EXHIBIT 4.1
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 20,
2001 (this "Agreement"), is made by and between COMPUTERIZED THERMAL IMAGING,
INC., a Nevada corporation, with headquarters located at Xxx Xxxxxxxxxxxx Xxxxx,
Xxxxx 000, Xxxx Xxxxxx, Xxxxxx 00000 (the "Company"), and each entity named on a
signature page hereto (each, an "Initial Investor") (each agreement with an
Initial Investor being deemed a separate and independent agreement between the
Company and such Initial Investor, except that each Initial Investor
acknowledges and consents to the rights granted to each other Initial Investor
under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of December 31, 2001, between the
Initial Investor and the Company (the "Securities Purchase Agreement;"
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement), the Company has agreed to issue
and sell to the Initial Investors the Debentures; and
WHEREAS, the Debentures are convertible into shares of Common
Stock (the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu of accrued
interest through the Maturity Date of the Debentures, as that term is defined in
and as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and
WHEREAS, the Company has agreed to issue the Warrants to the
Initial Lender in connection with the issuance of the Debentures, and the
Warrants may be exercised for the purchase of shares of Common Stock (the
"Warrant Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
(b) "Held Shares Value" means, for shares of Common Stock
acquired by the Investor upon a conversion of a Debenture within the thirty (30)
days preceding the Restricted Sale Date, but not yet sold by the Investor, the
principal amount of the Debentures converted into such Conversion Shares;
provided, however, that if the Investor effected more than one such conversion
during such thirty (30) day period and sold less than all of such shares, the
sold shares shall be deemed to be derived first from the conversions in the
sequence of such conversions (that is, for example, until the number of shares
from the first of such conversions have been sold, all shares shall be deemed to
be from the first conversion; thereafter, from the second conversion until all
such shares are sold).
(c) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Debentures, Warrants
or Registrable Securities.
(d) "Periodic Amount Shares" means shares of Common Stock
issuable in payment of any Periodic Amount due, as provided in Section 2(b)
below.
(e) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.
(f) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(g) "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Periodic Amount Shares.
(h) "Registration Statement" means a registration statement of
the Company under the Securities Act covering Registrable Securities on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form S-3 or other appropriate form.
(i) "Required Effective Date" means the relevant Initial
Required Effective Date or Increased Required Effective Date (as those terms are
defined below).
(j) "Restricted Sale Date" means the first date, other than a
date during a Permitted Suspension Period (as defined below), on which the
Investor is restricted from making sales of Registrable Securities covered by
any previously effective Registration Statement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION.
(i) The Company shall prepare and file with the SEC, as soon
as possible after the Closing Date but no later than thirty (30) days after the
Closing Date (the "Required Filing Date"), either a Registration Statement or an
amendment to an existing Registration Statement, in either event registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Initial Investors to sell the Registrable Securities, but in no event less than
the number of shares equal to two hundred percent (200%) of the aggregate of (x)
the number of shares into which the Debentures and all interest thereon through
the Maturity Date would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that all Debentures had been
issued, had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such issuance,
eligibility, accrual of interest or conversion had in fact occurred as of such
date) and (y) the number of Warrant Shares which would be issuable on exercise
of the Warrants (assuming for such purposes that Warrants for the twice the
number of shares as are covered by the Warrants actually issued on the Initial
Closing Date had been issued, had been eligible for exercise and had been
exercised for Warrant Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of such date). Unless
otherwise specifically agreed to in writing in advance by the Lender, the
Registration Statement (W) shall include only the Registrable Securities and (X)
shall also state that, in accordance with Rule 416 and 457 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Debentures or exercise of
the Warrants to prevent dilution resulting from stock splits, or stock
dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
ninety (90) days after the Closing Date.
(ii) If at any time (an "Increased Registered Shares Date"),
the number of shares of Common Stock represented by the Registrable Shares,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
seventy percent (70%) of the aggregate number of shares of Common Stock then
registered, the Company shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 2, if such
Registration Statement has not been declared effective by the SEC at
that time, to register, in the aggregate, at least the number of shares
(the "Increased Shares Amount") equal to (A) the number of shares
theretofore issued on conversion of the Debentures (including any
interest paid on conversion by the issuance of Conversion Shares) ,
plus (B) the number of shares theretofore issued on exercise of the
Warrants, plus (C) two hundred percent (200%) of
(I) the number of shares into which the unconverted
Debentures and all interest thereon through the Maturity Date
would be convertible at the date of such filing (assuming for
such purposes that all such Debentures had been issued, had
been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or
not such issuance eligibility, accrual of interest, or
conversion had in fact occurred as of such date), and
(II) the number of Warrant Shares which would be
issuable on exercise of the unexercised Warrants (assuming for
such purposes, as of such date, (x) for all Warrants which had
previously been issued, the unexercised portion of such
Warrants and (y) for all Warrants which had not yet been
issued, the number of shares equal to 15% of the fraction, the
numerator of which is $2,500,000 and denominator of which is
the Conversion Price applicable on the Increased Shares
Registration Date, and, (z) in all events, that all such
Warrants had been eligible for exercise and had been exercised
for Warrant Shares in accordance with their terms, whether or
not such issuance, eligibility or exercise had in fact
occurred as of such date), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Shares Amount
over the aggregate number of shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) ninety (90) days after the Increased Registered Shares Date.
(iii) The aggregate number of shares registered for the
Investors in each Registration Statement or amendment thereto shall be allocated
among the Investors on a pro rata basis among them according to their relative
Registrable Shares included in such Registration Statement.
(b) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Required Filing Date,
the Company will make payment to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).
(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if there
is a Restricted Sale Date, then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Debentures for the
period from the date following the relevant Required Filing Date or the Required
Effective Date or a Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date.
The "Periodic Amount Percentage" means (A) one percent (1%) of the Purchase
Price of all Debentures for the first Computation Date after the relevant
Required Filing Date, Required Effective Date or Restricted Sale Date, as the
case may be: and (B) two percent (2%) of the Purchase Price of all Debentures to
each Computation Date thereafter. Anything in the preceding provisions of this
paragraph (iii) to the contrary notwithstanding, after the relevant Effective
Date the Purchase Price shall be deemed to refer to the sum of (X) the principal
amount of all Debentures not yet converted and (Y) the Held Shares Value. By way
of illustration and not in limitation of the foregoing, if the Registration
Statement is filed on or before the Required Filing Date, but is not declared
effective until one hundred sixty-five (165) days after the Closing Date, the
Periodic Amount will aggregate five percent (5%) of the Purchase Price of the
Debentures theretofore issued (1% for days 91-120, plus 2% for days 121-150,
plus 2% for days 151-175).
(iv) Each Periodic Amount will be payable by the Company,
except as provided in the other provisions of this subparagraph (iv), in cash or
other immediately available funds to the Investor (1) on the day after the
Required Filing Date, the Required Effective Date or a Restricted Sale Date, as
the case may be, and (2) on the earlier of (A) each thirtieth day thereafter,
(B) the third business day after the date the Registration Statement is filed or
is declared effective, or (C) the third business day after the Registration
Statement has its restrictions removed after the relevant Effective Date, in
each case without requiring demand therefor by the Investor. Notwithstanding the
provisions of the first sentence of this subparagraph (iv), at the option of the
Investor, exercisable in its sole and absolute discretion by written notice to
the Company at any time before the Periodic Amount is paid, all or a portion of
the Periodic Amount shall be paid by the issuance of additional shares of Common
Stock to the Investor ("Periodic Amount Shares") in an amount equal to the
Periodic Amount being paid thereby divided by the then applicable Conversion
Price.
(v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that the
Periodic Amounts represent a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Initial Investor or its counsel.
(vii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, any relevant
Required Effective Date or a Restricted Sale Date, as the case may be, or (2)
the date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with respect
to payments due as contemplated by Section 2(b)(i) hereof) or is declared
effective or has its restrictions removed or the shares of the Company's stock
are listed on the Principal Trading Market (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date
which is the earlier of (1) thirty (30) days after the previous Computation Date
or (2) the date after the previous Computation Date on which the Registration
Statement is filed (with respect to payments due as contemplated by Section
2(b)(i) hereof) or is declared effective or has its restrictions removed or the
shares of the Company's stock are listed on the Principal Trading Market (with
respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:
(a) Prepare promptly, and file with the SEC by
the Required Filing Date a Registration
Statement with respect to not less than the
number of Registrable Securities provided in
Section 2(a) above, and thereafter use its
reasonable best efforts to cause such
Registration Statement relating to
Registrable Securities to become effective
by the Required Effective Date and keep the
Registration Statement effective at all
times during the period (the "Registration
Period") continuing until the earlier of (i)
the date when the Investors may sell all
Registrable Securities under Rule 144
without volume or other restrictions or
limits or (ii) the date the Investors no
longer own any of the Registrable
Securities, which Registration Statement
(including any amendments or supplements
thereto and prospectuses contained therein)
shall not contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements therein, in
light of the circumstances in which they
were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be Xxxxxxx & Xxxxxx
LLP, Attn: Xxxxxx Xxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
(but not less than three (3) business days) prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects;
(d) Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company 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; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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 light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;
(e) Furnish to each Investor and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided, however,
that the Company may not so suspend the right to such holders of Registrable
Securities during the periods the Registration Statement is required to be in
effect other than during a Permitted Suspension Period (and the applicable
provisions of Section 2(b) shall apply with respect to any such suspension other
than during a Permitted Suspension Period) . The term "Permitted Suspension
Period" means up to three such suspension periods during any consecutive
12-month period, each of which suspension period shall not either (i) be for
more than five (5) days or (ii) begin less than ten (10) business days after the
last day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period); provided further that the Company shall,
if lawful to do so, provide the Investor with at least two (2) business days'
notice of the existence (but not the substance of) a Potential Material Event;
(i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Principal Trading
Market.
(j) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date.
(k) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities(including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions; and
(l) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) Each Investor, by such Investor's acceptance
of the Registrable Securities, agrees to
cooperate with the Company as reasonably
requested by the Company in connection with
the preparation and filing of the
Registration Statement hereunder, unless
such Investor has notified the Company in
writing of such Investor's election to
exclude all of such Investor's Registrable
Securities from the Registration Statement;
and
(b) Each Investor agrees that, upon receipt of
any notice from the Company of the happening
of any event of the kind described in
Section 3(f) or 3(g), above, such Investor
will immediately discontinue disposition of
Registrable Securities pursuant to the
Registration Statement covering such
Registrable Securities until such Investor's
receipt of the copies of the supplemented or
amended prospectus contemplated by Section
3(f) or 3(g) and, if so directed by the
Company, such Investor shall deliver to the
Company (at the expense of the Company) or
destroy (and deliver to the Company a
certificate of destruction) all copies in
such Investor's possession, of the
prospectus covering such Registrable
Securities current at the time of receipt of
such notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of each Registration Statement and $2,000 for each post-effective
amendment to a Registration Statement, shall be borne by the Company.
6. INDEMNIFICATION. After Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless, the Investor, the directors, if any, of such Investor, the
officers, if any, of such Investor, and each Lender Control Person (each, an
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced in respect
thereof) arise out of or are based upon: (i) any untrue statement or untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or untrue statement
of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being collectively referred to as
"Violations"). The Company shall reimburse the Investor, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to any Claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Party expressly for use in connection
with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(b) hereof; (ii) be available to the extent such
Claim is based on a failure of the Investor to deliver or cause to be delivered
the prospectus made available by the Company; or (iii) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. The
Investor will indemnify the Company, its officers, directors and agents
(including legal counsel) (each an "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions set forth in
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Party, and shall
survive the offering and transfer of the Registrable Securities by the Investor.
(b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Party shall have the
right to retain its own counsel with the reasonable fees and expenses to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view
to making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(c) furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) if not available on the SEC's XXXXX
system, a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investor to sell such
securities pursuant to Rule 144 without Registration; and
(d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent instructions (supported by an
opinion of Company counsel, if required or requested by the Transfer Agent) to
the effect that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the shares of Registrable Securities which
the Holder proposes to sell (the "Securities Being Sold") is not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that the initial Investor's Counsel shall be
deemed acceptable if not given by Xxxxx Xxxxxx Xxxxxxxx) that, based on
the Rule 144 Certificate, Securities Being Sold may be sold pursuant to
the provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debentures) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a eighty (80%) percent interest of the Registrable Securities (as
calculated by the stated value of the Debentures). Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
contemplated by the Securities Purchase Agreement, and (ii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.
(e) 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 this Agreement or any of the other Transaction Agreements.
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(j) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(k) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(l) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------------
Title: CFO, Secretary, Treasurer
--------------------------------------
BEACH BOULEVARD LLC
By: Navigator Management Limited
--------------------------------------
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Title: Director
--------------------------------------
