EXHIBIT 10.9
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of October , 1998 (the
"Agreement"), between the entities listed on Schedule A attached hereto
(collectively referred to as the "Investors"), SETTONDOWN CAPITAL INTERNATIONAL
LTD. (the "Placement Agent") located at Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X.
Xxx X. 0000, Xxxxxx, Bahamas, a corporation organized under the laws of Bahamas,
and IMAGING DIAGNOSTIC SYSTEMS, INC., a corporation organized and existing under
the laws of the State of Florida (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
from time to time as provided herein, and the Investors shall purchase (a) an
aggregate of Warrant A's to purchase 25,000 Warrant Shares, (b) an aggregate of
Warrant B's to purchase 25,000 Warrant Shares, and (c) pursuant to the equity
line of credit established herein whereby the Company has the option of
exercising its "Put" rights upon the Investors for the purchase and sale of up
to an additional $15,000,000 of the Common Stock (the "Aggregate Purchase
Price"); and
WHEREAS, the Company shall issue to the Placement Agent, in return for
services rendered, from time to time as provided herein the fees set forth in
Section 12.7 below; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into, exchangeable for, or have any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any
security convertible into, or exchangeable for Capital Shares.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean with respect to a Closing for the
Put Shares shall be the fifth Trading Day following the Put Date related to such
Closing; provided all conditions to such Closing have been satisfied on or
before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the $15,000,000 up to which
the Investors have agreed to provide to the Company in order to purchase the
Warrants, and Put Shares pursuant to the terms and conditions of this Agreement.
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Section 1.7 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investors may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investors shall have purchased
Put Shares pursuant to this Agreement for an aggregate Purchase Price of
$15,000,000, (y) the date this Agreement is terminated pursuant to Section 2.4,
or (z) the date occurring three years from the date of commencement of the
Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, no
par value per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Floor Price" shall mean a Bid Price of Fifty Cents
($0.50) per share of Common Stock.
Section 1.14 "Investment Amount" shall mean the dollar amount to be
invested by the Investors to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investors, all in accordance with Section 2.2
hereof.
Section 1.15 "Market Price" on any given date shall mean the average of
the two lowest Bid Prices of the Common Stock during the Valuation Period.
Section 1.16 "Material Adverse Effect" shall mean any effect on the
business, Bid Price, trading volume of the Common Stock, operations, properties,
prospects, results of operations, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates,
individually, or taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Escrow Agreement, or the Warrants in any
material respect.
Section 1.17 "Maximum Put Amount" on any Put Date shall mean the amount
indicated opposite the range in which the Closing Price is on such Put Date and
below the 30 Day Average Daily trading Volume on such Put Date, as set forth in
the Table below:
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30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily
Trading Volume Trading Volume Trading Volume Trading Volume Trading Volume Trading Volume
Closing Price 25,000-50,000 50,001-75,000 75,001-100,000 100,001-125,000 125,001-150,000 150,001 and Above
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$0.50-$1.00 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000
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$1.01 - $1.50 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000
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$1.51 - $2.00 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000
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$2.01 - $2.50 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000
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$2.51 - $3.00 $300,000 $350,000 $400,000 $450,000 $500,000 $550,000
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$3.01 - $3.50 $350,000 $400,000 $450,000 $500,000 $550,000 $600,000
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$3.51 - $4.00 $400,000 $450,000 $500,000 $550,000 $600,000 $650,000
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$4.01 - Above $450,000 $500,000 $550,000 $600,000 $650,000 $700,000
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Section 1.18 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.19 "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.20 "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.
Section 1.21 "Principal Market" shall mean the OTC Bulletin Board, the
Nasdaq Small-Cap Market, or the American Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common Stock.
Section 1.22 "Purchase Price" shall mean (a) with respect to Put
Shares, eighty (80%) percent (the "Purchase Price Percentage") of the Market
Price upon a Put Date (or such other date on which the Purchase Price is
calculated in accordance with the terms and conditions of this Agreement) if the
Common Stock is then traded on the OTC Bulletin Board, or eighty five (85%)
percent (also referred to as the "Purchase Price Percentage") of the Market
Price upon a Put Date (or such other date on which the Purchase Price is
calculated in accordance with the terms and conditions of this Agreement) if the
Common Stock is then traded on the Nasdaq Small Cap Stock Market or American
Stock Exchange.
Section 1.23 "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investors to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.24 "Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice to sell Common Stock to the Investors is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.25 "Put Notice" shall mean a written notice to the Investors
setting forth the Investment Amount that the Company intends to sell to the
Investors and Compliance Certification from the Company as attached hereto as
Exhibit C.
Section 1.26 "Put Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to a Put that has occurred or may
occur in accordance with the terms and conditions of this Agreement.
Section 1.27 "Registrable Securities" shall mean any of the Put Shares,
and the Warrant Shares (i) in respect of which a Registration Statement has not
been declared effective by the SEC, (ii) which have not been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) which have not 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) the sales of which, in the opinion of
counsel to the Company, are subject to any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
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Section 1.28 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company, the Placement Agent,
and the Investors on the Subscription Date annexed hereto as Exhibit D.
Section 1.29 "Registration Statement" shall mean a registration
statement on Form SB-2 (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, the Registration Rights Agreement, and the
Warrants and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investors of the
Registrable Securities under the Securities Act.
Section 1.30 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.31 "SEC" shall mean the Securities and Exchange Commission.
Section 1.32 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.33 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.34 "SEC Documents" shall mean the Form10-KSB, Form 10-QSB's,
Form 8-K's, (including all amendments thereto) or Proxy Statements, filed by the
Company for a period of at twelve (12) months immediately preceding the date
hereof until such time the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.35 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.36 "Trading Cushion" shall mean the mandatory fifteen (15)
Trading Days between Put Dates.
Section 1.37 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
Section 1.38 "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) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital Shares"),
otherwise than as provided in the foregoing Subsections (a) and (b) above, 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;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for Capital
Shares and the consideration per share for which Additional Capital Shares 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;
(f) makes a distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares 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
(g) takes any action affecting the number of Outstanding Capital
Shares, 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 material adverse effect upon
the rights of the Investors at the time of a Put or exercise of the Warrant.
Section 1.39 "Valuation Period" shall mean with respect to the Purchase
Price on any Put Date, the six day period commencing three (3) Trading Days
immediately preceding, and the two (2) Trading Days immediately following, the
Trading Day on which an Put Notice is deemed to be delivered, as well as the
Trading Day on which such notice is deemed to be delivered; provided, however,
that if a Valuation Event occurs during a Valuation Period, a new Valuation
Period shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the sixth Trading Day thereafter.
Section 1.40 "Warrants" shall mean collectively the Warrant A's and
Warrant B's being issued pursuant to the terms herein.
Section 1.41 "Warrant A" shall have the meaning set forth in Section
2.5(a), and be subject to the terms and conditions substantially as set forth in
the form of Exhibit E.
Section 1.42 "Warrant B" shall have the meaning set forth in Section
2.5(b) and be subject to the terms and conditions substantially in the form of
Exhibit F.
Section 1.43 "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to exercise of the Warrants.
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ARTICLE II
Purchase and Sale of Warrants, and Put Shares
Section 2.1 Investments in Put Shares.
(a) Puts. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Put Date the
Company may make a Put by the delivery of a Put Notice in the form attached
hereto as Exhibit C. The number of Put Shares that the Investors shall receive
pursuant to such Put shall be determined by dividing the Investment Amount
specified in the Put Notice by the Purchase Price on such Put Date. The
Investment Amount for each Put as designated by the Company in the applicable
Put Notice shall not be less than $100,000 nor more than the Maximum Put Amount
on the Put Date.
(b) Maximum Aggregate Purchase of Common Stock. In the event the
Common Stock is listed on the Nasdaq Small Cap Stock Market or American Stock
Exchange, or if the rules of the exchange or market where the Common Stock is
then quoted require, unless the Company obtains Shareholder approval pursuant to
the applicable corporate governance rules of the Nasdaq Stock Market, the
Investors may not be compelled to make a purchase which results in the issuance
to the Investors of more than 19.99% of the shares of Common Stock (measured at
the time of such purchase) as a result of the transactions contemplated by this
Agreement
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period, provided all
of the conditions set forth in Article VII are satisfied, the Company may
deliver a Put Notice to the Investors (pro rata), subject to the conditions set
forth in Section 2.4.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investors if such notice is received prior to 12:00 noon Eastern Time, or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.
Section 2.3 Put Closings. On each Closing Date for a Put (i) the
Company shall deliver to the Escrow Agent one or more certificates, at the
Investor's option, representing the Put Shares to be purchased by the Investors
pursuant to Section 2.1 herein, registered in the name of the Investors or, at
the Investor's option, and (ii) the Investors shall deliver to escrow the
Investment Amount specified in the Put Notice by wire transfer of immediately
available funds to the Escrow Agent on or before the Closing Date for each Put.
In addition, on or prior to the Closing Date for each Put, each of the Company
and the Investors shall deliver to the Escrow Agent all documents, instruments
and writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. Payment of funds to the Company and delivery of the
certificates to the Investors shall occur out of escrow in accordance with the
conditions set forth above and those contained in the Escrow Agreement referred
to in Section 7.2(n).
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Section 2.4 Termination of Investment Obligation. The obligation of the
Investors to purchase Put Shares shall terminate permanently (including with
respect to a Closing Date that has not yet occurred) in the event that (i) there
shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of twenty (20) Trading Days during the
Commitment Period, for any reason other than deferrals or suspensions in
accordance with the Registration Rights Agreement as a result of corporate
developments subsequent to the Subscription Date that would require such
Registration Statement to be amended to reflect such event in order to maintain
its compliance with the disclosure requirements of the Securities Act, or (ii)
the Company shall at any time fail to comply with the requirements of Article VI
below.
Section 2.5 Warrants. On the Subscription Date, the Company will issue
to the Investors: (i) Warrant A's exercisable beginning six months after the
Subscription Date and then exercisable any time over the five-year period
thereafter, to purchase an aggregate of 25,000 Warrant Shares at the Exercise
Price and subject to the provisions contained in the Warrant A; and (ii) Warrant
B's exercisable beginning six months after the Subscription Date and then
exercisable any time over the five-year period thereafter, to purchase an
aggregate of 25,000 Warrant Shares at the Exercise Price and subject to the
provisions contained in the Warrant B. The Warrants shall be delivered by the
Company to the Escrow Agent, and delivered to the Investors pursuant to the
terms of this Agreement and the Escrow Agreement. The Warrant Shares shall be
registered for resale pursuant to the Registration Rights Agreement.
ARTICLE III
Representations and Warranties of Investors
Each of the Investors represents and warrants to the Company that:
Section 3.1 Organization and Authorization. Each of the Investors is
duly incorporated or organized and validly existing in the country of its
incorporation or organization and have all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by each of the Investors, the
performance by each of the Investors of its obligations hereunder and the
consummation by each of the Investors of the transactions contemplated hereby
have been duly authorized and requires no other proceedings on the part of any
of the Investors. The undersigned has all right, power and authority to execute
and deliver this Agreement on behalf of the Investors. This Agreement has been
duly executed and delivered by the Investors and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of each of the Investors, enforceable
against each of the Investors in accordance with its terms.
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Section 3.2 Evaluation of Risks. Each of the Investors has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks entailed by,
an investment in the Company and of protecting its interests in connection with
this transaction.
It recognizes that its investment in the Company involves a high degree of risk.
Section 3.3 Independent Counsel. Investors acknowledge that they have
been advised to consult with their own attorney regarding legal matters
concerning the Company and to consult with its tax advisor regarding the tax
consequences of acquiring the securities issuable hereunder.
Section 3.4 No Registration. The Investors understand that the
securities issuable hereunder have not been registered under the Act or any
other securities laws but are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of Federal and State
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of Investors set forth herein in order to determine the applicability of such
exemptions and the suitability of Investors to acquire the securities hereunder.
Section 3.5 Investment Intent. The Investors are entering into this
Agreement solely for their own account and the Investors have no present
arrangement (whether or not legally binding) at any time to sell the Put Shares
to or through any person or entity. Investors understand and agree that they may
bear the economic risk of its investment in the securities issuable hereunder
for an indefinite period of time.
Section 3.6 Registration Rights. The parties have entered into a
Registration Rights Agreement (Exhibit D).
Section 3.7 No Advertisements. The Investors are not entering into this
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Section 3.8 Sophisticated Investor. The Investors are each a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
accredited investors (as defined in Rule 501 of Regulation D), and each of the
Investors have such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in Common Stock. The
Investors acknowledge that an investment in the Common Stock is speculative and
involves a high degree of risk.
Section 3.9 Not an Affiliate. None of the Investors are either an
officer, director or "affiliate" (as that term is defined in Rule 405 of the
Securities Act) of the Company.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to, and covenants with, the
Investors that the following are true and correct as of the date hereof and as
of the Subscription Date:
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Section 4.1 Organization; Qualification. The Company is a corporation
duly organized and validly existing under the laws of the State of Florida and
is in good standing under such laws. The Company has all requisite corporate
power and authority to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of its business requires such qualification, except
where failure to so qualify would not have a Material Adverse Effect.
Section 4.2 Capitalization. The authorized capital stock of the Company
consists of 48,000,000 shares of Common Stock, no par value per share, of which
37,704,399 are outstanding, 2,000,000 shares of non-voting Preferred Stock, no
par value, of which 450 shares of non-voting Preferred Stock, no par value, have
been designated Series B Convertible Preferred Stock (all of which are
outstanding), and 108 shares of non-voting Preferred Stock which are designated
as Series H Convertible Preferred Stock, all of which are outstanding. All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
Section 4.3 Authorization. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the securities
issuable hereunder and the performance of the Company's obligations hereunder
have been taken. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the securities will be validly issued, fully paid
and nonassessable and will be free of any liens or encumbrances other than those
created hereunder or by the actions of the Investors; provided, however, that
the securities are subject to restrictions on transfer under state and/or
federal securities laws. The issuance and sale of the securities hereunder will
not give rise to any preemptive right or right of first refusal or right of
participation on behalf of any person.
Section 4.4 No Conflict. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default, or give rise to a
right of termination, cancellation or acceleration of any material obligation or
to a loss of a material benefit, under, any provision of the Articles of
Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and
any amendments thereto of the Company or any material mortgage, indenture, lease
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which would have a Material Adverse
Effect.
Section 4.5 No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Form 10-KSB, Form
10-QSBs, Form 8-K, Proxy Statement and S-1 Registration Statement filed by the
Company for a period of at least twelve (12) months immediately preceding this
offer (the "Reports"), this Agreement or those incurred in the ordinary course
of the Company's business since January 1, 1997, and which individually or in
the aggregate, do not or would not have a Material Adverse Effect.
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Section 4.6 No Default. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it is or its property
is bound, and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or any of the
Exhibits or attachments hereto, including the exercise provision of the
Warrants, will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under, any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company is a
party or by which it is bound or any statute or the Memorandum or Articles of
the Company, or any decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, or the Company's listing agreement for its Common Stock, in each
case which default, lien or charge is likely to cause a Material Adverse Effect.
Section 4.7 Absence of Events of Default. Except as set forth in the
Reports and this Agreement, no Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving
of notice or the passage of time or both, would become an Event of Default (as
so defined), has occurred and is continuing, which would have a Material Adverse
Effect.
Section 4.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
securities hereunder, or the consummation of any other transaction contemplated
hereby.
Section 4.9 Intellectual Property Rights. Except as disclosed in the
Reports, the Company, to the best of its knowledge, has sufficient trademarks,
trade names, patent rights, copyrights and licenses to conduct its business as
presently conducted in the Reports, except where failure to have any such
intellectual property would not cause a Material Adverse Effect. To the best of
its knowledge, neither the Company, nor its products is infringing or will
infringe any trademark, trade name, patent right, copyright, license, trade
secret or other similar right of others currently in existence; and there is no
claim being made against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a Material Adverse Effect.
Section 4.10 Material Contracts. Except as set forth in the Reports,
the agreements to which the Company is a party described in the Reports are
valid agreements, in full force and effect the Company is not in material breach
or material default under any of such agreements, except where such breach or
default would not cause a Material Adverse Effect.
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Section 4.11 Litigation. Except as disclosed in the Reports, there is
no action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, prospects,
financial conditions or operations of the Company. The Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality.
Section 4.12 Title to Assets. Except as set forth in Reports, the
Company has good and marketable title to all properties and material assets
described in the Reports as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Company.
Section 4.13 Subsidiaries. Except as disclosed in the Reports, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.14 Required Governmental Permits. Except as set forth in the
Reports, the Company is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities which are material to the conduct of
its business, all of which are valid and in full force and effect.
Section 4.15 Listing. The Company will maintain the listing of its
Common Stock on the OTC Bulletin Board or other organized United States market
or Quotation system. The Company has not received any notice, oral or written,
regarding continued listing and, as long as the Common Stock issuable hereunder,
the Warrant Shares or Put Shares are outstanding, the Company will take no
action, which would impact their continued listing or eligibility of the Company
for such listing.
Section 4.16 Other Outstanding Securities/Financing Restrictions. Other
than warrants and options to acquire shares of Common Stock as disclosed in the
Reports, there are no other outstanding securities, debt or equity presently
convertible into Common Stock. Except as disclosed in the Reports, the Company
has no outstanding restricted shares, or shares of Common Stock sold under
Regulation S, Regulation D or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
Section 4.17 Use of Proceeds. The Company represents that the net
proceeds from this offering will be used for working capital purposes and/or
general corporate purposes.
Section 4.18 Further Representations and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investors remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use its best efforts to maintain the listing of its Common Stock on the OTC
Bulletin Board or other organized United States market or quotron systems.
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Section 4.19 SEC Filings/Full Disclosure. For a period of at least
twelve (12) months immediately preceding this offer and sale, none of the
Company's filings with the SEC (as they may have been amended or supplemented as
provided in the Reports) 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 as of the date of such filing (or in such amendment or
supplement, as the case may be). The Company has timely, subject to permitted
extensions, filed all requisite forms, reports and exhibits thereto with the
SEC.
Section 4.20 Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to the Investors that could reasonably be expected
to have a Material Adverse Effect.
Section 4.21 Opinion of Counsel. Each of the Investors shall receive an
opinion letter from counsel to the Company prior to each Closing for the Put
Shares by the Company to the effect that:
(i) The Company is incorporated and validly existing
in the jurisdiction of its incorporation. The Company and/or its
subsidiaries are duly qualified to do business as a foreign corporation
and is in good standing in all jurisdictions where the Company and/or
its subsidiaries owns or leases properties, maintains employees or
conducts business, except for jurisdictions in which the failure to so
qualify would not have a material adverse effect on the Company, and
has all requisite corporate power and authority to own its properties
and conducts its business.
(ii) There is no action, proceeding or investigation
pending, or to such counsel's knowledge, threatened against the
Company, which might result, either individually or in the aggregate,
in any material adverse change in the business or financial condition
of the Company.
(iii) To counsel's knowledge, the Company is not a
party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality.
(iv) To counsel's knowledge, there is no action,
suit, proceeding or investigation by the Company currently pending.
(v) The Common Stock and Warrants which shall be
issued at each Put Closing, will be duly authorized and validly issued
under the laws of the Company's State of Incorporation.
(vi) This Subscription Agreement, the issuance of the
Warrants, Common Stock issuable upon exercise of the Warrants, and the
Put Shares have been duly approved by all required corporate action and
that all such securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable
(vii) The issuance of the Warrants, Common Stock
issuable upon exercise of the Warrants, and the Put Shares will not
violate the applicable listing agreement between the Company and any
securities exchange or market on which the Company's securities are
listed.
(viii) Assuming the accuracy of the representation
and warranties of the Company and the Investors set forth in this
Private Equity Line of Credit Agreement, the offer, issuance and sale
of the Warrants, Common Stock issuable upon exercise of the Warrants,
and the Put Shares, to be issued upon exercise to the Investors
pursuant to this Agreement are exempt from the registration
requirements of the Securities Act.
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(ix) The authorized capital stock of the Company
consists of 48,000,000 shares of Common Stock, no par value per share,
of which 37,704,399 are outstanding, 2,000,000 shares of non-voting
Preferred Stock, no par value, of which 450 shares of non-voting
Preferred Stock, no par value, have been designated Series B
Convertible Preferred Stock (all of which are outstanding), and 108
shares of non-voting Preferred Stock which are designated as Series H
Convertible Preferred Stock, all of which are outstanding. All issued
and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
(x) The Common Stock is registered pursuant to
Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934,
as amended, and the Company has timely filed all the material required
to be filed pursuant to Sections 13(a) or 15(d) of such Act for a
period of at least twelve months preceding the date hereof.
(xi) The Company has the requisite corporate power
and authority to enter into the Agreements and to sell and deliver the
Warrants, Common Stock issuable upon exercise of the Warrants, and the
Put Shares as described in the Agreements; each of the Agreements has
been duly and validly authorized by all necessary corporate action by
the Company and to our knowledge, no approval of any governmental or
other body is required for the execution and delivery of each of the
Agreements by the Company or the consummation of the transactions
contemplated thereby; each of the Agreements has been duly and validly
executed and delivered by and on behalf of the Company, and is a valid
and binding agreement of the Company, enforceable in accordance with
its terms, except as enforceability may be limited by general equitable
principles, bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting creditors rights
generally, and except as to compliance with federal, state and foreign
securities laws, as to which no opinion is expressed.
(xii) To the best of our knowledge, after due
inquiry, the execution, delivery and performance of the Agreements by
the Company and the performance of its obligations thereunder do not
and will not constitute a breach or violation of any of the terms and
provisions of, or constitute a default under or conflict with or
violate any provision of (i) the Company's Certificate of Incorporation
or By-Laws, (ii) any indenture, mortgage, deed of trust, agreement or
other instrument to which the Company is a party or by which it or any
of its property is bound, (iii) any applicable statute or regulation,
(iv) or any judgment, decree or other of any court or governmental body
having jurisdiction over the Company or any of its property.
Section 4.22 Opinion of Counsel. The Company will obtain for each of
the Investors, at the Company's expense, any and all opinions of counsel which
may be required in order to exercise or sell the securities issuable
hereunder.Such draft of opinion of counsel shall be received by the Investors on
or before the Subscription Date.
Section 4.23 Dilution. The Company is aware and acknowledges that the
issuance of Common Stock hereunder, and the exercise of the Warrants could cause
dilution to existing shareholders and could significantly increase the
outstanding number of shares of Common Stock.
Section 4.24 Employee Relations. The Company is not involved in any
labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union and the
Company believes that its relations with its employees are good.
Section 4.25 Environmental Laws. To the best of the Company's
knowledge, the Company is (i) in compliance with any and all foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants and which the Company know is applicable to them
("Environmental Laws"), (ii) has received all permits, licenses or other
approvals required under applicable Environmental Laws to conduct its business,
and (iii) is in compliance with all terms and conditions of any such permit,
license or approval.
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Section 4.26 Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires, or obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operation, of the Company.
ARTICLE V
Representations and Warranties of the Company and the Investors
Each of the Investors, and the Company represent to the other the
following with respect to itself:
Section 5.1 Authorization/Execution. This Agreement has been duly
authorized, validly executed and delivered on behalf of the Company and each of
the Investors and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
Section 5.2 Non-contravention. The execution and delivery of this
Agreement along with all Exhibits, and the consummation of the issuance of the
securities and the transactions contemplated by this Agreement do not and will
not conflict with or result in a breach by the Company or the Investors of any
of the terms or provisions of, or constitute a default under, the articles of
incorporation or by-laws of the Company or any of the Investors, or any
indenture, mortgage, deed of trust of other material agreement or instrument to
which the Company or any Investor is a party or by which it or any of its
properties or assets are bound, or any existing applicable law, rule or
regulation or any applicable decree, judgment or order of any court, Federal or
State regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or Investors or any of its properties or assets.
Section 5.3 Approvals. Neither the Company, nor any Investor, is aware
of any authorization, approval or consent of any governmental body which is
legally required for the issuance and sale of the securities.
Section 5.4 Indemnification. Each of the Company and the Investors
agree to indemnify the other and to hold the other harmless from and against any
and all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has authorized and reserved and the Company shall continue to reserve
and keep available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
shares of Common Stock upon exercise of the Warrants , and the Put Shares; such
14
amount of shares of Common Stock to be reserved shall be calculated based upon
the minimum Purchase Price and exercise price therefor under the terms of this
Agreement, the, and the Warrants respectively. The number of shares of Common
Stock so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder and the number of shares so reserved shall be increased or decreased
to reflect potential increases or decreases in the Common Stock that the Company
may thereafter be so obligated to issue by reason of adjustments to the
Warrants.
Section 6.3 Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Put Shares and the Warrant Shares. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Principal Market, it will include in such application the Put Shares and the
Warrant Shares, and will take such other action as is necessary or desirable in
the opinion of any Investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company will take all action to
continue the listing and trading of its Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market.
Section 6.4 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by Exchange 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 6.5 No Legend. The certificates evidencing the Put Shares to be
sold by the Investors shall be free of legends.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company will deliver to each
of the Investors, as and when the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Put. The Company will immediately notify each of the
Investors upon the occurrence of any of the following events in respect of a
registration statement or related prospectus relating to an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt 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; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, 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 not misleading, and
that in the case of the related prospectus, 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 the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investors any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investors any Put Notice during the
continuation of any of the foregoing events.
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Section 6.9 Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investors, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices.
Section 6.10 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investors such shares of stock and/or securities as
the Investors are entitled to receive pursuant to this Agreement.
Section 6.11 Issuance of Put Shares and Warrant Shares. The sale of the
Put Shares and the issuance of the Warrant Shares pursuant to exercise of the
Warrant shall be made in accordance with the provisions and requirements of
Section 4(2) of the Securities Act, or Regulation D and any applicable state
securities law. Issuance of the Warrant Shares pursuant to exercise of the
Warrant shall be made in accordance with the provisions and requirements under
the Securities Act and any applicable state securities law.
ARTICLE VII
Conditions to Delivery of Puts 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 the Investors (pro rata) incident to each Put Closing
is subject to the satisfaction, at or before each such Closing, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investors 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.
(b) Performance by the Investors. The Investors 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 the Investors at or prior to such Closing.
16
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
a Put Notice and the Obligation of the Investors to Purchase Put Shares. The
right of the Company to deliver a Put Notice and the obligation of the Investors
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall have
filed with the SEC a Registration Statement with respect to the resale of at
least that amount of Registrable Securities contained in the Put Notice in
accordance with the terms of the Registration Rights Agreement. As set forth in
the Registration Rights Agreement, the Registration Statement shall have
previously become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investors shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC's concerns
have been addressed and the Investors are 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 the Registration
Statement or related prospectus shall exist. The Registration Statement must
have been declared effective by the SEC prior to the first and each subsequent
Put Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Put Shares,
or shall have the availability of exemptions therefrom. The sale and issuance of
the Put Shares shall be legally permitted by all laws and regulations to which
the Company is subject.
(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 impairment to the Company or the Investors.
(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, the Registration Rights Agreement and
the Warrant to be performed, satisfied or complied with by the Company at or
prior to each Condition Satisfaction Date.
17
(e) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
or directly and 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 adversely affecting any of the transactions contemplated by
this Agreement.
(f) Adverse Changes. Since the Subscription Date, 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 (including, without limitation, the Put Shares) is not
suspended by the SEC or the Principal Market, and the Common Stock (including,
without limitation, the Put Shares) shall have been approved for listing or
quotation on and shall not have been delisted from the Principal Market. 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. The Company shall not have received any notice threatening the listing
of the Common Stock on the Principal Market.
(h) 4.99% Percent Limitation. On each Closing Date, the number of Put
Shares then to be purchased by each Investor will not exceed the number of such
shares which, when aggregated with all other shares of Common Stock then owned
by such Investor beneficially or deemed beneficially owned by such Investor,
would result in any Investor owning more than 4.99% of all of such Common Stock
as would be outstanding on such Closing Date, as determined in accordance with
Rule 13d-3 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Rule 13d-3 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether any Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and, if any, Warrant Shares, would
own more than 4.99% of the Common Stock following such Closing. Then, in such
event, the Company would reduce that number of Put Shares so issuable so that it
would not exceed the aforementioned 4.99% limitation. Such Investor shall notify
the Company as soon as possible, but in any event within three (3) business days
of receiving a Put Notice, if such Investor believes Investor's purchase of the
Put Shares specified in the Put Notice would result in any Investor exceeding
the 4.99% limitation described above.
18
(i) Minimum Bid Price. The Bid Price equals or exceeds the Floor Price
during the applicable Valuation Period (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(j) Minimum Average Trading Volume. The average trading volume for the
Common Stock over the previous thirty (30) Trading Days exceeds 25,000 shares
per Trading Day.
(k) No Knowledge. The Company has 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) Trading Cushion. The Trading Cushion shall have elapsed since the next
preceding Put Date.
(m)Escrow Agreement. The parties hereto shall have entered into a
mutually acceptable escrow agreement for the Purchase Prices due hereunder.
(n) Other. On each Condition Satisfaction Date, the Investors shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by any Investor in order for
such Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 7.2, including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case 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.
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investors pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD 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 the Investors
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 the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
19
Section 8.2 Non-Disclosure of Non-Public Information
(a) The Company shall not disclose non-public information to the
Investors, advisors to or representatives of the Investors (including, without
limitation, in connection with the giving of the Adjustment Period Notice
pursuant to Section 2.4) unless prior to disclosure of such information the
Company identifies such information as being non-public information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such non-public information for review. The Company may, as
a condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investors or their 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 Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investors and, if
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 the
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 8.2 shall be
construed to mean that such persons or entities other than the Investors
(without the written consent of the Investors prior to disclosure of such
information) may not obtain non-public information in the course of conducting
due diligence in accordance with the terms 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, that the
Registration Statement contains an untrue statement of a material fact or omits
a material fact required to be stated in the Registration Statement or necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE IX
Choice of Law/Jurisdiction
Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement
will be construed and enforced in accordance with and governed by the laws of
the State of Florida, except for matters arising under the Act, without
reference to principles of conflicts of law. The party who initiates legal
action shall choose the jurisdiction of the federal courts 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 conveniens, to the bringing of any such proceeding in such jurisdictions.
Each party waives its right to a trial by jury. Each party hereby agrees that if
another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
ARTICLE X
Assignment; Termination
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investors or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investors hereunder with respect
to the Common Stock held by such person, and (b) upon the prior written consent
of the Company, which consent shall not unreasonably be withheld, the Investors
interest in this Agreement may be assigned at any time, in whole or in part, to
any other person or entity (including any affiliate of the Investors) who agrees
to make the representations and warranties contained in Article III and who
agrees to be bound by the covenants of Article V.
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Section 10.2 Termination. This Agreement shall terminate five and
one-half (5-1/2) years after the Subscription Date; provided, however, that the
provisions of Articles I, III, IV, V, VI, VII, VIII, IX, X, XI, and XII shall
survive the termination of this Agreement.
ARTICLE XI
Notices
Section 11.1 Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b)on the second business day following the date of mailing
by reputable courier service, 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 XX 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Investors, at the address listed on Schedule A.
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 11.1 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts/Facsimile/Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 12.2 Entire Agreement. This Agreement, the Exhibits or
Attachments hereto, which include, but are not limited to the Warrants, the
Escrow Agreement, and the Registration Rights Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Attachments
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
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Section 12.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. 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.
Section 12.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investors and the Company shall be required to employ any other reporting
entity.
Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Warrants, Warrant Shares, or Put
Shares, and (ii) in the case of any such loss, theft or destruction of such
certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or (iii) in the case of any such
mutilation, on surrender and cancellation of such certificate, the Company at
its expense will execute and deliver, in lieu thereof, a new certificate of like
tenor.
Section 12.7 Fees and Expenses. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay (a) on the
Subscription Date, to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP fifty thousand (50,000)
shares of Common Stock that will be registered at the same time as the Put
Shares, and (b) on the Closing Date of each Put (i) one (1%) percent of the
proceeds in cash to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP for legal, administrative,
and escrow agent fees, and (ii) six (6%) percent of the gross proceeds of each
Put in cash to the Placement Agent, payable in the form of Common Stock that
will be registered at the same time as the Put Shares. In addition, the
Placement Agent shall receive, on a pro rata basis as the Equity Line of Credit
is drawn upon, (a) a Warrant A to purchase up to fifty thousand (50,000) shares
of Common Stock upon the same terms as the Warrant A issued to the Investors
pursuant to this Agreement (which Warrant Shares will be registered at the same
time as the Put Shares), and (b) eighty thousand (80,000) shares of Common Stock
that will be registered at the same time as the Put Shares.
Section 12.8 Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information, without retaining copies thereof, previously furnished by
it as a result of this Agreement or in connection herewith.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
Agreed to and Accepted as of the
day of October, 1998
IMAGING DIAGNOSTIC SYSTEMS, INC.
By____________________________
Xxxxx X. Xxxxxx, President
AUSTOST ANSTALT XXXXXX,
Investor
By___________________________
Name:
Title:
BALMORE FUNDS S.A.,
Investor
By___________________________
Name:
Title:
SETTONDOWN CAPITAL INTER-
NATIONAL, LTD.
Placement Agent
By___________________________
Xxxxxxx X.X. Xxxxx Xxxxx
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SCHEDULE A
List of Investors
-----------------
1. AUSTOST ANSTALT XXXXXX
733 Fuerstentum
Xxxxxxxxxxx Xxxxxxxxxxx 000
Telephone: 000 000.00.000.0000
Facsimile: 011 431.53.453.2895
Attention: Xxxxxx Xxxxx
Percentage of Put Amount: %
No. of shares of Common Stock
underlying Warrant A:
No. of shares of Common Stock
underlying Warrant B:
2. BALMORE FUNDS S.A.
Trident Xxxxxxxx
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxx, XXX
Telephone: 000-000-00-000-0000
Facsimile: 011-441-71-201-4800
Attention: Francois Morax
Percentage of Put Amount: %
No. of shares of Common Stock
underlying Warrant A:
No. of shares of Common Stock
underlying Warrant B:
EXHIBIT C
PUT NOTICE/COMPLIANCE CERTIFICATE
Imaging Diagnostic Systems, Inc.
The undersigned, Xxxxx Xxxxxx, hereby certifies, with respect to shares of
common stock of Imaging Diagnostic Systems, Inc. (the "Company") issuable in
connection with this Put Notice and Compliance Certificate dated _____________
(the "Notice"), delivered pursuant to Article II of the Equity Private Line Of
Credit Agreement (the "Agreement"), as follows:
1. The undersigned is the duly elected President of the Company.
2. The representations and warranties of the Company set forth in the Agreement
dated as of ________, are true and correct in all material respects as though
made on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.
4. The Investment Amount is $____________.
The undersigned has executed this Certificate this ____ day of ________, 199_.
Imaging Diagnostic Systems, Inc.
By_____________________________
Xxxxx Xxxxxx, President
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the __ day of
October, 1998, between the entities listed on Schedule A attached hereto
(referred to as a "Purchaser" or "Purchasers"), SETTONDOWN CAPITAL INTERNATIONAL
LTD. (the "Placement Agent" together with the Purchasers is also hereinafter
referred to as the "Holder") located at Charlotte House, Charlotte Street, P.O.
Box N. 9204, Nassau, Bahamas, a corporation organized under the laws of Bahamas,
XXXXXXXXX, XXXXXXXXX & XXXX, LLP ("GGR" and together with the Purchasers and the
Placement Agent also referred to as a "Holder") and IMAGING DIAGNOSTIC SYSTEMS,
INC., a corporation incorporated under the laws of the state of Florida, and
having its principle place of business at 0000 XX 00xx Xxxxx, Xxxxxxxxxx,
Xxxxxxx 00000, (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Purchasers are purchasing from the Company, pursuant to a
Private Equity Line of Credit Agreement dated the date hereof (the "Equity Line
Agreement"), (i) an aggregate of up to Fifteen Million ($15,000,000) Dollars
principal amount of shares of Common Stock, (ii) a Warrant A to purchase twenty
five thousand (25,000) shares of the Company's Common Stock, and (iii) a Warrant
B to purchase twenty five thousand (25,000) shares of the Company's Common
Stock. All capitalized terms not hereinafter defined shall have that meaning
assigned to them in the Equity Line Agreement; and
WHEREAS, the Company has agreed to pay to the Placement Agent
for services rendered, 6% of the gross proceeds of each Put, payable in the form
of Common Stock that will be registered at the same time as the Put Shares. In
addition, the Placement Agent shall receive, on a pro rata basis as the Equity
Line of Credit is drawn upon, (a) a Warrant A to purchase up to fifty thousand
(50,000)) shares of Common Stock upon the same terms as the Warrant A issued to
the Purchasers pursuant to the Equity Line Of Credit Agreement (whose Warrant
Shares will be registered at the same time as the Put Shares), and (b) eighty
thousand (80,000) shares of Common Stock which be registered at the same time as
the Put Shares; and
WHEREAS, the Company has agreed to pay to GGR for services
rendered, fifty thousand (50,000) shares of Common Stock ("GGR Shares") to be
registered at the same time as the Put Shares; and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the Put Shares, the Common
Stock and Warrant Shares to be issued to the Placement Agent, and the shares of
Common Stock underlying Warrants (hereinafter referred to as the "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities; provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "1933
Act") and disposed of pursuant thereto, (ii) registration under the 1933 Act is
no longer required for the immediate public distribution of such security as a
result of the provisions of Rule 144 promulgated under the 1933 Act, or (iii) it
has ceased to be outstanding. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holders acknowledge and
understand that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Holders understand that no disposition or transfer of the
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Securities may be made by Holders in the absence of (i) an opinion of counsel to
the Holders that such transfer may be made without registration under the 1933
Act or (ii) such registration.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file and cause
to become effective with the Securities and Exchange Commission ("Commission")
an amendment (the "Amendment") to the Form S-2 registration statement (which was
filed by the Company on _____) at the sole expense of the Company (except as
provided in Section 3(c) hereof), registering the GGR Shares and the shares of
Common Stock underlying the Warrants issued to the Purchasers on the
Subscription Date, in respect of GGR and the Purchasers. The Company also agrees
that, prior to each Put Closing it will prepare and file and cause to become
effective with the Commission , a registration statement (on Form S-2, or other
appropriate registration statement) under the 1933 Act (the "Registration
Statement"), at the sole expense of the Company (except as provided in Section
3(c) hereof), registering that amount of Common Stock, and the Common Stock
underlying the Warrants, associated with that Put Closing, in respect of all
holders of Registrable Securities, so as to permit a public offering and sale of
the Registrable Securities associated with the Put Closings, under the Act.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144 or (iii) five and one
half years after the date the applicable Registration Statement is filed. The
Company will maintain the Amendment or post-effective amendment filed under this
Section 3 hereof current under the 1933 Act until the earlier of (i) the date
that all of the GGR Shares and the shares of Common Stock underlying the
Warrants issued to the Purchasers on the Subscription Date have been sold by
such people pursuant to the Amendment, (ii) the date the holders thereof receive
an opinion of counsel that the GGR Shares and the shares of Common Stock
underlying the Warrants issued to the Purchasers on the Subscription Date may be
sold under the provisions of Rule 144 or (iii) five and one half years after the
Subscription Date.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Amendment and the Registration Statement under subparagraph 3(a) and in
complying with applicable securities and Blue Sky laws (including, without
limitation, all attorneys' fees) shall be borne by the Company. The Holders
shall bear the cost of underwriting discounts and commissions, if any,
applicable to the Registrable Securities being registered and the fees and
expenses of its counsel. The Company shall qualify any of the securities for
sale in such states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holders with copies of the Registration Statement and
the prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holders.
(d) The Company shall not be required by this Section 3 to
include a Holder's Registrable Securities or GGR Shares and the shares of Common
Stock underlying the Warrants issued to the Purchasers on the Subscription Date
in any Amendment or Registration Statement which is to be filed if, in the
opinion of counsel for both the Holders and the Company (or, should they not
agree, in the opinion of another counsel experienced in securities law matters
acceptable to counsel for the Holders and the Company) the proposed offering or
other transfer as to which such registration is requested is exempt from
applicable federal and state securities laws and would result in all purchasers
or transferees obtaining securities which are not "restricted securities", as
defined in Rule 144 under the 1933 Act.
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(e) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
(f) The Company agrees that it will declare the Amendment and/or
the Registration Statement effective within five business days after being
notified by the Commission that it may do so.
(e) In the event the Amendment to be filed by the Company
pursuant to Section 3(a) above is not filed with the Commission within fifteen
(15) days from the Subscription Date and/or the Amendment is not declared
effective by the Commission within forty five (45) days from the Subscription
Date, then the Company will pay GGR and the Purchasers (pro rated on a daily
basis), as liquidated damages for such failure and not as a penalty, two (2%)
percent of the purchase price of the then outstanding Securities for every
thirty (30) day period until the Amendment has been filed and/or declared
effective. Such payment of the liquidated damages shall be made to the GGR and
the Purchasers in cash, immediately upon demand, provided, however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Securities pursuant to this Section.
If the Company does not remit the damages as set forth above,
the Company will pay the reasonable costs of collection, including attorneys
fees, in addition to the liquidated damages. The registration of the Securities
pursuant to this provision shall not affect or limit other rights or remedies of
GGR and the Purchasers as set forth in this Agreement.
Section 4. Cooperation with Company. The Holders will cooperate with
the Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities, the GGR Shares and the shares of Common
Stock underlying the Warrants issued to the Purchasers on the Subscription Date.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities or the GGR Shares and the shares of Common
Stock underlying the Warrants issued to the Purchasers on the Subscription Date
under the Act, the Company shall (except as otherwise provided in this
Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the Amendment and/or Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with respect to
the sale or other disposition of all securities covered by such registration
statement whenever the holder of such securities shall desire to sell or
otherwise dispose of the same (including prospectus supplements with respect to
the sales of securities from time to time in connection with a registration
statement pursuant to Rule 415 promulgated under the Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best effort to register and qualify the securities
covered by the Amendment and Registration Statement under such other securities
or blue sky laws of such jurisdictions as the Holders shall reasonably request,
and do any and all other acts and things which may be necessary or advisable to
enable each Holder to consummate the public sale or other disposition in such
jurisdiction of the securities owned by such Holder, except that the Company
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified or to
file therein any general consent to service of process;
3
(d) list such securities on the NASDAQ Small Cap Stock Market or
other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such exchange or NASDAQ;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(f) notify each holder of Registrable Securities covered by the
Registration Statement and GGR and the holder of the shares of Common Stock
underlying the Warrants issued to the Purchasers on the Subscription Date, at
any time when a prospectus relating thereto covered by the Amendment or the
Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the Amendment or 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 not misleading in the light of the circumstances then existing.
Section 6. Information by Holder. Each holder of Registrable
Securities, GGR Shares and the shares of Common Stock underlying the Warrants
issued to the Purchasers on the Subscription Date, included in any registration
shall furnish to the Company such information regarding such holder and the
distribution proposed by such holder as the Company may request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Section 6.
Section 7. Assignment. The rights granted the Holders under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding upon
and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 8. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement
have been registered;
(b) all of such Holder's securities subject to this Agreement
may be sold without such registration pursuant to Rule 144 promulgated by the
SEC pursuant to the Securities Act;
(c) all of such Holder's securities subject to this Agreement
can be sold pursuant to Rule 144(k); or
(d) five and one half years from the issuance of the
Registrable Securities, GGR Shares, and the shares of Common Stock underlying
the Warrants issued to the Purchasers on the Subscription Date.
Section 9. Indemnification.
(a) In the event of the filing of any Registration Statement
with respect to Registrable Securities, or any Amendment with respect to the GGR
Shares and the shares of Common Stock underlying the Warrants issued to the
Purchasers on the Subscription Date pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holders and each officer, director of
the Holders, and each person, if any, who controls the Holders within the
meaning of the Securities Act ("Distributing Holders") against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Distributing Holders may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
4
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement 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; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by the
Distributing Holders, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof; arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in a Registration
Statement requested by such Distributing Holder, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement contained in this Section 9(b) shall not inure to the
benefit of the Company with respect to any person asserting such loss, claim,
damage or liability who purchased the Registrable Securities which are the
subject thereof if the Company failed to send or give (in violation of the
Securities Act or the rules and regulations promulgated thereunder) a copy of
the prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such Registrable
Securities, where the Company was obligated to do so under the Securities Act or
the rules and regulations promulgated thereunder. This indemnity agreement will
be in addition to any liability which the Distributing Holders may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than as to the particular item as to which indemnification is then
being sought solely pursuant to this Section. In case any such action is brought
against any 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 party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such 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 party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
5
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 10. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 9 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 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 this
Section. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. 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.
Section 11. Notices. Any notice pursuant to this Agreement by the
Company or by the Holders shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery or (iii) if mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holders, to its, his or her address set forth on
the signature page of this Agreement, with a copy to the person designated in
the Agreement.
(b) If to the Company, at the address set forth herein, or to
such other address as any such party may designate by notice to the other party.
Notices shall be deemed given at the time they are delivered personally or five
(5) days after they are mailed in the manner set forth above. If notice is
delivered by facsimile to the Company and followed by mail, delivery shall be
deemed given two (2) days after such facsimile is sent.
Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 14. Jurisdiction. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State of Florida,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of Florida 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 conveniens, to the bringing of any such proceeding in such
6
jurisdictions. Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
Section 15. Severability. If any provision of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
7
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
Attest: IMAGING DIAGNOSTIC SYSTEMS, INC.
By:_________________________ By:____________________________
Name: Name:
Title: Title:
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By_____________________________
XXXXXXXXX, XXXXXXXXX & XXXX, LLP
By_____________________________
By______________________________
By______________________________
8
EXHIBIT E
THIS WARRANT HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT A
To Purchase ______ Shares of Common Stock of
IMAGING DIAGNOSTIC SYSTEMS, INC.
THIS CERTIFIES that, for value received, _________ (the "Investor"),
is entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after October , 1999 (the "Exercise Commencement Date"), and
on or prior to October , 2004 (the "Termination Date") but not thereafter, to
subscribe for and purchase from IMAGING DIAGNOSTIC SYSTEMS, INC., a Florida
corporation (the "Company"), _________ (______) shares of Common Stock (the
"Warrant Shares"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to $1.00. The Exercise Price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. This Warrant is being issued in connection
with the Private Equity Line of Credit Agreement dated as of October , 1998, in
the aggregate amount of Fifteen Million ($15,000,000) Dollars (the "Agreement")
between the Company and Investor and is subject to its terms. In the event of
any conflict between the terms of this Warrant and the Agreement, the Agreement
shall control.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented
by this Warrant may be made at any time or times, in whole or in part, after the
Exercise Commencement Date and before the close of business on the Termination
Date, or such earlier date on which this Warrant may terminate as provided in
paragraph 11 below, by the surrender of this Warrant and the Subscription Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
five business days after the date on which this Warrant shall have been
exercised as aforesaid. Payment of the Exercise Price of the shares may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of shares being purchased.
1
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant thirty (30)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
2
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) Registration. The Company agrees to register the shares of Common
Stock underlying this Warrant pursuant to the terms of the Agreement and the
Registration Rights Agreement dated October _____, 1998. In addition to the
foregoing, the Holder of this Warrant shall have the right to include all of the
shares of Common Stock underlying this Warrant (the "Registrable Securities") as
part of any registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8) and must be notified in writing of such filing.
Holder shall have five (5) business days to notify the Company in writing as to
whether the Company is to include Holder or not include Holder as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith judgment of
the underwriter evidenced in writing of such offering only a limited number of
Registrable Securities should be included in such offering, or no such shares
should be included, the Holder, and all other selling stockholders, shall be
limited to registering such proportion of their respective shares as shall equal
the proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this Section (and all other
Registrable Securities held by the selling stockholders) shall be withheld from
the market by the Holders thereof for a period, not to exceed one hundred eighty
(180) days, which the underwriter may reasonably determine is necessary in order
to effect such underwritten offering.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive had such Warrant been exercised in advance
thereof. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
3
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
16. Call. The Company has the right to "call" any portion of this
Warrant for exercise, for any portion of this Warrant which has not been then
exercised, by sending written notice to the holder, upon the satisfaction of the
following conditions: (i) closing bid price of the Common Stock (as reported by
Bloomberg, L.P.) is at least $1.50 per share for twenty (20) consecutive trading
days, and (ii) the registration statement filed by the Company covering the
shares of Common Stock underlying this Warrant has been declared effective by
the Securities and Exchange Commission, and must remain in effect at the time of
the call by the Company.
17. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of Florida and for all purposes shall be construed in
accordance with and governed by the laws of said state without regard to its
conflict of law, principles or rules. The party who initiates legal action shall
choose the jurisdiction of the federal courts in connection with any dispute
arising under this Warrant and hereby waives, to the maximum permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party waives its
right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
4
IN WITNESS WHEREOF, the Company has caused this Warrant A to be
executed by its officers thereunto duly authorized.
Dated: October __, 1998
. IMAGING DIAGNOSTIC SYSTEMS, INC.
By______________________________
Xxxxx X. Xxxxxx, President
5
NOTICE OF EXERCISE
------------------
To: IMAGING DIAGNOSTIC SYSTEMS, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock of IMAGING DIAGNOSTIC SYSTEMS, INC. pursuant to the terms of the
attached Warrant A, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:________________________
------------------------------
Signature
ASSIGNMENT FORM
---------------
(To assign the foregoing Warrant A, execute
this form and supply required information.
Do not use this form to purchase
shares of Common Stock.)
FOR VALUE RECEIVED, the foregoing Warrant A and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ________________________
Holder's Signature: _______________________________
Holder's Address: _______________________________
_______________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant A, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant A.
EXHIBIT F
THIS WARRANT HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT B
To Purchase ______ Shares of Common Stock of
IMAGING DIAGNOSTIC SYSTEMS, INC.
THIS CERTIFIES that, for value received, _________ (the "Investor"),
is entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after April , 1999 (the "Exercise Commencement Date"), and on
or prior to April , 2004 (the "Termination Date") but not thereafter, to
subscribe for and purchase from IMAGING DIAGNOSTIC SYSTEMS, INC., a Florida
corporation (the "Company"), _________ (______) shares of Common Stock (the
"Warrant Shares"). The purchase price of one share of Common Stock (the
"Exercise Price") under this Warrant shall be equal to $1.50. The Exercise Price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. This Warrant is being issued in connection
with the Private Equity Line Of Credit Agreement dated as of October ___, 1998,
in the aggregate amount of Fifteen Million ($15,000,000) Dollars (the
"Agreement") between the Company and Investor and is subject to its terms. In
the event of any conflict between the terms of this Warrant and the Agreement,
the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented
by this Warrant may be made at any time or times, in whole or in part, after the
Exercise Commencement Date and before the close of business on the Termination
Date, or such earlier date on which this Warrant may terminate as provided in
paragraph 11 below, by the surrender of this Warrant and the Subscription Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased; whereupon the holder of this Warrant shall be entitled to receive a
certificate for the number of shares of Common Stock so purchased. Certificates
for shares purchased hereunder shall be delivered to the holder hereof within
five business days after the date on which this Warrant shall have been
exercised as aforesaid. Payment of the Exercise Price of the shares may be by
certified check or cashier's check or by wire transfer to an account designated
by the Company in an amount equal to the Exercise Price multiplied by the number
of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
2
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
11. Effect of Certain Events.
(a) If at any time the Company proposes (i) to sell or otherwise
convey all or substantially all of its assets or (ii) to effect a transaction
(by merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "Sale or Merger Transaction"), in which
the consideration to be received by the Company or its shareholders consists
solely of cash, the Company shall give the holder of this Warrant thirty (30)
days' notice of the proposed effective date of the transaction specifying that
the Warrant shall terminate if the Warrant has not been exercised by the
effective date of the transaction.
(b) In case the Company shall at any time effect a Sale or Merger
Transaction in which the consideration to be received by the Company or its
shareholders consists in part of consideration other than cash, the holder of
this Warrant shall have the right thereafter to purchase, by exercise of this
Warrant and payment of the aggregate Exercise Price in effect immediately prior
to such action, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such transaction had this Warrant been exercised immediately prior thereto.
(c) Registration. The Company agrees to register the shares of Common
Stock underlying this Warrant pursuant to the terms of the Agreement and the
Registration Rights Agreement dated October ____, 1998. In addition to the
foregoing, the Holder of this Warrant shall have the right to include all of the
shares of Common Stock underlying this Warrant (the "Registrable Securities") as
part of any registration of securities filed by the Company (other than in
3
connection with a transaction contemplated by Rule 145(a) promulgated under the
Act or pursuant to Form S-8) and must be notified in writing of such filing.
Holder shall have five (5) business days to notify the Company in writing as to
whether the Company is to include Holder or not include Holder as part of the
registration; provided, however, that if any registration pursuant to this
Section shall be underwritten, in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith judgment of
the underwriter evidenced in writing of such offering only a limited number of
Registrable Securities should be included in such offering, or no such shares
should be included, the Holder, and all other selling stockholders, shall be
limited to registering such proportion of their respective shares as shall equal
the proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. Those Registrable Securities which are excluded from an underwritten
offering pursuant to the foregoing provisions of this Section (and all other
Registrable Securities held by the selling stockholders) shall be withheld from
the market by the Holders thereof for a period, not to exceed one hundred eighty
(180) days, which the underwriter may reasonably determine is necessary in order
to effect such underwritten offering.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue any shares of its capital stock in a
reclassification of the Common Stock, the number of Warrant Shares purchasable
upon exercise of this Warrant immediately prior thereto shall be adjusted so
that the holder of this Warrant shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive had such Warrant been exercised in advance
thereof. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
4
13. Voluntary Adjustment by the Company. The Company may at its
warrant, at any time during the term of this Warrant, reduce the then current
Exchange Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the OTC
Bulletin Board or any domestic securities exchange upon which the Common Stock
may be listed.
16. Call. The Company has the right to "call" any portion of this
Warrant for exercise, for any portion of this Warrant which has not been then
exercised, by sending written notice to the holder, upon the satisfaction of the
following conditions: (i) closing bid price of the Common Stock (as reported by
Bloomberg, L.P.) is at least $2.25 per share for twenty (20) consecutive trading
days, and (ii) the registration statement filed by the Company covering the
shares of Common Stock underlying this Warrant has been declared effective by
the Securities and Exchange Commission, and must remain in effect at the time of
the call by the Company.
17. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of Florida and for all purposes shall be construed in
accordance with and governed by the laws of said state without regard to its
conflict of law, principles or rules. The party who initiates legal action shall
choose the jurisdiction of the federal courts in connection with any dispute
arising under this Warrant and hereby waives, to the maximum permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party waives its
right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant, if not registered, may have
restrictions upon its resale imposed by state and federal securities laws.
(c) Modification and Waiver. This Warrant and any provisions hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company has caused this Warrant B to be
executed by its officers thereunto duly authorized.
Dated October __, 1998
IMAGING DIAGNOSTIC SYSTEMS, INC.
By_______________________________
Xxxxx X. Xxxxxx, President
6
NOTICE OF EXERCISE
------------------
To: IMAGING DIAGNOSTIC SYSTEMS, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock of IMAGING DIAGNOSTIC SYSTEMS, INC. pursuant to the terms of the
attached Warrant B, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:________________________
------------------------------
Signature
ASSIGNMENT FORM
(To assign the foregoing Warrant B, execute
this form and supply required information.
Do not use this form to purchase
shares of Common Stock.)
FOR VALUE RECEIVED, the foregoing Warrant B and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ________________________
Holder's Signature: _______________________________
Holder's Address: _______________________________
_______________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant B, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant B.
EXHIBIT G
ESCROW AGREEMENT
THIS AGREEMENT is made as of the ____ day of October, 1998 by and among IMAGING
DIAGNOSTIC SYSTEMS, INC., with its principal office at 0000 XX 00xx Xxxxx,
Xxxxxxxxxx, Xxxxxxx 00000, (hereinafter the "Company"), SETTONDOWN CAPITAL
INTERNATIONAL LTD. (the "Placement Agent") located at Xxxxxxxxx Xxxxx, Xxxxxxxxx
Xxxxxx, X.X. Xxx X. 0000, Xxxxxx, Bahamas, the "Purchasers" specified on
Schedule A attached hereto, with their respective principal offices at the
addresses set forth in Schedule A (hereinafter together with the Placement Agent
referred to as the "Investors"), and XXXXXXXXX, XXXXXXXXX & XXXX, LLP, 00
Xxxxxxxx, 00xx Xx., Xxx Xxxx, XX 00000 (hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing, Common Stock and
Warrants from the Company at a purchase price as set forth in a Private Equity
Line Of Credit Agreement (the "Equity Line Agreement") dated October ____, 1998,
which will be issued as per the terms contained herein and in the Equity Line
Agreement executed by the Company and the Purchasers; all capitalized terms not
defined herein shall have the definition as set forth in the Agreement; and
WHEREAS, the Company shall issue to the Placement Agent, in
return for services rendered, from time to time as provided in the Agreement, 6%
of the gross proceeds of each Put, payable in the form of Common Stock that will
be registered at the same time as the Put Shares. In addition, the Placement
Agent shall receive, on a pro rata basis as the Equity Line of Credit is drawn
upon, a Warrant A to purchase up to fifty thousand (50,000) shares of Common
Stock upon the same terms as the Warrant A issued to the Investors pursuant to
the Equity Line Agreement and eighty thousand (80,000) shares of Common Stock;
and
WHEREAS, the Company has agreed to pay to GGR for services
rendered, fifty thousand (50,000) shares of Common Stock to be registered at the
same time as the Put Shares; and
WHEREAS, the Company shall have a Put for the Commitment
Amount, in accordance with the terms and conditions in the Equity Line
Agreement; and
WHEREAS, it is intended that the purchase of Securities be
consummated in accordance with the requirements set forth by Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the parties hereby agree to establish an escrow
account with the Escrow Agent whereby the Escrow Agent shall hold the funds for
the purchase of Put Shares and the Warrants (the "Securities"); and
WHEREAS, the Company has requested that the Escrow Agent (i)
hold the Commitment Amount in escrow until the Escrow Agent has received the Put
Shares, as applicable, and (ii) hold the shares of Common Stock and Warrants
issuable upon the Subscription Date until the execution of the Equity Line
Agreement. The Escrow Agent will then immediately (i) wire transfer or otherwise
deliver at the Company's discretion immediately available funds to the Company's
account and arrange for delivery of the Put Shares to Investors as per the terms
and conditions in the Agreement, and (ii) arrange for delivery of the shares of
Common Stock and Warrants.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
1
ARTICLE 1
TERMS OF THE ESCROW FOR THE PUT SHARES
AND PLACEMENT AGENT SHARES
1.1 Upon Escrow Agent's receipt of confirmation in writing
that the Company has properly served a Put Notice in accordance with the
Agreement, and once it has received the Purchase Price for the Put Shares into
its attorney trustee account, it shall notify the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
account.
1.2 The Company, upon receipt of said notice and acceptance by
the Investors, as evidenced by written notice by the Investors, shall deliver to
the Escrow Agent the Put Shares being purchased and the Warrants and shares of
Common Stock being issued to the Placement Agent. The Escrow Agent shall then
communicate with the Company to confirm the validity of their issuance.
1.3 Once the Escrow Agent confirms the validity of the
issuance of the Put Shares, Warrants and Common Stock, he shall immediately wire
that amount of funds necessary to purchase of the Put Shares per the written
instructions of the Company. The Company will furnish Escrow Agent with a "Net
Letter" directing payment of (i) legal, administrative, and escrow costs as per
the terms of the Equity Line Agreement to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP. Such
fees are to be remitted in accordance with wire instructions that will be sent
to Escrow Agent from the Company, with the net balance payable to the Company.
Once the funds have been received per the Company's instructions, the Escrow
Agent shall then arrange to have the Securities delivered as per instructions
from the Investors and the Placement Agent.
ARTICLE 2
TERMS OF THE ESCROW FOR THE WARRANTS AND SHARES
OF COMMON STOCK ISSUED TO THE ESCROW AGENT
2.1 Upon Escrow Agent's receipt of the executed Equity Line
Agreement by the Investors, it shall notify the Company, or the Company's
designated attorney or agent, of such event.
2.2 The Company, upon receipt of said notice and acceptance by
the Investors of the Equity Line Agreement, shall deliver to the Escrow Agent
the shares of Common Stock being issued to the Escrow Agent and the Warrants
being issued to the Investors per the terms of the Equity Line Agreement. The
Escrow Agent shall then communicate with the Company to confirm the validity of
their issuance.
2.3 Once the Escrow Agent confirms the validity of the
issuance of the shares of Common Stock and Warrants as referred to in Section
2.2 above, the Escrow Agent shall then arrange to have these Securities
delivered as per instructions from the Investors.
ARTICLE 3
MISCELLANEOUS
3.1 No waiver or any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
3.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
2
(a) Imaging Diagnostic Systems, Inc.
0000 XX 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Del Medico, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP
00 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) To the Purchasers at their respective addresses
listed on Schedule A.
(d) Settondown Capital International Ltd.
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
P.O. Box N. 9204
Nassau, Bahamas
Attention: Xxxxxxx X. X. Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other person at such other place as shall
designated in writing;
3.3 This Agreement shall be binding upon and shall inure to
the benefit of the permitted successors and assigns of the parties hereto.
3.4 This Agreement is the final expression of, and contains
the entire Agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
3.5 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
3.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP and it has
had the opportunity to consult with its own legal advisors prior to the signing
of this Agreement.
3.7 This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Florida, except for
matters arising under the Act, without reference to principles of conflicts of
law. The party who initiates legal action shall choose the jurisdiction of the
federal courts 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 conveniens, to the bringing of any such
proceeding in such jurisdictions. Each party waives its right to a trial by
jury. Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
3
3.8 This Agreement may be altered or amended only with the
written consent of all of the parties hereto. Should the Company, the Placement
Agent, or any Investor, attempt to change this Agreement in a manner which, in
the Escrow Agent's discretion, shall be undesirable, the Escrow Agent may resign
as Escrow Agent by notifying the Company and the Investors in writing. In the
case of the Escrow Agent's resignation or removal pursuant to the foregoing, its
only duty, until receipt of notice from the Company and the Investors or its
agent that a successor escrow agent shall have been appointed, shall be to hold
and preserve the funds. Upon receipt by the Escrow Agent of said notice from the
Company and the Investors of the appointment of a successor escrow agent, the
name of a successor escrow account and a direction to transfer the funds, the
Escrow Agent shall promptly thereafter transfer all of the funds held in escrow
to said successor escrow agent. Immediately after said transfer, the Escrow
Agent shall furnish the Company, the Placement Agent, and the Investors with
proof of such transfer. The Escrow Agent is authorized to disregard any notices,
requests, instructions or demands received by it from the Company, the Placement
Agent, or the Investors after notice of resignation or removal shall have been
given, unless the same shall be the aforementioned notice from the Company and
the Investors to transfer the funds to a successor escrow agent or to return
same to the respective parties.
3.9 The Escrow Agent shall be reimbursed by the Company and
the Investors for any reasonable expenses incurred in the event there is a
conflict between the parties and the Escrow Agent shall deem it necessary to
retain counsel.
3.10 The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith in accordance with the advice of the Escrow
Agent's counsel; and in no event shall the Escrow Agent be liable or responsible
except for the Escrow Agent's own gross negligence or willful misconduct.
3.11 The Company and the Investors warrant to and agree with
the Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities
or any part thereof;
(ii) no financing statement under the Uniform
Commercial Code is on file in any jurisdiction
claiming a security interest or in describing
(whether specifically or generally) the Securities or
any part thereof; and
(iii) the Escrow Agent shall have no responsibility
at any time to ascertain whether or not any security
interest exists in the Securities or any part thereof
or to file any financing statement under the Uniform
Commercial Code with respect to the Securities or any
part thereof.
3.12 The Escrow Agent in its capacity as such has no liability
hereunder to either party other than to hold the funds and the Securities and to
deliver them under the terms hereof. Each party hereto agrees to indemnify and
hold harmless the Escrow Agent in its capacity as such from and with respect to
any suits, claims, actions or liabilities arising in any way out of this
transaction including the obligation to defend any legal action brought which in
any way arises out of or is related to this Escrow.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
4
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the date first written above.
IMAGING DIAGNOSTIC SYSTEMS, INC.
By______________________________
Xxxxx Xxxxxx, President
AUSTOST ANSTALT XXXXXX, Purchaser
By_____________________________
Xxxxxx Xxxxx
BALMORE FUNDS S.A., Purchaser
By___________________________
Name:
SETTONDOWN CAPITAL INTER-
NATIONAL LTD., Placement Agent
By______________________________
Xxxxxxx X. X. Xxxxx Xxxxx
XXXXXXXXX, XXXXXXXXX & XXXX, LLP,
Escrow Agent
By______________________________
Xxxxx X. Xxxxxxxxx
5
EXHIBIT J
INSTRUCTIONS TO TRANSFER AGENT
Imaging Diagnostic Systems, Inc.
_______________, 1998
[Name and address of Transfer Agent]
Dear Sirs:
Reference is made to the Private Equity Line of Credit Agreement and
all Exhibits and Attachments thereto (the "Agreement") dated as of October ___
1998, between entities listed on Schedule A (the "Investors") and Imaging
Diagnostic Systems, Inc. (the "Company"). Pursuant to the Agreement, subject to
the terms and conditions set forth in the Agreement the Investors have agreed to
purchase from the Company and the Company has agreed to sell to the Investors
from time to time during the term of the Agreement, and the Company has agreed
to issue to Settondown Capital International, Ltd. ("Settondown"), and
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP ("GGR"), shares of common stock of the Company,
(the "Common Stock") and (ii) the Company has agreed to issue to the Investors
and the Settondown warrants to purchase Common Stock (the "Warrants"). As a
condition to the effectiveness of the Agreement, the Company has agreed to issue
to you, as the transfer agent for the Common Stock (the "Transfer Agent"), these
instructions relating to the Common Stock to be issued to the Investors,
Settondown and GGR (or their permitted assigns) pursuant to the Agreement or
upon exercise of the Warrants. All terms used herein and not otherwise defined
shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or registration statements registering the resale of the Common Stock to be
acquired by the Investors, Settondown and GGR, (i) under the Agreement and (ii)
upon exercise of the Warrants. The Company will advise the Transfer Agent in
writing of the effectiveness of any such registration statement promptly upon
its being declared effective. The Transfer Agent shall be entitled to rely on
such advice and shall assume that the effectiveness of such registration
statement remains in effect unless the Transfer Agent is otherwise advised in
writing by the Company and shall not be required to independently confirm the
continued effectiveness of such registration statement. In the circumstances set
forth in the following two paragraphs, the Transfer Agent shall deliver to the
Investors, Settondown and/or GGR, certificates representing Common Stock not
bearing the Legend without requiring further advice or instruction or additional
documentation from the Company or its counsel or the Investors, Settondown,
and/or GGR, or its their counsel or any other party (other than as described in
such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investors, Settondown and/or GGR, the certificates representing the Common
Stock not bearing the Legend, in such names and denominations as the Investors
shall request.
1
In the event the Company files a Form S-3 registration statement and such
registration statement is declared effective by the Securities and Exchange
Commission in connection with any such event, the Investors, Settondown and/or
GGR, (or their permitted assigns) shall confirm in writing to the Transfer Agent
that (i) the Investors, Settondown and/or GGR, has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona fide transaction to a third party that is not an affiliate of the
Company; and (ii) the Investors, Settondown and/or GGR, confirms to the transfer
agent that the Investors, Settondown and/or GGR, has complied with the
prospectus delivery requirement.
In the event the Company files a registration statement other than on Form
S-3, which is subsequently declared effective by the Securities and Exchange
Commission, the Investors, Settondown and/or GGR, need not confirm the above in
writing to the Transfer Agent.
In the event a registration statement is not filed by the Company, or for
any reason the registration statement which is filed by the Company is not
declared effective by the Securities and Exchange Commission the Investors,
Settondown and/or GGR, or their permitted assigns, or either of their brokers
confirms to the Transfer Agent that (i) the Investors, Settondown and/or GGR,
has held the shares of Common Stock for at least one year, (ii) counting the
shares surrendered as being sold upon the date the unlegended Certificates would
be delivered to the Investors, Settondown and/or GGR, (or the Trading Day
immediately following if such date is not a Trading Day), the Investors,
Settondown and/or GGR, will not have sold more than the greater of (a) one
percent (1%) of the total number of outstanding shares of Common Stock or (b)
the average weekly trading volume of the Common Stock for the preceding four
weeks during the three months ending upon such delivery date (or the Trading Day
immediately following if such date is not a Trading Day), and (iii) the
Investors, Settondown and/or GGR, has complied with the manner of sale and
notice requirements of Rule 144 under the Securities Act.
Any advice, notice, or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of (000) 000-0000.
2
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investors,
Settondown and/or GGR, acquires Common Stock under the Agreement, the Transfer
Agent shall deliver to the Transfer Agent as defined in the Agreement
certificates representing Common Stock (with or without the Legend, as
appropriate) immediately.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investors, Settondown and/or GGR, is an express third party beneficiary of these
Irrevocable Instructions and shall be entitled to rely upon, and enforce, the
provisions thereof.
IMAGING DIAGNOSTIC SYSTEMS, INC.
By:__________________________
Chief Executive Officer
AGREED:
[NAME OF TRANSFER AGENT]
By:__________________________
Name:
Title:
4
