EXHIBIT 2.2
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
COMPUTERIZED THERMAL IMAGING, INC.
AND
BEACH BOULEVARD LLC
Dated as of December 20, 2001
THIS PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 20th day
of December, 2001 (this "AGREEMENT"), by and between BEACH BOULEVARD LLC, an
entity organized and existing under the laws of The Cayman Islands ("INVESTOR"),
and COMPUTERIZED THERMAL IMAGING, INC., a corporation organized and existing
under the laws of the State of Nevada (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 Twenty
Million Dollars ($20,000,000) of the Common Stock (as defined below)of the
Company; 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 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)
"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
Section9.3(a).
"CLOSING" shall mean one of the closings of a purchase and
sale of shares of Common Stock pursuant to Section 2.1.
"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 Closing.
"COMMITMENT PERIOD" shall mean the period commencing on the
earlier to occur of (a) the Effective Date or (b) such earlier date as the
Company and Investor shall agree, and expiring on the earlier to occur 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 twenty-four (24) months from the date of commencement of the
Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, par
value $.001 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 warrants, 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.
"CONVERTIBLE DEBENTURE" shall mean the Convertible Debenture
in the principal amount of up to $2,500,000 issued and delivered by the Company
to the Investor.
"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) but
excluding lost profits, opportunity costs, punitive damages, penalties or fines.
"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).
"ESCROW AGENT" shall mean Xxxxxxx & Xxxxxx, LLP.
"ESCROW AGREEMENT" shall mean the Escrow Agent annexed hereto
as Exhibit G.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
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 DISCOUNT" shall mean six (6%) percent.
"INITIAL PURCHASE PRICE" shall mean, the product of 1 minus
the Initial Discount and the Market Price with respect to a Put.
"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.
"MANDATORY PUT AMOUNT" shall mean the portion of the
Redeemable Balance that the Company is then obligated to redeem under the
Convertible Debenture, unless and until the Lender (as defined in the
Convertible Debenture) exercises lender's rights with respect to the Redeemable
Balance, the Mandatory Put Amount shall be $-0-.
"MANDATORY PUT NOTICE" shall mean a Put Notice for a Mandatory
Put Amount, equal to the Maximum Put Amount which shall be deemed given on the
first trading day of each month after the Registration Statement has been
declared effective until Mandatory Put Notices equal to the Redeemable Balance
of the Convertible Debenture shall have been given until the Reedemable Balance
shall have been paid in full.
"MARKET PRICE" on any given date shall mean the average of the
lowest Bid Prices (not necessarily consecutive) for any three (3) Trading Days
during the ten (10) trading days period immediately following the Put Date.
"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 COMMITMENT AMOUNT" shall mean Twenty Million Dollars
($20,000,000), subject to increase as agreed to by the Company and Investor.
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the
lesser of (a) Five Hundred Thousand Dollars ($500,000), or (b) one hundred
twenty-five (125%) percent of the Weighted Average Volume for the twenty (20)
trading days immediately preceding the Put Date.
"MINIMUM COMMITMENT AMOUNT" shall mean the Reedemable Balance.
"MINIMUM PUT AMOUNT" shall mean Fifty Thousand Dollars
($50,000).
"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 Section
2.6.
"OLD BID PRICE" shall have the meaning specified in
Section2.6.
"OTHER CONSIDERATION" shall mean an amount equal to that
portion of the Redeemable Balance of the Convertible Debenture allocable to a
Mandatory Put Amount.
"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 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 market or exchange whichever
is at the time the principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean 94% of the Market Price with
respect to a Put.
"PUT" shall mean each Mandatory Put Notice and/or each
occasion that the Company issues a Put Notice to Investor requiring Investor to
buy Common Stock subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean, with respect to a Mandatory Put Notice,
the first Trading Day of each month, and thereafter 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 Mandatory Put Notice or a written
notice, substantially in the form of Exhibit B hereto, to the Investor, as may
be applicable, setting forth the Investment Amount pursuant to the terms of this
Agreement, and specifying the consideration to be delivered in connection
therewith.
"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.
"REDEEMABLE BALANCE" shall have the meaning set forth in the
Convertible Debenture.
"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.
"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, unless a shorter period is agreed to by the Company and
Investor.
"TRADING DAY" shall mean any day during which the Principal
Market shall be open for business.
"TRANSACTION DOCUMENTS" means this 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 warrants, 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
warrants, 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) issue 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 ten (10th) Trading Day
thereafter.
"WEIGHTED AVERAGE VOLUME" shall mean the average of the
product of (a) the Bid Price times (b) the volume on the Principal Market for
the relevant days.
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
during the Commitment Period the Company may call 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 Initial Purchase Price as applicable 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 equal to at least the sum of the
Minimum Commitment Amount. If the Company for any reason, notwithstanding
Section 6.2 hereof, fails to have sufficient authorized shares of Common Stock
which are neither outstanding nor reserved for issuance upon the exercise of
outstanding options and warrants, or fails to issue and deliver such Put Shares
for the Minimum Commitment Amount 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 Minimum
Commitment Amount minus the aggregate Investment Amounts of the Put Notices
delivered to Investor hereunder.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put in
the applicable Put Notice shall be not less than the Minimum Put Amount, nor
more than the Maximum Put Amount. No Put Notice may be issued prior to the
issuance and delivery of stock pursuant to Mandatory Put Notices, if and only if
the Redeemable Balance is still outstanding, and the Company is then obligated
to redeem all or a portion of the Redeemable Balance.
(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. A Put Notice for the Mandatory Put Amount, if any,
shall be deemed to have been delivered on the first Trading Day of each month.
Section 2.3 CLOSINGS. Pursuant to the Escrow Agreement, 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 (i) with respect to
Mandatory Put Notices, an Investment Amount in the form of the Other
Consideration, and (ii) with respect to other Put Notices 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 Investor's 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.
Section 2.4 WARRANTS. The Company agrees to issue to Investor upon
execution hereof transferable divisible warrants (the "Warrants") to purchase
shares of Common Stock equal to $1,000,000/Bid Price on the date prior to
execution of the Agreement, at an exercise price per share equal to one hundred
twenty-five (125%) percent of the average Bid Price for the five Trading Days
immediately prior to the date of this Agreement. Such Warrants (substantially in
the form of Exhibit F), shall not be exercisable until three (3) months after
the Effective Date, and for a period of five (5) years thereafter, together with
cashless exercise and registration rights under the Registration Rights
Agreement. The Company shall have the right to call the Warrants upon payment to
the Investor of $1.00 when the aggregate Investment Amount hereunder equal or
exceeds $1,000,000 in excess of the Mandatory Put Amount.
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor to purchase shares of Common Stock (other than as to the Mandatory Put
Amount) shall, at the Investors 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. Subject to Section 6.2 herein, 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 [RESERVED]
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledge and agree that the sum payable under Section 2.7 and 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, that by making the representations herein, Investor
does not agree to hold the Common Stock for any minimum or other specific term
and 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 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 Investor's Memorandum of Association or
Articles of Association or other applicable charter document, 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 have 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor, subject to the
exceptions of Schedule 4, that:
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 Nevada 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 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 the date of this Agreement, the
authorized capital stock of the Company consists of 200,000,000 shares of Common
Stock, par value $.001 of which as of December 6, 2001, 82,803,263 shares were
issued and outstanding, and 3,000,000 shares of Convertible Preferred stock, par
value $5.00 of which none are outstanding as of December 6, 2001. Except for (a)
options to purchase 9,754,839 shares of Common Stock; (b) warrants and exchange
rights to purchase 6,454,497 shares of Common Stock; 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 non assessable.
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 American
Stock Exchange. The Company is eligible to utilize Form S-3 for the registration
of a primary offering of securities.
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). 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. 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 non-assessable.
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 Nasdaq National Market); 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 event
has 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 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 be set
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 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 None of the following has occurred during the past ten
(10) years with respect to the Company (or any subsidiary or predecessor entity)
or control person of the Company (a "Control Person"):
(1) A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Control Person, or any
partnership in which he was a general partner at or within two years before the
time of such filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such filing;
(2) Such Control Person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Such Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:
(i) Acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, any other person regulated by the Commodity Futures
Trading Commission ("CFTC") or engaging in or continuing any conduct or practice
in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of federal or state
securities laws or federal commodities laws;
(4) Such Control Person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in paragraph (3) of this item,
or to be associated with persons engaged in any such activity;
(5) Such Control Person was found by a court of competent jurisdiction in a
civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.
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. The Company specifically acknowledges that, except to the extent
specifically provided herein or in any of the other Transaction Documents (but
limited in each instance to the extent so specified), the Investor 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 Common Stock, 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 of the
effectiveness of the Registration Statement, the Company shall reserve and keep
available at all times, free of preemptive rights, 200% of the number of shares
of Common Stock necessary, from time to time, to enable the Company to satisfy
any obligation to issue the Put Shares and the Blackout Shares, if any, and to
issue shares of Common Stock in connection with the exercise of the Warrants. If
at any time the Company is obligated to deliver Blackout Shares to Investor
under Section 2.6 and the Company does not have a sufficient number of
authorized but unissued and unreserved shares to deliver the requisite number of
Blackout Shares, the Company shall deliver to Investor such number of Blackout
Shares that the Company has authorized but unissued and unreserved. In either
case, the Company shall, at its expense, promptly seek and use its best efforts
to obtain shareholder approval as required under the Nevada General Corporation
Law to increase the number of shares of Common Stock it is authorized to issue,
in order to meet all of its obligations to issue Put Shares and Blackout Shares
(if any) under this Agreement, such that the Company shall have reserved for
issuance under this Agreement at least 200% of the shares required for issuance
under the Minimum Commitment Amount, based upon the then applicable Market Price
as if a Put Date occurred within five days prior to the date of the proxy
statement prepared by the Company in connection with such authorization, less
the number of Put Shares that may have been issued under this Agreement. In no
circumstances shall the Company issue a Put Notice requiring Investor to
purchase more shares of Common Stock than the Company has authority to issue
based upon the then number of shares of Common Stock outstanding or reserved for
issuance. 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 or make
available 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, any other federal
or state governmental authority or trading market of any stop order suspending
the effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose, or of its qualification and listing on such
Principal Market; (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 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 stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.
Section 6.10 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of
the Put Shares, 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 6.11 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. 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 6.12 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 6.13 USE OF PROCEEDS. The Company will use the proceeds
received hereunder (excluding amounts paid by the Company for legal fees, and
escrow fees in connection with the sale of the Common Stock) for the purposes
and the amounts specified in Schedule 6.13 hereto, and the Company shall not
vary such purpose or amount without the prior written consent of the Investor in
each instance. Unless specifically consented to in advance in each instance by
the Investor, the Company shall not, directly or indirectly, use such proceeds
for the repayment of any outstanding loan or obligation or advance by the
Company to any affiliate or control person.
Section 6.14 CERTAIN AGREEMENTS. (i) The Company covenants and agrees
that during the period from the date hereof through the later of (a) fifteen
(15) months from delivery of the first Put Notice, or (b) twelve (12) months
from the date which is the Effective Date, 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 below the Market Price (as defined
herein) on the date of closing of such transaction, except for sales of stock
pursuant to a Registration Statement filed on Form S-8., or sales pursuant to a
transaction subject to Rule 145 of the Securities Act.
(ii) In the event the Company breaches the provisions of this
Section , the Discount (as defined herein) shall be amended to be equal to
(x)110% of the Discount set forth herein for all shares held of record and (y)
the Investor may terminate his obligations under this Agreement and demand such
amounts as may be owing under Section 2.1.
Section 6.15 RIGHT OF FIRST REFUSAL, SPECIAL DILUTION PROTECTION.
(i) In addition to, and not in limitation of the provisions of
Section 6.14 the Company covenants and agrees that if during the period from the
date hereof through and including the later of (a) fifteen (15) months from
delivery of the first Put Notice, or (b) twelve (12) months from the date which
is the Effective Date, the Company offers to enter into any transaction (a "New
Transaction") for the sale of Common Stock (other than in connection with an
acquisition, merger or other business combination not involving cash
consideration), the Company shall notify the Investor in writing of all of the
terms of such offer (a "New Transaction Offer"). The Investor shall have the
right (the "Right of First Refusal"), exercisable by written notice given to the
Company by the close of business on the fifth business day after the Investor's
receipt of the New Transaction Offer (the "Right of First Refusal Expiration
Date"), to participate in all or any part of the New Transaction Offer on the
terms so specified.
(ii) If, and only if, the Investor does not exercise the Right
of First Refusal in full, the Company may consummate the remaining portion of
the New Transaction with any New Investor on the terms specified in the New
Transaction Offer within ninety (90) days of the Right of First Refusal
Expiration Date.
(iii) If the terms of the New Transaction to be consummated
with such other party differ from the terms specified in the New Transaction
Offer so that the terms are more beneficial in any respect to the New Investor,
the Company shall give the Investor a New Transaction Offer relating to the
terms of the New Transaction, as so changed, and the Investor's Right of First
Refusal and the preceding terms of this paragraph shall apply with respect to
such changed terms.
Section 6.16 [RESERVED]
Section 6.17 RELEASE. Effective upon the mutual execution hereof, the
Company, for itself and on behalf of all affiliated persons and entities,
representatives, and all predecessors in interest, successors and assigns
(collectively, the "Releasing Parties"), that except for the matters related to
the issuance and terms of the Convertible Debenture, hereby releases and forever
discharges each of Investor, and Investor's direct and indirect partners,
officers, directors, employees, affiliates, representatives, agents, trustees,
beneficiaries, predecessors in interest, successors in interest and nominees of
and from any and all claims, demands, actions and causes of action, whether
known or unknown, fixed or contingent, arising prior to the date of execution of
this Agreement, that the Company may have had, may now have or may hereafter
acquire with respect to any matters whatsoever under, relating to or arising
from any prior Purchase Agreement, Registration Statement, and the agreements
entered into in connection therewith (sometimes collectively referred to as the
"Prior Agreements"). The Company also fully waives any offsets it may have with
respect to the amounts owed under the Prior Agreements. Additionally, the
Company represents, warrants and covenants that it has not, and at the time this
release becomes effective will not have, sold, assigned, transferred, or
otherwise conveyed to any other person or entity all or any portion of its
rights, claims, demands, actions, or causes of action herein released.
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 REPRESENTATION 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 the Company shall use its
best efforts to cause such Registration Statement to be declared effective by
the SEC prior to the first Put Date, (and in any event no later than ninety (90)
days after filing of the Initial Registration Statement). 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
therefor.
(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, the Convertible Debenture
or 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 earlier of (i) the prior Put
Notice, or (ii) the 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 Put Notice and each subsequent Put Notice, an opinion of the Company's
legal counsel in the forms of Exhibit C-1 and C-2 hereto respectively, addressed
to Investor.
(i) [RESERVED]
(j) FIVE 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 4.9% 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 4.9% of the Common Stock following such Closing
Date.
(k) NO KNOWLEDGE. The Company shall have no knowledge of any
event more likely than not to have either (i) a Material Adverse Effect, or (b)
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).
(l) OTHER CONSIDERATION. The Investor shall have delivered in
executed form, all necessary documentation to vest title in the Other
Consideration in the Company.
(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, at the
Investor's expense (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
Statement for the sole purpose of enabling Investor and such representatives,
advisors and Underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the Company and the
accuracy of such Registration Statement.
(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, unless prior to disclosure of such
information, the Company identifies such information as being non-public
information and provides Investor, such advisors and representatives with the
opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require Investor's advisors and representatives to enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company and 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. 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 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.
Section 8.4 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 8.5 DELAY. The Company understands that a delay in the issuance
of the Put Shares beyond the Closing Date could result in economic loss to
Investor. On and after the Effective Date as compensation to Investor for such
loss, the Company agrees to pay late payments to Investor for late issuance of
Put Shares in accordance with the following schedule (where "NO. OF DAYS LATE"
is defined as the number of days beyond the Closing Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section 8.5 in
immediately available funds upon demand. Nothing herein shall limit Investor's
right to pursue actual damages for the Company's failure to issue and deliver
the Put Shares to Investor, except to the extent that such late payments shall
constitute payment for and offset any such actual damages alleged by Investor,
and any Buy In Adjustment Amount (as defined below).
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:
Computerized Thermal Imaging, Inc.
0 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Attn: Xxxxxxx Xxxxx, Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx Xxxxxx Xxxxxxxx LLP
24th Floor
0000 XX Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxxx XxXxxxxx-Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
eMail: xxx@xxx.xxx
if to Investor: BEACH BOULEVARD LLC
Xxxxxxxxx Xxxxxx
Xxxx Xxx Xxxx
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Telephone No.:0-000-000-0000
Telecopier No.: 0-000-000-0000
with a copy to (which shall not constitute notice:
Xxxxxxx & Xxxxxx, LLP
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
eMail: xxxxxxxx@xxxxxxxxx.xxx
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.
(a) 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, 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 officers, directors, employees,
agents or Controlling Persons negligence, recklessness or bad faith in
performing its obligations under this Agreement.
(b) If (i) the Investor becomes involved in any capacity in
any action, proceeding or investigation brought by any stockholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement, the Prior Agreements or the Note,
or if such the Investor impleaded in any such action, proceeding or
investigation by any person, or (ii) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by the Securities
and Exchange Commission, any self-regulatory organization or other body having
jurisdiction, against or involving the Company or in connection with or as a
result of the consummation of the transactions contemplated by this Agreement,
the Prior Agreements or the Note, or if the Investor is impleaded in any such
action, proceeding or investigation by any person, then in any such case, the
Company hereby agrees to indemnify, defend and hold harmless the Investor from
and against and in respect of all losses, claims, liabilities, damages or
expenses resulting from, imposed upon or incurred by the Investor, directly or
indirectly, and reimburse such 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, the Company
will reimburse the Investor for reasonable internal and overhead costs for the
time of any officers or employees of the 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
Prior Agreements or the Note. The indemnification and reimbursement obligations
of the Company under this paragraph shall be in addition to any liability which
the Company may otherwise have (other than matters specifically addressed in the
Registration Rights Agreement, which shall be governed solely by that
agreement), shall extend upon the same terms and conditions to any affiliates of
the Investor who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the 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, the Investor, any such affiliate and any such
person. The Company also agrees that neither the Investor nor any such
affiliate, partner, director, agent, employee or controlling person shall have
any liability to the Company or any person asserting claims on behalf of or in
right of the Company in connection with or as a result of the consummation of
this Agreement, the Prior Agreements or the Note, except as provided in or
contemplated by 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 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 it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
(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 it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
(c) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to.
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 New York
for contracts to be wholly performed in such state and without giving effect to
the principles thereof regarding the conflict of laws. Each of the parties
consents to the exclusive jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any dispute arising
under this Agreement OR ANY OF THE OTHER TRANSACTION DOCUMENTS and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
Section 10.2 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 10.3 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, the provisions of this Agreement shall inure to
the benefit of, and be enforceable by, any affiliate of Investor which is a
transferee of any of the Common Stock purchased or acquired by Investor
hereunder with respect to the Common Stock held by such person.
Section 10.4 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 10.5 TERMINATION. This Agreement shall terminate at the
termination of the Commitment Period (unless extended by the agreement of the
Company and Investor); provided, however, that the provisions of Article VI,
VIII, and Sections 10.1, 10.2, 10.4 and 10.7 shall survive the termination of
this Agreement.
Section 10.6 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 10.7 FEES AND EXPENSES; TERMINATION OF PRIOR AGREEMENTS. 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 the fee of $30,000 upon
execution hereof and $2,500 at each subsequent Closing. 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 10.8 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 other than Xxxx
Capital Partners. The Company agrees to indemnify the other against and hold the
Investor 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 in connection with this Agreement or the transactions contemplated
hereby.
Section 10.9 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 10.10 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 10.11 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 10.12 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 10.13 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 10.14 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 10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the Bid Price and the trading volume
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 10.16 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.
Section 10.17 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.
[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.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
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Title: CFO, Secretary, Treasurer
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BEACH BOULEVARD LLC
By: Navigator Management Limited
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By: /s/ Xxxxx X. Xxxx
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Title: Director
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