EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
July 21, 2000, between Dental/Medical Diagnostic Systems, Inc., a Delaware
corporation (the "COMPANY"), and the various investors identified and listed in
ANNEX A hereto (each referred to herein as an "INVESTOR" and, collectively, the
"INVESTORS").
WHEREAS:
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
B. The parties desire that, upon the terms and subject to the
conditions contained herein, the Investors shall purchase an aggregate of up to
1,396,396 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), as set forth on Schedule I hereto (the "SHARES"), at a price of
$1.11 per Share , and Warrants to purchase up to that number of shares of
the Common Stock as set forth in ANNEX A hereto, in the form of EXHIBIT A,
annexed hereto.
C. Contemporaneously with the execution and delivery of this
Agreement, the Company and the Investors are executing and delivering a
Registration Rights Agreement in the form attached hereto as EXHIBIT B (the
"REGISTRATION RIGHTS Agreement"), pursuant to which the Company has agreed to
provide to the Investors certain registration rights under the Securities Act
and the rules and regulations promulgated thereunder.
NOW THEREFORE, the Company and the Investors hereby agree as
follows:
For purposes of this Agreement, "BUSINESS DAY," "CAPITAL SHARES,"
"CAPITAL SHARES EQUIVALENTS," "CLOSING PRICE,""MAJOR TRANSACTION,""MARKET
PRICE," "PRINCIPAL MARKET," "SEC DOCUMENTS," "TAX," "TAXES," "TAX RETURN,"
"TRADING DAY," and "TRANSACTION DOCUMENTS" shall have the respective meanings
set forth in ANNEX B.
1. PURCHASE AND SALE OF THE SHARES AND WARRANTS.
(a) PURCHASE AND SALE. Upon the terms and conditions set
forth herein, the Company shall issue and sell to each Investor, and each
Investor, severally and not jointly, shall
purchase from the Company on the Closing Date (as defined below), the number of
Shares as set forth for such Investor in ANNEX A hereto.
(b) CLOSING. The closing of the purchase and sale of the
Shares and the issuance of the Warrants (the "Closing") shall take place at the
offices of Troop ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Troop ▇▇▇▇▇▇▇"), or by transmission by facsimile
and overnight courier, immediately following the execution hereof, or such later
date or different location as the parties shall agree, but not prior to the date
that the conditions set forth in Sections 5 and 6 have been satisfied or waived
by the appropriate party (the "Closing Date"). At the Closing:
(i) Each Investor shall deliver, as directed by the
Company, its portion of the purchase price as set forth next to its name in
ANNEX A hereto in United States dollars in immediately available funds to an
account or accounts designated in writing by the Company.
(ii) The Company shall deliver to each Investor a
stock certificate or certificates, in definitive form, registered in the name of
such Investor, representing the number of Shares purchased by such Investor as
set forth in ANNEX A hereto;
(iii) The Company shall deliver to each Investor a
Warrant, in the form of EXHIBIT A hereto, representing the right to acquire the
number of shares of Common Stock as set forth in ANNEX A hereto; and
(iv) The parties shall execute and deliver each of
the documents referred to in Sections 5 and 6 hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investors that:
(a) ORGANIZATION OF THE COMPANY. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more than fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have any effect on the business, operations,
properties, prospects, or financial condition of the Company that is material
and adverse to the Company and its subsidiaries and affiliates, taken as a
whole, and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the
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Company to enter into and perform any of its obligations under the Transaction
Documents in any material respect (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORITY. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement and to issue the Shares pursuant to the terms hereunder, (ii) the
execution, issuance and delivery of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) the Transaction Documents have been duly executed and
delivered by the Company and, at the Closing, shall constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the issuance of
Shares and the shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") hereunder.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock of which 6,988,266 shares
are issued and outstanding as of June 15, 2000 and 1,000,000 shares of preferred
stock, par value $0.01 per share, 2,000 of which have been designated Series A
and are issued and outstanding prior to the Closing and 2,750 of which have been
designated Series B and are issued and outstanding prior to the Closing.
(d) Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on the
Principal Market. As of the date of this Agreement, the Principal Market is the
Nasdaq SmallCap Market and the Company has not received any notice regarding,
and to its knowledge there is no threat, of the termination or discontinuance of
the eligibility of the Common Stock for such listing.
(e) SEC DOCUMENTS. The Company has delivered or made available
to the Investors true and complete copies of the SEC Documents. The Company has
not provided to the Investors any information that, according to applicable law,
rule or regulation, should have been disclosed publicly prior to the date hereof
by the Company, but which has not been so disclosed. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act, and rules and regulations of the SEC promulgated thereunder
and the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules
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and regulations with respect thereto at the time of such inclusion. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis 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 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 operations and cash flows for the periods then
ended (subject, in the case of unaudited interim statements, to normal year-end
audit adjustments). Neither the Company nor any of its subsidiaries has any
material indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the financial statements or in the notes thereto in accordance with GAAP,
which was not fully reflected in, reserved against or otherwise described in the
financial statements or the notes thereto included in the SEC Documents or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the last date of such financial statements.
(f) EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to
the accuracy of the Investors' representations in Section 3, the sale of the
Shares and Warrants to the Investors will not require registration under the
Securities Act and/or any applicable state securities law. When issued and paid
for in accordance herewith, the Shares and the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sale of the Shares
and Warrants nor the Company's performance of its obligations under the
Transaction Documents, will (i) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon the Shares and
Warrants, or (ii) entitle the holders of outstanding Capital Shares to
preemptive or other rights to subscribe to or acquire the Capital Shares or
other securities of the Company. Ownership of the Shares and Warrants shall not
subject the Investors to personal liability to the Company or its creditors by
reason of the possession thereof.
(g) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf has (i) conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to the sale hereunder of any of the Shares to the
Investors, or (ii) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would, other than
pursuant to the Registration Rights Agreement, require registration of the
Shares under the Securities Act; provided, that the Company makes no
representation or warranty with respect to the Investors.
(h) CORPORATE DOCUMENTS. The Company has furnished or made
available to the Investors true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"CERTIFICATE"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "BY-LAWS").
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(i) NO CONFLICTS. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Shares and the issuance of the Warrant Shares underlying the Warrants, do
not and will not (i) result in a violation of the Company's Certificate of
Incorporation or By-Laws or (ii) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument, or any
"lock-up" or similar provision of any underwriting or similar agreement to which
the Company is a party, or (iii) result in a violation of any federal, state or
local law, rule, regulation, order, judgment or decree (subject to the
effectiveness of the Registration Statement, including federal and state
securities laws and regulations) applicable to the Company or by which any
material property or asset of the Company is bound or affected, nor is the
Company otherwise in violation of, conflict with or default under any of the
foregoing (except in each case for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not have,
individually or in the aggregate, a Material Adverse Effect). The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations that
either singly or in the aggregate would not have a Material Adverse Effect. The
Company is not required under federal, state or local law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Shares in accordance with the terms hereof (other than any SEC, Nasdaq
SmallCap Market or state securities filings that may be required to be made by
the Company subsequent to Closing, any registration statement that may be filed
pursuant hereto, and any shareholder approval required by the rules applicable
to companies whose Common Stock trades on the Nasdaq SmallCap Market); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investors herein.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since March 31,
2000, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
(k) NO INTEGRATED OFFERING. The Company will not take, and the
Company shall not permit any of its directors, officers or Affiliates directly
or indirectly to take, any action, so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Investors of the Shares and Warrants as contemplated by this Agreement.
(l) LITIGATION AND OTHER PROCEEDINGS. Except as set forth in
the SEC Documents, there are no material lawsuits or proceedings pending or, to
the knowledge of the Company, threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation. Except as set forth in the SEC Documents, no
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judgment, order, writ, injunction or decree or award has been issued by or, to
the knowledge of the Company, requested of any court, arbitrator or governmental
agency which could result in a Material Adverse Effect.
(m) NO MISLEADING OR UNTRUE COMMUNICATION. The Company and, to
the knowledge of the Company, any person representing the Company, have not
made, at any time, any oral communication in connection with the offer or sale
of the Shares to the Investors which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
(n) INSURANCE. The Company maintains property and casualty,
general liability, workers' compensation, environmental hazard, personal injury
and other similar types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
(o) TAX MATTERS. (i) The Company has filed all Tax Returns
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and have been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it (whether or not such Taxes
are required to be shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authorities all Taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since December 31, 1998, the charges, accruals and reserves for
Taxes with respect to the Company (including any provisions for deferred income
taxes) reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending on the
date hereof.
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(ii) No claim has been made by a taxing authority in
a jurisdiction where the Company does not file tax returns that such corporation
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company; no information related
to Tax matters has been requested by any foreign, federal, state or local taxing
authority; and, except as disclosed above, no written notice indicating an
intent to open an audit or other review has been received by the Company from
any foreign, federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant to ss.
7121 of the Internal Revenue Code or any predecessor provision thereof or any
similar provision of state, local or foreign law; or (B) has not agreed to or is
required to make any adjustments pursuant to ss. 481 (a) of the Internal Revenue
Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its subsidiaries
or has any knowledge that the Internal Revenue Service (the "IRS") has proposed
any such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company. The
Company has not been a United States real property holding corporation within
the meaning of ss. 897(c)(2) of the Internal Revenue Code during the applicable
period specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
(iii) The Company has not made an election underss.
341(f) of the Internal Revenue Code. The Company is not liable for the Taxes of
another person that is not a subsidiary of the Company under (A) Treas. Reg. ss.
1.1502-6 (or comparable provisions of state, local or foreign law), (B) as a
transferee or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company has not made
any payments, is obligated to make payments or is a party to an agreement that
could obligate it to make any payments that would not be deductible under ss.
280G of the Internal Revenue Code.
(p) PROPERTY. Neither the Company nor any of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company.
(q) INTELLECTUAL PROPERTY. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
(r) INTERNAL CONTROLS AND PROCEDURES. The Company maintains
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
recorded accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with GAAP.
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(s) PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of
its directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
3. INVESTORS' REPRESENTATIONS AND WARRANTIES.
The Investors each represent and warrant to the Company that:
(a) INTENT. The Investor is entering into this Agreement
for its own account; provided, however, that by making the representations
herein, the Investor does not agree to hold such securities for any minimum or
other specific term and reserves the right to dispose of the Shares and Warrant
Shares at any time in accordance with federal and state securities laws
applicable to such disposition.
(b) SOPHISTICATED INVESTOR. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Shares. The Investor
acknowledges that an investment in the Shares is speculative and involves a high
degree of risk.
(c) AUTHORITY. The Transaction Documents have been duly
authorized and validly executed and delivered by the Investor and each
Transaction Document is a valid and binding agreement of the Investor
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
(d) NOT AN AFFILIATE. The Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
(e) ABSENCE OF CONFLICTS. The execution and delivery of
the Transaction Documents, and the consummation of the transactions contemplated
thereby, and compliance with the requirements thereof, will not violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
Investor or (a) violate any provision of any indenture, instrument or agreement
to which Investor is a party or is subject, or by which Investor or any of its
assets is bound; (b) conflict with or constitute a material default thereunder;
(c) result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by Investor to any third party; or (d) require the approval
of any third-party (which has not been obtained) pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
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(f) DISCLOSURE; ACCESS TO INFORMATION. The Investor has
received all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
the Investor. The Investor has reviewed or received copies of all SEC Documents
that have been requested by it.
(g) MANNER OF SALE. At no time was Investor presented
with or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
4. LEGENDS AND TRANSFER AGENT INSTRUCTIONS.
(a) LEGENDS. Each Investor agrees to the imprinting, so
long as is required by this Section 4(a), of the following legend on the Shares
and Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT O F 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the Shares, the Warrants, nor the Warrant Shares
shall contain the legend set forth above (or any other legend) (i) at any time
while a registration statement is effective under the Securities Act covering
such security, (ii) if, in the written opinion of counsel to the Company
experienced in the area of United States securities laws, such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) or
(iii) if such Shares, Warrants, or Warrant Shares may be sold pursuant to Rule
144(k) promulgated under the Securities Act. The Company agrees that it will
provide each Investor, upon request, with a certificate or certificates
representing the Shares, Warrants, or Warrant Shares, free from such legend at
such time as such legend is no longer required hereunder. If such certificate or
certificates had previously been issued with such a legend or any other legend,
the Company shall, upon request and delivery of such certificate or certificates
to the Company by such Investor, cause the Company's transfer agent to reissue
to such Investor such certificate or certificates free of any legend.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates,
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registered in the name of the Investor or its respective nominee(s), for the
Shares and Warrant Shares in such amounts as specified from time to time by the
Investor to the Company in the form of EXHIBIT C, attached hereto (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Nothing in this Section shall affect
in any way the Investors' obligations and agreements to comply with all
applicable prospectus delivery requirements, if any, upon resale of the Shares
and Warrant Shares. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Investors by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Investors shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
5. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the
Shares and Warrants to the Investors is further subject to the satisfaction, at
or before the Closing, of each of the following conditions set forth below.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
(a) The Investors shall have executed each of the
Transaction Documents and delivered the same to the Company.
(b) Each Investor shall have delivered to the Company the
Purchase Price for the Shares being purchased by the Investor at the Closing.
(c) The representations and warranties of the Investors
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such date), and the
Investors shall have performed, satisfied and complied with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Investors at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
6. CONDITIONS OF THE INVESTORS' OBLIGATION TO PURCHASE.
The obligation of the Investors hereunder to purchase Shares
and Warrants is subject to the satisfaction, at or before the Closing, of each
of the following conditions set forth below. These conditions are for the
Investors' sole benefit and may be waived by the Investors at any time in their
sole discretion.
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(a) The Company shall have executed each of the
Transaction Documents and delivered the same to the Investors.
(b) The Common Stock shall be authorized for trading or
quotation on the Principal Market and trading in the Common Stock shall not have
been suspended by the Principal Market or the SEC, at any time through and
including the Closing Date.
(c) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. The Investors shall have received (or receipt
shall have been confirmed on its behalf of) a certificate, executed by the Chief
Executive Officer and Chief Financial Officer of the Company, dated as of the
Closing Date to the foregoing effect and as to such other matters as may be
reasonably requested by the Investors including, without limitation, an update
as of the Closing Date regarding any changes in the Company's Certificate of
Incorporation and bylaws since the immediately preceding Closing Date.
(d) The Irrevocable Transfer Agent Instructions shall
have been delivered to, and acknowledged in writing by the Company's transfer
agent.
(e) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(f) There shall have been no filing of a petition in
bankruptcy, either voluntarily or involuntarily, with respect to the Company and
there shall not have been commenced any proceedings under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment of
indebtedness or reorganization of debtors, and there shall have been no calling
of a meeting of creditors of the Company or appointment of a committee of
creditors or liquidating agents or offering of a composition or extension to
creditors by, for, with or without the consent or acquiescence of the Company.
(g) The conditions to the Closing set forth in Section l
shall have been satisfied on or before such Closing Date.
(h) The Investors shall have received (or receipt shall
have been confirmed on its behalf of) the stock certificates representing the
Shares to be purchased at the Closing, which Shares shall meet the requirements
set forth in this Agreement.
7. INDEMNIFICATION.
Page 11
(a) GENERAL. (i) The Company hereby agrees to indemnify
and hold harmless the Investors, their Affiliates and their respective officers,
directors, partners and members (collectively, the "INVESTOR INDEMNITEES"), from
and against any and all losses, claims, damages, judgments, penalties, expenses,
liabilities and deficiencies (collectively, "LOSSES"), and agrees to reimburse
the Investor Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Investor Indemnitees and to the extent arising out of or in
connection with (A) any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or (B) any failure by the Company to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or (C) the status of the Investors or holder of the Shares and Warrants as an
investor in the Company (but not in case of Losses arising solely as a result of
actions or events that are wholly internal to the Investors).
(ii) The Investors hereby agree to indemnify and hold
harmless the Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "COMPANY INDEMNITEES"), from and against
any and all Losses, and agrees to reimburse the Company Indemnitees for
reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with (A) any
misrepresentation, omission of fact, or breach of any of the Investors'
representations or warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or certificate entered
into or delivered by the Investors pursuant to this Agreement; or (B) any
failure by the Investors to perform in any material respect any of their
covenants, agreements, undertakings or obligations set forth in this Agreement
or any instrument, certificate or agreement entered into or delivered by the
Investors pursuant to this Agreement.
(b) NOTICE. Promptly after receipt by either party hereto
seeking indemnification pursuant to Section 7(a) (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to Section 7(a) is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is
Page 12
materially prejudiced and forfeits substantive rights and defenses by reason of
such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded that representation
of the Indemnified Party and the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may be legal
defenses available to the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the Indemnifying Party
shall have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
(c) DIRECT CLAIMS. In the event one party hereunder should
have a claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver notice
of such claim to the Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of the Indemnified
Party and the Indemnifying Party or by binding arbitration conducted in
accordance with the procedures and rules of the American Arbitration Association
as set forth in Section 8. Judgment upon any award rendered by any arbitrators
may be entered in any court having competent jurisdiction thereof.
8 GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW; ARBITRATION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement or any Exhibit attached hereto shall be submitted to arbitration
under the American Arbitration Association (the "AAA") in New York City, New
York, and shall be finally and conclusively determined by the decision of a
board of
Page 13
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party including reasonable attorney's fees, in
connection with such arbitration.
(b) NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Dental/Medical Diagnostic Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Page 14
with a copy to:
(shall not constitute notice) Troop ▇▇▇▇▇▇▇ Pasich Reddick & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Holders: As set forth on the signature pages hereto.
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 8 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
(c) COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
(d) ENTIRE AGREEMENT. This Agreement, the agreements attached
as Exhibits hereto, which include, but are not limited to, the Registration
Rights Agreement, set forth the entire agreement and understanding of the
parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
(e) SEVERABILITY. 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 such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
(f) HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Page 15
(g) REPORTING ENTITY FOR THE Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
(h) REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Shares or the Warrant Shares and
(ii) in the case of any such loss, theft or destruction of such certificate,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company (which shall not exceed that required by the
Company's transfer agent in the ordinary course) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
(i) FEES AND EXPENSES. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder.
(j) BROKERAGE. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except for L.H. Friend Inc., whose fee shall be paid by the Company. The Company
on the one hand, and the Investors, on the other hand, agree to indemnify the
other against and hold the other harmless from any and all liabilities to any
person claiming brokerage commissions or finder's fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
(k) USE OF PROCEEDS. The primary use of proceeds is for working
capital. The Investors acknowledge that the Company has agreed that $100,000 of
the proceeds of the sale of shares will be paid to Troop ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& ▇▇▇▇▇ LLP for outstanding legal fees at Closing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
Page 16
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Dental/Medical Diagnostic Systems, Inc.
By:
---------------------------------
Its:
---------------------------------
Dolphin Offshore Partners
By:
---------------------------------
Its:
---------------------------------
A.N. Solomons
Winterthur Life RE A.N. Solomons
By:
---------------------------------
Its:
---------------------------------
▇▇▇▇▇▇▇ Investments Ltd.
By:
---------------------------------
Its:
---------------------------------
▇▇▇▇▇▇▇ Investmentss Pension Scheme
By:
---------------------------------
Its:
----------------------------------
Singer ▇▇▇▇▇▇▇▇▇▇▇ Limited
By:
---------------------------------
Its:
---------------------------------
Den-Mat Corporation
By:
---------------------------------
Its:
---------------------------------
▇▇▇▇▇▇ Court Trust
By:__________________________________
Its: _________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
The Weinress Group
By:
---------------------------------
Its:
---------------------------------
ANNEX A
INVESTORS
------------------------------ ----------------------------- ----------------------------- ----------------------------
NAME OF INVESTOR Purchase Price NUMBER OF SHARES OF NUMBER OF WARRANTS
---------------- ------------------- ------------------
Common Stock
Dolphin Offshore Partners $600,000.00 540,541 180,180
A.N. Solomons $250,000.00 225,225 75,075
Winterthur Life RE A.N.
Solomons $12,375.00 11,149 3,716
▇▇▇▇▇▇▇ Investments Ltd. $37,625.00 33,896 11,299
▇▇▇▇▇▇▇ Investments Pension
Scheme $50,000.00 45,045 15,015
Singer ▇▇▇▇▇▇▇▇▇▇▇ Limited $150,000.00 135,135 45,045
Den-Mat Corporation $150,000.00 135,135 45,045
▇▇▇▇▇▇ Court Trust $100,000.00 90,090 30,030
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $100,000.00 90,090 30,030
The Weinress Group $100,000.00 90,090 30,030
------------------------------ ----------------------------- ----------------------------- ----------------------------
ANNEX B
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which commercial banks in the City of New York are authorized or required by law
or executive order to remain closed or on which the Principal Market for the
Common Stock is not open for trading.
"CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of Common Stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
"CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
"CLOSING PRICE" shall mean the closing sale prices on the Principal
Market (as reported by Bloomberg L.P.) of the Common Stock.
"MAJOR TRANSACTION" means any of the following transactions or series
of related transactions: (i) the consolidation, merger or other business
combination of the Company with or into another person (other than pursuant to a
migratory merger effected solely for the purposes of changing the jurisdiction
of incorporation of the Company or a merger in which the Company is the
surviving entity and (x) shareholders of the Company immediately prior to the
closing of such merger continue to own in excess of 50% of the voting power of
the Company after the merger and (y) a majority of the directors comprising the
board of directors of the Company after the closing of the merger were directors
of the Company immediately prior to the merger); (ii) the sale or transfer of
all or substantially all of the Company's assets; or (iii) the consummation of a
purchase, tender or exchange offer made to, and accepted by, the holders of more
than 50% of the economic interest in, or the combined voting power of all
classes of voting stock of, the Company.
"MARKET PRICE" shall mean, for any Trading Day of determination, the
for any Trading Day during the ten (10) Trading Days immediately preceding such
Trading Day of determination.
"PRINCIPAL MARKET" means the national stock market or trading facility
on which the Common Stock is listed or quoted for trading.
"SEC DOCUMENTS" means the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1999 and each report or registration
statement filed by the Company with the SEC pursuant to the Exchange Act or the
Securities Act since the filing of such Annual Report through the date hereof or
any Closing Date, as applicable.
"TAX" or "TAXES" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"TRADING DAY" means any day during which the then Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" means the Purchase Agreement and the
Registration Rights Agreement.
Page 21
