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.
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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").
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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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.
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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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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.
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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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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 Xxxxx 00, 0000, (xxx) 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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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.
-------------------------------------------
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
-10-
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.
---------------------
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
Xxxxx XxXxx 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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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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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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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.
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: President
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxx
One East Camelback
Xxxxxxx, Xxxxxxx 00000
Attn: P. Xxxxxx Xxxx, Esq.
Tel. 000-000-0000
Fax. 000-000-0000
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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 Xxxxxxxx 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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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
ORTHOLOGIC CORP.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxx
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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