EXHIBIT 99.8
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between MEDIA LOGIC, INC.,
a Massachusetts corporation ("Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D
("Regulation D" as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, 7% Convertible Debentures (the
"Debentures"), of the Company which will be convertible into shares of Common
Stock, $.01 par value per share of the Company (the "Common Stock"), upon the
terms and subject to the conditions of such Debentures (the Common Stock and
the Debentures are sometimes referred to herein as the "Securities"), and
subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to initially purchase
from the Company, the Debentures of the Company, in the principal amount set
forth on the signature page of this Agreement, out of a total offering of
$750,000 in Debentures, and having the terms and conditions and being in the
form attached hereto as Annex I. The purchase price for the Debentures shall
be as set forth on the signature page hereto and shall be payable in United
States Dollars.
b. Form of Payment. The Buyer shall pay the purchase price for
the Debentures by delivering immediately available good funds in United
States Dollars as set forth in Section 1(c). Promptly following payment by
the Buyer to the Escrow Agent of the purchase price of the Debentures, the
Company shall deliver the Debentures duly executed on behalf of the Company
to the Escrow Agent. By signing this Agreement, the Buyer and the Company,
and subject to acceptance by the Escrow Agent, each agrees to all of the
terms and conditions of, and becomes a party to, the Joint Escrow
Instructions attached hereto as Annex II, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
c. Method of Payment. Payment into escrow of the purchase price
for the Debentures shall be made by wire transfer of funds to Krieger &
Prager, Esqs. (the "Escrow Agent") in accordance with the following
instructions:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No.: 637-1657450
Not later than 1:00 p.m., New York time, on the date which is one (1) New
York Stock Exchange trading day after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the
aggregate purchase price for the Debentures, in currently available funds.
Time is of the essence with respect to such payment, and failure by the Buyer
to make such payment, shall allow the Company to cancel this Agreement.
d. Rejection of Subscription. Notwithstanding anything herein to
the contrary, the Company reserves the right to reject in its sole discretion
this subscription for the Debentures in whole or in part at any time prior to
the Closing Date (as defined below). In the event of such rejection, the
Buyer's subscription payment will be returned to the Buyer and this Agreement
will have no force or effect. If the Buyer's subscription is not so
rejected, on the Closing Date funds shall be released to the Company and the
certificates representing the Debentures shall be released to the Buyer.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement, the Buyer is purchasing the
Debentures and will be acquiring the shares of Common Stock issuable upon
conversion of the Debenture (the "Conversion Shares") in the ordinary course
of its business and for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to
or for sale in connection with any distribution thereof or any arrangement or
understanding with any other persons regarding the distribution or purchase
of such Debentures or the Conversion Shares;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act
by reason of Rule 501(a)(3), (ii) experienced in making investments of the
kind described in this Agreement and the related
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documents, (iii) able, by reason of the business and financial experience of
its officers (if an entity) and professional advisors (who are not affiliated
with or compensated in any way by the Company or any of its affiliates or
selling agents), to protect its own interests in connection with the
transactions described in this Agreement, and the related documents, and (iv)
able to afford the entire loss of its investment in the Securities;
c. All subsequent offers and sales of the Debentures and the
Conversion Shares by the Buyer shall be made pursuant to registration of the
Shares under the 1933 Act or pursuant to an exemption from registration;
d. The Buyer understands that the Debentures are being offered and
sold, and the Conversion Shares are being offered, to it in reliance on
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgements and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Debentures and to receive an
offer of the Conversion Shares;
e. The Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debenture and the
offer of the Shares which have been requested by the Buyer, including Annex
III hereto. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality
of the foregoing, the Buyer has also had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K for the fiscal year ended
March 31, 1997, (2) Amendment No. 1 to Form 10-K on Form 10-K/A, (3)
Quarterly Reports on Form 10-Q dated September 30, 1996, December 31, 1996
and June 30, 1997 and (4) Proxy Statement dated August 11, 1997
(collectively, the "Company's SEC Documents").
f. The Buyer, taking into account the personnel and resources it
can practically bring to bear on the purchase of the Debentures, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to making an investment decision like that
involved in the purchase of the Debentures and the Buyer understands that its
investment in the Securities involves a high degree of risk;
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Securities;
h. The Buyer has full right, power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered on
behalf of the Buyer and is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity (regardless of whether such enforcement is
considered in a proceeding
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at law or in equity) and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Neither the Buyer, nor any affiliate of the Buyer, has any
present intention of entering into, any put option, short position, or other
similar position with respect to the Debentures or the Conversion Shares.
j. Notwithstanding the provisions hereof or of the Debentures, in
no event (except with respect to any event of mandatory conversion of the
Debentures) shall the holder be entitled to convert any Debenture to the
extent after such conversion, the sum of (1) the number of shares of Common
Stock beneficially owned by the Buyer and its affiliates (other than shares
of Common Stock which may be deemed beneficially owned through the ownership
of the unconverted portion of the Debenture), and (2) the number of shares of
Common Stock issuable upon the conversion of the Debenture with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Buyer and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
k. The Buyer acknowledges that the Company will characterize the
Debentures as preferred stock of the Company for federal income tax purposes,
and that, pursuant to Section 385(c) of the Internal Revenue Code of 1986, as
amended, this characterization is binding on all holders. Any holder
treating the Debentures in a manner inconsistent with such characterization
must disclose the inconsistent treatment on such holder's tax return. This
characterization, however, is not binding on the Internal Revenue Service,
and neither the Company nor the holder is excused from any interest or
penalties resulting from improper characterization.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Common Stock.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts. The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act, and the Common Stock is listed
and traded on the American Stock Exchange ("AMEX"). Except for the letter
from AMEX to the Company dated October 15, 1997, a copy of which is attached
hereto as Annex VI, the Company has received no notice, either oral or
written, with respect to the continued eligibility of the Common Stock for
such listing.
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c. Authorized Shares. The Company has sufficient authorized and
unissued shares of Common Stock as may be reasonably necessary to effect the
conversion of the Debentures. The Conversion Shares have been duly
authorized and, when issued upon conversion of, or as interest on, the
Debentures, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of
being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement
and Stock. This Agreement and the Registration Rights Agreement, the form of
which is attached hereto as Annex IV (the "Registration Rights Agreement"),
and the transactions contemplated thereby, have been duly and validly
authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Registration Rights
Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of
equity (regardless of whether such enforcement is considered in a proceeding
at law or in equity) and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally; and
the Debentures will be duly and validly authorized and, when executed and
delivered on behalf of the Company in accordance with this Agreement, will be
a valid and binding obligation of the Company in accordance with their terms,
subject to general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and to
bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance
of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Registration Rights
Agreement, and the Debentures do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the restated articles of organization or by-laws of the
Company, (ii) any indenture, mortgage, deed of trust, or other material
agreement or instrument to which the Company is a party or by which it or any
of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or (iv) to its knowledge, any order of any court, United States
federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its
properties or assets, except such conflict, breach or default which would not
have a material adverse effect on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Buyer as contemplated by this Agreement, except such authorizations,
approvals and consents that have been obtained and the approval or waiver
contemplated by Section 4(g) hereof.
g. SEC Filings. None of the SEC Filings with the Securities and
Exchange Commission since the filing of the 10-K on March 31, 1997 contained,
at the time they were filed,
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any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements made
therein in light of the circumstances under which they were made, not
misleading. The Company has since October 27, 1996 timely filed all
requisite forms, reports and exhibits thereto with the Securities and
Exchange Commission.
h. Absence of Certain Changes. Since January 1, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, or results of
operations of the Company, except as disclosed in the documents referred to
in Section 2(e) hereof.
i. Full Disclosure. There is no fact known to the Company (other
than general economic conditions known to the public generally) or as
disclosed in the documents referred to in Section 2(e), that has not been
disclosed in writing to the Buyer that (i) would reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company or (ii) would reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
j. Absence of Litigation. Except as set forth in Annex III hereto
and in the documents referred to in Section 2(e), which the Buyer has
reviewed, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of
the Company, threatened against or affecting the Company, wherein an
unfavorable decision, ruling or finding would have a material adverse effect
on the business or financial condition of the Company or the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
k. Absence of Events of Default. Except as set forth in Section
3(e), no Event of Default, as defined in the respective agreement to which
the Company is a party, and no event which, with the giving of notice or the
passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
l. Prior Issues. Except as set forth in Annex III,
during the twelve (12) months preceding the date hereof, the Company has not
issued any convertible securities. The presently outstanding unconverted
principal amount of each such issuance as at September 30, 1997 are set forth
in Annex III.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Debentures have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement,
the Conversion Shares have not been and are not being registered under the
1933 Act, and may not be sold or otherwise transferred without a legal
opinion satisfactory in form, scope and substance to the Company, to the
effect that the Securities
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to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration; (2) any sale of the Securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any
resale of such Securities under circumstances in which the seller, or the
person through whom the sale is made, may be deemed to be an underwriter, as
that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the
Registration Rights Agreement) under the 1933 Act or to comply with the terms
and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures, and, until such time as the Conversion Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective registration statement,
the shares of Common Stock issued to the holder upon conversion of the
Debentures shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
Debentures and such shares):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement, in substantially the form
attached hereto as Annex IV, on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Debentures to the Buyer
under any United States laws and regulations, or by any domestic securities
exchange or trading market, and to provide a copy thereof to the Buyer
promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any
of the Debentures, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures (excluding amounts paid by the Company for legal fees
and finder's fees in connection with the sale of the Debentures) for internal
working capital purposes, and shall not, directly or
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indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise or other person.
g. AMEX Approval or Waiver. The Company shall use its best
efforts to obtain the approval of, or a waiver from AMEX with respect to the
requirements of Section 713(a) of the AMEX Listing Standards and Requirements
(the "20% Rule") in connection with the issuance of the Conversion Shares.
If such approval or waiver is obtained, then, if required in connection
therewith, the Company shall promptly commence the mailing to shareholders
contemplated by the AMEX Listing Standards and Requirements. If, however,
such approval or waiver is not obtained within twenty (20) days after the
date (the "20% Date") the Company would, if it were to convert the Debentures
then sought to be converted by a Buyer, exceed the 20% Rule, the Company
shall take all practical steps necessary to obtain shareholder approval (the
"Shareholder Approval") for such issuances, including, but not limited to,
calling a regular or special meeting of shareholders of the Company.
Notwithstanding anything herein to the contrary, if the Company fails to
obtain (i) the approval of, or a waiver from AMEX with respect to the 20%
Rule in connection with the issuance of the Conversion Shares and (ii)
Shareholder Approval within 60 days after the 20% Date, the Company shall
redeem the Debentures in accordance with Section 12(B) of the Debentures.
h. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the number of shares of Common Stock
issuable at conversion as may be required to satisfy the conversion rights of
the Buyer pursuant to the terms and conditions of the Debentures.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Debentures in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to issue Common Stock
from time to time upon conversion of the Debentures in such amounts as
specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Conversion Shares under the 1933 Act, registered in the
name of the Buyer or its nominee and in such denominations to be specified by
the Buyer in connection with each conversion of the Debentures. The Company
warrants that no instruction other than such instructions referred to in this
Section 5 and stop transfer instructions to give effect to Section 4(a)
hereof prior to registration and sale of the Conversion Shares under the 1933
Act will be given by the Company to the transfer agent and that the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement to comply with
all applicable securities laws upon resale of the Securities including,
without limitation, the prospectus delivery requirements of the 1933 Act. If
the Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of a
8
resale by the Buyer of any of the Securities in accordance with clause (1) of
Section 4(a) of this Agreement is not required under the 1933 Act, the
Company shall (except as provided in clause (2) of Section 4(a) of this
Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares, promptly instruct the Company's transfer agent to issue
one or more certificates for Common Stock without legend in such name and in
such denominations as requested by the Buyer.
b. The Company will permit the Buyer to exercise its right to
convert the Debentures by telecopying an executed and completed Notice of
Conversion to the Company and delivering within three (3) business days
thereafter, the original Notice of Conversion and the Debentures representing
the Conversion Shares to the Company by express courier, with a copy to the
transfer agent. Each date on which a Notice of Conversion is telecopied to
and received by the Company in accordance with the provisions hereof shall be
deemed a Conversion Date. The Company will transmit the certificates
representing the Conversion Shares issuable upon conversion of any Debenture
(together with the Debentures representing the Conversion Shares not so
converted) to the Buyer via express courier, by electronic transfer or
otherwise, within five (5) business days after receipt by the Company of the
original Notice of Conversion and the Debenture representing the Shares to be
converted (the "Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss
to the Buyer. As compensation to the Buyer for such loss, the Company agrees
to pay late payments to the Buyer for late issuance of Shares upon Conversion
in accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date:
Late Payment For Each
$10,000 of Debenture
No. Business Days Late Principal Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
If the No. of Business Days Late shall exceed 10, the late payment for each
$10,000 of Debenture principal amount being converted shall increase at the
rate of $150 per day after such tenth day.
If such shares of Common Stock are not delivered within five business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice
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to such effect to the Company whereupon the Company and the Buyer shall each
be restored to their respective positions immediately prior to delivery of
such Notice of Conversion.
d. In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance
with the provisions contained in this paragraph, so long as the certificates
therefor do not bear a legend and the Buyer thereof is not obligated to
return such certificate for the placement of a legend thereon, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Buyer by crediting
the account of Buyer's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system.
6. DELIVERY INSTRUCTIONS.
The Debentures shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof, on a delivery against payment basis on the
Closing Date.
7. CLOSING DATE.
The date and time of the issuance and sale of the Debentures (the
"Closing Date") shall occur no later than 12:00 Noon, New York time on the
first NYSE trading day after the fulfillment or waiver of all closing
conditions pursuant to Sections 8 and 9, or such other mutually agreed to
time. The closing shall occur on such date at the offices of the Escrow
Agent. Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the funds representing the Purchase Price
for the Debentures, and the Debentures only upon satisfaction of the
conditions set forth in Section 8 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Debentures on the Closing Date is subject to the following conditions, any of
which may be waived by the Company:
a. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Debentures
in accordance with Section 1(c) hereof;
b. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before
the Closing Date;
c. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
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9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Debentures on the Closing Date is conditioned upon:
a. Acceptance by Buyer of an Agreement for the sale of Debentures,
as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the Debenture in
accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of
the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or
before the Closing Date of all covenants and agreements of the Company
required to be performed on or before the Closing Date and reasonably
satisfactory to the Buyer.
d. Delivery by the Company to the Escrow Agent of an opinion of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., substantially in the
form attached hereto as Annex V.
10. LOCK-UP
a. The Company covenants and agrees that it will not enter into
any subsequent or further offer or sale of Common Stock (whether of the same
class of Common Stock or otherwise) or securities convertible into shares of
Common Stock with any third party until the expiration of a period of one
hundred thirty five (135) days from the Effective Date (as defined in the
Registration Rights Agreement).
b. Notwithstanding anything herein to the contrary, the provisions
of Section 10(a) will not apply to (i) the issuance of any securities in
connection with a merger, consolidation, sale of assets, disposition of a
business, product or license by the Company, strategic alliance, public
offering of any securities issued at the then current market price or upon
the exercise of options, (ii) the exchange of the capital stock of the
Company for assets, stock or other joint venture interests, (iii) any
securities issued pursuant to any employee or director stock option plan or
(iv) the issuance of $1,500,000 of Common Stock contemplated by the Placement
Agent Agreement, dated as of October, 1997, among the Company, First Granite
Securities, Inc. and Boston Group L.P. Any action contemplated by Sections
10(b)(i), 10(b)(ii) or 10(b)(iii), however, is subject to the condition that
registration rights, if any, in connection with such action shall not require
or permit a Registration Statement in respect of such stock to be filed prior
to thirty (30) days after the Effective Date.
11. GOVERNING LAW; MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose
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districts encompass any part of the City of New York or the state courts of
the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of
this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement
may be amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given, (i) on the date delivered, (a) by personal delivery, or
(b) if advance copy is given by fax, (ii) seven business days mailing by
international express courier, with postage and fees prepaid, addressed to
each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days advance written
notice to each of the other parties hereto.
COMPANY: MEDIA LOGIC, INC.
310 South Street
Plainville, MA 02762
Attention: Chief Executive Officer
Telecopier No.: (508) 695-8593
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: Richard R. Kelly, Esq.
Telecopier No.: (617) 542-2241
BUYER: The address set forth on the signature page of this Agreement.
12
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Attention: Samuel Krieger, Esq.
Telecopier No. (212) 213-2077
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
Company's and the Buyer's representations and warranties shall survive the
execution and delivery hereof of this Agreement and the delivery of the
Debentures.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
AGGREGATE INITIAL PURCHASE PRICE OF SUCH DEBENTURE: $750,000.00
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities
Purchase Agreement to be duly executed on its behalf this 29th day of
October, 1997.
___________________________________
Address Printed Name of Subscriber
By: /s/ (Illegible)
--------------------------------
Telecopier No. ____________________ (Signature of Authorized Person)
General Attorneys
-----------------------------------
Printed Name and Title
Panama
- --------------------------------
Jurisdiction of Incorporation
or Organization
This Agreement has been accepted as of the date set forth below.
MEDIA LOGIC, INC.
By: /s/ William E. Davis, Jr.
---------------------------
William E. Davis, Jr.
Chief Executive Officer
Date: October 29, 1997
13
ANNEX I FORM OF DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III COMPANY DISCLOSURE MATERIALS
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V OPINION OF COUNSEL
ANNEX VI AMEX LETTER
ANNEX I
FORM OF DEBENTURE
NEITHER THIS DEBENTURE NOR THE COMMON STOCK ISSUABLE UPON CONVERSION
OF THIS DEBENTURE HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR THE SECURITIES COMMISSION OF ANY STATE UNDER
ANY STATE SECURITIES LAW. THE SECURITIES ARE RESTRICTED AND MAY NOT
BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR ARE
PERMITTED UNDER THE ACT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
No.______________ US $______________
MEDIA LOGIC, INC.
7% CONVERTIBLE DEBENTURE DUE OCTOBER_____, 2000
THIS DEBENTURE is one of a duly authorized issue of $750,000 in
Debentures of MEDIA LOGIC, INC., a corporation duly organized and existing
under the laws of The Commonwealth of Massachusetts (the "Company")
designated as its 7% Convertible Debenture Due October ___, 2000.
FOR VALUE RECEIVED, the Company promises to pay to
_______________________, the registered holder hereof (the "Holder"), the
principal sum of ____________________ 00/100 (US $________________) Dollars
on October ______, 2000 (the "Maturity Date") and to pay interest on the
principal sum outstanding from time to time in arrears upon conversion as
provided herein on October _____, 2000 at the rate of 7% per annum accruing
from the date of initial issuance (the "Issuance Date"). Accrual of interest
shall commence on the first such business day to occur after the date hereof
until payment in full of the principal sum has been made or duly provided
for. Subject to the provisions of Section 4 below, the principal of, and
interest on, this Debenture are payable at the option of the Company, in
shares of Common Stock, $.01 par value per share, of the Company ("Common
Stock"), or in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts,
at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Company will pay
the principal of and interest upon this Debenture on the Maturity Date, less
any amounts required by law to be deducted, to the registered holder of this
Debenture as of the tenth day prior to the Maturity Date and addressed to
such holder as the last address
appearing on the Debenture Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy
and discharge the liability for principal and interest on this Debenture to
the extent of the sum represented by such check plus any amounts so deducted.
The Company has issued this Debenture pursuant to a Securities
Purchase Agreement between the Company and the Buyer named therein (the
"Securities Purchase Agreement"). Capitalized terms used herein and not
defined herein shall have the meanings assigned thereto in the Securities
Purchase Agreement.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand
Dollars (US $10,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same. No service charge will be made for such registration or transfer
or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall
execute and deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. In the event
of any proposed transfer of this Debenture, the Company may require, prior to
issuance of a new Debenture in the name of such other person, that it receive
reasonable transfer documentation including opinions that the issuance of the
Debenture in such other name does not and will not cause a violation of the
Act or any applicable state or foreign securities laws. Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or
not this Debenture be overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.
4. A. Subject to Section 4(B), the Holder of this Debenture is
entitled, at its option, to convert at any time commencing seventy five (75)
days after the Issuance Date (the "Conversion Time") the principal amount of
this Debenture, provided that the principal amount is at least US $10,000
(unless if at the time of such election to convert the aggregate principal
amount of all Debentures registered to the Holder is less than Ten Thousand
Dollars (US $10,000), then the whole amount thereof) into shares of Common
Stock of the Company at a conversion price (the "Conversion Rate") for each
share of Common Stock equal to the lesser of (a) 120% of the Market Price on
the Issuance Date, and (b) 80% of the Market Price on the Conversion Date (as
defined below). For purposes of this Section 4, the Market Price shall be
2
the average closing bid price of the Common Stock on the five (5) trading
days immediately preceding the Issuance Date or Conversion Date, as may be
applicable, on the American Stock Exchange ("AMEX") or, if the Common Stock
is not then listed on AMEX or any other national securities exchange, the
Market Price shall be the average closing bid price of the Common Stock on
the five (5) trading days immediately preceding the Issuance Date or
Conversion Date, as may be applicable, as reported by the National
Association of Securities Dealers, Inc. or the closing bid price in the
over-the-counter market on such date. Conversion shall be effectuated by
surrendering the Debentures to be converted to the Company with the form of
conversion notice attached hereto as Exhibit A, executed by the Holder of the
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. Interest accrued or
accruing from the date of issuance to the date of conversion shall, at the
option of the Company, be paid in cash or Common Stock upon conversion at the
Conversion Rate. No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall
be rounded to the nearest whole share. The date on which notice of
conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder has delivered this Debenture, with the conversion notice
duly executed, to the Company or, the date set forth in such facsimile
delivery of the notice of conversion if the Debenture is received by the
Company within three (3) business days therefrom. Facsimile delivery of the
conversion notice shall be accepted by the Company at telephone number
(508-695-8593); ATTN: Chief Financial Officer. Certificates representing
Common Stock upon conversion will be delivered within five (5) business days
from the date the notice of conversion with the original Debenture is
delivered to the Company.
B. The Company shall have the right to require, by written
notice to the Holder of this Debenture at least ten (10) days prior to the
Maturity Date, that the Holder of this Debenture exercise its right of
conversion with respect to all or that portion of the principal amount and
interest outstanding on the Maturity Date.
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate,
and in the coin or currency, herein prescribed. This Debenture and all other
Debentures now or hereafter issued of similar terms are direct obligations of
the Company.
6. No recourse shall be had for the payment of the principal of,
or the interest on, this Debenture, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
7. If the Company merges or consolidates with another corporation
or sells or transfers all or substantially all of its assets to another
person and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for
3
Common Stock, then as a condition of such merger, consolidation, sale or
transfer, the Company and any such successor, purchaser or transferee agree
that this Debenture may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock, securities
or property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture
might have been converted immediately before such merger, consolidation, sale
or transfer, subject to adjustments which shall be as nearly equivalent as
may be practicable. In the event of any proposed merger, consolidation or
sale or transfer of all or substantially all of the assets of the Company (a
"Sale"), the Holder hereof shall have the right to convert by delivering a
Notice of Conversion to the Company within fifteen (15) days of receipt of
notice of such Sale from the Company. In the event the Holder hereof shall
elect not to convert, the Company may prepay all outstanding principal and
accrued interest on this Debenture, less all amounts required by law to be
deducted, upon which tender of payment all rights to conversion hereunder
shall terminate.
8. The Holder of the Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon conversion thereof except under circumstances which will
not result in a violation of the Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of securities.
9. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass
any part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non coveniens, to the
bringing of any such proceeding in such jurisdictions.
10. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture and such default shall remain
unremedied for five (5) business days after the Company
has been notified of the default in writing by a Holder;
or
b. Any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement or
in any other Agreement executed by the Company in connection
therewith, or in any certificate or financial or other
written statements furnished by the Company in connection
with the execution and delivery of this Debenture or the
Securities Purchase Agreement shall be false or misleading
in any material respect at the time made; or
4
c: The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this
Debenture, fails to transfer or to cause its Transfer Agent
to transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this Debenture and
when required by this Debenture or the Registration
Rights Agreement, or fails to remove any restrictive
legend or to cause its Transfer Agent to transfer any
certificate or any shares of Common Stock issued to the
Holder upon conversion of this Debenture as and when
required by this Debenture, the Securities Purchase
Agreement or the Registration Rights Agreement and any
such failure shall continue uncured for five (5) business
days after the Company has been notified of such failure
in writing by Holder;
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision,
condition, agreement or obligation of the Company under
this Debenture and such failure shall continue uncured
for a period of thirty (30) days after written notice to
the Company from the Holder of such failure; or
e. The Company shall (1) admit in writing its inability to
pay its debts generally as they mature; (2) make an
assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or
receiver for its or for a substantial part of its
property or business; or
f. A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or
business without its consent and shall not be discharged
within sixty (60) days after such appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60) days
thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Million ($1,000,000)
Dollars in the aggregate shall be entered or filed
against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of sixty (60) days; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall
be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed
within sixty (60) days after
5
such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such
proceedings or admit the material allegations of, or
default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the-counter market from
trading for in excess of five (5) trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the holders of at least
50% in principal amount of outstanding Debentures (which waiver shall not be
deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable, without presentment, demand, protest or notice
of any kinds, all of which are hereby expressly waived, anything herein or in
any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
11. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
12. A. If the Registration Statement covering the Conversion
Shares is not effective within 180 days of the Issuance Date (the "Final
Registration Date") (except as provided by the last sentence of Section 2(a)
of the Registration Rights Agreement), the Company shall redeem this
Debenture by paying to the Holder in cash an amount equal to the gross
proceeds which the Holder would have realized had this Debenture (and accrued
but unpaid interest thereon, if any) been converted on the Final Registration
Date (with the Conversion Date being the Final Registration Date) and all the
shares of Common Stock into which this Debenture was converted were sold on
the Final Registration Date at the Market Price on such date.
B. If (x) the Company fails to obtain the approval of, or a waiver
from AMEX with respect to the 20% Rule in connection with the issuance of the
Conversion Shares and (y) the Company does not receive Shareholder Approval
within sixty (60) days after the 20% Date (such 60th day, the "Final 20%
Approval Date"), the Company shall redeem this Debenture by paying to the
Holder in cash an amount equal to the gross proceeds which the Holder would
have received had this Debenture (and accrued but unpaid interest thereon, if
any) been converted on the Final 20% Approval Date (with the Conversion Date
being the Final 20% Approval Date) and all of the shares of Common Stock into
which this Debenture was converted were sold on the Final 20% Approval Date
at the Market Price on such date.
6
C. If the Company shall be required to redeem the Debentures
pursuant to Section 12(A) or 12(B), the Company shall send notice (the
"Redemption Notice") to the Holder at such Holder's address and telecopier
number as the same shall appear on the books of the Company and the Company
shall redeem the Debentures five (5) business days following the date on
which the Company provides the Redemption Notice (the "Redemption Date").
The Redemption Notice shall state that (i) the Debentures will be redeemed on
the Redemption Date, (ii) the redemption price, (iii) the place which
certificates for Debentures must be surrendered to collect the redemption
price, (iv) interest on the Debentures shall cease to accrue at the close of
business on the day prior to the Redemption Date and (v) the section of the
Debenture pursuant to which the Debentures are being redeemed.
Notwithstanding anything herein to the contrary, if after delivering the
Redemption Notice the Company does not redeem the Debentures on the
Redemption Date, the Company shall have no further right to redeem the
Debentures pursuant to Section 12(A) or 12(B) hereof.
13. Any provision of the Debentures may be amended or waived if the
Company shall obtain the written agreement thereto of the Holder or Holders
of at least 50% of the principal amount of the Debentures at the time
outstanding, except that, without the written agreement of the Holder or
Holders of all of the Debentures at the time outstanding, no such amendment
or waiver shall (i) change the maturity of any Debenture or change the
principal of, or rate of interest with respect to any Debenture, (ii) change
the percentage of the unpaid principal amount of the Debentures required with
respect to any amendment or waiver or (iii) change the Conversion Rate or
Conversion Time.
14. The Company will characterize the Debentures as preferred stock
of the Company for federal income tax purposes. Pursuant to Section 385(c)
of the Internal Revenue Code of 1986, as amended, this characterization is
binding on all Holders. A Holder treating the Debenture in a manner
inconsistent with such characterization must disclose the inconsistent
treatment on such Holder's tax return. This characterization, however, is
not binding on the Internal Revenue Service, and neither the Company nor any
Holder is excused from any interest or penalties resulting from improper
characterization.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized.
Dated: October_____, 1997
MEDIA LOGIC, INC.
By:_____________________________
Name: William E. Davis
Title: Chief Executive Officer
7
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ______________
of the principal amount of the above Debenture No. ___ into shares of
Common Stock of MEDIA LOGIC, INC., (the "Company") according to the conditions
hereof, as of the date written below. In converting the Debenture No.
______________, the undersigned hereby confirms and acknowledges that the
shares of Common Stock are being acquired solely for the account of the
undersigned and not a nominee for any other party, and that the undersigned
will not offer, sell or otherwise dispose of any such shares of Common Stock,
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended.
Date of Conversion*
___________________________________________________________________
Applicable Conversion Price
___________________________________________________________
Signature
____________________________________________________________________________
[Name]
Address:
____________________________________________________________________________
_____________________________________________________________________________
* This original Debenture and Notice of Conversion must be received by the
Company by the third business date following the Date of Conversion.
8
ANNEX II
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Securities Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
Attention: Samuel M. Krieger, Esq.
Dear Mr. Krieger:
As escrow agent for both Media Logic, Inc., a Massachusetts
corporation (the "Company"), and the Buyer (the "Buyer") of $750,000
principal amount of 7% Convertible Debentures due October 2000 of the Company
(the "7% Convertible Debentures"), who is named in the Securities Purchase
Agreement between the Company and the Buyer to which a copy of these Joint
Escrow Instructions is attached as Annex II (the "Agreement"), you
(hereafter, the "Escrow Agent") are hereby authorized and directed to hold
the documents, and the funds (such funds, together with any interest thereon,
the "Escrow Funds") delivered to the Escrow Agent pursuant to the terms of
the Agreement in accordance with the following instructions:
1. The Escrow Agent shall, as promptly as feasible, notify the
Company of receipt of $750,000 representing the purchase price for the 7%
Convertible Debentures (the "Purchase Price") from the Buyer, and notify the
Buyer (or such agent as the Buyer may designate in writing) of receipt of the
7% Convertible Debentures being purchased for such Purchase Price. As
promptly as feasible upon receipt of notice (whether oral or in written form)
from the Company and the Buyer that the respective conditions precedent to
the purchase and sale have been satisfied (which notice shall not be
unreasonably withheld), the Escrow Agent shall, after reduction by the
amounts referred to in the next succeeding sentence of this paragraph,
release the Escrow Funds to or upon the order of the Company, and shall
release the 7% Convertible Debentures to the Buyer. After receipt of such
notice, amounts equal to (i) 10% of the Purchase Price, as aggregate fees due
to First Granite Securities, Inc. shall be released to or upon the Order of
the Escrow Agent, and (ii) one half of 1% of the Purchase Price as escrow
fees to the Escrow Agent shall be released to or upon the order of the Escrow
Agent. If such 7% Convertible Debenture is not deposited with the Escrow
Agent within ten (10) days after receipt by the Company of notice of receipt
by the Escrow Agent of the funds from the Buyer, the Escrow
Agent shall notify the Buyer and Buyer shall be entitled to cancel the
purchase and demand repayment of the funds. If such funds are not deposited
with the Escrow Agent within ten (10) days after receipt by the Buyer of
notice of receipt by the Escrow Agent of the 7% Convertible Debenture from
the Company, the Escrow Agent shall notify the Company and the Company shall
be entitled to cancel the purchase and demand return of the 7% Convertible
Debenture. If the Company or the Buyer notifies the Escrow Agent that on the
Closing Date (as such term is defined in the Agreement) the conditions
precedent to the obligations of the Company or the Buyer, as the case may be,
under the Agreement were not satisfied or waived, then the Escrow Agent shall
return the Escrow Funds to the Buyer and shall return the 7% Convertible
Debenture to the Company. Prior to return of the Escrow Funds to the Buyer,
the Buyer shall furnish such tax reporting or other information as shall be
appropriate for the Escrow Agent to comply with applicable United States
laws. The Escrow Agent shall deposit all funds received hereunder in the
Escrow Agent's attorney escrow account at The Bank of New York.
2. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, the Buyer and
the Escrow Agent.
3. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do hereunder
as the Escrow Agent while acting in good faith, and any act done or omitted
by the Escrow Agent pursuant to the advice of the Escrow Agent's
attorneys-at-law shall be conclusive evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other
person or corporation, excepting only orders or process of courts of law and
is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case the Escrow Agent obeys or complies with any
such order, judgment or decree, the Escrow Agent shall not be liable to any
of the parties hereto or to any other person, firm or corporation by reason
of such decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account
of the identity, authorities or rights of the parties executing or delivering
or purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent shall be entitled to employ such legal counsel
and other experts as the Escrow Agent may deem necessary properly to advise
the Escrow Agent in connection with the Escrow Agent's duties hereunder, may
rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Buyer, and may continue to act as legal counsel for the Buyer, from time to
time, notwithstanding its duties as Escrow Agent hereunder. The Company
consents to the Escrow Agent acting in such capacity as legal counsel for the
Buyer and waives any claim that
2
such representation represents a conflict of interest on the part of the
Escrow Agent. The Company understands that the Buyer and the Escrow Agent are
relying explicitly on the foregoing provision in entering into these Joint
Escrow Instructions.
7. The Escrow Agent's responsibilities as Escrow Agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Buyer. In the event of any such resignation, the Buyer and
the Company shall appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further
instruments in connection with these Joint Escrow Instructions or obligations
in respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
9. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
documents or Escrow Funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent's sole discretion (1) to
retain in the Escrow Agent's possession without liability to anyone all or
any part of said documents or Escrow Funds until such disputes shall have
been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been perfected, but
the Escrow Agent shall be under no duty whatsoever to institute or defend any
such proceedings or (2) to deliver the Escrow Funds and any other property
and documents held by the Escrow Agent hereunder to a state or federal court
having competent subject matter jurisdiction and located in the State and
City of New York in accordance with the applicable procedure therefor.
10. The Company and the Buyer agree jointly and severally to
indemnify and hold harmless the Escrow Agent from any and all claims,
liabilities, costs or expenses in any way arising from or relating to the
duties or performance of the Escrow Agent hereunder other than any such
claim, liability, cost or expense to the extent the same shall (a) have been
tax obligations in connection with the Escrow Agent's fee hereunder, or (b)
have been determined by final, unappealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of the Escrow Agent, or (c) be a liability, or arise from liability, to
either the Company or the Buyer.
11. Any notice required or permitted hereunder shall be given in
the manner set forth in Section 12 of the Agreement, the terms of which are
incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the Escrow Agent
becomes a party hereto only for the purpose of these Joint Escrow
Instructions; the Escrow Agent does not become a party to the Agreement. The
Company and the Buyer have become parties hereto by their execution and
delivery of the Agreement, as provided therein.
13. This instrument shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns
and shall be governed by the laws of the State of New York without giving
effect to principles governing the conflicts of laws. A
3
facsimile transmission of these instructions signed by the Escrow Agent shall
be legal and binding on all parties hereto.
14. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement.
15. The rights and obligations of any party hereto are not
assignable without the written consent of the other parties hereto. These
Joint Escrow Instructions constitute the entire agreement among the parties
with respect to the subject matter hereof.
ACCEPTED BY ESCROW AGENT:
KRIEGER & PRAGER
By:_____________________________________
Date:___________________________________
4
ANNEX III
COMPANY DISCLOSURE
Pending Litigation
On or about January 16, 1996, Media Logic, Inc. and its subsidiary
MediaLogic ADL, Inc. (collectively, "Media Logic") commenced an action
against Christian P. Marlowe and Marlowe Engineering Company (collectively,
"Marlowe") seeking (a) a declaration of the rights of Media Logic under
certain technology transfer and consulting agreements, and (b) damages for
Marlowe's breach of those Agreements. On June 5, 1996, Marlowe answered the
complaint and counterclaimed, asserting claims for breach of contract,
misrepresentation, promissory estoppel, violation of the implied covenant of
good faith and fair dealing, M.G.L. c. 93A, and declaratory judgment. On
June 11, 1996, Marlowe amended the counterclaim to include a defamation count
relating to a press release issued by Media Logic concerning the litigation.
In August 1996, Media Logic moved to dismiss the counterclaims. The Court
denied Media Logic's motion in November 1996. Currently, the parties are
engaged in pre-trial discovery.
Convertible Securities Issuances
$3,530,000 aggregate principal amount of 7% Convertible Subordinated
Debentures Due 2000 issued on March 24, 1997. The unconverted principal
amount of such Debentures at September 30, 1997 was $1,518,608.00
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October ___, 1997
(this "Agreement"), is made by and between MEDIA LOGIC, INC., a Massachusetts
corporation (the "Company"), and the entity named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of October 27, 1997, between the
Initial Investor and the Company (the "Securities Purchase Agreement"), the
Company has agreed to issue and sell to the Initial Investor one or more 7%
Convertible Debentures of the Company, in an aggregate principal amount not
exceeding $750,000 (collectively, the "Debentures"), which Debentures will be
convertible into shares of the common stock, $.01 par value (the "Common
Stock"), of the Company (the "Conversion Shares") upon the terms and subject
to the conditions of such Debentures; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), with respect to the Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares.
(iv) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(v) "Potential Material Event" means any of the following: (a)
the possession by the Company of material information not ripe for disclosure
in a Registration Statement, which shall be evidenced by determination in
good faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
Registration Statement at such time, which determination shall be accompanied
by a good faith determination by the Board of Directors of the Company that
the Registration Statement would be materially misleading absent the
inclusion of such information.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file
with the SEC, no later than thirty (30) days following the Closing Date under
the Securities Purchase Agreement, either a Registration Statement on Form
S-3 registering for resale by the Investor a sufficient number of shares of
Common Stock for the Initial Investors (or such lesser number as may be
required by the SEC, but in no event less than the number of shares into
which the Debentures would be convertible) or an amendment to any pending
Company Registration Statement on Form S-3, and the Company shall use its
best efforts to have the Registration Statement declared effective no later
than 90 days after the Closing Date. If at any time the number of shares of
Common Stock into which the Debentures may be converted exceeds the aggregate
number of shares of Common Stock then registered, the Company shall, within
fifteen (15) business days after receipt of a written notice from any
Investor, either (i) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not
been declared effective by the SEC at that time, to register all shares of
Common Stock into which the Debentures may be converted, or (ii) if such
Registration Statement has been declared effective by the SEC at that time,
file with the SEC an additional Registration Statement on Form S-3 to
register the shares of Common Stock into which the Debentures may be
converted that exceed the aggregate number of shares of Common Stock already
registered.
(b) Payments by the Company if Filing Delayed. If the
Registration Statement covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not filed with the
SEC within thirty (30) days following the Closing Date (the "Required Filing
Date"), then the Company will make payments to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section
2(b). The amount to be paid by the Company to the Initial Investor shall be
equal to one percent (1%) of the purchase price paid by the Initial Investor
for all Debentures then purchased and outstanding pursuant to the Securities
Purchase Agreement per month from the Required Filing Date to the first
Computation Date and each Computation Date thereafter until the Registration
Statement is filed with the SEC
2
(the "First Periodic Amount"). The full First Periodic Amount shall be paid
by the Company in immediately available funds within five (5) business days
after each Computation Date. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the filing of the Registration Statement occurs because
of an act of, or a failure to act or to act timely by the Initial Investor or
its counsel, or in the event all of the Registrable Securities may be sold
pursuant to an exemption under the Securities Act. As used in this Section
2(b) "Computation Date" means the date which is thirty (30) days after the
Required Filing Date, and, if the Registration Statement required to be filed
by the Company pursuant to Section 2(a) is not then filed, (30) days after
the previous Computation Date (pro rated for partial periods) until such
Registration Statement is so filed.
(c) Payments by the Company if Effectiveness Delayed. If the
Registration Statement covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not effective by
ninety (90) days following the Closing Date (the "Required Effective Date")
(except as provided by the last sentence of Section 2(a)), then the Company
will make payments to the Initial Investor in such amounts and at such times
as shall be determined pursuant to this Section 2(c). The amount to be paid
by the Company to the Initial Investor shall be equal to one half of one
percent of the purchase price paid by the Initial Investor for all Debentures
then purchased and outstanding pursuant to the Securities Purchase Agreement
per week from the Required Effective Date to the first Computation Date and
each Computation Date thereafter until the Registration Statement is declared
effective by the SEC (the "Periodic Amount"). The full Periodic Amount shall
be paid by the Company in immediately available funds within five (5)
business days after each Computation Date. Notwithstanding the foregoing,
the amounts payable by the Company pursuant to this provision shall not be
payable to the extent any delay in the effectiveness of the Registration
Statement occurs because of an act of, or a failure to act or to act timely
by the Initial Investor or its counsel, or in the event all of the
Registrable Securities may be sold pursuant to Rule 144 or another available
exemption under the Securities Act. As used in this Section 2(c)
"Computation Date" means the date which is thirty (30) days after the
Required Effective Date (except as provided by the last sentence of section
2(a)), and, if the Registration Statement required to be filed by the Company
pursuant to Section 2(a) is not then effective, (30) days after the previous
Computation Date (pro rated for partial periods) until such Registration
Statement is so declared effective.
(d) Redemption. In accordance with the terms of the Debentures,
if the Registration Statement covering the Registrable Securities required to
be filed by the Company pursuant to Section 2(a) hereof is not effective
within one hundred eighty (180) days of the Closing Date (the "Final
Registration Date") (except as provided by the last sentence of Section
2(a)), in addition to paying the amount payable under Section 2(c) hereof,
the Company shall redeem the Debentures for the Redemption Amount (as
defined) on the Final Registration Date. For purposes of this Section 2(d),
"Redemption Amount" means the amount equal to the gross proceeds which the
Investor would have realized had all of the Investor's Debentures (and
accrued but unpaid interest thereon, if any) been converted on the Final
Registration Date and all of the shares of Common Stock into which such
Debentures were converted were sold on the Final Registration Date at the
Market Price (as defined in the Debenture) on such date.
3
3. Obligations of the Company. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC by thirty (30) days
after the Closing Date, a Registration Statement with respect to not less
than the number of Registrable Securities provided in Section 2(a), above,
and thereafter use its reasonable best efforts to cause each Registration
Statement relating to Registrable Securities to become effective within
ninety (90) days of the Closing Date, and keep the Registration Statement
effective at all times until the earliest (the "Registration Period") of (i)
the date that is two years after the Closing Date (ii) the date when the
Investors may sell all Registrable Securities under Rule 144 or (iii) the
date the Investors no longer own any of the Registrable Securities, which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during
the Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel designated
by the Initial Investors and reasonably satisfactory to the Company to review
the Registration Statement and all amendments and supplements thereto at a
reasonable period of time prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects in written
notice to the Company given within three (3) business days of such counsel's
receipt of the Registration Statement or any amendment or supplement thereto;
(d) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to
the Company, (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one (1) copy of
the Registration Statement, each preliminary prospectus and prospectus, and
each amendment or supplement thereto, and (ii) such number of copies of a
prospectus, and all amendments and supplements thereto and such other
documents, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor;
(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the happening of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make statements therein in light of the circumstances under
which they were made, not
4
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to each Investor as such Investor may
reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(g) Use its reasonable efforts to cause the Registrable
Securities to be listed for trading on the American Stock Exchange (or on any
other national securities exchange on which the Company's Common Stock is
then listed).
(h) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and opinion of such counsel; and
(j) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
the Registrable Securities held by it, as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may from time
to time reasonably request. At least five (5) days prior to the first
anticipated filing date of the Registration Statement, the Company shall
notify each Investor of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received
5
the Requested Information from an Investor (a "Non-Responsive Investor"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company and to take such
actions and execute such documents as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3(e) or 3(f), above, such Investor will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(e) or 3(f)
or until it is advised in writing by the Company (which notice the Company
shall give as promptly as possible), that the use of the prospectus may be
resumed, and, if so directed by the Company, such Investor shall deliver to
the Company or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any transaction involving or relating to the Registrable
Securities, from the time of the giving notice with respect to a Potential
Material Event until such Investor received written notice from the Company
that such Potential Material Event either has been disclosed to the public or
no longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable
Securities for more than two twenty (20) day periods in the aggregate during
any 12-month period ("Suspension Period") with at least a ten (10) business
day interval between such periods, during the periods the Registration
Statement is required to be in effect.
5. Expenses of Registration. All reasonable expenses, other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, and the fees and disbursements of counsel
for the Company, shall be borne by the Company; provided, however, that the
fees and disbursements of the Investors' counsel referred to in Section 3(c)
hereof shall be borne by the Investors.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within
6
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or
alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to
clause (b) of this Section 6, the Company shall reimburse the Investors,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, (II) be
available to the extent such Claim is based on a failure of the Investor to
deliver or cause to be delivered the prospectus made available by the
Company; (III) apply to a Claim arising out of or based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
prospectus, if such untrue statement or alleged untrue statement, omission or
alleged omission was corrected in an amendment or supplement to the
prospectus and if, having previously been furnished with copies of the
prospectus as so amended or supplemented, such Investor thereafter failed to
deliver such prospectus as so amended or supplemented, prior to or
concurrently with the sale of the Registrable Security to the person
asserting such Claim and (IV) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor
shall indemnify and hold harmless the Company and its officers, directors and
agents and any person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on
behalf of such Investor, expressly for use in connection with the preparation
of the Registration Statement, subject to such limitations and conditions as
are applicable to the Indemnification provided by the Company to this Section
6. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9.
7
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be. In case any such action is brought
against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6
for any legal or other reasonable out-of-pocket expenses subsequently
incurred by such Indemnified Person or Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action of its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and reasonable out-of-pocket expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying
party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced by
such failure in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 to the fullest extent permitted
by law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation; and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or
8
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"),
the Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities which continue to be "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed with the SEC by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall
be automatically assigned by the Investors to any transferee of the
Registrable Securities (or all or any portion of any Debenture of the Company
which is convertible into such securities) only if: (a) the Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy
of such agreement is furnished to the Company within a reasonable time after
such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect
to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws, and (d) at or before the
time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company
to be bound by all of the provisions contained herein. In the event of any
delay in filing or effectiveness of the Registration Statement as a result of
such assignment, the Company shall not be liable for any damages arising from
such delay, or the payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors
who hold a majority interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) Persons deemed to be Holders of Registrable Securities. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the
Company receives conflicting instructions, notices or
9
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices. Notices required or permitted to be given
hereunder shall be in writing and shall be deemed to be sufficiently given
when personally delivered (by hand, by courier, by telephone line facsimile
transmission, receipt confirmed, or other means) or sent by certified mail,
return receipt requested, properly addressed and with proper postage pre-paid
(i) if to the Company, MEDIA LOGIC, INC., 310 South Street, Plainville, MA
02761, ATTN: Chief Executive Officer, with a copy to Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, MA 02111,
ATTN: Richard R. Kelly Esq.; (ii) if to the Initial Investor, at the address
set forth under its name in the Securities Purchase Agreement, with a copy to
Samuel Krieger, Esq., Krieger & Prager, 319 Fifth Avenue, Third Floor, New
York, NY 10016 and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other
address as each such party furnishes by notice given in accordance with this
Section 11(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by certified mail, four (4) calendar days after
deposit with the United states Postal Service.
(c) No Waivers. Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver thereof.
(d) Governing Law, Etc. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. Each
of the parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of
the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of
this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement
may be amended only by an instrument in writing signed by the party to be
charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(e) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
10
(f) Successors and Assigns. Subject to the requirements of
Section 9 hereof, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
(g) Construction. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning thereof.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by telephone line
facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.
(j) Consequential Damages. Neither party shall be liable
for consequential damages.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
MEDIA LOGIC, INC.
By: /s/ William E. Davis, Jr.
-------------------------------
Name: William E. Davis, Jr.
Title: Chief Executive Officer
F.T.S. WORLDWIDE CORP.
By: /s/ (Illegible)
-------------------------------
Name:
Title: General Attorneys
12
ANNEX V
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300 www.Mintz.com
Fax: 202/434-7400
Direct Dial Number
October____, 1997
First Granite Securities, Inc.
c/o Krieger & Prager
319 Fifth Avenue
New York, NY 100016
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 2(b)(ii) of the
Placement Agency Agreement, dated October , 1997 (the "Placement Agency
Agreement"), by and between Media Logic, Inc. (the "Company") and you (the
"Placement Agent"), and Section 9(d) of the Securities Purchase Agreement,
dated as of October , 1997 (the "Securities Purchase Agreement"), by and
between the Company and the Buyer (as defined therein) relating to the
offering by the Company of an aggregate principal amount of $750,000 of its
7% Convertible Debentures Due 2000 (the "Debentures"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings
ascribed to such terms in the Placement Agency Agreement.
We have acted as counsel for the Company in connection with
the offering of the Debentures and in connection with the execution and
delivery of the Placement Agency Agreement, the Securities Purchase Agreement
and the Registration Rights Agreement, dated as of October , 1997 (the
"Registration Rights Agreement" and, collectively with the Placement Agency
Agreement and the Securities Purchase Agreement, the "Agreements"), by and
between the Company and the Initial Investor (as defined therein). We have
examined the Company's Restated Articles of Organization and By-laws, as
amended, to date, and such records of the corporate proceedings of the
Company as we have deemed material. We have made such inquiry of the officers
of the Company and have examined such other Company records, documents,
agreements and instruments of the Company made available to us and
certificates of officers of the Company and of public officials and have
examined such questions of law as we have deemed necessary for the purposes
of this opinion. In rendering this opinion, we have relied, as to all
questions of fact material to this opinion, upon certificates of public
officials and officers of the Company, and representations and warranties of
the Company contained in the Securities Purchase Agreement and the Placement
Agency Agreement and any certificates required thereby. Any reference herein
to "our knowledge" or any derivation thereof shall mean knowledge of the
particular attorneys in this
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
First Granite Securities, Inc.
October____, 1997
Page 2
firm who have performed services for the Company on behalf of this firm
without any independent investigation except as otherwise described above.
We have assumed, without independently verifying such assumptions,
the genuineness of the signatures on all of the documents examined by us, the
authenticity of all documents furnished for our examination as originals, and
the conformity to original documents of all documents furnished to us as
copies, including documents transmitted by telecopy.
For purposes of this opinion, we have assumed that you have all
requisite power and authority and have taken all necessary action to effect
the transactions mentioned above, and we have assumed that you have complied
with all applicable federal or state laws and regulations in connection with
the offering of the Debentures to the Purchaser and the execution and
delivery of the Agreements.
The opinions hereinafter expressed are qualified (a) to the extent
that the validity or enforceability of any agreement or instrument or of any
right granted thereunder may be subject to or affected by any applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally, (b) by
legal and equitable limitations on the availability of specific performance
as a remedy and the discretion of the court in awarding equitable relief and
(c) insofar as indemnification or contribution for liabilities arising under
the Securities Act of 1933, as amended, may be deemed to be against public
policy or otherwise limited by applicable laws. We do not express any opinion
with respect to the state securities or "blue sky laws" of any state or
foreign jurisdiction.
Based upon the foregoing and subject to the penultimate paragraph of
this letter, we are of the opinion that:
1. The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the Commonwealth of
Massachusetts. The Company is duly qualified to transact business and is in
good standing in all jurisdictions where the Company owns or leases property,
maintains employees or conducts business, except for jurisdictions in which
the failure to so qualify would not have a material adverse effect on the
Company. The Company has all requisite corporate power and authority to own
its properties and conduct its business as currently conducted.
2. The authorized capital stock of the Company consists of
20,000,000 shares of common stock, $.01 par value per share (the "Common
Stock").
3. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Company has timely
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
First Granite Securities, Inc.
October____, 1997
Page 3
filed all material required to be filed pursuant to Sections 13(a) or 15(d)
of the Exchange Act for a period of at least 12 months preceding the date
hereof.
4. When issued, executed, delivered and sold by the Company in
accordance with the Securities Purchase Agreement, the Debentures will have
been duly and validly issued, executed and delivered and will constitute
valid and binding obligations of the Company enforceable against the Company
in accordance with their terms and entitled to the benefits provided in the
Agreements, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
and contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity). The
Conversion Shares have been duly authorized and reserved for issuance upon
conversion of the Debentures and, when issued and delivered upon such
conversion in accordance with the Form of Debenture, will by fully paid and
non-assessable.
5. The Company has the requisite corporate power and authority to
enter into the Agreements and to sell and deliver the Debentures and the
Conversion Shares as described in the Agreements. Each of the Agreements has
been duly and validly authorized by all necessary corporate action by the
Company and to our knowledge, no approval of any governmental or other body
is required for the execution and delivery of each of the Agreements by the
Company or the consummation of the transactions contemplated thereby. Each
of the Agreements has been duly and validly executed and delivered by and on
behalf of the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and except as to compliance with federal, state, and
foreign securities laws, as to which no opinion is expressed.
6. To the best of our knowledge, after due inquiry, the execution,
delivery and performance of the Agreements by the Company and the performance
of its obligations thereunder do not and will not constitute a breach or
violation of any of the terms and provisions of, or constitute a default
under or conflict with or violate any provision of (i) the Company's Restated
Articles of Organization or By-laws, (ii) any indenture, mortgage, deed of
trust, material agreement or other instrument to which the Company is a party
or by which is or any of its property is bound, (iii) any applicable statute
or regulation, or (iv) any judgment, decree or order of any court or
governmental body having jurisdiction over the Company or any of its
property, except as to defaults, violations or breaches which individually or
in the aggregate would not have a material adverse effect on the Company.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
First Granite Securities, Inc.
October____, 1997
Page 4
7. The issuance of the Common Stock upon conversion of the
Debentures in accordance with the terms and conditions of the Agreements will
not violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are listed.
8. The Company complies with the eligibility requirements for the
use of Form S-3 under the Securities Act of 1933, as amended.
9. Except as described in Annex III to the Securities Purchase
Agreement, to our knowledge, after due inquiry, there is no pending or
threatened litigation, investigation or other proceeding against the Company
which would, insofar as can reasonably be foreseen, individually or in the
aggregate, have a material adverse effect on the Company.
This opinion is given as of the date hereof. We assume no
obligation to update or supplement this opinion to reflect any facts or
circumstances which may hereafter come to our attention including changes in
law which may occur hereafter. Our opinions above are limited to the laws of
the Commonwealth of Massachusetts, and the federal law of the United States
of America and we express no opinion with respect to the laws of any other
jurisdiction. We note that the Agreements state that they are governed by
the law of the State of New York, and for purposes of the opinions set forth
in paragraph 5 above, we have assumed, with your consent, that the law of the
State of New York is identical to the law of the Commonwealth of
Massachusetts. Furthermore, we express or imply no opinion with respect to
compliance with anti-fraud statutes, rules or regulations of applicable state
or federal law. This letter is furnished to you as the Placement Agent in
connection with the closing of the issuance of the Debentures and is solely
for your benefit and the benefit of the Purchaser of the Debentures, such
Purchaser who may rely upon this letter as though it were addressed directly
to such Purchaser; this letter may not be relied upon by any other person or
for any other purpose.
Very truly yours,
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
ANNEX VI
[AMEX Letterhead]
October 15, 1997
Mr. William E. Davis, Jr.
President and Chief Executive Officer
Media Logic, Inc.
310 South Street
P.O. Box 2258
Plainville, MA 02762
Dear Mr. Davis:
As we recently discussed, Media Logic, Inc. has fallen below certain of the
Exchange's continued listing guidelines and as a result we are reviewing its
listing eligibility. This review process allows a company to meet with us to
present information in support of continued listing and we look forward to
our meeting which has been scheduled for November 6, 1997 at 2:00 p.m.
The Exchange has adopted certain guidelines and procedures which assist in
this process and these are set forth in Part 10 of our Company Guide. The
guidelines which are most relevant in this situation are found in Section
1003.
Specifically, the Company has incurred net losses in each of its last three
fiscal years ended March 31, 1997 and in the first three months ended June
30, 1997 of its current fiscal year. Such losses were accompanied by net
operating cash outflows. At June 30, 1997, the Company's shareholders' equity
amounted to $3.0 million.
As a result, the Company has fallen below the continued listing guideline
triggered by equity below $4 million if the company had losses in three of
its four most recent fiscal years.
In its report on the Company's March 31, 1997 financial statements, the
Company's auditor discusses the Company's recurring losses from operations
and certain other issues and explains that there is substantial doubt about
the Company's ability to continue as a going concern. In that regard, the
Company disclosed in its June 30, 1997 Form 10-Q that if it is unable to
increase revenues significantly and/or secure additional financing, it could
be forced to curtail or discontinue its operations.
Mr. William E. Davis, Jr.
October 15, 1997
Page 2
In view of the foregoing, it appears that the Company's financial condition
is impaired, raising questions about whether it will be able to continue
operations or meet its obligations as they mature.
The Exchange is also concerned that the Company has not yet paid its 1997
annual listing fee.
If you would like to make a written submission, please send five copies to
Carol C. Hoover a week ahead of the meeting. Please feel free to call me or
Mrs. Hoover at 212-306-1424 if you have any questions.
Very truly yours,
/s/ Michael S. Emen
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