SIXTH PRIVATE EQUITY CREDIT AGREEMENT BY AND BETWEEN IMAGING DIAGNOSTIC SYSTEMS, INC. AND CHARLTON AVENUE LLC Dated April 21, 2008
Exhibit
10.81
SIXTH
PRIVATE EQUITY CREDIT AGREEMENT
BY
AND BETWEEN
IMAGING
DIAGNOSTIC SYSTEMS, INC.
AND
CHARLTON
AVENUE LLC
Dated
April 21,
2008
THIS
SIXTH PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 21st day of
April
2008 (this “AGREEMENT”), by and
between CHARLTON AVENUE LLC, a limited liability company organized and existing
under the laws of The Cayman Islands (“INVESTOR”), and IMAGING DIAGNOSTIC
SYSTEMS, INC., a corporation organized and existing under the laws of the State
of Florida (the “COMPANY”).
WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to Investor, from time to time as
provided herein, and Investor shall purchase, up to Fifteen Million Dollars
($15,000,000) of the Common Stock (as defined below); and
WHEREAS,
such investments will be made in reliance upon the provisions of Section 4(2)
(“SECTION 4(2)”) of the Securities Act of 1933 and Regulation D, and the rules
and 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 DEFINED TERMS as used in this Agreement, the following terms shall have the
following meanings specified or indicated (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined)
“AGREEMENT”
shall have the meaning specified in the preamble hereof.
“BID
PRICE” shall mean, for any Trading Day, the closing bid price of the Common
Stock on the Principal Market for such Trading Day.
“BLACKOUT
NOTICE” shall have the meaning specified in the Registration Rights
Agreement.
“BLACKOUT
SHARES” shall have the meaning specified in Section 2.6
“BY-LAWS”
shall have the meaning specified in Section 4.8.
“CERTIFICATE”
shall have the meaning specified in Section 4.8
“CLAIM
NOTICE” shall have the meaning specified in Section 9.3(a).
“CLOSING”
shall mean one of the closings of a purchase and sale of shares of Common Stock
pursuant to Section 2.3.
“CLOSING
DATE” shall mean, as applicable, an Interim Closing Date or a Remainder Closing
Date.
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“COMMITMENT
PERIOD” shall mean the period commencing on the Effective Date, and ending on
the earlier of (i) the date on which Investor shall have purchased Put Shares
pursuant to this Agreement for an aggregate Purchase Price of the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Section 2.5, or (iii) the date occurring (thirty-six) months from the date of
commencement of the Commitment Period.
“COMMON
STOCK” shall mean the Company’s common stock, no par value per share, and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of dividends (as and when
declared) and assets (upon liquidation of the Company).
“COMMON
STOCK EQUIVALENTS” shall mean any securities that are convertible into or
exchangeable for Common Stock or any options or other rights to subscribe for or
purchase Common Stock or any such convertible or exchangeable
securities.
“COMPANY”
shall have the meaning specified in the preamble to this Agreement.
“CONDITION
SATISFACTION DATE” shall have the meaning specified in Section 7.2.
“DAMAGES”
shall mean any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of expert witnesses and investigation).
“DISCOUNT”
shall mean seven (7%) percent.
“DISPUTE
PERIOD” shall have the meaning specified in Section 9.3(a).
“DTC”
shall the meaning specified in Section 2.3.
“DWAC”
shall the meaning specified in Section 2.3.
“EFFECTIVE
DATE” shall mean the date on which the SEC first declares effective a
Registration Statement registering resale of the Registrable Securities as set
forth in Section 7.2(a).
“EXCHANGE
ACT” shall mean the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
“FAST”
shall have the meaning specified in Section 2.3.
“FLOOR
PRICE” shall have the meaning specified in Section 2.1(c).
“INDEMNIFIED
PARTY” shall have the meaning specified in Section 9.3(a).
“INDEMNIFYING
PARTY” shall have the meaning specified in Section 9.3(a).
“INDEMNITY
NOTICE” shall have the meaning specified in Section 9.3(b).
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“INITIAL
REGISTRABLE SECURITIES” shall have the meaning specified in the Registration
Rights Agreement.
“INITIAL
REGISTRATION STATEMENT” shall have the meaning specified in the Registration
Rights Agreement.
“INTERIM
CLOSING DATE” shall mean, with respect to a Closing, the fifth (5th) Trading Day
following the Put Date related to a Closing provided all conditions to a Closing
have been satisfied on or before such Trading Day.
“INTERIM
INVESTMENT AMOUNT” shall mean fifty percent (50%) of the INVESTMENT AMOUNT with
respect to each Put Notice.
“INTERIM
MARKET PRICE” on any given Put shall mean the average of the closing Bid Prices,
other than Low Bid Prices for the first three (3) Trading Days during the
Valuation Period.
"INTERIM
PURCHASE PRICE" shall mean, with respect to Interim Put Shares, the Interim
Market Price less the product of the Discount and the Interim Market
Price.
“INTERIM
PUT SHARES” shall be the number of Put Shares deliverable on an Interim Closing
Date equal to the Interim Investment Amount divided by the Interim Purchase
Price.
“INVESTMENT
AMOUNT” shall mean the dollar amount (within the range specified in Section 2.2)
to be invested by Investor to purchase Put Shares with respect to any Put Date
as notified by the Company to Investor in accordance with Section
2.2.
“INVESTOR”
shall have the meaning specified in the preamble to this Agreement.
“LEGEND”
shall have the meaning specified in Section 8.1.
"MARKET
PRICE" on any given date shall mean the average of the lowest Bid Prices, other
than Low Bid Prices (not necessarily consecutive) for any three (3) Trading Days
during the ten (10) trading day period immediately following the Put
Date.
“LOW BID
PRICE” shall have the same meaning specified in Section 2.1 (c).
“MAXIMUM
COMMITMENT AMOUNT” shall mean Fifteen Million Dollars
($15,000,000).
“MATERIAL
ADVERSE EFFECT” shall mean any effect on the business, operations, properties,
prospects or financial condition of the Company that is material and adverse to
the Company or to the Company and such other entities controlling or controlled
by the Company, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the ability
of the Company to enter into and perform its obligations under any of (a) this
Agreement and (b) the Registration Rights Agreement.
“MAXIMUM
PUT AMOUNT” shall mean, with respect to any Put, the lesser of (a) Five Hundred
Thousand Dollars ($500,000), or (b)Five Hundred (500%) percent of the Weighted
Average Volume for the twenty (20) Trading Days immediately preceding the Put
Date.
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“MINIMUM
COMMITMENT AMOUNT” There shall be no minimum commitment amount.
“MINIMUM
PUT AMOUNT” shall mean, with respect to any Put, Fifty Thousand Dollars
($50,000).
“FINRA”
shall mean the Financial Industry Regulatory Authority.
“NASDAQ”
shall mean The Nasdaq Stock Market, Inc.
“NEW BID
PRICE” shall have the meaning specified in Section 2.6.
“OLD BID
PRICE” shall have the meaning specified in Section 2.6.
“OUTSTANDING”
shall mean, with respect to the Common Stock, at any date as of which the number
of shares of Common Stock is to be determined, all issued and outstanding shares
of Common Stock, including all shares of Common Stock issuable in respect of
outstanding convertible securities, scrip or any certificates representing
fractional interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
“PERSON”
shall mean an individual, a corporation, a partnership, an association, a trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
“PRINCIPAL
MARKET” shall mean the Nasdaq National Market, the Nasdaq Small Cap Market, the
Over the Counter Bulletin Board, the American Stock Exchange or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.
"PURCHASE
PRICE" shall mean, with respect to Interim Put Shares, the Interim Market Price
less the product of the Discount and the Interim Market Price, and with respect
to Remainder Put Shares, the Remainder Market Price less the product of the
Discount and the Remainder Market Price.
“PUT”
shall mean each occasion that the Company elects to exercise its right to tender
a Put Notice requiring Investor to purchase shares of Common Stock, subject to
the terms and conditions of this Agreement.
“PUT
DATE” shall mean the Trading Day during the Commitment Period that a Put Notice
is deemed delivered pursuant to Section 2.2(b).
“PUT
NOTICE” shall mean a written notice, substantially in the form of Exhibit B
hereto, to Investor setting forth the Investment Amount with respect to which
the Company intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
"PUT
SHARES" shall mean the Interim Put Shares and the Remainder Put
Shares.
“REGISTRABLE
SECURITIES” shall mean the (a) Put Shares, (b) the Blackout Shares and (c) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or
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stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a Registration Statement has been declared
effective by the SEC and such Registrable Securities have been disposed of
pursuant to a Registration Statement, (ii) such Registrable Securities have been
sold under circumstances under which all of the applicable conditions of Rule
144 are met, (iii) such time as such Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(iv) in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to Investor, such Registrable Securities may be sold without
registration under the Securities Actor the need for an exemption from any such
registration requirements and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
“REGISTRATION
RIGHTS AGREEMENT” shall mean the registration rights agreement in the form of
Exhibit A hereto.
“REGISTRATION
STATEMENT” shall mean a registration statement on Form S-1 (if use of such form
is then available to the Company pursuant to the rules of the SEC and, if not,
on such other form promulgated by the SEC for which the Company then qualifies
and which counsel for the Company shall deem appropriate and which form shall be
available for the resale of the Registrable Securities to be registered
thereunder in accordance with the provisions of this Agreement and the
Registration Rights Agreement and in accordance with the intended method of
distribution of such securities), for the registration of the resale by Investor
of the Registrable Securities under the Securities Act.
“REGULATION
D” shall have the meaning specified in the recitals of this
Agreement.
“REMAINDER
CLOSING DATE” shall mean, with respect to a Closing, the eleventh (11h) Trading
Day following the Put Date related to a Closing, provided all conditions to a
Closing have been satisfied on or before such Trading Day.
“REMAINDER
INVESTMENT AMOUNT” shall mean the Investment Amount less the Interim Investment
Amount.
"REMAINDER
MARKET PRICE" on any given Put shall mean the average of the lowest closing Bid
Prices, other than Low Bid Prices (not necessarily consecutive) for any three
(3) Trading Days during the Valuation Period.
"REMAINDER
PURCHASE PRICE" shall mean with respect to Remainder Put Shares, the Remainder
Market Price less the product of the Discount and the Remainder Market
Price.
“REMAINDER
PUT SHARES” shall be the number of Put Shares deliverable on a Remainder Closing
Date equal to the Investment Amount divided by the Remainder Purchase Price
minus the Interim Put Shares.
“REMAINING
PUT SHARES” shall have the meaning specified in Section 2.6.
“RULE
144” shall mean Rule 144 under the Securities Act or any similar provision then
in force under the Securities Act.
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“SEC”
shall mean the Securities and Exchange Commission.
“SECTION
4(2)” shall have the meaning specified in the recitals of this
Agreement.
“SECURITIES
ACT” shall have the meaning specified in the recitals of this
Agreement.
“SEC
DOCUMENTS” shall mean, as of a particular date, all reports and other documents
filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act
since the beginning of the Company’s then most recently completed fiscal year as
of the time in question (provided that if the date in question is within ninety
days of the beginning of the Company’s fiscal year, the term shall include all
documents filed since the beginning of the second preceding fiscal
year).
“SUBSCRIPTION
DATE” shall mean the date on which this Agreement is executed and delivered by
the Company and Investor.
“THIRD
PARTY CLAIM” shall have the meaning specified in Section 9.3(a).
“TRADING
DAY” shall mean any day during which the Principal Market shall be open for
business.
“TRANSACTION
DOCUMENTS” means the Private Equity Credit Agreement, the Registration Rights
Agreement, Closing Certificate, and the Transfer Agent
Instructions.
“TRANSFER
AGENT” shall mean the transfer agent for the Common Stock (and to any substitute
or replacement transfer agent for the Common Stock upon the Company’s
appointment of any such substitute or replacement transfer agent).
“TRANSFER
AGENT INSTRUCTIONS” shall mean the instructions for the Transfer Agent attached
hereto as Exhibit E.
“UNDERWRITER”
shall mean any underwriter participating in any disposition of the Registrable
Securities on behalf of Investor pursuant to a Registration
Statement.
“VALUATION
EVENT” shall mean an event in which the Company at any time during a Valuation
Period takes any of the following actions:
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(a)
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subdivides
or combines the Common Stock;
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(b)
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pays
a dividend in shares of Common Stock or makes any other distribution of
shares of Common Stock, except for dividends paid with respect to the
Preferred Stock;
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(c)
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issues
any options or other rights to subscribe for or purchase shares
of Common Stock and the price per share for which shares of Common Stock
may at any time thereafter be issuable pursuant to such options
or other rights shall be less than the Bid Price in effect immediately
prior to such issuance;
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(d)
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issues
any securities convertible into or exchangeable for shares of Common Stock
and the consideration per share for which shares of Common Stock may at
any time thereafter be issuable pursuant to the terms of such convertible
or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such
issuance;
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(e)
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issues
shares of Common Stock otherwise than as provided in the
foregoing subsections (a) through (d), at a price per share less, or for
other consideration lower, than the Bid Price in effect immediately prior
to such issuance, or without
consideration;
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(f)
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makes
a distribution of its assets or evidences of indebtedness to the holders
of Common Stock as a dividend in liquidation or by way of return of
capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution
to such holders made in respect of the sale of all or substantially all of
the Company’s assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e);
or
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(g)
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takes
any action affecting the number of Outstanding Common Stock, other than an
action described in any of the foregoing subsections (a) through (f)
hereof, inclusive, which in the opinion of the Company’s Board of
Directors, determined in good faith, would have a materially adverse
effect upon the rights of Investor at the time of a
Put.
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“VALUATION
PERIOD” shall mean the period of ten (10) Trading Days immediately following the
date on which the applicable Put Notice is deemed to be delivered and during
which the Purchase Price of the Common Stock is valued; provided, however, that
if a Valuation Event occurs during any Valuation Period, a new Valuation Period
shall begin on the Trading Day immediately after the occurrence of such
Valuation Event and end on the tenth (10th) Trading Day thereafter.
“WEIGHTED
AVERAGE VOLUME” shall mean the average of the Weighted Volume for the relevant
days.
“WEIGHTED
VOLUME” shall mean the product of (a) the Closing Bid Price times (b) the volume
on the Principal Market.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK
Section
2.1 INVESTMENTS.
(a) PUTS. Upon
the terms and conditions set forth herein (including, without limitation, the
provisions of Article VII), on any Put Date the Company may exercise a Put by
the delivery of a Put Notice.
(b) MINIMUM
AMOUNT OF PUTS. There shall be no minimum commitment amount of
puts.
(c) FLOOR
PRICE. In the event that, during a Valuation Period, the Bid Price on
any Trading Day falls more than twenty percent (20%) below the closing trade
price on the trading day immediately prior to the date of the Company’s Put
Notice (a “Low Bid Price”), for each such Trading Day the parties shall have no
right and shall be under no obligation to purchase and sell one tenth (1/10th)
of the Investment Amount specified in the Put Notice, and the Investment Amount
shall accordingly be deemed reduced by such amount. In the event that
during a Valuation Period there exists a Low Bid Price for any three (3) Trading
Days—not necessarily consecutive—then the balance of each party’s right and
obligation to purchase and sell the Investment Amount under such Put Notice
shall terminate on such third Trading
8
Day
(“Termination Day”), and the Investment Amount shall be adjusted to include only
one-tenth of the initial Investment Amount for each Trading Day during the
Valuation Period prior to the Termination Day that the Bid Price equals or
exceeds the Low Bid Price.
Section
2.2 MECHANICS.
(a) PUT
NOTICE. At any time during the Commitment Period, the Company may
deliver a Put Notice to 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 Notice shall be neither less than the Minimum Put
Amount nor more than the Maximum Put Amount.
(b) DATE
OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on
(i) the Trading Day it is received by facsimile or otherwise by Investor if such
notice is received on or 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 anytime on a day which is
not a Trading Day.
Section
2.3 CLOSINGS. On or prior to each Interim Closing Date, or
Remainder Closing Date, for a Put, (a) the Company shall deliver to the Investor
one or more certificates representing the Interim Put Shares or Remainder Put
Shares, as applicable, to be purchased by Investor pursuant to Section 2.1
herein, registered in the name of Investor and (b) provided all conditions to
Closing have been satisfied by the Company, Investor shall deliver to the
Company the Interim Investment Amount, or Remainder Investment Amount, as
applicable, by wire transfer of immediately available funds within 24 hours
after each Interim Closing Date, or Remainder Closing Date, as
applicable. In lieu of delivering physical certificates representing
the Common Stock issuable in accordance with clause (a) of this Section 2.3, and
provided that the Transfer Agent then is participating in the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon
request of Investor, the Company shall use its commercially reasonable efforts
to cause the Transfer Agent to electronically transmit, prior to the Closing
Date, the Put Shares by crediting the account of the Investor’s prime broker
with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system, and
provide proof satisfactory to the Investor of such delivery. In
addition, on or prior to such Closing Date, each of the Company and 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.
Section
2.4 [INTENTIONALLY OMITTED]
Section
2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation
of Investor pursuant to this Agreement to purchase shares of Common Stock shall
terminate permanently (including with respect to a Closing Date that has not yet
occurred) in the event that (a) there shall occur any stop order or suspension
of the effectiveness of any Registration Statement for an aggregate of thirty
(30) Trading Days during the Commitment Period, for any reason other than
deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement, as a result of corporate developments subsequent
to the Subscription Date that would require such Registration Statement to be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (b) the Company shall at any
time fail to comply with the requirements of Section 6.3, 6.4, or 6.6 and such
failure shall continue for more than thirty (30) days.
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Section
2.6 BLACKOUT SHARES. In the event that, (a) within fifteen
(15) Trading Days following any Closing Date, the Company gives a Blackout
Notice to Investor of a Blackout Period in accordance with the Registration
Rights Agreement, and (b) the Bid Price on the Trading Day immediately preceding
such Blackout Period (“OLD BID PRICE”) is greater than the Bid Price on the
first Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement (“NEW BID
PRICE”), then the Company shall issue to Investor the number of additional
shares of Registrable Securities (the “BLACKOUT SHARES”) equal to the difference
between (i) the product of the number of Put Shares held by Investor immediately
prior to the Blackout Period that were issued on the most recent Closing
Date(the “REMAINING PUT SHARES”) multiplied by the Old Bid Price, divided by the
New Bid Price, and (ii) the Remaining Put Shares that were issued on the most
recent Closing Date.
Section
2.7 [INTENTIONALLY LEFT BLANK]
Section
2.8 LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledge and agree that the requirement to issue Blackout Shares under
Section 2.6 shall give rise to liquidated damages and not penalties. Each of the
Company and Investor further acknowledge that (a) the amount of loss or damages
likely to be incurred is incapable or is difficult to precisely estimate, (b)
the amount specified in such Section bears a reasonable proportion and is not
plainly or grossly disproportionate to the probable loss likely to be incurred
by Investor in connection with the failure by the Company to make Puts with
aggregate Purchase Prices totaling at least the Minimum Commitment Amount or in
connection with a Blackout Period under the Registration Rights Agreement, and
(c) each of the Company and Investor are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm’s length.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF INVESTOR
Investor
represents and warrants to the Company that:
Section
3.1 INTENT. Investor is entering into this Agreement for
its own account and 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, Investor 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. Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Common Stock. Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section
3.3 AUTHORITY. (a) Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby in accordance with its terms; (b) the execution
and delivery of this Agreement and the Registration Rights Agreement, and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action and no further consent or authorization
of Investor or its partners is required; and (c) this
10
agreement
has been duly authorized and validly executed and delivered by Investor and is a
valid and binding agreement of 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. Investor is not an officer, director
or “affiliate” (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section
3.5 ORGANIZATION AND STANDING. Investor is a limited
liability company duly organized, validly existing and in good standing under
the laws of the Cayman Islands, and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Investor 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 on Investor.
Section
3.6 ABSENCE OF CONFLICTS. The execution and delivery of
this Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not (a) violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Investor, (b) 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, or 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 (that has not been obtained) pursuant to any material
contract, instrument, agreement, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
Section
3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has
received all documents, records, books and other information pertaining to
Investor’s investment in the Company that has been requested by Investor.
Investor has reviewed or received copies of the SEC Documents.
Section
3.8 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.
Section
3.9 FINANCIAL CAPABILITY. Investor presently has the
financial capacity and the necessary capital to perform its obligations
hereunder and shall and has provided to the Company such financial and other
information that the Company has requested to demonstrate such
capacity.
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Investor that, except as disclosed in the SEC
Documents:
Section
4.1 ORGANIZATION OF THE COMPANY. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Florida, and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. The Company is duly qualified as a domestic corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section
4.2 AUTHORITY. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares and
the Blackout Shares, if any; (b) the execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by it
of the transactions contemplated hereby and thereby 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 (c) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
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 April 21, 2008, the authorized
capital stock of the Company consisted of 450,000,000 shares of Common Stock, no
par value, of which 319,264,685 shares were issued and outstanding, and
2,000,000 shares of Preferred Stock, none of which are issued and outstanding.
Except for options to purchase approximately 22,789,938 shares of Common Stock
with exercises prices ranging between $0.35 and $ 2.77 per share, 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. .
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. The Company has registered the Common
Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act, and the Company
has maintained all requirements for the continued listing or quotation of the
Common Stock, and such Common Stock is currently listed or quoted on the
Principal Market. As of the date of this Agreement, the Principal Market is the
OTC Bulletin Board.
Section
4.5 SEC DOCUMENTS. The Company has delivered or made
available to Investor true and complete copies of the SEC Documents on file as
of December 31, 2007. To the best of Company’s knowledge, the Company has not
provided to 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
12
has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and other federal, state and local laws, rules
and regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section
4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. To the
best of Company’s knowledge, the sale and issuance of the Put Shares and the
Blackout Shares, if any, in accordance with the terms and on the bases of the
representations and warranties set forth in this Agreement, may and shall be
properly issued by the Company to Investor pursuant to an exemption from
registration pursuant to the Securities Act and/or any applicable state law.
When issued and paid for as herein provided, the Put Shares, and the Blackout
Shares, if any, shall be duly and validly issued, fully paid, and nonassessable.
Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to,
nor the Company’s performance of its obligations under, this Agreement or the
Registration Rights Agreement shall (a) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Put Shares or the
Blackout Shares, if any, or any of the assets of the Company, or (b) entitle the
holders of Outstanding Common Stock to preemptive or other rights to subscribe
to or acquire the Common Stock or other securities of the Company. The Put
Shares and the Blackout Shares, if any, shall not subject Investor to personal
liability by reason of the ownership thereof.
Section
4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any
person acting on its or their behalf (a) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to any of the Put Shares or the Blackout
Shares, if any, or (b) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Common Stock under the Securities Act.
Section
4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to 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
the Put Shares and the Blackout Shares, if any, do not and will not (a) result
in a violation of the Certificate or By-Laws or (b) conflict with, or constitute
a material default (or an event that with notice or lapse of time or both would
become a material default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement,
indenture,
13
instrument
or any “lock-up” or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) 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, however, that
for purposes of the Company’s representations and warranties as to violations of
foreign law, rule or regulation referenced in clause (c), such representations
and warranties are made only to the best of the Company’s knowledge 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 Investor under or pursuant to any
such foreign law, rule or regulation. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate do
not and will not have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Common Stock in
accordance with the terms hereof(other than any SEC, FINRA or state securities
filings that may be required to be made by the Company subsequent to any
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Over The Counter Bulletin Board); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
Investor herein.
Section
4.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 2007,
no event has occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents on file on the date
hereof.
Section
4.11 NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
and that are not disclosed in the SEC Documents on file on the date hereof or
otherwise publicly announced, other than those incurred in the ordinary course
of the Company’s businesses since December 31, 2007 and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect on the
Company.
Section
4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
December 31, 2007, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents on file on the
date hereof.
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 may be
set forth in the SEC Documents on file on the date hereof, 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
14
oral
notice of any such action, suit, proceeding or investigation, which would have a
Material Adverse Effect. Except as set forth in the SEC Documents on file on the
date hereof, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which would have a Material Adverse
Effect.
Section
4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company,
any Person representing the Company, and, to the knowledge of the Company, any
other Person selling or offering to sell the Put Shares or the Blackout Shares,
if any, in connection with the transactions contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the 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.
ARTICLE
V
COVENANTS
OF INVESTOR
Section
5.1 COMPLIANCE WITH LAW. Investor’s trading activities with respect
to shares of the Common Stock will be in compliance with all applicable state
and federal securities laws, rules and regulations and the rules and regulations
of the FINRA and the Principal Market on which the Common stock is
listed.
ARTICLE
VI
COVENANTS
OF THE COMPANY
Section
6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section
6.2 RESERVATION OF COMMON STOCK. Not later than April 10,
2008, the Company shall have available and the Company shall 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 and the Blackout Shares, if any; such amount of shares of Common Stock to
be reserved shall be calculated based upon a minimum Purchase Price of $.05 for
the Put Shares under the terms and conditions of this Agreement and a good faith
estimate by the Company in consultation with Investor of the number of Blackout
Shares, if any, that will need to be issued. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered
hereunder.
Section
6.3 LISTING OF COMMON STOCK. The Company shall maintain
the listing of the Common Stock on a Principal Market and, if applicable, will
cause the Put Shares and the Blackout Shares, if any, to be listed 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 the Blackout Shares, if any, and shall take such other action
as is necessary or desirable in the reasonable opinion of Investor to cause the
Common Stock to be listed on such other Principal Market as
15
promptly
as possible. The Company shall use its commercially reasonable efforts to
continue the listing and trading of the Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the FINRA and the Principal
Market.
Section
6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action or
file any document (whether or not permitted by said Act or the rules
thereunder)to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section
6.5 LEGENDS. The certificates evidencing the Put Shares
and the Blackout Shares, if any, shall be free of legends, except as provided
for in Article VIII.
Section
6.6 CORPORATE EXISTENCE. The Company shall take all
commercially reasonable steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.7 [INTENTIONALLY
OMITTED]
Section
6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A PUT. The Company shall promptly notify 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: (a) 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; (b) the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (c) 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; (d) 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
a 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 (e) the Company’s reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events.
Section
6.9 [INTENTIONALLY OMITTED]
Section
6.10 CONSOLIDATION; MERGER. The Company shall not, at any
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of the
Company to, another entity unless the resulting successor or acquiring entity
(if not
16
the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of Common Stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.
Section
6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale
of the Put Shares and the issuance of the Blackout Shares, if any, shall be made
in accordance with the provisions and requirements of Regulation D (or shall
otherwise be exempt from the registration requirements of the Securities Act)
and any applicable state law.
Section
6.12 REIMBURSEMENT. If (i) Investor, other than by reason
of its gross negligence or willful misconduct, becomes involved in any capacity
in any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Investor is
impleaded in any such action, proceeding or investigation by any person, or (ii)
Investor, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which Investor is a named party, the Company will
pay to Investor the charges, as reasonably determined by Investor, for the time
of any officers or employees of Investor devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearing, trials, and other
proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this section shall be in addition
to any liability which the Company may otherwise have, shall extend upon the
same terms and conditions to any affiliates of Investor that are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of Investor and
any such affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, Investor
and any such affiliate and any such person.
Section
6.13 DILUTION. The number of shares of Common Stock
issuable as Put Shares may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines during the period between the Effective Date
and the end of the Commitment Period. The Company’s executive
officers and directors have studied and fully understand the nature of the
transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect. The board of directors of the Company has
concluded, in its good faith business judgment that such issuance is in the best
interests of the Company. The Company specifically acknowledges that
its obligation to issue the Put Shares is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
Section 6.14 CERTAIN
AGREEMENTS. (a) (i) The Company covenants and agrees that it will
not, without the prior written consent of the Investor, enter into any
subsequent or further offer or sale of Common Stock or Common Stock Equivalents
(collectively, “New Common Stock”) with any third party pursuant to a
transaction which in any manner permits the sale of the New Common Stock on any
date which is thirty (30) days prior or subsequent to any Additional Closing
Date.
17
(ii) The
provisions of subparagraph 6.15(i) will not apply to (w) Common Stock issued
pursuant to an exemption from registration under the Securities Act of 1933; (x)
an underwritten public offering of shares of Common Stock or Preferred Stock;
(y) an offering of convertible Preferred Stock at market or above; or (z) the
issuance of securities (other than for cash) in connection with an acquisition,
merger, consolidation, sale of assets, disposition or the exchange of the
capital stock for assets, stock or other joint venture interests.
(iii) In
the event the Company breaches the provisions of this Section, the Discount (as
defined in shall be amended to be equal to (x)110% of the
Discount set forth herein and the Investor may terminate its obligations under
this Agreement and demand such amounts as may be owing under Section
2.1.
(b) The
Company covenants and agrees that it will not, without the prior written consent
of the Investor, enter into any subsequent or further equity credit line
agreement (however denominated) with any third party during the Commitment
Period.
ARTICLE
VII
CONDITIONS
TO DELIVERY OF
PUT
NOTICES AND CONDITIONS TO CLOSING
Section
7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to
issue and sell the Put Shares to Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY
OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Investor shall be true and correct in all material respects as of
the date of this Agreement and as of the date of each such Closing as though
made at each such time, except for changes which have not had a Material Adverse
Effect.
(b) PERFORMANCE
BY INVESTOR. Investor shall have performed, satisfied and complied in
all respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Investor at or prior to
such Closing.
Section
7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT
NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a “CONDITION SATISFACTION DATE”), of each of the
following conditions:
(a) REGISTRATION
OF REGISTRABLE SECURITIES WITH THE SEC. As set forth in the
Registration Rights Agreement, the Company shall have filed with the SEC the
Initial Registration Statement with respect to the resale of the Initial
Registrable Securities by Investor and such Registration Statement shall have
been declared effective by the SEC prior to the first Put Date. For the purposes
of any
18
Put
Notice with respect to the Registrable Securities other than the Initial
Registrable Securities, the Company shall have filed with the SEC a Registration
Statement with respect to the resale of such Registrable Securities by Investor
which shall have been declared effective by the SEC prior to the Put Date
therefore.
(b) EFFECTIVE
REGISTRATION STATEMENT. As set forth in the Registration Rights
Agreement, a Registration Statement shall have previously become effective for
the resale by Investor of the Registrable Securities subject to such Put Notice
and such Registration Statement shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor Investor shall have received
notice that the SEC has issued or intends to issue a stop order with respect to
such Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC’s concerns
have been addressed and Investor is reasonably satisfied that the SEC no longer
is considering or intends to take such action),and (ii) no other suspension of
the use or withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist.
(c) ACCURACY
OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company shall be true and correct in all material respects
as of each Condition Satisfaction Date as though made at each such time (except
for representations and warranties specifically made as of a particular date)
with respect to all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations or warranties
herein to be incorrect and which have been corrected with no continuing material
impairment to the Company or Investor.
(d) PERFORMANCE
BY THE COMPANY. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement and the Registration Rights Agreement to be
performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) NO
INJUNCTION. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or adopted by
any court or governmental authority of competent jurisdiction that prohibits or
directly and materially adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or materially adversely affecting any of the transactions
contemplated by this Agreement.
(f) ADVERSE
CHANGES. Since the date of filing of the Company's most recent SEC
Document, no event that had or is reasonably likely to have a Material Adverse
Effect has occurred.
(g) NO
SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of
the Common Stock shall not have been suspended by the SEC, the Principal Market
or the FINRA and the Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from the Principal
Market.
(h) LEGAL
OPINION. The Company shall have caused to be delivered to Investor,
within five (5) Trading Days of the effective date of the Initial Registration
Statement and each subsequent Registration Statement, an opinion of the
Company’s legal counsel in the form of Exhibit C hereto, addressed to
Investor.
19
(i) [INTENTIONALLY
OMITTED]
(j) FIVE
PERCENT LIMITATION. Notwithstanding anything to the contrary
contained herein, if, on any Closing Date, the number of Put Shares then to be
purchased pursuant to a Put Notice by Investor would, when aggregated with all
other shares of Common Stock then held by Investor (including, for the purposes
of this Section 7.2(j), Common Stock issuable upon conversion, exercise or
exchange, as applicable, of Common Stock Equivalents then held by Investor),
cause Investor to beneficially own in excess of 4.999% of the total number of
issued and outstanding shares of Common Stock after giving effect to the Put
(the “Percentage Cap”), then the number of Put Shares shall be reduced to the
extent necessary for Investor’s beneficial ownership of Common Stock, after
giving effect to the Put, not to exceed the Percentage Cap. For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. In the event the number of Put Shares with respect to any
Put are required to be reduced pursuant to this Section 7.2(j), Investor shall
provide, via facsimile, as soon as possible on the Closing Date, and in no event
later than 12:00 p.m. EST, a notice to the Company setting forth the maximum
number of shares issuable pursuant to such Put which would not result in
Investor’s beneficial ownership exceeding the Percentage Cap.
(k) NO
KNOWLEDGE. The Company shall have no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered.
(l) SHAREHOLDER
VOTE. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(m) OTHER. On
each Condition Satisfaction Date, Investor shall have received and been
reasonably satisfied with such other certificates and documents as shall have
been reasonably requested by Investor in order for 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 by an executive officer of the Company
and to the effect that all the conditions to such Closing shall have been
satisfied as at the date of each such certificate.
Section
7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
INFORMATION.
(a) The
Company shall make available for inspection and review by Investor, advisors to
and representatives of Investor (who may or may not be affiliated with Investor
and who are reasonably acceptable to the Company), and any Underwriter, any
Registration Statement or amendment or supplement thereto or any blue sky, FINRA
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company’s officers, directors and employees to supply all such information
reasonably requested by Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of such Registration.
20
(b) Each
of the Company, its officers, directors, employees and agents shall in no event
disclose non-public information to Investor, advisors to or representatives of
Investor.
(c) Nothing
herein shall require the Company to disclose non-public information to Investor
or its advisors or representatives, and the Company represents that it does not
disseminate non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the contrary, the
Company shall, as hereinabove provided, immediately notify the advisors and
representatives of Investor and any Underwriters of any event or the existence
of any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in a Registration Statement would cause such prospectus
to include a material misstatement or to omit a material fact required to be
stated therein in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Nothing
contained in this Section 7.3 shall be construed to mean that such persons or
entities other than Investor (without the written consent of Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms and conditions
of this Agreement and nothing herein shall prevent any such persons or entities
from notifying the Company of their opinion that based on such due diligence by
such persons or entities, any Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
such Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE
VIII
LEGENDS
Section
8.1 LEGENDS. (a) Except as otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the “LEGEND”):
The
securities represented by this certificate have not been registered under the
Securities Act of 1933 (the “Securities Act”) or qualified under applicable
state securities laws. These securities may not be offered, sold, pledged,
hypothecated, transferred or otherwise disposed of except pursuant to (i) an
effective registration statement and qualification in effect with respect
thereto under the Securities Act and under any applicable state securities law,
(ii) to the extent applicable, Rule 144 under the Securities Act, or (iii) an
opinion of counsel reasonably acceptable to the Company that such registration
and qualification is not required under applicable federal and state securities
laws.”
(b) As
soon as practicable after the execution and delivery hereof, the Company shall
issue to the Transfer Agent the Transfer Agent Instructions. Such instructions
shall be irrevocable by the Company from and after the date thereof or from and
after the issuance thereof except as otherwise expressly
21
provided
in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the Transfer Agent to issue
to Investor certificates evidencing shares of Common Stock incident to a
Closing, free of the Legend, without consultation by the transfer agent with the
Company or its counsel and without the need for any further advice or
instruction or documentation to the Transfer Agent by or from the Company or its
counsel or Investor; provided that (a) a Registration Statement shall then be
effective, (b) Investor confirms to the Transfer Agent and the Company that it
has or intends to sell such Common Stock to a third party which is not an
affiliate of Investor or the Company and Investor agrees to redeliver the
certificate representing such shares of Common Stock to the Transfer Agent to
add the Legend in the event the Common Stock is not sold, and (c) Investor
confirms to the transfer agent and the Company that Investor has complied with
the prospectus delivery requirement under the Securities Act. At any time after
the Effective Date, upon surrender of one or more certificates evidencing Common
Stock that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those
surrendered.
Section
8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No
legend other than the one specified in Section 8.1 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
VIII.
Section
8.3 COVER. If the Company fails for any reason to deliver
the Put Shares on such Closing Date and the holder of the Put Shares (a
“Investor”) purchases, in an open market transaction or otherwise, shares of
Common Stock (the “Covering Shares”) in order to make delivery in satisfaction
of a sale of Common Stock by such Investor (the “Sold Shares”), which delivery
such Investor anticipated to make using the Put Shares (a “Buy-In”), then the
Company shall pay to such Investor, in addition to all other amounts
contemplated in other provisions of the Transaction Documents, and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The “Buy-In Adjustment
Amount” is the amount equal to the excess, if any, of (x) such Investor’s total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by such
Investor from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to such Investor in immediately available funds immediately
upon demand by such Investor. By way of illustration and not in limitation of
the foregoing, if such Investor purchases Covering Shares having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock that it sold for net proceeds of $10,000,
the Buy-In Adjustment Amount that the Company will be required to pay to such
Investor will be $1,000.
Section
8.4 INVESTOR’S COMPLIANCE. Nothing in this Article VIII
shall affect in any way Investor’s obligations under any agreement to comply
with all applicable securities laws upon resale of the Common
Stock.
ARTICLE
IX
NOTICES;
INDEMNIFICATION
Section
9.1 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 (a) personally
served,(b) deposited in the mail, registered or certified, return receipt
requested,
22
postage
prepaid, (c) delivered by reputable air courier service with charges prepaid, or
(d) 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 given in accordance herewith. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (i) 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 (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the
Company: Imaging
Diagnostic Systems, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇
▇▇▇▇▇▇, P.A.
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇.▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier
No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to
Investor: Charlton
Avenue LLC
▇/▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇) Limited
P.O. Box
31106 SMB
Grand
Cayman, Cayman Islands
British
West Indies
with a
copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇▇▇
▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇)
▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
Either
party hereto may from time to time change its address or facsimile number for
notices under this Section 9.1 by giving at least ten (10) days’ prior written
notice of such changed address or facsimile number to the other party
hereto.
23
Section
9.2 INDEMNIFICATION.
The
Company agrees to indemnify and hold harmless Investor and its officers,
directors, employees, and agents, and each Person or entity, if any, who
controls Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor’s failure to perform any
covenant or agreement contained in this Agreement or Investor’s or its
officer’s, director’s, employee’s, agent’s or Controlling Person’s negligence,
recklessness or bad faith in performing its obligations under this
Agreement.
Section
9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims
for indemnification by any Indemnified Party (as defined below) under Section
9.2 shall 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 this Article (an “INDEMNIFIED
PARTY”) might seek indemnity under this Article is asserted against or sought to
be collected from such Indemnified Party by a person other than a party hereto
or an affiliate thereof (a “THIRD PARTY CLAIM”), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party’s claim for indemnification that is being asserted under any
provision of this Article against any person (the “INDEMNIFYING PARTY”),
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a “CLAIM NOTICE”)
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party’s ability to
defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the “DISPUTE PERIOD”) whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under this
Article and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim.(i)If
the Indemnifying Party notifies the Indemnified Party within the Dispute Period
that the Indemnifying Party desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying
Party shall have the right to defend, with counsel reasonably satisfactory to
the Indemnified Party, at the sole cost and expense of the Indemnifying Party,
such Third Party Claim by all appropriate proceedings, which proceedings shall
be vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party (but
only with the consent of the Indemnified Party in the case of any settlement
that provides for any relief other than the payment of monetary damages or that
provides for the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to this Article). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement
24
thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party’s delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and except as provided in the preceding sentence, the Indemnified
Party shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may takeover the control of
the defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under this Article with respect to such Third
Party Claim. (ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party(with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party’s defense pursuant to this clause (ii) or of the Indemnifying
Party’s participation therein at the Indemnified Party’s request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this clause (ii), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation. (iii) If the Indemnifying Party
notifies the Indemnified Party that it does not dispute its liability or the
amount of its liability to the Indemnified Party with respect to the Third Party
Claim under this Article or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under this Article and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(b) In
the event any Indemnified Party should have a claim under this Article against
the Indemnifying Party that does not involve a Third Party Claim, the
Indemnified Party shall deliver a written
25
notification
of a claim for indemnity under this Article specifying the nature of and basis
for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an
“INDEMNITY NOTICE”) with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party’s rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under this Article and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
entitled to institute such legal action as it deems appropriate.
(c) The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar rights of the Indemnified Party against the Indemnifying Party
or others, and (ii) any liabilities the Indemnifying Party may be subject
to.
Section
9.4 REIMBURSEMENT. If (i) any Investor, other than by
reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by any stockholder
of the Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Agreements, or if such Investor is
impleaded in any such action, proceeding or investigation by any Person, or (ii)
any Investor, other than by reason of its gross negligence or willful misconduct
or by reason of its trading of the Common Stock in a manner that is illegal
under the federal securities laws, becomes involved in any capacity in any
action, proceeding or investigation brought by the SEC against or involving the
Company or in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Agreements, or if such Investor is
impleaded in any such action, proceeding or investigation by any Person, then in
any such case, the Company will reimburse such Investor for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which such Investor is a
named party, the Company will pay such Investor the charges, as reasonably
determined by such Investor, for the time of any officers or employees of such
Investor devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Investor who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Investor and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Investor and any such
Affiliate and any such Person. The Company also agrees that neither
any Investor nor any such Affiliate, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Agreements except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of such
Investor.
26
ARTICLE
X
MISCELLANEOUS
Section
10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Florida
without regard to the principles of conflicts of law. Each of the Company and
Investor hereby submit to the exclusive jurisdiction of the United States
Federal and state courts located in Florida with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section
10.2 JURY TRIAL WAIVER. The Company and the Investor
hereby waive a trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other in respect of any matter
arising out of or in connection with the Transaction Documents.
Section
10.3 SPECIFIC ENFORCEMENT. The Company and the Investor
acknowledge and agree that irreparable damage would occur to the Investor in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Investor shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
Section
10.4 ASSIGNMENT. Neither this Agreement nor any rights of
Investor or the Company hereunder may be assigned by either party to any other
person.
Section
10.5 THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the Company and Investor, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
Section
10.6 TERMINATION. This Agreement shall terminate at the
end of the Commitment Period or as otherwise provided herein (unless extended by
the agreement of the Company and Investor); provided, however, that the
provisions of Article VI, VIII, IX and Sections 10.2, 10.3 and 10.4 shall
survive the termination of this Agreement.
Section
10.7 ENTIRE AGREEMENT. This Agreement together with
Exhibit A, and the instruments referenced herein contain the entire
understanding of the Company and Investor with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor Investor makes any representation, warranty, covenant or
undertaking with respect to such matters.
Section
10.8 FEES AND EXPENSES. Except as otherwise provided in
this Agreement or any of the Exhibits thereto, each of the Company and Investor
agrees to pay its own expenses in connection with the preparation of this
Agreement and performance of its obligations hereunder. In addition, the Company
shall pay all reasonable fees and expenses incurred by the Investor in
connection with any amendments, modifications or waivers of this Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement and the Registration Rights Agreement, including, without
limitation, all reasonable attorneys fees and expenses. The Company shall pay
all stamp or other similar
27
taxes and
duties levied in connection with issuance of the Shares pursuant
hereto.
Section
10.9 NO BROKERS. Each of the Company and Investor
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. The Company, agrees to indemnify the Investor against and hold the
other harmless from any and all liabilities to any 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
10.10 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which may be executed by less than all of the
Company 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. This Agreement,
once executed by a party, may be delivered to the other parties hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the
parties so delivering this Agreement.
Section
10.11 SURVIVAL; SEVERABILITY. The representations,
warranties, covenants and agreements of the Company hereto shall survive each
Closing hereunder for a period of one (1) year thereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section
10.12 FURTHER ASSURANCES. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section
10.13 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section
10.14 TITLE AND SUBTITLES. The titles and subtitles used
in this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
Section
10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg L.P. or any successor thereto.
Section
10.16 PUBLICITY. The Company and Investor shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public statement
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Investor without the prior written consent of such
Investor, except to the extent required by law. Investor acknowledges that this
Agreement
28
and all
or part of the Transaction Documents may be deemed to be “material contracts” as
that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company
may therefore be required to file such documents as exhibits to reports or
registration statements filed under the Securities Act or the Exchange Act.
Investor further agrees that the status of such documents and materials as
material contracts shall be determined solely by the Company, in consultation
with its counsel.
29
IN
WITNESS WHEREOF, the parties hereto have caused this Sixth Private Equity Credit
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
IMAGING
DIAGNOSTIC SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Executive Vice President & Chief Financial Officer
CHARLTON
AVENUE LLC
By: /s/ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Names: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
Navigator
Management Ltd., its Director
30
EXHIBITS
EXHIBIT
A Put
Notice
EXHIBIT
B Opinion
EXHIBIT
C Closing
Certificate
31