EXHIBIT 2.1
MEMORANDUM OF AGREEMENT
This MEMORANDUM OF AGREEMENT ("MOA") is executed as of April 4, 2000
among COMPUTERIZED THERMAL IMAGING, INC., a Nevada corporation ("CTI"), XXXXX
SCIENTIFIC INC., a California corporation ("BSI"), XXXXXXX X. XXXXX ("Xxxxx")
and XXXXXXX X. XXXXX and XXXXXXXX X. XXXXX as TRUSTEES of the XXXXXXX X. XXXXX
and XXXXXXXX X. XXXXX TRUST ("the Trust"). CTI, BSI, Xxxxx and the Trust are
referred to collectively hereinafter as "the Parties".
1. BSI designs, manufactures and sells machinery and equipment
utilizing infrared technology and is the owner of various patents, copyrights,
trademarks, service marks, plans, specifications, drawings, compilations of
information and other tangible possessions and intangible rights and/or ideas
pertaining thereto (collectively "BSI's Intellectual Property"). The Trust is
the owner of all right, title and interest in and to 90 percent of the issued
and outstanding shares of BSI's common stock ("the Trust BSI Shares"). Dr.
Xxxxx Xxxxx ("Green") is the owner of all right, title and interest in and to
the remaining 10 percent of the issued and outstanding shares of BSI's common
stock ("the Green BSI Shares"). CTI desires to acquire at least 90 percent of
the issued and outstanding shares of BSI's common stock for a combination of
cash and CTI's Common Stock as defined in Paragraph 4. BSI desires that CTI
purchase the Trust BSI Shares because BSI understands from CTI that said
acquisition will result in a substantial contribution of capital and human
resources to BSI's business and operations, thereby substantially increasing
BSI's research, development, marketing and sales opportunities. The Trust is
willing to sell the Trust BSI Shares to CTI in accordance with the terms and
conditions set forth in this MOA.
2. CTI shall:
i) purchase the Trust BSI Shares for the Trust Total Purchase
Price, which shall consist of: a) $ 4,600,000 cash; plus b) the amount of
CTI's Common Stock defined in Paragraph 4 as "the Trust CTI Shares"; plus or
minus c) 90 percent of the Adjustment Amount as defined in Paragraph 4; or
ii) purchase the Trust BSI Shares for the Trust Total Purchase
Price and, with the consent of Green, purchase the Green BSI Shares for the
Green Total Purchase Price, which shall consist of: a) $ 500,000 cash; plus
b) the amount of CTI's Common Stock defined in Paragraph 4 as "the Green CTI
Shares"; plus or minus c) 10 percent of the Adjustment Amount. The parties
acknowledge that the difference between the purchase price of the Trust BSI
Shares and the Green BSI Shares represents on a conservative estimated basis
the value of the Trust BSI Shares' controlling interest in BSI.
3. Xxxxx shall indemnify and hold CTI harmless from and against any and
all judgments and costs (including attorneys' fees) that CTI may incur in any
judicial proceeding in which it is finally determined that: i) any of BSI's
Intellectual Property owned by BSI prior to the Acquisition Date infringes
upon the patent or other property rights of third parties; or ii) BSI is
liable to third parties with respect to any other claims that arose prior to
the Acquisition Date.
4. For the purpose of this MOA:
i) "Acquisition Date" means a date mutually agreed by the Parties,
but in no event later than April15, 2000. On the Acquisition Date, the Trust
and, if applicable, Green, shall endorse and deliver to CTI the Trust BSI
Shares and, if applicable, the Green BSI Shares, and CTI shall deliver the
Trust Total Purchase Price to the Trust and, if applicable, the Green Total
Purchase Price to Green;
ii) "CTI's Common Stock" means shares of CTI's common stock to be
traded upon any exchange or through any market system in which other shares of
CTI's common stock are or will be regularly traded pursuant to CTI's
submission of a registration statement no later than July 1, 2000 to the
United States Securities and Exchange Commission, which shall provide XXXXX
and, if applicable Green, with piggy-back registration rights;
iii) "Bid Price" means the bid price on the exchange or market
system in which CTI's Common Stock is listed as of the close of regular New
York Stock Exchange trading hours;
iv) "the Trust CTI Shares" means the number of shares of CTI's
Common Stock with a total market value of $ 4,950,000 as determined by the Bid
Price on the last business day prior to the Acquisition Date;
v) "the Green CTI Shares" means the number of shares of CTI's
Common Stock with a total market value of $ 550,000 as determined by the Bid
Price on the last business day prior to the Acquisition Date; and
vi) "Adjustment Amount" means the amount by which BSI's cash, cash
equivalents and receivables aged 90 days or less as of the day before the
Acquisition Date exceeds (in which case the Adjustment Amount shall be added
to the cash portion of the Total Purchase Price) or is less than (in which
case the Adjustment Amount shall be subtracted from the cash portion of the
Total Purchase Price) the amount of BSI's total outstanding indebtedness
(including all accounts payable) as of the day before the Acquisition Date.
If the purchase and sale of the Trust (and Green) BSI Shares is (are)
judicially enforced, the Adjustment Amount shall be determined as of the day
that judgment is entered.
5. Simultaneously with the execution of this MOA, CTI shall pay to BSI
in immediately available non-refundable good funds the sum of $ 500,000 in
consideration for BSI's agreement, hereby given, that until the earlier of the
Acquisition Date or April 15, 2000 ("the Lockup Period"), BSI shall not
negotiate or discuss with any third party the possible acquisition by a third
party of all or a portion of BSI's stock or assets other than in the ordinary
course of business. By executing this MOA, and for no additional
consideration, the Trust agrees that the Trust shall not, during the Lockup
Period, negotiate or discuss with any third party the possible acquisition of
the Trust BSI Shares.
6. During the Lockup Period, and at no cost to CTI, BSI shall make its
best efforts to obtain from Xx. Xxxxxxxxx Xxxxx ("Xxxxx") a release ("the
Xxxxx Release") of all claims that Xxxxx has or hereafter may acquire as of
the effective date of the Xxxxx Release to any right, title or interest in or
to: i) Xxxxx or BSI's Intellectual Property; or ii) compensation for services
rendered or for any other reason.
7. During the Lockup Period, the parties shall: i) negotiate in good
faith for the purpose of reaching agreement on the language of the formal
transactional instruments and documents ("the Acquisition Documents") that the
parties desire to memorialize the acquisition(s) contemplated herein; ii)
cause their counsel to prepare the Acquisition Documents; and iii) fully
execute the same. However, the parties understand and agree that all material
terms and conditions to be included in the Acquisition Documents are as set
forth in this MOA. Accordingly, this MOA constitutes the binding obligation
of the Parties to effect the acquisition(s) contemplated herein in accordance
with the terms and conditions of this MOA even if the Parties are unable to
agree upon the form or substance of the Acquisition Documents.
Notwithstanding the foregoing, CTI shall not be obligated to purchase the
Trust BSI Shares or the Green BSI Shares if: i) BSI is unable to obtain the
Xxxxx Release; or ii) Xxxxx refuses to execute an employment agreement with
CTI whose material terms are as set forth in Paragraph 8.
8. On the Acquisition Date, Xxxxx and CTI shall execute an employment
agreement whereby Xxxxx shall be employed by CTI in the position of Senior
Vice President and Director of Research and Development for a term of three
years with the following compensation and benefits:
i) an annual salary, paid semi-monthly, of $ 200,000 for the first
year with annual increases as determined by CTI's Board of Directors for CTI's
senior executives;
ii) annual options to purchase up to 100,000 shares per option of
CTI's Common Stock at the Bid Price on the last business day prior to the
issuance of the option, with the first option issued on the Acquisition Date
and the second and third options issued on the first and second anniversaries,
respectively, of the employment agreement;
iii) a royalty of $ 500 for each photonic stimulator system or
replacement or derivative thereof manufactured by or on behalf of CTI or any
subsidiary or affiliate of CTI during the term of the employment agreement,
with corresponding audit rights to assure payment;
iv) standard non-competition provisions prohibiting Xxxxx from
competing with CTI during the term of the employment agreement and providing
that all inventions conceived or developed by Xxxxx during said term shall
belong to CTI;
v) a minimum of three weeks paid vacation annually, with any
unused portion accumulating from year to year; and
vi) all other benefits provided by CTI to CTI's senior executives.
9. On the Acquisition Date, CTI shall execute a three year lease of the
real property owned by the Trust and presently occupied by BSI. The rent
shall be at the prevailing market rate for similar properties in Walnut Creek,
California and shall increase on January 1 of each year of the lease term at
the rate of the annual increase in the consumer price index normally used for
commercial real estate leases in the San Francisco Bay Area, with 1999 being
the base year.
10. CTI, on behalf of itself and all of its officers, directors,
employees, agents and representatives, hereby covenants that in the event that
BSI discloses to CTI any of BSI's Intellectual Property during the Lockup
Period, CTI shall not, without BSI's prior written consent, directly or
indirectly: i) use BSI's Intellectual Property for any purpose whatsoever; or
ii) disclose to any third party any of BSI's Intellectual Property. CTI
understands and agrees that a breach of this covenant of non-use and
non-disclosure by any officer, director, employee, agent or representative of
CTI shall constitute a breach by CTI, and CTI shall be liable for all damages
and/or injunctive relief resulting therefrom.
11. Within 10 business days after the Acquisition Date, and upon
presentation of appropriate invoices therefor, CTI shall reimburse Xxxxx for
Xxxxx' costs and professional fees incurred in connection with the
acquisition(s) contemplated herein.
12. This MOA constitutes the entire understanding among the Parties and
supercedes all prior agreements and understandings, whether written or oral,
concerning the subject matter hereof. This MOA may not be amended or
otherwise modified except by a writing executed by all parties hereto.
13. No Party may assign any of its rights hereunder to any other Party.
14. Time is of the essence in the performance of each and every act to
be performed hereunder.
15. This MOA shall be governed by and interpreted and enforced in
accordance with the laws of the State of California.
16. This MOA may be executed in counterparts, each of which shall
constitute an original document, and all of which together shall constitute
one and the same instrument. Photocopy and facsimile signatures shall have
the same force and effect as original signatures.
COMPUTERIZED THERMAL IMAGING, INC.
By: /s/Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
XXXXX SCIENTIFIC INC.
By: /s/Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
President and Technical Director
XXXXXXX X. XXXXX and XXXXXXXX X. XXXXX TRUST
By: /s/Xxxxxxx X. Xxxxx, Trustee
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Xxxxxxx X. Xxxxx, Trustee
By: /s/Xxxxxxxx X. Xxxxx, Trustee
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Xxxxxxxx X. Xxxxx, Trustee
