EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between COMPUTERIZED THERMAL
IMAGING, INC., a Nevada corporation, with headquarters located at Xxx
Xxxxxxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxx, Xxxxxx 00000 (the "Company"), and
each entity named on a signature page hereto (each, a "Lender") (each agreement
with a Lender being deemed a separate and independent agreement between the
Company and such Lender, except that each Lender acknowledges and consents to
the rights granted to each other Lender under such agreement and the Transaction
Agreements, as defined below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Lender are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors
afforded, inter alia, by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Sections
4(2) and 4(6) of the 1933 Act; and
WHEREAS, the Lender wishes to lend funds to the Company,
subject to and upon the terms and conditions of this Agreement , the repayment
of which will be represented by 7% Convertible Debentures Series 01 of the
Company (the "Convertible Debentures"), which Convertible Debentures will be
convertible into shares of Common Stock, $.001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Debentures, together with the Warrants (as defined below) exercisable for
the purchase of shares of Common Stock, and subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE; CERTAIN DEFINITIONS.
(i) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements, the undersigned hereby agrees to loan to the
Company the principal amount set forth on the Lender's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Lenders of $2,500,000. The obligation to repay the loan shall be evidenced
by the Company's issuance of one or more Convertible Debentures to the Lender in
such principal amount (the Convertible Debentures issued to the Lender, the
"Debentures"). Each Debenture shall have the terms and conditions of, and be
substantially in the form attached hereto as, ANNEX I. The loan to be made by
the Lender and the issuance of the Debentures to the Lender are sometimes
referred to herein and in the other Transaction Agreements as the purchase and
sale of the Debentures.
(ii) The purchase price to be paid by the Lender (the
"Purchase Price") shall be equal to the face amount of the Debentures being
purchased on the Closing Date (as defined below) and shall be payable in United
States Dollars.
b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
(i) "Affiliate" means, with respect to a specific Person
referred to in the relevant provision, another Person who or which controls or
is controlled by or is under common control with such specified Person.
(ii) "Certificates" means the Debentures and the Warrants,
each duly executed by the Company and issued on the Closing Date in the name of
the Lender.
(iii) "Closing Date" means the date of the closing of the
purchase and sale of the Debentures, as provided herein.
(iv) "Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).
(v) "Conversion Shares" means the shares of Common Stock
issuable upon conversion of the Debentures (including, if relevant, accrued
interest on the Debentures so converted).
(vi) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement) relating to the Securities.
(vii) "Escrow Agent" means the escrow agent identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").
(viii) "Escrow Funds" means the Purchase Price delivered to
the Escrow Agent as contemplated by Sections 1(c) and (d) hereof.
(ix) "Escrow Property" means the Escrow Funds and the
Certificates delivered to the Escrow Agent as contemplated by Section 1(c)
hereof.
(x) "Holder" means the Person holding the relevant Securities.
(xi) "Last Audited Date" means June 30, 2001.
(xii) "Lender's Allocable Share" means the fraction, of which
the numerator is the Purchase Price of the Lender's Debentures and the
denominator is the aggregate Purchase Price of the Debentures of all Lenders.
(xiii) "Lender Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Lender pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
(xiv) "Material Adverse Effect" means an event or combination
of events, which individually or in the aggregate, would reasonably be expected
to (w) adversely affect the legality, validity or enforceability of the
Securities or any of the Transaction Agreements, (x) have or result in a
material adverse effect on the results of operations, assets, prospects, or
condition (financial or otherwise) of the Company and the it subsidiaries, taken
as a whole, (y) adversely impair the Company's ability to perform fully on a
timely basis its obligations under any of the Transaction Agreements or the
transactions contemplated thereby, or (z) materially and adversely affect the
value of the rights granted to the Lender in the Transaction Agreements.
(xv) "Person" means any living person or any entity, such as,
but not necessarily limited to, a corporation, partnership or trust.
(xvi) "Principal Trading Market" means The American Stock
Exchange.
(xvii) "Registration Rights Agreement" means the Registration
Rights Agreement in the form annexed hereto as ANNEX IV, as executed by the
Lender and the Company simultaneously with the execution of this Agreement.
(xviii) "Reporting Service" means Bloomberg LP or if that
service is not then reporting the relevant information regarding the Common
Stock, a comparable reporting service of national reputation selected by the
Holders of the Debentures and reasonably acceptable to the Company.
(xix) "Securities" means the Debentures, the Warrants, the
Conversion Shares and the Warrant Shares (as defined below).
(xx) "Shares" means the shares of Common Stock representing
any or all of the Conversion Shares and the Warrant Shares.
(xxi) "Transaction Agreements" means the Securities Purchase
Agreement, the Debentures, the Joint Escrow Instructions, the Registration
Rights Agreement, the Warrants and the Equity Line Credit Agreement (as defined
below) and includes all ancillary documents referred to in those agreements.
(xxii) "Warrant Shares" means the shares of Common Stock
issuable upon exercise of the Warrants.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Lender shall pay the Purchase Price for the Debentures
by delivering immediately available good funds in United States Dollars to the
Escrow Agent no later than the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates, each duly executed on behalf of the
Company and issued in the name of the Lender, to the Escrow Agent.
(iii) By signing this Agreement, each of the Lender and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
d. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Lender by Xxxxxxx
& Prager LLP]
Re: CIO Transaction
Not later than 3:00 p.m., New York time, on the date which is two (2) New York
Stock Exchange ("NYSE") trading days after both the Lender and the Company shall
have accepted this Agreement and each returned a signed counterpart of this
Agreement to the Escrow Agent by facsimile, the Lender shall deposit with the
Escrow Agent the Purchase Price for the Debentures in immediately available
funds.
2. LENDER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Lender represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Lender's right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with the 1933
Act, the Lender is purchasing the Debentures and will be acquiring the Shares
for its own account for investment only and not with a view towards the public
sale or distribution thereof and not with a view to or for sale in connection
with any distribution thereof.
b. (i) [APPLICABLE IF THE LENDER IS AN INDIVIDUAL] The Lender
resides in the state or province identified in the address of the Lender set
forth on the signature page hereof.
(ii) [APPLICABLE IF THE LENDER IS A PARTNERSHIP, CORPORATION,
LIMITED LIABILITY COMPANY OR OTHER ENTITY] The office or offices of Lender in
which its investment decision was made is located in the jurisdiction set forth
on the signature page hereof.
c. If the Lender is not a United States person (as defined in
Regulation S), the Lender hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction (the "Lender's
Jurisdiction") in connection with any invitation to subscribe for the Securities
or any use of this Agreement, including (i) the legal requirements within the
Lender's Jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions of the Lender's Jurisdiction applicable to such purchase,
(iii) any Lender's Jurisdiction government or other consents that may need to be
obtained in connection with Lender's execution of this Agreement and the other
Transaction Agreements to which the Lender is a party, (iv) the income tax and
other tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the Securities. The Lender's subscription and
payment for, and the Lender's continued beneficial ownership of, the Securities
will not violate any applicable securities or other laws of the Lender's
Jurisdiction.
d. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
e. All subsequent offers and sales of the Securities by the
Lender shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to an exemption from registration.
f. The Lender understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Securities.
g. The Lender and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debentures and the
offer of the Shares which have been requested by the Lender, including those set
forth on ANNEX V hereto. The Lender and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Lender has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K, as amended, for the fiscal year
ended June 30, 2001, (2) Current Report on Form 8-K filed November 2, 2001, (3)
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001,
and (4) Definitive Proxy Statement filed on May 21, 2001 (collectively, the
"Company's SEC Documents").
h. The Lender understands that its investment in the
Securities involves a high degree of risk.
i. The Lender understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
j. This Agreement and the other Transaction Agreements to
which the Lender is a party, and the transactions contemplated thereby, have
been duly and validly authorized, executed and delivered on behalf of the Lender
and are valid and binding agreements of the Lender enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Lender as of the date hereof and as of the Closing Date that,
except as otherwise provided in the ANNEX IV hereto or in the Company's SEC
Documents:
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares. No party other than a Lender has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.
b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is listed and quoted on the Principal Trading
Market. The Company has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for such listing and quotation
on the Principal Trading Market, and the Company has maintained all requirements
on its part for the continuation of such listing and quotation.
c. AUTHORIZED SHARES. The authorized capital stock of the
Company consists of (i) 200,000,000 shares of Common Stock, $.001 par value per
share, of which approximately 82,803,263 are outstanding as of December 6, 2001,
and (ii) 3,000,000 shares of Convertible Preferred Stock, $5.00 par value per
share, of which none are outstanding as of December 6, 2001. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. The Company has sufficient authorized and
unissued shares of Common Stock as may be necessary to effect the issuance of
the Shares. The Shares have been duly authorized and, when issued upon
conversion of, or as interest on, the Debentures or upon exercise of the
Warrants, each in accordance with its respective terms, will be duly and validly
issued, fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the
Debentures, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Debentures, the Warrants and
the other Transaction Agreements do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the certificate of incorporation or by-laws of the Company,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company is a party or by
which it or any of its properties or assets are bound, including any listing
agreement for the Common Stock except as herein set forth, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Lender as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained or for which the failure to obtain such
would not, individually or in the aggregate, have a Material Adverse Effect.
g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. Since November 1, 2000, the Company has timely filed all
requisite forms, reports and exhibits thereto required to be filed by the
Company with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect, except
as disclosed in the Company's SEC Documents. Since the Last Audited Date, except
as provided in the Company's SEC Documents, the Company has not (i) incurred or
become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past
practices; (ii) discharged or satisfied any material lien or encumbrance or paid
any material obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to shareholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or redeem, any shares of its
capital stock; (iv) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business
consistent with past practices; (v) suffered any substantial losses or waived
any rights of material value, whether or not in the ordinary course of business,
or suffered the loss of any material amount of existing business; (vi) made any
changes in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
i. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Lender that would reasonably be expected to have or result in a Material
Adverse Effect.
j. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
Person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements. The Company is not aware of any valid basis
for any such claim that (either individually or in the aggregate with all other
such events and circumstances) could reasonably be expected to have a Material
Adverse Effect. There are no outstanding or unsatisfied judgments, orders,
decrees, writs, injunctions or stipulations to which the Company is a party or
by which it or any of its properties is bound, that involve the transaction
contemplated herein or that, alone or in the aggregate, could reasonably be
expect to have a Material Adverse Effect.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Section 3(e) hereof, no Event of Default (or its equivalent term), as defined in
the respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse Effect.
l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. None of the following has occurred during the past ten (10) years with
respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property
of such Company Control Person, or any partnership in which he was a
general partner at or within two years before the time of such filing,
or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person
regulated by the Commodity Futures Trading Commission ("CFTC")
or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to
engage in any activity described in paragraph (3) of this item, or to
be associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
m. PRIOR ISSUES. During the twelve (12) months preceding the
date hereof, the Company has not issued any stock option grants, convertible
securities or any shares of its Common Stock.
n. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the Transaction
Agreements or the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the certificate of incorporation or
other charter document or by-laws of the Company, each as currently in effect,
with or without shareholder approval, which change would reduce or otherwise
adversely affect the rights and powers of the shareholders of the Common Stock
or (y) materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
o. NO DEFAULT. Neither the Company nor any of its subsidiaries
is in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material indenture, mortgage,
deed of trust or other material instrument or agreement to which it is a party
or by which it or its property is bound.
p. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since December 1, 2000, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
q. DILUTION. The number of Shares issuable upon conversion of
the Debentures may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion of the Debentures and the
Holder is entitled to apply the Variable Conversion Price (as that term is
defined in the Debentures). The Company's executive officers and directors have
studied and fully understand the nature of the Securities being sold hereby and
recognize that they have a potential dilutive effect. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Debentures and upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company, and the Company will honor every
Notice of Conversion (as defined in the Debentures) relating to the conversion
of the Debentures, and every Notice of Exercise (as contemplated by the
Warrants), unless the Company is subject to an injunction (which injunction was
not sought by the Company) prohibiting the Company from doing so.
r. TRADING IN SECURITIES. The Company specifically
acknowledges that, except to the extent specifically provided herein or in any
of the other Transaction Agreements (but limited in each instance to the extent
so specified), the Lender retains the right (but is not otherwise obligated) to
buy, sell, engage in hedging transactions or otherwise trade in the securities
of the Company, including, but not necessarily limited to, the Securities, at
any time before, contemporaneous with or after the execution of this Agreement
or from time to time and in any manner whatsoever permitted by applicable
federal and state securities laws.
s. FEES TO BROKERS, FINDERS AND OTHERS. The Company has taken
no action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Lender relating to this
Agreement or the transactions contemplated hereby. Lender shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section 3(q)
that may be due in connection with the transactions contemplated hereby. The
Company shall indemnify and hold harmless each of Lender, its employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as and when incurred.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Lender shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Lender acknowledges and agrees that
the Securities and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with an effective Registration Statement or otherwise in
accordance with another effective registration statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Lender
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to provide a copy
thereof to the Lender promptly after such filing.
d. REPORTING STATUS. So long as the Lender beneficially owns
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all
reasonable action under its control to ensure that adequate current public
information with respect to the Company, as required in accordance with Rule
144(c)(2) of the 1933 Act, is publicly available, and shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would permit such termination. The
Company will take all reasonable action under its control to maintain the
continued listing and quotation and trading of its Common Stock (including,
without limitation, all Registrable Securities) on the Principal Trading Market
or a listing on the NASDAQ/Small Cap or National Markets and will comply in all
material respects with the Comp
any's reporting, filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers, Inc. applicable to it at least
through the date which is thirty (30) days after the later of the date on which
all of the Debentures have been converted or all of the Warrants have been
exercised or have expired.
e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Securities) for the purposes
contemplated by the schedule attached hereto as ANNEX VII, and, unless
specifically consented to in advance in each instance by the Lender, the Company
shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership enterprise or other Person,
including any of its Affiliates, or for the repayment of any outstanding loan by
the Company to any other party or for any purpose constituting a material change
from such schedule.
f. WARRANTS. The Company agrees to issue to the Lender on each
Closing Date transferable warrants with cashless exercise rights (the
"Warrants") for the purchase of a number of shares equal to fifteen percent
(15%) of the Closing Date Conversion Shares (as defined below). The "Closing
Date Conversion Shares" is the number of shares equal to (i) the principal of
the Debentures purchased by the Lender on the Closing Date, divided by (ii) the
Conversion Price (as defined in the Debentures) which would be applicable if the
Lender were to convert any of the Debentures on the Closing Date. The exercise
price of the Warrants will be equal to one hundred thirty percent (130%) of the
Fixed Conversion Price (as defined in the Debentures). The Warrants will expire
on the last day of the calendar month in which the third annual anniversary of
the Closing Date occurs. Each of the Warrants shall be in the form annexed
hereto as ANNEX VI, and shall have (x) registration rights as provided in the
Registration Rights Agreement, and (y) piggy-back registration rights after the
effectiveness of the Registration Statement expires, as contemplated by the
Registration Rights Agreement.
g. CERTAIN AGREEMENTS. (i) Reference is made to the equity
line credit agreement being executed contemporaneously with this Agreement by
the Lender and the Company ("Equity Line Credit Agreement") and specifically to
the provisions of Sections 6.14 and Section 6.15 thereof (collectively, the
"Lock Up Provisions"). The Company covenants and agrees that the Lock Up
Provisions (utilizing the definitions of the Equity Line Credit Agreement) apply
to this Agreement as if set out herein in full.
(ii) In the event the Company breaches the provisions of this
Section 4(g) , the Conversion Price otherwise applicable under the terms of any
outstanding Debenture shall be adjusted to be equal to ninety percent (90%) of
such applicable Conversion Price.
h. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, a number of
shares (the "Minimum Available Shares") at least equal to the sum of (x) one
hundred fifty percent (150%) of the number of shares of Common Stock issuable as
may be required to satisfy the conversion rights of the Holders of all
outstanding Convertible Debentures, plus (y) the number of shares issuable upon
exercise of all outstanding Warrants held by all Holders (in each case, whether
such Convertible Debentures or Warrants were originally issued to the Lender or
to any other Lender). For the purposes of such calculations, the Company should
assume that all such Debentures were then convertible and all Warrants were then
exercisable without regard to any restrictions which might limit any Lender's
right to convert any of the Convertible Debentures or exercise any of the
Warrants held by any Lender.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Lender or its nominee and in such denominations to be specified
by the Lender in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law. Nothing in this Section shall
affect in any way the Lender's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Lender provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Lender of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Conversion Shares, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without legend in such
name and in such denominations as specified by the Lender.
b. Subject to the provisions of this Agreement, the Company
will permit the Lender to exercise its right to convert the Debentures in the
manner contemplated by the Debentures.
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date (as defined in the Debentures)
could result in economic loss to the Lender. As compensation to the Lender for
such loss, the Company agrees to pay late payments to the Lender for late
issuance of Shares upon Conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days which
is two (2) business days beyond the Delivery Date):
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
---------------------- -----------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Lender's exclusive remedy (other than the
following provisions of this Section 5(c) and the provisions of the immediately
following Section 5(d) of this Agreement) for such delay. Furthermore, in
addition to any other remedies which may be available to the Lender, in the
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the Delivery Date, the Lender will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company, whereupon the Company and the Lender shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion; provided, however, that any payments contemplated by this
Section 5(c) which have accrued through the date of such revocation notice shall
remain due and owing to the Converting Holder notwithstanding such revocation.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of a Debenture and
after such Delivery Date, the Holder of the Debentures being converted (a
"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder (the
"Sold Shares"), which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder
shall the right, to require the Company to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 5(c) hereof (but in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Holder and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
f. The holder of any Debentures shall be entitled to exercise
its conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C.ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C.ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C.ss.362 in respect of the conversion of the Debentures.
The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11
U.S.C.ss.362.
g. The Company will authorize its transfer agent to give
information relating to the Company directly to the Lender or the Lender's
representatives upon the request of the Lender or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Lender in connection with a Notice of
Conversion or exercise of a Warrant, or (ii) the number of outstanding shares of
Common Stock of all shareholders as of a current or other specified date. On the
Closing Date, the Company will provide the Lender with a copy of the
authorization so given to the transfer agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
NYSE trading day after each of the conditions contemplated by Sections 7 and 8
hereof shall have either been satisfied or been waived by the party in whose
favor such conditions run.
b. The closing of the purchase and issuance of the Debentures
shall occur on the Closing Date at the offices of the Escrow Agent and shall
take place no later than 3:00 P.M., New York time, on such day or such other
time as is mutually agreed upon by the Company and the Lender.
c. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Lender understands that the Company's obligation to sell
the Debentures to the Lender pursuant to this Agreement on the Closing Date is
conditioned upon:
a. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Lender;
b. Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Securities in
accordance with this Agreement;
c. The accuracy on such Closing Date of the representations
and warranties of the Lender contained in this Agreement, each as if made on
such date, and the performance by the Lender on or before such date of all
covenants and agreements of the Lender required to be performed on or before
such date; and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE LENDER'S OBLIGATION TO PURCHASE.
The Company understands that the Lender's obligation to
purchase the Debentures on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
b. Delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;
c. The accuracy in all material respects on such Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
d. On such Closing Date, the Registration Rights Agreement
shall be in full force and effect and the Company shall not be in default
thereunder;
e. On such Closing Date, the Lender shall have received an
opinion of counsel for the Company, dated the Closing Date, in form, scope and
substance reasonably satisfactory to the Lender, substantially to the effect set
forth in ANNEX III attached hereto;
f. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
g. From and after the date hereof to and including such
Closing Date, each of the following conditions will remain in effect: (i) the
trading of the Common Stock shall not have been suspended by the SEC or on the
Principal Trading Market; (iii), no minimum prices shall been established for
securities traded on the Principal Trading Market; (iv) there shall not have
been any outbreak or escalation of hostilities involving the United States; (v)
there shall not have been any material adverse change in any financial market
that, in the reasonable judgment of the Lender, makes it impracticable or
inadvisable to purchase the Debentures. In addition, on the Closing Date,
trading in Common Stock or in securities generally on the Principal Trading
Market shall not have been suspended or limited.
9. INDEMNIFICATION.
a. (i) The Company agrees to indemnify and hold harmless
Lender and its officers, directors, employees, and agents, and each Lender
Control Person from and against any losses, claims, damages, liabilities or
expenses incurred (collectively, "Damages"), joint or several, and any action in
respect thereof to which Lender, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Lender Control Person
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Lender's failure to perform any covenant or agreement contained in this
Agreement or Lender's or its officers, directors, employees, agents or Lender
Control Persons negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) If (x) the Lender becomes involved in any capacity in any
action, proceeding or investigation brought by any stockholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements, or if such
the Lender impleaded in any such action, proceeding or investigation by any
Person, or (y) the Lender becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC, any self-regulatory organization
or other body having jurisdiction, against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements, or if the
Lender is impleaded in any such action, proceeding or investigation by any
Person, then in any such case, the Company hereby agrees to indemnify, defend
and hold harmless the Lender from and against and in respect of all losses,
claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Lender, directly or indirectly, and reimburse such Lender for
its reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith, as such expenses are
incurred. In addition, the Company will reimburse the Lender for reasonable
internal and overhead costs for the time of any officers or employees of the
Lender devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement or the other Transaction Agreements. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have (other than matters specifically addressed in the Registration Rights
Agreement, which shall be governed solely by that agreement), shall extend upon
the same terms and conditions to any Affiliates of the Lender who are actually
named in such action, proceeding or investigation, and partners, directors,
agents, employees and Lender Control Persons (if any), as the case may be, of
the Lender and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Lender, any such Affiliate and any such Person. The Company also
agrees that neither the Lender nor any such Affiliate, partner, director, agent,
employee or Lender Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement o r the other
Transaction Agreements, except as provided in or contemplated by this Agreement.
b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section 9 shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section 9 (an
"Indemnified Party") might seek indemnity under Section 9(a) is asserted against
or sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a "Third Party Claim"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being
asserted under any provision of this Section 9 against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section 9 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to
this Section 9(b), then the Indemnifying Party shall have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party,
at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a
final conclusion or will be settled at the discretion of the
Indemnifying Party (but only with the consent of the Indemnified Party
in the case of any settlement that provides for any relief other than
the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be
indemnified in full pursuant to Section 9(a)). The Indemnifying Party
shall have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party's delivery of the
notice referred to in the first sentence of this subparagraph (x), file
any motion, answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate
protect its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
subparagraph (x), and except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses with respect to
such participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of a Third
Party Claim at any time if it irrevocably waives its right to indemnity
under Section 9(a) with respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 9(b), or if the Indemnifying
Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings shall be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will
be settled at the discretion of the Indemnified Party (with the consent
of the Indemnifying Party, which consent will not be unreasonably
withheld). The Indemnified Party will have full control of such defense
and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the
Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in subparagraph(z) below, the
Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this subparagraph (y) or
of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section
9(a) or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party with respect to such Third Party
Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under Section
9(a) and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty
(30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
(ii) In the event any Indemnified Party should have a claim
under Section 9(a) against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 9(a) specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 9(a) and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
c. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Lender hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement or
any of the other Transaction Agreements and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions.
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal
delivery as against written receipt therefor or by confirmed
facsimile transmission,
(b) the seventh business day after deposit, postage
prepaid, in the United States Postal Service by registered or
certified mail, or
(c) the third business day after mailing by domestic
or international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: COMPUTERIZED THERMAL IMAGING, INC.
at its address at the head of this Agreement
Attn: Xxxxxxx Xxxxx, Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx LLP
0000 XX Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx XxXxxxxx-Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
LENDER: At the address set forth on the signature page of
this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Lender's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price, and shall inure to the benefit of the
Lender and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Lender (if an entity, by one of its officers thereunto duly authorized) as
of the date set forth below.
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $ 2,500,000.00
----------------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Securities Purchase Agreement to be
duly executed on its behalf this 20th day of December, 2001.
NAVIGATOR MANAGEMENT LIMITED
------------------------------------
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
--------------------------------------
Title: Director
--------------------------------------
If Lender is a partnership, corporation, limited liability company or other
entity:
I. Jurisdiction where Lender's investment decision was made:
Q Jurisdiction of mailing address listed above
Q Other: ____________________________
II. Jurisdiction of Incorporation or Organization: ________________________
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------------
Title: CFO, Secretary, Treasurer
--------------------------------------
Date: December 20, 2001
--------------------------------------
