate of 18,065
shares of Common Stock of the Company and warrants to purchase 18,065 shares of
Common Stock of the Company at an exercise price of $2.50 per share.
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 which include an
explanatory paragraph regarding the Company's ability to continue as a going
concern.
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, September 30, 1997 and
December 31, 1997, filed pursuant to Section 13 or 15(d) of
the 1934 Act (File No. 1-9605).
(c) The Company's Current Reports on Form 8-K filed with the
Commission on December 31, 1997 and March 2, 1998.
11
<PAGE>
(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.
12
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following expenses incurred in connection with the sale of the securities
being registered will be borne by the Registrant. Other than the registration
fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC Registration Fee $1,410
AMEX Fees 17,500
Legal Fees and Expenses 15,000
Accounting Fees and Expenses 5,000
Miscellaneous 4,990
TOTAL $43,900
-------
</TABLE>
The Selling Stockholders 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
II-1
<PAGE>
of his acts or omissions as such Director or Officer, unless in such
proceeding he shall be finally adjudged liable by reason of dereliction
in the performance of his duty as such Director or Officer; provided,
however, that such indemnification shall not cover liabilities in
connection with any matter which shall be disposed of through a
compromise payment by such Director or Officer, pursuant to a consent
decree or otherwise, unless such compromise shall be approved as in the
best interests of the Corporation, after notice that it involves such
indemnification, by a vote of the Board of Directors in which no
interested Director participates, or by a vote or the written approval
of the holders of a majority of the outstanding stock at the time
having the right to vote for Directors, not counting as outstanding any
stock owned by any interested Director or Officer. The rights of
indemnification hereby provided shall not be exclusive of or affect any
other rights to which any Director or Officer may be entitled. As used
in this paragraph, the terms "Director" and "Officer" include their
respective heirs, executors and administrators, and an "interested"
Director or Officer is one against whom as such the proceedings in
question or another proceeding on the same or similar grounds is then
pending.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
4.1 Article 4 of Restated Articles of Organization of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31,
1993)
4.2 By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-18,
No. 33-14722-B, effective July 23, 1987)
4.3 Form of Common Stock Certificate (incorporated by reference
to Exhibit 10.7 to the Registrant's Registration Statement on
Form S-18, No. 33-14722-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 Form of Securities Purchase Agreement between Media Logic, Inc. and
each of the Selling Shareholders
99.2 Form of Warrant to Purchase Shares of Common Stock, par value $.01 per
share, of Media Logic, Inc. issued to each of the Selling Stockholders
</TABLE>
II-2
<PAGE>
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 May 29, 1998.
MEDIA LOGIC, INC.
By: /s/ Gregory Scorziello
----------------------
Gregory Scorziello
Chief Executive Officer and
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Gregory Scorziello his attorney-in-fact, and agent 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 attorney-in-fact and agent 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 attorney-in-fact and
agent or his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- -----
<S> <C> <C>
Director and Chief May 29, 1998
/s/ Gregory Scorziello Executive Officer and President
- ------------------------ (principal executive officer)
Gregory Scorziello
/s/ John T. Loughran Controller (principal financial May 28, 1998
- ------------------------ and accounting officer)
John T. Loughran
/s/ Joseph L. Mitchell Director May 26, 1998
- ------------------------
Joseph L. Mitchell
- ------------------------ Director May ___, 1998
Francis S. Wyman
/s/ Raymond W. Leclerc Director May 26, 1998
- ----------------------
Raymond W. Leclerc
/s/ Michael Salter
- ------------------- Director May 29, 1998
Michael Salter
</TABLE>
<PAGE>
MEDIA LOGIC, INC.
INDEX TO EXHIBITS FILED WITH
FORM S-3 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
<S> <C> <C>
4.1 Article 4 of Restated Articles of Organization
of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
March 31, 1993)
4.2 By-Laws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrant's
Registration Statement on Form S-18,
No. 33-14722-B, effective July 23, 1987).
4.3 Form of Common Stock Certificate
(incorporated by reference to Exhibit 0.7
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 Form of Securities Purchase Agreement between
Media Logic, Inc. and each of the Selling Stockholders
99.2 Form of Warrant to Purchase Shares of Common Stock,
par value $.01 per share, of Media Logic, Inc. issued to
each of the Selling Stockholders
</TABLE>
<PAGE>
Exhibit 5.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300 www.mintz.com
Fax: 202/434-7400
May 27, 1998
Media Logic, Inc.
310 South Street
Plainville, Massachusetts 02762
Ladies and Gentlemen:
We have acted as counsel to Media Logic, Inc., a Massachusetts
corporation (the "Company"), in connection with the preparation and filing
with the Securities and Exchange Commission of a Registration Statement on
Form S-3 (the "Registration Statement"), pursuant to which the Company is
registering under the Securities Act of 1933, as amended, a total of
4,097,790 shares (the "Shares") of its common stock, $.01 par value per share
(the "Common Stock"), for resale to the public. The Shares are to be sold by
the selling stockholders identified in the Registration Statement. This
opinion is being rendered in connection with the filing of the Registration
Statement. All capitalized terms used herein and not otherwise defined shall
have the respective meanings given to them in the Registration Statement.
In connection with this opinion, we have examined the Company's Restated
Articles of Organization and By-Laws, both as currently in effect; such other
records of the corporate proceedings of the Company and certificates of the
Company's officers as we have deemed relevant; and the Registration Statement
and the exhibits thereto.
Richard R. Kelly, Clerk of the Company, is a member of our firm.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, photostatic or facsimile copies and
the authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that (i) the Shares have
been duly and validly authorized by the Company and (ii) the Shares, when
sold, will be duly and validly issued, fully paid and non-assessable shares
of the Common Stock.
<PAGE>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
May 27, 1998
Page 2
Our opinion is limited to the General Corporation Laws of The
Commonwealth of Massachusetts, and we express no opinion with respect to the
laws of any other jurisdiction. No opinion is expressed herein with respect
to the qualification of the Shares under the securities or blue sky laws of
any state or any foreign jurisdiction.
We understand that you wish to file this opinion as an exhibit to the
Registration Statement, and we hereby consent thereto. We hereby further
consent to the reference to us under the caption "Legality of Common Stock"
in the prospectus included in the Registration Statement.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
cc: Richard R. Kelly, Esq.
<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.
Boston, Massachusetts
May 28, 1998
<PAGE>
Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of May ____, 1998, is
entered into by and between MEDIA LOGIC, INC., a Massachusetts corporation
(the "Company"), and ______________ (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, $.01 par value per
share, of the Company (the "Common Stock"), upon the terms and subject to the
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Subject to Section 1(a), upon the terms and subject to the
conditions set forth in this Agreement, the undersigned hereby agrees to
purchase from the Company shares (the "Shares") of Common Stock for ninety
cents ($.90) per share, for an aggregate purchase price (the "Purchase
Price") of $ . 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
<PAGE>
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.
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
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 such as is defined in the Securities Exchange Act of 1934, as
amended.
e. Most-Favored Treatment. In the event that, under any Stock Purchase
Agreement substantially similar hereto between the Company and a co-investor,
there are provided any terms and conditions more favorable to such
co-investor than are provided to the Buyer hereunder, this Agreement shall be
deemed amended by the incorporation by reference of such more favorable
provisions so as to convey the benefit thereof on the Buyer.
f. American Stock Exchange Rule. Buyer acknowledges that the offering to
which this Agreement relates is subject to a rule of the American Stock
Exchange which requires that, for any issuance which would constitute greater
than 20% of the Company's shares of Common Stock outstanding immediately
preceding the issuance, prior stockholder approval is required and that
obtaining such approval would be infeasible in the Company's circumstances.
Accordingly, in the event that the Company obtains commitments from investors
to purchase shares of Common Stock and warrants to purchase shares of Common
Stock which, if accepted, would cause such limit to be exceeded, in the
absence of a waiver by the American Stock Exchange of its rule, the Company
may reject, in whole or in part, any such commitment to purchase shares of
Common Stock and warrants to purchase shares of Common Stock and accept any
part thereof not so rejected. As a consequence, the Company may, in its
complete discretion, decline to sell to the Buyer all or any part of the
shares of Common Stock and Warrants which the Buyer has agreed hereunder to
purchase. If the Company agrees to accept part but not all of the Buyer's
commitment to purchase shares of Common Stock and Warrants hereunder, the
Company may do so, in its complete discretion, and shall not be required to
prorate such acceptance on the same percentage basis that it is accepting, in
whole or in part, any other investor's commitment to purchase shares of
Common Stock and warrants to purchase shares of Common Stock.
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<PAGE>
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 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 December 31, 1997,
(4) Proxy Statement dated August 11, 1997 (collectively, the "Company's SEC
Documents").
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<PAGE>
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 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
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<PAGE>
(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 11,284,514 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, 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 3C 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,
5
<PAGE>
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 3C 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 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
6
<PAGE>
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, September 30, 1997, and December 31, 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 December 31, 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.
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
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<PAGE>
under which they were made, not misleading. The Company has since April 1,
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 3H of the
Disclosure Schedule, since December 31, 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;
(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;
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<PAGE>
(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,
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 3K 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
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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 3L 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 3L 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.
m. Patents, Trademarks and Similar Rights.(i) Set forth on Schedule 3M
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 3M 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.
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(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 3N 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 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.
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o. Related Party Transactions. Except as set forth on Schedule 3O 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 3O of the Disclosure Schedule sets forth
a list of all Family Members, if any, 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.
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.
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s. Brokers. 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 the
investment by the Buyers 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,
Section 121.103), 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,
Section 121.301. 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 107.720.G.
u. Minimum Investment. Unless and until the investors listed on Schedule
3U invest in the aggregate the sum of the contemplated investments set forth
thereon and unless investors other than those listed on Schedule 3U invest in
the aggregate not less than an additional $500,000, the amount paid by the
Buyer as an investment hereunder shall be held in escrow by Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., legal counsel to the Company; provided
that, if such investment conditions shall not have been satisfied by April
30, 1998, such amount so paid by the Buyer shall be repaid to the Buyer.
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.
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:
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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.
(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 Title 13, Code of Federal
Regulations, Parts 112, 113 and 117.
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(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 Title 13, Code of Federal Regulations,
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. Warrants. The Company shall issue to the Buyer the Warrants, which
shall consist of five-year Warrants to purchase an aggregate of shares of
Common Stock (the "Exercise Shares"), of which (i) Warrants to purchase an
aggregate of shares of Common Stock shall be exercisable at a price per
share of $1.50 and (ii) Warrants to purchase an aggregate of shares of
Common Stock shall be exercisable at a price per share of $3.00.
g. 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 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
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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(i), 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.
h. 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.
i. 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.
j. 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.
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k. 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.
l. 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.
m. 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.
n. 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;
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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.
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.
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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.
i. The Company's authorized and outstanding capital stock as of the
Closing Date includes (i) no greater than 13,541,297 shares of Common Stock
outstanding, (plus that number of shares of Common Stock which result from
the conversion, on or before the Closing Date, of convertible debentures of
the Company outstanding as of the date hereof or the exercise of options or
warrants of the Company outstanding as of the date hereof) 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 substantially similar Securities
Purchase Agreements between the Company and parties co-investing with the
Buyer, and the capital stock issuable upon exercise of the Warrants and the
warrants issued pursuant to such substantially similar Purchase Agreements
(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) outstanding options or warrants to purchase
no greater than an aggregate of 2,031,193 shares of Common Stock (plus 20% of
that number of shares of Common Stock resulting from the conversion of
debentures or the exercise of options or warrants as aforesaid), including
(A) all options issued or authorized and unissued under the Company's 1991
Stock Option Plan and (B) options granted or to be granted to Gregory
Scorziello, Michael Salter, Michael Bruce and members of executive management
or consultants heretofore engaged or to be engaged hereafter and whose
options are not outstanding as of the date hereof, and excluding the Warrants
and similar warrants granted or to be granted to co-investors with the Buyer
under Stock Purchase Agreements substantially similar to this Agreement.
j. 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.
k. 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.
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l. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby.
m. The minimum investment requirements set forth in Section 3(u) shall
have been satisfied, unless waived by the Buyer.
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 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 Commonwealth of Massachusetts. Each of the parties
consents to the jurisdiction of the United States Federal District Court for
the District of Massachusetts or the state courts of the Commonwealth of
Massachusetts 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.
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(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
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:
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.
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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 April 30, 1998;
(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(m).
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
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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).
(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.
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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 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 sixty (60) 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
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<PAGE>
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 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 one hundred twenty (120)
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
security holder.
(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 one hundred twenty (120) 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
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<PAGE>
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:
(i) prepare promptly, and file with the SEC by sixty (60) 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
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<PAGE>
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;
(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
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<PAGE>
(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.
(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.
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(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 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
29
<PAGE>
prospectus contained therein, or any amendment or supplement thereof, if such
untrue statement or omission was made in reliance upon and in conformity 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
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<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 elections from two or more
persons or entities with respect to the same Registrable Securities, the
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Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
32
<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.
THE COMPANY: MEDIA LOGIC, INC.
By:
---------------------------
Michael G. Salter
Chairman
THE BUYER: [ ]
---------------
By:
---------------------------
Name:
Title:
33
<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.
34
<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. WY-__
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT ______________________________, 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 April __,
2003, at an exercise price of $1.50 [$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 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 April __, 1998, 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 April __,
2003, 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
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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, (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 fifteen percent (15%) 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 received
and receivable therefor and (C) treating any
4
<PAGE>
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
5
<PAGE>
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 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
6
<PAGE>
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,
7
<PAGE>
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 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 COMMONWEALTH OF
MASSACHUSETTS (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, as amended.
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<PAGE>
"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, 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.
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<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
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<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.
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:
12
<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, Gregory Scorziello, 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 April __, 1998 (the "Purchase Agreement"), between the
Company and ________________, as follows:
1. The representations and warranties of the Company
contained in Section 3 of the Purchase Agreement, to
the best of the undersigned's knowledge, are true
and correct in all material respects 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 April, 1998.
-------------------------------------
Gregory Scorziello,
Chief Executive Officer and President
<PAGE>
ANNEX III
MEDIA LOGIC, INC.
ASSISTANT CLERK'S CERTIFICATE
I, Richard R. Kelly, 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 April __, 1998, 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 April
__, 1998, by the Secretary of State of the Commonwealth of
Massachusetts.
<PAGE>
IN WITNESS WHEREOF, I have signed this certificate this ___
day of April, 1998.
------------------------------------
Richard R. Kelly, Assistant Clerk
The undersigned hereby certifies that Richard R. Kelly is the
duly elected, qualified and acting Assistant Clerk of the Company and that the
signature set forth above is his genuine signature.
-------------------------------------
Gregory Scorziello
Chief Executive Officer and President
<PAGE>
ANNEX IV
April __, 1998
[Name And Address
Of The Buyer]
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 7(h) of the
Securities Purchase Agreement, dated as of April __, 1998 (the "Securities
Purchase Agreement"), by and between Media Logic, Inc., (the "Company") and
you relating to the sale and issuance by the Company of _______ shares (the
"Shares") of common stock of the Company, $.01 par value per share (the
"Common Stock") and warrants (the "Warrants") to purchase _______ 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 April __, 1998, 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 April __, 1998 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
<PAGE>
April ___, 1996
Page 2
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(p) and 4(q) 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.
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
<PAGE>
April ___, 1996
Page 3
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 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 Exchange 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
<PAGE>
April ___, 1996
Page 4
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.
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
<PAGE>
April ___, 1996
Page 5
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,
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>
F.T.S. Worldwide $570,000
</TABLE>
Warrants
--------
<TABLE>
<CAPTION>
Holder Number of Shares Exercise Price per Share
<S> <C> <C>
Digital Media and Communications, 410,870 $3.00
L.P.
ACFS Limited 240,000 $3.00
Adar Equities LLC. 900,000 $3.00
Adar Equities LLC 500,000 $2.00
Adar Equities LLC 250,000 $2.00
Rochon Capital Group, Ltd. 200,000 $2.00
Wexford Spectrum Investors, LLC 666,666 1/2 at $1.50;1/2 at $3.00
Imprimis SB L.P. 1,333,334 1/2 at 1.50;1/2 at $3.00
Boston Group LP 250,000 $2.00
Mintz, Levin, Cohn, Ferris
Glovsky and Popeo, P.C. 18,065 $2.50
</TABLE>
Options
-------
<TABLE>
<CAPTION>
Options Outstanding/ Options Authorized
Performance Shares but Unissued
------------------
<S> <C> <C>
Media Logic Inc.
1991 Stock Option Plan 610,592 414,808
Gregory Scorziello 1,000,000 N/A
Michael Salter 100,000 N/A
Senior Management
(new hires) 300,000 N/A
</TABLE>
Registration Rights
-------------------
<TABLE>
<CAPTION>
Holder If Already Registered,
Number of Shares Date of Registration Statement
------------------------------
<S> <C> <C>
Digital Media and Communications 410,870 Jan. 1998
L.P.
ACFS Limited 240,000 Jan. 1998
Adar Equities LLC 900,000 Jan. 1998
Adar Equities LLC 500,000 March 1998
Adar Equities LLC 250,000 March 1998
Rochon Capital Group, Ltd. 200,000 Jan. 1998
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
F.T.S. Worldwide 891,668 Jan. 1998
Boston Group LP 250,000 March 1998
Raymond Leclerc 1,000,000 Jan. 1998
Boston Group LP up to 60,000 (est.)* N.A.
Lee H. Elizer 8,000** N.A.
Wexford Spectrum Investors, LLC 1,233,332 March 1998
Imprimis SB L.P. 2,466,668 March 1998
Mintz, Levin, Cohn, Ferris
Glovsky and Popeo, P.C. 18,065 N.A.
</TABLE>
* Number dependant on placement by Boston Group LP as placement agent in 1998
private placement. ** 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 - $570,000 Debentures - pursuant to Section 2(d) of
Registration Rights Agreement dated October 27, 1997, to the extent not
converted.
<PAGE>
SCHEDULE 3H
Contracts
Party Agreement
Gregory Scorziello Employment and option (See Schedule 3C)
Michael Salter Consultancy and performance shares (See
Schedule 3C)
William E. Davis, Jr. Severance (six months severance payable over
nine months beginning 4/98; 178,000
currently-held options given exercise period
of one year - through 3/31/99)
Paul M. O'Brien Severance (two months severance payable
over two months beginning 4/98; 133,000
currently-held options given exercise
period of 9 months - through 12/31/98
<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.
At the end of March 1998, Piessl Kitchen Vosik, the Company's former advertising
firm, commenced an action against the Company seeking approximately $35,000
claimed to be owed for the remaining term of its contract with the Company.
<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
Plainville, MA headquarters
2280 Wilderness Place Avalon Investment 3/31/00 $2774 former R&D
Ste. B Co. offices
Boulder, CO
</TABLE>
This property has been sublet for the remainder of the lease term.
<TABLE>
<S> <C> <C> <C> <C>
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
<TABLE>
<S> <C> <C>
U. S. Patent Application Serial No. 08/547,713 08/865,584 06884/009001
Entitled: TRANSFER MECHANISM File Wrapper Continuation Allowed
U.S. Patent Application Serial No. 08/548,413 08/865,554 06884/010001
Entitled: DATA LIBRARY File Wrapper Continuation Pending
U.S. Patent Application Serial No. 08/548,483 08/866,401 06884/007001
Entitled: DATA STORAGE SYSTEM File Wrapper Continuation Pending
U.S. Patent Application Serial No. 08/548,485 08/885,510 06884/008001
Entitled: CONVEYOR SYSTEM File Wrapper Continuation Pending
U.S. Patent Application filed Nov. 17, 1997 (Serial No. not yet issued) 08/971,602 06884/011001
Entitled: TAPE LIBRARY New Utility Pending
</TABLE>
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 TXU 592 149 September 3, 1993
Rev. 2.37
</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
Plainville, MA headquarters
</TABLE>
Contracts
See Schedule 3H, incorporated herein by reference.
<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.
See Schedule 3H, incorporated herein by reference.
<PAGE>
SCHEDULE 3U
Investors
<TABLE>
<CAPTION>
Name Amount Committed
<S> <C>
Michael Salter $500,000
Internacional Perifericos y Memorias, S.A. 750,000
ADB Leasing Corporation 100,000
N.H.B.D. LP 100,000
----------
TOTAL $1,450,000
----------
----------
</TABLE>
<PAGE>
Exhibit 99.2
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. WY-_____
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT __________________ 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 May __,
2003, at an exercise price of $1.50 [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 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,
<PAGE>
dated as of May __, 1998, 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 May
__, 2003, 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, (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 fifteen percent (15%) 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 received and receivable therefor and (C)
treating any
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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
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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 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
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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,
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<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.
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<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 COMMONWEALTH
OF MASSACHUSETTS (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, as amended.
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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 May __, 1998.
"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.
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"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
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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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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By:
--------------------------------
Michael G. Salter
Chairman
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[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)
