EXECUTION COPY
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STOCK PURCHASE AGREEMENT
DATED AS OF
AUGUST 18, 1997
AMONG
BONE, MUSCLE AND JOINT, INC.
AND
COMDISCO, INC.
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BONE, MUSCLE AND JOINT, INC.
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August 18, 1997
Comdisco, Inc.
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Stock Purchase Agreement
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Ladies and Gentlemen:
The undersigned, BONE, MUSCLE AND JOINT, INC., a Delaware
corporation (the "Corporation"), hereby agrees with Comdisco, Inc. (the
"Investor"), as follows:
SECTION 1. Issuance and Sale of Series E Preferred Stock; Closing.
1.1 Authorization of Shares. On the terms and subject to the conditions
hereof, the Corporation has authorized the issuance and sale at the Closing (as
hereinafter defined) of an aggregate of 41,667 shares (the "Shares") of the
Series E Convertible Preferred Stock, $.01 par value (the "Series E Preferred
Stock"), of the Corporation.
1.2 Agreement to Purchase and Sell the Shares. At the Closing, the
Corporation is selling to the Investor, and the Investor is purchasing from the
Corporation, upon the terms and subject to the conditions hereinafter set forth,
the Shares, at a purchase price of $6.00 per Share.
1.3 The Closing. The closing (the "Closing") hereunder with respect to the
purchase of the Shares is taking place on the date hereof at the offices of
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date hereof being sometimes referred to herein as the "Closing Date").
1.4 Delivery of Shares to the Investors. At the Closing, the Corporation
shall deliver to the Investor a certificate representing the Shares registered
in the name of the Investor and dated the Closing Date. Delivery to the Investor
of the Shares being purchased by the Investor hereunder shall be made against
receipt by the Corporation of a check payable to the Corporation, or a wire
transfer to an account designated by the Corporation, in either case in an
amount equal to $250,002.
SECTION 2. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to the Investor as follows:
2.1 Organization. The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Corporation has all requisite corporate power and authority to own and lease its
properties, to carry on its business as presently conducted and to carry out the
transactions contemplated hereby.
2.2 Capitalization. The authorized capital stock of the Corporation
immediately upon consummation of the transactions contemplated hereby shall
consist of:
(a) 20,000,000 shares of common stock, $.001 par value (the "Common
Stock"), of the Corporation, of which (i) 8,611,064 shares will be validly
issued and outstanding, fully paid and nonassessable; (ii) 2,000,000 shares
will be reserved for issuance pursuant to the Corporation's 1996 Stock
Option Plan (the "Stock Option Plan"); (iii) 8,804,716 shares will be
reserved for issuance upon conversion of the Preferred Stock; and 86,665
shares will be reserved for issuance upon exercise of outstanding warrants
issued by the Corporation.
(b) 8,633,049 shares of preferred stock, $.01 par value (the
"Preferred Stock"), of the Corporation, of which (i) 999,999 shares will be
designated Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and all of such shares will be validly issued and outstanding,
fully paid and nonassessable; (ii) 999,999 shares will be designated Series
A-1 Convertible Preferred Stock and all of such shares will be reserved for
issuance upon conversion of the Series A Preferred Stock pursuant to
Section 6 of Article IV of the Corporation's Amended and Restated
Certificate of Incorporation; (iii) 2,000,001 shares will be designated
Series B Convertible Preferred Stock (the "Series B Preferred Stock") and
all of such shares will be validly issued and outstanding, fully paid and
nonassessable; (iv) 2,000,001 shares will be designated Series B-1
Convertible Preferred Stock and all of such shares will be reserved for
issuance upon conversion of the Series B Preferred Stock pursuant to
Section 6 of Article IV of the Corporation's Amended and Restated
Certificate of Incorporation; (v) 254,999 shares will be designated Series
C Convertible Preferred Stock and all of such shares will be validly issued
and outstanding, fully paid and nonassessable; (vi) 189,000 shares will be
designated Series D Convertible Preferred Stock (the "Series D Preferred
Stock") and 188,072 of such shares will be validly issued and outstanding,
fully paid and nonassessable; (vii) 189,000 shares will be designated
Series D-1 Convertible Preferred Stock and all of such shares will be
reserved for issuance upon conversion of the Series D Preferred Stock
pursuant to Section 6 of Article IV of the Corporation's Amended and
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Restated Certificate of Incorporation; (viii) 1,000,025 shares will be
designated Series E Preferred Stock and 741,669 of such shares will be validly
issued and outstanding, fully paid and nonassessable; and (ix) 1,000,025 shares
will be designated Series E-1 Convertible Preferred Stock and all of such shares
will be reserved for issuance upon conversion of the Series E Preferred Stock
pursuant to Section 6 of Article IV of the Corporation's Amended and Restated
Certificate of Incorporation;
Except for Common Stock and Preferred Stock issuable (x) upon conversion of
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock, (y) upon exercise
of the outstanding warrants to purchase an aggregate of 86,667 shares of Common
Stock and (z) pursuant to the Stock Option Plan, and upon the consummation of
the transactiopns contemplated hereby, there will be no (i) outstanding
warrants, options, agreements, convertible securities or other commitments or
instruments pursuant to which the Corporation is obligated to issue or sell any
shares of capital stock or other securities of the Corporation or (ii)
preemptive or similar rights to purchase or otherwise acquire shares of capital
stock of the Corporation pursuant to any provision of law, the Amended and
Restated Certificate of Incorporation or By-laws of the Corporation or any
agreement to which the Corporation is party or otherwise, other than those set
forth in the Second Amended and Restated Stockholders Agreement dated as of
November 22, 1996 among the Corporation and the other parties thereto.
2.3 Authorization. The execution, delivery and performance by the
Corporation of this Agreement and the agreements referred to herein or
contemplated hereby to which the Corporation is a party (collectively, the
"Related Agreements") and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of the Corporation, and this Agreement and each of the Related
Agreements have been duly executed and delivered by the Corporation and
constitute the valid and binding obligation of the Corporation, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
relating to or affecting the rights and remedies of creditors and debtors, and
equitable principles generally, regardless of whether such principles are
considered in a proceeding at equity or at law. The execution, delivery and
performance of this Agreement and each of the Related Agreements and compliance
with the provisions hereof and thereof by the Corporation will not (a) violate
in any material respect any law or statute or order, judgment or decree of any
court, administrative agency or other governmental body applicable to the
Corporation or its properties or assets or (b) conflict in any material respect
with or result in any material breach of any of the terms or provisions or
constitute (with due notice or lapse of time, or both) a default
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under the Amended and Restated Certificate of Incorporation or By-laws of the
Corporation or any material note, indenture, mortgage, lease agreement or other
material agreement, contract or instrument to which the Corporation is a party
or by which it or any of its properties or assets may be bound or affected.
2.4 Consents or Approvals Required. Except for the filing of any notice
which may be required under applicable Federal or state securities law (which,
if required, has been or shall be filed on a timely basis as may be so
required), no authorization, consent, approval or other order of, or declaration
to or filing with, any governmental agency or body or other person or entity is
required for the valid authorization, execution, delivery and performance by the
Corporation of this Agreement or any of the Related Agreements.
2.5 Authorization of Shares. The issuance, sale and delivery of the Shares
have been duly authorized by all requisite corporate action of the Corporation
and when issued, sold and delivered in accordance with the terms of this
Agreement, the Shares will be validly issued and outstanding, fully paid and
nonassessable.
2.6 Financial Information. Attached hereto as Exhibit A is a copy of the
unaudited balance sheet of the Corporation as of March 31, 1997, and the related
unaudited income statement for the three-month period then ended, prepared by
the Corporation.
2.7 Litigation. There are no actions, suits, proceedings or investigations
pending against the Corporation before any court or governmental agency, nor to
the best of the Corporation's knowledge, is there any action, suit, proceeding
or investigation pending or threatened affecting the Corporation's properties,
assets or operations or its right to employ or retain any of its employees or
consultants.
2.8 Use of Proceeds. The net proceeds received by the Corporation from the
sale of the Shares shall be used by the Corporation for general working capital
purposes as determined by the Board of Directors from time to time.
SECTION 3. Representations and Warranties of the Investor. The Investor
hereby severally represents and warrants to the Corporation as follows:
3.1 Authorization. The execution, delivery and performance by the Investor
of this Agreement and the Related Agreements to which the Investor is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite action on the part of the Investor, and
this Agreement and each of the Related Agreements has been duly executed and
delivered by the Investor and
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constitute the valid and binding obligation of the Investor, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
relating to or affecting the rights and remedies of creditors and debtors and
equitable principles generally, regardless of whether such principles are
considered in a proceeding at equity or at law. The execution, delivery and
performance of this Agreement and each of the Related Agreements and compliance
with the provisions hereof and thereof by the Investor will not (a) violate in
any material respect any law or statute or order, judgment or decree of any
court, administrative agency or other governmental body applicable to the
Investor or its properties or assets or (b) conflict in any material respect
with or result in any material breach of any of the terms or provisions or
constitute (with due notice or lapse of time, or both) a default under the
charter or by-laws or agreement of partnership or any similar organizational
document of the Investor or any note, indenture, mortgage, lease agreement or
other material agreement, contract or instrument to which the Investor is a
party or by which the Investor or any of the Investor's properties or assets may
be bound or affected.
3.2 Accredited Investor. The Investor is an "accredited investor" (as such
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act")).
3.3 Investor Intent. The Investor is acquiring the Shares for its own
account, for investment and not with a view to, or for resale in connection
with, any distribution thereof, nor with any present intention of distributing
or reselling the same or any part thereof in any transactions that would be in
violation of the Securities Act or any state securities or "blue-sky" laws.
3.4 Restricted Securities. The Investor understands (i) that the Shares
will not be registered under the Securities Act or any state securities or
"blue-sky" laws by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act or any state securities or
"blue-sky" laws, (ii) that the Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or any
state securities or "blue-sky" laws or is exempt from such registration, (iii)
that the Corporation is under no obligation to so register any shares of Common
Stock, except as provided in the Second Amended and Restated Registration Rights
Agreement dated as of March 12, 1997 (the "Registration Rights Agreement") and
(iv) that the certificate(s) evidencing the shares of Series E Preferred Stock
will be imprinted with a legend that prohibits the transfer substantially as set
forth in Section 6.2(b) hereof unless they are registered or such registration
is not required.
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3.5 Rule 144. The Investor understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Investor)
promulgated under the Securities Act ("Rule 144") depends on the satisfaction of
various conditions and that, if applicable, Rule 144 may only afford the basis
for sales under certain circumstances only in limited amounts.
3.6 Access to Information; Experience. The Investor has been furnished with
or has had access during the course of this transaction to all information
necessary to enable the Investor to evaluate the merits and risks of an
investment in the Corporation and the Investor has had an opportunity to discuss
with representatives of the Corporation the business and financial affairs of
the Corporation. The Investor has conducted its own investigation and analysis
of the business and its investment in the Shares and is not relying on the
Corporation's business plan or any information or opinions contained therein in
making its decision to purchase the Shares. The Investor has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Corporation such that the Investor is
capable of evaluating the merits and the risks of its investment in the
Corporation and has the capacity to protect such Investor's own interests in
making this investment in the Corporation. The Investor can afford to suffer a
complete loss of its investment in the Shares.
SECTION 4. Conditions Precedent to Obligations of Investor. The obligations
of the Investor to purchase and pay for the Shares on the Closing Date are
subject to the following conditions precedent:
4.1 Corporate Proceedings; Consents; Etc. All corporate and/or other
proceedings to be taken by the Corporation, its officers, directors and
stockholders and all waivers and consents to be obtained by the Corporation in
connection with the transactions contemplated by this Agreement and each of the
Related Agreements shall have been taken or obtained.
4.2 Representations and Warranties. The representations and warranties of
the Corporation contained in Section 2 shall be true and correct in all material
respects.
4.3 Blue Sky Matters. All consents, approvals, qualifications and/or
registrations required to be obtained or effected under any applicable state
securities or "blue-sky" laws in connection with the execution and delivery of
the Shares shall have been obtained or effected.
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SECTION 5. Conditions Precedent to Obligations of Corporation. The
obligation of the Corporation to issue and sell the Shares on the Closing Date
is subject to the following conditions precedent:
5.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 3 shall be true and correct in all material
respects.
5.2 Blue Sky Matters. All consents, approvals, qualifications and/or
registrations required to be obtained or effected under any applicable state
securities or "blue-sky" laws in connection with the execution and delivery of
the Shares shall have been obtained or effected.
5.3 Payment of Purchase Price. The Investor shall have delivered the full
purchase price payable by the Investor hereunder as specified in Section 1.2
hereof.
SECTION 6. Affirmative Covenants.
6.1 Information Rights. The Corporation agrees to provide the Investor with
the following:
(a) General. The Corporation will permit such persons on reasonable
notice to visit and inspect during normal business hours any of the
properties of the Corporation, to examine its books and records, to make
copies thereof and to take extracts therefrom and to discuss its affairs,
finances and accounts with, and to be advised as to the same by, its
officers, consultants, counsel and accountants, at such reasonable times as
such persons may desire. In addition, the Corporation will provide to such
persons such other information as from time to time may reasonably be
requested.
(b) Monthly Statements. Within 30 days after the end of each monthly
accounting period, an unaudited consolidated financial report of the
Corporation, prepared in accordance with generally accepted accounting
principles consistently applied, except that such financial statements
shall not include footnotes and shall be subject to normal year-end audit
adjustments, including, with respect to such monthly accounting period, the
following:
(i) a profit and loss statement for such monthly accounting
period, together with a cumulative profit and loss statement from the
first day of the current year to the last day of such monthly
accounting period;
(ii) a balance sheet as at the last day of such monthly
accounting period;
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(iii) a statement of cash flow for such monthly accounting period
on a cumulative basis for the fiscal year to date; and
(iv) a comparison between the actual figures for such monthly
accounting period, the comparable figures (with respect to clauses (i)
and (ii) only) for the prior year (if any) and the comparable figures
included in the Budget (as hereinafter defined) for such monthly
accounting period.
(c) Quarterly Reports. As soon as available, but not later than 45
days after the end of each quarterly accounting period, an unaudited
consolidated financial report of the Corporation, prepared in accordance
with generally accepted accounting principles consistently applied, except
that such financial statements shall not include footnotes and shall be
subject to normal year-end audit adjustments, containing the information
contemplated by Sections 6.1(b)(i)-(iv) with respect to such quarterly
accounting period.
(d) Annual Reports. As soon as available, but not later than 120 days
after the end of each fiscal year of the Corporation, audited financial
statements of the Corporation, which shall include a statement of cash
flows and statement of operations for such fiscal year and a balance sheet
as at the last day thereof, each prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
the report of a firm of independent certified public accountants of
recognized standing selected by the Board of Directors of the Corporation
(the "Accountants").
(e) Budget. The Corporation shall deliver to the Investor a copy of
the budget (the "Budget") of the Corporation prepared with respect to each
calendar year commencing with the calendar year beginning January 1, 1998,
within 15 days after such budget is approved by the Board of Directors of
the Corporation.
(f) Termination of Information Rights. Notwithstanding the foregoing
provisions of this Section 6.1, the rights of the Investor and the
obligations of the Corporation under said Section 6.1 shall terminate upon
the consummation of the initial underwritten public offering of the Common
Stock of the Corporation.
6.2 Transfer of Securities.
(a) Restrictions on Transfer. The Investor acknowledges that the Shares
have not been registered under the Securities Act, that such shares are being
issued pursuant to an exemption from registration under the Securities Act and
that such shares constitute "restricted securities" under Rule 144. Accordingly,
the Shares held by the Investor shall not be sold,
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transferred, assigned, pledged, encumbered or otherwise disposed of (each, a
"Transfer") except upon the conditions specified in this Section 6.2, which
conditions are intended to ensure compliance with the provisions of the
Securities Act and this Agreement
(b) Restrictive Legend. Each certificate for shares of Preferred Stock held
by the Investor and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 6.2(c) and 6.2(d)) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR
LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS
SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6.2 OF THE
STOCK PURCHASE AGREEMENT DATED AS OF August 18, 1997, AMONG
BONE, MUSCLE AND JOINT, INC. AND COMDISCO, INC., AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF BONE, MUSCLE AND JOINT, INC."
(c) Notice of Transfer. The Investor agrees, prior to any Transfer of the
Shares, to give written notice to the Corporation of the Investor's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 6.2. Each such notice shall describe the manner and circumstances
of the proposed Transfer and shall be accompanied by the written opinion,
addressed to the Corporation, of counsel for the holder of such shares, stating
that in the opinion of such counsel (which opinion and counsel shall be
reasonably satisfactory to the Corporation), such proposed Transfer does not
involve any transaction requiring registration or qualification of such shares
under the Securities Act or the securities or "blue-sky" laws of any relevant
state of the United States; provided, however, that no such opinion of counsel
shall be necessary for a Transfer pursuant to Rule 144. The Investor shall
thereupon be entitled to Transfer such shares in accordance with the terms of
the notice delivered by the Investor to the Corporation. Each certificate or
other instrument evidencing the securities issued upon the Transfer of any such
shares (and each certificate or other instrument evidencing any untransferred
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balance of such shares) shall bear the legend set forth in Section 6.2(b) unless
(a) in such opinion of counsel, registration of any future Transfer is not
required by the applicable provisions of the Securities Act and applicable state
securities or "blue-sky" laws or (b) the Corporation shall have waived the
requirement of such legends; provided, however, that such legend shall not be
required on any certificate or other instrument evidencing the securities issued
upon such Transfer in the event such Transfer shall be made in compliance with
the requirements of Rule 144. The Investor shall not Transfer any shares of
Preferred Stock until such opinion of counsel has been given (unless waived by
the Corporation or unless such opinion is not required in accordance with the
provisions of this Section 6.2).
(d) Removal of Legends, Etc. Notwithstanding the foregoing provisions of
this Section 6.2, the restrictions imposed by this Section 6.2 upon the
transferability of any shares of the capital stock of the Corporation held by
the Investor shall cease and terminate when (a) any such shares are sold or
otherwise disposed of pursuant to an effective registration statement under the
Securities Act or as otherwise contemplated by Section 6.2(c) and, pursuant to
Section 6.2(c), the securities so transferred are not required to bear the
legend set forth in Section 6.2(b) or (b) the holder of such shares has met the
requirements for Transfer of such shares pursuant to subparagraph (k) of Rule
144. Whenever the restrictions imposed by this Section 6.2 shall terminate, as
herein provided, the Investor holding shares as to which such restrictions have
terminated shall be entitled to receive from the Corporation, without expense, a
new certificate not bearing the restrictive legend set forth in Section 6.2(b)
and not containing any other reference to the restrictions imposed by this
Section 6.2.
SECTION 7. Expenses. Each of the Corporation, on the one hand, and the
Investor, on the other hand, shall bear its own fees and expenses incurred in
connection with the preparation for and consummation of the transactions
contemplated by this Agreement.
SECTION 8. Notices. All notices, advices and communications to be given or
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person or by telecopier or
duly sent by first class registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier, addressed to such party at the address
set forth below or at such other address as may hereafter be designated in
writing by the addressee to the addresser listing all parties:
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(a) if to the Corporation, to:
Bone, Muscle and Joint, Inc.
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Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
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Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇; and
(b) if to the Investor, to:
Comdisco, Inc.
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery or delivery by telecopier, on the date of
such delivery, (ii) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted. As used in this Section 8, "business day" shall
mean any day other than a day on which banking institutions in the State of New
York are legally closed for business.
SECTION 9. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the parties hereto
and the respective successors and permitted assigns of the parties hereto.
SECTION 10. Amendments. The terms and provisions of this Agreement may only
be amended or waived with the written consent of the Corporation and the
Investor.
SECTION 11. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
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SECTION 12. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 13. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without reference to any
principles of conflicts of laws).
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IN WITNESS WHEREOF, each of the undersigned has caused this Stock Purchase
Agreement to be executed as of the date first written above.
BONE, MUSCLE AND JOINT, INC.
By:_________________________________
Name:
Title:
INVESTOR:
COMDISCO, INC.
By:_________________________________
Name:
Title: