-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T7aP7FAaB0+ovc+IYubkYwp+Ftv/Hb1Ib6ce5FscDDNNyG8g2Vtjm99Akue+2rnF qcUhxo103n+hr9Ao1lTbow== 0000950147-98-000544.txt : 19980714 0000950147-98-000544.hdr.sgml : 19980714 ACCESSION NUMBER: 0000950147-98-000544 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980710 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980713 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORTHOLOGIC CORP CENTRAL INDEX KEY: 0000887151 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 860585310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21214 FILM NUMBER: 98665334 BUSINESS ADDRESS: STREET 1: 2850 S 36TH ST #16 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6024375520 MAIL ADDRESS: STREET 1: 2850 S 36TH ST STREET 2: SUITE 16 CITY: PHOENIX STATE: AZ ZIP: 85034 8-K 1 CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): July 10, 1998 OrthoLogic Corp. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-21214 86-0585310 - ------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer Identification incorporation) Number)
- -------------------------------------------------------------------------------- 1275 West Washington Street, Tempe, Arizona 85281 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (602) 437-5520 Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 5. Other Events On July 13, 1998, the Company issued 15,000 shares of its Series B Convertible Preferred Stock and related Warrants in a private placement to institutional investors. The Company estimates the net proceeds of the offering, after expenses, to be approximately $14 million. The Series B Convertible Preferred Stock is subject to the terms and conditions of the Certificate of Designation attached hereto as Exhibit 3.1. The Warrants are subject to the terms and conditions of the form of Warrant attached hereto as Exhibit 4.1. Pursuant to a Registration Rights Agreement attached as Exhibit 4.2, the Company has agreed to prepare and file with the Securities and Exchange Commission a registration statement covering the resale of the shares of Common Stock issuable pursuant to the terms of the Series B Preferred Stock and related Warrants. The terms of the private placement are more fully set forth in the Securities Purchase Agreement attached hereto as Exhibit 10.1. Item 7. Financial Statements and Exhibits. (c) Exhibits Exhibit Number Description -------------- ----------------------------- 3.1 Certificate of Designation 4.1 Form of Warrant 4.2 Registration Rights Agreement 10.1 Securities Purchase Agreement 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ORTHOLOGIC CORP. Dated: July 13, 1998 /s/ Thomas R. Trotter ------------------------------------- Thomas R. Trotter Chief Executive Officer and President 3 EX-3.1 2 CERTIFICATE OF DESIGNATION CERTIFICATE OF DESIGNATION of SERIES B CONVERTIBLE PREFERRED STOCK of ORTHOLOGIC CORP. Pursuant to Section 151 of the Delaware General Corporation Law OrthoLogic Corp., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that the following resolutions were duly adopted by the Board of Directors of the Corporation pursuant to the authority of the Board of Directors granted by Section 151 of the Delaware General Corporation Law. RESOLVED, that pursuant to the authority granted to the Board of Directors in accordance with the provisions of the Corporation's Certificate of Incorporation, as amended, the Board of Directors hereby authorizes a series of the Corporation's previously authorized Preferred Stock, par value $0.0005 per share (the "Preferred Stock"), to be issued pursuant to a Securities Purchase Agreement between the Corporation and the Purchasers named therein (the "Securities Purchase Agreement"), and hereby states the designation and number of shares, and fixes the relative rights, preferences, privileges and restrictions thereof as follows: 1. DESIGNATION AND AMOUNT. The designation of this series, which consists of twenty thousand (20,000) shares (the "Preferred Shares") of Preferred Stock, is the Series B Convertible Preferred Stock (the "Series B Preferred Stock") and the face amount shall be One Thousand Dollars ($1,000) per share (subject to ratable adjustment in the event of any stock split or combination of the Series B Preferred Stock and to equitable adjustment in the event of a reclassification of the Series B Preferred Stock or other similar event)(the "Stated Value"). The date on which a Preferred Share is issued and sold pursuant to the Securities Purchase Agreement is referred to herein as the "Issue Date" and, in the event that Preferred Shares are issued in more than one tranche pursuant to the Securities Purchase Agreement, the Issue Date relating to the Preferred Shares issued in the first such tranche is referred to herein as the "Initial Issue Date". 2. DIVIDENDS. The Series B Preferred Stock will not bear dividends. 3. PRIORITY. (a) Payment upon Dissolution. (i) Upon the occurrence of (x) any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, commenced by the Corporation or by its creditors, as such, or relating to its assets or (y) the dissolution or other winding up of the Corporation whether total or partial, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy proceedings, or (z) any assignment for the benefit of creditors or any marshalling of the material assets or material liabilities of the Corporation (each, a "Liquidation Event"), no distribution shall be made to the holders of any shares of Junior Securities (as defined below) unless, following the payment of preferential amounts on all Senior Securities (as defined below), each Holder of Preferred Shares (each, a "Holder" and collectively, the "Holders") shall have received the Liquidation Preference (as defined below) with respect to each Preferred Share then held by such Holder. In the event that upon the occurrence of a Liquidation Event, and following the payment of preferential amounts on all Senior Securities (as defined below), the assets available for distribution to the Holders and the holders of Pari Passu Securities are insufficient to pay the Liquidation Preference with respect to all of the outstanding Preferred Shares and the preferential amounts payable to such holders, the entire assets of the Corporation shall be distributed ratably among the Preferred Shares and the shares of Pari Passu Securities in proportion to the ratio that the preferential amount payable on each such share (which shall be the Liquidation Preference in the case of a Preferred Share) bears to the aggregate preferential amount payable on all such shares. (ii) The "Liquidation Preference" with respect to a Preferred Share shall mean an amount equal to the Stated Value of such Preferred Share. "Junior Securities" shall mean the Common Stock and all other capital stock or securities of the Corporation that are not Pari Passu Securities or do not have a preference over the Series B Preferred Stock in respect of redemption or distribution upon liquidation. "Pari Passu Securities" shall mean any securities ranking pari passu with the Series B Preferred Stock in respect of redemption or distribution upon liquidation. "Senior Securities" shall mean any securities of the Corporation which by their terms have a preference over the Series B Preferred Stock in respect of redemption or distribution upon liquidation. 4. CONVERSION. (a) Right to Convert. Each Holder shall have the right to convert on the three hundredth (300th) day following the Initial Issue Date (the "Initial Conversion Date") or at any time thereafter, all or any part of the Preferred Shares held by such Holder into such number of fully paid and non-assessable shares ("Conversion Shares") of the Company's common stock, par value $0.0005 per share (the "Common Stock"), as is determined in accordance with the terms hereof (a "Conversion"); provided, however, that in the event that, prior to the three hundredth (300th) day following the Initial Issue Date, either (i) the Corporation enters into an agreement relating to a Change of Control Transaction (as defined below) immediately upon which event the Corporation shall make a public announcement of such transaction, (ii) a Material Adverse Event (as defined below) occurs or (iii) a Mandatory Redemption Event (as defined below) occurs (each of (i), (ii) and (iii) being referred to herein as an "Early Conversion Event"), the Initial Conversion Date for purposes hereof shall be deemed to be the first date on which an Early Conversion Event occurs. For purposes of this paragraph 4(a), the term "Material Adverse Event" shall have the meaning set forth in the Securities Purchase Agreement. In the event that a Material Adverse Event occurs, the Company must immediately notify each Holder of such occurrence and at the same time make a public announcement thereof. (b) Conversion Notice. In order to convert Preferred Shares, a Holder shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern time, on the date on which such Holder wishes to effect such Conversion (the "Conversion Date"), (i) a notice of conversion (a "Conversion Notice"), in substantially the form of Exhibit A hereto, to the Corporation and to -2- the Corporation's transfer agent for the Common Stock (the "Transfer Agent") stating the number of Preferred Shares to be converted, the applicable Conversion Price (as defined below) and a calculation of the number of shares of Common Stock issuable upon such Conversion and (ii) a copy of the certificate or certificates representing the Preferred Shares being converted. The Holder shall thereafter send the original of the Conversion Notice and of such certificate or certificates to the Transfer Agent. The Corporation shall issue a new certificate for Preferred Shares in the event that less than all of the Preferred Shares represented by a certificate delivered to the Corporation in connection with a Conversion are converted. Except as otherwise provided herein, upon delivery of a Conversion Notice by a Holder in accordance with the terms hereof, such Holder shall, as of the applicable Conversion Date, be deemed for all purposes to be the record owner of the Common Stock to which such Conversion Notice relates. In the case of a dispute between the Corporation and a Holder as to the calculation of the Conversion Price or the number of Conversion Shares issuable upon a Conversion, the Corporation shall promptly issue to such Holder the number of Conversion Shares that are not disputed and shall submit the disputed calculations to its independent accountant within one (1) Business Day of receipt of such Holder's Conversion Notice. The Corporation shall cause such accountant to calculate the Conversion Price as provided herein and to notify the Corporation and such Holder of the results in writing no later than two (2) Business Days following the day on which it received the disputed calculations. Such accountant's calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant. (c) Number of Conversion Shares; Conversion Price. The number of Conversion Shares to be delivered by the Corporation pursuant to a Conversion shall be determined by dividing the aggregate Stated Value of the Preferred Shares to be converted by the Conversion Price (as defined herein) in effect on the applicable Conversion Date. Subject to adjustment as provided in Section 6 below, "Conversion Price" with respect to a Preferred Share shall mean (A) for any Conversion occurring during the period of three hundred (300) days following the Issue Date relating to such Preferred Share (the "Initial Conversion Period"), the average of the ten (10) lowest Closing Bid Prices (as defined below) for the Common Stock occurring during the period of thirty (30) Trading Days (as defined below) immediately prior to (but not including) the applicable Conversion Date (the "Floating Conversion Price") and (B) for any Conversion occurring after the Initial Conversion Period, the lesser of the Floating Conversion Price and the Fixed Conversion Price. The "Fixed Conversion Price" with respect to a Preferred Share shall mean one hundred and three percent (103%) of the average Closing Bid Price for the Common Stock during the period of ten (10) Trading Days immediately prior to (but not including) the three hundredth (300th) day following the Issue Date relating to such Preferred Share; provided, however, that if the Corporation is not eligible to register shares of Common Stock on a registration statement on Form S-3 on or before September 1, 1998 (the "Registration Event"), the Fixed Conversion Price with respect to a Preferred Share shall mean, (x) during the period beginning on the one hundred and eightieth (180th) day following the Initial Issue Date and ending on such three hundredth day, one hundred and three percent (103%) of the average Closing Bid Price for the Common Stock during the period of ten (10) Trading Days immediately prior to (but not including) such one hundred and eightieth day, and (y) from and after such three hundredth day, the lesser of (I) the Fixed Conversion Price as determined pursuant to the immediately preceding clause (x) and (II) the Fixed Conversion Price that would otherwise be in effect had the Registration Event not occurred. (d) Certain Definitions. "Trading Day" means any day on which the Common Stock is traded on the principal securities exchange or market on which the Common Stock is then traded. "Closing Bid Price" means, with respect to the Common Stock, the closing bid price for the Common Stock occurring on a given Trading Day on the principal securities exchange or -3- trading market where such security is listed or traded as reported by Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then reporting such prices, by a comparable reporting service of national reputation selected by the Corporation and reasonably acceptable to holders of a majority of the then outstanding Preferred Shares (collectively, "Bloomberg") or if the foregoing does not apply, the last reported bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no bid price is reported for such security by Bloomberg, the average of the bid prices of all market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on any of the foregoing bases, the Closing Bid Price of such security shall be the fair market value as reasonably determined by an investment banking firm selected by the Holders (which may be a Holder) of a majority of the then outstanding Preferred Shares and reasonably acceptable to the Corporation, with the costs of such appraisal to be borne by the Corporation. "Business Day" means any day on which the New York Stock Exchange and commercial banks located in the City of New York are open for business. (e) Delivery of Common Stock Upon Conversion. Upon receipt of a Conversion Notice from a Holder pursuant to paragraph 4(b) above, the Corporation shall, no later than the close of business on the third (3rd) Business Day following the Conversion Date set forth in such Conversion Notice (the "Delivery Date"), issue and deliver or cause to be delivered to such Holder the number of Conversion Shares as shall be determined as provided herein. The Corporation shall effect delivery of Conversion Shares to a Holder by, as long as the Transfer Agent participates in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program ("FAST"), crediting the account of such Holder or its nominee at DTC through its Deposit Withdrawal Agent Commission system with the number of Conversion Shares required to be delivered, no later than the close of business on such Delivery Date. In the event that Transfer Agent is not a participant in FAST or if a Holder so specifies in a Conversion Notice or otherwise in writing, the Corporation shall effect delivery of Conversion Shares by delivering to the Holder or its nominee physical certificates representing such Conversion Shares, no later than the close of business on such Delivery Date. If any Conversion would create a fractional Conversion Share, such fractional Conversion Share shall be disregarded and the number of Conversion Shares issuable upon such Conversion, in the aggregate, shall be the next higher number of Conversion Shares. Conversion Shares delivered to the Holder shall not contain any restrictive legend as long as (A) the sale or transfer of such Conversion Shares is covered by an effective Registration Statement, (B) such Conversion Shares have been sold pursuant to Rule 144 ("Rule 144") under the Securities Act, or (C) such Conversion Shares are eligible for resale under Rule 144(k) or any successor rule or provision. (f) Failure to Deliver Conversion Shares. (i) In the event that the Corporation fails for any reason to deliver to a Holder certificates representing the number of Conversion Shares specified in the applicable Conversion Notice on or before the Delivery Date therefor (a "Conversion Default"), and such failure continues for seven (7) Business Days following the Delivery Date, the Corporation shall pay to such Holder payments ("Conversion Default Payments") in the amount of (i) (N/365) multiplied by (ii) the aggregate Stated Value of the Preferred Share(s) represented by the Conversion Shares which remain the subject of such Conversion Default multiplied by (iii) the lower of twenty-four percent (24%) and the maximum rate permitted by applicable law (the "Default Interest Rate"), where "N" equals the number of days elapsed between the original Delivery Date for such Conversion Shares and the date on which all of the certificates representing such Conversion Shares are issued and delivered to such Holder. Amounts payable under this subparagraph (f) shall be paid to the Holder in immediately available funds on or before the fifth -4- (5th) Business Day of the calendar month immediately following the calendar month in which such amounts have accrued. (ii) In the event that a Holder has not received certificates representing the Conversion Shares by the tenth (10th) Business Day following a Conversion Default, such Holder may, upon written notice (a "Withdrawal Notice") delivered to the Corporation on such Business Day or on any Business Day thereafter (unless, prior to the delivery of such notice, such Conversion Shares are delivered to such Holder), withdraw its Conversion Notice with respect to such Conversion Shares and regain its rights as a Holder of the Preferred Shares that are the subject of such Conversion Default. In such event, the Conversion Price that would otherwise be in effect when such Preferred Shares are thereafter converted in accordance with the terms hereof shall be reduced by one percent (1%) for each day occurring during the period immediately following such 10th Business Day until the day on which the such Holder delivers a Withdrawal Notice to the Corporation; provided, however, that the maximum percentage by which such Conversion Price may be reduced hereunder shall be fifty percent (50%). (For example, if such Conversion Default were to continue for five days following such 10th Business Day, such Conversion Price would be reduced by 5%; if for ten days, by 10%; and for fifty days or more, 50%, so that the number of Conversion Shares deliverable upon conversion of such Preferred Shares would be increased proportionately). Upon delivery by a Holder of a Withdrawal Notice, such Holder shall retain all of such Holder's rights and remedies with respect to the Corporation's failure to deliver such Conversion Shares (including without limitation the right to receive the cash payments specified in subparagraph 4(f)(i) above). (iii) In addition to any other remedies provided herein, each Holder shall have the right to pursue actual damages for the Corporation's failure to issue and deliver Conversion Shares on the applicable Delivery Date (including, without limitation, damages relating to any purchase of shares of Common Stock by such Holder to make delivery on a sale effected in anticipation of receiving Conversion Shares upon Conversion, such damages to be in an amount equal to (A) the aggregate amount paid by such Holder for the shares of Common Stock so purchased minus (B) the aggregate Conversion Price for such Conversion Shares), and such Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). (g) Conversion at Maturity. On the date which is four (4) years following the Issue Date relating to a Preferred Share ("Maturity Date"), such Preferred Share shall be automatically converted into the number of shares of Common Stock equal to the Stated Value of such Preferred Shares divided by the Conversion Price then in effect (a "Conversion at Maturity"); provided, however, that if, on a Maturity Date, (i) the number of shares of Common Stock authorized, unissued and unreserved for all other purposes, or held in the Corporation's treasury, is not sufficient to effect the issuance and delivery of the number of Conversion Shares into which all outstanding Preferred Shares are then convertible, (ii) the Common Stock is not actively traded on the Nasdaq National Market, or (iii) a Mandatory Redemption Event (as defined herein) has occurred and is continuing, each Holder shall have the option, upon written notice to the Corporation, to regain its rights as a holder of Preferred Shares, including without limitation, the right to convert such Preferred Shares in accordance with the terms of paragraphs 4(a) through 4(f) hereof and, upon delivery of such notice, such Preferred Shares shall not be subject to a Conversion at Maturity hereunder until the thirtieth (30th) day following the later of (a) the date on which the event specified (i), (ii) or (iii) is no longer continuing and (b) the date on which the Corporation delivers to each Holder written notice to such effect, and in such event, such thirtieth day shall be deemed to be the Maturity Date for purposes of this Certificate of Designation. If a Conversion at Maturity occurs, the Corporation and each Holder shall follow the procedures for Conversion set forth in this Section 4, with the Maturity Date deemed -5- to be the Conversion Date, except that the Holder shall not be required to send a Conversion Notice as contemplated by paragraph 4(b). 5. CONVERSION LIMITATIONS. In no event shall a Holder be permitted to convert any Preferred Shares in excess of the number of such shares, upon the Conversion of which: (a) the number of Conversion Shares to be issued pursuant to such Conversion, when added to the number of shares of Common Stock issued pursuant to all prior Conversions of Preferred Shares, would exceed five million (5,000,000) shares of Common Stock (subject to equitable adjustments from time to time for the events described in paragraph 6 below) (the "Cap Amount"), except that such limitation shall not apply in the event that the Corporation obtains the approval of a majority of its stockholders for issuances of Common Stock in excess of such amount. Until such approval is obtained, no purchaser of Preferred Shares pursuant to the Securities Purchase Agreement (each, a "Purchaser" and together the "Purchasers") shall be issued, upon Conversion of the Preferred Shares, Conversion Shares in an amount greater than the product of (A) the Cap Amount times (B) a fraction, the numerator of which is the number of Preferred Shares issued to such Purchaser pursuant to the Securities Purchase Agreement and the denominator of which is the aggregate amount of all of the Preferred Shares issued to the Purchasers pursuant to the Securities Purchase Agreement (the "Allocation Amount"). In the event that any Purchaser shall sell or otherwise transfer any of such Purchaser's Preferred Shares, the transferee shall be allocated a pro rata portion of the remaining unissued shares constituting such Purchaser's Allocation Amount. In the event that any Holder shall convert all of such Holder's Preferred Shares into a number of Conversion Shares which, in the aggregate, is less than such Holder's Allocation Amount, then the difference between such Holder's Allocation Amount and the number of Conversion Shares actually issued to such Holder shall be allocated to the respective Allocation Amounts of the remaining Holders of Preferred Shares on a pro rata basis in proportion to the number of Preferred Shares then held by each such Holder. In the event that any Holder's Allocation Amount represents one hundred and fifty percent (150%) or less of (A) the number of Conversion Shares into which the Preferred Shares then held by such Holder are convertible at the Conversion Price then in effect (without regard to any restriction on such conversion that may exist pursuant to the terms hereof or of any Transaction Document) plus (B) the number of Conversion Shares into which such Holder has previously converted Preferred Shares, such Holder shall have the right to require the Corporation, upon written notice delivered by such Holder to the Corporation, to, within five (5) days following the date on which such notice is delivered to the Corporation, either (i) redeem all of the Preferred Shares then held by such Holder by delivering to such Holder immediately available funds in an amount equal to the Conversion Cap Redemption Price (as defined below) or (ii) give written notice to each Holder that the Corporation will, within sixty (60) days of such Conversion Date, obtain the approval of the Corporation's stockholders for the issuance of Conversion Shares in excess of the Cap Amount. In the event that the Corporation does not obtain such stockholder approval prior to such sixtieth day, each Holder shall have the right, exercisable from time to time, upon written notice to the Corporation, to require the Corporation to redeem all or any part of such Holder's Preferred Shares within five (5) days following the receipt by the Corporation of such notice by delivering to such Holder immediately available funds in an amount equal to the Conversion Cap Redemption Price. Any amounts representing the Conversion Cap Redemption Price which are not paid when due shall bear interest at an annual rate equal to the Default Interest Rate. For purposes hereof, the "Conversion Cap Redemption Price" with respect to a Preferred Share shall be equal to (a) during the first three hundred and sixty (360) days following the Issue Date relating to such Preferred Share, 108.5% of the Stated Value of such Preferred Share and (b) following the last day of such three hundred and sixtieth -6- day period, a price that is calculated so that the Holder of such Preferred Share will receive an annualized return on the Stated Value of such Preferred Share of 8.5%; and (b) (x) the number of shares of Common Stock beneficially owned by such Holder (other than shares of Common Stock issuable upon conversion of Preferred Shares or which would otherwise be deemed beneficially owned except for being subject to a limitation on conversion or exercise analogous to the limitation contained in this subparagraph (b)) plus (y) the number of shares of Common Stock issuable upon the Conversion of such Preferred Shares, would be equal to or exceed (z) 4.99% of the number of shares of Common Stock then issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules thereunder. To the extent that the limitation contained in this paragraph 5(b) applies, the determination of whether Preferred Shares are convertible (in relation to other securities owned by a Holder) and of which Preferred Shares are convertible shall be in the sole discretion of such Holder, and the submission of Preferred Shares for Conversion shall be deemed to be such Holder's determination that such Preferred Shares are convertible pursuant to the terms hereof, and the Corporation shall have no obligation whatsoever to verify or confirm the accuracy of such determination. This paragraph may be amended (i) in order to clarify an ambiguity or otherwise to give effect to such limitation, by the Holders of two-thirds (2/3) of the Preferred Shares then outstanding and (ii) for any other reason, with the further consent of the holders of a majority of the shares of Common Stock then outstanding. Nothing contained herein shall be deemed to restrict the right of a Holder to convert Preferred Shares at such time as the Conversion thereof will not violate the provisions of this subparagraph 5(b). The restriction contained in this subparagraph 5(b) shall not apply in the event of a Conversion at Maturity or to a Holder delivering a Mandatory Redemption Notice (as defined below) on the seventy fifth (75th) day following the date on which such Holder delivers a notice to the Corporation that such restriction shall not apply, and may otherwise be irrevocably amended by any Holder with respect to itself so that such limit shall be 9.99% instead of 4.99% following at least seventy five (75) days' prior written notice by such Holder to the Corporation. 6. ADJUSTMENTS TO CONVERSION PRICE. (a) Adjustment to Fixed Conversion Price Due to Stock Split, Stock Dividend, Etc. If, prior to the Conversion of all of the Preferred Shares, (A) the number of outstanding shares of Common Stock is increased by a stock split, a stock dividend on the Common Stock, a reclassification of the Common Stock, the distribution to holders of Common Stock of rights or warrants entitling them to subscribe for or purchase Common Stock at less than the then current market price thereof (based upon the subscription or exercise price of such rights or warrants at the time of the issuance thereof) or other similar event, the Fixed Conversion Price shall be proportionately reduced, or (B) the number of outstanding shares of Common Stock is decreased by a reverse stock split, combination or reclassification of shares or other similar event, the Fixed Conversion Price shall be proportionately increased. In such event, the Corporation shall notify the Transfer Agent of such change on or before the effective date thereof. For purposes hereof, the market price per share of Common Stock on any date shall be the average Closing Bid Price for the Common Stock on the five (5) consecutive Trading Days occurring immediately prior to but not including the earlier of such date and the Trading Day before the "ex" date, if any, with respect to the issuance or distribution requiring such computation. The term "'ex' date", when used with respect to any issuance or distribution, means the first Trading Day on which the Common Stock trades regular way in the market from which such average Closing Bid Price is then to be determined without the right to receive such issuance or distribution. -7- (b) Adjustment to Conversion Price During Reference Period. If, prior to the Conversion of all of the Preferred Shares, the number of outstanding shares of Common Stock is increased or decreased by a stock split, a stock dividend on the Common Stock, a combination, a reclassification of the Common Stock or other similar event, and such event takes place during the reference period for the determination of the Conversion Price for any Conversion thereof, the Conversion Price shall be calculated giving appropriate effect to the stock split, stock dividend, combination, reclassification or other similar event for all Trading Days occurring during such reference period. (c) Adjustment Due to Merger, Consolidation, Etc. If, prior to the Conversion of all of the Preferred Shares, there shall be any merger, consolidation, business combination, tender offer, exchange of shares, recapitalization, reorganization, redemption or other similar event, as a result of which shares of Common Stock shall be changed into or exchanged for the same or a different number of shares of the same or another class or classes of stock or securities of the Corporation or another entity (an "Exchange Transaction"), then such Holder shall (A) upon the closing of such Exchange Transaction, have the right to receive, with respect to any shares of Common Stock then held by such Holder, or which such Holder is then entitled to receive pursuant to a Conversion Notice previously delivered by such Holder, (and without regard to whether such shares contain a restrictive legend or are freely-tradeable) the same amount and type of consideration (including without limitation, stock, securities and/or other assets) and on the same terms as a holder of shares of Common Stock would be entitled to receive in connection with the consummation of such Exchange Transaction (the "Exchange Consideration"), and (B) upon the Conversion of Preferred Shares occurring on a Conversion Date subsequent to the closing of such Exchange Transaction, have the right to receive the Exchange Consideration which such Holder would have been entitled to receive in connection with such Exchange Transaction had such shares been converted immediately prior to such Exchange Transaction at the Conversion Price in effect on such Conversion Date, and in any such case appropriate provisions shall be made with respect to the rights and interests of such Holder to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Price and of the number of shares issuable upon a Conversion) shall thereafter be applicable as nearly as may be practicable in relation to any securities thereafter deliverable upon the Conversion of such Preferred Shares. The Corporation shall not effect any Exchange Transaction unless (i) it first gives to each Holder twenty (20) days prior written notice of the closing of such Exchange Transaction (an "Exchange Notice"), and makes a public announcement of such event at the same time that it gives such notice and (ii) the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligations of the Corporation hereunder, including the terms of this subparagraph 6(c), and under the Securities Purchase Agreement and related the Registration Rights Agreement by and among the Corporation and the Purchasers named therein (the "Registration Rights Agreement"). (d) Distribution of Assets. If the Corporation or any of its subsidiaries shall declare or make any distribution of cash, evidences of indebtedness or other securities or assets (other than cash dividends or distributions payable out of earned surplus for the current or the immediately preceding year), or any rights to acquire any of the foregoing (including without limitation any rights distributed pursuant to the Rights Plan (as defined in the Securities Purchase Agreement)), to holders of Common Stock (or to a holder of the common stock of any such subsidiary), including any dividend or distribution in shares of capital stock of a subsidiary of the Corporation (collectively, a "Distribution"), each Holder shall have the right to receive, on the date such Distribution is made (the "Distribution Date"), the amount of the Distribution allocated to each share of Common Stock (or common stock of any such subsidiary) times the number of shares of Common Stock issuable upon conversion of the Preferred Shares held by such Holder on the Distribution Date, assuming for such purpose that such Preferred Shares are -8- convertible (regardless of whether any restriction on the ability of such Holder to convert such Preferred Shares then applies) at the Conversion Price applicable on the Distribution Date. (e) Adjustment Due to Major Announcement. If the Corporation (i) makes a public announcement that it intends to enter into a Change of Control Transaction (as defined below) or (ii) any person, group or entity (including the Corporation) publicly announces a tender offer, exchange offer or other transaction to purchase 50% or more of the Common Stock (such announcement being referred to herein as a "Major Announcement" and the date on which a Major Announcement is made, the "Announcement Date"), then, in the event that a Holder seeks to convert Preferred Shares on or following the Announcement Date, the Conversion Price shall, effective upon the Announcement Date and continuing through the fifth (5th) Business Day following the earlier to occur of the consummation of the proposed transaction or tender offer, exchange offer or other transaction and the Abandonment Date (as defined below), be equal to the lower of (x) the average Closing Bid Price for the Common Stock on the five (5) Trading Days immediately preceding (but not including) the Announcement Date and (y) the Conversion Price that would otherwise be in effect on the Conversion Date for such Preferred Shares. "Abandonment Date" means with respect to any proposed transaction or tender offer, exchange offer or other transaction for which a public announcement as contemplated by this paragraph 6(e) has been made, the date upon which the Corporation (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) publicly announces the termination or abandonment of the proposed transaction or tender offer, exchange offer or another transaction which caused this paragraph 6(e) to become operative. (f) Adjustment Pursuant to Other Agreements. In addition to and without limiting in any way the adjustments provided in this Section 6, the Conversion Price shall be adjusted as may be required by the provisions of the Registration Rights Agreement and/or by the provisions of the Securities Purchase Agreement. (g) No Fractional Shares. If any adjustment under this Section would create a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon Conversion shall be the next higher number of shares or, at the option of the Corporation, shall be paid in cash in an amount calculated by multiplying the amount of the fractional share times the Closing Bid Price used to calculate the Conversion Price for such Conversion. 7. MANDATORY REDEMPTION BY HOLDER. (a) Mandatory Redemption. In the event that a Mandatory Redemption Event (as defined below) occurs, each Holder shall have the right to require the Corporation to redeem all or any portion of the Preferred Shares held by such Holder (a "Mandatory Redemption") at the Mandatory Redemption Price (as defined herein) in same day funds. In order to exercise its right to effect a Mandatory Redemption, a Holder must deliver a written notice (a "Mandatory Redemption Notice") to the Corporation at any time on or before the Business Day following the day on which such event is no longer continuing; provided, however, that, in the case of subparagraph (b)(v) below, the following procedure shall be followed in lieu thereof: (a) no sooner than fifteen (15) days nor later than ten (10) days prior to the Corporation's good faith estimate of the consummation of a Change of Control Transaction (as defined below), but not prior to the public announcement of such Change of Control Transaction, the Corporation shall deliver a written notice (a "Notice of Change of Control Transaction") to each Holder, and (b) within five (5) days of delivery by the Corporation of a Notice of Change of Control Transaction, each Holder who wishes to exercise its right to effect a Mandatory Redemption hereunder shall deliver a Mandatory Redemption Notice to the Corporation. The Mandatory Redemption Notice shall specify the effective date of such Mandatory Redemption (the -9- "Mandatory Redemption Date") and the number of such shares to be redeemed. In the event that a Change of Control Transaction occurs and the Corporation does not deliver to a Holder a Notice of Change of Control Transaction within the time periods described above, such Holder may exercise its right to a Mandatory Redemption hereunder by delivering a Mandatory Redemption Notice to the Corporation (or to the surviving or successor entity) at any time on or before the twentieth (20th) Business Day following such Change of Control Transaction. (b) Mandatory Redemption Event. Each of the following events shall be deemed a "Mandatory Redemption Event": (i) the Corporation fails for any reason (including without limitation as a result of not having a sufficient number of shares of Common Stock authorized and reserved for issuance, or as a result of the limitation contained in Section 5(a) hereof) to issue shares of Common Stock to a Holder and deliver certificates representing such shares to such Holder as and when required by the provisions hereof upon Conversion of any Preferred Shares, and such failure continues for twenty (20) Business Days; (ii) the Corporation breaches, in a material respect, any covenant or other material term or condition of this Certificate, the Securities Purchase Agreement, the Registration Rights Agreement, or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated thereby, and such breach continues for a period of fifteen (15) Business Days after written notice thereof to the Corporation from a Holder; (iii) the Registration Statement is not declared effective by the one hundred and eightieth (180th) day following the Initial Issue Date or if the Registration Statement has been declared effective by such date and, while the effectiveness of the Registration Statement is required to be maintained pursuant to the terms of the Registration Rights Agreement, the effectiveness of the Registration Statement lapses for any reason (including without limitation, the issuance of a stop order) or is unavailable to the Holder for the sale of Conversion Shares in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five (5) Business Days, provided that the cause of such lapse or unavailability is not due to factors solely within the control of the Holder; (iv) the Corporation fails to obtain either (A) the approval of stockholders described in paragraph 5(a) above on or before the time frames set forth in paragraph 5(a) to obtain such approval or (B) the approval of stockholders described in paragraph 4.15 or paragraph 4.16 of the Securities Purchase Agreement on or before on or before the time frames set forth in such paragraph 4.15 or 4.16; (v) the Corporation undertakes any voluntary action to terminate the quotation or listing of the Common Stock on the Nasdaq National Market or on any national securities exchange; and (vi) there occurs the sale, conveyance or disposition of all or substantially all of the assets of the Corporation or any of its subsidiaries (including without limitation the sale or other conveyance of any common stock or other equity securities of any of the Corporation's subsidiaries), or the effectuation of a transaction or series of related transactions, in which more than 50% of the voting power of the Corporation is disposed of, or the consolidation, merger or other business combination of the Corporation or any of its subsidiaries with or into any other entity, immediately following which the prior stockholders of the Corporation fail to own, directly or indirectly, at least fifty percent (50%) of the surviving entity (a "Change of Control Transaction"), provided, however, that a tender offer or any other transaction with respect to -10- which the Corporation's Board of Directors is unable to exercise discretion as to the effectuation thereof shall not be deemed to constitute a Mandatory Redemption Event by operation of this subparagraph (vi). (c) Mandatory Redemption Price. The "Mandatory Redemption Price" shall be equal to the greater of (i) Liquidation Preference of the Preferred Shares being redeemed multiplied by one hundred and seventeen percent (117%) and (ii) an amount determined by dividing the Stated Value of the Preferred Shares being redeemed by the Conversion Price in effect on the Mandatory Redemption Date and multiplying the resulting quotient by the average Closing Bid Price for the Common Stock on the five (5) Trading Days immediately preceding (but not including) the Mandatory Redemption Date. (d) Payment of Mandatory Redemption Price. (i) The Corporation shall pay the Mandatory Redemption Price to the Holder exercising its right to redemption on the later to occur of (i) the fifth (5th) Business Day following the Mandatory Redemption Date and (ii) the date on which the Preferred Shares being redeemed are delivered by the Purchaser to the Corporation for cancellation. (ii) If Corporation fails to pay the Mandatory Redemption Price to the Holder within five (5) Business Days of the Mandatory Redemption Date, the Holder shall be entitled to interest thereon, from and after the Mandatory Redemption Date until the Mandatory Redemption Price has been paid in full, at an annual rate equal to the Default Interest Rate. (iii) If the Corporation fails to pay the Mandatory Redemption Price within ten (10) Business Days of the Mandatory Redemption Date, then the Holder shall have the right at any time, so long as the Corporation remains in default, to require the Corporation, upon written notice, to immediately issue, in lieu of the Mandatory Redemption Price, the number of shares of Common Stock of the Corporation equal to the Mandatory Redemption Price divided by the Conversion Price in effect on such Conversion Date as is specified by the Holder in writing to the Corporation, such Conversion Price to be reduced by one percent (1%) for each day beyond such 10th Business Day in which the failure to pay the Mandatory Redemption Price continues; provided, however, that the maximum percentage by which such Conversion Price may be reduced hereunder shall be fifty percent (50%). (e) Modification of Mandatory Redemption Provisions. The terms of this Section 7 shall apply to the Series B Preferred Stock until such time, if any, as such terms have been superseded, in whole or in part, by the terms of a Determination Certificate (as defined below). A "Determination Certificate" shall be a written instrument containing redemption provisions applicable to the Series B Preferred Stock (or affirming the absence of any such provisions) proposed by the Holders of a majority of the shares of Series B Preferred Stock at the time outstanding and duly adopted by the Board of Directors, provided that the approval of the Board of Directors shall be deemed to be given if the adopting Holders furnish the Corporation with a certificate to the effect that the Determination Certificate reflects a determination made in consultation with the Corporation's auditors or another firm of accountants of recognized national standing that the changes contemplated thereby are necessary to qualify the Series B Preferred Stock as stockholders' equity under generally accepted accounting principles. The Corporation shall promptly give written notice of the adoption of any Determination Certificate to all holders of its Series B Preferred Stock, shall refer to the existence of any Determination Certificate in its annual financial statements and shall supply to any stockholder upon request the full text thereof. One or more Determination Certificates may be adopted pursuant to this paragraph. The contents of a Determination Certificate shall be deemed to be "facts" for purposes of Section 151 of the Delaware General Corporation Law. -11- 8. MISCELLANEOUS. (a) Transfer of Preferred Shares. A Holder may sell or transfer all or any portion of the Preferred Shares to any person or entity as long as such sale or transfer is the subject of an effective registration statement under the Securities Act or is exempt from registration thereunder and otherwise is made in accordance with the terms of the Securities Purchase Agreement. From and after the date of such sale or transfer, the transferee thereof shall be deemed to be a Holder. Upon any such sale or transfer, the Corporation shall, promptly following the return of the certificate or certificates representing the Preferred Shares that are the subject of such sale or transfer, issue and deliver to such transferee a new certificate in the name of such transferee. (b) Notices. Except as otherwise provided herein, any notice, demand or request required or permitted to be given pursuant to the terms hereof, the form or delivery of which notice, demand or request is not otherwise specified herein, shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission on or before 5:00 p.m., eastern time, on a Business Day or, if such day is not a Business Day, on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the third Business Day after deposit in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed to the parties as follows: If to the Corporation: OrthoLogic Corp. 1275 West Washington Street Tempe, Arizona 85281 Attn: President Tel: (602) 437-5520 Fax: (602) 470-7080 with a copy to: Quarles & Brady One East Camelback Phoenix, Arizona 85012 Attn: P. Robert Moya, Esq. Tel. 602-230-5500 Fax. 602-230-5598 and if to any Holder, to such address for such Holder as shall be designated by such Holder in writing to the Corporation. (c) Lost or Stolen Certificate. Upon receipt by the Corporation of evidence of the loss, theft, destruction or mutilation of a certificate representing Preferred Shares, and (in the case of loss, theft or destruction) of indemnity reasonably satisfactory to the Corporation, and upon surrender and cancellation of such certificate if mutilated, the Corporation shall execute and deliver to the Holder a new certificate identical in all respects to the original certificate. (d) No Voting Rights. Except as provided by applicable law and paragraph 8(g) below, the Holders of the Preferred Shares shall have no voting rights with respect to the -12- business, management or affairs of the Corporation; provided that the Corporation shall provide each Holder with prior notification of each meeting of stockholders (and copies of proxy statements and other information sent to such stockholders). (e) Remedies, Characterization, Other Obligations, Breaches and Injunctive Relief. The remedies provided to a Holder in this Certificate of Designation shall be cumulative and in addition to all other remedies available to such Holder under this Certificate of Designation or under any Transaction Document (as defined in the Securities Purchase Agreement), at law or in equity (including without limitation a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing contained herein shall limit such Holder's right to pursue actual damages for any failure by the Corporation to comply with the terms of this Certificate of Designation. The Corporation agrees with each Holder that there shall be no characterization concerning this instrument other than as specifically provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder hereof and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation agrees, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. (f) Failure or Delay not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. (g) Protective Provisions. So long as shares of Series B Preferred Stock are outstanding, the Corporation shall not, without first obtaining the approval of the Holders of at least two-thirds (2/3) of the then outstanding shares of Series B Preferred Stock: (i) alter or change the rights, preferences or privileges of the Series B Preferred Stock or any other capital stock of the Corporation so as to affect adversely the Series B Preferred Stock; (ii) create any new class or series of capital stock having a preference over or ranking pari passu with the Series B Preferred Stock as to redemption or distribution of assets upon a Liquidation Event or any other liquidation, dissolution or winding up of the Corporation; (iii) increase the authorized number of shares of Preferred Stock; (iv) re-issue any shares of Series B Preferred Stock which have been converted or redeemed in accordance with the terms hereof; (v) issue any Pari Passu Securities or Senior Securities (other than (x) shares of Series B Preferred Stock issued pursuant to the Securities Purchase Agreement, (y) debt securities which are not convertible into or exchangeable for Common Stock or any other equity or convertible security of the Corporation, or (z) the issuance of Series A Preferred Stock -13- of the Company pursuant to the Rights Plan (as defined in the Securities Purchase Agreement) in effect as of the date hereof); or (vi) redeem, or declare, pay or make any provision for any dividend or distribution with respect to, the Common Stock or any other capital stock of the Corporation ranking junior to the Series B Preferred Stock as to the distribution of assets upon liquidation, dissolution or winding up of the Corporation (other than a dividend to be paid from and after the end of the two (2) year period following the later to occur of the Tranche A Closing Date and the Tranche B Closing Date (each as defined in the Securities Purchase Agreement) to holders of Common Stock out of retained earnings of the Corporation that have accrued during the prior fiscal year. In the event that Holders of at least two-thirds (2/3) of the then outstanding shares of Series B Preferred Stock agree to allow the Corporation to alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock, pursuant to the terms hereof, then the Corporation will deliver notice of such approved change to the holders of the Series B Preferred Stock that did not agree to such alteration or change (the "Dissenting Holders") and the Dissenting Holders shall have the right for a period of thirty (30) days following such delivery to convert their Preferred Shares pursuant to the terms hereof as they existed prior to such alteration or change, or to continue to hold such Preferred Shares. No such change shall be effective to the extent that, by its terms, it applies to less than all of the Holders of Preferred Shares then outstanding. [Remainder of Page Intentionally Left Blank] -14- IN WITNESS WHEREOF, the Corporation has executed this Certificate of Designation as of the 9th day of July, 1998. ORTHOLOGIC CORP. By: /s/ Thomas R. Trotter ------------------------- Name: Thomas R. Trotter Title: President & CEO -15- EXHIBIT A --------- NOTICE OF CONVERSION The undersigned hereby elects to convert shares of Series B Convertible Preferred Stock (the "Preferred Stock"), represented by stock certificate No(s). (the "Preferred Stock Certificates"), into shares of common stock ("Common Stock") of OrthoLogic Corp. according to the terms and conditions of the Certificate of Designation relating to the Preferred Stock (the "Certificate of Designation"), as of the date written below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Certificate of Designation. Date of Conversion: ____________________________ Number of Shares of Preferred Stock to be Converted: _______________ Applicable Conversion Price: _______________ Number of Shares of Common Stock to be Issued: _______________ Name of Holder: ____________________________ Address: ____________________________ ____________________________ ____________________________ Signature: ___________________________________ Name: Title: Holder Requests Delivery to be made: (check one) - ----------------------------------- |_| By Delivery of Physical Certificates to the Above Address |_| Through Depository Trust Corporation (Account _______________________________________________) EX-4.1 3 WARRANT TO PURCHASE COMMON STOCK EXHIBIT A --------- THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. THIS WARRANT (THIS "WARRANT") AND THE WARRANTS OF EVEN DATE HEREWITH (TOGETHER WITH THIS WARRANT, THE "WARRANTS") ARE ISSUED SUBJECT TO THE TERMS OF (A) A SECURITIES PURCHASE AGREEMENT, DATED JULY 9, 1998 ("SECURITIES PURCHASE AGREEMENT"), BY AND BETWEEN ORTHOLOGIC CORP. AND THE HOLDER OF THIS WARRANT AND (B) A REGISTRATION RIGHTS AGREEMENT, DATED JULY 9, 1998 ("REGISTRATION RIGHTS AGREEMENT"), BY AND BETWEEN ORTHOLOGIC CORP. AND THE HOLDER OF THIS WARRANT. Warrant to Purchase ____________ Shares WARRANT TO PURCHASE COMMON STOCK of ORTHOLOGIC CORP. THIS CERTIFIES that ________________________ or any subsequent holder hereof (the "Holder"), has the right to purchase from OrthoLogic Corp., a Delaware corporation (the "Company"), up to ___________ fully paid and nonassessable shares of the Company's Common Stock, par value $0.0005 per share (the "Common Stock"), subject to adjustment as provided herein, at a price equal to the Exercise Price (as defined below), at any time beginning on the date on which this Warrant is issued (the "Issue Date") and ending at 5:00 p.m., eastern time, on July 13, 2003 (the "Expiration Date"). This Warrant is issued, and all rights hereunder shall be, subject to all of the conditions, limitations and provisions set forth herein and in the Securities Purchase Agreement. 1. Exercise. (a) Right to Exercise; Exercise Price. The Holder shall have the right to exercise this Warrant at any time and from time to time up to and including the Expiration Date as to all or any part of the shares of Common Stock covered hereby (the "Warrant Shares"). The "Exercise Price" payable by the Holder in connection with the exercise of this Warrant shall be $5.50. (b) Exercise Notice. In order to exercise this Warrant, the Holder shall send by facsimile transmission, at any time prior to 11:59 p.m., eastern time, on the date on which the Holder wishes to effect such exercise (the "Exercise Date"), to the Company and to its designated transfer agent for the Common Stock (the "Transfer Agent") a copy of the notice of exercise in the form attached hereto as Exhibit A (the "Exercise Notice") stating the number of Warrant Shares as to which such exercise applies and the calculation therefor. The Holder shall thereafter deliver to the Company the original Exercise Notice, the original Warrant and the Exercise Price. In the case of a dispute as to the calculation of the Exercise Price or the number of Warrant Shares issuable hereunder, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and shall submit the disputed calculations to the Company's independent accountant within one (1) business day following the Exercise Date. The Company shall cause such accountant to calculate the Exercise Price and/or the number of Warrant Shares issuable hereunder and to notify the Company and the Holder of the results in writing no later than two (2) business days following the day on which it received the disputed calculations. Such accountant's calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant. (c) Cancellation of Warrant. This Warrant shall be canceled upon its exercise and the Holder shall be entitled to receive, as soon as practicable after the Exercise Date, a new Warrant or Warrants (containing terms identical to this Warrant) representing any unexercised portion of this Warrant. 2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a Exercise Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a Cashless Exercise (as defined below), no later than the close of business on the third (3rd) business day following the Exercise Date set forth in such Exercise Notice, (B) in the case of a Cash Exercise (as defined below) no later than the close of business on the earlier to occur of (i) the third (3rd) business day following the Exercise Date set forth in such Exercise Notice and (ii) such later date on which the Company shall have received payment of the Exercise Price, and (C) with respect to Warrant Shares which are disputed as described in paragraph 1(b) above, and required to be delivered by the Company pursuant to the accountant's calculations described therein, the third (3rd) business day following the date on which the Company has received the notice from its accountants described in such paragraph 1(b) (the "Delivery Date"), issue and -2- deliver or caused to be delivered to the Holder the number of Warrant Shares as shall be determined as provided herein. Warrant Shares delivered to the Holder shall not contain any restrictive legend as long as the sale of such Warrant Shares is covered by an effective Registration Statement (as defined in the Registration Rights Agreement) or may be made pursuant to Rule 144(k) under the Securities Act of 1933, as amended, or any successor rule or provision. 3. Failure to Deliver Warrant Shares. (a) Exercise Default. In the event that the Company fails for any reason (other than by operation of paragraph 4 below) to deliver to a Holder certificates representing the number of Warrant Shares specified in the applicable Exercise Notice on or before the seventh (7th) business day following the Delivery Date therefor (an "Exercise Default"), the Company shall pay to such Holder payments ("Exercise Default Payments") in the amount of (i) (N/365) multiplied by (ii) the aggregate Exercise Price for the Warrant Shares which are the subject of such Exercise Default multiplied by (iii) the lower of twenty-four percent (24%) and the maximum rate permitted by applicable law, where "N" equals the number of days elapsed between the original Delivery Date for such Warrant Shares and the date on which all of such Warrant Shares are issued and delivered to such Holder. Amounts payable under this subparagraph 3(a) shall be paid to the Holder in immediately available funds on or before the fifth (5th) business day of the calendar month immediately following the calendar month in which such amount has accrued. (b) Reduction of Exercise Price. In the event that a Holder has not received certificates representing the Warrant Shares by the tenth (10th) Business Day following an Exercise Default, such Holder may, upon written notice to the Company, regain on such business day the rights of a Holder of this Warrant, or part thereof, with respect to the Warrant Shares that are the subject of such Exercise Default, and the Exercise Price for such Warrant Shares shall be reduced by one percent (1%) for each day beyond such 10th business day in which the Exercise Default continues. In such event, such Holder shall retain all of such Holder's rights and remedies with respect to the Company's failure to deliver such Warrant Shares (including without limitation the right to receive the cash payments specified in subparagraph 3(a) above). (c) Buy-in. Nothing herein shall limit a Holder's right to pursue actual damages for the Company's failure to issue and deliver Warrant Shares in connection with an exercise on the applicable Delivery Date (including, without limitation, damages relating to any purchase of shares of Common Stock by such Holder to make delivery on a sale effected in anticipation of receiving Warrant Shares upon exercise, such damages to be in an amount equal to (A) the aggregate amount paid by such Holder for the shares of Common Stock so purchased minus (B) the aggregate amount of net proceeds, if any, received by such Holder from the sale of the Warrant Shares issued by the Company pursuant to such exercise), and such Holder shall have the right to pursue all remedies available to it at law or in equity (including, without limitation, a decree of specific performance and/or injunctive relief). (d) Holder of Record. Each Holder shall, for all purposes, be deemed to have -3- become the holder of record of Warrant Shares on the Exercise Date of this Warrant, irrespective of the date of delivery of such Warrant Shares. Nothing in this Warrant shall be construed as conferring upon the Holder hereof any rights as a stockholder of the Company. 4. Exercise Limitations. In no event shall a Holder be permitted to exercise this Warrant, or part thereof, with respect to Warrant Shares in excess of the number of such shares, upon the issuance of which, (x) the number of shares of Common Stock beneficially owned by such Holder and its affiliates (other than shares of Common Stock issuable upon exercise of the Warrants or the exercise or conversion of securities which contain a limitation similar to the limitation contained herein) plus (y) the number of shares of Common Stock issuable upon such exercise, would be equal to or exceed (z) 4.99% of the number of shares of Common Stock then issued and outstanding. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules thereunder. To the extent that the limitation contained in this paragraph 4 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by a Holder) shall be in the sole discretion of such Holder, and the submission of an Exercise Notice shall be deemed to be such Holder's determination that this Warrant is exercisable pursuant to the terms hereof, and the Company shall have no obligation whatsoever to verify or confirm the accuracy of such determination. Nothing contained herein shall be deemed to restrict the right of a Holder to exercise this Warrant, or part thereof, at such time as such exercise will not violate the provisions of this Section 4. 5. Payment of the Exercise Price. The Holder may pay the Exercise Price in either of the following forms or, at the election of Holder, a combination thereof: (a) Cash Exercise: by delivery of immediately available funds. -4- (b) Cashless Exercise: by surrender of this Warrant to the Company together with a notice of cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y x (A-B)/A where: X = the number of Warrant Shares to be issued to the Holder. Y = the number of Warrant Shares with respect to which this Warrant is being exercised. A = the average of the Closing Bid Prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Exercise Date. B = the Exercise Price. For purposes of Rule 144 under the Securities Act of 1933, as amended, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have been commenced, on the Closing Date (as defined in the Securities Purchase Agreement). 6. Anti-Dilution Adjustments. (a) Stock Dividend. If the Company shall at any time declare a dividend payable in shares of Common Stock, then the Holder hereof, upon exercise of this Warrant after the record date for the determination of Holders of Common Stock entitled to receive such dividend, shall be entitled to receive, in addition to the number of shares of Common Stock as to which this Warrant is exercised, such additional shares of Common Stock as such Holder would have received had this Warrant been exercised immediately prior to such record date and the Exercise Price will be proportionately adjusted. (b) Recapitalization or Reclassification. If the Company shall at any time effect a recapitalization, reclassification or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which the Holder hereof shall be entitled to purchase upon exercise of this Warrant shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise Price shall be, in the case of an increase in the number of shares, proportionally decreased and, in the case of decrease in the number of shares, proportionally increased. The Company shall give the Warrant Holder the same notice at the same time it provides such notice to holders of Common Stock of any transaction described in this Section 6(b). -5- (c) Distributions. If the Company shall at any time distribute to holders of Common Stock cash, evidences of indebtedness or other securities or assets (other than cash dividends or distributions payable out of earned surplus or net profits for the current or a preceding year) then, in any such case, the Holder of this Warrant shall be entitled to receive, upon exercise of this Warrant, with respect to each share of Common Stock issuable upon such exercise, the amount of cash or evidences of indebtedness or other securities or assets which such Holder would have been entitled to receive with respect to each such share of Common Stock as a result of the happening of such event had this Warrant been exercised immediately prior to the record date or other date fixing shareholders to be affected by such event. (d) Notice of Consolidation or Merger. In the event of a merger, consolidation, business combination, tender offer, exchange of shares, recapitalization, reorganization, redemption or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities or other assets of the Company or another entity or there is a sale of all or substantially all the Company's assets (a "Corporate Change"), then this Warrant shall be exercisable into such class and type of securities or other assets as the Holder would have received had the Holder exercised this Warrant immediately prior to such Corporate Change; provided, however, that Company may not affect any Corporate Change unless (i) it first shall have given thirty (30) business days' notice to the Holder hereof of any Corporate Change and makes a public announcement of such event at the same time that it gives such notice and (ii) it requires the resulting successor or acquiring entity (if not the Corporation) to assume by written instrument the obligations of the Corporation hereunder and under the Securities Purchase Agreement and the Registration Rights Agreement. (e) Exercise Price as Adjusted. As used in this Warrant, the term "Exercise Price" shall mean the purchase price per share specified in paragraph 1 of this Warrant, until the occurrence of an event stated in subsection (a), (b) or (c) of this paragraph 6, and thereafter shall mean said price as adjusted from time to time in accordance with the provisions of each such subsection. No such adjustment under this paragraph 6 shall be made unless such adjustment would change the Exercise Price at the time by two percent (2%) or more; provided, however, that all adjustments not so made shall be deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or more. No adjustment made pursuant to any provision of this paragraph 6 shall have the effect of increasing the total consideration payable upon exercise of this Warrant in respect of all the Common Stock as to which this Warrant may be exercised. (f) Adjustments: Additional Shares, Securities or Assets. In the event that at any time, as a result of an adjustment made pursuant to this Section 6, the Holder of this Warrant shall, upon exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this paragraph 6. -6- 7. Fractional Interests. No fractional shares or scrip representing fractional shares shall be issuable upon the exercise of this Warrant, but on exercise of this Warrant, the Holder hereof may purchase only a whole number of shares of Common Stock. If, on exercise of this Warrant, the Holder hereof would be entitled to a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon exercise shall be rounded up or down to the nearest whole number of shares of Common Stock. 8. Transfer of this Warrant. The Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in part, as long as (A) such sale or other disposition is made pursuant to pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act of 1933, as amended, and applicable state laws and (B) such sale or other disposition is made to an accredited investor (as such term is defined in Regulation D under the Securities Act). Upon such transfer or other disposition, the Holder shall deliver a written notice to Company, substantially in the form of the Transfer Notice attached hereto as Exhibit B (the "Transfer Notice"), indicating the person or persons to whom this Warrant shall be transferred and, if less than all of this Warrant is transferred or this Warrant is transferred in parts, the number of Warrant Shares to be covered by the part of this Warrant to be transferred to each such person. Within three (3) business days of receiving a Transfer Notice and the original of this Warrant, the Company shall deliver to the each transferee designated by the Holder a Warrant or Warrants of like tenor and terms for the appropriate number of Warrant Shares. 9. Benefits of this Warrant. Nothing in this Warrant shall be construed to confer upon any person other than the Holder of this Warrant any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Holder of this Warrant. 10. Loss, theft, destruction or mutilation of Warrant. Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnity reasonably satisfactory to the Company, and upon surrender of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. 11. Notice or Demands. Except as otherwise provided herein, any notice, demand or request required or permitted to be given pursuant to the terms of this Warrant shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 5:00 p.m., eastern time, on a business day or, if such day is not a business day, on the next -7- succeeding business day, (ii) on the next business day after timely delivery to a nationally-recognized overnight courier and (iii) on the third business day after deposit in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as follows: If to the Company: OrthoLogic Corp. 1275 West Washington Street Tempe, Arizona 85281 Attn: President Tel: (602) 437-5520 Fax: (602) 470-7080 with a copy to: Quarles & Brady One East Camelback Phoenix, Arizona 85012 Attn: P. Robert Moya, Esq. Tel: 602-230-5500 Fax: 602-230-5598 and if to the Holder, to such address as shall be designated by the Holder in writing to the Company. 12. Applicable Law. This Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the state of New York, without giving effect to conflict of law provisions thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -8- IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 9th day of July, 1998. ORTHOLOGIC CORP. By: /s/ Thomas R. Trotter ------------------------- Name: Thomas R. Trotter Title: President & CEO -9- EXHIBIT A to WARRANT -------------------- EXERCISE NOTICE --------------- The undersigned Holder hereby irrevocably exercises the right to purchase of the shares of Common Stock ("Warrant Shares") of OrthoLogic Corp., a Delaware corporation (the "Company"), evidenced by the attached Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant. 1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as: ______ a Cash Exercise with respect to _________________ Warrant Shares; and/or ______ a Cashless Exercise with respect to _________________ Warrant Shares. 2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the sum of $________________ to the Company in accordance with the terms of the Warrant. 3. Delivery of Warrant Shares. The Company shall deliver to the Holder _____________ Warrant Shares in accordance with the terms of the Warrant. Date: ______________________ ____________________________________ Name of Registered Holder By: _______________________________ Name: Title: -10- EXHIBIT B to WARRANT -------------------- TRANSFER NOTICE --------------- FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells, assigns and transfers unto the person or persons named below the right to purchase shares of the Common Stock of OrthoLogic Corp. evidenced by the attached Warrant. Date: ______________________ ____________________________________ Name of Registered Holder By: ________________________________ Name: Title: Transferee Name and Address: ____________________________________ ____________________________________ ____________________________________ -11- EX-4.2 4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 13, 1998, by and among OrthoLogic Corp., a Delaware corporation (the "Company"), and each of the entities whose names appear on the signature pages hereof. Such entities are each referred to herein as a "Purchaser" and, collectively, as the "Purchasers". The Company has agreed, on the terms and subject to the conditions set forth in the Securities Purchase Agreement of even date herewith (the "Securities Purchase Agreement"), to issue and sell to each Purchaser shares (the "Preferred Shares") of the Company's Series B Convertible Preferred Stock, par value $0.0005 per share (the "Preferred Stock"), and a Warrant (each, a "Warrant" and, when taken together with all of the warrants issued pursuant to the Securities Purchase Agreement, the "Warrants") entitling the holder thereof to purchase shares (the "Warrant Shares") of the Company's Common Stock, par value $0.0005 per share (the "Common Stock"). The Preferred Shares are convertible pursuant to the Company's Certificate of Designation (the "Certificate of Designation") into shares (the "Conversion Shares") of the Common Stock. In order to induce the Purchasers to enter into the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended (the "Securities Act"), and under applicable state securities laws. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Securities Purchase Agreement. In consideration of each Purchaser entering into the Securities Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DEFINITIONS. ----------- For purposes of this Agreement, the following terms shall have the meanings specified: (a) "Filing Deadline" shall mean September 3, 1998; (b) "Tranche A Closing Date" shall have the meaning specified in the Securities Purchase Agreement; (c) "Registration Deadline" means the seventieth (70th) day following the Filing Deadline; (d) "Holder" means any person owning or having the right to acquire, through conversion of Preferred Shares or exercise of the Warrant, Registrable Securities, including initially each Purchaser and thereafter any permitted assignee thereof; (e) "Register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement or statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act ("Rule 415") or any successor rule providing for the offering of securities on a continuous or delayed basis ("Registration Statement"), and the declaration or ordering of effectiveness of the Registration Statement by the Securities and Exchange Commission (the "Commission"); and (f) "Registrable Securities" means the Conversion Shares and the Warrant Shares and any other shares of Common Stock issuable pursuant to the terms of the Preferred Stock or the Warrants, whether as a dividend, payment of a redemption price or otherwise, and any shares of capital stock issued or issuable from time to time (with any adjustments) in replacement of, in exchange for or otherwise in respect of the Conversion Shares or the Warrant Shares, including without limitation any securities received by a Holder in connection with an Exchange Transaction (as defined in the Certificate of Designation). 2. MANDATORY REGISTRATION. ---------------------- (a) On or before the Filing Deadline, the Company shall prepare and file with the Commission a Registration Statement on Form S-3 as a "shelf" registration statement under Rule 415 covering the resale of at least 200% of the number of shares of Registrable Securities then issuable on conversion of the Preferred Shares and exercise of the Warrants then outstanding (such number to be determined using the Conversion Price or exercise price in effect on the date of such filing and without regard to any restriction on the ability of a Holder to convert Preferred Shares or exercise the Warrants as of such date). The Registration Statement shall state, to the extent permitted by Rule 416 under the Securities Act, that it also covers such indeterminate number of shares of Common Stock as may be required to effect (i) conversion of the Preferred Shares to prevent dilution resulting from stock splits, stock dividends or similar events, or by reason of changes in the Conversion Price in accordance with the terms of the Certificate of Designation and (ii) exercise of the Warrants in full to prevent dilution resulting from stock splits, stock dividends or similar events. The number of shares initially registered under the Registration Statement shall be allocated pro rata among the Purchasers based on the number of Preferred Shares issued to each Purchaser at the Tranche A Closing. Each increase in the number of shares registered under the Registration Statement shall be allocated pro rata among the Holders based on the number of Preferred Shares held by such Holder at the time of such increase. In the event that a Holder shall sell or otherwise transfer any of such Holder's Preferred Shares, each transferee shall be allocated a pro rata portion of such transferor's allocation of registered shares. Any portion of such allocated amount which remains allocated to any person or entity which does not hold any Preferred Shares shall be allocated to the remaining Holders pro rata based on the number of Preferred Shares then held by such Holders. (b) The Company shall use its best efforts to cause the Registration Statement to become effective as soon as practicable following the filing thereof, but in no event later than the Registration Deadline, and shall submit to the Commission, within one (1) business day after the Company learns that no review of the Registration Statement will be made by the staff of the Commission or that the staff of the Commission has no further comments on the Registration Statement, as the case may be, a request for acceleration of the effectiveness of the Registration -2- Statement to a time and date not later than forty-eight (48) hours after the submission of such request, and maintain the effectiveness of the Registration Statement until the earlier to occur of (i) the date on which all of the Registrable Securities have been sold pursuant to the Registration Statement and (ii) the date on which all of the remaining Registrable Securities (in the reasonable opinion of counsel to the Purchaser) may be immediately sold to the public under Rule 144(k) or any successor provision (the "Registration Period"). (c) If (A) the Registration Statement is not filed on or before the Filing Deadline or declared effective by the Commission on or before the Registration Deadline or (B) after the Registration Statement has been declared effective by the Commission, sales of Registrable Securities cannot be made by a Holder under the Registration Statement for any reason not within the exclusive control of such Holder (other than such Registrable Securities as are then freely saleable pursuant to Rule 144(k) under the Securities Act), (each, a "Registration Event"), the Company shall pay to each Holder an amount equal to the lesser of (x) one and one half percent (1.5%) per month and (y) the highest rate permitted by applicable law, times the aggregate Stated Value (as defined in the Certificate of Designation) of the Preferred Shares held by such Holder, accruing daily and compounded monthly, from the date on which a Registration Event first occurs until the date on which the Registration Event is no longer continuing. The amounts paid or payable by the Company hereunder shall be in addition to any other remedies available to a Holder at law or in equity or pursuant to the terms of any other Transaction Document. Payments of cash pursuant hereto shall be made within five (5) days after the end of each period that gives rise to such obligation, provided that, if any such period extends for more than thirty (30) days, payments shall be made at the end of each thirty-day period. (d) In the event that (A) the Registration Statement is not declared effective by the twentieth (20th) Business Day following the Registration Deadline, (B) after the Registration Statement has been declared effective by the Commission, sales of Registrable Securities cannot be made by a Holder under the Registration Statement for any reason not within the exclusive control of such Holder (other than such Registrable Securities as are then freely saleable pursuant to Rule 144(k) under the Securities Act), or (C) the Common Stock is not included for quotation on the Nasdaq Stock Market or listed on the New York Stock Exchange or the American Stock Exchange, (each event described in clause (A), (B) or (C) being hereinafter referred to as a "Repricing Event"), in addition to the amounts which may be payable pursuant to paragraph 2(c) above, the Fixed Conversion Price (as defined in the Certificate of Designation) for any conversion of Preferred Shares occurring during the twenty two (22) Trading Days following the Cure Date (as defined below) with respect to such event shall be deemed to be equal to the lesser of (i) the lowest Conversion Price (as defined in the Certificate of Designation) in effect during the period between the date on which a Repricing Event occurs and the date on which such Repricing Event is no longer continuing (the "Cure Date") and (ii) the Fixed Conversion Price that would otherwise be in effect on the relevant Conversion Date (as defined in the Certificate of Designation). 3. PIGGYBACK REGISTRATION. ---------------------- If at any time prior to the expiration of the Registration Period, (i) the Company proposes to register shares of Common Stock under the Securities Act in connection with the public -3- offering of such shares for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan or employee stock award or a registration on Form S-4 under the Securities Act or any successor or similar form registering stock issuable upon a reclassification, a business combination involving an exchange of securities or an exchange offer for securities of the issuer or another entity) (a "Proposed Registration") and (ii) a registration statement covering the sale of all of the Registrable Securities is not then effective and available for sales thereof by the Holders, the Company shall, at such time, promptly give each Holder written notice of such Proposed Registration. Each Holder shall have thirty (30) days from its receipt of such notice to deliver to the Company a written request specifying the amount of Registrable Securities that such Holder intends to sell and such Holder's intended method of distribution. Upon receipt of such request, the Company shall use its best efforts to cause all Registrable Securities which the Company has been requested to register to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Holder; provided, however, that the Company shall have the right to postpone or withdraw any registration effected pursuant to this paragraph 3 without obligation to the Holder. If, in connection with any underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)' judgment, marketing or other factors dictate such limitation is necessary to facilitate public distributions, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which each Holder has requested inclusion hereunder as such underwriter(s) shall permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in the Registration Statement, in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and provided, further, however, that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be made pro rata with holders of other securities having the right to include such securities in the Registration Statement before any Holder includes any or all of its Registrable Securities in any registration statement relating to an underwritten public offering with respect to which, in the good faith opinion of the managing underwriter, the inclusion in the offering of all shares requested to be registered by all persons holding registration rights would materially jeopardize the successful marketing of the securities to be sold. 4. OBLIGATIONS OF THE COMPANY. -------------------------- In addition to performing its obligations hereunder, including those pursuant to paragraphs 2(a) and 2(b) above, the Company shall: (a) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of the Securities Act or to maintain the effectiveness of the Registration Statement during the Registration Period, or as may be reasonably requested by a Holder -4- in order to incorporate information concerning such Holder or such Holder's intended method of distribution; (b) in the event that the number of shares available under the Registration Statement filed by the Company hereunder is insufficient during any period of three consecutive trading days to cover 175% of the Registrable Securities then issued or issuable (such number to be determined using the Conversion Price or exercise price in effect on such dates and without regard to any restriction on the ability of a Holder to convert Preferred Shares or exercise the Warrants as of such dates), the Company shall promptly amend the Registration Statement, or file a new Registration Statement, or both, so as to cover 200% of such Registrable Securities, in any event as soon as practicable, but not later than the tenth business day following the last day of such three day period. Any Registration Statement filed pursuant to this paragraph 4 shall state that, to the extent permitted by Rule 416 under the Securities Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon conversion of the Preferred Shares or exercise of the Warrants in full. Unless and until such amendment or new Registration Statement becomes effective, each Holder shall have the rights described in Section 2 above; (c) secure the designation and quotation of the Registrable Securities on the Nasdaq Stock Market or the listing thereof on the New York Stock Exchange or the American Stock Exchange; (d) furnish to each Holder such number of copies of the prospectus included in such Registration Statement, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such Holder may reasonably request in order to facilitate the disposition of such Holder's Registrable Securities; (e) use all commercially reasonable efforts to register or qualify the Registrable Securities under the securities or "blue sky" laws of such jurisdictions within the United States as shall be reasonably requested from time to time by a Holder, and do any and all other acts or things which may be necessary or advisable to enable such Holder to consummate the public sale or other disposition of the Registrable Securities in such jurisdictions; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction; (f) in the event of an underwritten public offering of the Registrable Securities, enter into and perform its obligations under an underwriting agreement, in usual and customary form reasonably acceptable to the Company, with the managing underwriter of such offering; (g) notify each Holder immediately upon the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, contains an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and as promptly as practicable, prepare, file and furnish to each Holder a reasonable number of copies of a supplement or an amendment to such prospectus as may be necessary so that such prospectus does not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or -5- necessary to make the statements therein not misleading in light of the circumstances then existing; (h) use all commercially reasonable efforts to prevent the issuance of any stop order or other order suspending the effectiveness of such Registration Statement and, if such an order is issued, to obtain the withdrawal thereof at the earliest possible time and to notify each Holder of the issuance of such order and the resolution thereof; (i) furnish to each Holder, on the date that such Registration Statement becomes effective, (x) a letter, dated such date, of outside counsel representing the Company (and reasonably acceptable to such Holder) addressed to such Holder, confirming the effectiveness of the Registration Statement and, to the knowledge of such counsel, the absence of any stop order, and (y) in the case of an underwriting, (A) an opinion, dated such date, of such outside counsel, in form and substance as is customarily given to underwriters in an underwritten public offering, and (B) a letter, dated such date, from the Company's independent certified public accountants, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters and to each Holder; (j) provide each Holder and its representatives the opportunity to conduct a reasonable inquiry of the Company's financial and other records during normal business hours and make available its officers, directors and employees for questions regarding information which such Holder may reasonably request in order to fulfill any due diligence obligation on its part; and (k) permit counsel for each Holder (at such Holder's expense) to review such Registration Statement and all amendments and supplements thereto a reasonable period of time prior to the filing thereof with the Commission. 5. OBLIGATIONS OF EACH HOLDER. -------------------------- In connection with the registration of the Registrable Securities pursuant to the Registration Statement, each Holder shall: (a) furnish to the Company such information regarding itself and the intended method of disposition of Registrable Securities as the Company shall reasonably request in order to effect the registration thereof; (b) upon receipt of any notice from the Company of the happening of any event of the kind described in paragraphs 4(g) or 4(h), immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement until the filing of an amendment or supplement as described in paragraph 4(g) or withdrawal of the stop order referred to in paragraph 4(h); (c) in the event of an underwritten offering of the Registrable Securities in which such Holder participates, enter into a customary and reasonable underwriting agreement and execute such other documents as the managing underwriter for such offering may reasonably request; -6- (d) to the extent required by applicable law, deliver a prospectus to each purchaser of Registrable Securities; and (e) notify the Company when it has sold all of the Registrable Securities theretofore held by it. 6. INDEMNIFICATION. --------------- In the event that any Registrable Securities are included in a Registration Statement under this Agreement: (a) To the extent permitted by law, the Company shall indemnify and hold harmless each Holder, the officers, directors, employees, agents and representatives of such Holder, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims, damages, liabilities or reasonable out-of-pocket expenses (whether joint or several) (collectively, including legal or other expenses reasonably incurred in connection with investigating or defending same, "Losses"), insofar as any such Losses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company will reimburse such Holder, and each such officer, director, employee, agent, representative or controlling person for any legal or other expenses as reasonably incurred by any such entity or person in connection with investigating or defending any Loss; provided, however, that the foregoing indemnity shall not apply to amounts paid in settlement of any Loss if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be obligated to indemnify any person for any Loss to the extent that such Loss arises out of or is based upon and in conformity with written information furnished by such person expressly for use in such Registration Statement; and provided, further, that the Company shall not be required to indemnify any person to the extent that any Loss results from such person selling Registrable Securities (i) to a person to whom there was not sent or given, at or prior to the written confirmation of the sale of such shares, a copy of the prospectus, as most recently amended or supplemented, if the Company has previously furnished or made available copies thereof or (ii) during any period following written notice by the Company to such Holder of an event described in paragraph 4(g) or 4(h). (b) To the extent permitted by law, each Holder, acting severally and not jointly, shall indemnify and hold harmless the Company, the officers, directors, employees, agents and representatives of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act or the 1934 Act, against any Losses to the extent (and only to the extent) that any such Losses arise out of or are based upon and in conformity with written information furnished by such Holder expressly for use in such Registration Statement; and such Holder will reimburse any legal or other expenses as reasonably incurred by the Company and any such officer, director, employee, agent, representative, or controlling person, in connection with investigating or -7- defending any such Loss; provided, however, that the foregoing indemnity shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of such Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subparagraph 6(b) exceed the net purchase price of securities sold by such Holder under the Registration Statement. (c) Promptly after receipt by an indemnified party under this paragraph 6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the reasonably incurred fees and expenses of one such counsel to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate under applicable standards of professional conduct due to actual or potential conflicting interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, to the extent prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this paragraph 6 with respect to such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this paragraph 6 or with respect to any other action. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable or insufficient to hold harmless an indemnified party for any reason, the Company and each Holder agree, severally and not jointly, to contribute to the aggregate Losses to which the Company or such Holder may be subject in such proportion as is appropriate to reflect the relative fault of the Company and such Holder in connection with the statements or omissions which resulted in such Losses; provided, however, that in no case shall such Holder be responsible for any amount in excess of the net purchase price of securities sold by it under the Registration Statement. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or by such Holder. The Company and each Holder agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person who controls a Holder within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee, agent or representative of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee, agent or representative of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this subparagraph (d). -8- (e) The obligations of the Company and each Holder under this paragraph 6 shall survive the conversion or redemption, if any, of the Preferred Shares, the exercise of the Warrant, the completion of any offering of Registrable Securities pursuant to a Registration Statement under this Agreement, or otherwise. 7. REPORTS. ------- With a view to making available to each Holder the benefits of Rule 144 under the Securities Act ("Rule 144") and any other similar rule or regulation of the Commission that may at any time permit such Holder to sell securities of the Company to the public without registration, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the 1934 Act; and (c) furnish to such Holder, so long as such Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing such Holder of any rule or regulation of the Commission which permits the selling of any such securities without registration. 8. MISCELLANEOUS. ------------- (a) Expenses of Registration. All expenses, other than underwriting discounts and commissions and fees and expenses of counsel to each Holder, incurred in connection with the registrations, filings or qualifications described herein, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, the fees and disbursements of counsel for the Company, and the fees and disbursements incurred in connection with the opinion and letter described in paragraph 4(i) hereof, shall be borne by the Company. (b) Amendment; Waiver. Any provision of this Agreement may be amended only pursuant to a written instrument executed by the Company and Holders of at least two thirds (2/3) of the outstanding Registrable Securities or, if no Registrable Securities are outstanding, of at least two thirds (2/3) of the outstanding Preferred Shares. Any waiver of the provisions of this Agreement may be made only pursuant to a written instrument executed by the party against whom enforcement is sought. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder, each future Holder, and the Company. The failure of any party to exercise any right or remedy under this Agreement or otherwise, or the delay by any party in exercising such right or remedy, shall not operate as a waiver thereof. -9- (c) Notices. Any notice, demand or request required or permitted to be given by any party to any other party pursuant to the terms of this Agreement shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 5:00 p.m., eastern time, on a business day or, if such day is not a business day, on the next succeeding business day, (ii) on the next business day after timely delivery to a nationally-recognized overnight courier and (iii) on the third business day after deposit in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed to the parties as follows: If to the Company: OrthoLogic Corp. 1275 West Washington Street Tempe, Arizona 85281 Attn: President Tel: (602) 437-5520 Fax: (602) 470-7080 with a copy to: Quarles & Brady One East Camelback Phoenix, Arizona 85012 Attn: P. Robert Moya, Esq. Tel. 602-230-5500 Fax. 602-230-5598 and if to any Holder, to such address as shall be designated by such Holder in writing to the Company. (d) Termination. This Agreement shall terminate on the earlier to occur of (a) the end of the Registration Period and (b) the date on which all of the Registrable Securities have been publicly distributed; but any such termination shall be without prejudice to (i) the parties' rights and obligations arising from breaches of this Agreement occurring prior to such termination and (ii) the indemnification and contribution obligations under this Agreement. (e) Assignment. The rights of a Holder hereunder shall be assigned automatically to any transferee of the Preferred Shares, the Warrant or Registrable Securities from such Holder as long as: (i) the Company is, within a reasonable period of time following such transfer, furnished with written notice of the name and address of such transferee, (ii) the transferee agrees in writing with the Company to be bound by all of the provisions hereof and (iii) such transfer is made in accordance with the applicable requirements of the Securities Purchase Agreement or the Warrant, as the case may be. (f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed one and the same -10- instrument. This Agreement, once executed by a party, may be delivered to any other party hereto by facsimile transmission. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflict of laws provisions thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -11- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written. ORTHOLOGIC CORP. By: /s/ Thomas R. Trotter ------------------------- Name: Thomas R. Trotter Title: President & CEO PURCHASER NAME: ______________________________ By: _________________________ Name: Title: -12- EX-10.1 5 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 13, 1998, by and between OrthoLogic Corp., a Delaware corporation (the "Company"), and each of the entities whose names appear on the signature pages hereof. Such entities are each referred to herein as a "Purchaser" and, collectively, as the "Purchasers". The Company wishes to sell to each Purchaser, and each Purchaser wishes to purchase, on the terms and subject to the conditions set forth in this Agreement, shares (the "Preferred Shares") of the Company's Series B Convertible Preferred Stock, par value $0.0005 per share (the "Preferred Stock") and related Warrants in the form attached hereto as Exhibit A (the "Warrants"). The Preferred Shares are convertible pursuant to the terms of a Certificate of Designation relating to the Preferred Stock, the form of which is attached hereto as Exhibit B (the "Certificate of Designation") into shares (the "Conversion Shares") of the Company's common stock, par value $0.0005 per share (the "Common Stock"). The Warrants are exercisable into shares of Common Stock (the "Warrant Shares") in accordance with their terms. The Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares are collectively referred to herein as the "Securities". The Company has agreed to effect the registration of the Conversion Shares and the Warrant Shares under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Rights Agreement of even date herewith by and among the Company and the Purchasers (the "Registration Rights Agreement"). The sale of the Preferred Shares and the Warrants by the Company to the Purchasers will be effected in reliance upon the exemption from securities registration afforded by the provisions of Regulation D ("Regulation D"), as promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act. The Company and each Purchaser hereby agree as follows: 1. PURCHASE AND SALE OF PREFERRED SHARES. ------------------------------------- 1.1 Agreement to Purchase and Sell. Upon the terms and subject to the satisfaction or waiver of the conditions set forth herein, the Company agrees to sell and each Purchaser severally agrees to purchase the number of Preferred Shares, together with Warrants to purchase the number of shares of Common Stock, set forth below such Purchaser's name on the signature pages hereof at a purchase price for such Preferred Shares and Warrants equal to one thousand dollars ($1,000) times the number of Preferred Shares purchased by such Purchaser (the "Purchase Price"). The Warrants will entitle each Purchaser to purchase forty (40) shares of Common Stock for each Preferred Share purchased by such Purchaser. The Preferred Shares and Warrants will be sold, subject to the conditions set forth herein, in two (2) tranches (each a "Tranche" and together, the "Tranches"). 1.2 Closing of Tranche A. The closing of the initial Tranche hereunder ("Tranche A"), at which closing the Purchasers will purchase Preferred Shares and Warrants for an aggregate Purchase Price of fifteen million dollars ($15,000,000), will occur upon the satisfaction (or waiver) of the Tranche A Closing Conditions (as defined below) (the "Tranche A Closing"). The date on which the Tranche A Closing occurs is hereinafter referred to as the "Tranche A Closing Date". Subject to the satisfaction or waiver of the conditions set forth herein, the Tranche A Closing will be deemed to occur when this Agreement and the other Transaction Documents (as defined below) have been executed and delivered by the Company and each Purchaser (which delivery may be effected by facsimile transmission), and full payment of the Purchase Price has been made by each Purchaser by wire transfer of immediately available funds against physical delivery by the Company of duly executed certificates representing the Preferred Shares and the Warrants purchased by such Purchaser at the Tranche A Closing. 1.3 Closing of Tranche B. If, during the period of three hundred (300) days following the Tranche A Closing Date (the "Initial Tranche B Period"), the Closing Bid Price (as defined in the Certificate of Designation) for the Common Stock is at or above eight dollars ($8.00) per share for ten (10) consecutive Trading Days (as defined in the Certificate of Designation), the Company must sell to each Purchaser its proportionate share of the tranche of Preferred Shares and Warrants ("Tranche B") to be issued at the Tranche B Closing (as defined below) for an aggregate Purchase Price to all of the Purchasers of five million dollars ($5,000,000) at a subsequent closing (the "Tranche B Closing"), such proportionate share to be calculated based on the number of Preferred Shares purchased by such Purchaser at the Tranche A Closing relative to the aggregate number of Preferred Shares purchased by all of the Purchasers at the Tranche A Closing. In such event, the Tranche B Closing will occur, subject to the satisfaction (or waiver) of the Tranche B Closing Conditions (as defined below), on the fifth (5th) business day (or other date mutually agreeable by the Company and the holders of a majority of the Preferred Shares then outstanding) following the tenth such Trading Day. If, at any time following the end of the Initial Tranche B Period, but prior to the second anniversary of the Tranche A Closing Date (the "Tranche B Option Period"), the Tranche B Closing has not occurred, and the Closing Bid Price (as defined in the Certificate of Designation) for the Common Stock is at or above eight dollars ($8.00) per share for ten (10) consecutive Trading Days (as defined in the Certificate of Designation)(a "Tranche B Option Event"), then the Company may, at its option and subject to the satisfaction (or waiver) of the Tranche B Closing Conditions (the "Tranche B Option"), sell to each Purchaser, and such Purchaser shall purchase, its proportionate share of the Preferred Shares and Warrants to be issued at the Tranche B Closing for an aggregate Purchase Price to all of the Purchasers of up to five million dollars ($5,000,000), such proportionate share to be calculated based on the number of Preferred Shares purchased by such Purchaser at the Tranche A Closing relative to the aggregate number of Preferred Shares purchased by all of the Purchasers at the Tranche A Closing; provided, however, that in order for the Company to exercise the Tranche B Option, the Company must deliver a written notice thereof to each Purchaser on a date that is (i) not more than thirty (30) days following the first occurrence of a Tranche B Option Event during the Tranche B Option Period and (ii) at least five (5) days prior to the date on which the Tranche B Closing is to occur, and in such notice specify the number of Preferred Shares and Warrants that the Company proposes to issue and the date on which the Tranche B Closing is to occur, it being understood (A) that the Company may exercise the Tranche B Option only with -2- respect to the first occurrence of a Tranche B Option Event during the Tranche B Option Period, and (B) that in no event may the Tranche B Closing occur after the second anniversary of the Tranche A Closing Date. The date on which the Tranche B Closing occurs is hereinafter referred to as the "Tranche B Closing Date". The Tranche B Closing will be deemed to occur when full payment of the Purchase Price for the Preferred Shares and Warrants to be issued and sold at such Closing has been made by each Purchaser by wire transfer of immediately available funds against physical delivery by the Company of duly executed certificates representing the Preferred Shares and Warrants purchased by such Purchaser at the Tranche B Closing. The closing of Tranche A or B hereunder is sometimes referred to as a "Closing" and, when taken together, as the "Closings". 1.4 Certain Definitions. When used herein, (A) "business day" shall mean any day on which the New York Stock Exchange and commercial banks in the city of New York are open for business, (B) an "affiliate" of a party shall mean any person or entity controlling, controlled by or under common control with that party and (C) "control" shall mean, with respect to an entity, the ability to direct the business, operations or management of such entity, whether through an equity interest therein or otherwise. The term "Material Adverse Event", as such term is used in paragraph 4(a) of the Certificate of Designation, shall have the meaning set forth on Schedule 1.4 hereof. 2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. ------------------------------------------------ Each Purchaser hereby makes the following representations and warranties to the Company and agrees with the Company that, as of the date of this Agreement and as of the date of each Closing: 2.1 Authorization; Enforceability. Such Purchaser is duly and validly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization with full power and authority to purchase the Preferred Shares and Warrants and to execute and deliver this Agreement. This Agreement constitutes such Purchaser's valid and legally binding obligation, enforceable in accordance with its terms, except as such enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity. 2.2 Accredited Investor. Such Purchaser is an accredited investor as that term is defined in Rule 501 of Regulation D, and is acquiring the Preferred Shares and Warrants solely for its own account as a principal and not with a present view to the public resale or distribution of all or any part thereof, except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act; provided, however that in making such representation, such Purchaser does not agree to hold the Securities for any minimum or specific term and reserves the right to sell, transfer or otherwise dispose of the Securities at any time in accordance with the provisions of this Agreement and with Federal and state securities laws applicable to such sale, transfer or disposition. 2.3 Information. The Company has provided such Purchaser with information regarding the business, operations and financial condition of the Company, and has granted to such Purchaser the opportunity to ask questions of and receive answers from representatives of the Company, its officers, -3- directors, employees and agents concerning the Company and materials relating to the terms and conditions of the purchase and sale of the Preferred Shares and Warrants hereunder. Neither such information nor any other investigation conducted by such Purchaser or any of its representatives shall modify, amend or otherwise affect such Purchaser's right to rely on the Company's representations and warranties contained in this Agreement. 2.4 Limitations on Disposition. Such Purchaser acknowledges that, except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom. 2.5 Legend. Such Purchaser understands that the certificates representing the Securities may bear at issuance a restrictive legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, and may not be offered or sold unless a registration statement under the Securities Act and applicable state securities laws shall have become effective with regard thereto, or an exemption from registration under the Securities Act and applicable state securities laws is available in connection with such offer or sale. Such securities are issued subject to the provisions of (i) the Certificate of Designation relating to the Series B Convertible Preferred Stock of OrthoLogic Corp. (the "Company"), (ii) a Securities Purchase Agreement, dated as of July 9, 1998, by and among the Company and the Purchasers named therein, and (iii) a Registration Rights Agreement, dated as of July 9, 1998, by and among the Company and such Purchasers." Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or transfer (including without limitation a pledge) of any of the Securities is registered pursuant to an effective registration statement, (B) such Securities have been sold pursuant to Rule 144 under the Securities Act or any successor provision ("Rule 144") or (C) such Securities are eligible for resale under Rule 144(k) or any successor provision, such Securities shall be issued without any legend or other restrictive language and, with respect to Securities upon which such legend is stamped, the Company shall issue new certificates without such legend to the holder upon request. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. ----------------------------------------------- The Company hereby makes the following representations and warranties to each Purchaser and agrees with each Purchaser that, as of the date of this Agreement and as of the date of each Closing: -4- 3.1 Organization, Good Standing and Qualification. Each of the Company and its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority to carry on its business as now conducted. Each of the Company and its subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the consolidated business, operations, properties, financial condition, prospects or results of operations of the Company and its subsidiaries taken as a whole or on the ability of the Company to perform its obligations under the Transaction Documents or the Certificate of Designation (a "Material Adverse Effect"). The term "subsidiaries" shall mean entities in which the Company has an equity interest of 50% or greater. 3.2 Authorization; Consents. The Company has the requisite corporate power and authority to enter into and perform its obligations under (i) this Agreement, (ii) the Registration Rights Agreement, (iii) the Warrants and (iv) all other agreements, documents, certificates or other instruments executed and delivered by or on behalf of the Company at any Closing (the instruments described in (i), (ii), (iii) and (iv) being collectively referred to herein as the "Transaction Documents"), to execute and perform its obligations under the Certificate of Designation, to issue and sell the Preferred Shares and the Warrants to the Purchasers in accordance with the terms hereof, to issue the Conversion Shares upon conversion of the Preferred Shares in accordance with the Certificate of Designation and to issue the Warrant Shares upon exercise of the Warrants. All corporate action on the part of the Company by its officers, directors and stockholders necessary for (A) the authorization, execution and delivery of, and the performance by the Company of its obligations under, the Transaction Documents, and (B) the authorization, execution and filing of, and the performance by the Company of its obligations under, the Certificate of Designation has been taken, and no further consent or authorization of the Company, its Board of Directors, its stockholders, any governmental agency or organization (other than such approval as may be required under the Securities Act and applicable state securities laws in respect of the Registration Rights Agreement), or any other person or entity is required (pursuant to any rule of the National Association of Securities Dealers, Inc. or otherwise). 3.3 Enforcement. The Transaction Documents and the Certificate of Designation constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except as such enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity. 3.4 Disclosure Documents; Agreements; Financial Statements; Other Information. The Company has filed with the Commission: (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1997, (ii) a Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, (iii) all Current Reports on Form 8-K required to be filed with the Commission since December 31, 1997 and (iv) the Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company is not aware of any event occurring on or prior to the date of such Closing (other than the transactions effected hereby) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such Closing. Each Disclosure Document, as of the date of the filing thereof with the Commission, conformed in all -5- material respects to the requirements of the Exchange Act, and the rules and regulations thereunder and, as of the date of such filing, such Disclosure Document did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All material agreements required to be filed as exhibits to the Disclosure Documents have been filed as required. Neither the Company nor any of its subsidiaries is in breach of any agreement to which it is a party or by which it is bound where such breach is reasonably likely to have a Material Adverse Effect. Except as set forth in the Disclosure Documents or any schedule or exhibit attached hereto, the Company has no liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business which, under generally accepted accounting principles, are not required to be reflected in such financial statements and which, individually or in the aggregate, are not material to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. As of their respective dates, the financial statements of the Company included in the Disclosure Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied at the times and during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments). The written information described in paragraph 2.3 above does not contain an untrue statement of material fact or omit to state a material fact required in order to make such information not misleading, and, except as specifically disclosed to such Purchaser, does not include any material, non-public information. 3.5 Capitalization. The capitalization of the Company as of the date hereof, including its authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company's stock option plans, the number of shares issuable and reserved for issuance pursuant to securities (other than the Preferred Stock) exercisable for, or convertible into or exchangeable for any shares of Common Stock and the number of shares initially to be reserved for issuance upon conversion of the Preferred Shares and exercise of the Warrants is set forth on Schedule 3.5 hereto. All of such outstanding shares of capital stock have been, or upon issuance will be, validly issued, fully paid and non-assessable. No shares of the capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders of the Company or any liens or encumbrances created by or through the Company. Except as disclosed on Schedule 3.5, or as contemplated herein, as of the date of this Agreement and as of the date of such Closing, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries. The Purchasers acknowledge and agree that the representation and warranty made in this paragraph 3.5 does not prohibit the Company from, at any meeting of its stockholders from time to time, amending an existing stock option plan or adopting a -6- new stock option plan to provide for the grant of options for as much as fifteen percent (15%), in the aggregate at any point in time, of the issued and outstanding shares of Common Stock, measured as of the record date for the meeting at which stockholder approval for such amended or new stock option plan is sought. 3.6 Valid Issuance. The Preferred Shares are duly authorized and, when issued, sold and delivered in accordance with the terms hereof, (i) will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company, (ii) based in part upon the representations of each Purchaser in this Agreement, will be issued, sold and delivered in compliance with all applicable Federal and state securities laws and (iii) will be entitled to all of the rights, preferences and privileges set forth in the Certificate of Designation. The Warrants are duly authorized and, when issued, sold and delivered in accordance with the terms hereof, (i) will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company and (ii) based in part upon the representations of each Purchaser in this Agreement, will be issued, sold and delivered in compliance with all applicable Federal and state securities laws. The Conversion Shares are duly authorized and reserved for issuance and, when issued upon conversion of the Preferred Shares in accordance with the terms of the Certificate of Designation, will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company. The Warrant Shares are duly authorized and, upon the issuance thereof in accordance with the terms of the Warrant, will be duly and validly issued, fully paid and nonassessable, free and clear of any taxes, liens, claims, preemptive or similar rights or encumbrances imposed by or through the Company. 3.7 No Conflict with Other Instruments. Neither the Company nor any of its subsidiaries is in violation of any provisions of its charter, Bylaws or any other governing document or in default (and no event has occurred which, with notice or lapse of time or both, would constitute a default) under any provision of any instrument or contract to which it is a party or by which it is bound, or of any provision of any Federal or state judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company, which would have a Material Adverse Effect. The (i) execution, delivery and performance of this Agreement and the other Transaction Documents, (ii) execution and filing of the Certificate of Designation, and (iii) consummation of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Preferred Shares and the Warrants and the reservation for issuance and issuance of the Conversion Shares and the Warrant Shares) will not (A) result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or of any of its subsidiaries or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer on the part of holders of the Company's securities or (B) cause any Purchaser, or any affiliate of such Purchaser (in either such case, alone or together with any other Purchaser), to be deemed to be an Acquiring Person, as such term is defined in the Rights Agreement, dated as of March 4, 1997, between the Company and the Bank of New York (the "Rights Plan") or trigger any rights under the Rights Plan. Each Conversion Share and Warrant Share shall be entitled to all of the rights afforded to shares of Common Stock under the Rights Plan. -7- 3.8 Financial Condition; Taxes; Litigation. 3.8.1 The Company's financial condition is, in all material respects, as described in the Disclosure Documents, except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the consolidated business or financial condition of the Company and its subsidiaries taken as a whole. Except as otherwise described in the Disclosure Documents, there has been no material adverse change to the Company's business, operations, properties, financial condition, prospects or results of operations since the date of the Company's most recent audited financial statements contained in the Disclosure Documents. 3.8.2 The Company has filed all tax returns required to be filed by it and paid all taxes which are due, except for taxes which it reasonably disputes or which could not reasonably be expected to have a Material Adverse Effect. 3.8.3 Except as set forth on Schedule 3.8.3, neither the Company nor any of its subsidiaries is the subject of any pending or, to the Company's knowledge, threatened inquiry, investigation or administrative or legal proceeding by the Internal Revenue Service, the taxing authorities of any state or local jurisdiction, the Commission or any state securities commission or other governmental or regulatory entity. 3.8.4 Except as described on Schedule 3.8.4, there is no material claim, litigation or administrative proceeding pending, or, to the Company's knowledge, threatened or contemplated, against the Company or any of its subsidiaries, or against any officer, director or employee of the Company or any such subsidiary in connection with such person's employment therewith. Neither the Company nor any of its subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could reasonably be expected to have a Material Adverse Effect. 3.9 Reporting Company; Form S-3. The Company is subject to the reporting requirements of the Exchange Act, has a class of securities registered under Section 12 of the Exchange Act, and has filed all reports required thereby. The Company will be, as of September 1, 1998, eligible to register a primary issuance of shares of its Common Stock on a registration statement on Form S-3 under the Securities Act. 3.10 Acknowledgement of Dilution. The Company acknowledges that the issuance of the Conversion Shares upon conversion of the Preferred Shares in accordance with the terms of the Certificate of Designation and the issuance of the Warrant Shares upon exercise of the Warrants may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Preferred Shares and to issue Warrant Shares upon exercise of the Warrants is unconditional and absolute regardless of the effect of any such dilution. 3.11 Intellectual Property. The Company and its subsidiaries each owns or possesses -8- adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property rights necessary to conduct the business now operated by it (the "Intellectual Property Rights"), and is not aware of any infringement by a third party with respect to such rights or of any infringement by it or conflict with asserted rights of others that, in any such case, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. The Intellectual Property Rights are valid and enforceable and no registration relating thereto has lapsed, expired or terminated or is the subject of any claim or proceeding that could result in any such lapse, expiration or termination. The Company and its subsidiaries each has complied in all material respects with its obligations pursuant to any agreement relating to the Intellectual Property Rights that are the subject of licenses granted by third parties. 3.12 Registration Rights; Rights of Participation. Except as described on Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to any person or entity any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority which has not been satisfied and (B) no person or entity, including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement, the other Transaction Documents or the Certificate of Designation which has not been waived. 3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not been suspended. The Company is in full compliance with the continued designation criteria of the Nasdaq National Market, and does not reasonably anticipate that the Common Stock will lose its designation as a Nasdaq National Market Security, whether by reason of the transactions contemplated by this Agreement, the other Transaction Documents or the Certificate of Designation, and is not aware of any inquiry by or received any notice from the National Association of Securities Dealers, Inc. ("NASD") regarding any failure or alleged failure by the Company to comply with such criteria. 3.14 Solicitation. Neither the Company nor any of its subsidiaries or affiliates, nor any person acting on its or their behalf, (i) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Preferred Shares or (ii) has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under any circumstances that would require registration of the Preferred Shares under the Securities Act. 3.15 Fees. Except as described on Schedule 3.15 hereto, the Company is not obligated to pay any compensation or other fee, cost or related expenditure to any underwriter, broker, agent or other representative in connection with the transactions contemplated hereby. 3.16 Foreign Corrupt Practices. To the knowledge of the Company, neither the Company, nor any of its subsidiaries nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect -9- unlawful payment to any foreign or domestic government official or employee, or (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 3.17 Other Issuances of Securities. The Company has not issued (and will not issue) any shares of Common Stock or shares of any series of preferred stock or other securities or instruments convertible into, exchangeable for or otherwise entitling the holder thereof to acquire shares of Common Stock which would be integrated with the sale of the Preferred Shares to the Purchasers, or the issuance of the Conversion Shares upon conversion thereof, for purposes of determining whether stockholder approval is required under the designation criteria of the Nasdaq National Market or otherwise. 3.18 Title. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, claims, encumbrances and defects, except for liens, claims, encumbrances or defects which do not materially affect the value of such property and do not interfere with the use made or proposed to be made of such property by the Company and its subsidiaries. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company and its subsidiaries. 3.19 Regulatory Permits. The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. 4. COVENANTS OF THE COMPANY AND THE PURCHASERS. ------------------------------------------- 4.1 Corporate Existence. The Company shall, so long as any Purchaser or any affiliate of such Purchaser beneficially owns any Securities, maintain its corporate existence in good standing and shall pay all taxes owed by it when due except for taxes which the Company reasonably disputes or as to which the failure to pay could not reasonably be expected to have a Material Adverse Effect. 4.2 Provision of Information. The Company shall provide each Purchaser with copies of its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, press releases and proxy statements and other materials sent to stockholders, in each such case promptly after the filing thereof with the Commission, until the conversion or redemption of all of the Preferred Shares. 4.3 Form D; Blue-Sky Qualification. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to each Purchaser promptly -10- after such filing. The Company shall, on or before the Tranche A Closing Date, take such action as is necessary to qualify the Preferred Shares for sale under applicable state or "blue-sky" laws or obtain an exemption therefrom, and shall provide evidence of any such action to each Purchaser at or prior to each Closing. 4.4 Reporting Status. As long as any Purchaser or any affiliate of such Purchaser beneficially owns any Securities and until the date on which any of the foregoing may be sold to the public pursuant to Rule 144(k) (or any successor rule or regulation), (i) the Company shall timely file with the Commission all reports required to be so filed pursuant to the Exchange Act and (ii) the Company shall not terminate its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit such termination. The Company agrees to file with the Commission a Form 8-K describing the terms of the transactions contemplated by this Agreement and the other Transaction Documents, with the Transaction Documents attached to such Form 8-K as an exhibit thereto, on or before the tenth (10th) day following the Tranche A Closing Date in the form required by the Exchange Act. On or before the business day immediately following a Closing, the Company agrees to issue a press release describing all of the material terms of the transaction consummated at such Closing. 4.5 Reservation of Common Stock. The Company shall at all times have authorized and reserved for issuance, free from any preemptive rights, solely for the purpose of effecting conversions of the Preferred Shares and exercise of the Warrants, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all of the Preferred Shares and exercise of all of the Warrants then outstanding (the "Reserved Amount"). As of the Tranche A Closing Date, the Reserved Amount shall be equal to no less than 175% of the number of shares of Common Stock issuable upon conversion of all of the Preferred Shares and exercise of all of the Warrants to be issued at the Tranche A Closing (assuming for such purpose that such conversion or exercise were to occur as of the Tranche A Closing Date). If on any date the Reserved Amount is less than 150% of the number of shares of Common Stock then issuable upon conversion of all of the Preferred Shares and exercise of all of the Warrants then outstanding (assuming for such purpose that such conversion or exercise were to occur as of such date), the Company shall take action (including without limitation seeking stockholder approval for the authorization or reservation of additional shares of Common Stock) as soon as practicable (but in no event later than the fifth (5th) business day or, in the event that stockholder approval is required, the sixtieth (60th) day following such date) to increase the Reserved Amount to no less than 175% of the number of shares of Common Stock into which such outstanding Preferred Shares are then convertible and such outstanding Warrants are exercisable. The Company shall not reduce the number of shares reserved for issuance hereunder without the written consent of the holders of two-thirds of the Preferred Shares then outstanding. Any determination made hereunder as to the number of shares of Common Stock issuable upon the conversion of Preferred Shares or exercise of Warrants shall be made without regard to any restriction on such conversion or exercise that might otherwise exist under this Agreement, the other Transaction Documents or the Certificate of Designation. The initial Reserved Amount shall be allocated pro rata among the Purchasers based on the number of Preferred Shares issued to each Purchaser at the Tranche A Closing. Each increase in the Reserved Amount shall be allocated pro rata among the Holders based on the number of Preferred Shares held by such Holder at the time of such increase. In the event that a Holder shall sell or -11- otherwise transfer any of such Holder's Preferred Shares, each transferee shall be allocated a pro rata portion of such transferor's Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Preferred Shares shall be allocated to the remaining Holders pro rata based on the number of Preferred Shares then held by such Holders. 4.6 Use of Proceeds. The Company shall use the proceeds from the sale of the Preferred Shares for general corporate purposes only, in the ordinary course of its business and consistent with past practice, and shall not use such proceeds to make a loan to any employee, officer or director of the Company or to repurchase or pay a dividend on shares of Common Stock. 4.7 Transactions with Affiliates. The Company agrees that any transaction or arrangement between it or any of its subsidiaries and any affiliate or employee of the Company shall be effected on an arms' length basis in accordance with customary commercial practice and shall be approved by a majority of the Company's outside directors. 4.8 Quotation on Nasdaq. The Company shall (i) promptly following the Tranche A Closing, take such action as may be necessary to include the Conversion Shares and the Warrant Shares on the Nasdaq National Market, and (ii) use its best efforts to maintain the designation and quotation, or listing, of the Common Stock on the Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange. 4.9 Use of Purchaser Name. Except as may be required by applicable law, the Company shall not use, directly or indirectly, any Purchaser's name or the name of any of its affiliates in any advertisement, announcement, press release or other similar communication unless it has received the prior written consent of any Purchaser for the specific use contemplated or as otherwise required by applicable law or regulation. 4.10 Company's Instructions to Transfer Agent. On or prior to the Tranche A Closing Date, the Company shall execute and deliver irrevocable instructions to its transfer agent (the "Transfer Agent") (i) to issue certificates representing Conversion Shares upon conversion of the Preferred Shares in accordance with the terms of the Certificate of Designation and receipt of a valid Conversion Notice (as defined in the Certificate of Designation) from a Purchaser, in the amount specified in such Conversion Notice, in the name of such Purchaser or its nominee, (ii) to issue certificates representing Warrant Shares upon exercise of the Warrants and (iii) to deliver such certificates to such Purchaser no later than the close of business on the third (3rd) business day following the related Conversion Date (as defined in the Certificate of Designation) or Exercise Date (as defined in the Warrant), as the case may be. As long as the Company shall instruct the transfer agent that, in lieu of delivering physical certificates representing shares of Common Stock to a Purchaser upon conversion of the Preferred Shares, or exercise of the Warrants, and as long as the Transfer Agent is a participant in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and such Purchaser has not informed the Company that it wishes to receive physical certificates therefor, the transfer agent may effect delivery of Conversion Shares or Warrant Shares, as the case may be, by crediting the account of such Purchaser or its nominee at DTC for the number of shares for which delivery is required hereunder within the time frame specified above for delivery of certificates. The Company represents -12- to and agrees with each Purchaser that it will not give any instruction to the Transfer Agent that will conflict with the foregoing instruction or otherwise restrict such Purchaser's right to convert the Preferred Shares or to receive Conversion Shares in accordance with the terms of the Certificate of Designation or to exercise the Warrant or to receive Warrant Shares upon exercise of the Warrants. In the event that the Company's relationship with the Transfer Agent should be terminated for any reason, the Company shall use its best efforts to cause the Transfer Agent to continue acting as transfer agent pursuant to the terms hereof until such time that a successor transfer agent is appointed by the Company and receives the instructions described above. 4.11 Capital Raising Limitation; Registration Limitation. The Company will not, during the one hundred and eighty (180) day period following the Tranche A Closing Date and, if the Tranche B Closing occurs, following the Tranche B Closing Date, offer for sale or sell any Common Stock (or any security convertible into, or exercisable or exchangeable for, Common Stock) (the "Capital Raising Limitation"). The Company will not, during the two hundred and seventy (270) day period following the effective date of the Registration Statement (as defined in the Registration Rights Agreement), register any shares of Common Stock otherwise than pursuant to the Registration Rights Agreement (the "Registration Limitation"). The Capital Raising Limitation and the Registration Limitation shall not apply to any transaction involving the issuance of Common Stock in a firm-commitment underwritten registered public offering, to the issuance of Common Stock pursuant to a warrant exercise for any warrant outstanding prior to the date hereof or the grant or exercise of options for Common Stock granted pursuant to one or more stock option plans (such plan or plans to be subject to the limitations described in paragraph 3.5 hereof) approved by the stockholders of the Company. 4.12 Right of First Offer. Prior to any offer or sale by the Company of Common Stock (or any securities convertible or exercisable into or exchangeable for Common Stock) during the one (1) year period following the Tranche A Closing Date and, if the Tranche B Closing occurs, following the Tranche B Closing Date (the "First Offer Period"), the Company must first deliver to each Purchaser written notice describing the proposed issuance, including the terms and conditions thereof, and provide such Purchaser with an option during the five (5) business day period following delivery of such notice to purchase up to its proportionate share (based on the number of Preferred Shares purchased by such Purchaser hereunder relative to the number of Preferred Shares purchased by all of the Purchasers hereunder) of the securities being offered on the same terms as contemplated by such issuance. In the event that such Purchaser either does not give notice within such five business day period that it intends to exercise the foregoing option or informs the Company in writing that it does not intend to participate in such issuance, the Company may offer to a third party the option to purchase up to, in the aggregate, the amount of securities which were declined by such Purchaser, on the same terms as were offered to such Purchaser. The Right of First Offer shall not apply to any transaction involving the issuance of Common Stock in a firm-commitment underwritten registered public offering or to a warrant exercise for any warrant outstanding prior to the date hereof or to the issuance of Common Stock pursuant to a stock option plan adopted by the Company prior to the date hereof. 4.13 No Adverse Action. The Company and its subsidiaries shall refrain, while any Preferred Shares are outstanding, from taking any action or entering into any arrangement which in any way adversely affects (i) the rights, privileges or benefits available to a holder of Preferred Stock pursuant to -13- the terms of the Certificate of Designation or (ii) the rights, privileges or benefits available to a holder of a Warrant. 4.14 Short Sales. Each Purchaser agrees that will not create a "short position" in the Common Stock at any time following the Tranche A Closing Date until the earlier of (a) the fourth (4th) anniversary of the later to occur of the Tranche A Closing Date and the Tranche B Closing Date and (b) the first date on which such Purchaser no longer owns any Preferred Shares. For purposes hereof, a "short position" shall be deemed to have been created by a Purchaser if such Purchaser (i) enters into a "short sale" (as such term is defined in Rule 3(b)(3) under the Exchange Act), (ii) purchases a put option to sell shares of Common Stock or (iii) enters into a derivative or other similar transaction whereby such Purchaser will be compensated in the event of a decline in the price of the Common Stock; provided, however, that such term shall not include any short sales effected (A) as a result of the Company's failure to deliver Conversion Shares or Warrant Shares, as the case may be, in accordance with the terms of the Certificate of Designation or Warrant, respectively or (B) on the same day (or on the immediately preceding Trading Day) on which a Conversion Notice (as defined in the Certificate of Designation) is delivered by such Purchaser to the Company. 4.15 Obligation to Hold Annual Stockholder Meeting. The Company agrees that, on or prior to May 31, 1999, it will hold a meeting of its stockholders at which it will recommend, and will otherwise use its best efforts to ensure, that such stockholders (i) approve the transactions contemplated by this Agreement, the other Transaction Documents and the Certificate of Designation and (ii) increase the Company's authorized Common Stock and out of such increase, increase the Reserved Amount by no less than the greater of seven million five hundred thousand (7,500,000) shares of Common Stock and one hundred and fifty percent (150%) of the number of shares of Common Stock issuable upon conversion of all of the Preferred Shares and exercise of the Warrants outstanding on the date the proxy statement relating to such meeting is filed with the Commission (assuming such conversion or exercise is effected at the Conversion Price or Exercise Price then in effect and without regard to any restrictions on such conversion or exercise that might otherwise exist); provided, however that if such approval is not obtained by May 31, 1999, and at any time thereafter, the sum of (i) the number of shares of Common Stock issuable upon conversion of all of the then outstanding Preferred Shares and exercise of the outstanding Warrants (assuming such conversion or exercise is effected at the Conversion Price or Exercise Price then in effect and without regard to any restrictions on such conversion or exercise that might otherwise exist) plus (ii) the aggregate number of shares of Common Stock theretofore issued upon conversion of the Preferred Shares and exercise of the Warrants is equal to or greater than five million (5,000,000) shares of Common Stock (the "Conversion Limit Amount") for five consecutive Trading Days, each Purchaser shall have the right, upon written notice to the Company, to require the Company to redeem a number of such Purchaser's Preferred Shares such that, immediately following such redemption (a "Conversion Limit Redemption"), such Purchaser's allocable portion of the Conversion Limit Amount (such allocable portion to be determined based on the number of Preferred Shares purchased by such Purchaser hereunder relative to the aggregate number of Preferred Shares purchased by the Purchasers hereunder) represents no less than one hundred and fifty percent (150%) of the number of shares of Common Stock issuable upon conversion of the Preferred Shares and exercise of the Warrants then held by such Purchaser (assuming such conversion or exercise is effected at the Conversion Price or Exercise Price then in effect and without -14- regard to any restrictions on such conversion or exercise that might otherwise exist). For purposes of clarification, the parties acknowledge and agree that each Purchaser shall have the right to require a Conversion Limit Redemption each and every time that the conditions set forth in this paragraph 4.15 to such redemption exist. The Company shall, within five (5) business days of its receipt from a Purchaser of a notice requesting a Conversion Limit Redemption, redeem the number of Preferred Shares subject to such redemption by delivering to such Purchaser immediately available funds in an amount equal to the Conversion Limit Redemption Price. Any amounts representing the Conversion Limit Redemption Price which are not paid when due shall bear interest at an annual rate equal to the Default Interest Rate (as defined in the Certificate of Designation). For purposes hereof, the "Conversion Limit Redemption Price" with respect to a Preferred Share shall be equal to (a) during the first three hundred and sixty (360) days following the Closing Date relating to such Preferred Share, 108.5% of the Stated Value of such Preferred Share and (b) following the last day of such three hundred and sixtieth day period, a price that is calculated so that the holder of such Preferred Share will receive an annualized return on the Stated Value of such Preferred Share of 8.5%. The right of a Purchaser to require a Conversion Limit Redemption in the circumstances described herein will be in addition to any other rights or remedies available to such Purchaser in such circumstances, whether at law or in equity, under this Agreement, the other Transaction Documents or the Certificate of Designation. 4.16 Obligation to Hold Special Stockholder Meeting. In the event that a "Material Adverse Event" (as defined in paragraph 4(a) of the Certificate of Designation) occurs, (A) the Company will have the right, upon written notice (a "Material Adverse Event Notice") delivered to the Holders during the five (5) day period immediately following the occurrence of a Material Adverse Event, to redeem all of the Preferred Shares then outstanding at a redemption price equal to the Conversion Limit Redemption Price for each Preferred Share (an "Optional Redemption"), and deliver funds representing such redemption price to each Purchaser within three (3) business days following such five day period, (B) if the Company does not exercise its right to an Optional Redemption, it must, within sixty days following the end of such five day period, hold a special meeting of its stockholders at which it will recommend, and will otherwise use its best efforts to ensure, that such stockholders approve the transactions contemplated by this Agreement, the other Transaction Documents and the Certificate of Designation and authorize for issuance by the Company no less than either (i) seven million five hundred thousand (7,500,000) additional shares of Common Stock, or (ii) one hundred and fifty percent (150%) of the number of shares of Common Stock issuable upon conversion of all of the Preferred Shares outstanding on the date that the proxy statement relating to such meeting is filed with the Commission, and (C) if the Company does not hold such special meeting within the time period specified in clause (B) above, or the stockholders do not approve the proposals described in clause (B) above, such failure will be deemed to constitute a Mandatory Redemption Event under the Certificate of Designation. Notwithstanding the foregoing, each Purchaser shall have the right, upon receipt by such Purchaser of a Material Adverse Event Notice from the Company, to notify the Company in writing within five (5) business days following such receipt that the Company will not be required to seek the stockholder approval described in clause (B) above, in which case the Company will no longer have the right to redeem any Preferred Shares pursuant to clause (A) above. -15- 5. CONDITIONS TO CLOSING. --------------------- 5.1 Conditions to Purchasers' Obligations at Tranche A Closing. Each Purchaser's obligations at the Tranche A Closing, including without limitation its obligation to purchase Preferred Shares and Warrants at the Tranche A Closing, are conditioned upon the fulfillment (or waiver by such Purchaser) of each of the following events as of the Tranche A Closing Date: 5.1.1 the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of such date as if made on such date; 5.1.2 the Company shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by the Company on or before such Closing; 5.1.3 the Company shall have delivered to such Purchaser a certificate, signed by an officer of the Company, certifying that the conditions specified in paragraphs 5.1.1 and 5.1.2 above have been fulfilled as of such Closing; 5.1.4 the Company shall have filed the Certificate of Designation with the Secretary of State of the State of Delaware and shall have furnished such Purchaser with a file-stamped copy thereof; 5.1.5 the Company shall have delivered to such Purchaser an opinion of counsel for the Company, dated as of such date, in substantially the form set forth on Exhibit 5.1.5 hereto, and covering such additional matters as may reasonably be requested by such Purchaser; 5.1.6 the Company shall have delivered duly executed certificates representing the Preferred Shares and the Warrants being so purchased; 5.1.7 the Company shall have executed and delivered the Registration Rights Agreement; 5.1.8 the Common Stock shall be designated for quotation and actively traded on the Nasdaq National Market; 5.1.9 there shall have been no material adverse change in the Company's consolidated business or financial condition since the date of the Company's most recent audited financial statements contained in the Disclosure Documents; 5.1.10 the Company shall have authorized and reserved for issuance one hundred and seventy five percent (175%) of the aggregate number -16- of shares of Common Stock issuable upon conversion of all of the Preferred Shares and exercise of all of the Warrants (such number to be determined using the Conversion Price or exercise price in effect on the Tranche A Closing Date and without regard to any restriction on the ability of a Purchaser to convert Preferred Shares or exercise the Warrants as of such date) to be issued at the Tranche A Closing; 5.1.11 each of the Company's executive officers shall have executed and delivered a letter agreement addressed to such Purchaser regarding such person's agreement to refrain from selling such person's holdings of Common Stock for one (1) year from the Tranche A Closing Date, provided, however, that the letter executed and delivered by Frank McGee shall state that such agreement to refrain from selling Common Stock shall expire on January 1, 1999; 5.1.12 each of the Company's executive officers who owns shares of Common Stock shall have executed and delivered a letter agreement addressed to such Purchaser regarding such person's agreement to vote such shares in favor of any proposal made at or in connection with any meeting of the holders of the Company's Common Stock regarding (i) approval of the transactions contemplated herein or (ii) the authorization of the issuance of additional shares of Common Stock as Conversion Shares; and 5.1.13 the Company shall have notified such Purchaser in writing of the name, address, and telephone and fax numbers of, and the name of a contact person at, the Transfer Agent for the purpose of delivering Conversion Notices (as defined in the Certificate of Designation). 5.2 Conditions to Purchasers' Obligations at the Tranche B Closing. Each Purchaser's obligations at the Tranche B Closing, including without limitation its obligation to purchase Preferred Shares and Warrants at such Closing, are conditioned upon the fulfillment (or waiver by the Purchaser) of each of the following events as of the date of such Closing: 5.2.1 the representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as of such date as if made on such date; 5.2.2 the Company shall have complied with or performed in all material respects all of the agreements, obligations and conditions set forth in this Agreement, the Registration Rights Agreement and the Certificate of Designation that are required to be complied with or performed by the Company at any time prior to such Closing; 5.2.3 the Company shall have delivered to the Purchaser a certificate, signed -17- by an officer of the Company, certifying that the conditions specified in paragraphs 5.2.1, 5.2.2 and 5.2.9 hereof have been fulfilled as of such Closing; 5.2.4 the Company shall have delivered to the Purchaser an opinion of counsel for the Company, dated as of such date, in substantially the form set forth on Exhibit 5.2.4 hereto, and covering such additional matters as may reasonably be requested by the Purchaser; 5.2.5 the Company shall have delivered duly executed certificates representing the Preferred Shares and Warrants being so purchased; 5.2.6 the Common Stock shall be designated for quotation and actively traded on the Nasdaq National Market; 5.2.7 there shall have been no material adverse change in the Company's consolidated business or financial condition since the date of the Company's most recent audited financial statements contained in the Disclosure Documents; 5.2.8 the Company shall have authorized and reserved for issuance not less than one hundred and seventy five percent (175%) of the aggregate number of shares of Common Stock issuable upon conversion or exercise of (i) all of the Preferred Shares and Warrants then outstanding and (ii) all of the Preferred Shares and Warrants to be issued at such Closing (such number to be determined using the Conversion Price or exercise price in effect on the date of such Closing and without regard to any restriction on the ability of a Purchaser to convert Preferred Shares or exercise the Warrants as of such date); 5.2.9 the Registration Statement (as defined in the Registration Rights Agreement) shall have been declared effective and shall be available for the sale by each Purchaser of not less than two hundred percent (200%) of the aggregate number of shares of Common Stock issuable upon conversion or exercise of (x) all of the Preferred Shares and Warrants then outstanding and (y) all of the Preferred Shares and Warrants to be issued at such Closing (such number to be determined using the Conversion Price or Exercise Price in effect on the date of such Closing and without regard to any restriction on the ability of a Purchaser to convert Preferred Shares or exercise the Warrants as of such date), and no proceedings shall have been instituted by any government agency or self regulatory organization for the purpose of or in connection with issuing a stop order or other restraint on the use of such Registration Statement; -18- 5.2.10 a Mandatory Redemption Event (as defined in the Certificate of Designation) or any other event entitling a Purchaser to exercise a right of redemption under this Agreement, the other Transaction Documents or the Certificate of Designation shall not have occurred and be continuing; and 5.2.11 in the event that the Tranche B Closing is to occur (A) prior to the end of the Initial Tranche B Period, the Closing Bid Price (as defined in the Certificate of Designation) for the Common Stock must be at or above eight dollars ($8.00) on the day immediately prior to the Tranche B Closing Date, or (B) after the end of the Initial Tranche B Period, the Company shall have received the approval of its stockholders for the matters described in paragraph 4.15 above and the Closing Bid Price (as defined in the Certificate of Designation) for the Common Stock must be at or above eight dollars ($8.00) on the day immediately prior to the Tranche B Closing Date. 5.3 Conditions to Company's Obligations at Each Closing. The Company's obligations at each Closing are conditioned upon the fulfillment of each of the following events as of the date of such Closing: 5.3.1 the representations and warranties of each Purchaser shall be true and correct in all material respects as of such date as if made on such date; and 5.3.2 each Purchaser shall have complied with or performed all of the agreements, obligations and conditions set forth in this Agreement that are required to be complied with or performed by the Purchaser on or before such Closing. 6. MISCELLANEOUS. ------------- 6.1 Survival; Severability. The representations, warranties, covenants and indemnities made by the parties herein shall survive each Closing notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties. 6.2 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties. -19- Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. The Purchaser may assign its rights and obligations hereunder, in connection with any private sale or transfer of the Preferred Shares in accordance with the terms hereof, as long as, as a condition precedent to such transfer, the transferee executes an acknowledgment agreeing to be bound by the applicable provisions of this Agreement, in which case the term "Purchaser" shall be deemed to refer to such transferee as though such transferee were an original signatory hereto. The Company may not assign it rights or obligations under this Agreement. 6.3 No Reliance. Each party acknowledges that (i) it has such knowledge in business and financial matters as to be fully capable of evaluating this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, (ii) it is not relying on any advice or representation of any other party in connection with entering into this Agreement, the other Transaction Documents or such transactions (other than the representations made in this Agreement or the other Transaction Documents), (iii) it has not received from such party any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into this Agreement or the other Transaction Documents or the performance of its obligations hereunder and thereunder, and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into this Agreement and the other Transaction Documents based on its own independent judgment and on the advice of its advisors as it has deemed necessary, and not on any view (whether written or oral) expressed by such other party. 6.4 Independent Nature of Purchasers' Obligations and Rights. The obligations of each Purchaser hereunder are several and not joint with the obligations of the other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at the Closing, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. 6.5 Injunctive Relief. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to each Purchaser and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such breach, in addition to all other available remedies, such Purchaser shall be entitled to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss. 6.6 Governing Law; Jurisdiction. This Agreement shall be governed by and -20- construed under the laws of the State of New York without regard to the conflict of laws provisions thereof. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 6.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 6.8 Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.9 Notices. Any notice, demand or request required or permitted to be given by any party to any other party pursuant to the terms of this Agreement shall be in writing and shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 5:00 p.m., eastern time, on a business day or, if such day is not a business day, on the next succeeding business day, (ii) on the next business day after timely delivery to a nationally-recognized overnight courier and (iii) on the third business day after deposit in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed to the parties as follows: If to the Company: OrthoLogic Corp. 1275 West Washington Street Tempe, Arizona 85281 Attn: President Tel: (602) 437-5520 Fax: (602) 470-7080 with a copy to: Quarles & Brady One East Camelback Phoenix, Arizona 85012 Attn: P. Robert Moya, Esq. Tel. 602-230-5500 Fax. 602-230-5598 -21- and if to any Purchaser, to such address for such Purchaser as shall appear on the signature page hereof executed by such Purchaser, or as shall be designated by such Purchaser in writing to the Company. 6.10 Expenses. The Company and each Purchaser each shall pay all costs and expenses that it incurs in connection with the negotiation, execution, delivery and performance of this Agreement, provided, however, that the Company shall reimburse Marshall Capital Management, Inc. for all out-of-pocket expenses (including without limitation legal fees and expenses) incurred by it in connection its due diligence investigation of the Company and the negotiation, preparation, execution, delivery and performance of the Certificate of Designation, this Agreement and the other Transaction Documents in an amount not to exceed forty thousand dollars ($40,000). 6.11 Entire Agreement; Amendments. This Agreement and the other Transaction Documents constitute the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and the holders of at least two-thirds (2/3) of the Preferred Shares then outstanding, and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such waiver is sought. [Remainder of Page Intentionally Left Blank] -22- IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above written. ORTHOLOGIC CORP. By: /s/ Thomas R. Trotter ------------------------- Name: Thomas R. Trotter Title: President & CEO PURCHASER NAME: ______________________________ By: _________________________ Name: Title: ADDRESS: _______________________________ _______________________________ Tel: __________________________ Fax: __________________________ Number of Shares of Series B Preferred Stock to be Purchased: _______________ Number of Shares of Common Stock represented by the Warrants to be Purchased: _______________ -23- -----END PRIVACY-ENHANCED MESSAGE-----