This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of May 21, 2004 by and between IMAGIN Diagnostic Centres, Inc., an
Ontario, Canada corporation ("IMAGIN" and the "Purchaser"), and Positron
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Corporation, a Texas corporation (the "Company").
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R E C I T A L S:
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WHEREAS, concurrent with the execution of this Agreement the Company and
Purchaser are entering into a Note Purchase Agreement (as defined below)
pursuant to which IMAGIN will purchase from the Company Secured Convertible
Promissory Notes in the principal amounts of $300,000 and $400,000 (the "Initial
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Notes"); and
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WHEREAS, the Initial Notes are convertible at the option of the holders
into shares of the Company's Series C Preferred Stock, $1.00 par value (the
"Series C Preferred Stock"), which shares are in turn convertible into shares of
------------------------
the Company's Common Stock (the "Common Stock");
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WHEREAS, concurrent with the execution of this Agreement the Company is
entering into a Loan Agreement with Purchaser which will provide the Company
with advances of up to a total of $1,300,000 to be evidenced by convertible
notes (the "Credit Notes," and referred to herein with the Initial Notes
-------------
collectively as the "Notes");
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WHEREAS, the Credit Notes are convertible at the option of the holders into
shares of the Company's Series D Preferred Stock, $1.00 par value (the "Series D
--------
Preferred Stock"), which shares are in turn convertible into shares of the
----------------
Company's Common Stock;
WHEREAS, the Company is granting warrants (the "Warrants") to the Purchaser
to acquire shares of the Company's Common Stock in consideration for the
purchase by Purchaser of PET scanners pursuant to the Equipment Purchase
Agreement (as defined below);
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties and conditions set forth in this Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
A G R E E M E N T :
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1. Definitions. For purposes of this Agreement, in addition to the
-----------
definitions set forth above and elsewhere herein, the following terms shall have
the following respective meanings:
"Acquisition Shares" shall mean the shares of Series C Preferred Stock,
-------------------
Series D Preferred Stock and Common Stock which the Purchaser will have a right
to acquire upon the conversion of the Notes.
"Commission" shall mean the United States Securities and Exchange
----------
Commission and any successor agency.
"Demand Date" shall mean the date the Company receives the written request
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for registration of Registrable Stock from Purchaser pursuant to Section 3
hereof.
"Equipment Purchase Agreement" shall mean the Equipment Purchase Agreement
-----------------------------
between the Company and Purchaser dated May 21, 2004.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
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or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the Purchaser and all transferees or assignees thereof
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to whom the rights under this Agreement are assigned in accordance with the
provisions of Section 8 hereof.
"Note Purchase Agreement" shall mean the Note Purchase Agreement between
-------------------------
the Company and the Purchaser, dated May 21, 2004.
"Person" shall mean an individual, corporation, partnership, limited
------
partnership, syndicate, person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity
or government, political subdivision, agency or instrumentality of a government.
"Register," "registered" and "registration" shall refer to a registration
--------- ---------- ------------
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Stock" shall mean (a) the Acquisition Shares, (b) the Warrant
------------------
Shares, (c) any shares of Common Stock or other capital stock issued as a
dividend, or other distribution with respect to, or in exchange for, or in
replacement of, any of the Acquisition Shares and/or the Warrant Shares, and (d)
any shares of capital stock issued by way of a stock split of the Acquisition
Shares and/or the Warrant Shares referred to in clauses (a) or (b) above. For
purposes of this Agreement, any Registrable Stock shall cease to be Registrable
Stock when (i) a registration statement covering such Registrable Stock has been
declared effective and such Registrable Stock has been disposed of pursuant to
such effective registration statement, (ii) such Registrable Stock is sold by a
person in a transaction in which the rights under the provisions of this
Agreement are not assigned, or (iii) all such Registrable Stock may be sold by
any and all Holders pursuant to Rule 144(k) (or any similar provision then in
force, but not Rule 144A) under the Securities Act without registration under
the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
---------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Warrant Shares" shall mean the shares of Common Stock issuable upon
---------------
exercise of warrants issued to IMAGIN.
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2. Restrictive Legend. Each certificate representing Acquisition Shares
-------------------
and Warrant Shares shall, except as otherwise provided in this Section 2, be
stamped or otherwise imprinted with a legend substantially in the form set forth
in the Note Purchase Agreement or the Warrant, as applicable. A certificate
shall not bear such legend if in the opinion of counsel satisfactory to the
Company or the Company shall determine that the securities being sold thereby
may be publicly sold without registration under the Securities Act or the
transfer of such securities is permitted under the provisions of Regulation S,
Rule 144(k) or Rule 144A (or any rule permitting public sale without
registration under the Securities Act).
3. Registration Rights. Upon the written request of Purchaser to the
--------------------
Company, the Company shall use its reasonable best efforts to prepare and file
with the Commission a registration statement on an applicable form, signed,
pursuant to Section 6(a) of the Securities Act, by the officers and directors of
the Company, with respect to the Registrable Stock. If the Company shall fail
to register the shares of Registrable Stock, the Company shall deliver the
unregistered shares of Registrable Stock to the Purchaser and such shares may be
sold pursuant to and subject to the requirements of Rule 144 under the
Securities Act. The Company's delivery of the unregistered shares shall be the
Purchaser's sole remedy for any failure by the Company to register shares
pursuant to this Section 3. In connection with this Section 3, the Company
shall:
(a) cause such registration statement to become effective on or
before the three-month anniversary of the Demand Date and to remain
effective through and including the earlier of (i) the time when all of the
Registrable Stock has been sold pursuant to such registration statement or
(ii) the time when all of the Holders of the Registrable Stock can sell all
of the Registrable Stock pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the Securities Act without
registration under the Securities Act.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement, signed, pursuant to Section
6(a) of the Securities Act, by the officers and directors of the Company,
and the prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Stock covered by such registration
statement;
(c) furnish to the Holders such numbers of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus and any amendments or supplements thereto) in conformity with
the requirements of the Securities Act and such other documents and
information as they may reasonably request;
(d) use its reasonable best efforts to register or qualify the
Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as required by law for the distribution of the Registrable
Stock covered by the registration statement; provided, however, that the
Company shall not be required in connection therewith or as a condition
thereto to qualify to do business in or to file a general consent to
service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph (d) be obligated to do so; and provided,
further, that the Company shall not be required to qualify such Registrable
Stock in any jurisdiction in which the securities regulatory
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authority requires that any Holder submit any shares of its Registrable
Stock to the terms, provisions and restrictions of any escrow, lockup or
similar agreement(s) for consent to sell Registrable Stock in such
jurisdiction unless such Holder agrees to do so;
(e) promptly notify each Holder for whom such Registrable Stock is
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and at
the request of any such Holder promptly prepare and furnish to such Holder
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to Holders
of such securities, such prospectus shall not include 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 not misleading in light
of the circumstances under which they were made;
(f) enter into customary agreements and take such other actions as
are reasonably required in order to expedite or facilitate the disposition
of the Registrable Stock to be so included in the registration statement;
(g) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission;
(h) use its reasonable best efforts to list the Registrable Stock
covered by such registration statement with any securities exchange on
which Holder Common Stock is then listed; and
(i) after the effectiveness of the registration statement, cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing the Registrable Stock to be sold, which
certificates shall not bear any restrictive legends other than restrictive
legends still required to be imposed by the Warrant or the Note Purchase
Agreement.
4. Suspension of Trading. Notwithstanding any other provision of this
-----------------------
Agreement, the Company shall have the right at any time to require that all
Holders suspend further open market offers and sales of Registrable Stock
whenever, and for so long as, in the reasonable judgment of the Company in good
faith based upon the advice of counsel satisfactory to the Holders of a majority
of the Registrable Stock, there is in existence material undisclosed information
or events with respect to the Company (the "Suspension Right") such that the
----------------
registration statement would contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. In the event the Company exercises the Suspension Right,
such suspension will continue for such period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to the Company
or until such time as the registration statement does not include any untrue
statement of a material
-4-
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, each as determined in good faith by
the Company. The Company will promptly give the Holders notice, in a writing
signed by an executive officer of the Company, of any exercise of the Suspension
Right. The Company agrees to notify the Holders promptly upon termination of
the Suspension Right. Notwithstanding the foregoing, under no circumstances
shall Holder be entitled to exercise the Suspension Right for more than sixty
calendar days in any twelve-month period.
5. Furnish Information. It shall be a condition precedent to the
--------------------
obligations of the Company to take any action pursuant to this Agreement that
the Holders shall furnish to the Company such information regarding themselves,
the Registrable Stock held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
6. Expenses of Registration. So long as the Company shall have received
-------------------------
at least $700,000 in principal under the Initial Notes, all expenses incurred in
connection with the registration pursuant to this Agreement, including without
limitation all registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees (including the expenses of any
special audits or comfort letters required by or incident to such performance
and compliance), fees of the National Association of Securities Dealers, Inc. or
listing fees, messenger and delivery expenses, all fees and expenses of
complying with state securities or blue sky laws, reasonable fees and
disbursements of counsel for the Company (collectively, the "Expenses"), shall
--------
be paid by the Company. If the Company has not received at least $700,000 in
principal under the Initial Notes and Purchaser has requested registration
pursuant to this Agreement, all Expenses shall be paid by Purchaser. In the
event Expenses are to be paid by Purchaser, such Expenses shall be prepaid by
Purchaser to the Company upon receipt of a reasonable estimate from the Company
(the "Expenses Estimate"). To extent the Expenses Estimate exceeds actual
------------------
Expenses, Purchaser shall be reimbursed within 30 days of the effective
registration of the Registrable Stock. To extent the Expenses Estimate is
insufficient to cover total actual Expenses, Purchaser shall reimburse the
Company for such excess within 30 days of receipt of an invoice for such excess
Expenses. The parties agree that all underwriting discounts and commissions
shall be the responsibility of the Holders.
7. Indemnification.
---------------
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Holder, such Holder's directors and
officers, any underwriter (as defined in the Securities Act), and each
person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the Securities Act
or any other applicable state or federal law, insofar as such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise
out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement on the effective
date thereof (including any prospectus filed under Rule 424 under the
Securities Act or any amendments or supplements thereto) or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated
-5-
therein or necessary to make the statements therein not misleading, and
shall reimburse each such Holder, such Holder's directors and officers,
such underwriter or controlling person for any legal or other expenses
reasonably incurred by them (but not in excess of expenses incurred in
respect of one counsel and one local counsel for all of them unless, in the
reasonable judgment of an indemnified party there is potential conflict of
interest between any indemnified parties, which indemnified parties may be
represented by separate counsel and local counsel) in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld); provided, further, that the Company shall not be liable to any
Holder, such Holder's directors and officers, underwriter or controlling
person in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in connection with such registration statement, preliminary prospectus,
final prospectus or amendments or supplements thereto, in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, such Holder's
directors and officers, underwriter or controlling person. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or on behalf of any such Holder, such Holder's directors and officers,
underwriter or controlling person, and shall survive the transfer of such
securities by such Holder.
(b) To the extent permitted by applicable law, each Holder shall
indemnify and hold harmless the Company, each of its directors and
officers, each person, if any, who controls the Company within the meaning
of the Securities Act, and any underwriter (within the meaning of the
Securities Act) for the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director,
officer, controlling person or underwriter may become subject, under the
Securities Act or any other applicable state or federal law, insofar as
such losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such registration
statement on the effective date thereof (including any prospectus filed
under Rule 424 under the Securities Act or any amendments or supplements
thereto) or arise out of or are based upon 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, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement in reliance upon and in conformity with written information
furnished expressly by or on behalf of such Holder for use in connection
with such registration; and each such Holder shall reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent or underwriter (but not in excess of
expenses incurred in respect of one counsel and one local counsel for all
of them unless, in the reasonable judgment to of an indemnified party,
there is a conflict of interest between any indemnified parties, which
indemnified parties may be represented by separate counsel and local
counsel) in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in
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this Section 7(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld), and provided, further, that the liability of each Holder
hereunder shall be limited to the proportion of any such loss, claim,
damage, liability or expense which is equal to the proportion that the net
proceeds from the sale of the shares sold by such Holder under any such
registration statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such Holder from the sale of Registrable Stock covered by such
registration statement.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party;
provided, however, that the exercise of the foregoing right shall be
conditioned upon the written acknowledgment of the indemnifying party to
the indemnified party of the indemnifying party's obligation hereunder to
indemnify the indemnified party for any losses arising from such action;
and provided further, that in such event, the indemnified party shall have
the right to retain its own counsel and local counsel, with all fees and
expenses thereof to be paid by such indemnified party, and to be apprised
of all progress in any proceeding the defense of which has been assumed by
the indemnifying party. The failure to notify an indemnifying party
promptly of the commencement of any such action, shall only release the
indemnifying party from any of its obligations under this Section 7(c) if,
and only to the extent that, such indemnifying party is materially
prejudiced by such failure, but the omission to so notify the indemnifying
party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in
connection with the actions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
-7-
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Transfer of Registration Rights. Subject to any transfer restrictions
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set forth in the Note Purchase Agreement, the Notes, or the Warrants, the rights
of any Holder under this Agreement with respect to any Registrable Stock may be
transferred to any transferee of such Registrable Stock; provided, however, that
(i) the transferring Holder shall give the Company written notice at or prior to
the time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this Agreement
are being transferred; (ii) such transferee shall agree in writing, in form and
substance reasonably satisfactory to the Company, to be bound as a Holder by the
provisions of this Agreement; and (iii) immediately following such transfer the
further disposition of such securities by such transferee is restricted under
the Securities Act. Except as set forth in this Section 8, no transfer of
Registrable Stock shall cause such Registrable Stock to lose such status.
9. Successors and Assigns. Except as otherwise expressly provided
------------------------
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto.
Except as expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended to confer upon any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
10. Counterparts; Titles. This Agreement may be executed and delivered
---------------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together shall constitute one and the
same agreement. The titles of the Sections of this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
11. Notices. Any notice required or permitted hereunder shall be given in
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writing and shall be conclusively deemed effectively given upon personal
delivery or delivery by courier, or on the first business day after transmission
if sent by confirmed facsimile transmission or electronic mail transmission, or
five days after deposit in the United States mail, by registered or certified
mail, postage prepaid, addressed (i) if to the Company, as set forth below the
Company's name on the signature page of this Agreement, and (ii) if to an
Investor, at such Investor's address as set forth on the Signature page of this
Agreement, or at such other address as the Company or such Investor may
designate by 10 days' advance written notice to the other parties hereto.
12. Amendments and Waivers. Any provision of this Agreement may be
------------------------
amended and the observance of any provision of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least 50% of the Registrable Stock then outstanding. Any
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amendment or waiver effected in accordance with this Section 12 shall be binding
upon each Holder of any securities subject to this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future Holder and all such securities, and the Company. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
13. Severability; Entire Agreement. If one or more provisions of this
--------------------------------
Agreement are held to be unenforceable under applicable law, such provisions
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms. All prior agreements of the parties concerning the
subject matter of this Agreement are expressly superseded by this Agreement.
This Agreement contains the entire Agreement of the parties concerning the
subject matter hereof. Any oral representations or modifications of this
Agreement shall be of no effect.
14. Governing Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Texas without regard to conflicts of
law principles.
15. Forum; Waiver of Jury Trial.
-------------------------------
(a) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in the Texas Superior Court or the
United States Superior Court located in the City of Houston, Texas. The
parties hereto hereby (i) submit to the exclusive jurisdiction of the Texas
Superior Court or the United States Superior Court located in the City of
Houston, Texas for the purpose of any action or proceeding arising out of
or relating to this Agreement brought by any party hereto, and (ii) waive,
and agree not to assert by way of motion, defense, or otherwise, in any
such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the action or proceeding is
brought in an inconvenient forum, that the venue of the action or
proceeding is improper, or that this Agreement may not be enforced in or by
any of the above-named courts.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY ACTIONS OR PROCEEDINGS DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Positron Corporation, IMAGIN Diagnostic Centres, Inc.,
a Texas corporation an Ontario, Canada corporation
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
Xxxx X. Xxxxxx, President Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
Address: 0000 Xxxxxxx Xxxxx Xxxxx, #000, Xxxxxxx: 0000 Xxxxx Xx., Xxxxx 000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxxxx, Xxxxxx X0X
0XX
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