SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): July 10, 1998
OrthoLogic Corp.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 0-21214 86-0585310
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification
incorporation) Number)
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1275 West Washington Street, Tempe, Arizona 85281
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(Address of principal executive offices)
Registrant's telephone number, including area code: (602) 437-5520
Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
On July 13, 1998, the Company issued 15,000 shares of its Series B
Convertible Preferred Stock and related Warrants in a private placement to
institutional investors. The Company estimates the net proceeds of the offering,
after expenses, to be approximately $14 million. The Series B Convertible
Preferred Stock is subject to the terms and conditions of the Certificate of
Designation attached hereto as Exhibit 3.1. The Warrants are subject to the
terms and conditions of the form of Warrant attached hereto as Exhibit 4.1.
Pursuant to a Registration Rights Agreement attached as Exhibit 4.2, the Company
has agreed to prepare and file with the Securities and Exchange Commission a
registration statement covering the resale of the shares of Common Stock
issuable pursuant to the terms of the Series B Preferred Stock and related
Warrants. The terms of the private placement are more fully set forth in the
Securities Purchase Agreement attached hereto as Exhibit 10.1.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Description
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3.1 Certificate of Designation
4.1 Form of Warrant
4.2 Registration Rights Agreement
10.1 Securities Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ORTHOLOGIC CORP.
Dated: July 13, 1998 /s/ Thomas R. Trotter
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Thomas R. Trotter
Chief Executive Officer and President
3
CERTIFICATE OF DESIGNATION
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
ORTHOLOGIC CORP.
Pursuant to Section 151 of the
Delaware General Corporation Law
OrthoLogic Corp., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies that the
following resolutions were duly adopted by the Board of Directors of the
Corporation pursuant to the authority of the Board of Directors granted by
Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to the Board of
Directors in accordance with the provisions of the Corporation's Certificate of
Incorporation, as amended, the Board of Directors hereby authorizes a series of
the Corporation's previously authorized Preferred Stock, par value $0.0005 per
share (the "Preferred Stock"), to be issued pursuant to a Securities Purchase
Agreement between the Corporation and the Purchasers named therein (the
"Securities Purchase Agreement"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences, privileges and
restrictions thereof as follows:
1. DESIGNATION AND AMOUNT.
The designation of this series, which consists of twenty thousand
(20,000) shares (the "Preferred Shares") of Preferred Stock, is the Series B
Convertible Preferred Stock (the "Series B Preferred Stock") and the face amount
shall be One Thousand Dollars ($1,000) per share (subject to ratable adjustment
in the event of any stock split or combination of the Series B Preferred Stock
and to equitable adjustment in the event of a reclassification of the Series B
Preferred Stock or other similar event)(the "Stated Value"). The date on which a
Preferred Share is issued and sold pursuant to the Securities Purchase Agreement
is referred to herein as the "Issue Date" and, in the event that Preferred
Shares are issued in more than one tranche pursuant to the Securities Purchase
Agreement, the Issue Date relating to the Preferred Shares issued in the first
such tranche is referred to herein as the "Initial Issue Date".
2. DIVIDENDS. The Series B Preferred Stock will not bear dividends.
3. PRIORITY.
(a) Payment upon Dissolution.
(i) Upon the occurrence of (x) any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, commenced by the Corporation or by its
creditors, as such, or relating to its assets or
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(y) the dissolution or other winding up of the Corporation whether total or
partial, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy proceedings, or (z) any assignment for the benefit of
creditors or any marshalling of the material assets or material liabilities of
the Corporation (each, a "Liquidation Event"), no distribution shall be made to
the holders of any shares of Junior Securities (as defined below) unless,
following the payment of preferential amounts on all Senior Securities (as
defined below), each Holder of Preferred Shares (each, a "Holder" and
collectively, the "Holders") shall have received the Liquidation Preference (as
defined below) with respect to each Preferred Share then held by such Holder. In
the event that upon the occurrence of a Liquidation Event, and following the
payment of preferential amounts on all Senior Securities (as defined below), the
assets available for distribution to the Holders and the holders of Pari Passu
Securities are insufficient to pay the Liquidation Preference with respect to
all of the outstanding Preferred Shares and the preferential amounts payable to
such holders, the entire assets of the Corporation shall be distributed ratably
among the Preferred Shares and the shares of Pari Passu Securities in proportion
to the ratio that the preferential amount payable on each such share (which
shall be the Liquidation Preference in the case of a Preferred Share) bears to
the aggregate preferential amount payable on all such shares.
(ii) The "Liquidation Preference" with respect to a Preferred
Share shall mean an amount equal to the Stated Value of such Preferred Share.
"Junior Securities" shall mean the Common Stock and all other capital stock or
securities of the Corporation that are not Pari Passu Securities or do not have
a preference over the Series B Preferred Stock in respect of redemption or
distribution upon liquidation. "Pari Passu Securities" shall mean any securities
ranking pari passu with the Series B Preferred Stock in respect of redemption or
distribution upon liquidation. "Senior Securities" shall mean any securities of
the Corporation which by their terms have a preference over the Series B
Preferred Stock in respect of redemption or distribution upon liquidation.
4. CONVERSION.
(a) Right to Convert. Each Holder shall have the right to convert on
the three hundredth (300th) day following the Initial Issue Date (the "Initial
Conversion Date") or at any time thereafter, all or any part of the Preferred
Shares held by such Holder into such number of fully paid and non-assessable
shares ("Conversion Shares") of the Company's common stock, par value $0.0005
per share (the "Common Stock"), as is determined in accordance with the terms
hereof (a "Conversion"); provided, however, that in the event that, prior to the
three hundredth (300th) day following the Initial Issue Date, either (i) the
Corporation enters into an agreement relating to a Change of Control Transaction
(as defined below) immediately upon which event the Corporation shall make a
public announcement of such transaction, (ii) a Material Adverse Event (as
defined below) occurs or (iii) a Mandatory Redemption Event (as defined below)
occurs (each of (i), (ii) and (iii) being referred to herein as an "Early
Conversion Event"), the Initial Conversion Date for purposes hereof shall be
deemed to be the first date on which an Early Conversion Event occurs. For
purposes of this paragraph 4(a), the term "Material Adverse Event" shall have
the meaning set forth in the Securities Purchase Agreement. In the event that a
Material Adverse Event occurs, the Company must immediately notify each Holder
of such occurrence and at the same time make a public announcement thereof.
(b) Conversion Notice. In order to convert Preferred Shares, a Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which such Holder wishes to effect such Conversion (the
"Conversion Date"), (i) a notice of conversion (a "Conversion Notice"), in
substantially the form of Exhibit A hereto, to the Corporation and to
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the Corporation's transfer agent for the Common Stock (the "Transfer Agent")
stating the number of Preferred Shares to be converted, the applicable
Conversion Price (as defined below) and a calculation of the number of shares of
Common Stock issuable upon such Conversion and (ii) a copy of the certificate or
certificates representing the Preferred Shares being converted. The Holder shall
thereafter send the original of the Conversion Notice and of such certificate or
certificates to the Transfer Agent. The Corporation shall issue a new
certificate for Preferred Shares in the event that less than all of the
Preferred Shares represented by a certificate delivered to the Corporation in
connection with a Conversion are converted. Except as otherwise provided herein,
upon delivery of a Conversion Notice by a Holder in accordance with the terms
hereof, such Holder shall, as of the applicable Conversion Date, be deemed for
all purposes to be the record owner of the Common Stock to which such Conversion
Notice relates. In the case of a dispute between the Corporation and a Holder as
to the calculation of the Conversion Price or the number of Conversion Shares
issuable upon a Conversion, the Corporation shall promptly issue to such Holder
the number of Conversion Shares that are not disputed and shall submit the
disputed calculations to its independent accountant within one (1) Business Day
of receipt of such Holder's Conversion Notice. The Corporation shall cause such
accountant to calculate the Conversion Price as provided herein and to notify
the Corporation and such Holder of the results in writing no later than two (2)
Business Days following the day on which it received the disputed calculations.
Such accountant's calculation shall be deemed conclusive absent manifest error.
The fees of any such accountant shall be borne by the party whose calculations
were most at variance with those of such accountant.
(c) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Corporation pursuant to a Conversion
shall be determined by dividing the aggregate Stated Value of the Preferred
Shares to be converted by the Conversion Price (as defined herein) in effect on
the applicable Conversion Date. Subject to adjustment as provided in Section 6
below, "Conversion Price" with respect to a Preferred Share shall mean (A) for
any Conversion occurring during the period of three hundred (300) days following
the Issue Date relating to such Preferred Share (the "Initial Conversion
Period"), the average of the ten (10) lowest Closing Bid Prices (as defined
below) for the Common Stock occurring during the period of thirty (30) Trading
Days (as defined below) immediately prior to (but not including) the applicable
Conversion Date (the "Floating Conversion Price") and (B) for any Conversion
occurring after the Initial Conversion Period, the lesser of the Floating
Conversion Price and the Fixed Conversion Price. The "Fixed Conversion Price"
with respect to a Preferred Share shall mean one hundred and three percent
(103%) of the average Closing Bid Price for the Common Stock during the period
of ten (10) Trading Days immediately prior to (but not including) the three
hundredth (300th) day following the Issue Date relating to such Preferred Share;
provided, however, that if the Corporation is not eligible to register shares of
Common Stock on a registration statement on Form S-3 on or before September 1,
1998 (the "Registration Event"), the Fixed Conversion Price with respect to a
Preferred Share shall mean, (x) during the period beginning on the one hundred
and eightieth (180th) day following the Initial Issue Date and ending on such
three hundredth day, one hundred and three percent (103%) of the average Closing
Bid Price for the Common Stock during the period of ten (10) Trading Days
immediately prior to (but not including) such one hundred and eightieth day, and
(y) from and after such three hundredth day, the lesser of (I) the Fixed
Conversion Price as determined pursuant to the immediately preceding clause (x)
and (II) the Fixed Conversion Price that would otherwise be in effect had the
Registration Event not occurred.
(d) Certain Definitions. "Trading Day" means any day on which the
Common Stock is traded on the principal securities exchange or market on which
the Common Stock is then traded. "Closing Bid Price" means, with respect to the
Common Stock, the closing bid price for the Common Stock occurring on a given
Trading Day on the principal securities exchange or
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trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or, if Bloomberg Financial Markets is not then reporting such
prices, by a comparable reporting service of national reputation selected by the
Corporation and reasonably acceptable to holders of a majority of the then
outstanding Preferred Shares (collectively, "Bloomberg") or if the foregoing
does not apply, the last reported bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no bid price is reported for such security by
Bloomberg, the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on any of the foregoing
bases, the Closing Bid Price of such security shall be the fair market value as
reasonably determined by an investment banking firm selected by the Holders
(which may be a Holder) of a majority of the then outstanding Preferred Shares
and reasonably acceptable to the Corporation, with the costs of such appraisal
to be borne by the Corporation. "Business Day" means any day on which the New
York Stock Exchange and commercial banks located in the City of New York are
open for business.
(e) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice from a Holder pursuant to paragraph 4(b) above, the
Corporation shall, no later than the close of business on the third (3rd)
Business Day following the Conversion Date set forth in such Conversion Notice
(the "Delivery Date"), issue and deliver or cause to be delivered to such Holder
the number of Conversion Shares as shall be determined as provided herein. The
Corporation shall effect delivery of Conversion Shares to a Holder by, as long
as the Transfer Agent participates in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program ("FAST"), crediting the account of such
Holder or its nominee at DTC through its Deposit Withdrawal Agent Commission
system with the number of Conversion Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that Transfer
Agent is not a participant in FAST or if a Holder so specifies in a Conversion
Notice or otherwise in writing, the Corporation shall effect delivery of
Conversion Shares by delivering to the Holder or its nominee physical
certificates representing such Conversion Shares, no later than the close of
business on such Delivery Date. If any Conversion would create a fractional
Conversion Share, such fractional Conversion Share shall be disregarded and the
number of Conversion Shares issuable upon such Conversion, in the aggregate,
shall be the next higher number of Conversion Shares. Conversion Shares
delivered to the Holder shall not contain any restrictive legend as long as (A)
the sale or transfer of such Conversion Shares is covered by an effective
Registration Statement, (B) such Conversion Shares have been sold pursuant to
Rule 144 ("Rule 144") under the Securities Act, or (C) such Conversion Shares
are eligible for resale under Rule 144(k) or any successor rule or provision.
(f) Failure to Deliver Conversion Shares.
(i) In the event that the Corporation fails for any reason to
deliver to a Holder certificates representing the number of Conversion Shares
specified in the applicable Conversion Notice on or before the Delivery Date
therefor (a "Conversion Default"), and such failure continues for seven (7)
Business Days following the Delivery Date, the Corporation shall pay to such
Holder payments ("Conversion Default Payments") in the amount of (i) (N/365)
multiplied by (ii) the aggregate Stated Value of the Preferred Share(s)
represented by the Conversion Shares which remain the subject of such Conversion
Default multiplied by (iii) the lower of twenty-four percent (24%) and the
maximum rate permitted by applicable law (the "Default Interest Rate"), where
"N" equals the number of days elapsed between the original Delivery Date for
such Conversion Shares and the date on which all of the certificates
representing such Conversion Shares are issued and delivered to such Holder.
Amounts payable under this subparagraph (f) shall be paid to the Holder in
immediately available funds on or before the fifth
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(5th) Business Day of the calendar month immediately following the calendar
month in which such amounts have accrued.
(ii) In the event that a Holder has not received certificates
representing the Conversion Shares by the tenth (10th) Business Day following a
Conversion Default, such Holder may, upon written notice (a "Withdrawal Notice")
delivered to the Corporation on such Business Day or on any Business Day
thereafter (unless, prior to the delivery of such notice, such Conversion Shares
are delivered to such Holder), withdraw its Conversion Notice with respect to
such Conversion Shares and regain its rights as a Holder of the Preferred Shares
that are the subject of such Conversion Default. In such event, the Conversion
Price that would otherwise be in effect when such Preferred Shares are
thereafter converted in accordance with the terms hereof shall be reduced by one
percent (1%) for each day occurring during the period immediately following such
10th Business Day until the day on which the such Holder delivers a Withdrawal
Notice to the Corporation; provided, however, that the maximum percentage by
which such Conversion Price may be reduced hereunder shall be fifty percent
(50%). (For example, if such Conversion Default were to continue for five days
following such 10th Business Day, such Conversion Price would be reduced by 5%;
if for ten days, by 10%; and for fifty days or more, 50%, so that the number of
Conversion Shares deliverable upon conversion of such Preferred Shares would be
increased proportionately). Upon delivery by a Holder of a Withdrawal Notice,
such Holder shall retain all of such Holder's rights and remedies with respect
to the Corporation's failure to deliver such Conversion Shares (including
without limitation the right to receive the cash payments specified in
subparagraph 4(f)(i) above).
(iii) In addition to any other remedies provided herein, each
Holder shall have the right to pursue actual damages for the Corporation's
failure to issue and deliver Conversion Shares on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in anticipation
of receiving Conversion Shares upon Conversion, such damages to be in an amount
equal to (A) the aggregate amount paid by such Holder for the shares of Common
Stock so purchased minus (B) the aggregate Conversion Price for such Conversion
Shares), and such Holder shall have the right to pursue all remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief).
(g) Conversion at Maturity. On the date which is four (4) years
following the Issue Date relating to a Preferred Share ("Maturity Date"), such
Preferred Share shall be automatically converted into the number of shares of
Common Stock equal to the Stated Value of such Preferred Shares divided by the
Conversion Price then in effect (a "Conversion at Maturity"); provided, however,
that if, on a Maturity Date, (i) the number of shares of Common Stock
authorized, unissued and unreserved for all other purposes, or held in the
Corporation's treasury, is not sufficient to effect the issuance and delivery of
the number of Conversion Shares into which all outstanding Preferred Shares are
then convertible, (ii) the Common Stock is not actively traded on the Nasdaq
National Market, or (iii) a Mandatory Redemption Event (as defined herein) has
occurred and is continuing, each Holder shall have the option, upon written
notice to the Corporation, to regain its rights as a holder of Preferred Shares,
including without limitation, the right to convert such Preferred Shares in
accordance with the terms of paragraphs 4(a) through 4(f) hereof and, upon
delivery of such notice, such Preferred Shares shall not be subject to a
Conversion at Maturity hereunder until the thirtieth (30th) day following the
later of (a) the date on which the event specified (i), (ii) or (iii) is no
longer continuing and (b) the date on which the Corporation delivers to each
Holder written notice to such effect, and in such event, such thirtieth day
shall be deemed to be the Maturity Date for purposes of this Certificate of
Designation. If a Conversion at Maturity occurs, the Corporation and each Holder
shall follow the procedures for Conversion set forth in this Section 4, with the
Maturity Date deemed
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to be the Conversion Date, except that the Holder shall not be required to send
a Conversion Notice as contemplated by paragraph 4(b).
5. CONVERSION LIMITATIONS.
In no event shall a Holder be permitted to convert any Preferred Shares
in excess of the number of such shares, upon the Conversion of which:
(a) the number of Conversion Shares to be issued pursuant to such
Conversion, when added to the number of shares of Common Stock issued pursuant
to all prior Conversions of Preferred Shares, would exceed five million
(5,000,000) shares of Common Stock (subject to equitable adjustments from time
to time for the events described in paragraph 6 below) (the "Cap Amount"),
except that such limitation shall not apply in the event that the Corporation
obtains the approval of a majority of its stockholders for issuances of Common
Stock in excess of such amount. Until such approval is obtained, no purchaser of
Preferred Shares pursuant to the Securities Purchase Agreement (each, a
"Purchaser" and together the "Purchasers") shall be issued, upon Conversion of
the Preferred Shares, Conversion Shares in an amount greater than the product of
(A) the Cap Amount times (B) a fraction, the numerator of which is the number of
Preferred Shares issued to such Purchaser pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate amount of all of the
Preferred Shares issued to the Purchasers pursuant to the Securities Purchase
Agreement (the "Allocation Amount"). In the event that any Purchaser shall sell
or otherwise transfer any of such Purchaser's Preferred Shares, the transferee
shall be allocated a pro rata portion of the remaining unissued shares
constituting such Purchaser's Allocation Amount. In the event that any Holder
shall convert all of such Holder's Preferred Shares into a number of Conversion
Shares which, in the aggregate, is less than such Holder's Allocation Amount,
then the difference between such Holder's Allocation Amount and the number of
Conversion Shares actually issued to such Holder shall be allocated to the
respective Allocation Amounts of the remaining Holders of Preferred Shares on a
pro rata basis in proportion to the number of Preferred Shares then held by each
such Holder. In the event that any Holder's Allocation Amount represents one
hundred and fifty percent (150%) or less of (A) the number of Conversion Shares
into which the Preferred Shares then held by such Holder are convertible at the
Conversion Price then in effect (without regard to any restriction on such
conversion that may exist pursuant to the terms hereof or of any Transaction
Document) plus (B) the number of Conversion Shares into which such Holder has
previously converted Preferred Shares, such Holder shall have the right to
require the Corporation, upon written notice delivered by such Holder to the
Corporation, to, within five (5) days following the date on which such notice is
delivered to the Corporation, either (i) redeem all of the Preferred Shares then
held by such Holder by delivering to such Holder immediately available funds in
an amount equal to the Conversion Cap Redemption Price (as defined below) or
(ii) give written notice to each Holder that the Corporation will, within sixty
(60) days of such Conversion Date, obtain the approval of the Corporation's
stockholders for the issuance of Conversion Shares in excess of the Cap Amount.
In the event that the Corporation does not obtain such stockholder approval
prior to such sixtieth day, each Holder shall have the right, exercisable from
time to time, upon written notice to the Corporation, to require the Corporation
to redeem all or any part of such Holder's Preferred Shares within five (5) days
following the receipt by the Corporation of such notice by delivering to such
Holder immediately available funds in an amount equal to the Conversion Cap
Redemption Price. Any amounts representing the Conversion Cap Redemption Price
which are not paid when due shall bear interest at an annual rate equal to the
Default Interest Rate. For purposes hereof, the "Conversion Cap Redemption
Price" with respect to a Preferred Share shall be equal to (a) during the first
three hundred and sixty (360) days following the Issue Date relating to such
Preferred Share, 108.5% of the Stated Value of such Preferred Share and (b)
following the last day of such three hundred and sixtieth
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day period, a price that is calculated so that the Holder of such Preferred
Share will receive an annualized return on the Stated Value of such Preferred
Share of 8.5%; and
(b) (x) the number of shares of Common Stock beneficially owned by such
Holder (other than shares of Common Stock issuable upon conversion of Preferred
Shares or which would otherwise be deemed beneficially owned except for being
subject to a limitation on conversion or exercise analogous to the limitation
contained in this subparagraph (b)) plus (y) the number of shares of Common
Stock issuable upon the Conversion of such Preferred Shares, would be equal to
or exceed (z) 4.99% of the number of shares of Common Stock then issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this paragraph 5(b) applies, the determination of whether Preferred Shares
are convertible (in relation to other securities owned by a Holder) and of which
Preferred Shares are convertible shall be in the sole discretion of such Holder,
and the submission of Preferred Shares for Conversion shall be deemed to be such
Holder's determination that such Preferred Shares are convertible pursuant to
the terms hereof, and the Corporation shall have no obligation whatsoever to
verify or confirm the accuracy of such determination. This paragraph may be
amended (i) in order to clarify an ambiguity or otherwise to give effect to such
limitation, by the Holders of two-thirds (2/3) of the Preferred Shares then
outstanding and (ii) for any other reason, with the further consent of the
holders of a majority of the shares of Common Stock then outstanding. Nothing
contained herein shall be deemed to restrict the right of a Holder to convert
Preferred Shares at such time as the Conversion thereof will not violate the
provisions of this subparagraph 5(b). The restriction contained in this
subparagraph 5(b) shall not apply in the event of a Conversion at Maturity or to
a Holder delivering a Mandatory Redemption Notice (as defined below) on the
seventy fifth (75th) day following the date on which such Holder delivers a
notice to the Corporation that such restriction shall not apply, and may
otherwise be irrevocably amended by any Holder with respect to itself so that
such limit shall be 9.99% instead of 4.99% following at least seventy five (75)
days' prior written notice by such Holder to the Corporation.
6. ADJUSTMENTS TO CONVERSION PRICE.
(a) Adjustment to Fixed Conversion Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the Conversion of all of the Preferred Shares, (A)
the number of outstanding shares of Common Stock is increased by a stock split,
a stock dividend on the Common Stock, a reclassification of the Common Stock,
the distribution to holders of Common Stock of rights or warrants entitling them
to subscribe for or purchase Common Stock at less than the then current market
price thereof (based upon the subscription or exercise price of such rights or
warrants at the time of the issuance thereof) or other similar event, the Fixed
Conversion Price shall be proportionately reduced, or (B) the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares or other similar event, the Fixed
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof. For purposes hereof, the market price per share of
Common Stock on any date shall be the average Closing Bid Price for the Common
Stock on the five (5) consecutive Trading Days occurring immediately prior to
but not including the earlier of such date and the Trading Day before the "ex"
date, if any, with respect to the issuance or distribution requiring such
computation. The term "'ex' date", when used with respect to any issuance or
distribution, means the first Trading Day on which the Common Stock trades
regular way in the market from which such average Closing Bid Price is then to
be determined without the right to receive such issuance or distribution.
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(b) Adjustment to Conversion Price During Reference Period. If, prior
to the Conversion of all of the Preferred Shares, the number of outstanding
shares of Common Stock is increased or decreased by a stock split, a stock
dividend on the Common Stock, a combination, a reclassification of the Common
Stock or other similar event, and such event takes place during the reference
period for the determination of the Conversion Price for any Conversion thereof,
the Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event for
all Trading Days occurring during such reference period.
(c) Adjustment Due to Merger, Consolidation, Etc. If, prior to the
Conversion of all of the Preferred Shares, there shall be any merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock shall be changed into or exchanged for the same
or a different number of shares of the same or another class or classes of stock
or securities of the Corporation or another entity (an "Exchange Transaction"),
then such Holder shall (A) upon the closing of such Exchange Transaction, have
the right to receive, with respect to any shares of Common Stock then held by
such Holder, or which such Holder is then entitled to receive pursuant to a
Conversion Notice previously delivered by such Holder, (and without regard to
whether such shares contain a restrictive legend or are freely-tradeable) the
same amount and type of consideration (including without limitation, stock,
securities and/or other assets) and on the same terms as a holder of shares of
Common Stock would be entitled to receive in connection with the consummation of
such Exchange Transaction (the "Exchange Consideration"), and (B) upon the
Conversion of Preferred Shares occurring on a Conversion Date subsequent to the
closing of such Exchange Transaction, have the right to receive the Exchange
Consideration which such Holder would have been entitled to receive in
connection with such Exchange Transaction had such shares been converted
immediately prior to such Exchange Transaction at the Conversion Price in effect
on such Conversion Date, and in any such case appropriate provisions shall be
made with respect to the rights and interests of such Holder to the end that the
provisions hereof (including, without limitation, provisions for the adjustment
of the Conversion Price and of the number of shares issuable upon a Conversion)
shall thereafter be applicable as nearly as may be practicable in relation to
any securities thereafter deliverable upon the Conversion of such Preferred
Shares. The Corporation shall not effect any Exchange Transaction unless (i) it
first gives to each Holder twenty (20) days prior written notice of the closing
of such Exchange Transaction (an "Exchange Notice"), and makes a public
announcement of such event at the same time that it gives such notice and (ii)
the resulting successor or acquiring entity (if not the Corporation) assumes by
written instrument the obligations of the Corporation hereunder, including the
terms of this subparagraph 6(c), and under the Securities Purchase Agreement and
related the Registration Rights Agreement by and among the Corporation and the
Purchasers named therein (the "Registration Rights Agreement").
(d) Distribution of Assets. If the Corporation or any of its
subsidiaries shall declare or make any distribution of cash, evidences of
indebtedness or other securities or assets (other than cash dividends or
distributions payable out of earned surplus for the current or the immediately
preceding year), or any rights to acquire any of the foregoing (including
without limitation any rights distributed pursuant to the Rights Plan (as
defined in the Securities Purchase Agreement)), to holders of Common Stock (or
to a holder of the common stock of any such subsidiary), including any dividend
or distribution in shares of capital stock of a subsidiary of the Corporation
(collectively, a "Distribution"), each Holder shall have the right to receive,
on the date such Distribution is made (the "Distribution Date"), the amount of
the Distribution allocated to each share of Common Stock (or common stock of any
such subsidiary) times the number of shares of Common Stock issuable upon
conversion of the Preferred Shares held by such Holder on the Distribution Date,
assuming for such purpose that such Preferred Shares are
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convertible (regardless of whether any restriction on the ability of such Holder
to convert such Preferred Shares then applies) at the Conversion Price
applicable on the Distribution Date.
(e) Adjustment Due to Major Announcement. If the Corporation (i) makes
a public announcement that it intends to enter into a Change of Control
Transaction (as defined below) or (ii) any person, group or entity (including
the Corporation) publicly announces a tender offer, exchange offer or other
transaction to purchase 50% or more of the Common Stock (such announcement being
referred to herein as a "Major Announcement" and the date on which a Major
Announcement is made, the "Announcement Date"), then, in the event that a Holder
seeks to convert Preferred Shares on or following the Announcement Date, the
Conversion Price shall, effective upon the Announcement Date and continuing
through the fifth (5th) Business Day following the earlier to occur of the
consummation of the proposed transaction or tender offer, exchange offer or
other transaction and the Abandonment Date (as defined below), be equal to the
lower of (x) the average Closing Bid Price for the Common Stock on the five (5)
Trading Days immediately preceding (but not including) the Announcement Date and
(y) the Conversion Price that would otherwise be in effect on the Conversion
Date for such Preferred Shares. "Abandonment Date" means with respect to any
proposed transaction or tender offer, exchange offer or other transaction for
which a public announcement as contemplated by this paragraph 6(e) has been
made, the date upon which the Corporation (in the case of clause (i) above) or
the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer, exchange offer or another transaction which caused this paragraph 6(e) to
become operative.
(f) Adjustment Pursuant to Other Agreements. In addition to and without
limiting in any way the adjustments provided in this Section 6, the Conversion
Price shall be adjusted as may be required by the provisions of the Registration
Rights Agreement and/or by the provisions of the Securities Purchase Agreement.
(g) No Fractional Shares. If any adjustment under this Section would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon Conversion shall be the next higher
number of shares or, at the option of the Corporation, shall be paid in cash in
an amount calculated by multiplying the amount of the fractional share times the
Closing Bid Price used to calculate the Conversion Price for such Conversion.
7. MANDATORY REDEMPTION BY HOLDER.
(a) Mandatory Redemption. In the event that a Mandatory Redemption
Event (as defined below) occurs, each Holder shall have the right to require the
Corporation to redeem all or any portion of the Preferred Shares held by such
Holder (a "Mandatory Redemption") at the Mandatory Redemption Price (as defined
herein) in same day funds. In order to exercise its right to effect a Mandatory
Redemption, a Holder must deliver a written notice (a "Mandatory Redemption
Notice") to the Corporation at any time on or before the Business Day following
the day on which such event is no longer continuing; provided, however, that, in
the case of subparagraph (b)(v) below, the following procedure shall be followed
in lieu thereof: (a) no sooner than fifteen (15) days nor later than ten (10)
days prior to the Corporation's good faith estimate of the consummation of a
Change of Control Transaction (as defined below), but not prior to the public
announcement of such Change of Control Transaction, the Corporation shall
deliver a written notice (a "Notice of Change of Control Transaction") to each
Holder, and (b) within five (5) days of delivery by the Corporation of a Notice
of Change of Control Transaction, each Holder who wishes to exercise its right
to effect a Mandatory Redemption hereunder shall deliver a Mandatory Redemption
Notice to the Corporation. The Mandatory Redemption Notice shall specify the
effective date of such Mandatory Redemption (the
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"Mandatory Redemption Date") and the number of such shares to be redeemed. In
the event that a Change of Control Transaction occurs and the Corporation does
not deliver to a Holder a Notice of Change of Control Transaction within the
time periods described above, such Holder may exercise its right to a Mandatory
Redemption hereunder by delivering a Mandatory Redemption Notice to the
Corporation (or to the surviving or successor entity) at any time on or before
the twentieth (20th) Business Day following such Change of Control Transaction.
(b) Mandatory Redemption Event. Each of the following events shall be
deemed a "Mandatory Redemption Event":
(i) the Corporation fails for any reason (including without
limitation as a result of not having a sufficient number of shares of Common
Stock authorized and reserved for issuance, or as a result of the limitation
contained in Section 5(a) hereof) to issue shares of Common Stock to a Holder
and deliver certificates representing such shares to such Holder as and when
required by the provisions hereof upon Conversion of any Preferred Shares, and
such failure continues for twenty (20) Business Days;
(ii) the Corporation breaches, in a material respect, any
covenant or other material term or condition of this Certificate, the Securities
Purchase Agreement, the Registration Rights Agreement, or any other agreement,
document, certificate or other instrument delivered in connection with the
transactions contemplated thereby, and such breach continues for a period of
fifteen (15) Business Days after written notice thereof to the Corporation from
a Holder;
(iii) the Registration Statement is not declared effective by
the one hundred and eightieth (180th) day following the Initial Issue Date or if
the Registration Statement has been declared effective by such date and, while
the effectiveness of the Registration Statement is required to be maintained
pursuant to the terms of the Registration Rights Agreement, the effectiveness of
the Registration Statement lapses for any reason (including without limitation,
the issuance of a stop order) or is unavailable to the Holder for the sale of
Conversion Shares in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of five (5)
Business Days, provided that the cause of such lapse or unavailability is not
due to factors solely within the control of the Holder;
(iv) the Corporation fails to obtain either (A) the approval
of stockholders described in paragraph 5(a) above on or before the time frames
set forth in paragraph 5(a) to obtain such approval or (B) the approval of
stockholders described in paragraph 4.15 or paragraph 4.16 of the Securities
Purchase Agreement on or before on or before the time frames set forth in such
paragraph 4.15 or 4.16;
(v) the Corporation undertakes any voluntary action to
terminate the quotation or listing of the Common Stock on the Nasdaq National
Market or on any national securities exchange; and
(vi) there occurs the sale, conveyance or disposition of all
or substantially all of the assets of the Corporation or any of its subsidiaries
(including without limitation the sale or other conveyance of any common stock
or other equity securities of any of the Corporation's subsidiaries), or the
effectuation of a transaction or series of related transactions, in which more
than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation or any of
its subsidiaries with or into any other entity, immediately following which the
prior stockholders of the Corporation fail to own, directly or indirectly, at
least fifty percent (50%) of the surviving entity (a "Change of Control
Transaction"), provided, however, that a tender offer or any other transaction
with respect to
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<PAGE>
which the Corporation's Board of Directors is unable to exercise discretion as
to the effectuation thereof shall not be deemed to constitute a Mandatory
Redemption Event by operation of this subparagraph (vi).
(c) Mandatory Redemption Price. The "Mandatory Redemption Price" shall
be equal to the greater of (i) Liquidation Preference of the Preferred Shares
being redeemed multiplied by one hundred and seventeen percent (117%) and (ii)
an amount determined by dividing the Stated Value of the Preferred Shares being
redeemed by the Conversion Price in effect on the Mandatory Redemption Date and
multiplying the resulting quotient by the average Closing Bid Price for the
Common Stock on the five (5) Trading Days immediately preceding (but not
including) the Mandatory Redemption Date.
(d) Payment of Mandatory Redemption Price.
(i) The Corporation shall pay the Mandatory Redemption Price
to the Holder exercising its right to redemption on the later to occur of (i)
the fifth (5th) Business Day following the Mandatory Redemption Date and (ii)
the date on which the Preferred Shares being redeemed are delivered by the
Purchaser to the Corporation for cancellation.
(ii) If Corporation fails to pay the Mandatory Redemption
Price to the Holder within five (5) Business Days of the Mandatory Redemption
Date, the Holder shall be entitled to interest thereon, from and after the
Mandatory Redemption Date until the Mandatory Redemption Price has been paid in
full, at an annual rate equal to the Default Interest Rate.
(iii) If the Corporation fails to pay the Mandatory Redemption
Price within ten (10) Business Days of the Mandatory Redemption Date, then the
Holder shall have the right at any time, so long as the Corporation remains in
default, to require the Corporation, upon written notice, to immediately issue,
in lieu of the Mandatory Redemption Price, the number of shares of Common Stock
of the Corporation equal to the Mandatory Redemption Price divided by the
Conversion Price in effect on such Conversion Date as is specified by the Holder
in writing to the Corporation, such Conversion Price to be reduced by one
percent (1%) for each day beyond such 10th Business Day in which the failure to
pay the Mandatory Redemption Price continues; provided, however, that the
maximum percentage by which such Conversion Price may be reduced hereunder shall
be fifty percent (50%).
(e) Modification of Mandatory Redemption Provisions. The terms of this
Section 7 shall apply to the Series B Preferred Stock until such time, if any,
as such terms have been superseded, in whole or in part, by the terms of a
Determination Certificate (as defined below). A "Determination Certificate"
shall be a written instrument containing redemption provisions applicable to the
Series B Preferred Stock (or affirming the absence of any such provisions)
proposed by the Holders of a majority of the shares of Series B Preferred Stock
at the time outstanding and duly adopted by the Board of Directors, provided
that the approval of the Board of Directors shall be deemed to be given if the
adopting Holders furnish the Corporation with a certificate to the effect that
the Determination Certificate reflects a determination made in consultation with
the Corporation's auditors or another firm of accountants of recognized national
standing that the changes contemplated thereby are necessary to qualify the
Series B Preferred Stock as stockholders' equity under generally accepted
accounting principles. The Corporation shall promptly give written notice of the
adoption of any Determination Certificate to all holders of its Series B
Preferred Stock, shall refer to the existence of any Determination Certificate
in its annual financial statements and shall supply to any stockholder upon
request the full text thereof. One or more Determination Certificates may be
adopted pursuant to this paragraph. The contents of a Determination Certificate
shall be deemed to be "facts" for purposes of Section 151 of the Delaware
General Corporation Law.
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<PAGE>
8. MISCELLANEOUS.
(a) Transfer of Preferred Shares. A Holder may sell or transfer all or
any portion of the Preferred Shares to any person or entity as long as such sale
or transfer is the subject of an effective registration statement under the
Securities Act or is exempt from registration thereunder and otherwise is made
in accordance with the terms of the Securities Purchase Agreement. From and
after the date of such sale or transfer, the transferee thereof shall be deemed
to be a Holder. Upon any such sale or transfer, the Corporation shall, promptly
following the return of the certificate or certificates representing the
Preferred Shares that are the subject of such sale or transfer, issue and
deliver to such transferee a new certificate in the name of such transferee.
(b) Notices. Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms hereof, the form
or delivery of which notice, demand or request is not otherwise specified
herein, shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission on or before 5:00 p.m.,
eastern time, on a Business Day or, if such day is not a Business Day, on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the third Business Day after
deposit in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed to the parties as follows:
If to the Corporation:
OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281
Attn: President
Tel: (602) 437-5520
Fax: (602) 470-7080
with a copy to:
Quarles & Brady
One East Camelback
Phoenix, Arizona 85012
Attn: P. Robert Moya, Esq.
Tel. 602-230-5500
Fax. 602-230-5598
and if to any Holder, to such address for such Holder as shall be designated by
such Holder in writing to the Corporation.
(c) Lost or Stolen Certificate. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of a certificate
representing Preferred Shares, and (in the case of loss, theft or destruction)
of indemnity reasonably satisfactory to the Corporation, and upon surrender and
cancellation of such certificate if mutilated, the Corporation shall execute and
deliver to the Holder a new certificate identical in all respects to the
original certificate.
(d) No Voting Rights. Except as provided by applicable law and
paragraph 8(g) below, the Holders of the Preferred Shares shall have no voting
rights with respect to the
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<PAGE>
business, management or affairs of the Corporation; provided that the
Corporation shall provide each Holder with prior notification of each meeting of
stockholders (and copies of proxy statements and other information sent to such
stockholders).
(e) Remedies, Characterization, Other Obligations, Breaches and
Injunctive Relief. The remedies provided to a Holder in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
to such Holder under this Certificate of Designation or under any Transaction
Document (as defined in the Securities Purchase Agreement), at law or in equity
(including without limitation a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing contained
herein shall limit such Holder's right to pursue actual damages for any failure
by the Corporation to comply with the terms of this Certificate of Designation.
The Corporation agrees with each Holder that there shall be no characterization
concerning this instrument other than as specifically provided herein. Amounts
set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be received by the
Holder hereof and shall not, except as expressly provided herein, be subject to
any other obligation of the Corporation (or the performance thereof). The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holders and that the remedy at law for any such
breach may be inadequate. The Corporation agrees, in the event of any such
breach or threatened breach, each Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(f) Failure or Delay not Waiver. No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
(g) Protective Provisions.
So long as shares of Series B Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the Holders
of at least two-thirds (2/3) of the then outstanding shares of Series B
Preferred Stock:
(i) alter or change the rights, preferences or
privileges of the Series B Preferred Stock or any other capital stock of the
Corporation so as to affect adversely the Series B Preferred Stock;
(ii) create any new class or series of capital stock
having a preference over or ranking pari passu with the Series B Preferred Stock
as to redemption or distribution of assets upon a Liquidation Event or any other
liquidation, dissolution or winding up of the Corporation;
(iii) increase the authorized number of shares of
Preferred Stock;
(iv) re-issue any shares of Series B Preferred Stock
which have been converted or redeemed in accordance with the terms hereof;
(v) issue any Pari Passu Securities or Senior
Securities (other than (x) shares of Series B Preferred Stock issued pursuant to
the Securities Purchase Agreement, (y) debt securities which are not convertible
into or exchangeable for Common Stock or any other equity or convertible
security of the Corporation, or (z) the issuance of Series A Preferred Stock
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<PAGE>
of the Company pursuant to the Rights Plan (as defined in the Securities
Purchase Agreement) in effect as of the date hereof); or
(vi) redeem, or declare, pay or make any provision
for any dividend or distribution with respect to, the Common Stock or any other
capital stock of the Corporation ranking junior to the Series B Preferred Stock
as to the distribution of assets upon liquidation, dissolution or winding up of
the Corporation (other than a dividend to be paid from and after the end of the
two (2) year period following the later to occur of the Tranche A Closing Date
and the Tranche B Closing Date (each as defined in the Securities Purchase
Agreement) to holders of Common Stock out of retained earnings of the
Corporation that have accrued during the prior fiscal year.
In the event that Holders of at least two-thirds (2/3) of the then
outstanding shares of Series B Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series B
Preferred Stock, pursuant to the terms hereof, then the Corporation will deliver
notice of such approved change to the holders of the Series B Preferred Stock
that did not agree to such alteration or change (the "Dissenting Holders") and
the Dissenting Holders shall have the right for a period of thirty (30) days
following such delivery to convert their Preferred Shares pursuant to the terms
hereof as they existed prior to such alteration or change, or to continue to
hold such Preferred Shares. No such change shall be effective to the extent
that, by its terms, it applies to less than all of the Holders of Preferred
Shares then outstanding.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Designation as of the 9th day of July, 1998.
ORTHOLOGIC CORP.
By: /s/ Thomas R. Trotter
-------------------------
Name: Thomas R. Trotter
Title: President & CEO
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<PAGE>
EXHIBIT A
---------
NOTICE OF CONVERSION
The undersigned hereby elects to convert shares of Series B Convertible
Preferred Stock (the "Preferred Stock"), represented by stock certificate No(s).
(the "Preferred Stock Certificates"), into shares of common stock ("Common
Stock") of OrthoLogic Corp. according to the terms and conditions of the
Certificate of Designation relating to the Preferred Stock (the "Certificate of
Designation"), as of the date written below. Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the
Certificate of Designation.
Date of Conversion: ____________________________
Number of Shares of
Preferred Stock to be Converted: _______________
Applicable Conversion Price: _______________
Number of Shares of
Common Stock to be Issued: _______________
Name of Holder: ____________________________
Address: ____________________________
____________________________
____________________________
Signature: ___________________________________
Name:
Title:
Holder Requests Delivery to be made: (check one)
- -----------------------------------
|_| By Delivery of Physical Certificates to the Above Address
|_| Through Depository Trust Corporation
(Account _______________________________________________)
EXHIBIT A
---------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. THIS WARRANT (THIS
"WARRANT") AND THE WARRANTS OF EVEN DATE HEREWITH (TOGETHER WITH THIS WARRANT,
THE "WARRANTS") ARE ISSUED SUBJECT TO THE TERMS OF (A) A SECURITIES PURCHASE
AGREEMENT, DATED JULY 9, 1998 ("SECURITIES PURCHASE AGREEMENT"), BY AND BETWEEN
ORTHOLOGIC CORP. AND THE HOLDER OF THIS WARRANT AND (B) A REGISTRATION RIGHTS
AGREEMENT, DATED JULY 9, 1998 ("REGISTRATION RIGHTS AGREEMENT"), BY AND BETWEEN
ORTHOLOGIC CORP. AND THE HOLDER OF THIS WARRANT.
Warrant to Purchase
____________ Shares
WARRANT TO PURCHASE COMMON STOCK
of
ORTHOLOGIC CORP.
THIS CERTIFIES that ________________________ or any subsequent holder
hereof (the "Holder"), has the right to purchase from OrthoLogic Corp., a
Delaware corporation (the "Company"), up to ___________ fully paid and
nonassessable shares of the Company's Common Stock, par value $0.0005 per share
(the "Common Stock"), subject to adjustment as provided herein, at a price equal
to the Exercise Price (as defined below), at any time beginning on the date on
which this Warrant is issued (the "Issue Date") and ending at 5:00 p.m., eastern
time, on July 13, 2003 (the "Expiration Date"). This Warrant is issued, and all
rights hereunder shall be, subject to all of the conditions, limitations and
provisions set forth herein and in the Securities Purchase Agreement.
<PAGE>
1. Exercise.
(a) Right to Exercise; Exercise Price. The Holder shall have the right
to exercise this Warrant at any time and from time to time up to and including
the Expiration Date as to all or any part of the shares of Common Stock covered
hereby (the "Warrant Shares"). The "Exercise Price" payable by the Holder in
connection with the exercise of this Warrant shall be $5.50.
(b) Exercise Notice. In order to exercise this Warrant, the Holder
shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern
time, on the date on which the Holder wishes to effect such exercise (the
"Exercise Date"), to the Company and to its designated transfer agent for the
Common Stock (the "Transfer Agent") a copy of the notice of exercise in the form
attached hereto as Exhibit A (the "Exercise Notice") stating the number of
Warrant Shares as to which such exercise applies and the calculation therefor.
The Holder shall thereafter deliver to the Company the original Exercise Notice,
the original Warrant and the Exercise Price. In the case of a dispute as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder, the Company shall promptly issue to the Holder the number of Warrant
Shares that are not disputed and shall submit the disputed calculations to the
Company's independent accountant within one (1) business day following the
Exercise Date. The Company shall cause such accountant to calculate the Exercise
Price and/or the number of Warrant Shares issuable hereunder and to notify the
Company and the Holder of the results in writing no later than two (2) business
days following the day on which it received the disputed calculations. Such
accountant's calculation shall be deemed conclusive absent manifest error. The
fees of any such accountant shall be borne by the party whose calculations were
most at variance with those of such accountant.
(c) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise and the Holder shall be entitled to receive, as soon as practicable
after the Exercise Date, a new Warrant or Warrants (containing terms identical
to this Warrant) representing any unexercised portion of this Warrant.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a Exercise
Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a
Cashless Exercise (as defined below), no later than the close of business on the
third (3rd) business day following the Exercise Date set forth in such Exercise
Notice, (B) in the case of a Cash Exercise (as defined below) no later than the
close of business on the earlier to occur of (i) the third (3rd) business day
following the Exercise Date set forth in such Exercise Notice and (ii) such
later date on which the Company shall have received payment of the Exercise
Price, and (C) with respect to Warrant Shares which are disputed as described in
paragraph 1(b) above, and required to be delivered by the Company pursuant to
the accountant's calculations described therein, the third (3rd) business day
following the date on which the Company has received the notice from its
accountants described in such paragraph 1(b) (the "Delivery Date"), issue and
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<PAGE>
deliver or caused to be delivered to the Holder the number of Warrant Shares as
shall be determined as provided herein. Warrant Shares delivered to the Holder
shall not contain any restrictive legend as long as the sale of such Warrant
Shares is covered by an effective Registration Statement (as defined in the
Registration Rights Agreement) or may be made pursuant to Rule 144(k) under the
Securities Act of 1933, as amended, or any successor rule or provision.
3. Failure to Deliver Warrant Shares.
(a) Exercise Default. In the event that the Company fails for
any reason (other than by operation of paragraph 4 below) to deliver to a Holder
certificates representing the number of Warrant Shares specified in the
applicable Exercise Notice on or before the seventh (7th) business day following
the Delivery Date therefor (an "Exercise Default"), the Company shall pay to
such Holder payments ("Exercise Default Payments") in the amount of (i) (N/365)
multiplied by (ii) the aggregate Exercise Price for the Warrant Shares which are
the subject of such Exercise Default multiplied by (iii) the lower of
twenty-four percent (24%) and the maximum rate permitted by applicable law,
where "N" equals the number of days elapsed between the original Delivery Date
for such Warrant Shares and the date on which all of such Warrant Shares are
issued and delivered to such Holder. Amounts payable under this subparagraph
3(a) shall be paid to the Holder in immediately available funds on or before the
fifth (5th) business day of the calendar month immediately following the
calendar month in which such amount has accrued.
(b) Reduction of Exercise Price. In the event that a Holder
has not received certificates representing the Warrant Shares by the tenth
(10th) Business Day following an Exercise Default, such Holder may, upon written
notice to the Company, regain on such business day the rights of a Holder of
this Warrant, or part thereof, with respect to the Warrant Shares that are the
subject of such Exercise Default, and the Exercise Price for such Warrant Shares
shall be reduced by one percent (1%) for each day beyond such 10th business day
in which the Exercise Default continues. In such event, such Holder shall retain
all of such Holder's rights and remedies with respect to the Company's failure
to deliver such Warrant Shares (including without limitation the right to
receive the cash payments specified in subparagraph 3(a) above).
(c) Buy-in. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to issue and deliver Warrant
Shares in connection with an exercise on the applicable Delivery Date
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such Holder to make delivery on a sale effected in anticipation
of receiving Warrant Shares upon exercise, such damages to be in an amount equal
to (A) the aggregate amount paid by such Holder for the shares of Common Stock
so purchased minus (B) the aggregate amount of net proceeds, if any, received by
such Holder from the sale of the Warrant Shares issued by the Company pursuant
to such exercise), and such Holder shall have the right to pursue all remedies
available to it at law or in equity (including, without limitation, a decree of
specific performance and/or injunctive relief).
(d) Holder of Record. Each Holder shall, for all purposes, be
deemed to have
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<PAGE>
become the holder of record of Warrant Shares on the Exercise Date of this
Warrant, irrespective of the date of delivery of such Warrant Shares. Nothing in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a stockholder of the Company.
4. Exercise Limitations.
In no event shall a Holder be permitted to exercise this Warrant, or
part thereof, with respect to Warrant Shares in excess of the number of such
shares, upon the issuance of which, (x) the number of shares of Common Stock
beneficially owned by such Holder and its affiliates (other than shares of
Common Stock issuable upon exercise of the Warrants or the exercise or
conversion of securities which contain a limitation similar to the limitation
contained herein) plus (y) the number of shares of Common Stock issuable upon
such exercise, would be equal to or exceed (z) 4.99% of the number of shares of
Common Stock then issued and outstanding. As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the rules thereunder. To the extent that the
limitation contained in this paragraph 4 applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by a Holder)
shall be in the sole discretion of such Holder, and the submission of an
Exercise Notice shall be deemed to be such Holder's determination that this
Warrant is exercisable pursuant to the terms hereof, and the Company shall have
no obligation whatsoever to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the right of
a Holder to exercise this Warrant, or part thereof, at such time as such
exercise will not violate the provisions of this Section 4.
5. Payment of the Exercise Price. The Holder may pay the Exercise Price
in either of the following forms or, at the election of Holder, a combination
thereof:
(a) Cash Exercise: by delivery of immediately available funds.
-4-
<PAGE>
(b) Cashless Exercise: by surrender of this Warrant to the Company
together with a notice of cashless exercise, in which event the Company shall
issue to the Holder the number of Warrant Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the Closing Bid Prices of the Common Stock
for the five (5) Trading Days immediately prior to (but not
including) the Exercise Date.
B = the Exercise Price.
For purposes of Rule 144 under the Securities Act of 1933, as amended, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the Closing Date (as defined in the Securities Purchase
Agreement).
6. Anti-Dilution Adjustments.
(a) Stock Dividend. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then the Holder hereof, upon exercise of this
Warrant after the record date for the determination of Holders of Common Stock
entitled to receive such dividend, shall be entitled to receive, in addition to
the number of shares of Common Stock as to which this Warrant is exercised, such
additional shares of Common Stock as such Holder would have received had this
Warrant been exercised immediately prior to such record date and the Exercise
Price will be proportionately adjusted.
(b) Recapitalization or Reclassification. If the Company shall at any
time effect a recapitalization, reclassification or other similar transaction of
such character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof, the number of shares of Common Stock which the Holder hereof shall
be entitled to purchase upon exercise of this Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization,
reclassification or similar transaction, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionally decreased and, in
the case of decrease in the number of shares, proportionally increased. The
Company shall give the Warrant Holder the same notice at the same time it
provides such notice to holders of Common Stock of any transaction described in
this Section 6(b).
-5-
<PAGE>
(c) Distributions. If the Company shall at any time distribute to
holders of Common Stock cash, evidences of indebtedness or other securities or
assets (other than cash dividends or distributions payable out of earned surplus
or net profits for the current or a preceding year) then, in any such case, the
Holder of this Warrant shall be entitled to receive, upon exercise of this
Warrant, with respect to each share of Common Stock issuable upon such exercise,
the amount of cash or evidences of indebtedness or other securities or assets
which such Holder would have been entitled to receive with respect to each such
share of Common Stock as a result of the happening of such event had this
Warrant been exercised immediately prior to the record date or other date fixing
shareholders to be affected by such event.
(d) Notice of Consolidation or Merger. In the event of a merger,
consolidation, business combination, tender offer, exchange of shares,
recapitalization, reorganization, redemption or other similar event, as a result
of which shares of Common Stock of the Company shall be changed into the same or
a different number of shares of the same or another class or classes of stock or
securities or other assets of the Company or another entity or there is a sale
of all or substantially all the Company's assets (a "Corporate Change"), then
this Warrant shall be exercisable into such class and type of securities or
other assets as the Holder would have received had the Holder exercised this
Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless (i) it first shall have given
thirty (30) business days' notice to the Holder hereof of any Corporate Change
and makes a public announcement of such event at the same time that it gives
such notice and (ii) it requires the resulting successor or acquiring entity (if
not the Corporation) to assume by written instrument the obligations of the
Corporation hereunder and under the Securities Purchase Agreement and the
Registration Rights Agreement.
(e) Exercise Price as Adjusted. As used in this Warrant, the term
"Exercise Price" shall mean the purchase price per share specified in paragraph
1 of this Warrant, until the occurrence of an event stated in subsection (a),
(b) or (c) of this paragraph 6, and thereafter shall mean said price as adjusted
from time to time in accordance with the provisions of each such subsection. No
such adjustment under this paragraph 6 shall be made unless such adjustment
would change the Exercise Price at the time by two percent (2%) or more;
provided, however, that all adjustments not so made shall be deferred and made
when the aggregate thereof would change the Exercise Price at the time by $.01
or more. No adjustment made pursuant to any provision of this paragraph 6 shall
have the effect of increasing the total consideration payable upon exercise of
this Warrant in respect of all the Common Stock as to which this Warrant may be
exercised.
(f) Adjustments: Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this Section 6,
the Holder of this Warrant shall, upon exercise of this Warrant, become entitled
to receive shares and/or other securities or assets (other than Common Stock)
then, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such shares and/or other securities or
assets; and thereafter the number of such shares and/or other securities or
assets shall be subject to adjustment from time to time in a manner and upon
terms as nearly equivalent as practicable to the provisions of this paragraph 6.
-6-
<PAGE>
7. Fractional Interests. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of this Warrant, but on
exercise of this Warrant, the Holder hereof may purchase only a whole number of
shares of Common Stock. If, on exercise of this Warrant, the Holder hereof would
be entitled to a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon exercise shall be rounded up
or down to the nearest whole number of shares of Common Stock.
8. Transfer of this Warrant. The Holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant, in whole or in part, as long as (A)
such sale or other disposition is made pursuant to pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act of 1933, as amended, and applicable state laws and (B) such sale
or other disposition is made to an accredited investor (as such term is defined
in Regulation D under the Securities Act). Upon such transfer or other
disposition, the Holder shall deliver a written notice to Company, substantially
in the form of the Transfer Notice attached hereto as Exhibit B (the "Transfer
Notice"), indicating the person or persons to whom this Warrant shall be
transferred and, if less than all of this Warrant is transferred or this Warrant
is transferred in parts, the number of Warrant Shares to be covered by the part
of this Warrant to be transferred to each such person. Within three (3) business
days of receiving a Transfer Notice and the original of this Warrant, the
Company shall deliver to the each transferee designated by the Holder a Warrant
or Warrants of like tenor and terms for the appropriate number of Warrant
Shares.
9. Benefits of this Warrant.
Nothing in this Warrant shall be construed to confer upon any
person other than the Holder of this Warrant any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Holder of this Warrant.
10. Loss, theft, destruction or mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date.
11. Notice or Demands.
Except as otherwise provided herein, any notice, demand or
request required or permitted to be given pursuant to the terms of this Warrant
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is not a business
day, on the next
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<PAGE>
succeeding business day, (ii) on the next business day after timely delivery to
a nationally-recognized overnight courier and (iii) on the third business day
after deposit in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:
If to the Company:
OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281
Attn: President
Tel: (602) 437-5520
Fax: (602) 470-7080
with a copy to:
Quarles & Brady
One East Camelback
Phoenix, Arizona 85012
Attn: P. Robert Moya, Esq.
Tel: 602-230-5500
Fax: 602-230-5598
and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.
12. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the state of New York,
without giving effect to conflict of law provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the
9th day of July, 1998.
ORTHOLOGIC CORP.
By: /s/ Thomas R. Trotter
-------------------------
Name: Thomas R. Trotter
Title: President & CEO
-9-
<PAGE>
EXHIBIT A to WARRANT
--------------------
EXERCISE NOTICE
---------------
The undersigned Holder hereby irrevocably exercises the right to
purchase of the shares of Common Stock ("Warrant Shares") of OrthoLogic Corp., a
Delaware corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as:
______ a Cash Exercise with respect to _________________ Warrant Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant Shares.
2. Payment of Exercise Price. In the event that the Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the Holder
_____________ Warrant Shares in accordance with the terms of the Warrant.
Date: ______________________
____________________________________
Name of Registered Holder
By: _______________________________
Name:
Title:
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<PAGE>
EXHIBIT B to WARRANT
--------------------
TRANSFER NOTICE
---------------
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of OrthoLogic Corp.
evidenced by the attached Warrant.
Date: ______________________
____________________________________
Name of Registered Holder
By: ________________________________
Name:
Title:
Transferee Name and Address:
____________________________________
____________________________________
____________________________________
-11-
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 13,
1998, by and among OrthoLogic Corp., a Delaware corporation (the "Company"), and
each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as a "Purchaser" and, collectively, as the
"Purchasers".
The Company has agreed, on the terms and subject to the conditions set
forth in the Securities Purchase Agreement of even date herewith (the
"Securities Purchase Agreement"), to issue and sell to each Purchaser shares
(the "Preferred Shares") of the Company's Series B Convertible Preferred Stock,
par value $0.0005 per share (the "Preferred Stock"), and a Warrant (each, a
"Warrant" and, when taken together with all of the warrants issued pursuant to
the Securities Purchase Agreement, the "Warrants") entitling the holder thereof
to purchase shares (the "Warrant Shares") of the Company's Common Stock, par
value $0.0005 per share (the "Common Stock"). The Preferred Shares are
convertible pursuant to the Company's Certificate of Designation (the
"Certificate of Designation") into shares (the "Conversion Shares") of the
Common Stock. In order to induce the Purchasers to enter into the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended (the "Securities Act"), and
under applicable state securities laws. Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Securities
Purchase Agreement.
In consideration of each Purchaser entering into the Securities
Purchase Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
For purposes of this Agreement, the following terms shall have the
meanings specified:
(a) "Filing Deadline" shall mean September 3, 1998;
(b) "Tranche A Closing Date" shall have the meaning specified
in the Securities Purchase Agreement;
(c) "Registration Deadline" means the seventieth (70th) day
following the Filing Deadline;
(d) "Holder" means any person owning or having the right to
acquire, through conversion of Preferred Shares or exercise of
the Warrant, Registrable Securities, including initially each
Purchaser and thereafter any permitted assignee thereof;
(e) "Register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration
statement or statements in compliance with the Securities Act
and pursuant to Rule 415 under the Securities Act ("Rule 415")
or any
<PAGE>
successor rule providing for the offering of securities on a
continuous or delayed basis ("Registration Statement"), and
the declaration or ordering of effectiveness of the
Registration Statement by the Securities and Exchange
Commission (the "Commission"); and
(f) "Registrable Securities" means the Conversion Shares and
the Warrant Shares and any other shares of Common Stock
issuable pursuant to the terms of the Preferred Stock or the
Warrants, whether as a dividend, payment of a redemption price
or otherwise, and any shares of capital stock issued or
issuable from time to time (with any adjustments) in
replacement of, in exchange for or otherwise in respect of the
Conversion Shares or the Warrant Shares, including without
limitation any securities received by a Holder in connection
with an Exchange Transaction (as defined in the Certificate of
Designation).
2. MANDATORY REGISTRATION.
----------------------
(a) On or before the Filing Deadline, the Company shall
prepare and file with the Commission a Registration Statement on Form S-3 as a
"shelf" registration statement under Rule 415 covering the resale of at least
200% of the number of shares of Registrable Securities then issuable on
conversion of the Preferred Shares and exercise of the Warrants then outstanding
(such number to be determined using the Conversion Price or exercise price in
effect on the date of such filing and without regard to any restriction on the
ability of a Holder to convert Preferred Shares or exercise the Warrants as of
such date). The Registration Statement shall state, to the extent permitted by
Rule 416 under the Securities Act, that it also covers such indeterminate number
of shares of Common Stock as may be required to effect (i) conversion of the
Preferred Shares to prevent dilution resulting from stock splits, stock
dividends or similar events, or by reason of changes in the Conversion Price in
accordance with the terms of the Certificate of Designation and (ii) exercise of
the Warrants in full to prevent dilution resulting from stock splits, stock
dividends or similar events. The number of shares initially registered under the
Registration Statement shall be allocated pro rata among the Purchasers based on
the number of Preferred Shares issued to each Purchaser at the Tranche A
Closing. Each increase in the number of shares registered under the Registration
Statement shall be allocated pro rata among the Holders based on the number of
Preferred Shares held by such Holder at the time of such increase. In the event
that a Holder shall sell or otherwise transfer any of such Holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of such
transferor's allocation of registered shares. Any portion of such allocated
amount which remains allocated to any person or entity which does not hold any
Preferred Shares shall be allocated to the remaining Holders pro rata based on
the number of Preferred Shares then held by such Holders.
(b) The Company shall use its best efforts to cause the
Registration Statement to become effective as soon as practicable following the
filing thereof, but in no event later than the Registration Deadline, and shall
submit to the Commission, within one (1) business day after the Company learns
that no review of the Registration Statement will be made by the staff of the
Commission or that the staff of the Commission has no further comments on the
Registration Statement, as the case may be, a request for acceleration of the
effectiveness of the Registration
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<PAGE>
Statement to a time and date not later than forty-eight (48) hours after the
submission of such request, and maintain the effectiveness of the Registration
Statement until the earlier to occur of (i) the date on which all of the
Registrable Securities have been sold pursuant to the Registration Statement and
(ii) the date on which all of the remaining Registrable Securities (in the
reasonable opinion of counsel to the Purchaser) may be immediately sold to the
public under Rule 144(k) or any successor provision (the "Registration Period").
(c) If (A) the Registration Statement is not filed on or
before the Filing Deadline or declared effective by the Commission on or before
the Registration Deadline or (B) after the Registration Statement has been
declared effective by the Commission, sales of Registrable Securities cannot be
made by a Holder under the Registration Statement for any reason not within the
exclusive control of such Holder (other than such Registrable Securities as are
then freely saleable pursuant to Rule 144(k) under the Securities Act), (each, a
"Registration Event"), the Company shall pay to each Holder an amount equal to
the lesser of (x) one and one half percent (1.5%) per month and (y) the highest
rate permitted by applicable law, times the aggregate Stated Value (as defined
in the Certificate of Designation) of the Preferred Shares held by such Holder,
accruing daily and compounded monthly, from the date on which a Registration
Event first occurs until the date on which the Registration Event is no longer
continuing. The amounts paid or payable by the Company hereunder shall be in
addition to any other remedies available to a Holder at law or in equity or
pursuant to the terms of any other Transaction Document. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, payments shall be made at the end of each
thirty-day period.
(d) In the event that (A) the Registration Statement is not
declared effective by the twentieth (20th) Business Day following the
Registration Deadline, (B) after the Registration Statement has been declared
effective by the Commission, sales of Registrable Securities cannot be made by a
Holder under the Registration Statement for any reason not within the exclusive
control of such Holder (other than such Registrable Securities as are then
freely saleable pursuant to Rule 144(k) under the Securities Act), or (C) the
Common Stock is not included for quotation on the Nasdaq Stock Market or listed
on the New York Stock Exchange or the American Stock Exchange, (each event
described in clause (A), (B) or (C) being hereinafter referred to as a
"Repricing Event"), in addition to the amounts which may be payable pursuant to
paragraph 2(c) above, the Fixed Conversion Price (as defined in the Certificate
of Designation) for any conversion of Preferred Shares occurring during the
twenty two (22) Trading Days following the Cure Date (as defined below) with
respect to such event shall be deemed to be equal to the lesser of (i) the
lowest Conversion Price (as defined in the Certificate of Designation) in effect
during the period between the date on which a Repricing Event occurs and the
date on which such Repricing Event is no longer continuing (the "Cure Date") and
(ii) the Fixed Conversion Price that would otherwise be in effect on the
relevant Conversion Date (as defined in the Certificate of Designation).
3. PIGGYBACK REGISTRATION.
----------------------
If at any time prior to the expiration of the Registration
Period, (i) the Company proposes to register shares of Common Stock under the
Securities Act in connection with the public
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<PAGE>
offering of such shares for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan or employee stock
award or a registration on Form S-4 under the Securities Act or any successor or
similar form registering stock issuable upon a reclassification, a business
combination involving an exchange of securities or an exchange offer for
securities of the issuer or another entity) (a "Proposed Registration") and (ii)
a registration statement covering the sale of all of the Registrable Securities
is not then effective and available for sales thereof by the Holders, the
Company shall, at such time, promptly give each Holder written notice of such
Proposed Registration. Each Holder shall have thirty (30) days from its receipt
of such notice to deliver to the Company a written request specifying the amount
of Registrable Securities that such Holder intends to sell and such Holder's
intended method of distribution. Upon receipt of such request, the Company shall
use its best efforts to cause all Registrable Securities which the Company has
been requested to register to be registered under the Securities Act to the
extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of such Holder;
provided, however, that the Company shall have the right to postpone or withdraw
any registration effected pursuant to this paragraph 3 without obligation to the
Holder. If, in connection with any underwritten public offering for the account
of the Company, the managing underwriter(s) thereof shall impose a limitation on
the number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distributions, then
the Company shall be obligated to include in such Registration Statement only
such limited portion of the Registrable Securities with respect to which each
Holder has requested inclusion hereunder as such underwriter(s) shall permit.
Any exclusion of Registrable Securities shall be made pro rata among the Holders
seeking to include Registrable Securities in the Registration Statement, in
proportion to the number of Registrable Securities sought to be included by such
Holders; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement before any Holder
includes any or all of its Registrable Securities in any registration statement
relating to an underwritten public offering with respect to which, in the good
faith opinion of the managing underwriter, the inclusion in the offering of all
shares requested to be registered by all persons holding registration rights
would materially jeopardize the successful marketing of the securities to be
sold.
4. OBLIGATIONS OF THE COMPANY.
--------------------------
In addition to performing its obligations hereunder, including those
pursuant to paragraphs 2(a) and 2(b) above, the Company shall:
(a) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply with the
provisions of the Securities Act or to maintain the effectiveness of the
Registration Statement during the Registration Period, or as may be reasonably
requested by a Holder
-4-
<PAGE>
in order to incorporate information concerning such Holder or such Holder's
intended method of distribution;
(b) in the event that the number of shares available under the
Registration Statement filed by the Company hereunder is insufficient during any
period of three consecutive trading days to cover 175% of the Registrable
Securities then issued or issuable (such number to be determined using the
Conversion Price or exercise price in effect on such dates and without regard to
any restriction on the ability of a Holder to convert Preferred Shares or
exercise the Warrants as of such dates), the Company shall promptly amend the
Registration Statement, or file a new Registration Statement, or both, so as to
cover 200% of such Registrable Securities, in any event as soon as practicable,
but not later than the tenth business day following the last day of such three
day period. Any Registration Statement filed pursuant to this paragraph 4 shall
state that, to the extent permitted by Rule 416 under the Securities Act, such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Shares or exercise of the Warrants in full. Unless and until such amendment or
new Registration Statement becomes effective, each Holder shall have the rights
described in Section 2 above;
(c) secure the designation and quotation of the Registrable
Securities on the Nasdaq Stock Market or the listing thereof on the New York
Stock Exchange or the American Stock Exchange;
(d) furnish to each Holder such number of copies of the
prospectus included in such Registration Statement, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of such Holder's Registrable Securities;
(e) use all commercially reasonable efforts to register or
qualify the Registrable Securities under the securities or "blue sky" laws of
such jurisdictions within the United States as shall be reasonably requested
from time to time by a Holder, and do any and all other acts or things which may
be necessary or advisable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities in such jurisdictions; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such jurisdiction;
(f) in the event of an underwritten public offering of the
Registrable Securities, enter into and perform its obligations under an
underwriting agreement, in usual and customary form reasonably acceptable to the
Company, with the managing underwriter of such offering;
(g) notify each Holder immediately upon the occurrence of any
event as a result of which the prospectus included in such Registration
Statement, as then in effect, contains an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and as promptly as practicable, prepare, file and furnish to each
Holder a reasonable number of copies of a supplement or an amendment to such
prospectus as may be necessary so that such prospectus does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or
-5-
<PAGE>
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(h) use all commercially reasonable efforts to prevent the
issuance of any stop order or other order suspending the effectiveness of such
Registration Statement and, if such an order is issued, to obtain the withdrawal
thereof at the earliest possible time and to notify each Holder of the issuance
of such order and the resolution thereof;
(i) furnish to each Holder, on the date that such Registration
Statement becomes effective, (x) a letter, dated such date, of outside counsel
representing the Company (and reasonably acceptable to such Holder) addressed to
such Holder, confirming the effectiveness of the Registration Statement and, to
the knowledge of such counsel, the absence of any stop order, and (y) in the
case of an underwriting, (A) an opinion, dated such date, of such outside
counsel, in form and substance as is customarily given to underwriters in an
underwritten public offering, and (B) a letter, dated such date, from the
Company's independent certified public accountants, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters and to each
Holder;
(j) provide each Holder and its representatives the
opportunity to conduct a reasonable inquiry of the Company's financial and other
records during normal business hours and make available its officers, directors
and employees for questions regarding information which such Holder may
reasonably request in order to fulfill any due diligence obligation on its part;
and
(k) permit counsel for each Holder (at such Holder's expense)
to review such Registration Statement and all amendments and supplements thereto
a reasonable period of time prior to the filing thereof with the Commission.
5. OBLIGATIONS OF EACH HOLDER.
--------------------------
In connection with the registration of the Registrable Securities
pursuant to the Registration Statement, each Holder shall:
(a) furnish to the Company such information regarding itself
and the intended method of disposition of Registrable Securities as the Company
shall reasonably request in order to effect the registration thereof;
(b) upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraphs 4(g) or 4(h),
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement until the filing of an amendment or supplement as
described in paragraph 4(g) or withdrawal of the stop order referred to in
paragraph 4(h);
(c) in the event of an underwritten offering of the
Registrable Securities in which such Holder participates, enter into a customary
and reasonable underwriting agreement and execute such other documents as the
managing underwriter for such offering may reasonably request;
-6-
<PAGE>
(d) to the extent required by applicable law, deliver a
prospectus to each purchaser of Registrable Securities; and
(e) notify the Company when it has sold all of the Registrable
Securities theretofore held by it.
6. INDEMNIFICATION.
---------------
In the event that any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company shall
indemnify and hold harmless each Holder, the officers, directors, employees,
agents and representatives of such Holder, and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "1934 Act"), against any losses, claims, damages,
liabilities or reasonable out-of-pocket expenses (whether joint or several)
(collectively, including legal or other expenses reasonably incurred in
connection with investigating or defending same, "Losses"), insofar as any such
Losses arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company will reimburse such Holder, and each such
officer, director, employee, agent, representative or controlling person for any
legal or other expenses as reasonably incurred by any such entity or person in
connection with investigating or defending any Loss; provided, however, that the
foregoing indemnity shall not apply to amounts paid in settlement of any Loss if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be obligated to
indemnify any person for any Loss to the extent that such Loss arises out of or
is based upon and in conformity with written information furnished by such
person expressly for use in such Registration Statement; and provided, further,
that the Company shall not be required to indemnify any person to the extent
that any Loss results from such person selling Registrable Securities (i) to a
person to whom there was not sent or given, at or prior to the written
confirmation of the sale of such shares, a copy of the prospectus, as most
recently amended or supplemented, if the Company has previously furnished or
made available copies thereof or (ii) during any period following written notice
by the Company to such Holder of an event described in paragraph 4(g) or 4(h).
(b) To the extent permitted by law, each Holder, acting
severally and not jointly, shall indemnify and hold harmless the Company, the
officers, directors, employees, agents and representatives of the Company, and
each person, if any, who controls the Company within the meaning of the
Securities Act or the 1934 Act, against any Losses to the extent (and only to
the extent) that any such Losses arise out of or are based upon and in
conformity with written information furnished by such Holder expressly for use
in such Registration Statement; and such Holder will reimburse any legal or
other expenses as reasonably incurred by the Company and any such officer,
director, employee, agent, representative, or controlling person, in connection
with investigating or
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<PAGE>
defending any such Loss; provided, however, that the foregoing indemnity shall
not apply to amounts paid in settlement of any such Loss if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided, that, in no event shall any indemnity under
this subparagraph 6(b) exceed the net purchase price of securities sold by such
Holder under the Registration Statement.
(c) Promptly after receipt by an indemnified party under this
paragraph 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in and to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonably incurred fees and expenses of one such counsel to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate under
applicable standards of professional conduct due to actual or potential
conflicting interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, to the extent prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this paragraph 6 with respect to such action, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
paragraph 6 or with respect to any other action.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable or insufficient to hold harmless an
indemnified party for any reason, the Company and each Holder agree, severally
and not jointly, to contribute to the aggregate Losses to which the Company or
such Holder may be subject in such proportion as is appropriate to reflect the
relative fault of the Company and such Holder in connection with the statements
or omissions which resulted in such Losses; provided, however, that in no case
shall such Holder be responsible for any amount in excess of the net purchase
price of securities sold by it under the Registration Statement. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or by such Holder. The
Company and each Holder agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each officer, director, employee, agent or
representative of such Holder shall have the same rights to contribution as such
Holder, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act and each officer, director, employee,
agent or representative of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this subparagraph (d).
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(e) The obligations of the Company and each Holder under this
paragraph 6 shall survive the conversion or redemption, if any, of the Preferred
Shares, the exercise of the Warrant, the completion of any offering of
Registrable Securities pursuant to a Registration Statement under this
Agreement, or otherwise.
7. REPORTS.
-------
With a view to making available to each Holder the benefits of
Rule 144 under the Securities Act ("Rule 144") and any other similar rule or
regulation of the Commission that may at any time permit such Holder to sell
securities of the Company to the public without registration, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
1934 Act; and
(c) furnish to such Holder, so long as such Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the Securities Act and the 1934 Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably requested
in availing such Holder of any rule or regulation of the Commission which
permits the selling of any such securities without registration.
8. MISCELLANEOUS.
-------------
(a) Expenses of Registration. All expenses, other than
underwriting discounts and commissions and fees and expenses of counsel to each
Holder, incurred in connection with the registrations, filings or qualifications
described herein, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, the fees and disbursements of
counsel for the Company, and the fees and disbursements incurred in connection
with the opinion and letter described in paragraph 4(i) hereof, shall be borne
by the Company.
(b) Amendment; Waiver. Any provision of this Agreement may be
amended only pursuant to a written instrument executed by the Company and
Holders of at least two thirds (2/3) of the outstanding Registrable Securities
or, if no Registrable Securities are outstanding, of at least two thirds (2/3)
of the outstanding Preferred Shares. Any waiver of the provisions of this
Agreement may be made only pursuant to a written instrument executed by the
party against whom enforcement is sought. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder, each future
Holder, and the Company. The failure of any party to exercise any right or
remedy under this Agreement or otherwise, or the delay by any party in
exercising such right or remedy, shall not operate as a waiver thereof.
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<PAGE>
(c) Notices. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely delivery to a nationally-recognized overnight courier and (iii) on
the third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
If to the Company:
OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281
Attn: President
Tel: (602) 437-5520
Fax: (602) 470-7080
with a copy to:
Quarles & Brady
One East Camelback
Phoenix, Arizona 85012
Attn: P. Robert Moya, Esq.
Tel. 602-230-5500
Fax. 602-230-5598
and if to any Holder, to such address as shall be designated by such Holder in
writing to the Company.
(d) Termination. This Agreement shall terminate on the earlier
to occur of (a) the end of the Registration Period and (b) the date on which all
of the Registrable Securities have been publicly distributed; but any such
termination shall be without prejudice to (i) the parties' rights and
obligations arising from breaches of this Agreement occurring prior to such
termination and (ii) the indemnification and contribution obligations under this
Agreement.
(e) Assignment. The rights of a Holder hereunder shall be
assigned automatically to any transferee of the Preferred Shares, the Warrant or
Registrable Securities from such Holder as long as: (i) the Company is, within a
reasonable period of time following such transfer, furnished with written notice
of the name and address of such transferee, (ii) the transferee agrees in
writing with the Company to be bound by all of the provisions hereof and (iii)
such transfer is made in accordance with the applicable requirements of the
Securities Purchase Agreement or the Warrant, as the case may be.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall be deemed one and the same
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<PAGE>
instrument. This Agreement, once executed by a party, may be delivered to any
other party hereto by facsimile transmission.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflict of laws provisions thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.
ORTHOLOGIC CORP.
By: /s/ Thomas R. Trotter
-------------------------
Name: Thomas R. Trotter
Title: President & CEO
PURCHASER NAME: ______________________________
By: _________________________
Name:
Title:
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 13,
1998, by and between OrthoLogic Corp., a Delaware corporation (the "Company"),
and each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as a "Purchaser" and, collectively, as the
"Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser wishes
to purchase, on the terms and subject to the conditions set forth in this
Agreement, shares (the "Preferred Shares") of the Company's Series B Convertible
Preferred Stock, par value $0.0005 per share (the "Preferred Stock") and related
Warrants in the form attached hereto as Exhibit A (the "Warrants"). The
Preferred Shares are convertible pursuant to the terms of a Certificate of
Designation relating to the Preferred Stock, the form of which is attached
hereto as Exhibit B (the "Certificate of Designation") into shares (the
"Conversion Shares") of the Company's common stock, par value $0.0005 per share
(the "Common Stock"). The Warrants are exercisable into shares of Common Stock
(the "Warrant Shares") in accordance with their terms. The Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares are collectively referred
to herein as the "Securities".
The Company has agreed to effect the registration of the Conversion
Shares and the Warrant Shares under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Rights Agreement of even date
herewith by and among the Company and the Purchasers (the "Registration Rights
Agreement"). The sale of the Preferred Shares and the Warrants by the Company to
the Purchasers will be effected in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act.
The Company and each Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell and each Purchaser severally agrees to purchase the number of Preferred
Shares, together with Warrants to purchase the number of shares of Common Stock,
set forth below such Purchaser's name on the signature pages hereof at a
purchase price for such Preferred Shares and Warrants equal to one thousand
dollars ($1,000) times the number of Preferred Shares purchased by such
Purchaser (the "Purchase Price"). The Warrants will entitle each Purchaser to
purchase forty (40) shares of Common Stock for each Preferred Share purchased by
such Purchaser. The Preferred Shares and Warrants will be sold, subject to the
conditions set forth herein, in two (2) tranches (each a "Tranche" and together,
the "Tranches").
<PAGE>
1.2 Closing of Tranche A. The closing of the initial Tranche hereunder
("Tranche A"), at which closing the Purchasers will purchase Preferred Shares
and Warrants for an aggregate Purchase Price of fifteen million dollars
($15,000,000), will occur upon the satisfaction (or waiver) of the Tranche A
Closing Conditions (as defined below) (the "Tranche A Closing"). The date on
which the Tranche A Closing occurs is hereinafter referred to as the "Tranche A
Closing Date". Subject to the satisfaction or waiver of the conditions set forth
herein, the Tranche A Closing will be deemed to occur when this Agreement and
the other Transaction Documents (as defined below) have been executed and
delivered by the Company and each Purchaser (which delivery may be effected by
facsimile transmission), and full payment of the Purchase Price has been made by
each Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of duly executed certificates representing the Preferred
Shares and the Warrants purchased by such Purchaser at the Tranche A Closing.
1.3 Closing of Tranche B. If, during the period of three hundred (300)
days following the Tranche A Closing Date (the "Initial Tranche B Period"), the
Closing Bid Price (as defined in the Certificate of Designation) for the Common
Stock is at or above eight dollars ($8.00) per share for ten (10) consecutive
Trading Days (as defined in the Certificate of Designation), the Company must
sell to each Purchaser its proportionate share of the tranche of Preferred
Shares and Warrants ("Tranche B") to be issued at the Tranche B Closing (as
defined below) for an aggregate Purchase Price to all of the Purchasers of five
million dollars ($5,000,000) at a subsequent closing (the "Tranche B Closing"),
such proportionate share to be calculated based on the number of Preferred
Shares purchased by such Purchaser at the Tranche A Closing relative to the
aggregate number of Preferred Shares purchased by all of the Purchasers at the
Tranche A Closing. In such event, the Tranche B Closing will occur, subject to
the satisfaction (or waiver) of the Tranche B Closing Conditions (as defined
below), on the fifth (5th) business day (or other date mutually agreeable by the
Company and the holders of a majority of the Preferred Shares then outstanding)
following the tenth such Trading Day. If, at any time following the end of the
Initial Tranche B Period, but prior to the second anniversary of the Tranche A
Closing Date (the "Tranche B Option Period"), the Tranche B Closing has not
occurred, and the Closing Bid Price (as defined in the Certificate of
Designation) for the Common Stock is at or above eight dollars ($8.00) per share
for ten (10) consecutive Trading Days (as defined in the Certificate of
Designation)(a "Tranche B Option Event"), then the Company may, at its option
and subject to the satisfaction (or waiver) of the Tranche B Closing Conditions
(the "Tranche B Option"), sell to each Purchaser, and such Purchaser shall
purchase, its proportionate share of the Preferred Shares and Warrants to be
issued at the Tranche B Closing for an aggregate Purchase Price to all of the
Purchasers of up to five million dollars ($5,000,000), such proportionate share
to be calculated based on the number of Preferred Shares purchased by such
Purchaser at the Tranche A Closing relative to the aggregate number of Preferred
Shares purchased by all of the Purchasers at the Tranche A Closing; provided,
however, that in order for the Company to exercise the Tranche B Option, the
Company must deliver a written notice thereof to each Purchaser on a date that
is (i) not more than thirty (30) days following the first occurrence of a
Tranche B Option Event during the Tranche B Option Period and (ii) at least five
(5) days prior to the date on which the Tranche B Closing is to occur, and in
such notice specify the number of Preferred Shares and Warrants that the Company
proposes to issue and the date on which the Tranche B Closing is to occur, it
being understood (A) that the Company may exercise the Tranche B Option only
with
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<PAGE>
respect to the first occurrence of a Tranche B Option Event during the Tranche B
Option Period, and (B) that in no event may the Tranche B Closing occur after
the second anniversary of the Tranche A Closing Date. The date on which the
Tranche B Closing occurs is hereinafter referred to as the "Tranche B Closing
Date". The Tranche B Closing will be deemed to occur when full payment of the
Purchase Price for the Preferred Shares and Warrants to be issued and sold at
such Closing has been made by each Purchaser by wire transfer of immediately
available funds against physical delivery by the Company of duly executed
certificates representing the Preferred Shares and Warrants purchased by such
Purchaser at the Tranche B Closing. The closing of Tranche A or B hereunder is
sometimes referred to as a "Closing" and, when taken together, as the
"Closings".
1.4 Certain Definitions. When used herein, (A) "business day" shall
mean any day on which the New York Stock Exchange and commercial banks in the
city of New York are open for business, (B) an "affiliate" of a party shall mean
any person or entity controlling, controlled by or under common control with
that party and (C) "control" shall mean, with respect to an entity, the ability
to direct the business, operations or management of such entity, whether through
an equity interest therein or otherwise. The term "Material Adverse Event", as
such term is used in paragraph 4(a) of the Certificate of Designation, shall
have the meaning set forth on Schedule 1.4 hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
------------------------------------------------
Each Purchaser hereby makes the following representations and
warranties to the Company and agrees with the Company that, as of the date of
this Agreement and as of the date of each Closing:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares and Warrants and to execute and deliver this
Agreement. This Agreement constitutes such Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
2.2 Accredited Investor. Such Purchaser is an accredited investor as
that term is defined in Rule 501 of Regulation D, and is acquiring the Preferred
Shares and Warrants solely for its own account as a principal and not with a
present view to the public resale or distribution of all or any part thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or sales registered under the Securities Act; provided,
however that in making such representation, such Purchaser does not agree to
hold the Securities for any minimum or specific term and reserves the right to
sell, transfer or otherwise dispose of the Securities at any time in accordance
with the provisions of this Agreement and with Federal and state securities laws
applicable to such sale, transfer or disposition.
2.3 Information. The Company has provided such Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to such Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
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<PAGE>
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Preferred Shares and
Warrants hereunder. Neither such information nor any other investigation
conducted by such Purchaser or any of its representatives shall modify, amend or
otherwise affect such Purchaser's right to rely on the Company's representations
and warranties contained in this Agreement.
2.4 Limitations on Disposition. Such Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom.
2.5 Legend. Such Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate 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 offered or sold unless a registration statement
under the Securities Act and applicable state securities laws
shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and
applicable state securities laws is available in connection
with such offer or sale. Such securities are issued subject to
the provisions of (i) the Certificate of Designation relating
to the Series B Convertible Preferred Stock of OrthoLogic
Corp. (the "Company"), (ii) a Securities Purchase Agreement,
dated as of July 9, 1998, by and among the Company and the
Purchasers named therein, and (iii) a Registration Rights
Agreement, dated as of July 9, 1998, by and among the Company
and such Purchasers."
Notwithstanding the foregoing, it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement, (B)
such Securities have been sold pursuant to Rule 144 under the Securities Act or
any successor provision ("Rule 144") or (C) such Securities are eligible for
resale under Rule 144(k) or any successor provision, such Securities shall be
issued without any legend or other restrictive language and, with respect to
Securities upon which such legend is stamped, the Company shall issue new
certificates without such legend to the holder upon request.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
-----------------------------------------------
The Company hereby makes the following representations and warranties
to each Purchaser and agrees with each Purchaser that, as of the date of this
Agreement and as of the date of each Closing:
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<PAGE>
3.1 Organization, Good Standing and Qualification. Each of the Company
and its subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to carry on its business as now conducted.
Each of the Company and its subsidiaries is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on the consolidated business, operations,
properties, financial condition, prospects or results of operations of the
Company and its subsidiaries taken as a whole or on the ability of the Company
to perform its obligations under the Transaction Documents or the Certificate of
Designation (a "Material Adverse Effect"). The term "subsidiaries" shall mean
entities in which the Company has an equity interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement, (iii) the Warrants and (iv)
all other agreements, documents, certificates or other instruments executed and
delivered by or on behalf of the Company at any Closing (the instruments
described in (i), (ii), (iii) and (iv) being collectively referred to herein as
the "Transaction Documents"), to execute and perform its obligations under the
Certificate of Designation, to issue and sell the Preferred Shares and the
Warrants to the Purchasers in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation and to issue the Warrant Shares upon exercise of the
Warrants. All corporate action on the part of the Company by its officers,
directors and stockholders necessary for (A) the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents, and (B) the authorization, execution and filing of, and
the performance by the Company of its obligations under, the Certificate of
Designation has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers, Inc. or otherwise).
3.3 Enforcement. The Transaction Documents and the Certificate of
Designation constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) a Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998, (iii) all Current
Reports on Form 8-K required to be filed with the Commission since December 31,
1997 and (iv) the Company's definitive Proxy Statement for its 1998 Annual
Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company
is not aware of any event occurring on or prior to the date of such Closing
(other than the transactions effected hereby) that would require the filing of,
or with respect to which the Company intends to file, a Form 8-K after such
Closing. Each Disclosure Document, as of the date of the filing thereof with the
Commission, conformed in all
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<PAGE>
material respects to the requirements of the Exchange Act, and the rules and
regulations thereunder and, as of the date of such filing, such Disclosure
Document did not contain an untrue statement of 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 under which they were made, not
misleading. All material agreements required to be filed as exhibits to the
Disclosure Documents have been filed as required. Neither the Company nor any of
its subsidiaries is in breach of any agreement to which it is a party or by
which it is bound where such breach is reasonably likely to have a Material
Adverse Effect. Except as set forth in the Disclosure Documents or any schedule
or exhibit attached hereto, the Company has no liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the Disclosure
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied at
the times and during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end adjustments). The written
information described in paragraph 2.3 above does not contain an untrue
statement of material fact or omit to state a material fact required in order to
make such information not misleading, and, except as specifically disclosed to
such Purchaser, does not include any material, non-public information.
3.5 Capitalization. The capitalization of the Company as of the date
hereof, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Stock) exercisable
for, or convertible into or exchangeable for any shares of Common Stock and the
number of shares initially to be reserved for issuance upon conversion of the
Preferred Shares and exercise of the Warrants is set forth on Schedule 3.5
hereto. All of such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and non-assessable. No shares of
the capital stock of the Company are subject to preemptive rights or any other
similar rights of the stockholders of the Company or any liens or encumbrances
created by or through the Company. Except as disclosed on Schedule 3.5, or as
contemplated herein, as of the date of this Agreement and as of the date of such
Closing, there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries.
The Purchasers acknowledge and agree that the representation and warranty made
in this paragraph 3.5 does not prohibit the Company from, at any meeting of its
stockholders from time to time, amending an existing stock option plan or
adopting a
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new stock option plan to provide for the grant of options for as much as fifteen
percent (15%), in the aggregate at any point in time, of the issued and
outstanding shares of Common Stock, measured as of the record date for the
meeting at which stockholder approval for such amended or new stock option plan
is sought.
3.6 Valid Issuance. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company, (ii) based in part upon the representations of each
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be entitled
to all of the rights, preferences and privileges set forth in the Certificate of
Designation. The Warrants are duly authorized and, when issued, sold and
delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company and (ii) based in part upon the representations of each Purchaser in
this Agreement, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Conversion Shares are duly
authorized and reserved for issuance and, when issued upon conversion of the
Preferred Shares in accordance with the terms of the Certificate of Designation,
will be duly and validly issued, fully paid and nonassessable, free and clear of
any taxes, liens, claims, preemptive or similar rights or encumbrances imposed
by or through the Company. The Warrant Shares are duly authorized and, upon the
issuance thereof in accordance with the terms of the Warrant, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company.
3.7 No Conflict with Other Instruments. Neither the Company nor any of
its subsidiaries is in violation of any provisions of its charter, Bylaws or any
other governing document or in default (and no event has occurred which, with
notice or lapse of time or both, would constitute a default) under any provision
of any instrument or contract to which it is a party or by which it is bound, or
of any provision of any Federal or state judgment, writ, decree, order, statute,
rule or governmental regulation applicable to the Company, which would have a
Material Adverse Effect. The (i) execution, delivery and performance of this
Agreement and the other Transaction Documents, (ii) execution and filing of the
Certificate of Designation, and (iii) consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Preferred Shares and the Warrants and the reservation for issuance and
issuance of the Conversion Shares and the Warrant Shares) will not (A) result in
any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or of any of its
subsidiaries or the triggering of any preemptive or anti-dilution rights or
rights of first refusal or first offer on the part of holders of the Company's
securities or (B) cause any Purchaser, or any affiliate of such Purchaser (in
either such case, alone or together with any other Purchaser), to be deemed to
be an Acquiring Person, as such term is defined in the Rights Agreement, dated
as of March 4, 1997, between the Company and the Bank of New York (the "Rights
Plan") or trigger any rights under the Rights Plan. Each Conversion Share and
Warrant Share shall be entitled to all of the rights afforded to shares of
Common Stock under the Rights Plan.
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3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, there has been no material
adverse change to the Company's business, operations, properties, financial
condition, prospects or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents.
3.8.2 The Company has filed all tax returns required to be
filed by it and paid all taxes which are due, except for taxes which it
reasonably disputes or which could not reasonably be expected to have a Material
Adverse Effect.
3.8.3 Except as set forth on Schedule 3.8.3, neither the
Company nor any of its subsidiaries is the subject of any pending or, to the
Company's knowledge, threatened inquiry, investigation or administrative or
legal proceeding by the Internal Revenue Service, the taxing authorities of any
state or local jurisdiction, the Commission or any state securities commission
or other governmental or regulatory entity.
3.8.4 Except as described on Schedule 3.8.4, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its subsidiaries, or against any officer, director or employee of the Company or
any such subsidiary in connection with such person's employment therewith.
Neither the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have
a Material Adverse Effect.
3.9 Reporting Company; Form S-3. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company will be, as of September 1, 1998, eligible to register a
primary issuance of shares of its Common Stock on a registration statement on
Form S-3 under the Securities Act.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation and the issuance of
the Warrant Shares upon exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Preferred Shares and to issue
Warrant Shares upon exercise of the Warrants is unconditional and absolute
regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its subsidiaries each owns
or possesses
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adequate trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual property
rights necessary to conduct the business now operated by it (the "Intellectual
Property Rights"), and is not aware of any infringement by a third party with
respect to such rights or of any infringement by it or conflict with asserted
rights of others that, in any such case, if determined adversely to the Company
or any of its subsidiaries, would individually or in the aggregate have a
Material Adverse Effect. The Intellectual Property Rights are valid and
enforceable and no registration relating thereto has lapsed, expired or
terminated or is the subject of any claim or proceeding that could result in any
such lapse, expiration or termination. The Company and its subsidiaries each has
complied in all material respects with its obligations pursuant to any agreement
relating to the Intellectual Property Rights that are the subject of licenses
granted by third parties.
3.12 Registration Rights; Rights of Participation. Except as described
on Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to
any person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation which has not been
waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not
been suspended. The Company is in full compliance with the continued designation
criteria of the Nasdaq National Market, and does not reasonably anticipate that
the Common Stock will lose its designation as a Nasdaq National Market Security,
whether by reason of the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation, and is not aware of any
inquiry by or received any notice from the National Association of Securities
Dealers, Inc. ("NASD") regarding any failure or alleged failure by the Company
to comply with such criteria.
3.14 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
3.15 Fees. Except as described on Schedule 3.15 hereto, the Company is
not obligated to pay any compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby.
3.16 Foreign Corrupt Practices. To the knowledge of the Company,
neither the Company, nor any of its subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect
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unlawful payment to any foreign or domestic government official or employee, or
(iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
3.17 Other Issuances of Securities. The Company has not issued (and
will not issue) any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into, exchangeable for or
otherwise entitling the holder thereof to acquire shares of Common Stock which
would be integrated with the sale of the Preferred Shares to the Purchasers, or
the issuance of the Conversion Shares upon conversion thereof, for purposes of
determining whether stockholder approval is required under the designation
criteria of the Nasdaq National Market or otherwise.
3.18 Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, claims,
encumbrances and defects, except for liens, claims, encumbrances or defects
which do not materially affect the value of such property and do not interfere
with the use made or proposed to be made of such property by the Company and its
subsidiaries. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company
and its subsidiaries.
3.19 Regulatory Permits. The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
4. COVENANTS OF THE COMPANY AND THE PURCHASERS.
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4.1 Corporate Existence. The Company shall, so long as any Purchaser or
any affiliate of such Purchaser beneficially owns any Securities, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes or as to which the
failure to pay could not reasonably be expected to have a Material Adverse
Effect.
4.2 Provision of Information. The Company shall provide each Purchaser
with copies of its annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, press releases and proxy statements and other
materials sent to stockholders, in each such case promptly after the filing
thereof with the Commission, until the conversion or redemption of all of the
Preferred Shares.
4.3 Form D; Blue-Sky Qualification. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser promptly
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after such filing. The Company shall, on or before the Tranche A Closing Date,
take such action as is necessary to qualify the Preferred Shares for sale under
applicable state or "blue-sky" laws or obtain an exemption therefrom, and shall
provide evidence of any such action to each Purchaser at or prior to each
Closing.
4.4 Reporting Status. As long as any Purchaser or any affiliate of such
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to Rule 144(k) (or any
successor rule or regulation), (i) the Company shall timely file with the
Commission all reports required to be so filed pursuant to the Exchange Act and
(ii) the Company shall not terminate its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination. The Company agrees to file
with the Commission a Form 8-K describing the terms of the transactions
contemplated by this Agreement and the other Transaction Documents, with the
Transaction Documents attached to such Form 8-K as an exhibit thereto, on or
before the tenth (10th) day following the Tranche A Closing Date in the form
required by the Exchange Act. On or before the business day immediately
following a Closing, the Company agrees to issue a press release describing all
of the material terms of the transaction consummated at such Closing.
4.5 Reservation of Common Stock. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares and exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Preferred Shares and
exercise of all of the Warrants then outstanding (the "Reserved Amount"). As of
the Tranche A Closing Date, the Reserved Amount shall be equal to no less than
175% of the number of shares of Common Stock issuable upon conversion of all of
the Preferred Shares and exercise of all of the Warrants to be issued at the
Tranche A Closing (assuming for such purpose that such conversion or exercise
were to occur as of the Tranche A Closing Date). If on any date the Reserved
Amount is less than 150% of the number of shares of Common Stock then issuable
upon conversion of all of the Preferred Shares and exercise of all of the
Warrants then outstanding (assuming for such purpose that such conversion or
exercise were to occur as of such date), the Company shall take action
(including without limitation seeking stockholder approval for the authorization
or reservation of additional shares of Common Stock) as soon as practicable (but
in no event later than the fifth (5th) business day or, in the event that
stockholder approval is required, the sixtieth (60th) day following such date)
to increase the Reserved Amount to no less than 175% of the number of shares of
Common Stock into which such outstanding Preferred Shares are then convertible
and such outstanding Warrants are exercisable. The Company shall not reduce the
number of shares reserved for issuance hereunder without the written consent of
the holders of two-thirds of the Preferred Shares then outstanding. Any
determination made hereunder as to the number of shares of Common Stock issuable
upon the conversion of Preferred Shares or exercise of Warrants shall be made
without regard to any restriction on such conversion or exercise that might
otherwise exist under this Agreement, the other Transaction Documents or the
Certificate of Designation. The initial Reserved Amount shall be allocated pro
rata among the Purchasers based on the number of Preferred Shares issued to each
Purchaser at the Tranche A Closing. Each increase in the Reserved Amount shall
be allocated pro rata among the Holders based on the number of Preferred Shares
held by such Holder at the time of such increase. In the event that a Holder
shall sell or
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otherwise transfer any of such Holder's Preferred Shares, each transferee shall
be allocated a pro rata portion of such transferor's Reserved Amount. Any
portion of the Reserved Amount which remains allocated to any person or entity
which does not hold any Preferred Shares shall be allocated to the remaining
Holders pro rata based on the number of Preferred Shares then held by such
Holders.
4.6 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares for general corporate purposes only, in the ordinary
course of its business and consistent with past practice, and shall not use such
proceeds to make a loan to any employee, officer or director of the Company or
to repurchase or pay a dividend on shares of Common Stock.
4.7 Transactions with Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and shall be approved by a
majority of the Company's outside directors.
4.8 Quotation on Nasdaq. The Company shall (i) promptly following the
Tranche A Closing, take such action as may be necessary to include the
Conversion Shares and the Warrant Shares on the Nasdaq National Market, and (ii)
use its best efforts to maintain the designation and quotation, or listing, of
the Common Stock on the Nasdaq National Market, the New York Stock Exchange or
the American Stock Exchange.
4.9 Use of Purchaser Name. Except as may be required by applicable law,
the Company shall not use, directly or indirectly, any Purchaser's name or the
name of any of its affiliates in any advertisement, announcement, press release
or other similar communication unless it has received the prior written consent
of any Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.
4.10 Company's Instructions to Transfer Agent. On or prior to the
Tranche A Closing Date, the Company shall execute and deliver irrevocable
instructions to its transfer agent (the "Transfer Agent") (i) to issue
certificates representing Conversion Shares upon conversion of the Preferred
Shares in accordance with the terms of the Certificate of Designation and
receipt of a valid Conversion Notice (as defined in the Certificate of
Designation) from a Purchaser, in the amount specified in such Conversion
Notice, in the name of such Purchaser or its nominee, (ii) to issue certificates
representing Warrant Shares upon exercise of the Warrants and (iii) to deliver
such certificates to such Purchaser no later than the close of business on the
third (3rd) business day following the related Conversion Date (as defined in
the Certificate of Designation) or Exercise Date (as defined in the Warrant), as
the case may be. As long as the Company shall instruct the transfer agent that,
in lieu of delivering physical certificates representing shares of Common Stock
to a Purchaser upon conversion of the Preferred Shares, or exercise of the
Warrants, and as long as the Transfer Agent is a participant in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and such
Purchaser has not informed the Company that it wishes to receive physical
certificates therefor, the transfer agent may effect delivery of Conversion
Shares or Warrant Shares, as the case may be, by crediting the account of such
Purchaser or its nominee at DTC for the number of shares for which delivery is
required hereunder within the time frame specified above for delivery of
certificates. The Company represents
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to and agrees with each Purchaser that it will not give any instruction to the
Transfer Agent that will conflict with the foregoing instruction or otherwise
restrict such Purchaser's right to convert the Preferred Shares or to receive
Conversion Shares in accordance with the terms of the Certificate of Designation
or to exercise the Warrant or to receive Warrant Shares upon exercise of the
Warrants. In the event that the Company's relationship with the Transfer Agent
should be terminated for any reason, the Company shall use its best efforts to
cause the Transfer Agent to continue acting as transfer agent pursuant to the
terms hereof until such time that a successor transfer agent is appointed by the
Company and receives the instructions described above.
4.11 Capital Raising Limitation; Registration Limitation. The Company
will not, during the one hundred and eighty (180) day period following the
Tranche A Closing Date and, if the Tranche B Closing occurs, following the
Tranche B Closing Date, offer for sale or sell any Common Stock (or any security
convertible into, or exercisable or exchangeable for, Common Stock) (the
"Capital Raising Limitation"). The Company will not, during the two hundred and
seventy (270) day period following the effective date of the Registration
Statement (as defined in the Registration Rights Agreement), register any shares
of Common Stock otherwise than pursuant to the Registration Rights Agreement
(the "Registration Limitation"). The Capital Raising Limitation and the
Registration Limitation shall not apply to any transaction involving the
issuance of Common Stock in a firm-commitment underwritten registered public
offering, to the issuance of Common Stock pursuant to a warrant exercise for any
warrant outstanding prior to the date hereof or the grant or exercise of options
for Common Stock granted pursuant to one or more stock option plans (such plan
or plans to be subject to the limitations described in paragraph 3.5 hereof)
approved by the stockholders of the Company.
4.12 Right of First Offer. Prior to any offer or sale by the Company of
Common Stock (or any securities convertible or exercisable into or exchangeable
for Common Stock) during the one (1) year period following the Tranche A Closing
Date and, if the Tranche B Closing occurs, following the Tranche B Closing Date
(the "First Offer Period"), the Company must first deliver to each Purchaser
written notice describing the proposed issuance, including the terms and
conditions thereof, and provide such Purchaser with an option during the five
(5) business day period following delivery of such notice to purchase up to its
proportionate share (based on the number of Preferred Shares purchased by such
Purchaser hereunder relative to the number of Preferred Shares purchased by all
of the Purchasers hereunder) of the securities being offered on the same terms
as contemplated by such issuance. In the event that such Purchaser either does
not give notice within such five business day period that it intends to exercise
the foregoing option or informs the Company in writing that it does not intend
to participate in such issuance, the Company may offer to a third party the
option to purchase up to, in the aggregate, the amount of securities which were
declined by such Purchaser, on the same terms as were offered to such Purchaser.
The Right of First Offer shall not apply to any transaction involving the
issuance of Common Stock in a firm-commitment underwritten registered public
offering or to a warrant exercise for any warrant outstanding prior to the date
hereof or to the issuance of Common Stock pursuant to a stock option plan
adopted by the Company prior to the date hereof.
4.13 No Adverse Action. The Company and its subsidiaries shall refrain,
while any Preferred Shares are outstanding, from taking any action or entering
into any arrangement which in any way adversely affects (i) the rights,
privileges or benefits available to a holder of Preferred Stock pursuant to
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the terms of the Certificate of Designation or (ii) the rights, privileges or
benefits available to a holder of a Warrant.
4.14 Short Sales. Each Purchaser agrees that will not create a "short
position" in the Common Stock at any time following the Tranche A Closing Date
until the earlier of (a) the fourth (4th) anniversary of the later to occur of
the Tranche A Closing Date and the Tranche B Closing Date and (b) the first date
on which such Purchaser no longer owns any Preferred Shares. For purposes
hereof, a "short position" shall be deemed to have been created by a Purchaser
if such Purchaser (i) enters into a "short sale" (as such term is defined in
Rule 3(b)(3) under the Exchange Act), (ii) purchases a put option to sell shares
of Common Stock or (iii) enters into a derivative or other similar transaction
whereby such Purchaser will be compensated in the event of a decline in the
price of the Common Stock; provided, however, that such term shall not include
any short sales effected (A) as a result of the Company's failure to deliver
Conversion Shares or Warrant Shares, as the case may be, in accordance with the
terms of the Certificate of Designation or Warrant, respectively or (B) on the
same day (or on the immediately preceding Trading Day) on which a Conversion
Notice (as defined in the Certificate of Designation) is delivered by such
Purchaser to the Company.
4.15 Obligation to Hold Annual Stockholder Meeting. The Company agrees
that, on or prior to May 31, 1999, it will hold a meeting of its stockholders at
which it will recommend, and will otherwise use its best efforts to ensure, that
such stockholders (i) approve the transactions contemplated by this Agreement,
the other Transaction Documents and the Certificate of Designation and (ii)
increase the Company's authorized Common Stock and out of such increase,
increase the Reserved Amount by no less than the greater of seven million five
hundred thousand (7,500,000) shares of Common Stock and one hundred and fifty
percent (150%) of the number of shares of Common Stock issuable upon conversion
of all of the Preferred Shares and exercise of the Warrants outstanding on the
date the proxy statement relating to such meeting is filed with the Commission
(assuming such conversion or exercise is effected at the Conversion Price or
Exercise Price then in effect and without regard to any restrictions on such
conversion or exercise that might otherwise exist); provided, however that if
such approval is not obtained by May 31, 1999, and at any time thereafter, the
sum of (i) the number of shares of Common Stock issuable upon conversion of all
of the then outstanding Preferred Shares and exercise of the outstanding
Warrants (assuming such conversion or exercise is effected at the Conversion
Price or Exercise Price then in effect and without regard to any restrictions on
such conversion or exercise that might otherwise exist) plus (ii) the aggregate
number of shares of Common Stock theretofore issued upon conversion of the
Preferred Shares and exercise of the Warrants is equal to or greater than five
million (5,000,000) shares of Common Stock (the "Conversion Limit Amount") for
five consecutive Trading Days, each Purchaser shall have the right, upon written
notice to the Company, to require the Company to redeem a number of such
Purchaser's Preferred Shares such that, immediately following such redemption (a
"Conversion Limit Redemption"), such Purchaser's allocable portion of the
Conversion Limit Amount (such allocable portion to be determined based on the
number of Preferred Shares purchased by such Purchaser hereunder relative to the
aggregate number of Preferred Shares purchased by the Purchasers hereunder)
represents no less than one hundred and fifty percent (150%) of the number of
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants then held by such Purchaser (assuming such conversion
or exercise is effected at the Conversion Price or Exercise Price then in effect
and without
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regard to any restrictions on such conversion or exercise that might otherwise
exist). For purposes of clarification, the parties acknowledge and agree that
each Purchaser shall have the right to require a Conversion Limit Redemption
each and every time that the conditions set forth in this paragraph 4.15 to such
redemption exist. The Company shall, within five (5) business days of its
receipt from a Purchaser of a notice requesting a Conversion Limit Redemption,
redeem the number of Preferred Shares subject to such redemption by delivering
to such Purchaser immediately available funds in an amount equal to the
Conversion Limit Redemption Price. Any amounts representing the Conversion Limit
Redemption Price which are not paid when due shall bear interest at an annual
rate equal to the Default Interest Rate (as defined in the Certificate of
Designation). For purposes hereof, the "Conversion Limit Redemption Price" with
respect to a Preferred Share shall be equal to (a) during the first three
hundred and sixty (360) days following the Closing Date relating to such
Preferred Share, 108.5% of the Stated Value of such Preferred Share and (b)
following the last day of such three hundred and sixtieth day period, a price
that is calculated so that the holder of such Preferred Share will receive an
annualized return on the Stated Value of such Preferred Share of 8.5%. The right
of a Purchaser to require a Conversion Limit Redemption in the circumstances
described herein will be in addition to any other rights or remedies available
to such Purchaser in such circumstances, whether at law or in equity, under this
Agreement, the other Transaction Documents or the Certificate of Designation.
4.16 Obligation to Hold Special Stockholder Meeting. In the event that
a "Material Adverse Event" (as defined in paragraph 4(a) of the Certificate of
Designation) occurs, (A) the Company will have the right, upon written notice (a
"Material Adverse Event Notice") delivered to the Holders during the five (5)
day period immediately following the occurrence of a Material Adverse Event, to
redeem all of the Preferred Shares then outstanding at a redemption price equal
to the Conversion Limit Redemption Price for each Preferred Share (an "Optional
Redemption"), and deliver funds representing such redemption price to each
Purchaser within three (3) business days following such five day period, (B) if
the Company does not exercise its right to an Optional Redemption, it must,
within sixty days following the end of such five day period, hold a special
meeting of its stockholders at which it will recommend, and will otherwise use
its best efforts to ensure, that such stockholders approve the transactions
contemplated by this Agreement, the other Transaction Documents and the
Certificate of Designation and authorize for issuance by the Company no less
than either (i) seven million five hundred thousand (7,500,000) additional
shares of Common Stock, or (ii) one hundred and fifty percent (150%) of the
number of shares of Common Stock issuable upon conversion of all of the
Preferred Shares outstanding on the date that the proxy statement relating to
such meeting is filed with the Commission, and (C) if the Company does not hold
such special meeting within the time period specified in clause (B) above, or
the stockholders do not approve the proposals described in clause (B) above,
such failure will be deemed to constitute a Mandatory Redemption Event under the
Certificate of Designation. Notwithstanding the foregoing, each Purchaser shall
have the right, upon receipt by such Purchaser of a Material Adverse Event
Notice from the Company, to notify the Company in writing within five (5)
business days following such receipt that the Company will not be required to
seek the stockholder approval described in clause (B) above, in which case the
Company will no longer have the right to redeem any Preferred Shares pursuant to
clause (A) above.
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5. CONDITIONS TO CLOSING.
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5.1 Conditions to Purchasers' Obligations at Tranche A Closing. Each
Purchaser's obligations at the Tranche A Closing, including without limitation
its obligation to purchase Preferred Shares and Warrants at the Tranche A
Closing, are conditioned upon the fulfillment (or waiver by such Purchaser) of
each of the following events as of the Tranche A Closing Date:
5.1.1 the representations and warranties of the
Company set forth in this Agreement shall be
true and correct in all material respects as
of such date as if made on such date;
5.1.2 the Company shall have complied with or
performed in all material respects all of
the agreements, obligations and conditions
set forth in this Agreement that are
required to be complied with or performed by
the Company on or before such Closing;
5.1.3 the Company shall have delivered to such
Purchaser a certificate, signed by an
officer of the Company, certifying that the
conditions specified in paragraphs 5.1.1 and
5.1.2 above have been fulfilled as of such
Closing;
5.1.4 the Company shall have filed the Certificate
of Designation with the Secretary of State
of the State of Delaware and shall have
furnished such Purchaser with a file-stamped
copy thereof;
5.1.5 the Company shall have delivered to such
Purchaser an opinion of counsel for the
Company, dated as of such date, in
substantially the form set forth on Exhibit
5.1.5 hereto, and covering such additional
matters as may reasonably be requested by
such Purchaser;
5.1.6 the Company shall have delivered duly
executed certificates representing the
Preferred Shares and the Warrants being so
purchased;
5.1.7 the Company shall have executed and
delivered the Registration Rights Agreement;
5.1.8 the Common Stock shall be designated for
quotation and actively traded on the Nasdaq
National Market;
5.1.9 there shall have been no material adverse
change in the Company's consolidated
business or financial condition since the
date of the Company's most recent audited
financial statements contained in the
Disclosure Documents;
5.1.10 the Company shall have authorized and
reserved for issuance one hundred and
seventy five percent (175%) of the aggregate
number
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of shares of Common Stock issuable upon
conversion of all of the Preferred Shares
and exercise of all of the Warrants (such
number to be determined using the Conversion
Price or exercise price in effect on the
Tranche A Closing Date and without regard to
any restriction on the ability of a
Purchaser to convert Preferred Shares or
exercise the Warrants as of such date) to be
issued at the Tranche A Closing;
5.1.11 each of the Company's executive officers
shall have executed and delivered a letter
agreement addressed to such Purchaser
regarding such person's agreement to refrain
from selling such person's holdings of
Common Stock for one (1) year from the
Tranche A Closing Date, provided, however,
that the letter executed and delivered by
Frank McGee shall state that such agreement
to refrain from selling Common Stock shall
expire on January 1, 1999;
5.1.12 each of the Company's executive officers who
owns shares of Common Stock shall have
executed and delivered a letter agreement
addressed to such Purchaser regarding such
person's agreement to vote such shares in
favor of any proposal made at or in
connection with any meeting of the holders
of the Company's Common Stock regarding (i)
approval of the transactions contemplated
herein or (ii) the authorization of the
issuance of additional shares of Common
Stock as Conversion Shares; and
5.1.13 the Company shall have notified such
Purchaser in writing of the name, address,
and telephone and fax numbers of, and the
name of a contact person at, the Transfer
Agent for the purpose of delivering
Conversion Notices (as defined in the
Certificate of Designation).
5.2 Conditions to Purchasers' Obligations at the Tranche B Closing.
Each Purchaser's obligations at the Tranche B Closing, including without
limitation its obligation to purchase Preferred Shares and Warrants at such
Closing, are conditioned upon the fulfillment (or waiver by the Purchaser) of
each of the following events as of the date of such Closing:
5.2.1 the representations and warranties of the
Company set forth in this Agreement shall be
true and correct in all material respects as
of such date as if made on such date;
5.2.2 the Company shall have complied with or
performed in all material respects all of
the agreements, obligations and conditions
set forth in this Agreement, the
Registration Rights Agreement and the
Certificate of Designation that are required
to be complied with or performed by the
Company at any time prior to such Closing;
5.2.3 the Company shall have delivered to the
Purchaser a certificate, signed
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by an officer of the Company, certifying
that the conditions specified in paragraphs
5.2.1, 5.2.2 and 5.2.9 hereof have been
fulfilled as of such Closing;
5.2.4 the Company shall have delivered to the
Purchaser an opinion of counsel for the
Company, dated as of such date, in
substantially the form set forth on Exhibit
5.2.4 hereto, and covering such additional
matters as may reasonably be requested by
the Purchaser;
5.2.5 the Company shall have delivered duly
executed certificates representing the
Preferred Shares and Warrants being so
purchased;
5.2.6 the Common Stock shall be designated for
quotation and actively traded on the Nasdaq
National Market;
5.2.7 there shall have been no material adverse
change in the Company's consolidated
business or financial condition since the
date of the Company's most recent audited
financial statements contained in the
Disclosure Documents;
5.2.8 the Company shall have authorized and
reserved for issuance not less than one
hundred and seventy five percent (175%) of
the aggregate number of shares of Common
Stock issuable upon conversion or exercise
of (i) all of the Preferred Shares and
Warrants then outstanding and (ii) all of
the Preferred Shares and Warrants to be
issued at such Closing (such number to be
determined using the Conversion Price or
exercise price in effect on the date of such
Closing and without regard to any
restriction on the ability of a Purchaser to
convert Preferred Shares or exercise the
Warrants as of such date);
5.2.9 the Registration Statement (as defined in
the Registration Rights Agreement) shall
have been declared effective and shall be
available for the sale by each Purchaser of
not less than two hundred percent (200%) of
the aggregate number of shares of Common
Stock issuable upon conversion or exercise
of (x) all of the Preferred Shares and
Warrants then outstanding and (y) all of the
Preferred Shares and Warrants to be issued
at such Closing (such number to be
determined using the Conversion Price or
Exercise Price in effect on the date of such
Closing and without regard to any
restriction on the ability of a Purchaser to
convert Preferred Shares or exercise the
Warrants as of such date), and no
proceedings shall have been instituted by
any government agency or self regulatory
organization for the purpose of or in
connection with issuing a stop order or
other restraint on the use of such
Registration Statement;
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<PAGE>
5.2.10 a Mandatory Redemption Event (as defined in
the Certificate of Designation) or any other
event entitling a Purchaser to exercise a
right of redemption under this Agreement,
the other Transaction Documents or the
Certificate of Designation shall not have
occurred and be continuing; and
5.2.11 in the event that the Tranche B Closing is
to occur (A) prior to the end of the Initial
Tranche B Period, the Closing Bid Price (as
defined in the Certificate of Designation)
for the Common Stock must be at or above
eight dollars ($8.00) on the day immediately
prior to the Tranche B Closing Date, or (B)
after the end of the Initial Tranche B
Period, the Company shall have received the
approval of its stockholders for the matters
described in paragraph 4.15 above and the
Closing Bid Price (as defined in the
Certificate of Designation) for the Common
Stock must be at or above eight dollars
($8.00) on the day immediately prior to the
Tranche B Closing Date.
5.3 Conditions to Company's Obligations at Each Closing. The Company's
obligations at each Closing are conditioned upon the fulfillment of each of the
following events as of the date of such Closing:
5.3.1 the representations and warranties of each
Purchaser shall be true and correct in all
material respects as of such date as if made
on such date; and
5.3.2 each Purchaser shall have complied with or
performed all of the agreements, obligations
and conditions set forth in this Agreement
that are required to be complied with or
performed by the Purchaser on or before such
Closing.
6. MISCELLANEOUS.
-------------
6.1 Survival; Severability. The representations, warranties,
covenants and indemnities made by the parties herein shall survive each Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
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<PAGE>
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement. The Purchaser
may assign its rights and obligations hereunder, in connection with any private
sale or transfer of the Preferred Shares in accordance with the terms hereof, as
long as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term "Purchaser" shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto. The
Company may not assign it rights or obligations under this Agreement.
6.3 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of any other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such other party.
6.4 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
6.5 Injunctive Relief. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to each Purchaser
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, such Purchaser shall be entitled to an injunction restraining any
breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss.
6.6 Governing Law; Jurisdiction. This Agreement shall be
governed by and
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<PAGE>
construed under the laws of the State of New York without regard to the conflict
of laws provisions thereof. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
6.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.8 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.9 Notices. Any notice, demand or request required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 5:00 p.m., eastern time, on a business day or, if such day is not a
business day, on the next succeeding business day, (ii) on the next business day
after timely delivery to a nationally-recognized overnight courier and (iii) on
the third business day after deposit in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed to the parties as
follows:
If to the Company:
OrthoLogic Corp.
1275 West Washington Street
Tempe, Arizona 85281
Attn: President
Tel: (602) 437-5520
Fax: (602) 470-7080
with a copy to:
Quarles & Brady
One East Camelback
Phoenix, Arizona 85012
Attn: P. Robert Moya, Esq.
Tel. 602-230-5500
Fax. 602-230-5598
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<PAGE>
and if to any Purchaser, to such address for such Purchaser as shall appear on
the signature page hereof executed by such Purchaser, or as shall be designated
by such Purchaser in writing to the Company.
6.10 Expenses. The Company and each Purchaser each shall pay
all costs and expenses that it incurs in connection with the negotiation,
execution, delivery and performance of this Agreement, provided, however, that
the Company shall reimburse Marshall Capital Management, Inc. for all
out-of-pocket expenses (including without limitation legal fees and expenses)
incurred by it in connection its due diligence investigation of the Company and
the negotiation, preparation, execution, delivery and performance of the
Certificate of Designation, this Agreement and the other Transaction Documents
in an amount not to exceed forty thousand dollars ($40,000).
6.11 Entire Agreement; Amendments. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
ORTHOLOGIC CORP.
By: /s/ Thomas R. Trotter
-------------------------
Name: Thomas R. Trotter
Title: President & CEO
PURCHASER NAME: ______________________________
By: _________________________
Name:
Title:
ADDRESS:
_______________________________
_______________________________
Tel: __________________________
Fax: __________________________
Number of Shares of Series B Preferred Stock to be Purchased: _______________
Number of Shares of Common Stock represented by
the Warrants to be Purchased: _______________
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