EXHIBIT 99.2
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PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BY AND AMONG
CERTAIN INVESTORS
AND
IMAGING TECHNOLOGIES CORPORATION
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DATED AS OF JULY 5, 2000
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This PRIVATE EQUITY LINE OF CREDIT AGREEMENT is entered into as of the
5th day of July, 2000 (this "Agreement"), by and between the various investors
identified on Schedule A hereto (each an "Investor" or "Investors"), and Imaging
Technologies Corporation., a corporation organized and existing under the laws
of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to each Investor
and each Investor shall purchase (i) from time to time as provided herein, its
Proportionate Share of up to $36,000,000 of the Common Stock (as defined below),
and (ii) warrants for its Proportionate Share (as defined below) of up to
2,000,000 shares of Common Stock; 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 "Affiliates" shall have the meaning assigned to such term
in Section 3.4 hereof.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "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 1.4 "Commitment Amount" shall mean the $36,000,000 up to which
the Investors have agreed to provide to the Company in order to purchase Put
Shares pursuant to the terms and conditions of this Agreement.
Section 1.5 "Commitment Period" shall mean the period commencing on the
Effective Date 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 $36,000,000, or (y) the date occurring two (2) years
from the date of commencement of the Commitment Period.
Section 1.6 "Common Stock" shall mean the Company's common stock, $.005
par value per share.
Section 1.7 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.8 "Condition Satisfaction Date" shall have the meaning
assigned to such term in Section 7.2 hereof.
Section 1.9 "Control Persons" shall have the meaning assigned to such
term in Section 12.2 hereof..
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "▇▇▇▇▇" shall mean the SEC's electronic data gathering and
retrieval system.
Section 1.12 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "Escrow Agent" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP.
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the regulations promulgated thereunder.
Section 1.15 "Floor Price" shall mean twenty-five cents ($0.25) per
share.
Section 1.16 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by the Investor to purchase
Put Shares with respect to any Put Purchase Notice delivered by the Company to
the Investor in accordance with Section 2.2 hereof.
Section 1.17 "Legend" shall have the meaning assigned to such term in
Section 9.1 hereof.
Section 1.18 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance or situation that would prohibit or otherwise
interfere with the ability of the Company to enter into and perform its
obligations under this Agreement.
Section 1.19 "Market Price" shall mean for the purpose of calculating
the Purchase Price of the Put Shares, the average of the three (3) lowest Bid
Prices of the Common Stock over the Valuation Period.
Section 1.20 "Maximum Put Amount" shall mean the amounts set forth in
the following table:
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Bid Average Daily Average Daily Average Daily Average Daily Average Daily
Price Trading Volume Trading Volume Trading Volume of Trading Volume Trading Volume
of up to 75,000 of 75,001-150,000 150,001-250,000 of 250,001- of 400,001 and
400,000 above
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
0.25-0.49 $200,000 $300,000 $500,000 $650,000 $750,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
0.50-0.74 $300,000 $500,000 $650,000 $750,000 $1,000,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
0.75-0.99 $350,000 $550,000 $600,000 $800,000 $1,250,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
1.00-1.24 $400,000 $600,000 $750,000 $850,000 $1,500,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
1.25-1.49 $500,000 $675,000 $800,000 $925,000 $1,750,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
1.50-1.99 $600,000 $750,000 $850,000 $1,000,000 $2,000,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
2.00-2.24 $675,000 $825,000 $925,000 $1,000,000 $2,250,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
2.25-2.49 $700,000 $850,000 $950,000 $1,000,000 $2,500,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
2.50-3.50 $750,000 $900,000 $1,000,000 $1,000,000 $2,750,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
Above 3.50 $800,000 $1,000,000 $1,250,000 $1,500,000 $3,000,000
----------------- ------------------ ------------------ ------------------- ------------------ ------------------
"Average Daily Trading Volume" shall mean the average daily volume of shares of
Common Stock traded during the preceding thirty (30) Trading Days. The Maximum
Put Amount represents the aggregate of all Proportionate Shares of all
Investors.
Section 1.21 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.22 "Outstanding" when used with reference to 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 1.23 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.24 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq Small-Cap Market, the NASD OTC Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.25 "Proportionate Share" shall mean the proportion of the
Commitment Amount agreed to be purchased by each Investor as set forth on
Schedule A.
Section 1.26 "Purchase Price" as used in this Agreement shall mean
ninety percent (90%) of the Market Price on the Put Date, but such Purchase
Price shall be, increased to ninety-two percent (92%) of the Market Price if
such Market Price is above $1.00 per share on the Put Date for such Put, or
increased to ninety-three percent (93%) of the Market Price if such Market Price
is above $1.50 per share. The foregoing percentages are the "Purchase Price
Percentages."
Section 1.27 "Put" shall mean each occasion the Company elects to draw
down a portion from the equity line by exercising its right to tender a Put
Purchase Notice requiring the Investor to purchase a discretionary amount of the
Company's Common Stock, subject to the terms of this Agreement which tender must
be given to each Investor for such Investor's Proportionate Share.
Section 1.28 "Put Closing" shall mean one of the closings of a purchase
and sale of the Put Shares pursuant to Section 2.3.
Section 1.29 "Put Closing Date" shall mean, with respect to a Put
Closing the fourth Trading Day following the Put Date related to such Put
Closing, provided all conditions to such Put Closing have been satisfied on or
before such Trading Day.
Section 1.30 "Put Purchase Notice" shall mean a written notice to the
Investor setting forth the Investment Amount that the Company intends to sell to
the Investor, as such form is attached hereto as Exhibit A.
Section 1.31 "Put Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Put that has occurred or may occur in accordance with
the terms and conditions of this Agreement.
Section 1.32 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until the Registration Statement has been declared effective by
the SEC and all Put Shares and Warrant Shares have been disposed of pursuant to
the Registration Statement.
Section 1.33 "Registration Statement" shall mean a registration
statement on Form [S-1] (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor and Placement Agent of the Registrable Securities under the Securities
Act.
Section 1.34 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.35 "SEC" shall mean the Securities and Exchange Commission.
Section 1.36 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.37 "Securities Act" shall have the definition ascribed to it
in the recitals of this Agreement.
Section 1.38 "SEC Documents" shall mean, to the extent applicable, the
Company's latest Form 10-K as of the time in question, all Forms 10-Q and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement.
Section 1.39 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.40 "Trading Cushion" shall mean the mandatory minimum fifteen
(15) Trading Days between Put Dates.
Section 1.41 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.42 "Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions:
(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 materially
adverse effect upon the rights of the Investor at the time of
a Put.
Section 1.43 "Valuation Period" shall mean the period of five (5)
Trading Days during which the Purchase Price of the Common Stock is determined
with respect to the Put Date, which period shall begin two (2) Trading Days
prior to the Put Date and ending two (2) Trading Days following the Put Date.
Section 1.44 "Warrants" shall mean the common stock purchase warrants
of the Company described in Section 13.2, a form of which is annexed hereto as
Exhibit E.
Section 1.45 "Warrant Shares" shall mean the Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments/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 exercise a Put by the delivery of a Put Purchase
Notice. The number of Put Shares that the Investor shall receive pursuant to
such Put shall be determined by dividing the relevant portions of the Investment
Amount specified in the Put Purchase Notice by the Purchase Price determined
during the Valuation Period.
Section 2.2 Mechanics.
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(a) Put Purchase Notice. At any time during the
Commitment Period, the Company may deliver a Put Purchase Notice, in
substantially the form and substance of Exhibit A, to the Investor, subject to
the conditions set forth in Section 7.2; provided, however, the Investment
Amount for each Put as designated by the Company in the applicable Put Purchase
Notices shall be neither less than $200,000 in the aggregate to all Investors
nor more than $3,000,000 as evidenced in the Maximum Put Amount table.
(b) Date of Delivery of Put Purchase Notice. A Put
Purchase Notice shall be deemed delivered on (i) the Trading Day it is received
by facsimile or otherwise by the Investor if such notice is received prior to
12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it
is received by facsimile or otherwise after 12:00 noon New York time on a
Trading Day or at any time on a day which is not a Trading Day. No Put Purchase
Notice may be deemed delivered, on a day that is not a Trading Day.
(c) Determination of Put Shares Issuable. The
Purchase Price shall be based on the Purchase Price Percentage of the Market
Price during the Valuation Period. The number of Put Shares to be purchased by
each Investor with respect to such Investor's Proportionate Share shall be
settled on the Put Closing Date.
(d) Floor Price Limitation. If the Market Price is
less than the Floor Price, the Company shall not sell and the Investor shall not
purchase the Put Shares otherwise to be purchased for such Put Date.
Section 2.3 Put Closings. On each Put Closing Date for a Put (i) the
Company shall deliver in the form required pursuant to Article IX hereof to the
Investor or to escrow one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, or if deliverable without legend pursuant to Article IX and if DTC
eligible, deliver the Put Shares electronically after the Put Date and on or
prior to the Put Closing Date, registered in the name of the Investor or, at the
Investor's option, deposit such certificate(s) into such account or accounts
previously designated by the Investor and (ii) the Investor shall deliver to
escrow the Investment Amount specified in the Put Purchase Notice by wire
transfer of immediately available funds on or before the Put Closing Date. In
addition, on or prior to the Put Closing Date, each of the Company and the
Investor shall deliver 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 Investor
shall occur out of escrow in accordance with the escrow agreement referred to in
Section 7.2(p) following (x) the Company's deposit into escrow of the
certificates representing the Put Shares and (y) the Investor's deposit into
escrow of the Investment Amount; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 13.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds drawn out of the
deposited funds, at the direction of the Investor, to Investor's counsel with no
reduction in the number of Put Shares issuable to the Investor on such Put
Closing Date.
Section 2.4 Purchase and Sale of Warrants. Under the terms of this
Agreement, the Company shall issue to the Investor Warrants to purchase its
Proportionate Share of up to 2,000,000 shares of Common Stock. Each Warrant
shall be exercisable for a period of three (3) years commencing six (6) months
from the Subscription Date and shall have an exercise price equal to 120% of the
Market Price as of the Subscription Date.
Section 2.5 Liquidated Damages. In the event the Put Shares are not
timely delivered by the Company on a Put Closing Date or the Company fails to
deliver to the Investor unlegended shares of Common Stock within three (3)
Trading Days of the Investor's request to remove the legend , the Company will
pay the Investor, as liquidated damages for such failure to deliver and not as a
penalty, one percent (1%) of the applicable Investment Amount for each seven (7)
day period, or part thereof following such failure, in cash, until such Put
Shares or unlegended shares have been delivered. The Escrow Agent shall be
directed to pay such liquidated damages to the Investor out of the Investment
Amount delivered by the Investor to the Escrow Agent. If no funds remain in
Escrow, the Company will be liable for the liquidated damages which shall be
payable on demand.
Section 2.6 Termination of Investment Obligation. The obligation of the
Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Put 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 a consecutive ten day calendar
period or for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason, or (ii) the Company shall at any time fail to comply
with the requirements of Section 6.2, 6.3, 6.4, 6.5 or 6.6.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
its own account and not with a view to the distribution of the Common Stock, and
the Investor has no present arrangement (whether or not legally binding) at any
time to sell the Common Stock to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Common Stock for any minimum or other specific term and reserves the
right to dispose of the Common Stock at any time in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the
merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated hereby, and compliance
with the requirements hereof, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (a) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.6 Disclosure; Access to Information. The Investor has
received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has had access to copies of any such reports that have
been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor, except as may be
set forth in the Disclosure Schedule delivered in connection herewith, that:
Section 4.1 Organization of the Company. The Company is a corporation
duly organized and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement to issue the Put Shares; (ii) the execution, issuance and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Section 4.3 Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 200,000,000 shares of Common Stock, of
which 99,572,047 shares are issued and outstanding and 100,000 shares of
preferred stock, of which 420.5 shares are issued and outstanding. Except as set
forth in Schedule 4.3, there are no options, warrants, or rights to subscribe
to, securities, rights or obligations convertible into or exchangeable for or
giving any right to subscribe for any shares of capital stock of the Company.
All of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and nonassessable.
Section 4.4 Common Stock. As of the commencement of the Commitment
Period, the Company will have registered its Common Stock pursuant to Section
12(b) or 12(g) of the Exchange Act and be in full compliance with all reporting
requirements of the Exchange Act, if any, and the Company will have maintained
all requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is then listed or quoted on the Principal Market. As of the
date hereof, the Common Stock is quoted on the OTC Bulletin Board.
Section 4.5 Financial Statements. The Company has delivered or made
available to the Investor true and complete copies of unaudited financial
statements (without footnotes) as of and for the period ending March 31, 2000
("Financial Statements"). The Company has not provided to the Investor any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which has
not been so disclosed. The Financial Statements fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations for the periods then ended, subject to normal year-end
audit adjustments.
Section 4.6 Valid Issuances. Assuming the accuracy of the
representations and warranties contained in Sections 3.1, 3.2 and 3.7 hereof
both at the date hereof and at the time of sale and issuance, the sale and
issuance of the Put Shares will be exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof and/or Regulation D thereto and when
issued, the Put Shares shall be duly and validly issued, fully paid, and
nonassessable. Neither the sales of the Put Shares pursuant to, nor the
Company's performance of its obligations under this Agreement will (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Put Shares or any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
to or acquire the Capital Shares or other securities of the Company. The Put
Shares shall not subject the Investor to personal liability by reason of the
possession thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or
general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including, without limitation, the issuance of
Common Stock do not and will not (i) result in a violation of the Company's
Certificate or By-Laws or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state, local
or foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (iii), no such representations and warranties
are being made insofar as the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby are or may be affected by the status of the Investor under
or pursuant to any such foreign law, rule or regulation. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either
individually or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Common Stock in accordance with the terms hereof (other than any
SEC, NASD or state securities filings that may be required to be made by the
Company subsequent to any Put Closing, any registration statement that may be
filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on any Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.10 No Material Adverse Change. Since the date of the
Financial Statements described in Section 4.5, no Material Adverse Effect has
occurred or exists with respect to the Company.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, and are not
disclosed to the Investor in the Financial Statements or otherwise in writing,
other than those incurred in the ordinary course of the Company's businesses
since the date of the Financial Statements and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires as of the date hereof, public
disclosure or announcement prior to the date hereof by the Company.
Section 4.13 No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as set forth in
the Financial Statements described in Section 4.5, there are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which might have a Material Adverse
Effect. Except as set forth on Schedule 4.14, no judgment, order, writ,
injunction, decree or award has been issued by or, so far as is known by the
Company, requested by any court, arbitrator or governmental agency which might
result in a Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any oral
communication in connection with same, which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16. Non-Public Information. Neither the Company nor any of
its officers of agents has disclosed any material non-public information about
the Company to the Investor or the Placement Agent.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
Section 5.2 Selling Restrictions. The Investor has the right to sell
shares of the Company's Common Stock equal in number to the number of the Shares
to be purchased pursuant to this Agreement during the Commitment Period.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause a Registration
Statement to be filed with respect to all Put Shares and Warrant Shares within
forty-five (45) days of the Subscription
Date and shall use its best efforts to cause such Registration Statement to be
declared effective within ninety (90) days but in no event later than one
hundred-twenty (120) days of the Subscription Date and remain effective for a
period of two (2) years.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has 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 the Put
Shares.
Section 6.3 Quoting or Listing of Common Stock. The Company shall
maintain the quoting or 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 on the Principal Market. The Company
further shall, if the Company applies to have the Common Stock traded on any
other Principal Market, include in such application the Put Shares, and shall
take such other action as is necessary or desirable in the opinion of the
Investor to cause the Common Stock to be listed on such other Principal Market
as promptly as possible. The Company shall take all action necessary to continue
the quoting, listing and trading of its Common Stock on the Principal Market 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 shall cause its
Common Stock to become and continue to be registered under Section 12(g) or
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 the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act. The Company will
take all action to obtain a listing and continue the listing and trading of its
Common Stock on the Principal Market 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 6.5 Legends. The certificates evidencing the Common Stock to be
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth in Article IX.
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. In the event that the SEC
Documents furnished or submitted to the SEC by the Company are not available or
accessible by the Investor(s) on ▇▇▇▇▇, the Company will deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all such SEC Documents.
Section 6.8 Blackout Period. The Company will immediately notify the
Investor upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of 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 such 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 Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Purchase Notice during the
continuation of any of the foregoing events or if the Company has knowledge that
any of the foregoing events will occur within ten (10) days of such knowledge.
Section 6.9 Expectations Regarding Put Purchase Notices. Within ten
(10) days after the commencement of each calendar quarter occurring subsequent
to the commencement of the Commitment Period, the Company undertakes to notify
the Investor 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 Purchase 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 Purchase Notices. The
failure by the Company to comply with this provision can be cured by the
Company's notifying the Investor at any time as to its reasonable expectations
with respect to the current calendar quarter.
Section 6.10 Disclosure of Material Information. In the event that any
or all of the information set forth on Schedule 8.2(a) hereto becomes material,
the Company shall make full and complete public disclosure in accordance with
all applicable law.
Section 6.11 Merger/Acquisition. In the event that the Company elects
to deliver a Put Purchase Notice for the purpose of utilizing the funds to
effect a merger of the Company with or into, or to acquire all or substantially
all of the assets of, another corporation, or for payment of a one-time charge
that the Company expects to incur for any reason ("Adjustment Event"), the
Trading Cushion shall be decreased to a minimum of eight (8) Trading Days for a
period of seven (7) consecutive weeks (the "Trading Cushion Adjustment"). The
Company covenants and agrees to provide the Investor(s) twenty-one (21) calendar
days advance notice of such Trading Cushion Adjustment and further agrees to
lower the Purchase Price Percentage during such Adjustment Event by three
percent (3%) per Put.
Section 6.12 Other Financings. The Company may enter into other
financing agreements during the Commitment Period (an "Other Financing"),
provided that the Company gives notice of such Other Financing to the Investor.
The Investor shall have the option (the "Purchase Option"), which option shall
be exercised within five (5) calendar days of the date the Company gives such
notice, to purchase up to the same number of shares of Common Stock issued or to
be issued in the Other Financing at the price and on the terms of the Other
Financing. If the Investor does not exercise its Purchase Option in writing
before 5:00 p.m., eastern time, on such fifth (5th) calendar day following the
Company's notice of such Other Financing, the Company shall have the right to
close such Other Financing on the scheduled closing date with a third party;
provided that all of the financial terms and conditions of such closing are the
same as those provided to the Investor at the time of the Company's giving of
such notice.
Section 6.13. Issuance of Put Shares. The sale and issuance of the Put
Shares shall be made in accordance with the provisions and requirements of
applicable federal and state law.
ARTICLE VII
CONDITIONS TO DELIVERY OF PUT
PURCHASE NOTICES AND CONDITIONS TO PUT 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 Investor incident to each Put Closing is subject
to the satisfaction, at or before each such Put Closing, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representation and
Warranties. The representations and warranties of the Investor
shall be true and correct in all material respects as of the
date of this Agreement and as of the date of each such Put
Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall
have performed, satisfied and complied in all respects with
all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Investor at or prior to such Put Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
a Put Purchase Notice and the Obligation of the Investor to purchase Put Shares.
The right of the Company to deliver a Put Purchase Notice and the obligation of
the Investor hereunder to acquire and pay for the Put Shares incident to a Put
Closing is subject to the satisfaction, (i) on the Put Date, (ii) for each day
during the Valuation Period, and (iii) on the applicable Put 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 the Registrable
Securities that shall have been declared effective by the SEC
prior to the first Put Date, but in no event later than one
hundred twenty (120) days after the Subscription Date.
(b) Effective Registration Statement. The
Registration Statement shall have become effective on or prior
to the Put Date and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor
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, and (ii) no other suspension of the use or withdrawal of
the effectiveness of the Registration Statement or related
prospectus shall exist.
(c) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
shall be true and correct in all material respects as of each
Condition Satisfaction Date as though made at each such time
(except for representations and warranties specifically made
as of a particular date) with respect to all periods, and as
to all events and circumstances occurring or existing to and
including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations
or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the
Investor.
(d) Performance by the Company. The Company shall
have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to each Condition
Satisfaction Date, including but not limited to the
requirements for the Company and its transfer agent set forth
in Sections 9.1 and 9.2 to deliver Common Stock without
legends pursuant to the terms set forth in Sections 9.1 and
9.2, and Exhibit B hereto.
(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 or materially adversely affects any of
the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect
of prohibiting or materially adversely affecting any of the
transactions contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the
Company's most recent SEC Document, no event that had or is
reasonably likely to have a Material Adverse Effect has
occurred.
(g) No Suspension of Trading In or Delisting of
Common Stock. The trading of the Common Stock (including
without limitation the Put Shares) shall not have been
suspended by the SEC, the Principal Market or the NASD and the
Common Stock (including without limitation the Put Shares)
shall have been approved for listing or quotation and shall
have actually been listed or quoted on, and shall not have
been delisted from the Principal Market, nor shall the Company
have received any letter or notice of any suspension or
delisting or warning of such suspension or delisting. The
issuance of shares of Common Stock with respect to the
applicable Put Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(h) Legal Opinions. The Company's in-house counsel
shall deliver to the Investor and Placement Agent upon
execution of this Agreement an opinion in the form of Exhibit
C hereto, reasonably satisfactory to the Investor and
Placement Agent addressing, among other things, corporate
matters and the exemption from registration under the
Securities Act of the issuance of the Registrable Securities
by the Company to the Investor and Placement Agent under this
Agreement. The Company shall also have caused to be delivered
to the Investor and Placement Agent, within five (5) Trading
Days of the effective date of the Registration Statement and
upon the delivery of a Put Purchase Notice, an updated opinion
of the Company's in-house counsel addressed to the Investor
and Placement Agent; provided, however, that in the event that
such an opinion cannot be delivered by the Company's in-house
counsel to the Investor, the Company shall promptly revise the
Registration Statement and shall not deliver a Put Purchase
Notice. If a Put Purchase Notice shall have been delivered in
good faith without knowledge by the Company that an opinion of
in-house counsel can not be delivered as required, at the
option of the Investor, either the applicable Put Closing Date
shall automatically be postponed for a period of up to five
(5) Trading Days until such an opinion is delivered to the
Investor, or such Put Closing shall otherwise be canceled.
Liquidated damages determined pursuant to Section 2.5 shall be
calculated and payable on the Put Closing Date.
(i) Due Diligence. No dispute between the Company and
the Investor shall exist pursuant to Section 8.2(c) as to the
adequacy of the disclosure contained in the Registration
Statement.
(j) Ten Percent Limitation. The number of Put Shares
to be purchased on each Put Closing Date and the number of
Warrant Shares issuable upon any exercise of such Warrant by
the Investor shall not exceed the number of such shares that,
when aggregated with all other shares of Common Stock then
owned by the Investor beneficially or deemed beneficially
owned by the Investor, would result in the Investor owning
more than 9.99% of all of such Common Stock as would be
outstanding on such Put Closing Date or such date of exercise
of the Warrant, as determined in accordance with Section 16 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 Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Put Closing Date than
on the date upon which the Put Purchase Notice associated with
such Put Closing Date is given, the amount of Common Stock
outstanding on such Put Closing Date shall govern for purposes
of determining whether the Investor, when aggregating all
purchases of Common Stock made pursuant to this Agreement and,
if any, Shares, would own more than 9.99% of the Common Stock
following such Put Closing Date.
(k) Cross Default. The Company shall not be in
default of a term, covenant, warranty or undertaking of any
other agreement to which the Company and Investor are parties,
nor shall there have occurred an event of default under any
such other agreement, in each case which default would have a
material adverse effect on the financial condition of the
Company or the Company's ability to comply with its
obligations to the Investor.
(l) Minimum Average Trading Volume. The average
trading volume for the Common Stock over the previous thirty
(30) Trading Days equals or exceeds 75,000 shares per Trading
Day.
(m) No Knowledge. The Company shall have no knowledge
of any event more likely than not to have the effect of
causing such Registration Statement to be suspended or
otherwise ineffective (which event is more likely than not to
occur within the Valuation Period during which the Put
Purchase Notice is deemed delivered).
(n) Trading Cushion. The Trading Cushion shall have
elapsed since the immediately preceding Put Date.
(o) Shareholder Vote. The issuance of shares of
Common Stock with respect to the applicable Put Closing, if
any, shall not violate the shareholder approval requirements
of the Principal Market.
(p) Escrow Agreement. The parties hereto shall have
entered into a mutually acceptable escrow agreement for the
Purchase Prices due hereunder, providing for reasonable
interest on any funds deposited into the escrow account
established under such agreement.
(q) Other. On each Condition Satisfaction Date, the
Investor shall have received and been reasonably satisfied
with such other certificates and documents as shall have been
reasonably requested by the Investor in order for the 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
D hereto, executed in either case by an executive officer of
the Company and to the effect that all the conditions to such
Put Closing shall have been satisfied as at the date of each
such certificate.
ARTICLE VIII
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 Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor 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 Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor 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.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) Except as set forth on Schedule 8.2(a) hereof,
the Company represents and warrants that the Company and its officers,
directors, employees and agents have not disclosed any non-public information to
the Investor or advisors to or representatives of the Investor. The Company
covenants and agrees that it shall refrain from disclosing, and shall cause its
officers, directors, employees and agents to refrain from disclosing,
(including, without limitation, in connection with the giving of the Trading
Cushion Adjustment pursuant to Section 6.11), unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides the Investor, 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
Investor.
(b) The Company acknowledges and understands that the
Investor is entering into this Agreement at the request of the Company and in
good faith reliance on (i) the Company's representation set forth in Section
4.16 that neither it nor its agents have disclosed to the Investor any material
non-public information; and (ii) the Company's covenant set forth in Section
6.10 that if all or any portion of the information set forth on Schedule 8.2(a)
becomes material, the Company shall timely make full and complete public
disclosure of all or such portion of such information that shall have become
material in accordance with all applicable law.
(c) Nothing herein shall require the Company to
disclose non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts, provided, however,
that notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investor 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 Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms 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
LEGENDS
Section 9.1 Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend (the
"Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES
LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN
A PRIVATE EQUITY LINE OF CREDIT AGREEMENT AMONG IMAGING
TECHNOLOGIES CORPORATION AND CERTAIN INVESTORS DATED JULY 5,
2000. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S
EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit B hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided herein. It is the intent and purpose of such
instructions, as provided therein, to require the transfer agent for the Common
Stock from time to time upon transfer of Registrable Securities by the Investor
to issue certificates evidencing such Registrable Securities free of the Legend
during the following periods and under the following circumstances and without
consultation by the transfer agent with the Company or its counsel and without
the need for any further advice or instruction or documentation to the transfer
agent by or from the Company or its counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend,
to the extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered; provided
that (i) the Registration Statement shall then be effective; (ii) the
Investor confirms to the transfer agent that it 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 (iii) the Investor confirms to the
transfer agent that the Investor has complied with the prospectus
delivery requirement; and
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates
free of the Legend to replace those surrendered and containing
representations that (i) the Investor is permitted to dispose of such
Registrable Securities without limitation as to amount or manner of
sale pursuant to Rule 144(k) under the Securities Act or (ii) the
Investor has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Registrable Securities in a manner
other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities. Any of the notices referred to above in this Section 9.1
may be sent by facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article IX shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW/VENUE
Section 10.1 Choice of Law/Venue. This Agreement and the Warrants shall
be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of laws. Any action brought by
either party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor 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, and be binding upon, any transferee of any of the Common Stock
purchased or acquired by the Investor hereunder with respect to the Common Stock
held by such person unless such Common Stock is free from restrictions on
further transfer of such Common Stock, and (b) the Investor's 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 Investor) effective upon written
notice to the Company. The Company shall have the right to require any assignee
to execute a counterpart of this Agreement.
Section 11.2 Termination. This Agreement shall terminate twenty-four
(24) months after the commencement of the Commitment Period; provided, however,
that the provisions of Articles VI, VIII, IX, X, XI, and XII shall survive the
termination of this Agreement.
Section 11.3 Entire Agreement, Amendment. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof, and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement. Except as expressly provided in this
Agreement, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by both
parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 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 express 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 Imaging Technologies Corporation:
Imaging Technologies Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
If to the Investor:
To the address and telecopier number set forth on Schedule A hereto.
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 12.2 Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Investor, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the Investor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act or is controlled by the Investor (the "Control Person") from and
against any Damages, joint or several, and any action in respect thereof to
which the Investor, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Control Person becomes subject to,
resulting from, arising out of or relating to any misrepresentation, breach of
warranty or nonfulfillment of or failure to perform any covenant or agreement on
the part of Company contained in this Agreement in any event as such Damages are
incurred.
(b) The Investor agrees to indemnify and hold
harmless the Company, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the Control Persons from and against any
Damages, joint or several, and any action in respect thereof to which the
Company, its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and any such Control Person becomes subject to, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Investor contained in this Agreement in an aggregate amount not to exceed
one-quarter of each such Investor's Proportionate Share.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of
which any person claiming indemnification under any provision of Section 12.2
(an "Indemnified Party") might seek indemnity under Section 12.2 is asserted
against or sought to be collected from such Indemnified Party by a person other
than the Company, the Investor or any affiliate of the Company or (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of Section 12.2
against any person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party will not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the period ending
thirty (30) calendar days following receipt by the Indemnifying Party of either
a Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period")
whether the Indemnifying Party disputes its liability or the amount of its
liability to the
2
Indemnified Party under Section 12.2 and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim.
1. If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
12.3(a), then the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
which affects the Indemnified Party, other than the payment of monetary damages
or that provides for the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to Section 12.2). The
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this clause 1, file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided further, that if
requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause 1, and except as provided in the
preceding sentence, the Indemnified Party will bear its own costs and expenses
with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under Section 12.2 with respect to such Third Party Claim.
2. If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 12.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause 2, if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause 3 below, the Indemnifying
Party will not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this clause 2 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense
or settlement controlled by the Indemnified Party pursuant to this clause 2, and
the Indemnifying Party will bear its own costs and expenses with respect to such
participation.
3. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section 12.2 or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the Loss in the amount
specified in the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 12.2 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by arbitration in accordance with paragraph (c) of this Section
12.3.
(b) In the event any Indemnified Party should have a
claim under Section 12.2 against the Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver a written notification of
a claim for indemnity under Section 12.2 specifying the nature of and basis for
such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 12.2 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (c) of this Section 12.3.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the reasonable fees, expenses and
disbursements of the Investor's counsel in an amount not less than $1,500 per
Put Closing.
Section 13.2 Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except as described on Schedule 13.2 ("Placement Agent"). The Company agrees to
pay to the Placement Agent a fee equal to two percent (2%) ("Placement Agent
Fee") of the Investment Amount actually received by the Company, as set forth on
Schedule 13.2 hereto. Said sum shall be paid out of the escrow account
established for deposit of Investment Amounts. A default by
the Company of the Company's obligations to the Placement Agent shall be deemed
a default under the Agreement and shall terminate the Investment Obligation. The
Investment Obligation shall terminate if the Placement Agent does not receive
the Placement Agent Fee on or before a Put Closing Date. The Company on the one
hand, and the Investor, on the other hand, agree to indemnify the other against
and hold the other harmless from any and all liabilities to any other persons
claiming brokerage commissions or finder's fees on account of services purported
to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
Section 13.3 Publicity. Except as required by applicable law, the
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Purchaser.
Section 13.4 Counterparts. 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.
Section 13.5 Entire Agreement. This Agreement with the Exhibits hereto
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
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as if fully set forth herein.
Section 13.6 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Put 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 13.7 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 13.8 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 Investor and the Company shall be required to employ any other reporting
entity.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
IMAGING TECHNOLOGIES CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
IMPANY INVESTMENT LIMITED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
Director
SCHEDULE A
------------------------------------------------------------ ---------------------------------------------------------
INVESTOR PROPORTIONATE SHARE
------------------------------------------------------------ ---------------------------------------------------------
Impany Investment Limited One hundred percent
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, Liechtenstein
Attn: Dr. ▇▇. ▇▇▇▇▇▇▇▇
Fax no.: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
------------------------------------------------------------ ---------------------------------------------------------
SCHEDULE 4.3
------------
OUTSTANDING OPTIONS AND WARRANTS
SHARES
Warrants associated with Series D Convertible Preferred Stock 2,200,000
Warrants associated with Series E Convertible Preferred Stock 2,265,000
Incentive warrants for retention of key employees 3,000,000
Employee warrant plan registered June, 2000 4,500,000
General warrants 6,000,000
1998 Employee Stock Option Plan 50,000
1988 Employee Stock Option Plan 20,000
1984 Employee Stock Option Plan 10,000
SCHEDULE 4.14
-------------
JUDGMENTS
During 1999 and 2000, various creditors of the Company, primarily trade
creditors, have obtained judgments for the amount owed to them. The total of
such judgments obtained by trade creditors is approximately $1,500,000 and the
total of such judgments obtained by other creditors is approximately $750,000.
Some of these creditors have recorded liens based upon these judgments. The
first priority security interest held by Imperial Bank has prevented these
creditors from attempting to levy on the assets of the Company to satisfy their
judgments. The Company intends to use the funds provided by this Agreement, in
part to settle these judgments.
EXHIBIT A
FORM OF
PUT PURCHASE NOTICE
Reference is made to the Private Equity Line of Credit
Agreement dated as of July 5, 2000 (the "Agreement ") between Imaging
Technologies Corporation, a Delaware corporation (the "Company") and
____________ Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Agreement.
In accordance with and pursuant to Section 2.2 of the
Agreement, the Company hereby issues this Put Purchase Notice to exercise a Put
request for the Put Amount indicated below.
Put Amount:
Valuation Period start date:
----------------------------
Valuation Period end date:
----------------------------
Put Closing Date:
----------------------------
Floor Price: $0.25
----------------------------
Dated:
----------------
--------------------------------
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Wire Instructions: ___________
Contact Name: _______________
EXHIBIT B
INSTRUCTIONS TO TRANSFER AGENT
IMAGING TECHNOLOGIES CORPORATION
________________, 2000
[Name and address
of Transfer Agent]
Ladies & Gentlemen:
Reference is made to that certain Private Equity Line of Credit
Agreement (the "Agreement") by and among certain Investors (the "Investor") and
Imaging Technologies Corporation (the "Company"). Pursuant and subject to the
terms and conditions set forth in the Agreement the Investor has agreed to
purchase from the Company and the Company has agreed to sell to the Investor
from time to time during the term of the Agreement shares (the "Shares") of
Common Stock of the Company, $0.005 par value (the "Common Stock") and certain
warrants (the "Warrants") which shall be exercisable into shares of Common
Stock. The shares of Common Stock issuable upon exercise of the Warrants are
referred to herein as "Warrant Shares." The Shares and Warrant Shares are
collectively referred to herein as "Underlying Shares."
This letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time upon
notice from the Company to issue such Underlying Shares. So long as you have
previously received (w) a notice of effectiveness of the Company's outside
counsel substantially in the form of Exhibit I attached hereto (which the
Company shall direct be delivered to you by such outside counsel upon the
effectiveness of the registration statement covering resales of Underlying
Shares) stating that a registration statement covering resales of Underlying
Shares has been declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and that Underlying Shares may be
issued (or reissued if they have been issued at a time when there was not such
an effective registration statement) or resold without any restrictive legend
(the "Notice of Effectiveness"), (x) a copy of such registration statement, (y)
an appropriate representation that the resale prospectus contained in the
registration statement has been delivered in compliance with applicable rules
and regulations and (z) with respect to the issuance of replacement Warrant
Shares, the certificates representing the originally issued Warrant Shares have
been returned to you as transfer agent, then certificates representing
Underlying Shares shall not bear any legend restricting transfer of Underlying
Shares thereby and should not be subject to any stop-transfer restriction;
provided, however, that if you have not previously received a copy of the Notice
of Effectiveness, such registration statement and such representation or you
have received a subsequent notice by the Company or its counsel of the
suspension or termination of the effectiveness of the registration statement or
the imposition of a Blackout Period as set forth in the Section 6.8 of the
Agreement, then certificates representing Underlying Shares shall bear the
following legend:
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS OR IMAGING TECHNOLOGIES
CORPORATION (THE "COMPANY") SHALL HAVE RECEIVED AN OPINION OF
ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
and, provided, further, that the Company may, from time to time, notify you to
place stop-transfer restrictions on the certificates for Underlying Shares in
the event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.
Please be advised that the Investor has relied upon this instruction
letter as an inducement to enter into the Agreement and, accordingly, the
Investor, is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at
----------------------.
Very truly yours,
IMAGING TECHNOLOGIES CORPORATION
By: ________________________________
Name: __________________________
Title: _________________________
ACKNOWLEDGED AND AGREED:
[TRANSFER AGENT]
By: ________________________________
Name: _______________________
Title: ______________________
Tel.: _______________________
Exhibit I
[FORM OF NOTICE OF EFFECTIVENESS]
[Addressee]
[Address]
TO WHOM IT MAY CONCERN:
We are counsel to Imaging Technologies Corporation, a Delaware
corporation (the "Company"), and we have represented the Company in connection
with that certain Private Equity Line of Credit Agreement (the "Agreement")
between the Company and the Investor named therein, pursuant to which the
Company agreed to issue shares (the "Shares") of its common stock (the "Common
Stock") from time to time during the term of the Agreement and warrants to
purchase shares of the Common Stock (the "Warrant Shares"). Pursuant to the
Agreement, the Company agreed to register the Common Stock and the Warrant
Shares.
In connection with the foregoing, we have been advised that the
Registration Statement on Form ____ (File No. 333-______________) of the Company
(the "Registration Statement"), a copy of which is enclosed, was declared
effective at ____________M., eastern time, on ____________, 2000. Upon issuance
of the Underlying Shares referred to in the Company's instruction letter
attached, and provided that you have received a copy of the representation
pursuant to item (z) in the second paragraph of such instruction letter, you are
authorized to issue certificates for the Company's Common Stock without
restrictive legends. We have no knowledge as of the date hereof, after
telephonic inquiry of a member of the Securities and Exchange Commission's staff
that any stop order suspending the effectiveness of the Registration Statement
has been issued or that any proceedings for that purpose are pending before, or
threatened by, the Securities and Exchange Commission and, accordingly, the
Underlying Shares are available for resale under the Securities Act of 1933, as
amended in the manner specified in, and pursuant to the terms of the
Registration Statement.
Very truly yours,
EXHIBIT C
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company has the
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified to
do business as a foreign corporation and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Equity Line of Credit Agreement and
to issue and sell the Common Stock, the Warrants and the Common Stock issuable
upon exercise of the Warrants (the "Warrant Shares"). The execution, delivery
and performance of the Equity Line of Credit Agreement by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. The Equity Line of Credit Agreement has been duly executed and
delivered, and the Common Stock and the Warrants have been duly executed, issued
and delivered by the Company and the Equity Line of Credit Agreement constitutes
a legal, valid and binding obligations of the Company enforceable against the
Company in accordance with its respective terms. The Common Stock is not subject
to preemptive rights under the Company's certificate of incorporation or bylaws.
3. The Common Stock and the Warrants have been duly authorized and the
Common Stock, when delivered against payment in full as provided in the Equity
Line of Credit Agreement, will be validly issued, fully paid and nonassessable.
The Warrant Shares have been duly authorized and reserved for issuance, and,
when delivered upon exercise or against payment in full as provided in the
Warrants, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Equity Line of Credit Agreement and the consummation by the Company
of the transactions contemplated thereby (i) do not violate any provision of the
Company's certificate of incorporation or bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries are bound or affected, except, in all cases other than
violations pursuant to clause (i) above, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. There is no action, suit, claim, investigation or proceeding pending
or threatened against the Company or any subsidiary which questions the validity
of this Agreement or the transactions contemplated hereby or any action taken or
to be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to our knowledge, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets and which, if adversely determined, is reasonably likely to result in a
Material Adverse Effect.
6. 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 the Equity Line of Credit
Agreement, or the offer, sale or issuance of the Common Stock and the Warrants
or the consummation of any other transaction contemplated by the Equity Line of
Credit Agreement (other than any filings which may be required to be made by the
Company with the Commission, or the OTC Bulletin Board or an Alternate Market
subsequent to the Closing, and, any registration statement which may be filed
pursuant to the Equity Line of Credit Agreement).
7. The offer, issuance and sale of the Common Stock and the Warrants
pursuant to the Equity Line of Credit Agreement, and the issuance of the Warrant
Shares to the Purchaser, pursuant to the Equity Line of Credit Agreement will be
exempt from registration under the Securities Act of 1933, as amended, pursuant
to Rule 4(2) thereunder.
8. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
EXHIBIT D
COMPLIANCE CERTIFICATE
IMAGING TECHNOLOGIES CORPORATION.
The undersigned, _______________, hereby certifies, with respect to
shares of common stock of Imaging Technologies Corporation. (the "Company")
issuable in connection with the Put Purchase Notice, dated (the "Notice"),
delivered pursuant to Article II of the Private Equity Line of Credit Agreement,
dated July 5, 2000, by and among the Company and certain Investors (the
"Agreement"), as follows:
1. The undersigned is the duly elected [Chairman and Chief Executive
Officer] of the Company.
2. The representations and warranties of the Company set forth in
Article IV of the Agreement 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 Put Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VI and Article VII of the
Agreement.
The undersigned has executed this Certificate this ____ day of ______,
2000.
IMAGING TECHNOLOGIES CORPORATION
By:_____________________________________
Name:
Title:
EXHIBIT E
FORM OF WARRANT