EXHIBIT 10.32
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 17, 2000
(this "Agreement"), is made by and between IMAGING DIAGNOSTIC SYSTEMS, INC., a
Florida corporation, with headquarters located at 0000 X.X. 00xx Xxxxx,
Xxxxxxxxxx, XX 00000 (the "Company"), and each entity named on a signature page
hereto (each, 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 July 17, 2000, between the Initial
Investor and the Company (the "Securities Purchase Agreement"; 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 Investor shares of Series K Convertible Preferred Stock of the Company
having an aggregate stated value of $4,000,000 (the "Preferred Stock"); and
WHEREAS, the Preferred Stock is 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 dividends through the Mandatory Conversion Date as contemplated by
the Certificate of Designations) upon the terms and subject to the conditions
contained in the Certificate of Designations; 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 Conversion Shares;
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:
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(a) "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 Preferred Stock or
Registrable Securities.
(b) "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 determinations 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, which 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.
(c) "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").
(d) "Registrable Securities" means the Conversion Shares
(which term includes the Periodic Amount Shares defined below).
(e) "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 SB-2 or other appropriate form.
(f) "Required Effective Date" means the relevant Initial
Required Effective Date or Increased Required Effective Date (as those terms are
defined below).
(g) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.
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 forty-five (45) 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 (or such
lesser number as may be required by the SEC, but in no event less than the
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number of shares equal to the sum of one hundred fifty percent (150%) of the
number of shares into which the Preferred Stock and all dividends thereon
through the Mandatory Conversion Date would be convertible at the time of filing
of such Registration Statement (assuming for such purposes that all shares of
Preferred Stock had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such accrual of
dividends, eligibility or conversion had in fact occurred as of such date). 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 Preferred Stock and
the 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) one
hundred twenty (120) 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 Securities,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
seventy-five percent (75%) of the aggregate number of shares of Common Stock
then registered, the Company shall either (X) amend the 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 (I) the number of shares theretofore issued
on conversion of the Preferred Stock (including any dividends paid on conversion
by the issuance of Conversion Shares) plus (II) one hundred fifty percent (150%)
of the number of shares into which the unconverted Preferred Stock and all
dividends thereon through the Mandatory Conversion Date would be convertible at
the Increased Registered Shares Date (assuming for such purposes that all such
shares of Preferred Stock had been eligible to be converted, and had been
converted, into Conversion Shares in accordance with their terms, whether or not
such issuance, accrual of dividends, eligibility or conversion 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)
forty-five (45) days after the Increased Registered Shares Date.
(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).
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(ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if the
Investor is restricted from making sales of Registrable Securities covered by a
previously effective Registration Statement at any time (the date such
restriction commences, a "Restricted Sale Date") after the Effective Date other
than during a Permitted Suspension Period (as defined below), 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 Preferred Stock for
the period from the date following the relevant Required Effective Date or
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) two percent (2%) of the Purchase Price of all Preferred
Stock to the first Computation Date and (B) two percent (2%) of the Purchase
Price of all Preferred Stock to each Computation Date thereafter. Anything in
the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the Effective Date, the Purchase Price for such Preferred
Stock shall be deemed to refer to the sum of (X) the principal amount of all
Preferred Stock not yet converted and (Y) the Held Shares Value (as defined
below). The "Held Shares Value" means, for shares acquired by the Investor upon
a conversion within the thirty (30) days preceding the Restricted Sale Date, but
not yet sold by the Investor, the principal amount of the Preferred Stock
converted into such Conversion Shares; provided, however, that if the Investor
effected more than one 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). By way of
illustration and not in limitation of the foregoing, if the Registration
Statement is not declared effective until one hundred ninety-five (195) days
after the Closing Date, the Periodic Amount will aggregate six percent (6%) of
the Purchase Price of the Preferred Stock theretofore issued (2% for days
121-150, plus 2% for days 151-180, plus 2% for days 181-195).
(iv) Each Periodic Amount will be payable by the Company (x)
in cash or other immediately available funds to the Investor monthly, without
requiring demand therefor by the Investor, or (y) if the Registration Statement
is then effective, at the election of the Company, in shares of Common Stock
("Periodic Amount Shares") equal to the Periodic Amount divided by the lowest
Conversion Rate (as defined in the Certificate of Designations) applicable
during the Aggregate Computation Period (as defined below). The "Aggregate
Computation Period" is the period (x) commencing on the first day of the period
in which the first Computation Date to which such Periodic Amounts apply and (y)
ending on the date the Periodic Amount is paid as provided in this subparagraph
(iv).
(v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement has not been filed by the
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Required Filing Date or if 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 for any reason 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 (i) 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, (ii) in the event all of the Registrable Securities may be sold
pursuant to Rule 144 or another available exemption under the Act without volume
or other restrictions or limits or (iii) with respect to a Permitted Suspension
Period.
(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 (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 (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 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 earliest of (i) the date that is two (2) years after the
last day of the calendar month following the month in which the Effective Date
occurs, (ii) the date when the Investors may sell all Registrable Securities
under Rule 144 without volume or other restrictions or limits or (iii) 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
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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 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 such Investor's legal counsel
identified to the Company and which has requested by written notice to the
Company that it receive such notification (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"), 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;
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(e) Furnish to each Investor and to the 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) hereof shall apply with respect to any such
suspension other than during a Permitted Suspension Period). The term "Permitted
Suspension Period" means up to two suspension periods during any consecutive
12-month period, each of which suspension period shall not either (i) be for
more than twenty (20) 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 "Nasdaq/SmallCap Market" of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") within the meaning of
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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
Nasdaq/SmallCap Market; and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register with the National
Association of Securities Dealers, Xxx.xx such with respect to such Registrable
Securities;
(j) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the 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 three (3) 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; 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) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. At
least ten (10) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor has any Registrable Securities included in the
Registration Statement. If at least two (2) business days prior to the filing
date the Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) 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
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(c) 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 $4,000 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. In the event any 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 each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person" or
"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 or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged 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 alleged 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 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, "Violations"). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
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Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (I) apply to a Claim 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 Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
after such prospectus was made available by the Company pursuant to Section 3(c)
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 the amendment or supplement thereto made available by the
Company; (III) be available to the extent such Claim is based on the delivery of
a prospectus by the Investor after receiving notice from the Company under
Section 3(f), (g) or (h) hereof (other than a notice regarding the effectiveness
of the Registration Statement or any amendment or supplement thereto), or (IV)
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 or delayed. Each Investor will indemnify the Company and
its officers, directors and agents (each, an "Indemnified Person" or
"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 or the amendment
or supplement thereto, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
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 Person or the Indemnified Party, as the
case may be. In case any such action is brought against any Indemnified Person
or Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such Indemnified Person or
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Person or Indemnified Party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Person or Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of such
counsel shall not be at the expense of the indemnifying party if the
10
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the Indemnified Person or Indemnified Party provided such
counsel is of the opinion that all defenses available to the Indemnified Party
can be maintained without prejudicing the rights of the indemnifying party. 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 Person or 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 the Investors 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 the Investors 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;
and
(c) furnish to each Investor so long as such 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) 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 Investors to sell such securities pursuant to Rule 144 without
registration.
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
11
Investors to any transferee of the Registrable Securities (or all or any portion
of any unconverted Preferred Stock or unexercised Warrant) only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(b) hereof arising from such delay.
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 sixty-seven (67%) percent interest of the Registrable Securities (as
calculated by the stated value of the Preferred Stock without any reference to
the Warrant Shares). 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 (iii) 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.
12
(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. To the extent determined by such court, the Company shall
reimburse the Investor for any reasonable legal fees and disbursements incurred
by the Investor in enforcement of or protection of any of its rights under this
Agreement.
(e) 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.
(f) 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.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) 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.
(j) 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.
(k) 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.
13
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14
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:
IMAGING DIAGNOSTIC SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
INITIAL INVESTOR:
CHARLTON AVENUE LLC
By: /s/ Xxxxx Xxxx
Name: Navigator Management Ltd.
Title: Director
15
ANNEX II
TO
SECURITIES PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Securities Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Xxxxxxx & Prager LLP
00 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Dear Xx. Xxxxxxx:
As escrow agent for both Imaging Diagnostic Systems, Inc., a Florida
corporation (the "Company"), and one or more Buyers (each, a "Buyer") of shares
of Series K Convertible Preferred Stock (the "Preferred Stock") of the Company,
who is named in the Securities Purchase Agreement between the Company and the
Buyer to which a copy of these Joint Escrow Instructions is attached as Annex II
(the "Agreement"; capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement), you (hereafter,
the "Escrow Agent") are hereby authorized and directed to hold the documents and
funds (together with any interest thereon, the "Escrow Funds") delivered to the
Escrow Agent pursuant to the terms of the Agreement in accordance with the
following instructions:
1. The Escrow Agent shall, as promptly as feasible, notify the Company
orally or in writing of receipt of the Purchase Price for the Preferred Stock
from or on behalf of each Buyer and notify the Buyer orally or in writing of
receipt of the Certificates. As promptly as feasible upon the Escrow Agent's
receipt of the Purchase Price, Certificates and opinion of counsel of the
Company (or, with respect to any one or more of them, receipt of notice, whether
oral or in written form, from the Company or a Buyer that the respective
conditions precedent to the purchase and sale have been satisfied; collectively,
the "Release Conditions"), the Escrow Agent shall, after reduction by the
amounts referred to in the next succeeding sentences of this paragraph, release
the Escrow Funds to or upon the order of the Company, and shall release the
Certificates to the Buyer. After receipt of Release Conditions, if the Escrow
Funds have been deposited with the Escrow Agent, an amount equal to five percent
(5%) of the Purchase Price as the aggregate cash fees due to the Placement Agent
shall be released to or upon the order of the Placement Agent. If the
Certificates are not deposited with the Escrow Agent within ten (10) days after
receipt by the Company of notice of receipt by the Escrow Agent of the Purchase
Price funds from the Buyer for the Preferred Stock, the
Escrow Agent shall notify the Buyer and the Buyer shall be entitled to cancel
the purchase and demand repayment of the funds. If the Purchase Price funds are
not deposited with the Escrow Agent within ten (10) days after receipt by the
Buyer of notice of receipt by the Escrow Agent of the Certificates from the
Company, the Escrow Agent shall notify the Company and the Company shall be
entitled to cancel the purchase and demand return of such Certificates.
Notwithstanding the Escrow Agent's receipt of the Release Conditions, if the
Company or the Buyer notifies the Escrow Agent before the release of the Escrow
Property that the conditions precedent to the obligations of the Company or the
Buyer, as the case may be, under the Agreement with respect to the purchase and
sale of Preferred Stock to be effected on the Closing Date were not satisfied or
waived, then the Escrow Agent shall return the Escrow Funds to the Buyer and
shall return the Certificates to the Company. Prior to return of any Escrow
Funds to the Buyer, the Buyer shall furnish such tax reporting or other
information as shall be appropriate for the Escrow Agent to comply with
applicable United States laws. The Escrow Agent shall deposit all funds received
hereunder in the Escrow Agent's attorney escrow account at The Bank of New York.
2. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the party to be charged
therewith.
3. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account of
the identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Buyer, and may continue to act as legal counsel for such party, from time to
time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent acting in such capacity as legal counsel for the
2
Buyer and waives any claim that such representation represents a conflict of
interest on the part of the Escrow Agent. The Company understands that the Buyer
and the Escrow Agent are relying explicitly on the foregoing provision in
entering into these Joint Escrow Instructions.
7. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Buyer. In the event of any such resignation, the Buyer and the Company shall
appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further instruments
in connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
9. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the Escrow Funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the Escrow Funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned or by a final order,
decree or judgment of a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under no duty whatsoever to institute or defend any such proceedings or (2)
to deliver the Escrow Funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
10. The Company and the Buyer agree jointly and severally to indemnify
and hold harmless the Escrow Agent from any and all claims, liabilities, costs
or expenses in any way arising from or relating to the duties or performance of
the Escrow Agent hereunder other than any such claim, liability, cost or expense
to the extent the same shall (a) have been tax obligations in connection with
Escrow Agent's fee hereunder, or (b) have been determined by final, unappealable
judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent, or (c) be a liability, or
arise from liability, to either the Company or the Buyer.
11. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Agreement, the terms of which
are incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the Escrow Agent
becomes a party hereto only for the purpose of these Joint Escrow Instructions;
the Escrow Agent does not become a party to the Agreement. The Company and the
Buyer have become parties hereto by their execution and delivery of the
Agreement, as provided therein.
3
13. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns and
shall be governed by the laws of the State of New York without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
14. The rights and obligations of any party hereto are not assignable
without the written consent of the other parties hereto. These Joint Escrow
Instructions constitute the entire agreement amongst the parties with respect to
the subject matter hereof.
15. The Company agrees that the Placement Agent is a third party
beneficiary of the provisions of clause (i) in Section 1 hereof and that such
clause can not be amended or revoked without the prior written consent of the
Placement Agent.
ACCEPTED BY ESCROW AGENT:
XXXXXXX & XXXXXX LLP
By: /s/ Xxxxxx Xxxxxxxx
Date: July 17, 2000
4
ANNEX V
TO
SECURITIES PURCHASE AGREEMENT
COMPANY DISCLOSURE MATERIALS
None
ANNEX VI
TO
SECURITIES PURCHASE AGREEMENT
IMAGING DIAGNOSTIC SYSTEMS, INC.
Conversion Notice
(To be Executed by the Registered Holder
in order to Convert the Series K Convertible Preferred Stock)
TO: IMAGING DIAGNOSTIC SYSTEMS, INC. VIA TELECOPIER:
0000 X.X. 00xx Xxxxx (000) 000-0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
FROM: ________________________________________ ("Holder")
DATE: ________________________________________ (the "Conversion Date")
RE: Conversion of _____ shares (the "Converted Shares") of the Series K
Convertible Preferred Stock (the "Preferred Stock") of IMAGING DIAGNOSTIC
SYSTEMS, INC. (the "Company") into _____________ shares (the "Conversion
Shares") of Common Stock (defined below
CONVERSION DATE: ____________________________
The captioned Holder hereby gives notice to the Company, pursuant to
the Certificate of Designations, Preferences and Rights of Series K Convertible
Preferred Stock of IMAGING DIAGNOSTIC SYSTEMS, INC. (the "Certificate of
Designation"), that the Holder elects to convert the Converted Shares into fully
paid and non-assessable shares of Common Stock, no par value (the "Common
Stock"), of the Company as of the Conversion Date specified above. Said
conversion shall be based on the following Conversion Price (the lower of the
two alternatives is checked):
o $______________ , representing the Maximum Conversion Price (as
defined in the Certificate of Designation)
o $______________ , representing the Conversion Price based on the
formula in Section 5(a) of the Certificate of Designation (the
"Variable Conversion Price")
A schedule of the Closing Bid Prices of the Common Stock on the
Principal Market (as those terms are defined in the Certificate of Designation)
for the twenty trading days prior to the relevant Conversion Date is attached
for your reference in determining the Variable Conversion Price, if that box is
checked above.
Based on this Conversion Price, the number of Conversion Shares
indicated above should be issued in the following name(s):
Name and Record Address Conversion Shares
As contemplated by the Certificate of Designations and the Securities
Purchase Agreement, dated July , 2000 (the "Securities Purchase Agreement"), to
which the Company and the Holder are parties, this Conversion Notice is being
sent by facsimile to the telecopier number and officer indicated above, with a
copy to the Company's counsel.
If this conversion represents the conversion of all of the Holder's
shares of Series K Convertible Preferred Stock, the Holder has previously
surrendered or will surrender (or cause to be surrendered) the certificate(s)
for the Series K Convertible Preferred Stock held by the Holder to the Company
at the address indicated above by express courier within 5 business days after
delivery or facsimile transmission of this Conversion Notice.
The certificates representing the Conversion Shares should be
transmitted by the Company to the Holder via express courier or by electronic
transfer within the time contemplated by the Certificate of Designations after
receipt of this Conversion Notice (by facsimile transmission or otherwise) and
the certificate(s) representing the Converted Shares to:
As contemplated by the Certificate of Designation, the Company should
also pay all unpaid dividends on the Converted Shares by check payable to the
Holder (unless such dividends are being paid in Common Stock as contemplated by
the Certificate of Designations, in which event such shares should be issued in
the name of the Holder) delivered in the same manner as, and together with, the
Conversion Shares.
__________________________________
(Print name of Holder)
By: ______________________________
(Signature of Authorized Person)
__________________________________
(Printed Name and Title)
