EXHIBIT 10.31
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below (this "Agreement"), is entered into by and between
IMAGING DIAGNOSTIC SYSTEMS, INC., a Florida corporation, with headquarters
located at 0000 X.X. 00xx Xxxxx, Xxxxxxxxxx, XX 00000 (the "Company"), and each
entity named on a signature page hereto (each, a "Buyer") (each agreement with a
Buyer being deemed a separate and independent agreement between the Company and
such Buyer, except that each Buyer acknowledges and consents to the rights
granted to each other Buyer 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 Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the _1933
Act_), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of Series K Convertible
Preferred Stock, no par value, and having a stated value of $10,000 per share,
of the Company (the "Convertible Preferred Stock") which will be convertible
into shares of Common Stock, no par value, of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Convertible Preferred
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) The undersigned hereby agrees to purchase from the Company
Convertible Preferred Stock having a stated value in the amount set forth on the
Buyer's signature page of this Agreement (the "Preferred Stock"), out of a total
offering of $4,000,000 of such Convertible Preferred Stock, and having the terms
and conditions set forth in the Certificate of Designations, Preferences and
Rights of Series K Convertible Preferred Stock of the Company attached hereto as
Annex I (the "Certificate of Designations").
(ii) The purchase price to be paid by the Buyer shall be equal
to the amount set forth on the Buyer's signature page of this Agreement, 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) "Securities" means the Preferred Stock and the Conversion
Shares (as defined below).
(ii) "Purchase Price" means the purchase price for the
Preferred Stock.
(iii) "Closing Date" means the date of the closing of the
purchase and sale of the Preferred Stock, as provided herein.
(iv) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement defined below).
(v) "Conversion Shares" or "Shares" mean the shares of Common
Stock issuable upon conversion of the Preferred Stock.
(vi) "Person" means any living person or any entity, such as,
but not necessarily limited to, a corporation, partnership or trust.
(vii) "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.
(viii) "Transaction Agreements" means the Securities Purchase
Agreement, the Registration Rights Agreement, the Certificate of Designations,
and the Joint Escrow Instructions (as defined below).
(ix) "Latest Audited Date" means June 30, 1999.
c. Form of Payment; Delivery of Certificates.
(i) The Buyer shall pay the Purchase Price for the Preferred
Stock by delivering immediately available good funds in United States Dollars to
the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions") on
the date prior to the Closing Date.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Purchase Price, the
Company shall deliver one or more certificates representing the Preferred Stock,
each duly executed on behalf of the Company and issued in the name of the Buyer
(collectively, the "Certificates") to the Escrow Agent. Time is of the essence
with respect to such delivery, and failure by the Company to make such delivery
shall allow the Buyer to cancel this Agreement.
2
(iii) By signing this Agreement, each of the Buyer 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 Buyer by Xxxxxxx
& Prager LLP]
Re: Imaging Diagnostic Systems Transaction
Not later than 5:00 p.m., New York time, on the date which is three (3) New York
Stock Exchange ("NYSE") trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the Purchase
Price for the Preferred Stock in immediately available funds. Time is of the
essence with respect to such payment, and failure by the Buyer to make such
payment, shall allow the Company to cancel this Agreement.
e. Escrow Property. The Purchase Price which is delivered to
the Escrow Agent as contemplated by Section 1(d) hereof is referred to as the
"Escrow Funds." The Escrow Funds and the Certificates delivered to the Escrow
Agent as contemplated by Section 1(c) hereof are referred to as the "Escrow
Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement, the Buyer is purchasing the Preferred
Stock 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. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
3
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.
c. All subsequent offers and sales of the Preferred Stock and
the Shares by the Buyer shall be made pursuant to registration of the Shares
under the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Preferred Stock is are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including those
set forth on Annex V hereto. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Buyer has also had the opportunity to obtain
and to review the Company's (1) Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1999, (2) Quarterly Reports on Form 10-QSB for the fiscal
quarters ended September 30, 1999, December 31, 1999 and March 31, 2000,
respectively, (3) Proxy Statement filed on April 10, 2000, and (4) Registration
Statement on Form S-2 filed on October 22, 1999, as amended to date
(collectively, the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. This Agreement and the other Transaction Agreements to
which the Buyer is a party have been duly and validly authorized, executed and
delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer 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.
4
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of each Closing Date that,
except as otherwise provided in the Company Disclosure Materials attached hereto
as Annex V hereto:
a. Concerning the Preferred Stock and the Shares. The
Preferred Stock has been duly authorized, and when issued and paid for in
accordance with the terms of this Agreement, will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability solely by reason of acquiring the Preferred Stock hereunder.
There are no preemptive rights of any stockholder of the Company, as such, to
acquire the Preferred Stock or the Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida 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 a material adverse effect on the business, operations
or financial condition or results of operation of the Company and its
subsidiaries taken as a whole. The Company has registered its stock and is
obligated to file reports pursuant to Section 12 of the 1934 Act. The Common
Stock is listed and traded on The NASDAQ/Bulletin Board 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 the Company has maintained
all requirements for the continuation of such listing.
c. Authorized Shares. The authorized capital stock of the
Company consists of (i) 150,000,000 shares of Common Stock, no par value, of
which approximately 105,256,678 shares had been issued as of the date hereof and
(ii)2,000,000 shares of Preferred Stock, no par value per share, of which no
shares have been issued as of the date hereof. All issued and outstanding shares
of Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable. As of the date hereof and based on the Conversion Price (as
defined below) in effect on the date hereof, 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 dividends on, the Preferred Stock, in accordance with
the terms of the Certificate of Designations and the other Transaction
Agreements, will be duly and validly issued, fully paid and non-assessable and
will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement; Registration Rights
Agreement and Stock. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as Annex IV (the "Registration Rights
Agreement"), and the transactions contemplated thereby, have been duly and
validly authorized by the Company. This Agreement has been duly executed and
delivered by the Company and this Agreement is, and each of the other
Transaction Agreements, when executed and delivered by the Company, will be, a
valid and binding agreement of the Company enforceable in accordance with their
5
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 the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock 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, (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, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the business, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries, taken
as a whole, or on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. To the best of the Company's knowledge, none
of the Company's SEC Documents contained, at the time they were filed (except as
heretofore amended), 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. The Company has since June 1, 1999 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since the Latest Audited Date,
there has been no material adverse change and no material adverse development in
the business, properties, operations, condition (financial or otherwise), or
results of operations of the Company, except as disclosed in the Company's SEC
Documents. Since the Latest 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 stockholders with
respect to its capital stock, or purchased
6
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 Buyer that (i) would reasonably be expected to have a material adverse
effect on the business, operations, condition (financial or otherwise), or
results of operations of the Company and its subsidiaries, taken as a whole ,
(ii) would reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement or any of
the other Transaction Agreements, or (iii) would reasonably be expected to
materially and adversely affect the value of the rights granted to the Buyer in
the Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, operations, condition (financial or otherwise), or results
of operation of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Agreements 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.
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 on the
business, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole.
l. Prior Issues. Except as disclosed in the Company's SEC
Documents, during the twelve (12) months preceding the date hereof, the Company
has not issued any convertible securities. As of the date hereof, the
outstanding unconverted principal amount of each such issuance is as set forth
in Annex V hereto.
m. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the
7
ordinary course of the Company's business since the Latest Audited Date, and
which individually or in the aggregate, do not or would not have a material
adverse effect on the properties, business, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries, taken
as a whole. 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.
n. No Default. The Company is not 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.
o. 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 June 1, 1999, 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 Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of
the Preferred Stock 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 Preferred
Stock. 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 Preferred Stock 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 Conversion Notice (as defined in the Certificate of
Designations) relating to the conversion of the Preferred Stock unless the
Company is subject to an injunction (which injunction was not sought by the
Company) prohibiting the Company from doing so.
q. Brokers, Finders. Except for payment of fees to Spinneret
Financial Systems, Ltd. (the "Placement Agent"), payment of which is the sole
responsibility of the Company, the Company has taken no action which would give
rise to any claim by any person for brokerage
8
commission, finder's fees or similar payments by Buyer relating to this
Agreement or the transactions contemplated hereby. Buyer 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 Buyer, 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 Buyer acknowledges that (1) the
Preferred Stock have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the 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
Buyer 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 to the extent contemplated by
the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that
the Preferred Stock 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 an applicable
exemption from registration, 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 (THE "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.
The legend set forth above shall be promptly removed, and the Company shall
issue a certificate without such legend to the holder of any such Securities
upon which such legend is stamped, if,
9
unless otherwise required by federal or state securities laws, (i) such
Securities are registered for resale under the Securities Act and are sold in
accordance with an effective Registration Statement, or (ii) such holder
provides the Company with reasonable assurances that such Securities can be sold
pursuant to Rule 144(k) promulgated under the Securities Act. The Company shall
bear the cost of the removal of any legend as anticipated by this Section 4.
c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. Filings. (i) The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Buyer
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 Buyer promptly after such filing.
(ii) Subject to the conditions of the immediately following
sentence, the Company undertakes and agrees to take all steps necessary to have
a meeting and vote of the stockholders of the Company no later than the Meeting
Date (as defined below) regarding either or both (A) the authorization of the
Company's issuance to the holders of the Preferred Stock of shares of Common
Stock in excess of twenty percent (20%) of the outstanding shares of Common
Stock on the date of this Agreement in accordance with NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable and/or (B) the
increase of the authorized shares of Common Stock of the Company, if and as may
be necessary, to enable the Company to meet its obligations regarding the
reservation of shares and the conversion of the Preferred Stock as contemplated
by the Certificate of Designations and the other Transaction Agreements. The
term "Meeting Date" means the date which is the earlier of (x) seventy-five (75)
days after the date on which the Company has issued, after the date of this
Agreement, shares of Common Stock which, in the aggregate equal or exceed ten
percent (10%) of the outstanding shares of Common Stock on the date hereof or
(y) the date on which the Company holds its next regular or special stockholders
meeting. The Company will recommend to the stockholders that such authorization
be granted and will seek proxies from stockholders not attending the meeting
naming a director or officer of the Company as such stockholder's proxy and
directing the proxy to vote, or giving the proxy the authority to vote, in favor
of such authorization.
(iii) In furtherance of the provisions of the immediately
preceding subparagraph (ii) hereof, the Company (a) commits to using its best
efforts to obtain any stockholder authorization contemplated by said
subparagraph (ii), and (b) represents to the Buyer that the Company has obtained
the binding irrevocable commitment or proxy (each, a "Principal Voter Proxy") of
each Principal Voter (as defined below) that such Principal Voter will vote in
favor of any stockholder authorization contemplated by said subparagraph (ii). A
"Principal Voter" is a person who meets any one or more of the following
criteria: (A) a person who is a director or principal officer of the Company
(each, a "Company Principal") and who, directly or indirectly, holds any shares
of Common Stock of the Company; (B) a spouse of a Company Principal who resides
in the household of the Company Principal (a "Principal's Spouse") and who,
directly or indirectly, holds any shares of Common Stock of the Company, (C) a
parent, sibling or child of a Company Principal who resides in the household of
a Company Principal or of a Principal's Spouse (each, a "Principal's
10
Relative") and who, directly or indirectly, holds any shares of Common Stock or
(D) any other person or entity, including, without limitation, for profit or
non-profit corporations, partnerships and trusts, whose voting rights regarding
Common Stock of the Company is subject to the direction, control or other
influence of any Company Principal, Principal's Spouse or Principal's Relative.
The Company will deliver such Principal Voter Proxies to the Buyer or the
Buyer's designee within ten (10) business days after the Closing Date.
e. Reporting Status. So long as the Buyer 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, and the Company
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 obtain and to continue the listing and trading of its Common Stock
(including, without limitation, all Registrable Securities) on The
NASDAQ/Bulletin Board Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The
NASDAQ/Bulletin Board Market.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees, escrow fees and similar fees in connection with the sale of
the Preferred Stock) for internal working capital purposes, and, unless
specifically consented to in advance in each instance by the Buyer, 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 or
for the repayment of any outstanding loan by the Company to any other party.
g. Certain Agreements. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock (collectively, "New Common Stock") with any third party on any
date which is earlier than one hundred eighty (180) days from the last day of
the calendar month in which the Effective Date occurs.
(ii) In the event the Company breaches the provisions of this
Section 4(g), the Conversion Price (as defined in the Certificate of
Designations) shall be amended to be equal to (x) ninety percent (90%) of (y)
the amount determined in accordance with the provisions of the Certificate of
Designations, without regard to this provision, and the Buyer may require the
Company to immediately redeem all outstanding shares of Preferred Stock in
accordance with Section 4(j)(y) hereof.
h. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield the aggregate of one hundred fifty percent
(150%) of the number of shares of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Certificate of Designations or to represent payment of
dividends on the Preferred Stock.
11
i. Intentionally Omitted.
j. Limitation on Issuance of Shares. If applicable to the
Company, the Company may be limited in the number of shares of Common Stock it
may issue by virtue of (i) the number of authorized shares or (ii) the
applicable rules and regulations of the principal securities market on which the
Common Stock is listed or traded, including, but not necessarily limited to,
NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable
(collectively, the "Cap Regulations"). Without limiting the other provisions
thereof, the Preferred Stock shall provide that (i) the Company will take all
steps reasonably necessary to be in a position to issue shares of Common Stock
on conversion of the Preferred Stock without violating the Cap Regulations and
(ii) if, despite taking such steps, the Company still can not issue such shares
of Common Stock without violating the Cap Regulations, the holder of a share of
Preferred Stock which can not be converted as result of the Cap Regulations
after all such shares of Preferred Stock which can be converted under the Cap
Regulations have been converted (each such share, an "Unconverted Share") shall
have the option, exercisable in such holder's sole and absolute discretion, to
elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the Company
to issue shares of Common Stock in accordance with such holder's notice
of conversion at a conversion purchase price equal to the average of
the closing price per share of Common Stock for any five (5)
consecutive trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty (60)
trading days immediately preceding the date of notice of conversion; or
(y) require the Company to redeem such Unconverted Share for
an amount (the "Cap Limitation Redemption Amount"), payable in cash,
equal to:
V x M
______
CP
where:
"V" means the liquidation preference of the Unconverted Share
plus any accrued but unpaid dividends thereon;
"CP" means the Conversion Price in effect on the date of
redemption (the "Redemption Date") specified in the notice from the
holder of the Unconverted Share electing this remedy; and
"M" means the highest closing price per share of the Common
Stock during the period beginning on the Redemption Date and ending on
the date of payment of the Cap Limitation Redemption Amount.
12
A holder of more than one Unconverted Share may elect one of the above remedies
with respect to some of such Unconverted Shares and the other remedy with
respect to other Unconverted Shares. The Cap Limitation Redemption Amount
payable under the provisions of this Section 4(j) shall be payable within thirty
(30) days of the Redemption Date. The Certificate of Designations shall contain
provisions substantially consistent with the above terms, with such additional
provisions as may be consented to by the Buyer. The provisions of this paragraph
are not intended to limit the scope of the provisions otherwise included in the
Certificate of Designations.
k. Reimbursement. If (i) any Buyer, other than by reason of
its gross negligence or willful misconduct, 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 the Transaction Agreements, or if such Buyer is
impleaded in any such action, proceeding or investigation by any Person, or (ii)
any Buyer, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if such Buyer is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse such Buyer 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, other than
with respect to any matter in which such Buyer is a named party, the Company
will pay such Buyer the charges, as reasonably determined by such Buyer, for the
time of any officers or employees of such Buyer 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. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Buyers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Buyers 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 Buyers and any such Affiliate and any such Person. The Company
also agrees that neither any Buyer nor any such Affiliate, partners, directors,
agents, employees or controlling persons 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 the Transaction Agreements
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Buyer.
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
13
Preferred Stock 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 Buyer or its nominee and in such denominations to
be specified by the Buyer in connection with each conversion of the Preferred
Stock. 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 Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyer 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 Buyer.
b. Subject to the provisions of this Agreement, the Company
will permit the Buyer to exercise its right to convert the Preferred Stock in
the manner contemplated by the Certificate of Designations. The Company
acknowledges that the submission (by facsimile transmission or delivery by mail,
messenger or courier) of a Conversion Notice substantially in the form annexed
hereto as Annex VI shall constitute adequate notice of the exercise of the
conversion right by the holder of the Preferred Stock.
c. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
d. If, at any time (i) the Company challenges, disputes or
denies the right of a holder of Preferred Stock to effect a conversion of the
Preferred Stock into Common Stock or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with the terms of this Agreement or
the Certificate of Designations or (ii) any third party who is not and has never
been an Affiliate of such holder commences any lawsuit or proceeding or
otherwise asserts any claim before any court or public or governmental
authority, which lawsuit, proceeding or claim seeks to challenge, deny, enjoin,
limit, modify, delay or dispute the right of such holder to effect the
conversion of the Preferred Stock into Common Stock, and the Company refuses to
honor any such Conversion Notice, then such holder shall have the right, by
written notice to the Company, to require the Company to promptly redeem the
Preferred Stock for cash as provided in Article 8 of the
14
Certificate of Designations. Under any of the circumstances set forth above, the
Company shall be responsible for the payment of all costs and expenses of such
holder, including, but not necessarily limited to, reasonable legal fees and
expenses, as and when incurred in connection with such holder's disputing any
such action or pursuing such holder's rights hereunder (in addition to any other
rights such holder may have hereunder or otherwise).
e. The Company will authorize its transfer agent to give
information relating to the Company directly to the Buyer or the Buyer's
representatives upon the request of the Buyer 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 Buyer in connection with a Conversion
Notice, or (ii) the number of outstanding shares of Common Stock of all
stockholders as of a current or other specified date. The Company will provide
the Buyer with a copy of the authorization so given to the transfer agent.
6. CLOSING DATES.
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 Preferred Stock
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 Buyer.
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 Buyer understands that the Company's obligation to sell
the Preferred Stock to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon:
a. The Buyer's execution and delivery of this Agreement and
the other Transaction Agreements contemplated to be signed by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with this Agreement;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date;
15
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; and
e. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC
or the NASD and trading in securities generally on The NASDAQ/Bulletin Board
Market shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on The NASDAQ/Bulletin Board Market, nor shall
there be any outbreak or escalation of hostilities involving the United States
or any material adverse change in any financial market that in either case in
the reasonable judgment of the Company makes it impracticable or inadvisable to
sell the Preferred Stock.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Preferred Stock on the Closing Date is conditioned upon:
a. The adoption of the Certificate of Designations by all
necessary corporate action of the Company and the filing of all filings
necessary to effectuate the Certificate of Designations as a part of the charter
documents of the Company;
b. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
c. Delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;
d. The accuracy in all material respects on the 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;
e. On the Closing Date, the Registration Rights Agreement
shall be in full force and effect and the Company shall not be in default
thereunder;
f. On the Closing Date, the Buyer shall have received an
opinion of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, substantially to the effect set
forth in Annex III attached hereto;
16
g. 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;
h. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC
or the NASD and trading in securities generally on The NASDAQ/Bulletin Board
Market shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on The NASDAQ/Bulletin Board Market, nor shall
there be any outbreak or escalation of hostilities involving the United States
or any material adverse change in any financial market that in either case in
the reasonable judgment of the Buyer makes it impracticable or inadvisable to
purchase the Preferred Stock.
9. 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 jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
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.
17
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.
10. 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: IMAGING DIAGNOSTIC SYSTEMS, INC.
0000 X.X. 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Attention: , Esq.
Telecopier No.: ( ) -
Telecopier No.: ( ) -
BUYER: At the address set forth on the signature page of this Agreement.
18
with a copy to:
Xxxxxxx & Prager LLP
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Prager 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
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Buyer'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
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
19
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer by one of its officers thereunto duly authorized as of the date set
forth below.
STATED VALUE OF PREFERRED STOCK: $10,000
PURCHASE PRICE OF PREFERRED STOCK: $4,000,000
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 17th day July, 2000.
Corporate Centre, West Bay Road
P.O. Box 31106SMB
Grand Cayman, Cayman Is. BWI
Address Printed Name of Subscriber
Charlton Avenue LLC
By: /s/ Xxxxx Xxxx
Telecopier No. 000 000 0000 (Signature of Authorized Person)
Cayman Islands
Jurisdiction of Incorporation Printed Name and Title
or Organization Navigator Management Ltd.
Director
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.
IMAGING DIAGNOSTIC SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
Title: President
Date: July 17, 2000
20
