AMENDED PRIVATE EQUITY CREDIT AGREEMENT BY AND BETWEEN IMAGING DIAGNOSTIC SYSTEMS, INC. AND SOUTHRIDGE PARTNERS II, LP Dated January 7, 2010
Exhibit
10.106
AMENDED
PRIVATE EQUITY CREDIT AGREEMENT
BY
AND BETWEEN
IMAGING
DIAGNOSTIC SYSTEMS, INC.
AND
SOUTHRIDGE
PARTNERS II, LP
Dated
January
7, 2010
THIS
AMENDED PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 7th day
of January, 2010 (this “AGREEMENT”), by and between SOUTHRIDGE PARTNERS II, LP,
a limited liability company organized and existing under the laws of Delaware
(“INVESTOR”), and IMAGING DIAGNOSTIC SYSTEMS, INC., a corporation organized and
existing under the laws of the State of Florida (the “COMPANY”) and amends and
restates the Private Equity Credit Agreement between Investor and the Company
dated as of November 23, 2009 (the “Prior Agreement”).
NOW,
THEREFORE, the parties hereto agree as follows:
Section
1.1 DEFINED TERMS as used in this Agreement, the following terms shall have the
following meanings specified or indicated (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined)
“AGREEMENT”
shall have the meaning specified in the preamble hereof.
“BID
PRICE” shall mean, for any Trading Day, the closing bid price of the Common
Stock on the Principal Market for such Trading Day.
“BLACKOUT
NOTICE” shall have the meaning specified in the Registration Rights
Agreement.
“BLACKOUT
SHARES” shall have the meaning specified in Section 2.6
“BY-LAWS”
shall have the meaning specified in Section 4.8.
“CERTIFICATE”
shall have the meaning specified in Section 4.8
“CLAIM
NOTICE” shall have the meaning specified in Section 9.3(a).
“CLOSING”
shall mean one of the closings of a purchase and sale of shares of Common Stock
pursuant to Section 2.3.
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“CLOSING
DATE” shall mean, as applicable, an Interim Closing Date or a Remainder Closing
Date.
“COMMITMENT
PERIOD” shall mean the period commencing on the Effective Date, and ending on
the earlier of (i) the date on which Investor shall have purchased Put Shares
pursuant to this Agreement for an aggregate Purchase Price of the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Section 2.5, or (iii) the date occurring (thirty-six) months from the date of
commencement of the Commitment Period.
“COMMON
STOCK” shall mean the Company’s common stock, no par value per share, and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of dividends (as and when
declared) and assets (upon liquidation of the Company).
“COMMON
STOCK EQUIVALENTS” shall mean any securities that are convertible into or
exchangeable for Common Stock or any options or other rights to subscribe for or
purchase Common Stock or any such convertible or exchangeable
securities.
“COMPANY”
shall have the meaning specified in the preamble to this Agreement.
“CONDITION
SATISFACTION DATE” shall have the meaning specified in Section 7.2.
“DAMAGES”
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of expert witnesses and investigation).
“DISCOUNT”
shall mean seven (7%) percent.
“DISPUTE
PERIOD” shall have the meaning specified in Section 9.3(a).
“DTC”
shall the meaning specified in Section 2.3.
“DWAC”
shall the meaning specified in Section 2.3.
“EFFECTIVE
DATE” shall mean the date on which the SEC first declares effective a
Registration Statement registering resale of the Registrable Securities as set
forth in Section 7.2(a).
“EXCHANGE
ACT” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“FAST”
shall have the meaning specified in Section 2.3.
“INDEMNIFIED
PARTY” shall have the meaning specified in Section 9.3(a).
“INDEMNIFYING
PARTY” shall have the meaning specified in Section 9.3(a).
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“INDEMNITY
NOTICE” shall have the meaning specified in Section 9.3(b).
“INITIAL
REGISTRABLE SECURITIES” shall have the meaning specified in the Registration
Rights Agreement.
“INITIAL
REGISTRATION STATEMENT” shall have the meaning specified in the Registration
Rights Agreement.
“INTERIM
CLOSING DATE” shall mean, with respect to a Closing, the fifth (5th) Trading Day
following the Put Date related to a Closing provided all conditions to a Closing
have been satisfied on or before such Trading Day.
“INTERIM
INVESTMENT AMOUNT” shall mean fifty percent (50%) of the INVESTMENT AMOUNT with
respect to each Put Notice.
“INTERIM
MARKET PRICE” on any given Put shall mean the average of the closing Bid Prices,
other than Low Bid Prices for the first three (3) Trading Days during the
Valuation Period.
"INTERIM
PURCHASE PRICE" shall mean, with respect to Interim Put Shares, the Interim
Market Price less the product of the Discount and the Interim Market
Price.
“INTERIM
PUT SHARES” shall be the number of Put Shares deliverable on an Interim Closing
Date equal to the Interim Investment Amount divided by the Interim Purchase
Price.
“INVESTMENT
AMOUNT” shall mean the dollar amount (within the range specified in Section 2.2)
to be invested by Investor to purchase Put Shares with respect to any Put Date
as notified by the Company to Investor in accordance with Section
2.2.
“INVESTOR”
shall have the meaning specified in the preamble to this Agreement.
“LEGEND”
shall have the meaning specified in Section 8.1.
"MARKET
PRICE" on any given date shall mean the average of the lowest Bid
Prices (not necessarily consecutive) for any three (3) Trading Days
during the ten (10) trading day period immediately following the Put
Date.
“MAXIMUM
COMMITMENT AMOUNT” shall mean Fifteen Million Dollars
($15,000,000).
“MATERIAL
ADVERSE EFFECT” shall mean any effect on the business, operations, properties,
prospects or financial condition of the Company that is material and adverse to
the Company or to the Company and such other entities controlling or controlled
by the Company, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform its obligations under any of (a) this
Agreement and (b) the Registration Rights Agreement.
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“MAXIMUM
PUT AMOUNT” shall mean, with respect to any Put, the lesser of (a) Five Hundred
Thousand Dollars ($500,000), or (b)Five Hundred (500%) percent of the Weighted
Average Volume for the twenty (20) Trading Days immediately preceding the Put
Date.
“MINIMUM
COMMITMENT AMOUNT” There shall be no minimum commitment amount.
“FINRA”
shall mean the Financial Industry Regulatory Authority.
“NASDAQ”
shall mean The Nasdaq Stock Market, Inc.
“NEW BID
PRICE” shall have the meaning specified in Section 2.6.
“OLD BID
PRICE” shall have the meaning specified in Section 2.6.
“OUTSTANDING”
shall mean, with respect to the Common Stock, at any date as of which the number
of shares of Common Stock is to be determined, all issued and outstanding shares
of Common Stock, including all shares of Common Stock issuable in respect of
outstanding convertible securities, scrip or any certificates representing
fractional interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
“PERSON”
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
“PRINCIPAL
MARKET” shall mean the Nasdaq National Market, the Nasdaq Small Cap Market, the
Over the Counter Bulletin Board, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
"PURCHASE
PRICE" shall mean, with respect to Interim Put Shares, the Interim Market Price
less the product of the Discount and the Interim Market Price, and with respect
to Remainder Put Shares, the Remainder Market Price less the product of the
Discount and the Remainder Market Price.
“PUT”
shall mean each occasion that the Company elects to exercise its right to tender
a Put Notice requiring Investor to purchase shares of Common Stock, subject to
the terms and conditions of this Agreement.
“PUT
DATE” shall mean the Trading Day during the Commitment Period that a Put Notice
is deemed delivered pursuant to Section 2.2(b).
“PUT
NOTICE” shall mean a written notice, substantially in the form of Exhibit B
hereto, to Investor setting forth the Investment Amount with respect to which
the Company intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
"PUT
SHARES" shall mean the Interim Put Shares and the Remainder Put
Shares.
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“REGISTRABLE
SECURITIES” shall mean the (a) Put Shares, (b) the Blackout Shares and (c) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a Registration
Statement has been declared effective by the SEC and such Registrable Securities
have been disposed of pursuant to a Registration Statement, (ii) such
Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 are met, (iii) such time as such Registrable
Securities have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to Investor, such Registrable Securities
may be sold without registration under the Securities Actor the need for an
exemption from any such registration requirements and without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act.
“REGISTRATION
RIGHTS AGREEMENT” shall mean the registration rights agreement in the form of
Exhibit A hereto.
“REGISTRATION
STATEMENT” shall mean a registration statement on Form S-1 (if use of such form
is then available to the Company pursuant to the rules of the SEC and, if not,
on such other form promulgated by the SEC for which the Company then qualifies
and which counsel for the Company shall deem appropriate and which form shall be
available for the resale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the
Registration Rights Agreement and in accordance with the intended method of
distribution of such securities), for the registration of the resale by Investor
of the Registrable Securities under the Securities Act.
“REGULATION
D” shall have the meaning specified in the recitals of this
Agreement.
“REMAINDER
CLOSING DATE” shall mean, with respect to a Closing, the eleventh (11h) Trading
Day following the Put Date related to a Closing, provided all conditions to a
Closing have been satisfied on or before such Trading Day.
“REMAINDER
INVESTMENT AMOUNT” shall mean the Investment Amount less the Interim Investment
Amount.
"REMAINDER
MARKET PRICE" on any given Put shall mean the average of the lowest closing Bid
Prices, other than Low Bid Prices (not necessarily consecutive) for any three
(3) Trading Days during the Valuation Period.
"REMAINDER
PURCHASE PRICE" shall mean with respect to Remainder Put Shares, the Remainder
Market Price less the product of the Discount and the Remainder Market
Price.
“REMAINDER
PUT SHARES” shall be the number of Put Shares deliverable on a Remainder Closing
Date equal to the Investment Amount divided by the Remainder Purchase Price
minus the Interim Put Shares.
“REMAINING
PUT SHARES” shall have the meaning specified in Section 2.6.
6
“RULE
144” shall mean Rule 144 under the Securities Act or any similar provision then
in force under the Securities Act.
“SEC”
shall mean the Securities and Exchange Commission.
“SECTION
4(2)” shall have the meaning specified in the recitals of this
Agreement.
“SECURITIES
ACT” shall have the meaning specified in the recitals of this
Agreement.
“SEC
DOCUMENTS” shall mean, as of a particular date, all reports and other documents
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since the beginning of the Company’s then most recently completed fiscal year as
of the time in question (provided that if the date in question is within ninety
days of the beginning of the Company’s fiscal year, the term shall include all
documents filed since the beginning of the second preceding fiscal
year).
“SUBSCRIPTION
DATE” shall mean the date on which this Agreement is executed and delivered by
the Company and Investor.
“THIRD
PARTY CLAIM” shall have the meaning specified in Section 9.3(a).
“TRADING
DAY” shall mean any day during which the Principal Market shall be open for
business.
“TRANSACTION
DOCUMENTS” means the Private Equity Credit Agreement, the Registration Rights
Agreement, Closing Certificate, and the Transfer Agent
Instructions.
“TRANSFER
AGENT” shall mean the transfer agent for the Common Stock (and to any substitute
or replacement transfer agent for the Common Stock upon the Company’s
appointment of any such substitute or replacement transfer agent).
“TRANSFER
AGENT INSTRUCTIONS” shall mean the instructions for the Transfer Agent attached
hereto as Exhibit E.
“UNDERWRITER”
shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of Investor pursuant to a Registration
Statement.
“VALUATION
EVENT” shall mean an event in which the Company at any time during a Valuation
Period takes any of the following actions:
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(a)
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subdivides
or combines the Common Stock;
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(b)
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pays
a dividend in shares of Common Stock or makes any other distribution of
shares of Common Stock, except for dividends paid with respect to the
Preferred Stock;
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(c)
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issues
any options or other rights to subscribe for or purchase shares
of Common Stock and the price per share for which shares of Common Stock
may at any time thereafter be issuable pursuant to such options
or other rights shall be less than the Bid Price in effect immediately
prior to such issuance;
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7
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(d)
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issues
any securities convertible into or exchangeable for shares of Common Stock
and the consideration per share for which shares of Common Stock may at
any time thereafter be issuable pursuant to the terms of such convertible
or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such
issuance;
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(e)
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issues
shares of Common Stock otherwise than as provided in the
foregoing subsections (a) through (d), at a price per share less, or for
other consideration lower, than the Bid Price in effect immediately prior
to such issuance, or without
consideration;
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(f)
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makes
a distribution of its assets or evidences of indebtedness to the holders
of Common Stock as a dividend in liquidation or by way of return of
capital or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all
or substantially all of the Company’s assets (other than under the
circumstances provided for in the foregoing subsections (a)
through (e); or
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(g)
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takes
any action affecting the number of Outstanding Common Stock, other than an
action described in any of the foregoing subsections (a) through (f)
hereof, inclusive, which in the opinion of the Company’s Board of
Directors, determined in good faith, would have a materially adverse
effect upon the rights of Investor at the time of a
Put.
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“VALUATION
PERIOD” shall mean the period of ten (10) Trading Days immediately following the
date on which the applicable Put Notice is deemed to be delivered and during
which the Purchase Price of the Common Stock is valued; provided, however, that
if a Valuation Event occurs during any Valuation Period, a new Valuation Period
shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the tenth (10th) Trading Day thereafter.
“WEIGHTED
AVERAGE VOLUME” shall mean the average of the Weighted Volume for the relevant
days.
“WEIGHTED
VOLUME” shall mean the product of (a) the Closing Bid Price times (b) the volume
on the Principal Market.
(b) MINIMUM
AMOUNT OF PUTS. There shall be no minimum commitment amount of
puts.
8
Section
2.4 [INTENTIONALLY OMITTED]
9
number of
additional shares of Registrable Securities (the “BLACKOUT SHARES”) equal to the
difference between (i) the product of the number of Put Shares held by Investor
immediately prior to the Blackout Period that were issued on the most recent
Closing Date(the “REMAINING PUT SHARES”) multiplied by the Old Bid Price,
divided by the New Bid Price, and (ii) the Remaining Put Shares that were issued
on the most recent Closing Date.
Section
2.7 [INTENTIONALLY LEFT BLANK]
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
Investor
represents and warrants to the Company that:
Section
3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Common Stock. Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
10
Section
3.4 NOT AN AFFILIATE. Investor is not an officer, director
or “affiliate” (as that term is defined in Rule 405 of the Securities Act) of
the Company.
The
Company represents and warrants to Investor that, except as disclosed in the SEC
Documents:
Section
4.1 ORGANIZATION OF THE COMPANY. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Florida, and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified as a domestic corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes
11
such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
12
(a) as
may be otherwise indicated in such financial statements or the notes thereto or
(b) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section
4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any
person acting on its or their behalf (a) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to any of the Put Shares or the Blackout
Shares, if any, or (b) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Common Stock under the Securities Act.
13
Company
of the transactions contemplated hereby are or may be affected by the status of
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, FINRA or state securities filings that may be required to
be made by the Company subsequent to any Closing, any registration statement
that may be filed pursuant hereto, and any shareholder approval required by the
rules applicable to companies whose common stock trades on the Over The Counter
Bulletin Board); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of Investor herein.
Section
4.10 NO MATERIAL ADVERSE CHANGE. Since October 31, 2009,
no event has occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents on file on the date
hereof.
Section
4.11 NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
and that are not disclosed in the SEC Documents on file on the date hereof or
otherwise publicly announced, other than those incurred in the ordinary course
of the Company’s businesses since October 31, 2009 and which, individually or in
the aggregate, do not or would not have a Material Adverse Effect on the
Company.
Section
4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since October
31, 2009, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents on file on the
date hereof.
14
material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
15
or not
permitted by said Act or the rules thereunder)to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
Section 6.7 [INTENTIONALLY
OMITTED]
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(ii) The
provisions of subparagraph 6.15(i) will not apply to (w) Common Stock issued
pursuant to an exemption from registration under the Securities Act of 1933; (x)
an underwritten public offering of shares of Common Stock or Preferred Stock;
(y) an offering of convertible Preferred Stock at market or above; or (z) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, sale of assets, disposition or the exchange of the
capital stock for assets, stock or other joint venture interests.
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(iii) In
the event the Company breaches the provisions of this Section, the Discount (as
defined in shall be amended to be equal to (x)110% of the
Discount set forth herein and the Investor may terminate its obligations under
this Agreement and demand such amounts as may be owing under Section
2.1.
(b) The
Company covenants and agrees that it will not, without the prior written consent
of the Investor, enter into any subsequent or further equity credit line
agreement (however denominated) with any third party during the Commitment
Period.
ARTICLE
VII
CONDITIONS
TO DELIVERY OF
PUT
NOTICES AND CONDITIONS TO CLOSING
Section
7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to
issue and sell the Put Shares to Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY
OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor shall be true and correct in all material respects as of
the date of this Agreement and as of the date of each such Closing as though
made at each such time, except for changes which have not had a Material Adverse
Effect.
(b) PERFORMANCE
BY INVESTOR. Investor shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Investor at or prior to
such Closing.
Section
7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT
NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a “CONDITION SATISFACTION DATE”), of each of the
following conditions:
(a) REGISTRATION
OF REGISTRABLE SECURITIES WITH THE SEC. As set forth in the
Registration Rights Agreement, the Company shall have filed with the SEC the
Initial Registration Statement with respect to the resale of the Initial
Registrable Securities by Investor and such Registration Statement shall have
been declared effective by the SEC prior to the first Put Date. For the purposes
of any Put Notice with respect to the Registrable Securities other than the
Initial Registrable Securities, the Company shall have filed with the SEC a
Registration Statement with respect to the resale of such Registrable Securities
by Investor which shall have been declared effective by the SEC prior to the Put
Date therefore.
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(b) EFFECTIVE
REGISTRATION STATEMENT. As set forth in the Registration Rights
Agreement, a Registration Statement shall have previously become effective for
the resale by Investor of the Registrable Securities subject to such Put Notice
and such Registration Statement shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor Investor shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
such Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC’s concerns
have been addressed and Investor is reasonably satisfied that the SEC no longer
is considering or intends to take such action),and (ii) no other suspension of
the use or withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist.
(c) ACCURACY
OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company shall be true and correct in all material respects
as of each Condition Satisfaction Date as though made at each such time (except
for representations and warranties specifically made as of a particular date)
with respect to all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations or warranties
herein to be incorrect and which have been corrected with no continuing material
impairment to the Company or Investor.
(d) PERFORMANCE
BY THE COMPANY. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) NO
INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or adopted by
any court or governmental authority of competent jurisdiction that prohibits or
directly and materially adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE
CHANGES. Since the date of filing of the Company's most recent SEC
Document, no event that had or is reasonably likely to have a Material Adverse
Effect has occurred.
(g) NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of
the Common Stock shall not have been suspended by the SEC, the Principal Market
or the FINRA and the Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from the Principal
Market.
(h) LEGAL
OPINION. The Company shall have caused to be delivered to Investor,
within five (5) Trading Days of the effective date of the Initial Registration
Statement and each subsequent Registration Statement, an opinion of the
Company’s legal counsel in the form of Exhibit C hereto, addressed to
Investor.
(i) [INTENTIONALLY
OMITTED]
(j) FIVE
PERCENT LIMITATION. Notwithstanding anything to the contrary
contained herein, if, on any Closing Date, the number of Put Shares then to be
purchased pursuant to a Put Notice by
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Investor
would, when aggregated with all other shares of Common Stock then held by
Investor (including, for the purposes of this Section 7.2(j), Common Stock
issuable upon conversion, exercise or exchange, as applicable, of Common Stock
Equivalents then held by Investor), cause Investor to beneficially own in excess
of 4.999% of the total number of issued and outstanding shares of Common Stock
after giving effect to the Put (the “Percentage Cap”), then the number of Put
Shares shall be reduced to the extent necessary for Investor’s beneficial
ownership of Common Stock, after giving effect to the Put, not to exceed the
Percentage Cap. For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. In the event the number of
Put Shares with respect to any Put are required to be reduced pursuant to this
Section 7.2(j), Investor shall provide, via facsimile, as soon as possible on
the Closing Date, and in no event later than 12:00 p.m. EST, a notice to the
Company setting forth the maximum number of shares issuable pursuant to such Put
which would not result in Investor’s beneficial ownership exceeding the
Percentage Cap.
(k) NO
KNOWLEDGE. The Company shall have no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered.
(l) SHAREHOLDER
VOTE. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(m) OTHER. On
each Condition Satisfaction Date, Investor shall have received a certificate in
substantially the form and substance of Exhibit D hereto, executed by an
executive officer of the Company and to the effect that all the conditions to
such Closing shall have been satisfied as at the date of each such
certificate.
Section
7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
INFORMATION.
(a) The
Company shall make available for inspection and review by Investor, advisors to
and representatives of Investor (who may or may not be affiliated with Investor
and who are reasonably acceptable to the Company), and any Underwriter, any
Registration Statement or amendment or supplement thereto or any blue sky, FINRA
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company’s officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of such Registration.
(b) Each
of the Company, its officers, directors, employees and agents shall in no event
disclose non-public information to Investor, advisors to or representatives of
Investor.
(c) Nothing
herein shall require the Company to disclose non-public information to Investor
or its advisors or representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the contrary,
the
20
Company
shall, as hereinabove provided, immediately notify the advisors and
representatives of Investor and any Underwriters of any event or the existence
of any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in a Registration Statement would cause such prospectus
to include a material misstatement or to omit a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing
contained in this Section 7.3 shall be construed to mean that such persons or
entities other than Investor (without the written consent of Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms and conditions
of this Agreement and nothing herein shall prevent any such persons or entities
from notifying the Company of their opinion that based on such due diligence by
such persons or entities, any Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
such Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
The
securities represented by this certificate have not been registered under the
Securities Act of 1933 (the “Securities Act”) or qualified under applicable
state securities laws. These securities may not be offered, sold, pledged,
hypothecated, transferred or otherwise disposed of except pursuant to (i) an
effective registration statement and qualification in effect with respect
thereto under the Securities Act and under any applicable state securities law,
(ii) to the extent applicable, Rule 144 under the Securities Act, or (iii) an
opinion of counsel reasonably acceptable to the Company that such registration
and qualification is not required under applicable federal and state securities
laws.”
(b) As
soon as practicable after the execution and delivery hereof, the Company shall
issue to the Transfer Agent the Transfer Agent Instructions. Such instructions
shall be irrevocable by the Company from and after the date thereof or from and
after the issuance thereof except as otherwise expressly provided in the
Registration Rights Agreement. It is the intent and purpose of such
instructions, as provided therein, to require the Transfer Agent to issue to
Investor certificates evidencing shares of Common Stock incident to a Closing,
free of the Legend, without consultation by the transfer agent with the Company
or its counsel and without the need for any further advice or instruction or
documentation to the Transfer Agent by or from the Company or its counsel or
Investor; provided that (a) a Registration Statement shall then be effective,
(b) Investor confirms to the Transfer Agent and the Company that it has or
intends to sell such Common Stock to a third party which is not an affiliate of
Investor or the Company and Investor agrees to redeliver the certificate
representing such shares of Common Stock to the Transfer
21
Agent to
add the Legend in the event the Common Stock is not sold, and (c) Investor
confirms to the transfer agent and the Company that Investor has complied with
the prospectus delivery requirement under the Securities Act. At any time after
the Effective Date, upon surrender of one or more certificates evidencing Common
Stock that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those
surrendered.
Section
8.4 INVESTOR’S COMPLIANCE. Nothing in this Article VIII
shall affect in any way Investor’s obligations under any agreement to comply
with all applicable securities laws upon resale of the Common
Stock.
22
day after
deposited in the mail, in each case, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the
Company: Imaging
Diagnostic Systems, Inc.
0000 X.X. 00xx
Xxxxxxx
Xx.
Xxxxxxxxxx, XX 00000
Telephone
No.: (000) 000-0000
Telecopier
No.: (000) 000-0000
with a
copy (which shall not constitute notice) to:
Xxxxxx X.
Xxxxxxxx, Esq.
Xxxxxxx
Xxxxxx, P.A.
0000
Xxxxxxxxxxxxx Xxxxx
000 X.X.
Xxxxxx Xxxxxx
Xxxxx, XX
00000-0000
Telephone
No.: (000) 000-0000
Telecopier
No.: (000) 000-0000
If to
Investor: Southridge
Partners II, LP
00 Xxxxx
Xxxxxx
Xxxxxxxxxx
XX 00000
Either
party hereto may from time to time change its address or facsimile number for
notices under this Section 9.1 by giving at least ten (10) days’ prior written
notice of such changed address or facsimile number to the other party
hereto.
The
Company agrees to indemnify and hold harmless Investor and its officers,
directors, employees, and agents, and each Person or entity, if any, who
controls Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor’s failure to perform any
covenant or agreement contained in this Agreement or Investor’s or its
officer’s, director’s, employee’s, agent’s or Controlling Person’s negligence,
recklessness or bad faith in performing its obligations under this
Agreement.
23
(a) In
the event any claim or demand in respect of which any person claiming
indemnification under any provision of this Article (an “INDEMNIFIED
PARTY”) might seek indemnity under this Article is asserted against or sought to
be collected from such Indemnified Party by a person other than a party hereto
or an affiliate thereof (a “THIRD PARTY CLAIM”), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party’s claim for indemnification that is being asserted under any
provision of this Article against any person (the “INDEMNIFYING PARTY”),
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a “CLAIM NOTICE”)
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party’s ability to
defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the “DISPUTE PERIOD”) whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under this
Article and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim.(i)If
the Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying
Party shall have the right to defend, with counsel reasonably satisfactory to
the Indemnified Party, at the sole cost and expense of the Indemnifying Party,
such Third Party Claim by all appropriate proceedings, which proceedings shall
be vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to this Article). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the Indemnified Party
may, at the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party’s delivery of the notice referred to in the first
sentence of this clause (i), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and provided further, that if requested
by the Indemnifying Party, the Indemnified Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and expenses
with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may takeover the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under this Article with respect to such Third Party Claim. (ii) If the
Indemnifying Party fails to notify the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but
fails to prosecute vigorously and diligently or settle the Third Party Claim, or
if the Indemnifying Party fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the
24
Indemnified
Party(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in clause
(iii) below, the Indemnifying Party will not be required to bear the costs and
expenses of the Indemnified Party’s defense pursuant to this clause (ii) or of
the Indemnifying Party’s participation therein at the Indemnified Party’s
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. (iii) If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with respect to the Third
Party Claim under this Article or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under this Article and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(b) In
the event any Indemnified Party should have a claim under this Article against
the Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver a written notification of a claim for indemnity
under this Article specifying the nature of and basis for such claim, together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an “INDEMNITY NOTICE”) with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party’s rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under this Article and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
(c) The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar rights of the Indemnified Party against the Indemnifying Party
or others, and (ii) any liabilities the Indemnifying Party may be subject
to.
25
Section
10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Florida
without regard to the principles of conflicts of law. Each of the Company and
Investor hereby submit to the exclusive jurisdiction of the United States
Federal and state courts located in Florida with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
26
accordingly
agreed that the Investor shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.
Section
10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the Company and Investor, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
27
thereafter.
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that such severability shall be ineffective if it materially changes
the economic benefit of this Agreement to any party.
IN
WITNESS WHEREOF, the parties hereto have caused this Private Equity Credit
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
IMAGING
DIAGNOSTIC SYSTEMS, INC.
By: /s/ Xxxxx X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
|
Title:
Chief Executive Officer
|
SOUTHRIDGE
PARTNERS II, LP
By: /s/ Xxxxxxx
Xxxxx
Xxxxxxx
Xxxxx, Manager of General Partner
28
EXHIBITS
EXHIBIT
A Registration
Rights Agreement
EXHIBIT
B Put
Notice
EXHIBIT
C Opinion
EXHIBIT
D Closing
Certificate
29