EXHIBIT 10.57
THIRD PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
IMAGING DIAGNOSTIC SYSTEMS, INC.
AND
CHARLTON AVENUE LLC
Dated as of
October 29, 2002
THIS THIRD PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 29th
day of October 2002 (this "AGREEMENT"), by and between CHARLTON AVENUE LLC, a
limited liability company organized and existing under the laws of The Cayman
Islands ("INVESTOR"), and IMAGING DIAGNOSTIC SYSTEMS, INC., a corporation
organized and existing under the laws of the State of Florida (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Fifteen
Million Dollars ($15,000,000) of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933, Regulation D and
Regulation S, and the rules and regulations promulgated thereunder (the
"SECURITIES ACT"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"ADDITIONAL CLOSING DATE" shall mean the date of the closing of
the purchase and sale of the Additional Common Stock, as the case may be.
"AGREEMENT" shall have the meaning specified in the preamble
hereof.
"BID PRICE" shall mean the closing bid price of the Common Stock
on the Principal Market.
"BLACKOUT NOTICE" shall have the meaning specified in the
Registration Rights Agreement. "BLACKOUT SHARES" shall have the
meaning specified in Section 2.6
"BY-LAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section 4.8.
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of
shares of Common Stock pursuant to Section 2.3.
"CLOSING DATE" shall mean, with respect to a Closing, the eleventh
(11th) Day following the Put Date related to such Closing, or such earlier date
as the Company and Investor shall agree, provided all conditions to such Closing
have been satisfied on or before such Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the
Effective Date, and ending on the earlier of (i) the date on which Investor
shall have purchased Put Shares pursuant to this Agreement for an aggregate
Purchase Price of the Maximum Commitment Amount, (ii) the date this Agreement is
terminated pursuant to Section 2.5, or (iii) the date occurring thirty six (36)
months from the date of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, no par value
per share, and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are
convertible into or exchangeable for Common Stock or any options or other rights
to subscribe for or purchase Common Stock or any such convertible or
exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement. "CONDITION SATISFACTION DATE" shall have the meaning
specified in Section 7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISCOUNT" shall mean nine (9%)percent.
"DISPUTE PERIOD" shall have the meaning specified in Section
9.3(a).
"DTC" shall the meaning specified in Section 2.3.
"DWAC" shall the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of1934 and
the rules and regulations promulgated thereunder.
"FAST" shall the meaning specified in Section 2.3.
"INDEMNIFIED PARTY" shall have the meaning specified in Section
9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section
9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section
9.3(b).
"INITIAL REGISTRABLE SECURITIES" shall have the meaning specified
in the Registration Rights Agreement.
"INITIAL REGISTRATION STATEMENT" shall have the meaning specified
in the Registration Rights Agreement.
"INVESTMENT AMOUNT" shall mean the dollar amount (within the range
specified in Section 2.2) to be invested by Investor to purchase Put Shares with
respect to any Put Date as notified by the Company to Investor in accordance
with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to
this Agreement. "LEGEND" shall have the meaning specified in
Section 8.1.
"MARKET PRICE" on any given date shall mean the average of the
Bid Prices (not necessarily consecutive) for any three (3) Trading Days during
the ten (10) trading day period immediately following the Put Date.
"MINIMUM COMMITMENT AMOUNT" shall mean Two Million Five
Hundred Thousand Dollars ($2,500,000).
"MAXIMUM COMMITMENT AMOUNT" shall mean Fifteen Million Dollars
($15,000,000).
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement and (b) the Registration Rights
Agreement.
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the
lesser of (a) One Million Dollars ($1,000,000), or (b)One Hundred Fifty (150%)
percent of the Weighted Average Volume for the fifteen (15) trading days
immediately preceding each of the Put Date and the Closing Date.
["MINIMUM PUT AMOUNT" shall mean, with respect to any Put, Sixty
Thousand Dollars ($60,000).]
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"NEW BID PRICE" shall have the meaning specified in Section2.6.
"OLD BID PRICE" shall have the meaning specified in Section2.6.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any
date as of which the number of shares of Common Stock is to be determined, all
issued and outstanding shares of Common Stock, including all shares of Common
Stock issuable in respect of outstanding convertible securities, scrip or any
certificates representing fractional interests in shares of Common Stock;
provided, however, that Outstanding shall not include any shares of Common Stock
then directly or indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the Over the Counter Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean, with respect to a Put, the Market
Price on the applicable Put Date (or such other date on which the Purchase Price
is calculated in accordance with the terms and conditions of this Agreement)
less the product of the Discount and the Market Price.
"PUT" shall mean each occasion that the Company elects to exercise
its right to tender a Put Notice requiring Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment Period
that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the
form of Exhibit B hereto, to Investor setting forth the Investment Amount with
respect to which the Company intends to require Investor to purchase shares of
Common Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has been exercised or may be exercised in
accordance with the terms and conditions of this Agreement.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b) the
Blackout Shares and (c) any securities issued or issuable with respect to any of
the foregoing by way of exchange, stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to Investor, such
Registrable Securities may be sold without registration under the Securities
Actor the need for an exemption from any such registration requirements and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in the form of Exhibit A hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by Investor of the Registrable Securities under the Securities Act.
"REGULATION D" shall have the meaning specified in the recitals of
this Agreement.
"REGULATION S" shall have the meaning specified in the recitals of
this Agreement.
"REMAINING PUT SHARES" shall have the meaning specified in Section
2.6.
"RULE 144" shall mean Rule 144 under the Securities Act or any
similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of
this Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals
of this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports
and other documents file by the Company pursuant to Section 13(a) or 15(d) of
the Exchange Act since the beginning of the Company's then most recently
completed fiscal year as of the time in question (provided that if the date in
question is within ninety days of the beginning of the Company's fiscal year,
the term shall include all documents filed since the beginning of the second
preceding fiscal year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement
is executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section
9.3(a).
"TRADING CUSHION" shall mean a minimum of five (5) Trading Days
between Put Dates.
"TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" means the Private Equity Credit Agreement,
the Registration Rights Agreement, the Warrant, Closing Certificate, and the
Transfer Agent Instructions.
"TRANSFER AGENT" shall mean the transfer agent for the Common
Stock (and to any substitute or replacement transfer agent for the Common Stock
upon the Company's appointment of any such substitute or replacement transfer
agent).
"UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at any
time during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common
Stock or makes any other distribution of
shares of Common Stock, except for
dividends paid with respect to the
Preferred Stock;
(c) issues any options or other rights to
subscribe for or purchase shares of
Common Stock and the price per share for
which shares of Common Stock may at any
time thereafter be issuable pursuant to
such options or other rights shall be
less than the Bid Price in effect
immediately prior to such issuance;
(d) issues any securities convertible into
or exchangeable for shares of Common
Stock and the consideration per share
for which shares of Common Stock may at
any time thereafter be issuable pursuant
to the terms of such convertible or
exchangeable securities shall be less
than the Bid Price in effect immediately
prior to such issuance;
(e) issues shares of Common Stock otherwise
than as provided in the foregoing
subsections (a) through (d), at a price
per share less, or for other
consideration lower, than the Bid Price
in effect immediately prior to such
issuance, or without consideration;
(f) makes a distribution of its assets or
evidences of indebtedness to the holders
of Common Stock as a dividend in
liquidation or by way of return of
capital or other than as a dividend
payable out of earnings or surplus
legally available for dividends under
applicable law or any distribution to
such holders made in respect of the sale
of all or substantially all of the
Company's assets (other than under the
circumstances provided for in the
foregoing subsections (a) through (e);
or
(g) takes any action affecting the number of
Outstanding Common Stock, other than an
action described in any of the foregoing
subsections (a) through (f) hereof,
inclusive, which in the opinion of the
Company's Board of Directors, determined
in good faith, would have a materially
adverse effect upon the rights of
Investor at the time of a Put.
"VALUATION PERIOD" shall mean the period of ten (10)
Trading Days immediately following the date on which the applicable Put
Notice is deemed to be delivered and during which the Purchase Price of the
Common Stock is valued; provided, however, that if a Valuation Event occurs
during any Valuation Period, a new Valuation Period shall begin on the
Trading Day immediately after the occurrence of such Valuation Event and
end on the tenth (10th) Trading Day thereafter.
`WEIGHTED AVERAGE VOLUME" shall mean the average of the
Weighted Volume for the relevant days.
"WEIGHTED VOLUME" shall mean the product of (a) the Closing Bid Price
times (b) the volume on the Principal Market.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any Put
Date the Company may exercise a Put by the delivery of a Put Notice. The
number of Put Shares that Investor shall receive pursuant to such Put shall
be determined by dividing the Investment Amount specified in the Put Notice
by the Purchase Price with respect to such Put Date.
(b) MINIMUM AMOUNT OF PUTS. The Company shall, in
accordance with Section 2.2(a), deliver to Investor during the Commitment
Period, Put Notices with an aggregate Investment Amount at least equal to
the Minimum Commitment Amount. If the Company for any reason fails to issue
and deliver such Put Shares during the Commitment Period, on the first
Trading Day after the expiration of the Commitment Period, the Company
shall wire to Investor a sum in immediately available funds equal to the
product of (i) the Minimum Commitment Amount minus the aggregate Investment
Amounts of the Put Notices delivered to Investor hereunder, and (ii) the
Discount.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period,
the Company may deliver a Put Notice to Investor, subject to the conditions
set forth in Section 7.2; provided, however, the Investment Amount for each
Put as designated by the Company in the applicable Put Notice shall be
neither less than the Minimum Put Amount nor more than the Maximum Put
Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by Investor if such notice is received on or prior to 12:00 noon
New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon New York time on a
Trading Day or at anytime on a day which is not a Trading Day.
Section 2.3 CLOSINGS. On or prior to each Closing Date for a Put,
(a) the Company shall deliver to Escrow Agent one or more certificates, at
Investor's option, representing the Put Shares to be purchased by Investor
pursuant to Section 2.1 herein, registered in the name of Investor and (b)
Investor shall deliver to the Escrow Agent the Investment Amount specified
in the Put Notice by wire transfer of immediately available funds to an
account designated by the Escrow Agent on or before the Closing Date. In
lieu of delivering physical certificates representing the Common Stock
issuable in accordance with clause (a) of this Section 2.3, and provided
that the Transfer Agent then is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of Investor, the Company shall use its commercially reasonable
efforts to cause the Transfer Agent to electronically transmit, prior to
the Closing Date, the Put Shares by crediting the account of the holder's
prime broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system, and provide proof satisfactory to the Escrow Agent of such
delivery. In addition, on or prior to such Closing Date, each of the
Company and Investor shall deliver to the Escrow Agent all documents,
instruments and writings required to be delivered or reasonably requested
by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein. On the Closing Date and
provided all conditions to Closing have been satisfied by the Company, the
Escrow agent shall wire transfer to the Company, the Investment Amount,
less any applicable fees and expenses.
Section 2.4 [INTENTIONALLY OMITTED]
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation
of Investor pursuant to this Agreement to purchase shares of Common Stock
shall, at Investor's option, terminate permanently (including with respect
to a Closing Date that has not yet occurred) in the event that (a) there
shall occur any stop order or suspension of the effectiveness of any
Registration Statement for an aggregate of thirty (30)Trading Days during
the Commitment Period, for any reason other than deferrals or suspension
during a Blackout Period in accordance with the Registration Rights
Agreement, as a result of corporate developments subsequent to the
Subscription Date that would require such Registration Statement to be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act or (b) the Company shall at
any time fail to comply with the requirements of Section 6.3, 6.4, or 6.6
and such failure shall continue for more than thirty (30) days.
Section 2.6 BLACKOUT SHARES. In the event that, (a) within fifteen
(15) Trading Days following any Closing Date, the Company gives a Blackout
Notice to Investor of a Blackout Period in accordance with the Registration
Rights Agreement, and (b) the Bid Price on the Trading Day immediately
preceding such Blackout Period ("OLD BID PRICE") is greater than the Bid
Price on the first Trading Day following such Blackout Period that Investor
may sell its Registrable Securities pursuant to an effective Registration
Statement ("NEW BID PRICE"), then the Company shall issue to Investor the
number of additional shares of Registrable Securities (the "BLACKOUT
SHARES") equal to the difference between (i) the product of the number of
Put Shares held by Investor immediately prior to the Blackout Period that
were issued on the most recent Closing Date(the "REMAINING PUT SHARES")
multiplied by the Old Bid Price, divided by the New Bid Price, and (ii) the
Remaining Put Shares.
Section 2.7 [INTENTIONALLY LEFT BLANK]
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledge and agree that the requirement to issue Blackout Shares under
Section 2.6 shall give rise to liquidated damages and not penalties. Each
of the Company and Investor further acknowledge that (a) the amount of loss
or damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable
loss likely to be incurred by Investor in connection with the failure by
the Company to make Puts with aggregate Purchase Prices totaling at least
the Minimum Commitment Amount or in connection with a Blackout Period under
the Registration Rights Agreement, and (c) each of the Company and Investor
are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this
Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for
its own account and Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any
person or entity; provided, however, Investor reserves the right to dispose
of the Common Stock at any time in accordance with federal and state
securities laws applicable to such disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an
accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Common Stock.
Investor acknowledges that an investment in the Common Stock is speculative
and involves a high degree of risk.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement
and the transactions contemplated hereby in accordance with its terms; (b)
the execution and delivery of this Agreement and the Registration Rights
Agreement, and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action and no
further consent or authorization of Investor or its partners is required;
and (c) this Agreement has been duly authorized and validly executed and
delivered by Investor and is a valid and binding agreement of Investor
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally
the enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act)
of the Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is a limited
liability company duly organized, validly existing and in good standing
under the laws of the Cayman Islands, and has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted. Investor is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes
such qualification necessary, other than those in which the failure so to
qualify would not have a material adverse effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of
this Agreement and any other document or instrument contemplated hereby,
and the consummation of the transactions contemplated hereby and thereby,
and compliance with the requirements hereof and thereof, will not (a)
violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on Investor, (b) violate any provision of any
indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound, or conflict
with or constitute a material default thereunder, (c) result in the
creation or imposition of any lien pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any fiduciary
duty owed by Investor to any third party, or (d) require the approval of
any third-party (that has not been obtained) pursuant to any material
contract, instrument, agreement, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management
may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has
received all documents, records, books and other information pertaining to
Investor's investment in the Company that has been requested by Investor.
Investor has reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with
or solicited by or through any leaflet, public promotional meeting,
television advertisement or any other form of general solicitation or
advertising.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the
financial capacity and the necessary capital to perform its obligations
hereunder and shall and has provided to the Company such financial and
other information that the Company has requested to demonstrate such
capacity.
Section 3.10 (a) OFFSHORE TRANSACTION.
(i) Investor is not a U.S. person as that term is defined under
Regulation S of the Rules and Regulations of the Securities
Exchange Act.
(ii) Investor is outside the United States as of the date of the
execution and delivery of this Agreement.
(iii)Investor is purchasing the Put Shares for its own account and not
on behalf of any U.S. person, and has not pre-arranged any sale
with purchaser in the United States.
(iv) Investor represents and warrants and hereby agrees that all
offers and sales of the Common Stock prior to the expiration of a
period commencing on the date of the transaction and ending after
the Distribution Compliance Period shall only be made in
compliance with the safe harbor contained in Regulation S,
pursuant to registration of securities under the Securities Act
of 1933 or pursuant to an exemption from registration, and all
offers and sales after the expiration of the Distribution
Compliance Period shall be made only pursuant to such
registration or to such exemption from registration.
(v) Investor understands that in the view of the SEC the statutory
basis for the exemption claimed for this transaction would not be
present if the offering of Securities, although in technical
compliance with Regulation S, is part of a plan or scheme to
evade the registration provisions of the 1933 Act. Investor is
acquiring the Securities for investment purposes and has no
present intention to sell the Shares in the United States or to a
U.S. Person or for the account or benefit of a U.S. Person either
now or after the expiration of the Distribution Compliance
Period.
(vi) Investor is not an underwriter of, or dealer in, the Securities,
and Investor is not participating, pursuant to a contractual
agreement, in the distribution of Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as
disclosed in the SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a
corporation duly organized and validly existing and in good standing under
the laws of the State of Florida, and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as
now being conducted. The Company does not own more than fifty percent (50%)
of the outstanding capital stock of or control any other business entity.
The Company is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not
have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares
and the Blackout Shares, if any; (b) the execution and delivery of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required; and (c) each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company and constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
Section 4.3 CAPITALIZATION. As of October 28, 2002, the authorized
capital stock of the Company consisted of 150,000,000 shares of Common
Stock, of which 139,258,029 shares were issued and outstanding, and
2,000,000 shares of Preferred stock, none of which are issued and
outstanding. Except for (a) options to purchase approximately 7,832,995
shares of Common Stock with exercises prices ranging between $.11and $3.75
per share; (b) warrants to purchase 125,000 shares of Common Stock with an
exercise price ranging between $1.00 to $1.50 per share as set forth in
Schedule 4.3, there were no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or
giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
nonassessable.
Section 4.4 COMMON STOCK. The Company has registered the Common
Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act, and the
Company has maintained all requirements for the continued listing or
quotation of the Common Stock, and such Common Stock is currently listed or
quoted on the Principal Market. As of the date of this Agreement, the
Principal Market is the OTC Bulletin Board.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made
available to Investor true and complete copies of the SEC Documents
(including, without limitation, proxy information and solicitation
materials). To the best of Company's knowledge, the Company has not
provided to Investor any information that, according to applicable law,
rule or regulation, should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may
be, and other federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except (a) as may be otherwise indicated in such
financial statements or the notes thereto or (b) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof and
the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the
best of Company's knowledge, the sale and issuance of the Put Shares and
the Blackout Shares, if any, in accordance with the terms and on the bases
of the representations and warranties set forth in this Agreement, may and
shall be properly issued by the Company to Investor pursuant to Section
4(2), Regulation D and/or any applicable state law. When issued and paid
for as herein provided, the Put Shares, and the Blackout Shares, if any,
shall be duly and validly issued, fully paid, and nonassessable. Neither
the sales of the Put Shares or the Blackout Shares, if any, pursuant to,
nor the Company's performance of its obligations under, this Agreement or
the Registration Rights Agreement shall (a) result in the creation or
imposition of any liens, charges, claims or other encumbrances upon the Put
Shares or the Blackout Shares, if any, or any of the assets of the Company,
or (b) entitle the holders of Outstanding Common Stock to preemptive or
other rights to subscribe to or acquire the Common Stock or other
securities of the Company. The Put Shares and the Blackout Shares, if any,
shall not subject Investor to personal liability by reason of the ownership
thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO
THIS TRANSACTION. Neither the Company nor any of its affiliates nor any
person acting on its or their behalf (a) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares or the
Blackout Shares, if any, or (b) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"CERTIFICATE"), and the Company's By-Laws, as amended and in effect on the
date hereof (the "BY-LAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance
of the Put Shares and the Blackout Shares, if any, do not and will not (a)
result in a violation of the Certificate or By-Laws or (b) conflict with,
or constitute a material default (or an event that with notice or lapse of
time or both would become a material default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, instrument or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is
a party, or (c) result in a violation of any federal, state, local or
foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations)applicable to the Company or by
which any property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect) nor is the Company otherwise in
violation of, conflict with or in default under any of the foregoing;
provided, however, that for purposes of the Company's representations and
warranties as to violations of foreign law, rule or regulation referenced
in clause (c), such representations and warranties are made only to the
best of the Company's knowledge insofar as the execution, delivery and
performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby are or may be affected by
the status of Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Common
Stock in accordance with the terms hereof(other than any SEC, NASD or state
securities filings that may be required to be made by the Company
subsequent to any Closing, any registration statement that may be filed
pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Over The Counter
Bulletin Board); provided that, for purposes of the representation made in
this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since July 1, 2001, no
eventhas occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations that are material, individually or in the
aggregate, and that are not disclosed in the SEC Documents or otherwise
publicly announced, other than those incurred in the ordinary course of the
Company's businesses since July 1, 2001 and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the
Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since July 1,
2001, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, 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 in the SEC Documents.
Section 4.13 NO INTEGRATED OFFERING. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, other than pursuant to this
Agreement, under circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may beset
forth in the SEC Documents, there are no lawsuits or proceedings pending or
to the best knowledge of the Company threatened, against the Company, nor
has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which would have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by
the Company, requested of any court, arbitrator or governmental agency
which would have a Material Adverse Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company,
any Person representing the Company, and, to the knowledge of the Company,
any other Person selling or offering to sell the Put Shares or the Blackout
Shares, if any, in connection with the transactions contemplated by this
Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the same which contained any untrue statement of
a material fact or omitted to state any material fact necessary in order to
make the statements, in the light of the circumstances under which they
were made, not misleading.
Section 4.16 MATERIAL NON-PUBLIC INFORMATION. The Company is not
in possession of, nor has the Company or its agents disclosed to Investor,
any material non-public information that (a) if disclosed, would reasonably
be expected to have a materially adverse effect on the price of the Common
Stock or(b) according to applicable law, rule or regulation, should have
been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
Section 4.17.
a. OFFSHORE TRANSACTION. The Company has not offered these securities
to any person in the United States or to any U.S. person as that term is
defined in Regulation S.
b. NO DIRECTED SELLING EFFORTS. In regard to this
transaction, the Company has not conducted any "direct selling efforts" as
that term is defined in Rule 902 of Regulation S nor has Company conducted
any general solicitation relating to the offer and the sale of the within
securities to persons resident within the United States or elsewhere.
c. FILINGS. The Company undertakes and agrees pursuant to the sale of
its securities under Regulation S to make all necessary filings in
connection with the sale of its securities as required by the laws and
regulations of all appropriate jurisdictions.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities
with respect to shares of the Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the NASD and the Principal Market on which the
Common stock is listed.
Section 5.2 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.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has available and the Company shall reserve and keep available at
all times, free of preemptive rights, shares of Common Stock for the
purpose of enabling the Company to satisfy any obligation to issue the Put
Shares and the Blackout Shares, if any; such amount of shares of Common
Stock to be reserved shall be calculated based upon a minimum Purchase
Price of $.93(50% of Current Price) for the Put Shares under the terms and
conditions of this Agreement and a good faith estimate by the Company in
consultation with Investor of the number of Blackout Shares, if any, that
will need to be issued. The number of shares so reserved from time to time,
as theretofore increased or reduced as hereinafter provided, may be reduced
by the number of shares actually delivered hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the
listing of the Common Stock on a Principal Market, and will cause the Put
Shares and the Blackout Shares, if any, to be listed on the Principal
Market. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such
application the Put Shares and the Blackout Shares, if any, and shall take
such other action as is necessary or desirable in the reasonable opinion of
Investor to cause the Common Stock to be listed on such other Principal
Market as promptly as possible. The Company shall use its commercially
reasonable efforts to continue the listing and trading of the Common Stock
on the Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any
action or file any document (whether or not permitted by said Act or the
rules thereunder)to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Put Shares and the
Blackout Shares, if any, shall be free of legends, except as provided for
in Article VIII.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all
commercially reasonable steps necessary to preserve and continue the
corporate existence of the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to
Investor, promptly after the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO MAKE A PUT. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities: (a) receipt of any request for additional information by the
SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or
supplements to the registration statement or related prospectus; (b) the
issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of any Registration Statement
or the initiation of any proceedings for that purpose; (c) receipt of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; (d) the happening of any event that makes any statement made
in such Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the
case of a Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and (e)
the Company's reasonable determination that a post-effective amendment to
the registration statement would be appropriate, and the Company shall
promptly make available to Investor any such supplement or amendment to the
related prospectus. The Company shall not deliver to Investor any Put
Notice during the continuation of any of the foregoing events.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten(10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify
Investor as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance
of Put Notices. Such notification shall constitute only the Company's good
faith estimate with respect to such calendar quarter and shall in no way
obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Put Notices during such calendar
quarter. The failure by the Company to comply with this provision can be
cured by the Company's notifying Investor at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of
the Company to, another entity unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the obligation to
deliver to Investor such shares of Common Stock and/or securities as
Investor is entitled to receive pursuant to this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of
the Put Shares and the issuance of the Blackout Shares, if any, shall be
made in accordance with the provisions and requirements of Regulation D and
any applicable state law.
Section 6.12 REIMBURSEMENT. If (i) Investor, 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
shareholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents,
or if Investor is impleaded in any such action, proceeding or investigation
by any person, or (ii) Investor, 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 Documents, or if Investor is impleaded in any such action,
proceeding or investigation by any person, then in any such case, the
Company will reimburse Investor 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 Investor is a named party, the
Company will pay to Investor the charges, as reasonably determined by
Investor, for the time of any officers or employees of Investor 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 section 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 Investor that 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 Investor 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,
Investor and any such affiliate and any such person.
Section 6.13 DILUTION. The number of shares of Common Stock issuable as
Put Shares may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price
of the Common Stock declines during the period between the Effective Date
and the end of the Commitment Period. The Company's executive officers and
directors have studied and fully understand the nature of the transactions
contemplated by this Agreement 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 Put Shares 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.
Section 6.14 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 Common
Stock) for internal working capital purposes, and, unless specifically
consented to in advance in each instance by the Investor, 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.
Section 6.15 CERTAIN AGREEMENTS. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Investor, enter
into any subsequent or further offer or sale of Common Stock or Common
Stock Equivalents (collectively, "New Common Stock") with any third party
pursuant to a transaction which in any manner permits the sale of the New
Common Stock on any date which is thirty (30) days prior or subsequent to
any Additional Closing Date.
(ii) The provisions of subparagraph 6.15(i) will not apply to
(w) Common Stock issued pursuant to an exemption from registration under
the Securities Act of 1933; (x) an underwritten public offering of shares
of Common Stock or Preferred Stock; (y) an offering of convertible
Preferred Stock at market or above; or (z) the issuance of securities
(other than for cash) in connection with an acquisition, merger,
consolidation, sale of assets, disposition or the exchange of the capital
stock for assets, stock or other joint venture interests.
(iii) In the event the Company breaches the provisions of this
Section , the Discount (as defined in shall be amended to be equal to
(x)110% of the Discount set forth herein and the Investor may terminate its
obligations under this Agreement and demand such amounts as may be owing
under Section 2.1.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to
issue and sell the Put Shares to Investor incident to each Closing is
subject to the satisfaction, at or before each such Closing, of each of the
conditions set forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time, except for changes
which have not had a Material Adverse Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is
subject to the satisfaction, on (a) the date of delivery of such Put Notice
and (b) the applicable Closing Date (each a "CONDITION SATISFACTION DATE"),
of each of the following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As
set forth in the Registration Rights Agreement, the Company shall have
filed with the SEC the Initial Registration Statement with respect to the
resale of the Initial Registrable Securities by Investor and such
Registration Statement shall have been declared effective by the SEC prior
to the first Put Date. For the purposes of any Put Notice with respect to
the Registrable Securities other than the Initial Registrable Securities,
the Company shall have filed with the SEC a Registration Statement with
respect to the resale of such Registrable Securities by Investor which
shall have been declared effective by the SEC prior to the Put Date
therefore.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the
Registration Rights Agreement, a Registration Statement shall have
previously become effective for the resale by Investor of the Registrable
Securities subject to such Put Notice and such Registration Statement shall
remain effective on each Condition Satisfaction Date and (i) neither the
Company nor Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to such Registration Statement
or that the SEC otherwise has suspended or withdrawn the effectiveness of
such Registration Statement, either temporarily or permanently, or intends
or has threatened to do so (unless the SEC's concerns have been addressed
and Investor is reasonably satisfied that the SEC no longer is considering
or intends to take such action),and (ii) no other suspension of the use or
withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct
in all material respects as of each Condition Satisfaction Date as though
made at each such time (except for representations and warranties
specifically made as of a particular date) with respect to all periods, and
as to all events and circumstances occurring or existing to and including
each Condition Satisfaction Date, except for any conditions which have
temporarily caused any representations or warranties herein to be incorrect
and which have been corrected with no continuing impairment to the Company
or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with
by the Company at or prior to each Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits or directly and materially adversely affects
any of the transactions contemplated by this Agreement, and no proceeding
shall have been commenced that may have the effect of prohibiting or
materially adversely affecting any of the transactions contemplated by this
Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock shall not have been suspended by the SEC,
the Principal Market or the NASD and the Common Stock shall have been
approved for listing or quotation on and shall not have been delisted from
the Principal Market.
(h) LEGAL OPINION. The Company shall have caused to be
delivered to Investor, within five (5) Trading Days of the effective date
of the Initial Registration Statement and each subsequent Registration
Statement, an opinion of the Company's legal counsel in the form of Exhibit
C hereto, addressed to Investor.
(i) [INTENTIONALLY OMITTED]
(j) TEN PERCENT LIMITATION. On each Closing Date, the number
of Put Shares then to be purchased by Investor shall not exceed the number
of such shares that, when aggregated with all other shares of Registrable
Securities then owned by Investor beneficially or deemed beneficially owned
by Investor, would result in Investor owning no more than 9.9% of all of
such Common Stock as would be outstanding on such Closing Date, as
determined in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder. For purposes of this Section 7.2(j), in
the event that the amount of Common Stock outstanding as determined in
accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon
which the Put Notice associated with such Closing Date is given, the amount
of Common Stock outstanding on such Closing Date shall govern for purposes
of determining whether Investor, when aggregating all purchases of Common
Stock made pursuant to this Agreement and Blackout Shares, if any, would
own more than 9.9% of the Common Stock following such Closing Date.
(k) MINIMUM BID PRICE AND WEIGHTED AVERAGE VOLUME. The average
of the Bid Prices and the Weighted Average Volume for the fifteen (15)
Trading Days immediately preceding each of the Put Notice and the Closing
Date, shall have equaled or exceeded $.10 and $20,000 respectively (as
adjusted for stock splits, stock dividends, reverse stock splits, and
similar events).
(l) NO KNOWLEDGE. The Company shall have no knowledge of any
event more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more
likely than not to occur within the fifteen Trading Days following the
Trading Day on which such Notice is deemed delivered).
(m) TRADING CUSHION. The Trading Cushion shall have elapsed since
the immediately preceding Put Date.
(n) SHAREHOLDER VOTE. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) NO VALUATION EVENT. No Valuation Event shall have occurred
since the Put Date.
(p) OTHER. On each Condition Satisfaction Date, Investor shall
have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by Investor in order
for Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit D hereto, executed by an
executive officer of the Company and to the effect that all the conditions
to such Closing shall have been satisfied as at the date of each such
certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall make available for inspection and review
by Investor, advisors to and representatives of Investor (who may or may
not be affiliated with Investor and who are reasonably acceptable to the
Company), any Underwriter, any Registration Statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to
time after the filing and effectiveness of such Registration. This is
subject to SEC Regulation FD.
(b) Each of the Company, its officers, directors, employees
and agents shall in no event disclose non-public information to Investor,
advisors to or representatives of Investor.
(c) Nothing herein shall require the Company to disclose
non-public information to Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company shall, as
hereinabove provided, immediately notify the advisors and representatives
of Investor and any Underwriters of any event or the existence of any
circumstance(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in a Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 7.3 shall be construed to
mean that such persons or entities other than Investor (without the written
consent of Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in
accordance with the terms and conditions of this Agreement and nothing
herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such persons
or entities, any Registration Statement contains an untrue statement of a
material fact or omits a material fact required to be stated in such
Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following
legend (the "LEGEND"):
The securities represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Securities Act") or qualified under applicable state
securities laws. These securities may not be offered,
sold, pledged, hypothecated, transferred or otherwise
disposed of except pursuant to (I) an effective
registration statement and qualification in effect with
respect thereto under the Securities Act and under any
applicable state securities law, (ii) to the extent
applicable, Rule 144 under the Securities Act, or (iii) an
opinion of counsel reasonably acceptable to the Company
that such registration and qualification is not required
under applicable federal and state securities laws."
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the Transfer Agent Instructions in substantially the form of
Exhibit E hereto. Such instructions shall be irrevocable by the Company
from and after the date thereof or from and after the issuance thereof
except as otherwise expressly provided in the Registration Rights
Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the Transfer Agent to issue to Investor certificates
evidencing shares of Common Stock incident to a Closing, free of the
Legend, without consultation by the transfer agent with the Company or its
counsel and without the need for any further advice or instruction or
documentation to the Transfer Agent by or from the Company or its counsel
or Investor; provided that (a) a Registration Statement shall then be
effective, (b) Investor confirms to the Transfer Agent and the Company that
it has or intends to sell such Common Stock to a third party which is not
an affiliate of Investor or the Company and Investor agrees to redeliver
the certificate representing such shares of Common Stock to the Transfer
Agent to add the Legend in the event the Common Stock is not sold, and (c)
if reasonably requested by the transfer agent or the Company, Investor
confirms to the transfer agent and the Company that Investor has complied
with the prospectus delivery requirement under the Securities Act. At any
time after the Effective Date, upon surrender of one or more certificates
evidencing Common Stock that bear the Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the Legend to
replace those surrendered.
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No
legend other than the one specified in Section 8.1 has been or shall be
placed on the share certificates representing the Common Stock and no
instructions or "stop transfers orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set
forth in this Article VIII.
Section 8.3 COVER. If the Company fails for any reason to deliver
the Put Shares on such Closing Date and the holder of the Put Shares (a
"Investor") purchases, in an 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 such Investor (the "Sold
Shares"), which delivery such Investor anticipated to make using the Put
Shares (a "Buy-In"), then the Company shall pay to such Investor, in
addition to all other amounts contemplated in other provisions of the
Transaction Documents, and not in lieu thereof, the Buy-In Adjustment
Amount (as defined below). The "Buy-In Adjustment Amount" is the amount
equal to the excess, if any, of (x) such Investor'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 such
Investor from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to such Investor in immediately available funds
immediately upon demand by such Investor. By way of illustration and not in
limitation of the foregoing, if such Investor purchases Covering Shares
having a total purchase price (including brokerage commissions) of $11,000
to cover a Buy-In with respect to shares of Common Stock that it sold for
net proceeds of $10,000, the Buy-In Adjustment Amount that the Company will
be required to pay to such Investor will be $1,000.
Section 8.4 INVESTOR'S COMPLIANCE. Nothing in this Article VIII
shall affect in any way Investor's obligations under any agreement to
comply with all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall
be in writing and, unless otherwise specified herein, shall be (a)
personally served,(b) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (c) delivered by reputable air
courier service with charges prepaid, or (d) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice
given in accordance herewith. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (i) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business
day following the date of mailing by express courier service or on the
fifth business day after deposited in the mail, in each case, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall
be:
If to the Company: Imaging Diagnostic Systems, Inc.
0000 XX 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx X. Xxxxxxxx, Esq.
Mitrani, Rynor, Xxxxxxx & Macaulay P.A.
2200 Suntrust Int'l Center
Xxx Xxxxxxxxx Xxxxx Xxxxxx
Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
if to Investor:
Charlton Avenue LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
British West Indies
with a copy to:
Xxxxxxx & Xxxxxx, LLP
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 9.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the
other party hereto.
Section 9.2 INDEMNIFICATION.
The Company agrees to indemnify and hold harmless Investor
and its officers, directors, employees, and agents, and each Person or
entity, if any, who controls Investor within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
Controlling Persons (as defined in the Registration Rights Agreement) from
and against any Damages, joint or several, and any action in respect
thereof to which Investor, its partners, affiliates, officers, directors,
employees, and duly authorized agents, and any such Controlling 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 Investor's failure to perform any covenant or
agreement contained in this Agreement or Investor's or its officer's,
director's, employee's, agent's or Controlling Person's negligence,
recklessness or bad faith in performing its obligations under this
Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims
for indemnification by any Indemnified Party (as defined below) under
Section 9.2 shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
any person claiming indemnification under any provision of Section 9.2 (an
"INDEMNIFIED PARTY") might seek indemnity under Section 9.2 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 Section 9.2
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 Section 9.2 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party
against such Third Party Claim.(i)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 9.3(a), 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 9.2). 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
clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate to 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 clause
(i), 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
takeover 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 9.2
with respect to such Third Party Claim. (ii) 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 9.3(a), 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 clause (ii), 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 clause(iii) below, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause (ii) 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 clause (ii), and the Indemnifying Party shall bear
its own costs and expenses with respect to such participation. (iii) 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 9.2 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 9.2 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 if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim
under Section 9.2 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 9.2 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 9.2 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 if the
dispute is not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled 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.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware without regard to the principles of conflicts of law. Each of the
Company and Investor hereby submit to the exclusive jurisdiction of the
United States Federal and state courts located in Delaware with respect to
any dispute arising under this Agreement, the agreements entered into in
connection herewith or the transactions contemplated hereby or thereby.
Section 10.2 JURY TRIAL WAIVER. The Company and the Investor
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 of or in connection with the Transaction Documents.
Section 10.3 SPECIFIC ENFORCEMENT. The Company and the Investor
acknowledge and agree that irreparable damage would occur to the Investor
in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Investor shall be entitled to
an injunction or injunctions to prevent or cure breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any
of them may be entitled by law or equity.
Section 10.4 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Company and Investor and their respective
successors and permitted assigns. Neither this Agreement nor any rights of
Investor or the Company hereunder may be assigned by either party to any
other person. Notwithstanding the foregoing, (a) the provisions of this
Agreement shall inure to the benefit of, and be enforceable by, any
transferee of any of the Common Stock purchased or acquired by Investor
hereunder with respect to the Common Stock held by such person, and (b)
Investor's interest in this Agreement may be assigned at any time, in whole
but not in part, to any affiliate of Investor.
Section 10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the Company and Investor and their respective successors
and permitted assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 10.6 TERMINATION. This Agreement shall terminate at the
end of Commitment Period or as otherwise provided herein (unless extended
by the agreement of the Company and Investor); provided, however, that the
provisions of Article VI, VIII, and Sections 9.2,10.2, 10.3 and 10.4 shall
survive the termination of this Agreement.
Section 10.7 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This
Agreement and the instruments referenced herein contain the entire
understanding of the Company and Investor with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
Section 10.8 FEES AND EXPENSES. Each of the Company and Investor
agrees to pay its own expenses in connection with the preparation of this
Agreement and performance of its obligations hereunder, except that the
Company shall pay Xxxxxxx & Xxxxxx, LLP a fee of $1,500 for this
transaction. In addition, the Company shall pay all reasonable fees and
expenses incurred by the Investor in connection with any amendments,
modifications or waivers of this Agreement or the Registration Rights
Agreement or incurred in connection with the enforcement of this Agreement
and the Registration Rights Agreement, including, without limitation, all
reasonable attorneys fees and expenses. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the
Shares pursuant hereto.
Section 10.9 NO BROKERS. Each of the Company and Investor
represents that it has had no dealings in connection with this transaction
with any finder or broker who will demand payment of any fee or commission
from the other party, [except that the company agrees to pay the
consultant, Spinneret Financial Systems, Inc., a fee in the amount of 4% of
the new money funded excluding the first $2,090,000.] The Company on the
one hand, and Investor, on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying
party in connection with this Agreement or the transactions contemplated
hereby.
Section 10.10 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which may be executed by less than all of
the Company and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and
all of which together shall constitute one and the same instrument. This
Agreement, once executed by a party, may be delivered to the other parties
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the parties so delivering this Agreement.
Section 10.11 SURVIVAL; SEVERABILITY. The representations,
warranties, covenants and agreements of the Company hereto shall survive
each Closing hereunder for a period of one (1) year thereafter. In the
event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 10.12 FURTHER ASSURANCES. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
Section 10.13 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be
applied against any party.
Section 10.14 EQUITABLE RELIEF. The Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be
inadequate relief to Investor. The Company therefore agrees that Investor
shall be entitled to temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages.
Section 10.15 TITLE AND SUBTITLES. The titles and subtitles used
in this Agreement are used for the convenience of reference and are not to
be considered in construing or interpreting this Agreement.
Section 10.16 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg L.P. or any successor thereto. The written mutual consent of
Investor and the Company shall be required to employ any other reporting
entity.
Section 10.17 PUBLICITY. The Company and Investor shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other parties, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law, in which
such case the disclosing party shall provide the other parties with prior
notice of such public statement. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of Investor without the prior written
consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction
Documents may be deemed to be "material contracts" as that term is defined
by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be
required to file such documents as exhibits to reports or registration
statements filed under the Securities Act or the Exchange Act. Investor
further agrees that the status of such documents and materials as material
contracts shall be determined solely by the Company, in consultation with
its counsel.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Private
Equity Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
IMAGING DIAGNOSTIC SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
CHARLTON AVENUE LLC
By: /s/ Xxxxx Xxxx
Name:Xxxxx Xxxx
Title:Director
Navigator Management Ltd.
EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
EXHIBIT F Schedule 4.3
EXHIBIT A Registration Rights Agreement (Filed as Exhibit 10.58)
EXHIBIT B
[FORM OF PUT NOTICE]
TO: CHARLTON AVENUE LLC
We refer to the Third Private Equity Credit Agreement dated October 29,
2002, (the "Agreement") made between ourselves as the issuer and you as the
subscriber. Expressions defined or to which a meaning is assigned in the Amended
Private Equity Credit Agreement shall, unless the context otherwise requires,
bear the same meaning when used herein.
We hereby:
1. give you notice that we require you to subscribe for $___________
of Common Stock of Imaging Diagnostic Systems, Inc. (the
"Investment Amount"); and;
2. certify that the conditions stipulated in Article VII of the
Third Private Equity Credit Agreement have been fulfilled and
satisfied.
For and on behalf of Imaging Diagnostic Systems, Inc.
By: __________________________________________
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
Date: ________________2002
Note:
The date of Closing must fall on the 11th Trading Day after the date of this
notice.
Exhibit C
[FORM OF OUTSIDE COUNSEL OPINION]
[Addressee]
[Address]
TO WHOM IT MAY CONCERN:
The Registration Statement on Form ____ (File No. 333-______________) of
the Company (the "Registration Statement"), a copy of which is enclosed, was
declared effective at ____________M. Eastern Time on ____________, 2002. Upon
issuance of the Underlying Shares referred to in the Company's instruction
letter attached, you are authorized to issue certificates for the Company's
common stock without restrictive legends. No stop order suspending the
effectiveness of the Registration Statement has been issued.
Very truly yours,
Exhibit D
Certificate of Chief Executive Officer
Of
---------------------------
The undersigned, the Chief Executive Officer of________________hereby
certifies that:
1. The representations and warranties of _______________________________,
set forth in a certain Third Private Equity Credit Agreement (the "Agreement"),
dated the____day of____________, 2002, by and among ________________________(the
"Company"), and ("Investor") (and in any other agreements, documents or
instruments delivered by the Company to Investor contemporaneously therewith)
are each true and correct in all material respects on and as of the date hereof
with the same effect as if made on and as of the date hereof.
2. The Company has performed and complied with all the agreements,
obligations, and conditions required by the Agreement (and any other agreements,
documents or instruments delivered by the Company to Investor contemporaneously
therewith) to be performed and complied with by the Company, on or before the
date hereof.
IN WITNESS WHEREOF, the undersigned has hereunto affixed his hand as of the
____day of ___________, 2002.
--------------------------------------
By: __________________________________
Its __________________________________
EXHIBIT E
TRANSFER AGENT INSTRUCTIONS
________________, 2002
Ladies & Gentlemen:
Reference is made to that certain Common Stock Purchase Agreement (the
"Agreement") between IMAGING DIAGNOSTIC SYSTEMS, INC., a Florida corporation
(the "Company"), and , a Cayman Islands LLC (the "Investor") pursuant to which
the Company is issuing to the Investor shares (the "Shares") of the Company's
common stock, no par value per share (the "Common Stock") and certain Common
Stock purchase warrants (the "Warrants") which shall be exercisable into shares
of Common Stock. The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as "Warrant Shares"). The Shares and Warrant
Shares are collectively referred to herein as "Underlying Shares".
This letter shall serve as our irrevocable authorization and direction to
you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time upon
notice from the Company to issue such Underlying Shares. So long as you have
previously received (x) an opinion of the Company's outside counsel
substantially in the form of Exhibit I attached hereto (which the Company shall
direct be delivered to you by such outside counsel upon the effectiveness of the
registration statement covering resales of Underlying Shares) stating that a
registration statement covering resales of Underlying Shares has been declared
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended, and that Underlying Shares may be issued (or reissued if they
have been issued at a time when there was not such an effective registration
statement) or resold without any restrictive legend (the "Opinion"), (y) a copy
of such registration statement and (z) an appropriate representation that the
resale prospectus contained in the registration statement will be delivered in
compliance with applicable rules and regulations, then certificates representing
Underlying Shares shall not bear any legend restricting transfer of Underlying
Shares thereby and should not be subject to any stop-transfer restriction.
Provided, however, that if you have not previously received a copy of the
Opinion, such registration statement and such representation, then certificates
representing Underlying Shares shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
and, provided, further, that the Company may, from time to time, notify you
to place stop-transfer restrictions on the certificates for Underlying Shares in
the event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.
Please be advised that the Investor has relied upon this instruction letter
as an inducement to enter into the Purchase Agreement and, accordingly, the
Investor, is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at ______________________.
Very truly yours,
___________________________________
By: ________________________________
Name: ________________________
Title: ________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By: _________________________________
Name: _________________________
Title: __________________________
Tel.: ___________________________
EXHIBIT F
Imaging Diagnostic Systems, Inc.
Warrants Outstanding
Date of Term Warrant Warrant Cash Proceeds
Warrant of Warrant Series Holder Shares Price to the Company
------- ---------- ------ ------ ------ ----- --------------
11/2/98 5 Year Series H (A) Austost 25,000 $ 1.000 $ 25,000.00
11/2/98 5 Year Series H (A) Balmore 25,000 $ 1.000 $ 25,000.00
11/2/98 5 Year Series H (A) Settondown 25,000 $ 1.000 $ 25,000.00
11/2/98 5 Year Series H (B) Austost 25,000 $ 1.500 $ 37,500.00
11/2/98 5 Year Series H (B) Balmore 25,000 $ 1.500 $ 37,500.00
Total Remaining 125,000 $150,000.00
