UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MEDIA LOGIC, INC.
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(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
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(Title of Class of Securities)
58441B100
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(CUSIP Number)
Arthur H. Amron, Esq.
411 West Putnam Avenue
Greenwich, CT 06830
(203) 862-7028
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 29, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]
Check the following box if a fee is being paid with this statement O. (A fee is
not required only if the filing person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.) [ ]
Note: Six copies of this statement, including all exhibits, should be filed with
the commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
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SCHEDULE 13D
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CUSIP No. CUSIP No. 58441B100 Page 2 of 14 Pages
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1 NAME OF REPORTING PERSON
Wexford Spectrum Investors LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Intentionally Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
None
8 SHARED VOTING POWER
1,233,332
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
1,233,332
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,233,332
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.28%
14 TYPE OF REPORTING PERSON
00
<PAGE>
SCHEDULE 13D
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CUSIP No. CUSIP No. 58441B100 Page 3 of 14 Pages
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1 NAME OF REPORTING PERSON
Imprimis SB L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Intentionally Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X}
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
None
8 SHARED VOTING POWER
2,466,668
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
2,466,668
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,466,668
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.27%
14 TYPE OF REPORTING PERSON
00
<PAGE>
SCHEDULE 13D
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CUSIP No. CUSIP No. 58441B100 Page 4 of 14 Pages
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1 NAME OF REPORTING PERSON
Wexford Management LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Intentionally Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X}
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Connecticut
7 SOLE VOTING POWER
None
8 SHARED VOTING POWER
3,700,000
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
3,700,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,700,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.17%
14 TYPE OF REPORTING PERSON
00
<PAGE>
SCHEDULE 13D
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CUSIP No. CUSIP No. 58441B100 Page 5 of 14 Pages
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1 NAME OF REPORTING PERSON
Joseph M. Jacobs
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Intentionally Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X}
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
7 SOLE VOTING POWER
None
8 SHARED VOTING POWER
3,700,000
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
3,700,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,700,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.17%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
SCHEDULE 13D
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CUSIP No. CUSIP No. 58441B100 Page 6 of 14 Pages
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1 NAME OF REPORTING PERSON
Charles E. Davidson
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
(Intentionally Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X}
(b)
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
7 SOLE VOTING POWER
None
8 SHARED VOTING POWER
3,700,000
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
3,700,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,700,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.17%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 7 of 14 Pages
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Item 1. Security and Issuer.
The classes of securities to which this statement relates are (a) the
common stock, $.01 par value (the "Common Stock"), of Media Logic, Inc. (the
"Company") and (b) warrants to purchase Common Stock (the "Warrants"). The
Company is a Massachusetts corporation with its principal executive offices at
310 South Street, P.O. Box 2258, Plainville, MA 02762.
Item 2. Identity and Background.
(a) This statement is being filed by (i) Wexford Spectrum Investors LLC,
a Delaware limited liability company ("Wexford Spectrum"), (ii)
Imprimis SB L.P., a Delaware limited partnership ("Imprimis SB"),
(iii) Wexford Management LLC, a Connecticut limited liability
company ("Wexford Management"), (iii) Joseph M. Jacobs and (iv)
Charles E. Davidson (the individuals and entities referred to above,
collectively, the "Reporting Persons") with respect to shares of
Common Stock and Warrants beneficially owned by the Reporting
Persons.
(b) The principal business and office address for the Reporting Persons
is c/o Wexford Management LLC, 411 West Putnam Avenue, Suite 125,
Greenwich, Connecticut 06830.
(c) Wexford Spectrum is a Delaware limited liability company, the
members of which are private investment funds. Wexford Spectrum was
organized for the purpose of making various investments.
Imprimis SB is a Delaware limited partnership, the general partner
of which is Imprimis SB GP LLC ("Imprimis GP") and the limited
partner of which ("Imprimis LP" and collectively with Imprimis GP,
"Imprimis Partners") is an entity the members of which are private
investment funds. Imprimis SB was formed for the purpose of making
various investments as a "small business concern" within the meaning
of the Small Business Investment Act of 1958 and the regulations
thereunder (the "SBIC Act"), including Title 13, Code of Federal
Regulations, e121.301.
Wexford Management, a registered Investment Advisor, is the manager
of both Wexford Spectrum and Imprimis GP. Wexford Management also
serves as an investment advisor or sub-advisor to the members of
Wexford Spectrum and the members of the Imprimis Partners.
Charles E. Davidson is chairman, a managing member and a controlling
member of Wexford Management. Mr. Davidson owns a 66.04% interest in
Wexford Management and is a controlling person or an investor in a
number of private companies, including certain members of Wexford
Spectrum and certain members of the Imprimis Partners.
Joseph M. Jacobs is president, a managing member and a controlling
member of Wexford Management. Mr. Jacobs owns 25.47% interest in
Wexford Management and is a controlling person or an investor in a
number of private companies, including certain members of Wexford
Spectrum and certain members of the Imprimis Partners.
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CUSIP No. CUSIP No. 58441B100 Page 8 of 14 Pages
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(d) None of the Reporting Persons has during the last five years been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
(e) None of the Reporting persons was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
(f) Mr. Davidson and Mr. Jacobs are United States citizens.
Item 3. Source and Amount of Funds or Other Consideration.
The members of Wexford Spectrum have contributed to the capital of
Wexford Spectrum from their respective funds. Pursuant to a Securities Purchase
Agreement (the "Spectrum SPA") dated December 22, 1997, Wexford Spectrum
purchased from the Company, in a private transaction which closed on December
29, 1997 (the "Closing Date") for $509,999.40, 566,666 shares of Common Stock
and in connection with such transaction also obtained 333,333 Warrants with a
strike price of $1.50 per share and 333,333 Warrants with a strike price of
$3.00 per share.
The Imprimis Partners have contributed to the capital of Imprimis SB
from their respective funds. Pursuant to a Securities Purchase Agreement (the
"Imprimis SB SPA") dated December 22, 1997, Imprimis SB purchased from the
Company, in a private transaction on the Closing Date for $1,020,000.60,
1,133,334 shares (the "Shares") of Common Stock and in connection with such
transaction also obtained 666,667 Warrants with a strike price of $1.50 per
share and 666,667 Warrants with a strike price of $3.00 per share.
The Spectrum SPA and the Imprimis SB SPA (the "SPAs") state that (i)
the Company shall (x) within thirty (30) days of the Closing Date file with the
Securities and Exchange Commission (the "SEC") a Shelf Registration Statement
(as defined below) relating to the offer and sale of (a) the Shares of Common
Stock (including shares issuable or issued upon the exercise of any Warrants or
the exercise of any other exchange, conversion or similar right), (b) any
securities issued in respect of any such shares by way of a stock dividend or
stock spilt 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 Section 18 of the SPAs. "Shelf Registration Statement" means a shelf
registration statement of the Company filed with the SEC pursuant to the
provisions of this Section 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
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 9 of 14 Pages
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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 is subject to the prior
approval of the Company's Board of Directors.
(ii) The Company shall use its best efforts (x) to cause such Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as practicable but in no event more than ninety (90) days after the
Closing Date and (y) after the effectiveness of the Shelf Registration
Statement, promptly upon the request of Wexford Spectrum and Imprimis SB or any
permitted transferee or assignee pursuant to Section 18(h) of the SPAs holding
any Registrable Securities (such transferees and assignees, together with
Wexford Spectrum and Imprimis SB, are collectively referred to in this Section
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) of the
SPAs is not declared effective by ninety (90) days after the Closing Date (the
"Required Effective Date"), then the Company will make payments to Wexford
Spectrum and Imprimis SB in such amounts and at such times as shall be
determined pursuant to Section 18(a)(iii) of the SPAs. The amount to be paid by
the Company to Wexford Spectrum and Imprimis SB 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 Wexford Spectrum and
Imprimis SB 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 Wexford Spectrum and Imprimis SB 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, Wexford Spectrum and Imprimis SB or its
counsel in connection with any act for which Wexford Spectrum and Imprimis SB
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.
Item 4. Purpose of Transaction.
The Reporting Persons have acquired the Shares and Warrants for
investment purposes. In addition, the Reporting Persons and their affiliates may
in the future acquire additional securities of Media Logic, Inc. from time to
time, if such securities become available to them at favorable prices. Any such
acquisitions may be made through private purchases, in the open market or by any
other means deemed advisable, and may be at higher or lower prices than those
paid for the securities already acquired.
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 10 of 14 Pages
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Pursuant to the SPAs the Company agreed that the Company's Board of
Directors shall refrain from filling one of its two currently existing vacancies
until such time as a Buyer Nominee (as defined below), if any, has been
appointed a Director by the Board of Directors. For the longer of (x) a period
of one (1) year beginning on the Closing Date and (y) the period that Wexford
Spectrum and Imprimis SB and their Affiliates hold, in the aggregate, shares of
capital stock equal to at least five percent (5%) of the outstanding Common
Stock of the Company, Wexford Spectrum and Imprimis SB shall have the right to
request that its representative, who shall be reasonably acceptable to the
Company ("Buyer Nominee"), be appointed to the Company's Board of Directors.
Such request shall be made in writing to the Company. Within ten (10) days after
its receipt of such request, the Company's Board of Directors shall appoint the
Buyer Nominee as a member of the Company's Board of Directors (the "Nominee
Appointment"). At the first Company annual shareholders meeting following the
Nominee Appointment and at each Company annual shareholders meeting thereafter,
the Company shall nominate one representative of the Buyer to the Company's
Board of Directors; provided however, that this subsection 4(i) shall be applied
in concert with Section 4(i) of the Affiliate Purchase Agreement such that only
one (1) representative of Imprimis SB and Wexford Spectrum shall serve on the
Company's Board of Directors at any one time pursuant to Section 4(i) of this
Agreement or Section 4(i) of the Affiliate Purchase Agreement. In addition,
pursuant to the SPAs, the Company agreed to certain negative covenants and other
matters.
None of the Reporting Persons have any present plans or intentions
with respect to a merger, reorganization, liquidation, sale of assets or
financing of Media Logic, Inc. or a change in the management, capitalization or
distribution policy of Media Logic, Inc.; but each reserves the right to propose
or undertake or participate in any of the foregoing actions in the future.
Item 5. Interest in Securities of the Issuer.
As a result of the acquisition of the Shares and Warrants, the
Reporting Persons may be deemed to own beneficially the respective percentages
and numbers of outstanding Shares of Common Stock and Warrants set forth below
(on the basis of 8,563,660 shares of Common Stock of Media Logic, Inc. issued
and outstanding, which, based upon certain publicly available information, is
the number of shares outstanding as of December 22, 1997).
A. Wexford Spectrum Investors LLC
(a) Aggregate number of shares of Common Stock and Warrants
beneficially owned:
Percentage: 11.28%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote: 1,233,332
3. Sole power to dispose or to direct the disposition: -0-
4. Shared power to dispose or to direct the disposition: 1,233,332
(c) There were no transactions by Wexford Spectrum during the past 60
days.
(d) Wexford Spectrum may be deemed to have the right to receive or the
power to direct the receipt of dividends from, or proceeds from the
sale of, the Common Stock and Warrants.
(e) Not applicable.
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 11 of 14 Pages
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B. Imprimis SB L.P.
(a) Aggregate number of shares of Common Stock and Warrants
beneficially owned:
Percentage: 21.27%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote: 2,466,668
3. Sole power to dispose or to direct the disposition: -0-
4. Shared power to dispose or to direct the disposition: 2,466,668
(c) There were no transactions by Imprimis SB during the past 60 days.
(d) Imprimis SB may be deemed to have the right to receive or the power
to direct the receipt of dividends from, or proceeds from the sale of,
the Common Stock and Warrants.
(e) Not applicable.
B. Wexford Management LLC
(a) Aggregate number of shares of Common Stock and Warrants
beneficially owned:
Percentage: 30.17%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote: 3,700,000
3. Sole power to dispose or to direct the disposition: -0-
4. Shared power to dispose or to direct the disposition: 3,700,000
(c) There were no transactions by Wexford Management during the past
60 days.
(d) Wexford Management may be deemed to have the right to receive or
the power to direct the receipt of dividends from, or proceeds from the
sale of, the Common Stock and Warrants.
(e) Not applicable.
C. Joseph M. Jacobs
(a) Aggregate number of shares of Common Stock and Warrants
beneficially owned:
Percentage: 30.17%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote: 3,700,000
3. Sole power to dispose or to direct the disposition: -0-
4. Shared power to dispose or to direct the disposition: 3,700,000
(c) There were no transactions by Mr. Jacobs during the past 60 days.
(d) Mr. Jacobs may be deemed to have the right to receive or the power
to direct the receipt of dividends from, or proceeds from the sale of,
the Common Stock and Warrants.
(e) Not applicable.
D. Charles E. Davidson
(a) Aggregate number of shares of Common Stock and Warrants
beneficially owned:
Percentage: 30.17%
(b) 1. Sole power to vote or to direct vote: -0-
2. Shared power to vote or to direct vote: 3,700,000
3. Sole power to dispose or to direct the disposition: -0-
4. Shared power to dispose or to direct the disposition: 3,700,000
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 12 of 14 Pages
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(c) There were no transactions by Mr. Davidson during the past 60 days.
(d) Mr. Davidson may be deemed to have the right to receive or the
power to direct the receipt of dividends from, or proceeds from the
sale of, the Common Stock and Warrants.
(e) Not applicable.
Wexford Management may, by reason of its status as manager of Wexford
Spectrum and of the Imprimis GP, be deemed to own beneficially the Common Stock
and Warrants of which Wexford Spectrum and Imrpimis SB possess beneficial
ownership.
Each of Charles E. Davidson and Joseph M. Jacobs may, by reason of
his status as a controlling person of Wexford Management, be deemed to own
beneficially the Common Stock and Warrants of which Wexford Spectrum and
Imprimis SB possess beneficial ownership
Each of Charles E. Davidson, Joseph M. Jacobs and Wexford Management
shares the power to vote and to dispose of the shares of Common Stock and
Warrants of Wexford Spectrum and Imprimis SB beneficially owns.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
See items 2, 3, 4 and 5 above.
Item 7. Material to be Filed as Exhibits.
1. Exhibit 1 - Securities Purchase Agreement dated December 22,
1997 by and between Media Logic, Inc. and Wexford Spectrum
Investors LLC.
2. Exhibit 2 - Securities Purchase Agreement dated December 22,
1997 by and between Media Logic, Inc. and Imprimis SB L.P.
3. Exhibit 3 - Form of Warrant Agreement
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 13 of 14 Pages
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SIGNATURE
After reasonable inquiry and to the best of each of the undersigned's
knowledge and belief, each of the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: January 12, 1997
WEXFORD SPECTRUM INVESTORS LLC
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Vice President
IMPRIMIS SB L.P.
By: IMPRIMIS SB GP LLC, its General Partner
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Vice President
WEXFORD MANAGEMENT LLC
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Senior Vice President
/s/Charles E. Davidson
----------------------
Charles E. Davidson
/s/Joseph M. Jacobs
-------------------
Joseph M. Jacobs
<PAGE>
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CUSIP No. CUSIP No. 58441B100 Page 13 of 14 Pages
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EXHIBIT I
Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General Rules
and Regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, the undersigned agree that the statement to
which this Exhibit is attached is filed on behalf of each of them in the
capacities set forth below.
WEXFORD SPECTRUM INVESTORS LLC
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Vice President
IMPRIMIS SB L.P.
By: IMPRIMIS SB GP LLC, its General Partner
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Vice President
WEXFORD MANAGEMENT LLC
By: /s/Arthur H. Amron
------------------
Name: Arthur H. Amron
Title: Senior Vice President
/s/Charles E. Davidson
----------------------
Charles E. Davidson
/s/Joseph M. Jacobs
-------------------
Joseph M. Jacobs
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as December 22,
1997, is entered into by and between MEDIA LOGIC, INC., a Massachusetts
corporation (the "Company"), and IMPRIMIS SB L.P., a Delaware limited
partnership (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of the common stock, $.01
par value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Upon the terms and subject to the conditions set
forth in this Agreement, the undersigned hereby agrees to purchase from the
Company 1,133,334 shares (the "Shares") of Common Stock for ninety cents ($0.90)
per share, for an aggregate purchase price (the "Purchase Price") of
$1,020,000.60. The Purchase Price for the Shares shall be payable in United
States Dollars.
b. Form of Payment. In consideration of the issuance and sale
of the Shares and the Warrants (as hereinafter defined) by the Company to the
Buyer, the Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars pursuant to the wire instructions
set forth in Section 1(c). Immediately upon payment by the Buyer to the Company
of the Purchase Price of the Shares, the Company shall deliver certificates
evidencing such Shares duly executed on behalf of the Company and countersigned
by the Company's transfer agent to the Buyer, together with warrant
certificates, the form of which is attached hereto as ANNEX I hereto, evidencing
the Warrants (the "Warrants"), duly executed on behalf of the Company, and the
Shares and Warrants shall each be free and clear of all security interests,
liens, pledges, charges, escrows, options, rights of first refusal,
encumbrances, agreements, arrangements, commitments or other claims of any kind
or character (collectively, the "Claims"). The obligation of the parties hereto
as set forth in this Section 1(b) are subject to the satisfaction of the
conditions set forth (i) in the case of the Buyer, in Section 7(c) and (ii) in
the case of the Company, in Section 6(d), each of which may not be waived by
either party hereto.
<PAGE>
c. Method of Payment. Payment of the Purchase Price shall be
made by wire transfer of funds to the Company in accordance with the following
instructions:
FLEET BANK OF MA
Account Name MEDIALOGIC, INC.
Account No. 050-0759123 Bank ABA #011500010
SWIFT address: FLTBUS3B Bank Phone # 800/841-4000
Please reference invoice # on Transfer
d. Affiliates. For purposes of this Agreement (except as expressly
defined in Section 3(t) solely for purposes of Section 3(t)), "Affiliate" shall
mean (a) such as is defined in the Securities Exchange Act of 1934, as amended,
and (b) as to each other, IMPRIMIS SB L.P. and WEXFORD SPECTRUM INVESTORS LLC.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Shares pursuant
to the Registration Statement (as hereinafter defined), the Buyer is purchasing
the Shares in the ordinary course of its business and for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof or any arrangement or understanding with any other persons regarding the
distribution or purchase of such Shares;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and 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
<PAGE>
generality of the foregoing, the Buyer has also had the opportunity to obtain
and to review the Company's (1) Annual Report on Form 10-K for the fiscal year
ended March 31, 1997 (the "Form 10-K"), (2) Amendment No. 1 to the Form 10-K on
Form 10-K/A, (3) Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1997 and September 30, 1997 and (4) Proxy Statement dated August 11,
1997 (collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Shares, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to making an investment decision like that involved
in the purchase of the Shares and the Buyer understands that its investment in
the Shares involves a high degree of risk;
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares;
h. The Buyer has full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity (regardless of whether such enforcement is considered in a proceeding at
law or in equity) and to bankruptcy, insolvency, fraudulent transfer,
reorganization moratorium and other similar laws affecting creditors' rights
generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Shares.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Organization, Standing and Power. (i) The Company and its
wholly-owned subsidiary, MediaLogic ADL, Inc. (the "Subsidiary"), are duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively, and each
has all requisite corporate power and authority to own, lease and operate its
respective properties and to carry on its respective businesses as now being
conducted and as currently proposed to be conducted. The Company and the
Subsidiary are duly qualified to do business and are in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by them or because of the nature of their business as
now being conducted, except for those jurisdictions where the failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the Company
and the Subsidiary taken as a whole ("Material Adverse Effect").
(ii) The Company has, prior to the execution and delivery by
the Company of this Agreement, delivered to the Buyer a true and complete copy
of the Certificate of Incorporation (together with any amendments thereto) and
the By-laws of the Company. The minute books of the Company are true and
complete in all material respects.
<PAGE>
b. Securities Purchase Agreement; Warrants and Stock. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the certificates evidencing the Warrants, and the certificates
evidencing the Shares and to perform all of its obligations and undertakings
under such agreements and to carry out the transactions contemplated under such
agreements. This Agreement, the certificates evidencing the Shares and the
Warrants and the transactions contemplated thereby, and the issuance and sale of
the Shares and the Warrants, have each been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance by the
Company of this Agreement or the Warrants. This Agreement has been duly executed
and delivered by the Company and this Agreement is, and the Warrants, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
c. Capitalization; Equity Interests. (i) As of the date of
this Agreement, the authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, of which 8,563,660 shares are issued and
outstanding. The outstanding shares of Common Stock have been duly authorized
and issued and are fully paid and non-assessable and not subject to any purchase
option or right of first refusal or preemptive, subscription or similar rights.
The Shares have been duly authorized and, when issued in accordance with this
Agreement, will (i) be duly issued, fully paid and non-assessable and not
subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder. The shares of Common Stock
initially issuable upon exercise of the Warrants (the "Exercise Shares") have
been duly authorized and reserved for issuance upon exercise and, when issued
upon such exercise, will (ii) be duly issued, fully paid and non-assessable and
not subject to any purchase option, or right of first refusal or preemptive,
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder.
(ii) Except for this Agreement, the Warrants and as set forth
in Schedule 3(c) of the Disclosure Schedule, (x) there are no bonds, debentures,
notes or other indebtedness or securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote, (y) there
are no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which the Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Common Stock or
other voting securities of the Company or obligating the Company to issue,
grant, extend or enter into any such security, option, warrant, call right,
commitment, agreement, arrangement or undertaking and (z) there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire any
shares of Common Stock or other voting securities of the Company or any
securities of the type described in clauses (x) or (y) above. No dividends on
any shares of Common Stock have been declared but not yet paid.
(iii) Except for the Subsidiary, the Company does not have any
subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
<PAGE>
joint venture or other entity. The Company is not subject to any liability for
any claim that the Company violated any applicable Federal or state securities
laws in connection with the issuance of Common Stock or other securities. There
are no restrictions on the transfer of shares of Common Stock other than those
imposed by relevant state and Federal securities laws. There are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock to which the Company is a party, or to
the best of the knowledge of any of the Company's officers, directors or
employees (the "Company's Knowledge"), among or between any persons other than
the Company. Except as set forth in Schedule 3(c) of the Disclosure Schedule, no
person has the right to demand or other rights to cause the Company to file any
registration statement under the 1933 Act relating to any securities of the
Company presently outstanding or any right to participate in any such
registration statement.
(iv) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act, and the Common Stock is listed and traded on the
American Stock Exchange ("AMEX").
d. Non-contravention. The execution and delivery of this
Agreement and the Warrants by the Company, the issuance of the Shares and the
Warrants, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Warrants and compliance by the Company with
any of the provisions hereof or thereof do not and will not conflict with or
result in a breach or violation by the Company of any of the terms or provisions
of, or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to any increased,
additional, accelerated or guaranteed rights or entitlement of any person or
entity under, or result in the creation of any Claim on the properties or assets
of the Company under (i) the restated articles of organization or by-laws of the
Company, (ii) any indenture, mortgage, note, bond, license, lease, contract,
commitment, arrangement, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or (iv)
to its knowledge, any judgment, decree or order of any court, United States
federal or state regulatory body, administrative agency, or other governmental
body having jurisdiction over the Company or any of its properties or assets (v)
any license, franchise, permit or other similar authorization held by the
Company, except such conflict, breach or default which would not have a Material
Adverse Effect on the transactions contemplated herein.
e. Financial Statements. (i) The consolidated financial
statements (the "Financial Statements") of the Company set forth in the (A)
Company's Annual Report on Form 10-K for the year ended March 31, 1997, reported
on by Arthur Andersen LLP, (B) Amendment No. 1 to the Form 10-K on Form 10-K/A,
and (C) Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1997 and September 30, 1997, in each case fairly present the
consolidated financial position of the Company as of such dates and the
consolidated results of operation and cash flows for such periods then ended in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis. Arthur Andersen LLP is an independent accountant as defined
under the 1933 Act and the rules and regulations promulgated thereunder.
<PAGE>
(ii) All reserves established by the Company are reflected on
the balance sheets contained in the Financial Statements or in the footnotes to
the Financial Statements of the Company and in management's reasonable estimate
are adequate in the aggregate and there are no loss contingencies that are
required to be accrued by Statement of Financial Accounting Standard No. 5 of
the Financial Accounting Standards Board which are not provided for on such
balance sheets. As of the date hereof, except for liabilities (A) reflected on
or reserved against on the balance sheet as of September 30, 1997 (the "Latest
Balance Sheet") (B) incurred in the ordinary course of the Company's business
and consistent with past practice or (C) contemplated by this Agreement, the
Company has no liabilities (absolute, accrued, fixed, contingent, known, unknown
or otherwise) which would be required by GAAP to be reflected or reserved
against on the balance sheet of the Company and which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(iii) Any forecasts and projections previously delivered to
the Buyer by the Company have been prepared in good faith and on the basis of
assumptions that are fair and reasonable in light of current and reasonably
foreseeable circumstances.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Shares or the Warrants
to the Buyer as contemplated by this Agreement, except such authorizations,
approvals and consents that have been obtained and except as contemplated in
Section 4(s) of this Agreement.
g. SEC Filings. None of the SEC filings with the Securities
and Exchange Commission since the filing of the 10-K on March 31, 1997
contained, at the time they were filed, any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements made therein in light of the circumstances under which they
were made, not misleading. The Company has since December 22, 1996 timely filed
all requisite forms, reports and exhibits thereto with the Securities and
Exchange Commission.
h. Absence of Changes. Except as set forth on Schedule 3(h) of
the Disclosure Schedule and except as may apply in the context of the Securities
Purchase Agreement entered into between the Company and an Affiliate of the
Buyer of even date herewith (the "Affiliate Purchase Agreement"), since
September 30, 1997, the Company and the Subsidiary have operated in the ordinary
course consistent with past practice and there has not been:
(i) any event, occurrence or development or state of
circumstances of facts which has had or would reasonably be expected to have a
Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any Claim or
obligation of the Company or the Subsidiary or any amendment, termination or
waiver of any rights of value to the Company or the Subsidiary, except in the
ordinary course of business and consistent with past practice;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of Common Stock of the
Company or the Subsidiary any direct or indirect redemption, purchase or other
acquisition of any such shares;
<PAGE>
(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;
(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.
<PAGE>
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 3(k) of the Disclosure Schedule, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's financial condition or results of
operations.
l. Assets, Property And Related Matters; Real Property. (i)
The Company or the Subsidiary has good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the Financial Statements, free
and clear of all Claims. To the Company's Knowledge, such assets (other than
inventory) are in good operating condition and repair, subject to ordinary wear
and tear and constitute all of the properties, interests, assets and rights held
for use or used in connection with the business and operations of the Company or
the Subsidiary and constitute all those necessary to continue to operate the
business of the Company or the Subsidiary, as the case may be, consistent with
current and historical practice.
(ii) All leases of real property to which the Company or the
Subsidiary is a party ("Leases"), as set forth in Schedule 3(1) of the
Disclosure Schedule, are in writing and in full force and effect and constitute
valid and binding obligations of the Company and, to the Company's Knowledge, of
the other parties thereto, enforceable in accordance with their respective terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Company or the
Subsidiary holds good and valid title to the leasehold interests under the
Leases for the term of each such Lease, free and clear of all Claims. The Leases
have not been modified in any material respect, except to the extent that such
modifications are disclosed, in writing, in a copy delivered to the Buyer. There
exists no material default, or any event which upon notice or the passage of
time, or both, would give rise to any material default, in the performance of
the Company or the Subsidiary or, to the Company's Knowledge, by any lessor
under any such lease. Except as disclosed on Schedule 3(l) of the Disclosure
Schedule, the Company or the Subsidiary have not, and to the Company's
Knowledge, no other person has, granted any oral or written right to anyone
other than the Company or the Subsidiary to lease, sublease or otherwise occupy
any of its properties through the end of the applicable lease periods.
(iii) The Company does not own, and has not previously owned,
any real property.
<PAGE>
m. Patents, Trademarks and Similar Rights. (i) Set forth on
Schedule 3(m) of the Disclosure Schedule is a true and complete list of the
patents, patent applications, trademarks (registered or unregistered) and
service marks (and any applications or registrations therefor), trade names,
corporate names, copyrights, copyright registrations and other intellectual
property that currently exists in written form owned or filed by, or licensed
to, the Company or the Subsidiary or used in the conduct of the Company's or the
Subsidiary's business as presently conducted ("Intellectual Property"). With
respect to registered trademarks, Schedule 3(m) of the Disclosure Schedule sets
forth a list of all jurisdictions in which such trademarks are registered or
applied for and all registration and application numbers. To the Company's
Knowledge, the Company has all rights to Intellectual Property as are used or
are necessary in connection with the businesses of the Company and the
Subsidiary as presently conducted, and the Company owns, or has the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person or
entity, all Intellectual Property free and clear of all Claims whatsoever. The
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any
options, licenses or agreements of any kind relating to Intellectual Property or
the marketing or distribution thereof. Neither the Company nor the Subsidiary is
bound by or a party to any options, licenses or agreements of any kind relating
to the intellectual property of any other person or entity. The conduct of the
business of the Company and of the Subsidiary as presently conducted does not,
to the Company's Knowledge, violate, conflict with or infringe the intellectual
property of any other person or entity. No claims are pending, or to the
Company's Knowledge, threatened, against the Company or the Subsidiary by any
person or entity with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property and, during the past three
years, neither the Company nor the Subsidiary has received any communications
alleging that the Company has violated any rights relating to intellectual
property of any person or entity.
n. Agreements. (i) Schedule 3(n) of the Disclosure Schedule
contains a true and complete list or description of all written or oral
contracts, agreements and other instruments ("Contracts") to which the Company
or the Subsidiary is a party (A) relating to indebtedness for money borrowed or
the deferred purchase price of property or services or capital leases in excess
of $50,000, (B) relating to any forward commitments or to other commitments in
excess of $50,000 in any given year, (C) relating to any joint venture,
partnership or limited liability company; (D) relating to the employment or
compensation of any director, officer or shareholder of the Company or the
Subsidiary, or any Affiliate of such companies, and not disclosed in the proxy
statement filed in connection with the Company's fiscal year ended March 31,
1997, (E) relating to the employment or compensation of any employee,
consultant, independent contractor or other agent of the Company or the
Subsidiary, or any Affiliate of such companies, involving a payment in excess of
$50,000 in any given year, (F) relating to the sale or other disposition of any
assets, properties or rights (other than the sale of inventory), (G) which
restricts the Company's or the Subsidiary's ability to do business in any
geographic area or grants to any person exclusive or similar rights in any line
of business or in any geographic area, (I) which restricts the Company's 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
<PAGE>
other personal property owned by any other person or entity, for which the
annual rental exceeds $50,000; (K) relating to the lease of any real or personal
property to any other person or entity, for which the annual rental exceeds
$50,000; (L) relating to any advance, loan, extension of credit or capital
contribution to, or other investment in, any person or entity not in excess of
$50,000 in the aggregate; or (M) that is otherwise material to the business,
properties or assets of the Company or the Subsidiary and entered into other
than in the ordinary course of business.
(ii) All Contracts are valid, binding and in full force and
effect as to the Company or the Subsidiary and neither the Company nor, to the
Company's Knowledge, any other party thereto is in breach or violation of, or
default under, any such Contracts in any material respect.
o. Related Party Transactions. Except as set forth on Schedule
3(o) of the Disclosure Schedule, no current or former partner, director,
officer, employee or shareholder of the Company or the Subsidiary or any
associate or Affiliate thereof, or any parent, spouse, child, brother, sister or
any other relative with a relationship (by blood, marriage or adoption) of not
more remote than first cousin of any of the foregoing (collectively, "Family
Members"), is presently, or during the 12-month period ending on the date of
this Agreement has been, directly or indirectly (i) a party to any transaction
with the Company (including any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or shareholder or such associate) or (ii) to the Company's Knowledge,
the direct or indirect owner of an interest in any corporation, firm,
association or business organization (other than the ownership of less than two
percent (2%) of the outstanding capital stock of any publicly traded entity)
which is a present (or potential) competitor, lender, broker or customer of the
Company or the Subsidiary, nor does any member of management or any of their
Family Members receive income from any source other than the Company or the
Subsidiary which relates to the Company's or the Subsidiary's business or should
properly accrue to the Company or the Subsidiary. Schedule 3(o) of the
Disclosure Schedule sets forth a list of all Family Members who are currently
employed or who were employed by the Company or the Subsidiary at any time
during the last three fiscal years together with a description of job, title and
annual salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
p. Disclosure. No representation, warranty or statement of the
Company contained in this Agreement, or any other agreement contemplated by this
Agreement, or any certificate, schedule, annex or other writing furnished to the
Buyer by the Company, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statement contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
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
<PAGE>
solicited offers with respect thereto from, or entered into any preliminary
conversations or negotiations relating thereto with, any person, so as to bring
the issuance and sale of such Shares under the registration provisions of the
1933 Act.
s. Brokers. Other than the Placement Agents (as defined
below), no agent, broker, investment banker, person or firm acting on behalf of
the Company or under the authority of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties in connection with any of the transactions
contemplated by this Agreement.
t. Small Business Matters. The Company, together with its
"Affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
e121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder (the "SBIC Act"),
including Title 13, Code of Federal Regulations, e121.301. The information set
forth in the Small Business Administration Forms 480, 652 and Section A of Form
1031 which have been delivered on or prior to the date hereof to the SBIC,
regarding the Company is accurate and complete. Neither the Company nor the
Subsidiary or Affiliates thereof presently engages in, and it shall not
hereafter engage in, any activities , nor shall the Company or its Subsidiary or
Affiliates thereof use directly or indirectly the proceeds from the sale of the
shares of the capital stock of the Company hereunder (including the Warrants and
any capital stock issued respect hereof) for any purpose for which a "small
business investment company" (an "SBIC") (as defined in Section 103(3) of the
SBIC Act) is prohibited from providing funds by the SBIC Act, including Title
13, Code of Federal Regulations Section, ss. 107.720.G.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictions On Transferability. The Company shall not be
required to register the transfer of any Shares on the books of the Company
unless: (i) such securities have been registered under applicable Federal and
state securities laws, (ii) such shares are being transferred pursuant to Rule
144, or any successor rule, promulgated under the 1933 Act or (iii) the Company
shall have been provided with an opinion of counsel reasonably satisfactory to
it to the effect that the proposed transfer is exempt from the registration
requirement of the 1933 Act and the relevant state securities laws.
b. Restrictive Legend. The Buyer acknowledges and agrees that
until such time as the Shares have been registered under the 1933 Act as
contemplated herein and sold in accordance with an effective registration
statement, the Shares shall bear a restrictive legend in substantially the
following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES,
A TRANSFER PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER REASONABLE ACCEPTABLE
EVIDENCE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Shares and the Warrants to
the Buyer under any United States laws and regulations and any applicable state
securities or "Blue Sky" laws, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
<PAGE>
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 13 C.F.R. Parts 112, 113 and 117.
(iv) Within 45 days after the end of each fiscal year, and at
any other time reasonably requested by any SBIC, the Company shall deliver to
such SBIC a written assessment, in form and substance satisfactory to such SBIC
of the economic impact of such SBIC's investment in the Company, specifying (1)
the full-time equivalent jobs created or retained in connection with the
investment, and (2) the impact of the investment on the Company's business in
terms of revenue and profits, and on taxes paid by the Company, its subsidiaries
and Affiliates thereof and their respective employees. Upon advance written
request, the Company promptly (and in any event within 20 days of such request)
shall furnish to any SBIC all information (1) reasonably requested by such SBIC
in order for such SBIC to comply with the requirements of 13 C.F.R. Section
107.620 or to prepare and file Small Business Administration Form 468 and (2)
reasonably requested or required by any Governmental Authority asserting
jurisdiction over such SBIC. Any submission of financial information pursuant to
this Section shall be under cover of a certificate executed by the president,
chief executive officer, chief financial officer or treasurer of the Company
certifying that such information (1) relates to the Company, its subsidiaries
and affiliates thereof (2) is accurate and (3) if applicable, has been audited
by the Company's independent auditors.
f. Broker's Fees. The Buyer acknowledges that the Company
intends (i) to pay The Boston Group, L.P. and First Granite Securities, Inc.
(together, the "Placement Agents") fees of ten percent (10%) and two percent
(2%), respectively, of the Purchase Price paid by the Buyer, and (ii) to issue
to the Placement Agents warrants to purchase an aggregate of 250,000 shares of
<PAGE>
Common Stock of the Company (the "Placement Agent Warrants", such aggregate
being the total number of Placement Agent Warrants to be issued under this
Agreement and the Affiliate Purchase Agreement) with an exercise price per share
equal to the greater of (a) $2.00 and (b) the Market Price (as defined in
Section 4(h) of this Agreement).
g. Expenses. The Company shall pay the Buyer a non-accountable
expense reimbursement (the "Expense Reimbursement") of $50,000 to cover the
Buyer's expenses, including legal fees and disbursements. The Expense
Reimbursement shall be payable in United States Dollars. In addition, the
Company shall pay any and all stamp and other documentary taxes payable or
determined to be payable in connection with the issuance of the Shares and
agrees to hold the Buyer harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
h. Warrants. The Company shall issue to the Buyer the
Warrants, which shall consist of five-year warrants to purchase 1,333,334 shares
of Common Stock (the "Exercise Shares") of which (i) Warrants to purchase
666,667 shares of Common Stock shall be exercisable at a price per share equal
to the greater of (a) $1.50 or (b) the closing or last price of the Common Stock
on the Composite Tape or other comparable reporting system for the trading day
immediately preceding the Closing Date (the "Market Price"), and (ii) Warrants
to purchase 666,667 shares of Common Stock shall be exercisable at a price per
share such that the weighted average exercise price of the 1,333,334 Warrants
issued by the Company to the Buyer under this Agreement shall equal (a) $2.25,
if the exercise price of the Warrants issued under Section 4(h)(i) is less than
or equal to $1.75, or (b) $2.15, if the exercise price of the Warrants issued
under Section 4(h)(i) is greater than $1.75; provided, however, that in no case
will the exercise price of any Warrants be less than the Market Price.
i. Board of Directors. The Company's Board of Directors shall
refrain from filling one of its two currently existing vacancies until such time
as a Buyer Nominee (as defined below), if any, has been appointed a Director by
the Board of Directors. For the longer of (x) a period of one (1) year beginning
on the Closing Date and (y) the period that the Buyer and its Affiliates hold,
in the aggregate, shares of capital stock equal to at least five percent (5%) of
the outstanding Common Stock of the Company, the Buyer shall have the right to
request that its representative, who shall be reasonably acceptable to the
Company ("Buyer Nominee"), be appointed to the Company's Board of Directors.
Such request shall be made in writing to the Company. Within ten (10) days after
its receipt of such request, the Company's Board of Directors shall appoint the
Buyer Nominee as a member of the Company's Board of Directors (the "Nominee
Appointment"). At the first Company annual shareholders meeting following the
Nominee Appointment and at each Company annual shareholders meeting thereafter,
the Company shall nominate one representative of the Buyer to the Company's
Board of Directors; provided, however, that this subsection 4(i) shall be
applied in concert with Section 4(i) of the Affiliate Purchase Agreement such
that only one (1) representative of IMPRIMIS SB L.P. and WEXFORD SPECTRUM
INVESTORS LLC shall serve on the Company's Board of Directors at any one time
pursuant to Section 4(i) of this Agreement or Section 4(i) of the Affiliate
Purchase Agreement.
j. Conduct Of Business. (i) From the date of this Agreement
until the Closing Date, the Company shall operate its business only in the
ordinary course of business consistent with past practice. The Company shall
not, until the Closing Date, directly or indirectly, cause or permit any state
of affairs, action or omission described in clauses (i) through (xiii) of
Section 3(h).
<PAGE>
(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 defined in Section
1202(d) of the Internal Revenue Code of 1986, as amended), and provide each
licensed SBIC with all information requested by any Governmental Authority to
permit such SBIC to comply with its obligations under the SBIC Act. Each SBIC
shall use commercially reasonable efforts to protect any information which the
Company labels as confidential. If any such confidential information is required
to be disclosed by such SBIC in order to comply with any such request, the SBIC
shall cause to be filed a confidential treatment request on behalf of the
Company seeking to withhold from public availability all of such confidential
information. For purposes of this Section 4(j), the term "Governmental
Authority" shall mean any government or state (or any subdivision thereof),
whether domestic, foreign or multinational (including European Union), or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
k. Further Assurances. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Articles 6 and 7 are satisfied, insofar as such
matters are within the control of any of them.
l. Access And Information. From the date of this Agreement
until the first to occur of (x) the Closing Date and (y) the termination of this
Agreement in accordance with Article 11, the Company shall permit the Buyer and
its representatives to make such investigation of the business, operations and
properties of the Company as the Buyer deems necessary or desirable in
connection with the transactions contemplated by this Agreement. Such
investigation shall include access to the respective directors, officers,
employees, agents and representatives (including legal counsel and independent
accountants) of the Company and the properties, books, records and commitments
of the Company. The Company shall furnish the Buyer and its representatives with
such financial, operating and other data and information, and copies of
documents with respect to the Company or any of the transactions contemplated by
this Agreement, as the Buyer shall from time to time reasonably request. Such
access and investigation shall be made upon reasonable notice and at reasonable
places and times. Such access and information shall not in any way affect or
diminish any of the representations or warranties hereunder. Without limiting
the foregoing, during such period, the Company shall keep the Buyer informed as
to the business and operations of the Company and shall consult with the Buyer
as appropriate.
<PAGE>
m. Reporting Requirements. For so long as the Buyer and its
Affiliates, in the aggregate, or its transferees (except transferees who acquire
the Buyers' Common Stock in a transaction not exempt from the registration
requirements of the 1933 Act), hold an amount of shares of Common Stock equal to
at least five percent (5%) of the Common Stock then outstanding, the Buyer shall
have the right to request, and if so requested the Company shall furnish to the
Buyer, the following:
(i) as soon as practicable after the end of each month and
fiscal quarter, and in any event within 45 days thereafter, copies of: (A) an
unaudited consolidated balance sheet of the Company as at the end of such month
and quarter, (B) unaudited consolidated statements of operations, shareholders'
equity and cash flows of the Company for the period ending with such month and
quarter and setting forth in comparative form the figures for the corresponding
periods in the preceding fiscal year certified by the chief financial officer of
the Company as complete and correct, and having been prepared in accordance with
GAAP (other than monthly balance sheets and statements of operations,
shareholders' equity and cash flows) subject to the absence of footnotes and
changes resulting from year-end adjustments;
(ii) such financial information (other than the information
described in clause (i) above) as the Company and Buyer may agree;
(iii) as soon as practicable after the end of each fiscal year
of the Company, and in any event within 90 days thereafter, copies of: (i) a
consolidated balance sheet of the Company as at the end of such year, and (ii)
consolidated statements of operations, shareholders' equity and cash flows of
the Company for such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, together with supporting
notes thereto and accompanied by an opinion thereon of independent accountants
of recognized national standing, together with a summary prepared by the Company
concerning the Company's operations and financial condition;
(iv) no later than 60 days prior to the end of each fiscal
year of the Company, the proposed annual business plan and budget (including the
capital expenditures and financing plans) of the Company for the next fiscal
year;
(v) promptly after sending, making available, or filing the
same, all reports and financial statements that the Company sends or makes
available to the shareholders of the Company or files with the SEC; and
(vi) any other information respecting the business, properties
or the condition or operations, financial or otherwise, of the Company that the
Buyer may from time to time reasonably request, including, but not limited to,
business units analyses, performance reviews analyses and monthly sales
analyses.
The Buyer agrees that with respect to any information received
by it pursuant to this subsection (m) ("Requested Information"), the Buyer will
use the Requested Information solely for purposes of monitoring and/or assessing
its investment in the Company and not for any other purpose and will keep the
Requested Information confidential. The Buyer acknowledges that if, and to the
extent, it receives Requested Information which is non-public, material
information relating to the Company, it may be subject to legal restrictions in
connection with the "insider trading" provisions of the federal securities laws
with respect to such Requested Information.
<PAGE>
n. No Shopping. From the date of this Agreement until the
earlier of (i) the Closing Date and (ii) the date this Agreement is terminated
in accordance with Article 11, the Company shall not, and shall ensure that any
directors, officers, agents, representatives or Affiliates of the Company do
not, directly or indirectly, solicit or initiate, enter into or conduct,
discussions concerning, or exchange information (including by way of furnishing
information concerning the Company or their respective businesses) or enter into
any negotiations concerning, or solicit, entertain or agree to any proposals
for, (i) a merger, consolidation or other business combination involving the
Company, (ii) a sale of any equity interest in the Company, (iii) a sale of a
significant portion of business or assets of the Company, (iv) a
recapitalization or restructuring of the Company or (v) a transaction similar to
any of the foregoing. In addition, during such time period, the Company shall
not authorize, direct or knowingly permit any officer, shareholder, director,
employee or agent of the Company to do any of the foregoing and the Company
shall notify the Buyer promptly of the identity of any person who approaches the
Company with respect to any of the foregoing, as well as the price and terms of
any such proposal, if applicable
o. Public Announcements. No press release or public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued or made without the joint approval of the Buyer and the Company,
the Buyer's approval which shall not be unreasonably withheld, unless required
by applicable law or legal process in which case the Buyer and the Company shall
have the right, to the extent reasonably practicable, to review and comment on
such press release or announcement prior to publication.
p. Reserved Shares. The Company shall reserve and at all times
keep available, free from preemptive rights, out of its authorized but unissued
stock, a sufficient number of shares of Common Stock to provide for the issuance
of such shares upon the exercise of the Warrants.
q. Notification. The Company shall promptly notify the Buyer
of (i) any notice or other communications from any person or entity that the
consent of such person or entity is or may be required in connection with the
consummation of the transactions contemplated hereby and (ii) any notice or
other communication from any Governmental Authority (as defined in Section
4(j)(iii) of this Agreement) in connection with the consummation of the
transactions contemplated hereby.
r. Negative Covenants. For so long as the Buyer and its
Affiliates hold an aggregate amount of shares of Common Stock equal to at least
five percent (5%) of the Common Stock then outstanding on a fully diluted basis,
then the following actions by the Company or the Subsidiary, shall require the
prior written consent of the Buyer (in addition to any stockholder or Board of
Directors approval as may be required by applicable statute, agreement or
otherwise):
(i) the purchase, construction, acquisition, sale, lease,
exchange or disposition of any property or asset, or the making of any
investment, other than in the ordinary course of business, the purchase price or
value of which exceeds $100,000;
(ii) the entry into any agreement or series of related
agreements, including any agreement to borrow money that, either individually or
collectively, (A) creates a monetary obligation or a liability greater than
$100,000 or (B) grants a mortgage on, a security interest in, a pledge or
otherwise encumbers, any material asset of the Company or the Subsidiary;
<PAGE>
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring payments or the
issuance of securities (including stock options) (or any amendments,
modifications or waivers of any such contract, agreement or arrangement) to any
shareholder (who holds in excess of five percent (5%) of the issued and
outstanding voting securities of the Company) or any officer or director of the
Company or any of their respective Affiliates, or any Family Members of any of
the foregoing;
(iv) the initiation by the Company of a voluntary case, the
filing of, or authorization to file a bankruptcy petition, or request for
relief, under Title 11 of the United States Code (11 U.S.C. ss. 1, et seq.) or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or consent by the Company to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or a general
assignment by the Company for the benefit of creditors, or the failure by the
Company generally to pay their respective debts as they become due, or the
taking by the Company of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement, transaction or arrangement
with any, officer, director or shareholder (who holds in excess of five percent
(5%) of the issued and outstanding voting securities of the Company) of the
Company, the Subsidiary or any of their respective Affiliates or of any Family
Members of any of the foregoing other than the reimbursement of expenses of any
such person in the ordinary course in accordance with the policies of the
Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other business combination or the
sale, assignment, lease or other disposition of all or substantially all of the
assets of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company, including the
capitalization of any subsidiaries of the Company, or any repurchase or
redemption of the Company's securities, other than (A) the issuance of shares of
Common Stock upon the exercise of stock options either currently outstanding or
hereinafter granted pursuant to the Company's 1991 Stock Option Plan, (B) the
issuance of shares of Common Stock (1) upon the exercise of warrants outstanding
as of the date of this Agreement, (2) upon the conversion of Debentures (as
defined in Section 7(i) of this Agreement) outstanding as of the date of this
Agreement, (3) upon the exercise of the Affiliate Warrants, or (4) upon the
exercise of the Placement Agent Warrants, and (C) as expressly provided in this
Agreement;
(viii) any distributions or dividends, whether in cash,
securities or in property in kind, by the Company to its stockholders;
(ix) any material changes in accounting policies of the
Company and any removal or appointment of the Company's independent accountants;
<PAGE>
(x) the settlement of legal, administrative or other suits or
proceedings in the Company's name in which the amount in dispute equals or
exceeds $100,000;
(xi) the establishment or amendment of, or the grant,
acceleration or waiver of any terms or conditions in, or determination or
acceleration pursuant to the terms of, any pension, retirement, savings,
deferred compensation, profit sharing, benefit or incentive plan or any stock
option, stock appreciation, stock purchase, performance or other similar plan,
for any or all current or former employees, officers or directors of the Company
or any of their respective Affiliates or of any Family Member of any of the
foregoing; provided that the granting of options to employees (other than
officers) for amounts less than 25,000 shares per employee, pursuant to the
Company's 1991 Stock Option Plan, under which a maximum of 414,808 options are
currently authorized but unissued and can therefore be additionally granted,
shall not require the consent of the Buyer;
(xii) the amendment of the Certificate of Incorporation or
By-laws in any respect;
(xiii) any change in any of the names under which the Company
conducts business
(xiv) the issuance of any new, or amendment to or modification
or restatement of any existing, warrants, options, Debentures, calls, rights,
commitments, agreements, arrangements or similar undertakings, other than (A)
the issuance of options pursuant to the Company's 1991 Stock Option Plan, (B) as
may be required to effect the transactions contemplated by this Agreement, and
(C) as expressly provided in this Agreement; or
(xv) any other transaction, agreement or arrangement or series
of related transactions, agreements or arrangements that is material to the
business of the Company or to the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the Company,
taken as a whole.
s. Additional Listing Application. The Company shall, within
two (2) Business Days of the execution of this Agreement, file with AMEX an
Additional Listing Application (the "Initial Application") for the Registrable
Securities (as defined below, but for purposes of this Section 4(s), excluding
the Warrants). To the extent that AMEX approves the Initial Application as to
only the Shares and not as to all Registrable Securities (excluding the
Warrants), the Company shall, within two (2) Business Days of the Closing Date,
file a second or amended Additional Listing Application for the portion of the
Registrable Securities (excluding the Warrants) the listing of which was not
approved pursuant to the Initial Application.
t. Registration of Warrants. The Company shall use its best
efforts to, within 60 days of the Closing Date, register (as such term is
defined in Section 18(a)(i) of this Agreement) the Warrants for public trading
in the United States securities markets.
5. CLOSING DATE.
The date and time of the issuance and sale of the Shares and
the Warrants (the "Closing Date") shall occur no later than 12:00 Noon, New York
time on the first NYSE trading day after the fulfillment or waiver of all
<PAGE>
closing conditions pursuant to Sections 6 and 7, or such other mutually agreed
to time. The closing shall occur on such date at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Shares on the Closing Date is subject to the following conditions, any of
which may be waived by the Company (with the exception of the condition set
forth in Section 6(d)):
a. Delivery by the Buyer of good funds as payment in full of
an amount equal to the Purchase Price in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
d. The Company shall have received notification from AMEX that
the Shares have been approved for listing by AMEX.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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,
<PAGE>
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which the Company is a party or by which any of its properties or
assets are bound or with respect to any license, franchise, permit or other
similar authorization held by the Company shall have been obtained or taken.
f. There shall not have been any material adverse change in
the condition (financial or otherwise), operations, business, assets,
liabilities, earnings or prospects of the Company or the Subsidiary, taken as a
whole.
g. The Buyer shall have received a certificate of (i) an
executive officer of the Company, dated the Closing Date, in substantially the
form of ANNEX II and (ii) the Clerk or Assistant Clerk of the Company, dated the
Closing Date, in substantially the form of ANNEX III, together with a copy of
all documents referenced therein.
h. Delivery by the Company to the Buyer of an opinion of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., in substantially the form
attached hereto as ANNEX IV.
i. Of the Company's 7% Convertible Subordinated Debentures Due
March 24, 2000 and the 7% Convertible Debentures Due October 29, 2000
(collectively, the "Debentures"), no less than ninety percent (90%) of the
Debentures have been either (i) converted into Common Stock at a price of ninety
cents ($0.90) per share of Common Stock, or (ii) agreed in writing by the
holders thereof to be amended such that each Debenture provides (A) for the
conversion thereof, for a period of thirty (30) days from the Closing Date, into
Common Stock at a price of ninety cents ($0.90) per share of Common Stock and
thereafter shall be convertible at the terms originally set forth in such
Debenture, and (B) for a minimum conversion price of ninety cents ($0.90) per
share of Common Stock.
j. The Company's authorized and outstanding capital stock as
of the Closing Date includes (i) no greater than 13,935,000 shares of Common
Stock outstanding, including (A) the Shares to be issued to the Buyer pursuant
to this Agreement and the shares of Common Stock to be issued pursuant to the
Affiliate Purchase Agreement, and the capital stock issuable upon exercise of
the Warrants and the warrants issued pursuant to the Affiliate Purchase
Agreement (the "Affiliate Warrants"), and (B) shares of Common Stock issuable
upon the conversion of any outstanding Debentures at a conversion price of
ninety cents ($0.90) per share, and (ii) no greater than 3,540,000 outstanding
options or warrants to purchase Common Stock, including (A) all options issued
or authorized and unissued under the Company's 1991 Stock Option Plan and (B)
the Placement Agent Warrants, and excluding the Warrants and the Affiliate
Warrants.
k. The Buyer shall have received duplicate originals of (A) an
executed copy of U.S. Small Business Administration (the "SBA") Form 480 Size
Status Declaration, (B) an executed copy of SBA Form 652 Assurance of Compliance
for Nondiscrimination and (C) the information needed to complete Part A and Part
B of SBA Form 1031.
l. The Company shall be in compliance with the requirements of
Section 713(a) of the AMEX Listing Standards and Requirements in connection with
the issuance of the Shares.
m. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
<PAGE>
n. The Market Price is less than or equal to $2.15.
8. LOCK-UP
The Buyer hereby covenants and agrees not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities of the Company that are substantially similar to the Common Stock,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, the Common Stock or
any substantially similar securities until the expiration of a period of
seventy-five (75) days from the Closing Date; provided however, that this
Section 8 shall not apply, and have no effect upon the Buyer, if (i) there has
been a public announcement that a person or group of affiliated or associated
persons (other than the Buyer and its Affiliates) has acquired beneficial
ownership of twenty percent (20%) or more of the outstanding Common Stock or
(ii) a tender offer or exchange offer, the consummation of which would result in
the beneficial ownership by a person or group of affiliated or associated
persons (other than the Buyer and its Affiliates) of twenty percent (20%) or
more of the outstanding Common Stock, has been commenced or an announcement of
an intention to make such an offer has been made.
9. GOVERNING LAW; SPECIFIC ENFORCEMENT; MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement, the Warrants and the schedules, annexes and
exhibits hereto or thereto contain the entire agreement among the parties with
respect to the transactions contemplated by this Agreement and supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(ii) Each party expressly agrees that the other party will be
irreparably damaged if this Agreement is not specifically enforced, including,
without limitation, the covenant set forth in Section 4(i). Upon a breach or
threatened breach of the terms, covenants or conditions of this Agreement, the
non-breaching party shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without any showing of any actual damage, or
a decree for specific performance, in accordance with the provision hereof.
10. NOTICES.
All notices, requests and other communications to any party
hereunder shall be in writing and sufficient if delivered personally or sent by
telecopy (with confirmation of receipt) or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
<PAGE>
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: IMPRIMIS SB L.P.
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert H. Holtz
Telecopy: (203) 862-7310
With a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telecopy: (212) 841-1010
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
11. TERMINATION. (a) This Agreement shall terminate on the
earliest to occur of any of the following events:
(i) the mutual written agreement of the Buyer and the Company;
(ii) at the discretion of either party, if the Closing shall
not have occurred prior to the close of business on December 31, 1997;
(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.
<PAGE>
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except that
if this Agreement terminates in accordance with Section 11(a) and the Buyer
receives reimbursement of its costs and expenses in accordance with Section
4(h), then this Agreement shall terminate without any further liability. Except
as aforesaid, upon the termination of this Agreement, all rights and obligations
of the parties under this Agreement shall terminate, except their obligations
under Section 4(g) and Section 4(o).
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
Company's and the Buyer's representations, warranties, agreements and covenants
shall survive the execution and delivery hereof of this Agreement and the
delivery of the Shares and the Warrants. Neither the period of survival nor the
liability of the Company with respect to the representations and warranties
shall be reduced by any investigation made at any time by or on behalf of the
Buyer.
13. INDEMNIFICATION. (a) The Company indemnifies and holds
harmless the Buyer and its Affiliates and each of their members, directors,
officers, employees and other agents and representatives from and against any
and all liabilities, judgments, claims, settlements, losses, damages (including
any diminution in value as appropriate), reasonable fees (including attorneys'
and other experts' fees and disbursements), liens, taxes, penalties, obligations
and expenses (collectively, "Losses") incurred or suffered by any such person or
entity arising from, by reason of or in connection with any misrepresentation or
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or any certificate or other document delivered by
the Company under this Agreement. The Company shall indemnify and hold harmless
the Buyer and its Affiliates and each of their members, directors, officers,
employees and other agents and representatives from and against any and all
Losses incurred or suffered by the Buyer, arising from, by reason of or in
connection with any third party claim or action, or potential or threatened
claim or action, related to this Agreement and the transactions contemplated
hereby.
(b) The Company shall not have any liability under Section
13(a) unless the aggregate of all Losses relating thereto for which the Company
would, but for this Section 13(b), be liable exceeds $50,000, in which case the
Buyer shall be entitled to all Losses regardless of the limitation set forth in
this sentence. The limitation on liability set forth in the immediately
preceding sentence shall not apply (i) in the event of fraud, intentional
misrepresentation or intentional breach or (ii) in the case of any
representation or warranty set forth in Section 3(a) or Section 3(c).
(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
<PAGE>
existence, nature and amount of potential loss. Failure to give such notice
shall not affect the rights of the Indemnified Party, except to the extent that
the Indemnifying Party shall have been materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in and, if (i) such
claim can properly be resolved by money damages alone and the Indemnifying Party
has the financial resources to pay such damages and (ii) the Indemnifying Party
admits that this indemnity fully covers the claim or litigation, the
Indemnifying Party shall be entitled to direct the defense of any claim at its
expense, but such defense shall be conducted by legal counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall be liable to
an Indemnified Party for any settlement of any action or claim without the
consent of the Indemnifying Party; provided that the Indemnifying Party shall
not unreasonably withhold its consent to any such settlement. No Indemnifying
Party shall, except with the consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability and equitable claims in
response to such claim or litigation.
(e) Nothing contained in this Article 13, or elsewhere in this
Agreement, shall be deemed an election of remedies under this Agreement or limit
in any way the liability of any party under any other agreement to which such
party is a party relating to this Agreement or the transactions contemplated by
this Agreement.
14. ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other party; provided that notwithstanding the
foregoing, the Buyer may assign this Agreement and the rights and obligations
hereunder, in whole or in part, to an Affiliate. Any instrument purporting to
make an assignment in violation of this Section shall be void. All covenants,
agreements, representations, warranties and undertakings in this Agreement made
by and on behalf of any party hereto shall bind and inure to the benefit of the
successors and permitted assigns of such party.
15. BENEFITS OF AGREEMENT. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective 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
<PAGE>
person includes its permitted successors and assigns; (vi) a reference to GAAP
refers to United States GAAP; and (vii) a reference in this Agreement to an
Article, Section, Exhibit or Schedule is to the Article, Section, Exhibit or
Schedule of this Agreement.
17. GENERAL. All Exhibits, Annexes, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
18. REGISTRATION OF REGISTRABLE SECURITIES.
(a) Shelf Registration.
(i) The Company shall (x) within thirty (30) days of
the Closing Date file with the Securities and Exchange Commission (the
"SEC") a Shelf Registration Statement (as defined below) relating to
the offer and sale of (a) the Shares of Common Stock (including shares
issuable or issued upon the exercise of any Warrants or the exercise of
any other exchange, conversion or similar right), (b) any securities
issued in respect of any such shares by way of a stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization and (c) the
Warrants (collectively, the "Registrable Securities") by the holders of
Registrable Securities from time to time in accordance with the methods
of distribution elected by such holders and set forth in such Shelf
Registration Statement. "Register," "registered" and "registration"
each refer to a registration of Registrable Securities effected by
filing with the SEC a registration statement in compliance with the
Securities Act and the declaration or ordering by the SEC of
effectiveness of such registration statement. "Shelf Registration"
means a registration effected pursuant to this Section 18. "Shelf
Registration Statement" means a shelf registration statement of the
Company filed with the SEC pursuant to the provisions of this Section
18 which covers some or all of the Registrable Securities, as
applicable, on Form S-3 under Rule 415 under the Securities Act, or any
similar rule that may be adopted by the SEC, amendments and supplements
to such registration statement, including post-effective amendments, in
each case including the prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein; provided,
however, that the registration of the Warrants pursuant to this Section
18 is subject to the prior approval of the Company's Board of
Directors.
(ii) The Company shall use its best efforts (x) to
cause such Shelf Registration Statement to be declared effective under
the Securities Act as promptly as practicable but in no event more than
ninety (90) days after the Closing Date and (y) after the effectiveness
of the Shelf Registration Statement, promptly upon the request of the
Buyer or any permitted transferee or assignee pursuant to Section 18(h)
holding any Registrable Securities (such transferees and assignees,
together with the Buyer, are collectively referred to in this Section
18 as the "Investors"), to take any action necessary to register the
sale of any Registrable Securities of such Investor and to identify
such Investor as a selling securityholder.
(iii) If the Shelf Registration Statement covering
the Registrable Securities required to be filed by the Company under
Section 18(a)(i) is not declared effective by ninety (90) days after
<PAGE>
the Closing Date (the "Required Effective Date"), then the Company will
make payments to the Buyer in such amounts and at such times as shall
be determined pursuant to this Section 18(a)(iii). The amount to be
paid by the Company to the Buyer shall be equal to one (1) percent of
the Purchase Price per calendar week (or any pro rata portion thereof)
from the Required Effective Date until the Shelf Registration Statement
is declared effective by the SEC and shall be paid to the Buyer based
upon the period between (x) the Required Effective Date and the first
Computation Date and (y) each Computation Date thereafter and the
immediately preceding Computation Date (the "Periodic Amount"). The
full amount of each Periodic Amount shall be paid to the Buyer in
immediately available funds within five (5) days after each Computation
Date. Notwithstanding the foregoing, the amount payable by the Company
pursuant to this provision shall not be payable (x) to the extent any
delay in the effectiveness of the Shelf Registration Statement occurs
because of an act of, or a failure to act or to act timely by, the
Buyer or its counsel in connection with any act for which the Buyer and
its counsel have had adequate and sufficient notice, or (y) in the
event all of the Registrable Securities may be sold pursuant to Section
(k) of Rule 144 promulgated under the 1993 Act. As used in this
Section, "Computation Date" means the date which is thirty (30) days
after the Required Effective Date, and, if the Shelf Registration
Statement required to be filed by the Company pursuant to this Section
is not then effective, thirty (30) days after the previous Computation
Date (pro rata for any partial period) until the Shelf Registration
Statement is so declared effective by the SEC.
(b) Registration Procedures. In connection with any
Shelf Registration Statement, the Company shall do each of the following:
(i) prepare promptly, and file with the SEC by thirty
(30) days after the Closing Date, a Shelf Registration Statement with
respect to the Registrable Securities and use its best efforts to cause
to keep the Shelf Registration Statement continuously effective in
order to permit the prospectus forming part thereof to be usable by the
Investors for a period (the "Registration Period") equal to the
earliest of (1) five years from the effective date of such Shelf
Registration Statement, (2) the date when each Investor may sell all
Registrable Securities held by such Investor pursuant to Section (k) of
Rule 144 and (3) the date the Investors no longer owns any Registrable
Securities, which Shelf Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein)
shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading;
(ii) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Shelf
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Shelf Registration Statement effective
and current during the entire Registration Period and, at all times
during the Registration Period, to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by the Shelf Registration Statement, including such
amendments and supplements as may be necessary, until all of such
<PAGE>
Registrable Securities have been disposed of in accordance with the
intended method of disposition from time to time by prospective seller
or sellers of such Registrable Securities as set forth in the Shelf
Registration Statement;
(iii) furnish to each selling Investor, and its legal
counsel identified to the Company, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Shelf Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement
thereto, (2) each letter written by or on behalf of the Company to the
SEC or the staff of the SEC and each item of correspondence from the
SEC or the staff of the SEC relating to such Shelf Registration
Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment),
and (y) such number of copies of a prospectus in conformity with the
requirements of the Securities Act, and such other documents, as such
Investor may reasonably request in order to facilitate the public sale
or other disposition of the Registrable Securities owned by such
Investor;
(iv) permit a single firm of counsel designated by
the Buyer and reasonable satisfactory to the Company to review the
Shelf Registration Statement and all amendments and supplements thereto
at a reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects in written notice to the Company given within three (3)
business days of counsel's receipt of the Shelf Registration Statement
or any amendment or supplement thereto;
(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;
<PAGE>
(viii) use its best efforts to cause the Registrable
Securities to be listed for trading on the American Stock Exchange (or
on any other national securities exchange on which the Company's Common
Stock is then listed);
(ix) provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than
the effective date of the Shelf Registration Statement;
(x) cooperate with the Investors to facilitate the
timely preparation and delivery of certificates for the Registrable
Securities to be offered pursuant to the Shelf Registration Statement
and enable such certificate for the Registrable Securities to be in
such denominations or amount as the case may be, as the Investors may
reasonable request; and
(xi) take all other reasonable actions necessary to
expedite and facilitate disposition by any Investor of the Registrable
Securities pursuant to the Shelf Registration Statement.
(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.
<PAGE>
(e) Expenses. All expenses incurred in complying with
this Section 18, including, without limitation, all registration, qualifications
and filing fees (including all expenses incident to filing with the American
Stock Exchange), fees and expenses of complying with securities and "blue sky"
laws, printing expenses and fees and disbursements of counsel for the Company
and one counsel for the Investors, and of the independent certified public
accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to this Section 18 shall
not be borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any
Registrable Securities under the Securities Act pursuant to this
Section 18 or registration or qualification of any 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
<PAGE>
underwriter specifically for use in the preparation thereof and (ii) to
any broker or other person acting on behalf of such seller to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any representation or other statement of such broker or
other person that is not in conformity with the preliminary prospectus
or prospectus.
(ii) Before Registrable Securities held by a
prospective seller shall be included in any registration pursuant to
this Section 18 such prospective seller and any underwriter acting on
its behalf shall have agreed to indemnify and hold harmless (in the
same manner and to the same extent as set forth in (i) above) the
Company, each director of the Company, each officer of the Company who
shall sign such registration statement and any person who controls the
Company within the meaning of the Securities Act, with respect to any
untrue statement or omission from such registration statement, any
preliminary prospectus or prospectus contained therein, or any
amendment or supplement thereof, if such untrue statement or omission
was made in reliance upon and in conformity 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,
<PAGE>
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 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
<PAGE>
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 Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a
duly authorized officer of each of the Buyer and the Company as of the date
first above written.
MEDIA LOGIC, INC.
By: /s/William E. Davis, Jr.
------------------------
William E. Davis, Jr.
Chief Executive Officer
IMPRIMIS SB L.P.
By: IMPRIMIS SB GP LLC,
its General Partner
By: WEXFORD MANAGEMENT LLC,
its Manager
By: /s/Robert H. Holtz
------------------
Name: Robert H. Holtz
Title: Senior Vice President
Address of Buyer: 411 West Putnam Avenue
Suite 125
Greenwich, CT 06830
Telephone No.: (203) 862-7000
Telecopier No.: (203) 862-7300
<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.
<PAGE>
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE
SECURITIES LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN
SAID LAWS. THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS AND THE SHARES
UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933,
(2) SUCH WARRANTS ARE TRANSFERRED PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE,
UNDER SUCH ACT OR (3) MEDIA LOGIC, INC. SHALL HAVE RECEIVED AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR
STATE ACTS WILL BE INVOLVED IN SUCH TRANSFER.
WARRANT NO. WX-1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE,
OF
MEDIA LOGIC, INC.
THIS IS TO CERTIFY THAT IMPRIMIS SB L.P., or such holder's
registered assigns (the "Investor"), is the owner of 666,667 Warrants (as
defined below), each of which entitles the registered holder thereof to purchase
from MEDIA LOGIC, INC., a Massachusetts corporation (the "Company"), one fully
paid, duly authorized and nonassessable share of Common Stock, par value $0.01
per share, of the Company (the "Common Stock"), at any time or from time to time
on or before 5:00 p.m., New York City time, on December 29, 2002, at an exercise
price of $1.50 per share (the "Exercise Price"), all on the terms and subject to
the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of
each such Warrant (the "Number Issuable"), which is initially one (1) share, is
subject to adjustment from time to time pursuant to the provisions of Section 2
of this Warrant Certificate. The Warrants evidenced by this certificate are part
of a series of Warrants being issued by the Company on the Issue Date (the
"Warrants"). The execution and delivery of this Warrant Certificate is a
condition precedent to the obligations of the Investor under the Securities
Purchase Agreement, dated as of December 22, 1997, between the Investor and the
Company (the "Securities Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall
have the meanings given them in Section 12 hereof.
Section 1. Exercise of Warrant. (a) The Warrants evidenced
hereby may be exercised, in whole or in part, by the registered holder hereof at
any time or from time to time on or before 5:00 p.m., New York City time, on
December 29, 2002, upon delivery to the Company at the principal executive
office of the Company in the United States of America, of (i) this Warrant
Certificate, (ii) a written notice, in the form annexed hereto and entitled
"Election To Purchase" and (iii) payment of the Exercise Price for the shares of
Common Stock issuable upon exercise of such Warrants, which shall be payable by
a certified or official bank check payable to the order of the Company
(collectively, the "Warrant Exercise Documentation").
<PAGE>
(b) As promptly as practicable, and in any event within five
(5) Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (a) certificates representing the
number (rounded up to the nearest full share) of validly issued, fully paid and
nonassessable shares of Common Stock specified in the Warrant Exercise
Documentation, and (b) if less than the full number of Warrants evidenced hereby
are being exercised, a new Warrant Certificate or Certificates, of like tenor,
for the number of Warrants evidenced by this Warrant Certificate, less the
number of Warrants then being exercised. Such exercise shall be deemed to have
been made at the close of business on the date of delivery of the Warrant
Exercise Documentation so that the Person entitled to receive shares of Common
Stock upon such exercise shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. No such surrender
shall be effective to constitute the Person entitled to receive such shares as
the record holder thereof while the transfer books of the Company for the Common
Stock are closed for any purpose (but not for any period in excess of five
days); but any such surrender of this Warrant Certificate for exercise during
any period while such books are so closed shall become effective for exercise
immediately upon the reopening of such books, as if the exercise had been made
on the date the Warrant Exercise Documentation was received and for the Number
Issuable of Common Stock specified in the Warrant Exercise Documentation and at
the Exercise Price.
(c) The Company shall pay all expenses in connection with, and
all taxes and other governmental charges (other than income taxes of the holder)
that may be imposed in respect of, the issue or delivery of any shares of Common
Stock issuable upon the exercise of the Warrants evidenced hereby. The Company
shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for shares
of Common Stock in any name other than that of the registered holder of the
Warrants evidenced hereby.
Section 2. Adjustments.
(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
<PAGE>
which such holder would have owned or had been entitled to receive upon
or by reason of any of the events described above, had such Warrant
been exercised immediately prior to the happening of such event. An
adjustment made pursuant to this clause (i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of any such
subdivision or combination to the close of business on the date upon
which such corporate action becomes effective.
(ii) If after the Issue Date, the Company shall at
any time or from time to time issue or sell (x) shares of Common Stock
or (y) securities convertible into or exchangeable for shares of Common
Stock, or any options, warrants or other rights to acquire shares of
Common Stock (other than (A) shares of Common Stock issued upon
exercise of the Warrants, (B) shares of Common Stock issued upon
conversion of the Debentures outstanding on the Issue Date that have
been amended pursuant to Section 7(i) of the Securities Purchase
Agreement, (C) shares of Common Stock issued pursuant to an employee
stock option plan, stock bonus plan or other incentive compensation
plan or award, each as approved by the Company's Board of Directors
that, in the aggregate with all other shares of Common Stock issued
pursuant to any such plans (whether or not approved by the Company's
Board of Directors) constitute no more than ten percent (10%) of the
issued and outstanding Common Stock, and (D) shares of Common Stock
issued as a result of adjustments made under agreements related to
shares described in 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
<PAGE>
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 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
<PAGE>
2(a)(ii)), then, and in each such case, the Number Issuable then in
effect shall be adjusted by multiplying the Number Issuable in effect
immediately prior to the date of such distribution by a fraction (x)
the numerator of which shall be the Current Market Price per share on
the record date referred to below and (y) the denominator of which
shall be such Current Market Price per share less the then Fair Market
Value (as determined in good faith by the Board of Directors of the
Company, a certified resolution with respect to which shall be mailed
to the holder of the Warrants evidenced hereby) of the portion of the
cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator shall in no event be
zero). Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately
following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) In case the Company at any time or from time to
time shall take any action which could have a dilutive effect on the
number of shares of Common Stock that may be issued upon exercise of
the Warrants, other than an action described in any of Section 2(a)(i)
through 2(a)(iii), inclusive, or Section 2(b), then, the Number
Issuable shall be adjusted in such manner and at such time as the Board
of Directors of the Company reasonably determines to be equitable under
the circumstances (such determination to be 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
<PAGE>
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
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.
<PAGE>
Section 3. Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or
from time to time the holders of the Warrants evidenced hereby are entitled to
notice pursuant to the terms of Section 2, such notice shall provide (a) the
date on which a record is to be taken for the purpose of such dividend,
distribution, subdivision, combination or issuance of shares of Common Stock,
securities convertible into or exchangeable for shares of Common Stock or
options, warrants or other rights, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision, combination, shares of Common Stock, securities
convertible into or exchangeable for shares of Common Stock or options, warrants
or other rights, are to be determined, (b) the issue date (as defined in Section
2(a)(ii) hereof) or (c) the date on which such Transaction, dissolution,
liquidation or winding up is expected to become effective.
Section 5. Certain Covenants. The Company covenants and agrees
that all shares of capital stock of the Company which may be issued upon the
exercise of the Warrants evidenced hereby will be duly authorized, validly
issued and fully paid and nonassessable. The Company shall at all times reserve
and keep available for issuance upon the exercise of the Warrants, such number
of its authorized but unissued shares of Common Stock as will from time to time
be sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common stock to permit such reservation or to permit the exercise of all
outstanding Warrants. The Company shall prepare and file, and cooperate with the
holder of this Warrant so that it may prepare and file, in each case within five
Business Days of a request by such holder, notification and report forms in
compliance with the HSR Act, and shall otherwise fully comply with the
requirements of the HSR Act, to the extent required in connection with the
exercise of the Warrant. The Company shall bear all of its own expenses and all
of its own out of pocket expenses (including reasonable attorneys' fees, charges
and expenses) and filing fees of such holder in connection with any such
preparation and filing.
Section 6. Registered Holder. The person in whose name this
Warrant Certificate is registered shall be deemed the owner hereof and of the
Warrants evidenced hereby for all purposes.
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.
<PAGE>
Section 8. Denominations. The Company covenants that it will,
at its expense, promptly upon surrender of this Warrant Certificate at the
principal executive office of the Company in the United States of America,
execute and deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an institutional investor, its own unsecured indemnity agreement shall be deemed
to be reasonably satisfactory), or, in the case of mutilation, upon surrender
and cancellation thereof, the Company will issue a new Warrant Certificate of
like tenor for a number of Warrants equal to the number of Warrants evidenced by
this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISIONS).
Section 11. Rights Inure to Registered Holder. The Warrants
evidenced by this Warrant Certificate will inure to the benefit of and be
binding upon the registered holder thereof and the Company and their respective
successors and permitted assigns. This Warrant Certificate shall be for the sole
benefit of the registered holder thereof. Nothing in this Warrant Certificate
shall be construed to give the registered holder hereof any rights as a holder
of shares of Common Stock until such time, if any, as the Warrants evidenced by
this Warrant Certificate are exercised in accordance with the provisions hereof.
Section 12. Definitions. For the purposes of this Warrant
Certificate, the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Common Stock" shall have the meaning assigned to such term in
the Preamble hereof.
"Company" shall have the meaning assigned to such term in the
Preamble hereof.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) if the Common Stock is then
listed on a national securities exchange, designated as a Nasdaq Stock Market
security or quoted in the over-the-counter-market by a member firm of the NYSE,
the average daily Market Price of the Common Stock for those days during the
period of 15 days, ending on such date, on which the national securities
exchanges were open for trading, and (b) if the Common Stock is not then so
listed, designated or quoted, the Market Price on such date.
"Debentures" shall mean the Company's 7% Convertible
Subordinated Debentures Due March 24, 2000 and the 7% Convertible Debentures Due
October 29, 2000.
"Exercise Price" shall have the meaning assigned to such term
in the Preamble hereof.
<PAGE>
"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.
"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.
<PAGE>
"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 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
MEDIA LOGIC, INC.
By: /s/William E. Davis, Jr.
------------------------
William E. Davis, Jr.
Chief Executive Officer and President
<PAGE>
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to ____________________ whose Social Security Number or Tax ID
Number is _________________ and whose record address is
______________________________, and irrevocably appoints ________________ as
agent to transfer this security on the books of the Company. Such agent may
substitute another to act for such agent.
Date:_________________________
------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
<PAGE>
[Form Of Election To Purchase]
[To be executed upon exercise of the Warrants]
TO: MEDIA LOGIC, INC.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase ____ shares of
Common Stock issuable upon the exercise of such Warrants and requests
that certificates for such shares be issued in the name of:
(Please insert social security, tax identification or other identifying
number)
---------------------------
---------------------------
---------------------------
(Please print name and address)
Date:_________________________
------------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Warrant Certificate)
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as December 22,
1997, is entered into by and between MEDIA LOGIC, INC., a Massachusetts
corporation (the "Company"), and WEXFORD SPECTRUM INVESTORS LLC, a Delaware
limited liability company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of the common stock, $.01
par value per share, of the Company (the "Common Stock"), upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. Upon the terms and subject to the conditions set
forth in this Agreement, the undersigned hereby agrees to purchase from the
Company 566,666 shares (the "Shares") of Common Stock for ninety cents ($0.90)
per share, for an aggregate purchase price (the "Purchase Price") of
$509,999.40. The Purchase Price for the Shares shall be payable in United States
Dollars.
b. Form of Payment. In consideration of the issuance and sale
of the Shares and the Warrants (as hereinafter defined) by the Company to the
Buyer, the Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars pursuant to the wire instructions
set forth in Section 1(c). Immediately upon payment by the Buyer to the Company
of the Purchase Price of the Shares, the Company shall deliver certificates
evidencing such Shares duly executed on behalf of the Company and countersigned
by the Company's transfer agent to the Buyer, together with warrant
certificates, the form of which is attached hereto as ANNEX I hereto, evidencing
the Warrants (the "Warrants"), duly executed on behalf of the Company, and the
Shares and Warrants shall each be free and clear of all security interests,
liens, pledges, charges, escrows, options, rights of first refusal,
encumbrances, agreements, arrangements, commitments or other claims of any kind
or character (collectively, the "Claims"). The obligation of the parties hereto
as set forth in this Section 1(b) are subject to the satisfaction of the
conditions set forth (i) in the case of the Buyer, in Section 7(c) and (ii) in
the case of the Company, in Section 6(d), each of which may not be waived by
either party hereto.
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:
<PAGE>
FLEET BANK OF MA
Account Name MEDIALOGIC, INC.
Account No. 050-0759123 Bank ABA #011500010
SWIFT address: FLTBUS3B Bank Phone # 800/841-4000
Please reference invoice # on Transfer
d. Affiliates. For purposes of this Agreement (except as expressly
defined in Section 3(t) solely for purposes of Section 3(t)), "Affiliate" shall
mean (a) such as is defined in the Securities Exchange Act of 1934, as amended,
and (b) as to each other, IMPRIMIS SB L.P. and WEXFORD SPECTRUM INVESTORS LLC.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Shares pursuant
to the Registration Statement (as hereinafter defined), the Buyer is purchasing
the Shares in the ordinary course of its business and for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof or any arrangement or understanding with any other persons regarding the
distribution or purchase of such Shares;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Shares;
c. All subsequent offers and sales of the Shares by the Buyer
shall be made pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration;
d. The Buyer understands that the Shares are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and 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
<PAGE>
and to review the Company's (1) Annual Report on Form 10-K for the fiscal year
ended March 31, 1997 (the "Form 10-K"), (2) Amendment No. 1 to the Form 10-K on
Form 10-K/A, (3) Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1997 and September 30, 1997 and (4) Proxy Statement dated August 11,
1997 (collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources
it can practically bring to bear on the purchase of the Shares, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to making an investment decision like that involved
in the purchase of the Shares and the Buyer understands that its investment in
the Shares involves a high degree of risk;
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Shares;
h. The Buyer has full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity (regardless of whether such enforcement is considered in a proceeding at
law or in equity) and to bankruptcy, insolvency, fraudulent transfer,
reorganization moratorium and other similar laws affecting creditors' rights
generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Shares.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Organization, Standing and Power. (i) The Company and its
wholly-owned subsidiary, MediaLogic ADL, Inc. (the "Subsidiary"), are duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and the State of Delaware, respectively, and each
has all requisite corporate power and authority to own, lease and operate its
respective properties and to carry on its respective businesses as now being
conducted and as currently proposed to be conducted. The Company and the
Subsidiary are duly qualified to do business and are in good standing in each
jurisdiction in which such qualification is necessary because of the property
owned, leased or operated by them or because of the nature of their business as
now being conducted, except for those jurisdictions where the failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the Company
and the Subsidiary taken as a whole ("Material Adverse Effect").
(ii) The Company has, prior to the execution and delivery by
the Company of this Agreement, delivered to the Buyer a true and complete copy
of the Certificate of Incorporation (together with any amendments thereto) and
the By-laws of the Company. The minute books of the Company are true and
complete in all material respects.
<PAGE>
b. Securities Purchase Agreement; Warrants and Stock. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, the certificates evidencing the Warrants, and the certificates
evidencing the Shares and to perform all of its obligations and undertakings
under such agreements and to carry out the transactions contemplated under such
agreements. This Agreement, the certificates evidencing the Shares and the
Warrants and the transactions contemplated thereby, and the issuance and sale of
the Shares and the Warrants, have each been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance by the
Company of this Agreement or the Warrants. This Agreement has been duly executed
and delivered by the Company and this Agreement is, and the Warrants, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
c. Capitalization; Equity Interests. (i) As of the date of
this Agreement, the authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, of which 8,563,660 shares are issued and
outstanding. The outstanding shares of Common Stock have been duly authorized
and issued and are fully paid and non-assessable and not subject to any purchase
option or right of first refusal or preemptive, subscription or similar rights.
The Shares have been duly authorized and, when issued in accordance with this
Agreement, will (i) be duly issued, fully paid and non-assessable and not
subject to any purchase option or right of first refusal or preemptive,
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder. The shares of Common Stock
initially issuable upon exercise of the Warrants (the "Exercise Shares") have
been duly authorized and reserved for issuance upon exercise and, when issued
upon such exercise, will (ii) be duly issued, fully paid and non-assessable and
not subject to any purchase option, or right of first refusal or preemptive,
subscription or similar rights and (ii) not subject the holder thereof to
personal liability by reason of being such holder.
(ii) Except for this Agreement, the Warrants and as set forth
in Schedule 3(c) of the Disclosure Schedule, (x) there are no bonds, debentures,
notes or other indebtedness or securities of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote, (y) there
are no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which the Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of Common Stock or
other voting securities of the Company or obligating the Company to issue,
grant, extend or enter into any such security, option, warrant, call right,
commitment, agreement, arrangement or undertaking and (z) there are no
outstanding rights, commitments, agreements, arrangements or undertakings of any
kind obligating the Company to repurchase, redeem or otherwise acquire any
shares of Common Stock or other voting securities of the Company or any
securities of the type described in clauses (x) or (y) above. No dividends on
any shares of Common Stock have been declared but not yet paid.
(iii) Except for the Subsidiary, the Company does not have any
subsidiaries or own or hold, directly or indirectly, any equity or other
security interests in any corporation, partnership, limited liability company,
<PAGE>
joint venture or other entity. The Company is not subject to any liability for
any claim that the Company violated any applicable Federal or state securities
laws in connection with the issuance of Common Stock or other securities. There
are no restrictions on the transfer of shares of Common Stock other than those
imposed by relevant state and Federal securities laws. There are no voting
trusts, voting agreements, proxies or other agreements or instruments with
respect to the voting of the Common Stock to which the Company is a party, or to
the best of the knowledge of any of the Company's officers, directors or
employees (the "Company's Knowledge"), among or between any persons other than
the Company. Except as set forth in Schedule 3(c) of the Disclosure Schedule, no
person has the right to demand or other rights to cause the Company to file any
registration statement under the 1933 Act relating to any securities of the
Company presently outstanding or any right to participate in any such
registration statement.
(iv) The Company has registered its Common Stock pursuant to
Section 12 of the Exchange Act, and the Common Stock is listed and traded on the
American Stock Exchange ("AMEX").
d. Non-contravention. The execution and delivery of this
Agreement and the Warrants by the Company, the issuance of the Shares and the
Warrants, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Warrants and compliance by the Company with
any of the provisions hereof or thereof do not and will not conflict with or
result in a breach or violation by the Company of any of the terms or provisions
of, or constitute a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or to any increased,
additional, accelerated or guaranteed rights or entitlement of any person or
entity under, or result in the creation of any Claim on the properties or assets
of the Company under (i) the restated articles of organization or by-laws of the
Company, (ii) any indenture, mortgage, note, bond, license, lease, contract,
commitment, arrangement, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or (iv)
to its knowledge, any judgment, decree or order of any court, United States
federal or state regulatory body, administrative agency, or other governmental
body having jurisdiction over the Company or any of its properties or assets (v)
any license, franchise, permit or other similar authorization held by the
Company, except such conflict, breach or default which would not have a Material
Adverse Effect on the transactions contemplated herein.
e. Financial Statements. (i) The consolidated financial
statements (the "Financial Statements") of the Company set forth in the (A)
Company's Annual Report on Form 10-K for the year ended March 31, 1997, reported
on by Arthur Andersen LLP, (B) Amendment No. 1 to the Form 10-K on Form 10-K/A,
and (C) Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1997 and September 30, 1997, in each case fairly present the
consolidated financial position of the Company as of such dates and the
consolidated results of operation and cash flows for such periods then ended in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis. Arthur Andersen LLP is an independent accountant as defined
under the 1933 Act and the rules and regulations promulgated thereunder.
<PAGE>
(ii) All reserves established by the Company are reflected on
the balance sheets contained in the Financial Statements or in the footnotes to
the Financial Statements of the Company and in management's reasonable estimate
are adequate in the aggregate and there are no loss contingencies that are
required to be accrued by Statement of Financial Accounting Standard No. 5 of
the Financial Accounting Standards Board which are not provided for on such
balance sheets. As of the date hereof, except for liabilities (A) reflected on
or reserved against on the balance sheet as of September 30, 1997 (the "Latest
Balance Sheet") (B) incurred in the ordinary course of the Company's business
and consistent with past practice or (C) contemplated by this Agreement, the
Company has no liabilities (absolute, accrued, fixed, contingent, known, unknown
or otherwise) which would be required by GAAP to be reflected or reserved
against on the balance sheet of the Company and which would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(iii) Any forecasts and projections previously delivered to
the Buyer by the Company have been prepared in good faith and on the basis of
assumptions that are fair and reasonable in light of current and reasonably
foreseeable circumstances.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Shares or the Warrants
to the Buyer as contemplated by this Agreement, except such authorizations,
approvals and consents that have been obtained and except as contemplated in
Section 4(s) of this Agreement.
g. SEC Filings. None of the SEC filings with the Securities
and Exchange Commission since the filing of the 10-K on March 31, 1997
contained, at the time they were filed, any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements made therein in light of the circumstances under which they
were made, not misleading. The Company has since December 22, 1996 timely filed
all requisite forms, reports and exhibits thereto with the Securities and
Exchange Commission.
h. Absence of Changes. Except as set forth on Schedule 3(h) of
the Disclosure Schedule and except as may apply in the context of the Securities
Purchase Agreement entered into between the Company and an Affiliate of the
Buyer of even date herewith (the "Affiliate Purchase Agreement"), since
September 30, 1997, the Company and the Subsidiary have operated in the ordinary
course consistent with past practice and there has not been:
(i) any event, occurrence or development or state of
circumstances of facts which has had or would reasonably be expected to have a
Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any Claim or
obligation of the Company or the Subsidiary or any amendment, termination or
waiver of any rights of value to the Company or the Subsidiary, except in the
ordinary course of business and consistent with past practice;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of Common Stock of the
Company or the Subsidiary any direct or indirect redemption, purchase or other
acquisition of any such shares;
<PAGE>
(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;
(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.
<PAGE>
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 3(k) of the Disclosure Schedule, no Event of Default, as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company's financial condition or results of
operations.
l. Assets, Property And Related Matters; Real Property. (i)
The Company or the Subsidiary has good title to, or a valid leasehold interest
in, as applicable, all of the assets reflected on the Financial Statements, free
and clear of all Claims. To the Company's Knowledge, such assets (other than
inventory) are in good operating condition and repair, subject to ordinary wear
and tear and constitute all of the properties, interests, assets and rights held
for use or used in connection with the business and operations of the Company or
the Subsidiary and constitute all those necessary to continue to operate the
business of the Company or the Subsidiary, as the case may be, consistent with
current and historical practice.
(ii) All leases of real property to which the Company or the
Subsidiary is a party ("Leases"), as set forth in Schedule 3(1) of the
Disclosure Schedule, are in writing and in full force and effect and constitute
valid and binding obligations of the Company and, to the Company's Knowledge, of
the other parties thereto, enforceable in accordance with their respective terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Company or the
Subsidiary holds good and valid title to the leasehold interests under the
Leases for the term of each such Lease, free and clear of all Claims. The Leases
have not been modified in any material respect, except to the extent that such
modifications are disclosed, in writing, in a copy delivered to the Buyer. There
exists no material default, or any event which upon notice or the passage of
time, or both, would give rise to any material default, in the performance of
the Company or the Subsidiary or, to the Company's Knowledge, by any lessor
under any such lease. Except as disclosed on Schedule 3(l) of the Disclosure
Schedule, the Company or the Subsidiary have not, and to the Company's
Knowledge, no other person has, granted any oral or written right to anyone
other than the Company or the Subsidiary to lease, sublease or otherwise occupy
any of its properties through the end of the applicable lease periods.
(iii) The Company does not own, and has not previously owned,
any real property.
m. Patents, Trademarks and Similar Rights. (i) Set forth on
Schedule 3(m) of the Disclosure Schedule is a true and complete list of the
patents, patent applications, trademarks (registered or unregistered) and
<PAGE>
service marks (and any applications or registrations therefor), trade names,
corporate names, copyrights, copyright registrations and other intellectual
property that currently exists in written form owned or filed by, or licensed
to, the Company or the Subsidiary or used in the conduct of the Company's or the
Subsidiary's business as presently conducted ("Intellectual Property"). With
respect to registered trademarks, Schedule 3(m) of the Disclosure Schedule sets
forth a list of all jurisdictions in which such trademarks are registered or
applied for and all registration and application numbers. To the Company's
Knowledge, the Company has all rights to Intellectual Property as are used or
are necessary in connection with the businesses of the Company and the
Subsidiary as presently conducted, and the Company owns, or has the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person or
entity, all Intellectual Property free and clear of all Claims whatsoever. The
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such right.
(ii) Neither the Company nor the Subsidiary has granted any
options, licenses or agreements of any kind relating to Intellectual Property or
the marketing or distribution thereof. Neither the Company nor the Subsidiary is
bound by or a party to any options, licenses or agreements of any kind relating
to the intellectual property of any other person or entity. The conduct of the
business of the Company and of the Subsidiary as presently conducted does not,
to the Company's Knowledge, violate, conflict with or infringe the intellectual
property of any other person or entity. No claims are pending, or to the
Company's Knowledge, threatened, against the Company or the Subsidiary by any
person or entity with respect to the ownership, validity, enforceability,
effectiveness or use of any Intellectual Property and, during the past three
years, neither the Company nor the Subsidiary has received any communications
alleging that the Company has violated any rights relating to intellectual
property of any person or entity.
n. Agreements. (i) Schedule 3(n) of the Disclosure Schedule
contains a true and complete list or description of all written or oral
contracts, agreements and other instruments ("Contracts") to which the Company
or the Subsidiary is a party (A) relating to indebtedness for money borrowed or
the deferred purchase price of property or services or capital leases in excess
of $50,000, (B) relating to any forward commitments or to other commitments in
excess of $50,000 in any given year, (C) relating to any joint venture,
partnership or limited liability company; (D) relating to the employment or
compensation of any director, officer or shareholder of the Company or the
Subsidiary, or any Affiliate of such companies, and not disclosed in the proxy
statement filed in connection with the Company's fiscal year ended March 31,
1997, (E) relating to the employment or compensation of any employee,
consultant, independent contractor or other agent of the Company or the
Subsidiary, or any Affiliate of such companies, involving a payment in excess of
$50,000 in any given year, (F) relating to the sale or other disposition of any
assets, properties or rights (other than the sale of inventory), (G) which
restricts the Company's or the Subsidiary's ability to do business in any
geographic area or grants to any person exclusive or similar rights in any line
of business or in any geographic area, (I) which restricts the Company's 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
<PAGE>
contribution to, or other investment in, any person or entity not in excess of
$50,000 in the aggregate; or (M) that is otherwise material to the business,
properties or assets of the Company or the Subsidiary and entered into other
than in the ordinary course of business.
(ii) All Contracts are valid, binding and in full force and
effect as to the Company or the Subsidiary and neither the Company nor, to the
Company's Knowledge, any other party thereto is in breach or violation of, or
default under, any such Contracts in any material respect.
o. Related Party Transactions. Except as set forth on Schedule
3(o) of the Disclosure Schedule, no current or former partner, director,
officer, employee or shareholder of the Company or the Subsidiary or any
associate or Affiliate thereof, or any parent, spouse, child, brother, sister or
any other relative with a relationship (by blood, marriage or adoption) of not
more remote than first cousin of any of the foregoing (collectively, "Family
Members"), is presently, or during the 12-month period ending on the date of
this Agreement has been, directly or indirectly (i) a party to any transaction
with the Company (including any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or otherwise requiring payments to, any such director, officer,
employee or shareholder or such associate) or (ii) to the Company's Knowledge,
the direct or indirect owner of an interest in any corporation, firm,
association or business organization (other than the ownership of less than two
percent (2%) of the outstanding capital stock of any publicly traded entity)
which is a present (or potential) competitor, lender, broker or customer of the
Company or the Subsidiary, nor does any member of management or any of their
Family Members receive income from any source other than the Company or the
Subsidiary which relates to the Company's or the Subsidiary's business or should
properly accrue to the Company or the Subsidiary. Schedule 3(o) of the
Disclosure Schedule sets forth a list of all Family Members who are currently
employed or who were employed by the Company or the Subsidiary at any time
during the last three fiscal years together with a description of job, title and
annual salary and bonus for each such person. Neither the Company nor the
Subsidiary has any loans outstanding to any employee, officer, director or
shareholder of the Company or the Subsidiary or to any Family Member.
p. Disclosure. No representation, warranty or statement of the
Company contained in this Agreement, or any other agreement contemplated by this
Agreement, or any certificate, schedule, annex or other writing furnished to the
Buyer by the Company, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statement contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
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.
<PAGE>
s. Brokers. Other than the Placement Agents (as defined
below), no agent, broker, investment banker, person or firm acting on behalf of
the Company or under the authority of the Company is or will be entitled to any
broker's or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties in connection with any of the transactions
contemplated by this Agreement.
t. Small Business Matters. The Company, together with its
"Affiliates" (as that term is defined in Title 13, Code of Federal Regulations,
e121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958 and the regulations thereunder (the "SBIC Act"),
including Title 13, Code of Federal Regulations, e121.301. The information set
forth in the Small Business Administration Forms 480, 652 and Section A of Form
1031 which have been delivered on or prior to the date hereof to the SBIC,
regarding the Company is accurate and complete. Neither the Company nor the
Subsidiary or Affiliates thereof presently engages in, and it shall not
hereafter engage in, any activities , nor shall the Company or its Subsidiary or
Affiliates thereof use directly or indirectly the proceeds from the sale of the
shares of the capital stock of the Company hereunder (including the Warrants and
any capital stock issued respect hereof) for any purpose for which a "small
business investment company" (an "SBIC") (as defined in Section 103(3) of the
SBIC Act) is prohibited from providing funds by the SBIC Act, including Title
13, Code of Federal Regulations Section, ss. 107.720.G.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictions On Transferability. The Company shall not be
required to register the transfer of any Shares on the books of the Company
unless: (i) such securities have been registered under applicable Federal and
state securities laws, (ii) such shares are being transferred pursuant to Rule
144, or any successor rule, promulgated under the 1933 Act or (iii) the Company
shall have been provided with an opinion of counsel reasonably satisfactory to
it to the effect that the proposed transfer is exempt from the registration
requirement of the 1933 Act and the relevant state securities laws.
b. Restrictive Legend. The Buyer acknowledges and agrees that
until such time as the Shares have been registered under the 1933 Act as
contemplated herein and sold in accordance with an effective registration
statement, the Shares shall bear a restrictive legend in substantially the
following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES,
A TRANSFER PURSUANT TO RULE 144, OR ANY SUCCESSOR RULE, UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL OR OTHER REASONABLE ACCEPTABLE
EVIDENCE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Shares and the Warrants to
the Buyer under any United States laws and regulations and any applicable state
securities or "Blue Sky" laws, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
d. Reporting Status. So long as the Buyer beneficially owns
any of the Shares, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company
<PAGE>
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 13 C.F.R. Parts 112, 113 and 117.
(iv) Within 45 days after the end of each fiscal year, and at
any other time reasonably requested by any SBIC, the Company shall deliver to
such SBIC a written assessment, in form and substance satisfactory to such SBIC
of the economic impact of such SBIC's investment in the Company, specifying (1)
the full-time equivalent jobs created or retained in connection with the
investment, and (2) the impact of the investment on the Company's business in
terms of revenue and profits, and on taxes paid by the Company, its subsidiaries
and Affiliates thereof and their respective employees. Upon advance written
request, the Company promptly (and in any event within 20 days of such request)
shall furnish to any SBIC all information (1) reasonably requested by such SBIC
in order for such SBIC to comply with the requirements of 13 C.F.R. Section
107.620 or to prepare and file Small Business Administration Form 468 and (2)
reasonably requested or required by any Governmental Authority asserting
jurisdiction over such SBIC. Any submission of financial information pursuant to
this Section shall be under cover of a certificate executed by the president,
chief executive officer, chief financial officer or treasurer of the Company
certifying that such information (1) relates to the Company, its subsidiaries
and affiliates thereof (2) is accurate and (3) if applicable, has been audited
by the Company's independent auditors.
f. Broker's Fees. The Buyer acknowledges that the Company
intends (i) to pay The Boston Group, L.P. and First Granite Securities, Inc.
(together, the "Placement Agents") fees of ten percent (10%) and two percent
(2%), respectively, of the Purchase Price paid by the Buyer, and (ii) to issue
to the Placement Agents warrants to purchase an aggregate of 250,000 shares of
Common Stock of the Company (the "Placement Agent Warrants", such aggregate
being the total number of Placement Agent Warrants to be issued under this
Agreement and the Affiliate Purchase Agreement) with an exercise price per share
equal to the greater of (a) $2.00 and (b) the Market Price (as defined in
Section 4(h) of this Agreement).
<PAGE>
g. Expenses. The Company shall pay the Buyer a non-accountable
expense reimbursement (the "Expense Reimbursement") of $50,000 to cover the
Buyer's expenses, including legal fees and disbursements. The Expense
Reimbursement shall be payable in United States Dollars. In addition, the
Company shall pay any and all stamp and other documentary taxes payable or
determined to be payable in connection with the issuance of the Shares and
agrees to hold the Buyer harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
h. Warrants. The Company shall issue to the Buyer the
Warrants, which shall consist of five-year warrants to purchase 666,666 shares
of Common Stock (the "Exercise Shares") of which (i) Warrants to purchase
333,333 shares of Common Stock shall be exercisable at a price per share equal
to the greater of (a) $1.50 or (b) the closing or last price of the Common Stock
on the Composite Tape or other comparable reporting system for the trading day
immediately preceding the Closing Date (the "Market Price"), and (ii) Warrants
to purchase 333,333 shares of Common Stock shall be exercisable at a price per
share such that the weighted average exercise price of the 666,666 Warrants
issued by the Company to the Buyer under this Agreement shall equal (a) $2.25,
if the exercise price of the Warrants issued under Section 4(h)(i) is less than
or equal to $1.75, or (b) $2.15, if the exercise price of the Warrants issued
under Section 4(h)(i) is greater than $1.75; provided, however, that in no case
will the exercise price of any Warrants be less than the Market Price.
i. Board of Directors. The Company's Board of Directors shall
refrain from filling one of its two currently existing vacancies until such time
as a Buyer Nominee (as defined below), if any, has been appointed a Director by
the Board of Directors. For the longer of (x) a period of one (1) year beginning
on the Closing Date and (y) the period that the Buyer and its Affiliates hold,
in the aggregate, shares of capital stock equal to at least five percent (5%) of
the outstanding Common Stock of the Company, the Buyer shall have the right to
request that its representative, who shall be reasonably acceptable to the
Company ("Buyer Nominee"), be appointed to the Company's Board of Directors.
Such request shall be made in writing to the Company. Within ten (10) days after
its receipt of such request, the Company's Board of Directors shall appoint the
Buyer Nominee as a member of the Company's Board of Directors (the "Nominee
Appointment"). At the first Company annual shareholders meeting following the
Nominee Appointment and at each Company annual shareholders meeting thereafter,
the Company shall nominate one representative of the Buyer to the Company's
Board of Directors; provided, however, that this subsection 4(i) shall be
applied in concert with Section 4(i) of the Affiliate Purchase Agreement such
that only one (1) representative of IMPRIMIS SB L.P. and WEXFORD SPECTRUM
INVESTORS LLC shall serve on the Company's Board of Directors at any one time
pursuant to Section 4(i) of this Agreement or Section 4(i) of the Affiliate
Purchase Agreement.
j. Conduct Of Business. (i) From the date of this Agreement
until the Closing Date, the Company shall operate its business only in the
ordinary course of business consistent with past practice. The Company shall
not, until the Closing Date, directly or indirectly, cause or permit any state
of affairs, action or omission described in clauses (i) through (xiii) of
Section 3(h).
(ii) From the Closing Date and for so long as the Buyer and
its Affiliates, in the aggregate, hold an amount of shares of Common Stock equal
to at least five percent (5)% of the Common Stock then outstanding, the Company
shall not change its line of business without the prior written consent of the
Buyer.
<PAGE>
(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 defined in Section
1202(d) of the Internal Revenue Code of 1986, as amended), and provide each
licensed SBIC with all information requested by any Governmental Authority to
permit such SBIC to comply with its obligations under the SBIC Act. Each SBIC
shall use commercially reasonable efforts to protect any information which the
Company labels as confidential. If any such confidential information is required
to be disclosed by such SBIC in order to comply with any such request, the SBIC
shall cause to be filed a confidential treatment request on behalf of the
Company seeking to withhold from public availability all of such confidential
information. For purposes of this Section 4(j), the term "Governmental
Authority" shall mean any government or state (or any subdivision thereof),
whether domestic, foreign or multinational (including European Union), or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
k. Further Assurances. Each party shall use all commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, to consummate and make effective the transactions
contemplated by this Agreement as expeditiously as practicable and to ensure
that the conditions set forth in Articles 6 and 7 are satisfied, insofar as such
matters are within the control of any of them.
l. Access And Information. From the date of this Agreement
until the first to occur of (x) the Closing Date and (y) the termination of this
Agreement in accordance with Article 11, the Company shall permit the Buyer and
its representatives to make such investigation of the business, operations and
properties of the Company as the Buyer deems necessary or desirable in
connection with the transactions contemplated by this Agreement. Such
investigation shall include access to the respective directors, officers,
employees, agents and representatives (including legal counsel and independent
accountants) of the Company and the properties, books, records and commitments
of the Company. The Company shall furnish the Buyer and its representatives with
such financial, operating and other data and information, and copies of
documents with respect to the Company or any of the transactions contemplated by
this Agreement, as the Buyer shall from time to time reasonably request. Such
access and investigation shall be made upon reasonable notice and at reasonable
places and times. Such access and information shall not in any way affect or
diminish any of the representations or warranties hereunder. Without limiting
the foregoing, during such period, the Company shall keep the Buyer informed as
to the business and operations of the Company and shall consult with the Buyer
as appropriate.
m. Reporting Requirements. For so long as the Buyer and its
Affiliates, in the aggregate, or its transferees (except transferees who acquire
the Buyers' Common Stock in a transaction not exempt from the registration
requirements of the 1933 Act), hold an amount of shares of Common Stock equal to
at least five percent (5%) of the Common Stock then outstanding, the Buyer shall
have the right to request, and if so requested the Company shall furnish to the
Buyer, the following:
<PAGE>
(i) as soon as practicable after the end of each month and
fiscal quarter, and in any event within 45 days thereafter, copies of: (A) an
unaudited consolidated balance sheet of the Company as at the end of such month
and quarter, (B) unaudited consolidated statements of operations, shareholders'
equity and cash flows of the Company for the period ending with such month and
quarter and setting forth in comparative form the figures for the corresponding
periods in the preceding fiscal year certified by the chief financial officer of
the Company as complete and correct, and having been prepared in accordance with
GAAP (other than monthly balance sheets and statements of operations,
shareholders' equity and cash flows) subject to the absence of footnotes and
changes resulting from year-end adjustments;
(ii) such financial information (other than the information
described in clause (i) above) as the Company and Buyer may agree;
(iii) as soon as practicable after the end of each fiscal year
of the Company, and in any event within 90 days thereafter, copies of: (i) a
consolidated balance sheet of the Company as at the end of such year, and (ii)
consolidated statements of operations, shareholders' equity and cash flows of
the Company for such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, together with supporting
notes thereto and accompanied by an opinion thereon of independent accountants
of recognized national standing, together with a summary prepared by the Company
concerning the Company's operations and financial condition;
(iv) no later than 60 days prior to the end of each fiscal
year of the Company, the proposed annual business plan and budget (including the
capital expenditures and financing plans) of the Company for the next fiscal
year;
(v) promptly after sending, making available, or filing the
same, all reports and financial statements that the Company sends or makes
available to the shareholders of the Company or files with the SEC; and
(vi) any other information respecting the business, properties
or the condition or operations, financial or otherwise, of the Company that the
Buyer may from time to time reasonably request, including, but not limited to,
business units analyses, performance reviews analyses and monthly sales
analyses.
The Buyer agrees that with respect to any information received
by it pursuant to this subsection (m) ("Requested Information"), the Buyer will
use the Requested Information solely for purposes of monitoring and/or assessing
its investment in the Company and not for any other purpose and will keep the
Requested Information confidential. The Buyer acknowledges that if, and to the
extent, it receives Requested Information which is non-public, material
information relating to the Company, it may be subject to legal restrictions in
connection with the "insider trading" provisions of the federal securities laws
with respect to such Requested Information.
n. No Shopping. From the date of this Agreement until the
earlier of (i) the Closing Date and (ii) the date this Agreement is terminated
in accordance with Article 11, the Company shall not, and shall ensure that any
directors, officers, agents, representatives or Affiliates of the Company do
not, directly or indirectly, solicit or initiate, enter into or conduct,
discussions concerning, or exchange information (including by way of furnishing
<PAGE>
information concerning the Company or their respective businesses) or enter into
any negotiations concerning, or solicit, entertain or agree to any proposals
for, (i) a merger, consolidation or other business combination involving the
Company, (ii) a sale of any equity interest in the Company, (iii) a sale of a
significant portion of business or assets of the Company, (iv) a
recapitalization or restructuring of the Company or (v) a transaction similar to
any of the foregoing. In addition, during such time period, the Company shall
not authorize, direct or knowingly permit any officer, shareholder, director,
employee or agent of the Company to do any of the foregoing and the Company
shall notify the Buyer promptly of the identity of any person who approaches the
Company with respect to any of the foregoing, as well as the price and terms of
any such proposal, if applicable
o. Public Announcements. No press release or public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued or made without the joint approval of the Buyer and the Company,
the Buyer's approval which shall not be unreasonably withheld, unless required
by applicable law or legal process in which case the Buyer and the Company shall
have the right, to the extent reasonably practicable, to review and comment on
such press release or announcement prior to publication.
p. Reserved Shares. The Company shall reserve and at all times
keep available, free from preemptive rights, out of its authorized but unissued
stock, a sufficient number of shares of Common Stock to provide for the issuance
of such shares upon the exercise of the Warrants.
q. Notification. The Company shall promptly notify the Buyer
of (i) any notice or other communications from any person or entity that the
consent of such person or entity is or may be required in connection with the
consummation of the transactions contemplated hereby and (ii) any notice or
other communication from any Governmental Authority (as defined in Section
4(j)(iii) of this Agreement) in connection with the consummation of the
transactions contemplated hereby.
r. Negative Covenants. For so long as the Buyer and its
Affiliates hold an aggregate amount of shares of Common Stock equal to at least
five percent (5%) of the Common Stock then outstanding on a fully diluted basis,
then the following actions by the Company or the Subsidiary, shall require the
prior written consent of the Buyer (in addition to any stockholder or Board of
Directors approval as may be required by applicable statute, agreement or
otherwise):
(i) the purchase, construction, acquisition, sale, lease,
exchange or disposition of any property or asset, or the making of any
investment, other than in the ordinary course of business, the purchase price or
value of which exceeds $100,000;
(ii) the entry into any agreement or series of related
agreements, including any agreement to borrow money that, either individually or
collectively, (A) creates a monetary obligation or a liability greater than
$100,000 or (B) grants a mortgage on, a security interest in, a pledge or
otherwise encumbers, any material asset of the Company or the Subsidiary;
(iii) the entry into any transaction, including any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring payments or the
issuance of securities (including stock options) (or any amendments,
<PAGE>
modifications or waivers of any such contract, agreement or arrangement) to any
shareholder (who holds in excess of five percent (5%) of the issued and
outstanding voting securities of the Company) or any officer or director of the
Company or any of their respective Affiliates, or any Family Members of any of
the foregoing;
(iv) the initiation by the Company of a voluntary case, the
filing of, or authorization to file a bankruptcy petition, or request for
relief, under Title 11 of the United States Code (11 U.S.C. ss. 1, et seq.) or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or consent by the Company to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or a general
assignment by the Company for the benefit of creditors, or the failure by the
Company generally to pay their respective debts as they become due, or the
taking by the Company of any action to authorize any of the foregoing;
(v) the loan of funds to, or the guaranty of any obligation or
liability of, or the entry into any other agreement, transaction or arrangement
with any, officer, director or shareholder (who holds in excess of five percent
(5%) of the issued and outstanding voting securities of the Company) of the
Company, the Subsidiary or any of their respective Affiliates or of any Family
Members of any of the foregoing other than the reimbursement of expenses of any
such person in the ordinary course in accordance with the policies of the
Company;
(vi) the merger or the consolidation of the Company or the
Subsidiary with or into another entity or other business combination or the
sale, assignment, lease or other disposition of all or substantially all of the
assets of the Company or the Subsidiary;
(vii) any issuance of securities or any recapitalization,
restructuring or other reorganization of the Company, including the
capitalization of any subsidiaries of the Company, or any repurchase or
redemption of the Company's securities, other than (A) the issuance of shares of
Common Stock upon the exercise of stock options either currently outstanding or
hereinafter granted pursuant to the Company's 1991 Stock Option Plan, (B) the
issuance of shares of Common Stock (1) upon the exercise of warrants outstanding
as of the date of this Agreement, (2) upon the conversion of Debentures (as
defined in Section 7(i) of this Agreement) outstanding as of the date of this
Agreement, (3) upon the exercise of the Affiliate Warrants, or (4) upon the
exercise of the Placement Agent Warrants, and (C) as expressly provided in this
Agreement;
(viii) any distributions or dividends, whether in cash,
securities or in property in kind, by the Company to its stockholders;
(ix) any material changes in accounting policies of the
Company and any removal or appointment of the Company's independent accountants;
(x) the settlement of legal, administrative or other suits or
proceedings in the Company's name in which the amount in dispute equals or
exceeds $100,000;
<PAGE>
(xi) the establishment or amendment of, or the grant,
acceleration or waiver of any terms or conditions in, or determination or
acceleration pursuant to the terms of, any pension, retirement, savings,
deferred compensation, profit sharing, benefit or incentive plan or any stock
option, stock appreciation, stock purchase, performance or other similar plan,
for any or all current or former employees, officers or directors of the Company
or any of their respective Affiliates or of any Family Member of any of the
foregoing; provided that the granting of options to employees (other than
officers) for amounts less than 25,000 shares per employee, pursuant to the
Company's 1991 Stock Option Plan, under which a maximum of 414,808 options are
currently authorized but unissued and can therefore be additionally granted,
shall not require the consent of the Buyer;
(xii) the amendment of the Certificate of Incorporation or
By-laws in any respect;
(xiii) any change in any of the names under which the Company
conducts business
(xiv) the issuance of any new, or amendment to or modification
or restatement of any existing, warrants, options, Debentures, calls, rights,
commitments, agreements, arrangements or similar undertakings, other than (A)
the issuance of options pursuant to the Company's 1991 Stock Option Plan, (B) as
may be required to effect the transactions contemplated by this Agreement, and
(C) as expressly provided in this Agreement; or
(xv) any other transaction, agreement or arrangement or series
of related transactions, agreements or arrangements that is material to the
business of the Company or to the condition (financial or otherwise),
operations, business, assets, liabilities, earnings or prospects of the Company,
taken as a whole.
s. Additional Listing Application. The Company shall, within
two (2) Business Days of the execution of this Agreement, file with AMEX an
Additional Listing Application (the "Initial Application") for the Registrable
Securities (as defined below, but for purposes of this Section 4(s), excluding
the Warrants). To the extent that AMEX approves the Initial Application as to
only the Shares and not as to all Registrable Securities (excluding the
Warrants), the Company shall, within two (2) Business Days of the Closing Date,
file a second or amended Additional Listing Application for the portion of the
Registrable Securities (excluding the Warrants) the listing of which was not
approved pursuant to the Initial Application.
t. Registration of Warrants. The Company shall use its best
efforts to, within 60 days of the Closing Date, register (as such term is
defined in Section 18(a)(i) of this Agreement) the Warrants for public trading
in the United States securities markets.
5. CLOSING DATE.
The date and time of the issuance and sale of the Shares and
the Warrants (the "Closing Date") shall occur no later than 12:00 Noon, New York
time on the first NYSE trading day after the fulfillment or waiver of all
closing conditions pursuant to Sections 6 and 7, or such other mutually agreed
to time. The closing shall occur on such date at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C.
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Shares on the Closing Date is subject to the following conditions, any of
which may be waived by the Company (with the exception of the condition set
forth in Section 6(d)):
a. Delivery by the Buyer of good funds as payment in full of
an amount equal to the Purchase Price in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
d. The Company shall have received notification from AMEX that
the Shares have been approved for listing by AMEX.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
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.
<PAGE>
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. Of the Company's 7% Convertible Subordinated Debentures Due
March 24, 2000 and the 7% Convertible Debentures Due October 29, 2000
(collectively, the "Debentures"), no less than ninety percent (90%) of the
Debentures have been either (i) converted into Common Stock at a price of ninety
cents ($0.90) per share of Common Stock, or (ii) agreed in writing by the
holders thereof to be amended such that each Debenture provides (A) for the
conversion thereof, for a period of thirty (30) days from the Closing Date, into
Common Stock at a price of ninety cents ($0.90) per share of Common Stock and
thereafter shall be convertible at the terms originally set forth in such
Debenture, and (B) for a minimum conversion price of ninety cents ($0.90) per
share of Common Stock.
j. The Company's authorized and outstanding capital stock as
of the Closing Date includes (i) no greater than 13,935,000 shares of Common
Stock outstanding, including (A) the Shares to be issued to the Buyer pursuant
to this Agreement and the shares of Common Stock to be issued pursuant to the
Affiliate Purchase Agreement, and the capital stock issuable upon exercise of
the Warrants and the warrants issued pursuant to the Affiliate Purchase
Agreement (the "Affiliate Warrants"), and (B) shares of Common Stock issuable
upon the conversion of any outstanding Debentures at a conversion price of
ninety cents ($0.90) per share, and (ii) no greater than 3,540,000 outstanding
options or warrants to purchase Common Stock, including (A) all options issued
or authorized and unissued under the Company's 1991 Stock Option Plan and (B)
the Placement Agent Warrants, and excluding the Warrants and the Affiliate
Warrants.
k. The Buyer shall have received duplicate originals of (A) an
executed copy of U.S. Small Business Administration (the "SBA") Form 480 Size
Status Declaration, (B) an executed copy of SBA Form 652 Assurance of Compliance
for Nondiscrimination and (C) the information needed to complete Part A and Part
B of SBA Form 1031.
l. The Company shall be in compliance with the requirements of
Section 713(a) of the AMEX Listing Standards and Requirements in connection with
the issuance of the Shares.
m. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby.
n. The Market Price is less than or equal to $2.15.
<PAGE>
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 State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement, the Warrants and the schedules, annexes and
exhibits hereto or thereto contain the entire agreement among the parties with
respect to the transactions contemplated by this Agreement and supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.
(ii) Each party expressly agrees that the other party will be
irreparably damaged if this Agreement is not specifically enforced, including,
without limitation, the covenant set forth in Section 4(i). Upon a breach or
threatened breach of the terms, covenants or conditions of this Agreement, the
non-breaching party shall, in addition to all other remedies, be entitled to a
temporary or permanent injunction, without any showing of any actual damage, or
a decree for specific performance, in accordance with the provision hereof.
10. NOTICES.
All notices, requests and other communications to any party
hereunder shall be in writing and sufficient if delivered personally or sent by
telecopy (with confirmation of receipt) or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
<PAGE>
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: WEXFORD SPECTRUM INVESTORS LLC
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert H. Holtz
Telecopy: (203) 862-7310
With a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, New York 10019
Attention: Michael B. Hopkins, Esq.
Telecopy: (212) 841-1010
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section or on
the fifth business day following the date on which such communication is posted,
whichever occurs first.
11. TERMINATION. (a) This Agreement shall terminate on the
earliest to occur of any of the following events:
(i) the mutual written agreement of the Buyer and the
Company;
(ii) at the discretion of either party, if the
Closing shall not have occurred prior
to the close of business on December 31, 1997;
(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.
<PAGE>
(b) Nothing in this Section shall relieve any party of any
liability for a breach of this Agreement prior to its termination, except that
if this Agreement terminates in accordance with Section 11(a) and the Buyer
receives reimbursement of its costs and expenses in accordance with Section
4(h), then this Agreement shall terminate without any further liability. Except
as aforesaid, upon the termination of this Agreement, all rights and obligations
of the parties under this Agreement shall terminate, except their obligations
under Section 4(g) and Section 4(o).
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
Company's and the Buyer's representations, warranties, agreements and covenants
shall survive the execution and delivery hereof of this Agreement and the
delivery of the Shares and the Warrants. Neither the period of survival nor the
liability of the Company with respect to the representations and warranties
shall be reduced by any investigation made at any time by or on behalf of the
Buyer.
13. INDEMNIFICATION. (a) The Company indemnifies and holds
harmless the Buyer and its Affiliates and each of their members, directors,
officers, employees and other agents and representatives from and against any
and all liabilities, judgments, claims, settlements, losses, damages (including
any diminution in value as appropriate), reasonable fees (including attorneys'
and other experts' fees and disbursements), liens, taxes, penalties, obligations
and expenses (collectively, "Losses") incurred or suffered by any such person or
entity arising from, by reason of or in connection with any misrepresentation or
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or any certificate or other document delivered by
the Company under this Agreement. The Company shall indemnify and hold harmless
the Buyer and its Affiliates and each of their members, directors, officers,
employees and other agents and representatives from and against any and all
Losses incurred or suffered by the Buyer, arising from, by reason of or in
connection with any third party claim or action, or potential or threatened
claim or action, related to this Agreement and the transactions contemplated
hereby.
(b) The Company shall not have any liability under Section
13(a) unless the aggregate of all Losses relating thereto for which the Company
would, but for this Section 13(b), be liable exceeds $50,000, in which case the
Buyer shall be entitled to all Losses regardless of the limitation set forth in
this sentence. The limitation on liability set forth in the immediately
preceding sentence shall not apply (i) in the event of fraud, intentional
misrepresentation or intentional breach or (ii) in the case of any
representation or warranty set forth in Section 3(a) or Section 3(c).
(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
<PAGE>
shall not affect the rights of the Indemnified Party, except to the extent that
the Indemnifying Party shall have been materially prejudiced by such failure.
The Indemnifying Party shall be entitled to participate in and, if (i) such
claim can properly be resolved by money damages alone and the Indemnifying Party
has the financial resources to pay such damages and (ii) the Indemnifying Party
admits that this indemnity fully covers the claim or litigation, the
Indemnifying Party shall be entitled to direct the defense of any claim at its
expense, but such defense shall be conducted by legal counsel reasonably
satisfactory to the Indemnified Party. No Indemnifying Party shall be liable to
an Indemnified Party for any settlement of any action or claim without the
consent of the Indemnifying Party; provided that the Indemnifying Party shall
not unreasonably withhold its consent to any such settlement. No Indemnifying
Party shall, except with the consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability and equitable claims in
response to such claim or litigation.
(e) Nothing contained in this Article 13, or elsewhere in this
Agreement, shall be deemed an election of remedies under this Agreement or limit
in any way the liability of any party under any other agreement to which such
party is a party relating to this Agreement or the transactions contemplated by
this Agreement.
14. ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by any party hereto without
the prior written consent of the other party; provided that notwithstanding the
foregoing, the Buyer may assign this Agreement and the rights and obligations
hereunder, in whole or in part, to an Affiliate. Any instrument purporting to
make an assignment in violation of this Section shall be void. All covenants,
agreements, representations, warranties and undertakings in this Agreement made
by and on behalf of any party hereto shall bind and inure to the benefit of the
successors and permitted assigns of such party.
15. BENEFITS OF AGREEMENT. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective 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.
<PAGE>
17. GENERAL. All Exhibits, Annexes, Schedules and Disclosure
Schedules are hereby incorporated by reference and made a part of this
Agreement.
18. REGISTRATION OF REGISTRABLE SECURITIES.
(a) Shelf Registration.
(i) The Company shall (x) within thirty (30) days of
the Closing Date file with the Securities and Exchange Commission (the
"SEC") a Shelf Registration Statement (as defined below) relating to
the offer and sale of (a) the Shares of Common Stock (including shares
issuable or issued upon the exercise of any Warrants or the exercise of
any other exchange, conversion or similar right), (b) any securities
issued in respect of any such shares by way of a stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization and (c) the
Warrants (collectively, the "Registrable Securities") by the holders of
Registrable Securities from time to time in accordance with the methods
of distribution elected by such holders and set forth in such Shelf
Registration Statement. "Register," "registered" and "registration"
each refer to a registration of Registrable Securities effected by
filing with the SEC a registration statement in compliance with the
Securities Act and the declaration or ordering by the SEC of
effectiveness of such registration statement. "Shelf Registration"
means a registration effected pursuant to this Section 18. "Shelf
Registration Statement" means a shelf registration statement of the
Company filed with the SEC pursuant to the provisions of this Section
18 which covers some or all of the Registrable Securities, as
applicable, on Form S-3 under Rule 415 under the Securities Act, or any
similar rule that may be adopted by the SEC, amendments and supplements
to such registration statement, including post-effective amendments, in
each case including the prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein; provided,
however, that the registration of the Warrants pursuant to this Section
18 is subject to the prior approval of the Company's Board of
Directors.
(ii) The Company shall use its best efforts (x) to
cause such Shelf Registration Statement to be declared effective under
the Securities Act as promptly as practicable but in no event more than
ninety (90) days after the Closing Date and (y) after the effectiveness
of the Shelf Registration Statement, promptly upon the request of the
Buyer or any permitted transferee or assignee pursuant to Section 18(h)
holding any Registrable Securities (such transferees and assignees,
together with the Buyer, are collectively referred to in this Section
18 as the "Investors"), to take any action necessary to register the
sale of any Registrable Securities of such Investor and to identify
such Investor as a selling securityholder.
(iii) If the Shelf Registration Statement covering
the Registrable Securities required to be filed by the Company under
Section 18(a)(i) is not declared effective by ninety (90) days after
the Closing Date (the "Required Effective Date"), then the Company will
make payments to the Buyer in such amounts and at such times as shall
be determined pursuant to this Section 18(a)(iii). The amount to be
paid by the Company to the Buyer shall be equal to one (1) percent of
<PAGE>
the Purchase Price per calendar week (or any pro rata portion thereof)
from the Required Effective Date until the Shelf Registration Statement
is declared effective by the SEC and shall be paid to the Buyer based
upon the period between (x) the Required Effective Date and the first
Computation Date and (y) each Computation Date thereafter and the
immediately preceding Computation Date (the "Periodic Amount"). The
full amount of each Periodic Amount shall be paid to the Buyer in
immediately available funds within five (5) days after each Computation
Date. Notwithstanding the foregoing, the amount payable by the Company
pursuant to this provision shall not be payable (x) to the extent any
delay in the effectiveness of the Shelf Registration Statement occurs
because of an act of, or a failure to act or to act timely by, the
Buyer or its counsel in connection with any act for which the Buyer and
its counsel have had adequate and sufficient notice, or (y) in the
event all of the Registrable Securities may be sold pursuant to Section
(k) of Rule 144 promulgated under the 1993 Act. As used in this
Section, "Computation Date" means the date which is thirty (30) days
after the Required Effective Date, and, if the Shelf Registration
Statement required to be filed by the Company pursuant to this Section
is not then effective, thirty (30) days after the previous Computation
Date (pro rata for any partial period) until the Shelf Registration
Statement is so declared effective by the SEC.
(b) Registration Procedures. In connection with any
Shelf Registration Statement, the Company shall do each of the following:
(i) prepare promptly, and file with the SEC by thirty
(30) days after the Closing Date, a Shelf Registration Statement with
respect to the Registrable Securities and use its best efforts to cause
to keep the Shelf Registration Statement continuously effective in
order to permit the prospectus forming part thereof to be usable by the
Investors for a period (the "Registration Period") equal to the
earliest of (1) five years from the effective date of such Shelf
Registration Statement, (2) the date when each Investor may sell all
Registrable Securities held by such Investor pursuant to Section (k) of
Rule 144 and (3) the date the Investors no longer owns any Registrable
Securities, which Shelf Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein)
shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
they were made, not misleading;
(ii) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Shelf
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Shelf Registration Statement effective
and current during the entire Registration Period and, at all times
during the Registration Period, to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by the Shelf Registration Statement, including such
amendments and supplements as may be necessary, until all of such
Registrable Securities have been disposed of in accordance with the
intended method of disposition from time to time by prospective seller
or sellers of such Registrable Securities as set forth in the Shelf
Registration Statement;
<PAGE>
(iii) furnish to each selling Investor, and its legal
counsel identified to the Company, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by
the Company, one copy of the Shelf Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement
thereto, (2) each letter written by or on behalf of the Company to the
SEC or the staff of the SEC and each item of correspondence from the
SEC or the staff of the SEC relating to such Shelf Registration
Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment),
and (y) such number of copies of a prospectus in conformity with the
requirements of the Securities Act, and such other documents, as such
Investor may reasonably request in order to facilitate the public sale
or other disposition of the Registrable Securities owned by such
Investor;
(iv) permit a single firm of counsel designated by
the Buyer and reasonable satisfactory to the Company to review the
Shelf Registration Statement and all amendments and supplements thereto
at a reasonable period of time prior to their filing with the SEC, and
not file any document in a form to which such counsel reasonably
objects in written notice to the Company given within three (3)
business days of counsel's receipt of the Shelf Registration Statement
or any amendment or supplement thereto;
(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);
<PAGE>
(ix) provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than
the effective date of the Shelf Registration Statement;
(x) cooperate with the Investors to facilitate the
timely preparation and delivery of certificates for the Registrable
Securities to be offered pursuant to the Shelf Registration Statement
and enable such certificate for the Registrable Securities to be in
such denominations or amount as the case may be, as the Investors may
reasonable request; and
(xi) take all other reasonable actions necessary to
expedite and facilitate disposition by any Investor of the Registrable
Securities pursuant to the Shelf Registration Statement.
(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"
<PAGE>
laws, printing expenses and fees and disbursements of counsel for the Company
and one counsel for the Investors, and of the independent certified public
accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Securities covered by registrations effected pursuant to this Section 18 shall
not be borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any
Registrable Securities under the Securities Act pursuant to this
Section 18 or registration or qualification of any 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.
<PAGE>
(ii) Before Registrable Securities held by a
prospective seller shall be included in any registration pursuant to
this Section 18 such prospective seller and any underwriter acting on
its behalf shall have agreed to indemnify and hold harmless (in the
same manner and to the same extent as set forth in (i) above) the
Company, each director of the Company, each officer of the Company who
shall sign such registration statement and any person who controls the
Company within the meaning of the Securities Act, with respect to any
untrue statement or omission from such registration statement, any
preliminary prospectus or prospectus contained therein, or any
amendment or supplement thereof, if such untrue statement or omission
was made in reliance upon and in conformity 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
<PAGE>
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 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.
<PAGE>
(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 Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by a
duly authorized officer of each of the Buyer and the Company as of the date
first above written.
MEDIA LOGIC, INC.
By: /s/ William E. Davis, Jr.
-------------------------
William E. Davis, Jr.
Chief Executive Officer
WEXFORD SPECTRUM INVESTORS LLC
By: WEXFORD MANAGEMENT LLC,
its Manager
By: /s/Robert H. Holtz
------------------
Name: Robert H. Holtz
Title: Senior Vice President
Address of Buyer: 411 West Putnam Avenue
Suite 125
Greenwich, CT 06830
Telephone No.: (203) 862-7000
Telecopier No.: (203) 862-7300
<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.
